Reading International Inc.
Annual Report 2013

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KREADING INTERNATIONAL INC - RDIFiled: March 07, 2014 (period: December 31, 2013)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results.UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-KþANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 or ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from _______ to ______ Commission File No. 1-8625READING INTERNATIONAL, INC.(Exact name of registrant as specified in its charter) NEVADA(State or other jurisdiction of incorporation or organization)6100 Center Dr., Suite 900Los Angeles, CA(Address of principal executive offices)95-3885184(I.R.S. Employer Identification Number) 90045(Zip Code)Registrant’s telephone number, including Area Code: (213) 235-2240Securities Registered pursuant to Section 12(b) of the Act: Title of each className of each exchange on which registeredClass A Nonvoting Common Stock, $0.01 par valueNASDAQClass B Voting Common Stock, $0.01 par valueNASDAQ Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes  No If this report is an annual or transition report, indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes  No Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Exchange Act of 1934 during the preceding 12 months (or for shorter period than the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit andpost such files). Yes  No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K of any amendments to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-acceleratedfiler, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reportingcompany” in Rule 12b-2 of the Exchange Act.Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct). Yes  No Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latestpracticable date. As of March 6, 2014, there were 22,015,738 shares of class A non-voting common stock, par value $0.01per share and 1,495,490 shares of class B voting common stock, par value $0.01 per share, outstanding. The aggregatemarket value of voting and nonvoting stock held by non-affiliates of the Registrant was $112,400,258 as of June 30,2013. Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. READING INTERNATIONAL, INC.ANNUAL REPORT ON FORM 10-KYEAR ENDED DECEMBER 31, 2013INDEXPART I3Item 1 – Our Business3Item 1A – Risk Factors10Item 1B - Unresolved Staff Comments17Item 2 – Properties18Item 3 – Legal Proceedings25PART II27Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities27Item 6 – Selected Financial Data29Item 7 – Management’s Discussions and Analysis of Financial Condition and Results of Operations31Item 7A – Quantitative and Qualitative Disclosure about Market Risk53Item 8 – Financial Statements and Supplementary Data54Report of Independent Registered Public Accounting Firms55Consolidated Balance Sheets as of December 31, 2013 and 201256Consolidated Statements of Operations for the Three Years Ended December 31, 201357Consolidated Statements of Comprehensive Income (Loss) for the Three Years Ended December 31, 201358Consolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 201359Consolidated Statements of Cash Flows for the Three Years Ended December 31, 201360Notes to Consolidated Financial Statements61Schedule II – Valuation and Qualifying Accounts102Item 9 – Change in and Disagreements with Accountants on Accounting and Financial Disclosure103Item 9A – Controls and Procedures104PART III106PART IV107Item 15 – Exhibits, Financial Statement Schedules107SIGNATURES129CERTIFICATIONS130 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART I Item 1 – Our BusinessGeneral Description of Our BusinessReading International, Inc., a Nevada corporation (“RDI”), was incorporated in 1999 incident to ourreincorporation in Nevada. Our class A non-voting common stock (“Class A Stock”) and class B voting common stock(“Class B Stock”) are listed for trading on the NASDAQ Capital Market (Nasdaq-CM) under the symbols RDI and RDIB,respectively. Our principal executive offices are located at 6100 Center Drive, Suite 900, Los Angeles, California90045. Our general telephone number is (213) 235-2240 and our website is www.readingrdi.com. It is our practice tomake available free of charge on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, currentreports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of theExchange Act as soon as reasonably practicable after we have electronically filed such material with or furnished it to theSecurities and Exchange Commission. In this Annual Report, we from time to time use terms such as the “Company,”“Reading” and “we,” “us,” or “our” to refer collectively to RDI and our various consolidated subsidiaries and corporatepredecessors.We are an internationally diversified “hard asset” company principally focused on the development,ownership and operation of entertainment and real property assets in the United States, Australia, and NewZealand. Currently, we have two business segments:1.Cinema Exhibition, through our 56 cinemas, and2.Real Estate, including real estate development and the rental of retail, commercial and live theater assets.We believe that these two business segments complement one another, as the comparatively consistent cashflows generated by our cinema operations allow us to be opportunistic in acquiring and holding real estate assets, and canbe used not only to grow and develop our cinema business but also to help fund the front-end cash demands of our realestate development business.At December 31, 2013, the book value of our assets was $386.8 million, and, as of that same date, we had aconsolidated stockholders’ book equity of $121.7 million. Calculated based on book value, $120.7 million or 30%, ofour assets relate to our cinema exhibition activities and $226.9 million or 59%, of our assets relate to our real estateactivities. At December 31, 2013, we had cash and cash equivalents of $37.7 million, which is accounted for as acorporate asset. Our cash included $23.0 million denominated in the U.S. dollars, $7.5 million (AUS$$8.4 million) inAustralia dollars, and $7.2 million (NZ$8.7 million) in New Zealand dollars. 3 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.For additional segment financial information, please see Note 22 – Business Segments and Geographic AreaInformation to our 2013 Consolidated Financial Statements.We have diversified our assets among three countries: the United States, Australia, and New Zealand. AtDecember 31, 2013, we had approximately 29% of our assets (based on net book value) in the United States, 51% inAustralia and 20% in New Zealand compared to 29%, 53%, and 18% at the end of 2012. For 2013, our gross revenue inthese jurisdictions was $131.5 million, $100.4 million, and $26.3 million, respectively, compared to $121.5 million,$108.3 million, and $24.6 million for 2012.For additional financial information concerning the geographic distribution of our business, please see Note 22 –Business Segments and Geographic Area Information to our 2013 Consolidated Financial Statements.While we do not believe the cinema exhibition business to be a growth business, we do believe it to be abusiness that will likely continue to generate fairly consistent cash flows in the years ahead even in recessionary orinflationary environments. This is based on our belief that people will continue to spend some reasonable portion of theirentertainment dollar on entertainment outside of the home, and, that when compared to other forms of outside the homeentertainment, movies continue to be a popular and competitively priced option. As we believe the cinema exhibitionbusiness to be a mature business with most markets either adequately screened or over-screened, we see growth in ourcinema business coming principally from the enhancement of our current cinemas, the development in select markets ofspecialty cinemas, and the opportunistic acquisition of already existing cinemas rather than from the development of newconventional cinemas.In 2012, we essentially completed the conversion of our U.S. cinemas to digital projection, and followed that upwith a conversion of our Australia and New Zealand cinemas, which was completed in 2013. In 2013, we took back acinema in New Zealand that, at the time we acquired the property, was already leased to a competitor. We are now in theprocess of upgrading that cinema into a state-of-the art facility and plan to begin operations in the 3 Quarter of2014. We are also working to expand our Angelika Film Center circuit. In the last quarter of 2013, we and Edens, anationally known developer, announced our plans to develop a new Angelika style cinema in the Union Market districtof Washington D.C. It is currently anticipated that this Angelika will open in mid-2016. Also, we are advancing plans toconvert one of our San Diego area cinemas to an upgraded Angelika format, and working on plans to upgrade the foodand beverage offerings at a number of our U.S. cinemas. Finally, during 2013, we acquired equity interests in entitiesholding the leases to two of our Angelika Film Centers.Given the resurgence of Manhattan commercial real estate values, we intend to redevelop our Cinemas 1, 2 & 3property and our Union Square property. Overseas, in 2013, we entered into a lease agreement for a new grocery storeanchor tenant in our Courtenay Central property in Wellington, New Zealand and are actively pursuing 4 rdSource: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the development of the next phase of that center. Additionally, we have obtained the necessary land use approvals andare working on plans to add a cinema to our Newmarket shopping center in Brisbane, Australia.Historically, it has not been our practice to sell assets, except in connection with the repositioning of such assetsto a higher and better use. However, in light of the current market conditions and our desire to free up capital and paydown debt, in 2012, we sold our 24,000 square foot office building in Indooroopilly, Australia for $12.4 million(AUS$12.0 million). In 2013, we entered into a purchase and sale agreement to sell our 3.3-acre properties in MooneePonds for AUS$23.0 million which is scheduled to close on April 16, 2015 and is classified as land held for sale on ourDecember 31, 2013 consolidated balance sheet. We are continuing to evaluate our options with respect to our 50.6-acreBurwood property in Australia and our 70.3-acre Manukau property in New Zealand. We may sell all or portions of theseproperties to provide liquidity for other projects. In evaluating whether to sell a particular property, we consider thepotential upside in a particular property and costs required to achieve that upside compared to the opportunitiespresented by our other properties. Typically, we have endeavored to match the currency in which we have financed our development with thejurisdiction within which these developments are located. We have followed this approach to reduce our risk to currencyfluctuations. This structure has, however, somewhat limited our ability to move cash from one jurisdiction toanother. During 2012, we deviated somewhat from this policy by purchasing $8.0 million in time deposits denominatedin U.S. dollars and held by an Australian bank which matured in January 2013. Additionally, at December 31, 2013, wehold $4.5 million in Australia and $495,000 in New Zealand denominated in U.S. dollars.In summary, while we do have operating company attributes, we see ourselves principally as a geographicallydiversified real estate and cinema company and intend to add to stockholder value by building the value of our portfolioof tangible real estate and entertainment-oriented assets. We endeavor to maintain a reasonable asset allocation betweenour U.S. and international assets and operations, and between our cash generating cinema operations and our cashconsuming real estate development activities. We believe that by blending the cash generating capabilities of a cinemaoperation with the investment and development opportunities of our real estate operation coupled with our internationaldiversification of assets, our business strategy is unique among public companies. While historically we have retained ourproperties through development, we continue to evaluate the sale of certain assets to provide capital to develop ourremaining properties.At December 31, 2013, our principal assets included:·interests in 55 cinemas comprising some 463 screens;·fee interests in four live theaters (the Union Square, the Orpheum and Minetta Lane in Manhattan and the RoyalGeorge in Chicago);·fee ownership of approximately 24.0 million square feet of developed and undeveloped real estate; and·cash, cash equivalents, and time deposits aggregating $37.7 million.Our Cinema Exhibition ActivitiesGeneralWe conduct our cinema operations on four basic and rather simple premises:·first, notwithstanding the enormous advances that have been made in home entertainment technology, humansare essentially social beings, and will continue to want to go beyond the home for their entertainment, providedthat they are offered clean, comfortable and convenient facilities, with state of the art technology;·second, cinemas can be used as anchors for larger retail developments and our involvement in the cinemabusiness can give us an advantage over other real estate developers or redevelopers who must identify andnegotiate exclusively with third party anchor tenants;·third, pure cinema operators can get themselves into financial difficulty as demands upon them to producecinema based earnings growth tempt them into reinvesting their cash flow into increasingly marginal cinemasites. While we believe that there will continue to be attractive opportunities to acquire cinema assets and/or todevelop upper end specialty type theaters (like our Angelika Film Centers) in the future, we do not feel pressureto build or acquire cinemas for the sake of adding units. We intend to focus our use 5 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of cash flow on our real estate development and operating activities, to the extent that attractive cinemaopportunities are not available to us; and·fourth, we are always open to the idea of converting an entertainment property to another use, if there is a higherand better use for the property, or to sell individual assets, if we are presented with an attractive opportunity.Our current cinema assets that we own and/or manage are as set forth in the following chart:Wholly OwnedConsolidatedUnconsolidatedManagedTotalsAustralia18 cinemas2 cinemas1 cinemaNone21 cinemas138 screens11 screens16 screens165 screensNew Zealand7 cinemasNone2 cinemasNone9 cinemas40 screens13 screens53 screensUnited States24 cinemas1 cinemaNone1 cinema26 cinemas242 screens3 screens4 screens249 screensTotals49 cinemas3 cinemas3 cinemas1 cinemas56 cinemas420 screens14 screens29 screens4 screens467 screens [1] Cinemas owned and operated through consolidated, but not wholly owned subsidiaries.[2] Cinemas owned and operated through unconsolidated subsidiaries.[3] Cinemas in which we have no ownership interest, but which are operated by us under management agreements.[4] 33.3% unincorporated joint venture interest.[5] 50% unincorporated joint venture interests. We focus on the ownership and/or operation of three categories of cinemas: ·first, modern stadium seating multiplex cinemas featuring conventional film product;·second, specialty and art cinemas, such as our Angelika Film Centers in Manhattan, Dallas, Plano, and Fairfax,Virginia and the Rialto cinema chain in New Zealand; and ·third, in some markets, particularly small town markets that will not support the development of a modernstadium design multiplex cinema, conventional sloped floor cinemas. We also have various premium class offerings including luxury seating, premium audio, private lounges, caféand bar service, and other amenities in certain of our cinemas and are in the process of converting certain of our exitingcinemas to provide this premium offering.Although we operate cinemas in three jurisdictions, the general nature of our operations and operating strategiesdoes not vary materially from jurisdiction to jurisdiction. In each jurisdiction, our gross receipts are primarily from boxoffice receipts, concession sales, and screen advertising. Our ancillary revenue is created principally from theater rentals(for example, for film festivals and special events), ancillary programming (such as concerts and sporting events), andinternet advertising and ticket sales.Our cinemas generated approximately 67% of their 2013 revenue from box office receipts. Ticket prices vary bylocation and we offer reduced rates for senior citizens and children.Show times and features are placed in advertisements in local newspapers, internet sites, and on our variouswebsites. In the United States, film distributors may also advertise certain feature films in various print, radio andtelevision media, as well as on the internet and those costs are generally paid by distributors. In Australia and NewZealand, the exhibitor typically pays the costs of local newspaper film advertisements, while the distributors areresponsible for the cost of any national advertising campaign. 6 12345Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Concession sales accounted for approximately 27% of our total 2013 cinema revenue. Although certain cinemashave licenses for the sale and consumption of alcoholic beverages, concession products primarily include popcorn,candy, and soda. Screen advertising and other revenue contribute approximately 6% of our total 2013 cinema revenue. With theexception of certain rights that we have retained to sell to local advertisers, generally speaking, we are not in the screenadvertising business and nationally recognized screen-advertising companies provide such advertising for us.In New Zealand, we also own a one-third interest in Rialto Distribution. Rialto Distribution, an unincorporatedjoint venture, is engaged in the business of distributing art film in New Zealand and Australia. The remaining 2/3 interestis owned by the founders of the company, who have been in the art film distribution business since 1993.Management of CinemasWith the exception of our three unconsolidated cinemas, we manage all of our cinemas with executives locatedin Los Angeles, Manhattan, Melbourne, Australia, and Wellington, New Zealand. Approximately 2,311 individuals wereemployed (on a full time or part time basis) in our cinema operations in 2013. Our two New Zealand Rialto cinemas areowned by a joint venture in which Reading New Zealand is a 50% joint venture partner. While we are principallyresponsible for the booking of the cinemas, our joint venture partner, Greater Union, manages the day-to-day operationsof these cinemas. In addition, we have a 33.3% interest in a 16-screen Brisbane cinema. Greater Union manages thatcinema as well.Licensing/PricingFilm product is available from a variety of sources ranging from the major film distributors such as Columbia,Disney, Buena Vista, DreamWorks, Fox, MGM, Paramount, Warner Bros, and Universal, to a variety of smallerindependent film distributors. In Australia and New Zealand, some of those major distributors distribute through localunaffiliated distributors. The major film distributors dominate the market for mainstream conventional films. Similarly,most art and specialty films come from the art and specialty divisions of these major distributors, such as Fox’sSearchlight and Miramax. Generally speaking, film payment terms are based upon an agreed upon percentage of boxoffice receipts which will vary from film to film as films are licensed in Australia, New Zealand and the United States on afilm-by-film, theater by theater basis. While in certain markets film may be allocated by the distributor among competitive cinemas, typically in themarkets in which we operate, we have access to all conventional film product. In the art and specialty markets, due to thelimited number of prints available, we from time to time are unable to license all of the films that we might desire toplay. In summary, while in some markets we are subject to film allocation, on the whole, access to film product has not inrecent periods been a major impediment to our operations.CompetitionIn each of the United States, Australia, and New Zealand, film patrons typically select the cinema that they aregoing to go to first by selecting the film they want to see, and then by selecting the cinema in which they would prefer tosee it. Accordingly, the principal factor in the success or failure of a particular cinema is access to popular filmproducts. If a particular film is only offered at one cinema in a given market, then customers wishing to see that film will,of necessity, go to that cinema. If two or more cinemas in the same market offer the same film, then customers willtypically take into account factors such as the relative convenience and quality of the various cinemas. In many markets,the number of digital “prints” available is less than the number of exhibitors seeking that film for that market, anddistributors typically take the position that they are free to provide or not provide their films to particular exhibitors, attheir complete and absolute discretion.Competition for films can be intense, depending upon the number of cinemas in a particular market. Our abilityto obtain top grossing first run feature films may be adversely impacted by our comparatively small size, and the limitednumber of screens we can supply to distributors. Moreover, in the United States, because of the dramatic consolidation ofscreens into the hands of a few very large and powerful exhibitors such as Regal and AMC, these mega exhibitioncompanies are in a position to offer distributors access to many more screens in major markets than 7 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.we can. Accordingly, distributors may decide to give preference to these mega exhibitors when it comes to licensing topgrossing films, rather than deal with independents such as ourselves. The situation is different in Australia and NewZealand where typically every major multiplex cinema has access to all of the film currently in distribution, regardless ofthe ownership of that multiplex cinema. However, we have suffered somewhat in these markets from competition fromboutique operators, who are able to book top grossing commercial films for limited runs, thus increasing competition forcustomers wishing to view such top film product.Once a patron has selected the film, the choice of cinema is typically impacted by the quality of the cinemaexperience offered weighed against convenience and cost. For example, most cinema patrons seem to prefer a modernstadium design multiplex, to an older sloped floor cinema, and to prefer a cinema that either offers convenient access tofree parking (or public transport) over a cinema that does not. However, if the film they desire to see is only available at alimited number of locations, they will typically choose the film over the quality of the cinema and/or the convenience ofthe cinema. Generally speaking, our cinemas are modern multiplex cinemas with good and convenient parking. Asdiscussed further below, the availability of 3D or digital technology and/or premium class seating can also be a factor inthe preference of one cinema over another.In recent periods, a number of cinemas have been opened or re-opened featuring expanded food and beverageservice, including the sale of alcoholic beverages and food served to the seat. We have for a number of years offeredalcoholic beverages in certain of our Australia and New Zealand cinemas and our Angelika cinemas in the U.S. We arecurrently studying a number of our existing locations as candidates for such expanded food and beverage offerings.The film exhibition markets in the United States, Australia, and New Zealand are to a certain extent dominatedby a limited number of major exhibition companies. The principal exhibitors in the United States are Regal (with 7,342screens in 576 cinemas), AMC (with 4,950 screens in 343 cinemas), Cinemark (with 4,413 screens in 331 cinemas), andCarmike (with 2,484 screens in 246 cinemas). As of December 31, 2013, we were the 11th largest exhibitor with 1% of thebox office in the United States with 249 screens in 26 cinemas.The principal exhibitors in Australia are Greater Union, which do business under the Event name (a subsidiary ofAmalgamated Holdings Limited), Hoyts Cinemas (“Hoyts”), and Village. The major exhibitors control approximately65% of the total cinema box office: Event 30%, Hoyts 20%, and Village 14%. Event has 478 screens nationally, Hoyts359 screens, and Village 218 screens. By comparison, our 148 screens represent approximately 6% of the total box office.The principal exhibitors in New Zealand are Event with 93 screens nationally and Hoyts with 63screens. Reading has 40 screens (not including partnerships). The major exhibitors in New Zealand controlapproximately 55% of the total box office: Event 34% and Hoyts 21%. Reading has 12% of the market (Event andReading market share figures again do not include any partnership theaters).Greater Union is the owner of Birch Carroll & Coyle in Australia and purchased Sky Cinemas in New Zealandduring 2010. In addition, generally speaking, all new multiplex cinema projects announced by Village are being jointlydeveloped by a joint venture comprised of Greater Union and Village. These companies have substantial capitalresources. Village had a publicly reported consolidated net worth of approximately $524.3 million (AUS$572.1 million)at June 30, 2013. The Greater Union organization does not separately publish financial reports, but its parent,Amalgamated Holdings, had a publicly reported consolidated net worth of approximately $824.5 million (AUS$899.6million) at June 30, 2013. Hoyts is privately held and does not publish financial reports. Hoyts is currently owned byPacific Equity Partners.In Australia, the industry is somewhat vertically integrated in that Roadshow Film Distributors, a subsidiary ofVillage, serves as a distributor of film in Australia and New Zealand for Warner Brothers and New Line Cinema. Filmsproduced or distributed by the majority of the local international independent producers are also distributed byRoadshow Film Distributors. Hoyts is also involved in film production and distribution.Digital ExhibitionAfter years of uncertainty as to the future of digital exhibition and the impact of this technology on cinemaexhibition, it became clear in 2012 that the industry must go digital. We have now completed the conversion of all 8 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of our U.S., Australian, and New Zealand cinema operations to digital projection. We anticipate that the cost of thisconversion, over time, will be covered in substantial part by the receipt of Virtual Print Fees paid by film distributors forthe use of such digital projection equipment.In-Home CompetitionThe “in-home” entertainment industry has experienced significant leaps in recent periods in both the quality andaffordability of in-home entertainment systems and in the accessibility to entertainment programming through cable,satellite, DVD, and internet distribution channels. These alternative distribution channels are putting pressure on cinemaexhibitors to reduce the time period between theatrical and secondary release dates, and certain distributors are talkingabout possible simultaneous or near simultaneous releases in multiple channels of distribution. These are issues commonto both our U.S. and international cinema operations. Competitive issues are discussed in greater detail above under the caption, Competition, and under the caption,Item 1A - Risk Factors.SeasonalityMajor films are generally released to coincide with holidays. With the exception of Christmas and New Year’sDays, this fact provides some balancing of our revenue because there is no material overlap between holidays in theUnited States and those in Australia and New Zealand. Distributors will delay, in certain cases, releases in Australia andNew Zealand to take advantage of Australian and New Zealand holidays that are not celebrated in the United States. EmployeesWe have 74 full time executive and administrative employees and approximately 2,311 cinema employees. Ourcinema employees in Wellington, New Zealand and our projectionists in Hawaii are unionized. None of our otheremployees are subject to union contracts. Our one union contract with respect to our projectionists in Hawaii expired onMarch 31, 2012. Our union contracts with respect to our New Zealand employees have been renewed through to2015. None of our Australian based employees is unionized. Overall, we are of the view that the existence of thesecontracts does not materially increase our costs of labor or our ability to compete. We believe our relations with ouremployees to be generally good.Our Real Estate ActivitiesOur real estate activities have historically consisted principally of:·the ownership of fee or long-term leasehold interests in properties used in our cinema exhibition activities orwhich were acquired for the development of cinemas or cinema based real estate development projects;·the acquisition of fee interests in land for general real estate development;·the leasing to production companies of our live theaters; and·the redevelopment of our existing fee owned cinema or live theater sites to their highest and best use. While we report our real estate as a separate segment, it has historically operated as an integral portion of ouroverall business and, again historically, has principally been in support of that business. In recent periods, however, wehave acquired or developed properties which do not have any cinema or other entertainment component. Asopportunities for cinema development become more limited, it is likely that our real estate activities will continue toexpand beyond the development of entertainment-oriented properties. Our real estate activities, holdings and developments are described in greater detail in Item 2 – Properties. 9 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 1A – Risk Factors Investing in our securities involves risk. Set forth below is a summary of various risk factors that you shouldconsider in connection with your investment in our company. This summary should be considered in the context of ouroverall Annual Report on Form 10K, as many of the topics addressed below are discussed in significantly greater detail inthe context of specific discussions of our business plan, our operating results, and the various competitive forces that weface.Business Risk FactorsWe are currently engaged principally in the cinema exhibition and real estate businesses. Since we operate intwo business segments (cinema exhibition and real estate), we discuss separately below the risks we believe to be materialto our involvement in each of these segments. We have discussed separately certain risks relating to the internationalnature of our business activities, our use of leverage, and our status as a controlled corporation. Please note, that while wereport the results of our live theater operations as real estate operations – since we are principally in the business ofrenting space to producers rather than in licensing or producing plays ourselves – the cinema exhibition and live theaterbusinesses share certain risk factors and are, accordingly, discussed together below.Cinema Exhibition and Live Theater Business Risk FactorsWe operate in a highly competitive environment, with many competitors who are significantly larger and mayhave significantly better access to funds than do we.We are a comparatively small cinema operator and face competition from much larger cinema exhibitors. Theselarger exhibitors are able to offer distributors more screens in more markets – including markets where they may be theexclusive exhibitor – than can we. In some cases, faced with such competition, we may not be able to get access to all ofthe films we want, which may adversely affect our revenue and profitability.These larger competitors may also enjoy (i) greater cash flow, which can be used to develop additional cinemas,including cinemas that may be competitive with our existing cinemas, (ii) better access to equity capital and debt, and(iii) better visibility to landlords and real estate developers, than do we. In the case of our live theaters, we compete for shows not only with other “for profit” off-Broadway theaters, butalso with not-for-profit operators and, increasingly, with Broadway theaters. We believe our live theaters are generallycompetitive with other off-Broadway venues. However, due to the increased cost of staging live theater productions, weare seeing an increasing tendency for plays that would historically have been staged in an off-Broadway theater, movingdirectly to larger Broadway venues.We face competition from other sources of entertainment and other entertainment delivery systems.Both our cinema and live theater operations face competition from developing “in-home” sources ofentertainment. These include competition from DVDs, cable and satellite television, pay per view, the internet and othersources of entertainment, and video games. The quality of in-house entertainment systems has increased while the cost ofsuch systems has decreased in recent periods, and some consumers may prefer the security of an ”in-home” entertainmentexperience to the more public experience offered by our cinemas and live theaters. The movie distributors have beenresponding to these developments by, in some cases, decreasing the period of time between cinema release and the datesuch product is made available to “in-home” forms of distribution. The narrowing of this so-called “window” for cinema exhibition may be problematic for the cinema exhibitionindustry. On the other hand, the significant quantity of films produced in recent periods has probably had more to do, atleast to date, with the shortening of the time most movies play in the cinemas, than any shortening of the cinemaexhibition window. In recent periods, there has been discussion about the possibility of eliminating the cinema windowaltogether for certain films, in favor of a simultaneous release in multiple channels of distribution, such as theaters, pay-per-view, and DVD. However, again to date, this move has been strenuously resisted by the cinema exhibition industryand we view the total elimination of the cinema exhibition window, while theoretically possible, to be unlikely. 10 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.However, there is the risk that, over time, distributors may move towards simultaneous release of motion pictureproduct in multiple channels of distribution. This would adversely affect the competitive advantage enjoyed by cinemasover “in-home” forms of entertainment, as it may be that both the cinema market and the “in-home” market will havesimultaneous access to motion picture product.We also face competition from various other forms of “beyond-the-home” entertainment, including sportingevents, concerts, restaurants, casinos, video game arcades, and nightclubs. Our cinemas also face competition from livetheaters and vice versa.Competition from less expensive “in-home” entertainment alternatives may be intensified as a result of thecurrent economic recession.Our cinema operations depend upon access to film that is attractive to our patrons and our live theateroperations depend upon the continued attractiveness of our theaters to producers.Our ability to generate revenue and profits is largely dependent on factors outside of our control, specifically, thecontinued ability of motion picture and live theater producers to produce films and plays that are attractive to audiences,the amount of money spent by film distributors to promote their motion pictures, and the willingness of these producers tolicense their films on terms that are financial viable to our cinemas and to rent our theaters for the presentation of theirplays. To the extent that popular movies and plays are produced, our cinema and live theater activities are ultimatelydependent upon our ability, in the face of competition from other cinema and live theater operators, to book these moviesand plays into our facilities.We rely on film distributors to supply the films shown in our theatres. In the U.S., the film distribution business ishighly concentrated, with six major film distributors accounting for approximately 83.0% of U.S. box office revenues.Numerous antitrust cases and consent decrees resulting from these antitrust cases affect the distribution of films. Theconsent decrees bind certain major film distributors to license films to exhibitors on a theatre-by-theatre and film-by-filmbasis. Consequently, we cannot guarantee a supply of films by entering into long-term arrangements with majordistributors. We are therefore required to negotiate licenses for each film and for each theatre. A deterioration in ourrelationship with any of the [six] major film distributors could adversely affect our ability to obtain commerciallysuccessful films and to negotiate favorable licensing terms for such films, both of which could adversely affect ourbusiness and operating results.Adverse economic conditions could materially affect our business by reducing discretionary income and bylimiting or reducing sources of film and live theater funding.Cinema and live theater attendance is a luxury, not a necessity. Accordingly, a decline in the economy resultingin a decrease in discretionary income, or a perception of such a decline, may result in decreased discretionary spending,which could adversely affect our cinema and live theater businesses. Adverse economic conditions can also affect thesupply side of our business, as reduced liquidity can adversely affect the availability of funding for movies andplays. This is particularly true in the case of Off-Broadway plays, which are often times financed by high net worthindividuals or groups of such individuals and which are very risky due to the absence of any ability to recoup investmentin secondary markets like DVD or cable.Our screen advertising revenue may decline. Over the past several years, cinema exhibitors have been looking increasingly to screen advertising as a way toboost income. No assurances can be given that this source of income will be continuing or that the use of suchadvertising will not ultimately prove to be counterproductive by giving consumers a disincentive to choose going to themovies over “in-home” entertainment alternatives.We face uncertainty as to the timing and direction of technological innovations in the cinema exhibitionbusiness and as to our access to those technologies.We have converted all of our cinema auditoriums to digital projection. However, no assurances can be giventhat other technological advances will not require us to make further material investments in our cinemas or face loss ofbusiness. For example, only a limited number of our cinemas are equipped with the 48 frame per second 11 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.equipment that is required to show such films as The Hobbit. Also, equipment is currently being developed forholographic or laser projection. The future of these technologies in the cinema exhibition industry is uncertain.We face competition from new competitors offering food and beverage as an integral part of their cinemaofferings.A number of new entrants, such as Alamo Draft House, offering an expanded food and beverage menu (includingthe sale of alcoholic beverages) have emerged in recent periods. In addition, some competitors are converting existingcinemas to provide such expanded menu offerings. The existence of such cinemas may alter traditional cinema selectionpractices of moviegoers, as they seek out cinemas with such expanded offerings as a preferred alternative to traditionalcinemas.Real Estate Development and Ownership Business RisksWe operate in a highly competitive environment, in which we must compete against companies with muchgreater financial and human resources than we have.We have limited financial and human resources, compared to our principal real estate competitors. In recentperiods, we have relied heavily on outside professionals in connection with our real estate development activities. Manyof our competitors have significantly greater resources than do we and may be able to achieve greater economies of scalethan can we.Risks Related to the Real Estate Industry GenerallyOur financial performance will be affected by risks associated with the real estate industry generally.Events and conditions generally applicable to developers, owners, and operators of real property will affect ourperformance as well. These include (i) changes in the national, regional and local economic climate, (ii) local conditionssuch as an oversupply of, or a reduction in demand for commercial space and/or entertainment oriented properties, (iii)reduced attractiveness of our properties to tenants, (iv) the rental rates and capitalization rates applicable to the markets inwhich we operate and the quality of properties that we own, (v) competition from other properties, (vi) inability to collectrent from tenants, (vii) increased operating costs, including labor, materials, real estate taxes, insurance premiums, andutilities, (viii) costs of complying with changes in government regulations, (ix) the relative illiquidity of real estateinvestments, and (x) decreases in sources of both construction and long-term lending as traditional sources of suchfunding leave or reduce their commitments to real estate based lending. In addition, periods of economic slowdown orrecession, rising interest rates or declining demand for real estate, or the public perception that any of these events mayoccur, could result in declining rents or increased lease defaults.We may incur costs complying with the Americans with Disabilities Act and similar laws.Under the Americans with Disabilities Act and similar statutory regimes in Australia and New Zealand or underapplicable state law, all places of public accommodation (including cinemas and theaters) are required to meet certaingovernmental requirements related to access and use by persons with disabilities. A determination that we are not incompliance with those governmental requirements with respect to any of our properties could result in the imposition offines or an award of damages to private litigants. The cost of addressing these issues could be substantial. Illiquidity of real estate investments could impede our ability to respond to adverse changes in the performanceof our properties.Real estate investments are relatively illiquid and, therefore, tend to limit our ability to vary our portfoliopromptly in response to changes in economic or other conditions. Many of our properties are either (i) “special purpose”properties that could not be readily converted to general residential, retail or office use, or (ii) undeveloped land. Inaddition, certain significant expenditures associated with real estate investment, such as real estate taxes and maintenancecosts, are generally not reduced when circumstances cause a reduction in income from the investment and competitivefactors may prevent the pass-through of such costs to tenants. 12 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Real estate development involves a variety of risks.Real estate development includes a variety of risks, including the following:·The identification and acquisition of suitable development properties. Competition for suitable developmentproperties is intense. Our ability to identify and acquire development properties may be limited by our size andresources. Also, as we and our affiliates are considered to be “foreign owned” for purposes of certain Australianand New Zealand statutes, we have been in the past, and may in the future be, subject to regulations that are notapplicable to other persons doing business in those countries.·The procurement of necessary land use entitlements for the project. This process can take many years,particularly if opposed by competing interests. Competitors and community groups (sometimes funded by suchcompetitors) may object based on various factors including, for example, impacts on density, parking, traffic,noise levels and the historic or architectural nature of the building being replaced. If they are unsuccessful at thelocal governmental level, they may seek recourse to the courts or other tribunals. This can delay projects andincrease costs. ·The construction of the project on time and on budget. Construction risks include the availability and cost offinance; the availability and costs of material and labor; the costs of dealing with unknown site conditions(including addressing pollution or environmental wastes deposited upon the property by prior owners);inclement weather conditions; and the ever-present potential for labor related disruptions. ·The leasing or sell-out of the project. Ultimately, there are risks involved in the leasing of a rental property orthe sale of a condominium or built-for-sale property. For our entertainment themed retail centers (“ETRCs”), theextent to which our cinemas can continue to serve as an anchor tenant will be influenced by the same factors aswill influence generally the results of our cinema operations. Leasing or sale can be influenced by economicfactors that are neither known nor knowable at the commencement of the development process and by local,national, and even international economic conditions, both real and perceived.·The refinancing of completed properties. Properties are often developed using relatively short-term loans. Uponcompletion of the project, it may be necessary to find replacement financing for these loans. This processinvolves risk as to the availability of such permanent or other take-out financing, the interest rates, and thepayment terms applicable to such financing, which may be adversely influenced by local, national, orinternational factors. To date, we have been successful in negotiating development loans with roll over or otherprovisions mitigating our need to refinance immediately upon completion of construction. The ownership of properties involves risk. The ownership of investment properties involves risks, such as: (i) ongoing leasing and re-leasing risks, (ii)ongoing financing and re-financing risks, (iii) market risks as to the multiples offered by buyers of investment properties,(iv) risks related to the ongoing compliance with changing governmental regulation (including, without limitation,environmental laws and requirements to remediate environmental contamination that may exist on a property (such as, byway of example, asbestos), even though not deposited on the property by us), (v) relative illiquidity compared to someother types of assets, and (vi) susceptibility of assets to uninsurable risks, such as biological, chemical or nuclearterrorism. Furthermore, as our properties are typically developed around an entertainment use, the attractiveness of theseproperties to tenants, sources of finance and real estate investors will be influenced by market perceptions of the benefitsand detriments of such entertainment type properties.A number of our assets are in geologically active areas, presenting risk of earthquake and land movement.We have cinemas in California and New Zealand, areas which present a greater risk of earthquake and/or landmovement than other locations. New Zealand has in recent periods had several major earthquakes damaging our facilitiesin Christchurch and Wellington. The ability to insure for such casualties is limited and may become more difficult and/ormore expensive in future periods.International Business RisksOur international operations are subject to a variety of risks, including the following: 13 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Risk of currency fluctuations. While we report our earnings and assets in US dollars, substantial portions of ourrevenue and of our obligations are denominated in either Australian or New Zealand dollars. The value of thesecurrencies can vary significantly compared to the US dollar and compared to each other. We typically have not hedgedagainst these currency fluctuations, but rather have relied upon the natural hedges that exist as a result of the fact that ourfilm costs are typically fixed as a percentage of the box office, and our local operating costs and obligations are likewisetypically denominated in local currencies. However, we do have debt at our parent company level that is serviced by ouroverseas cash flow and our ability to service this debt could be adversely impacted by declines in the relative value of theAustralian and New Zealand dollar compared to the US dollar. $7.5 million (AUS$8.4 million) of our Australian cash and$7.2 million (NZ$8.7 million) of our New Zealand cash is denominated in local currencies and subject to the risk ofcurrency exchange rate fluctuations. Also, our use of local borrowings to mitigate the business risk of currencyfluctuations has reduced our flexibility to move cash between jurisdictions. Set forth below is a chart of the exchangeratios between these three currencies over the past twenty years:·Risk of adverse government regulation. At the present time, we believe that relations between the United States,Australia, and New Zealand are good. However, no assurances can be given that this relationship will continueand that Australia and New Zealand will not in the future seek to regulate more highly the business done by UScompanies in their countries. ·Risk of adverse labor relations. Our labor relations and costs of labor (including future governmentrequirements with respect to pension liabilities, disability insurance and health coverage, and vacations andleave).Risks Associated with Certain Discontinued OperationsCertain of our subsidiaries were previously in industrial businesses. As a consequence, properties that arecurrently owned or may have in the past been owned by these subsidiaries may prove to have environmentalissues. Where we have knowledge of such environmental issues and are in a position to make an assessment as to ourexposure, we have established what we believe to be appropriate reserves, but we are exposed to the risk that 14 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.currently unknown problems may be discovered. These subsidiaries are also exposed to potential claims related toexposure of former employees to coal dust, asbestos, and other materials now considered to be, or which in the future maybe found to be, carcinogenic or otherwise injurious to health. Operating Results, Financial Structure and Borrowing RiskFrom time to time, we may have negative working capital. In recent years, as we have invested our cash in new acquisitions and the development of our existing properties,we have from time to time had negative working capital. This negative working capital is typical in the cinemaexhibition industry because our short-term liabilities are in part financing our long-term assets instead of long-termliabilities financing short-term assets as is the case in other industries such as manufacturing and distribution.We have substantial short to medium term debt.Generally speaking, we have historically financed our operations through relatively short-term debt. Noassurances can be given that we will be able to refinance this debt, or if we can, that the terms will bereasonable. However, as a counterbalance to this debt, we have significant unencumbered real property assets, whichcould be sold to pay debt or encumbered to assist in the refinancing of existing debt, if necessary. In February 2007, we issued $50.0 million in 20-year Trust Preferred Securities (“TPS”), and utilized the netproceeds principally to retire short-term bank debt in New Zealand and Australia. The interest rate on our TPS was onlyfixed for five years. Additionally, we used US dollar denominated obligations to retire debt denominated in New Zealandand Australian dollars which has increased our exposure to currency risk. In the first quarter of 2009, we repurchased$22.9 million of our TPS at a 50% discount.At the present time, corporate borrowers both domestically and internationally are facing greater than normalconstraints on liquidity. No assurances can be given that we will be able to refinance these debts as they become due.We have substantial lease liabilities.Most of our cinemas operate in leased facilities. These leases typically have cost of living or other rentadjustment features and require that we operate the properties as cinemas. A down turn in our cinema exhibition businessmight, depending on its severity, adversely affect the ability of our cinema operating subsidiaries to meet these rentalobligations. Even if our cinema exhibition business remains relatively constant, cinema level cash flow will likely beadversely affected unless we can increase our revenue sufficiently to offset increases in our rental liabilities. Unlikeproperty rental leases, our newly added digital equipment leases do not have cost of living or other lease adjustmentfeatures.Our stock is thinly traded.Our stock is thinly traded, with an average daily volume in 2013 of only approximately 33,000 shares. This canresult in significant volatility, as demand by buyers and sellers can easily get out of balance. Ownership and Management Structure, Corporate Governance, and Change of Control Risks The interests of our controlling stockholder may conflict with your interests.Mr. James J. Cotter beneficially owns 70.4% of our outstanding Class B Stock. Our Class A Stock is non-voting,while our Class B Stock represents all of the voting power of our Company. As a result, as of December 31, 2013, Mr.Cotter controlled 70.4% of the voting power of all of our outstanding common stock. For as long as Mr. Cotter continuesto own shares of common stock representing more than 50% of the voting power of our common 15 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.stock, he will be able to elect all of the members of our board of directors and determine the outcome of all matterssubmitted to a vote of our stockholders, including matters involving mergers or other business combinations, theacquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional shares of common stockor other equity securities and the payment of dividends on common stock. Mr. Cotter will also have the power to preventor cause a change in control, and could take other actions that might be desirable to Mr. Cotter but not to otherstockholders. In addition, Mr. Cotter and his affiliates have controlling interests in companies in related and unrelatedindustries. In the future, we may participate in transactions with these companies (see Note 25 – Related Parties andTransactions to our 2013 Consolidated Financial Statements).Since we are a Controlled Company, our Directors have determined to take advantage of certain exemptionsprovide by the NASDAQ from the corporate governance rules adopted by that Exchange.Generally speaking, the NASDAQ requires listed companies to meet certain minimum corporate governanceprovisions. However, a Controlled Corporation, such as we, may elect not to be governed by certain of theseprovisions. Our board of directors has elected to exempt our Company from requirements that (i) at least a majority of ourdirectors be independent, (ii) nominees to our board of directors be nominated by a committee comprised entirely ofindependent directors or by a majority of our Company’s independent directors, and (iii) the compensation of our chiefexecutive officer be determined or recommended to our board of directors by a compensation committee comprisedentirely of independent directors or by a majority of our Company’s independent directors. Notwithstanding thedetermination by our board of directors to opt-out of these NASDAQ requirements, a majority of our board of directors isnevertheless currently comprised of independent directors, and our compensation committee is nevertheless currentlycomprised entirely of independent directors.We depend on key personnel for our current and future performance.Our current and future performance depends to a significant degree upon the continued contributions of oursenior management team and other key personnel. The loss or unavailability to us of any member of our seniormanagement team or a key employee could significantly harm us. We cannot assure you that we would be able to locateor employ qualified replacements for senior management or key employees on acceptable terms. 16 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 1B - Unresolved Staff CommentsNone. 17 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 2 – PropertiesExecutive and Administrative OfficesWe lease approximately 11,700 square feet of office space in Los Angeles, California to serve as our executiveheadquarters. We own an 8,100 square foot office building in Melbourne, Australia, approximately 5,200 square feet ofwhich serves as the headquarters for our Australian and New Zealand operations (the remainder being leased to anunrelated third party). We maintain our accounting personnel and certain IT and operational personnel in approximately5,900 square foot of offices located in our Wellington Courtenay Central shopping center. We occupy approximately3,500 square feet at our Village East leasehold property for administrative purposes. We also own a residentialcondominium unit in Los Angeles, used for offsite corporate meetings and residential space by our Chairman and ChiefExecutive Officer. Entertainment PropertiesEntertainment Use Leasehold InterestsAs of December 31, 2013, we lease approximately 1.8 million square feet of completed cinema space in theUnited States, Australia, and New Zealand as follows:Aggregate Square FootageApproximate Range ofRemaining Lease Terms(including renewals)United States942,0002014 – 2049Australia724,0002017 – 2049New Zealand150,0002024 – 2034 On December 31, 2013, we settled a management fee claim that we had with the owner of the lease interest in thePlano, Texas cinema that we had managed since 2003. As part of the settlement, we acquired that entity. Also, inSeptember 2013, we took back a cinema at one of our fee properties in New Zealand and commenced to refurbish andupgrade that facility with the intent of operating the cinema ourselves. The cinema was already leased to a competitor atthe time we acquired it in May 2007. We expect to begin operations of this cinema in the third quarter of 2014. Duringthe first quarter 2014, we entered into a lease for a new Angelika style cinema currently being developed by Edens in theUnion Market area of Washington D.C.Fee InterestsIn Australia, as of December 31, 2013, we own approximately 3.2 million square feet of land at ninelocations. Most of this land is located in the greater metropolitan areas of Brisbane, Melbourne, Perth, and Sydney,including the 50.6-acre Burwood site. Of these fee interests, approximately 138,000 square feet are currently improvedwith cinemas. These figures include the 3.3-acre Moonee Ponds property which is under a contract of sale withcompletion due on April 16, 2015.In New Zealand, as of December 31, 2013, we own approximately 3.4 million square feet of land at sevenlocations. This includes the Courtney Central ETRC in Wellington, the 70.3 acre Manukau site, and the fee interestsunderlying three cinemas in New Zealand, which properties include approximately 21,000 square feet of ancillary retailspace. In the United States, as of December 31, 2013, we own approximately 134,000 square feet of improved real estatecomprised of four live theater buildings, which include approximately 58,000 square feet of leasable space, and the feeinterest in our Cinemas 1, 2 & 3 in Manhattan (held through a limited liability company in which we have a 75%managing member interest).Live Theaters (“Liberty Theaters”) Included among our real estate holdings are four “Off Broadway” style live theaters, operated through ourLiberty Theaters subsidiary. We license theater auditoriums to the producers of “Off Broadway” theatrical 18 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.productions and provide various box office and concession services. The terms of our licenses are, naturally, principallydependent upon the commercial success of our tenants. STOMP has been playing at our Orpheum Theatre in excess of 17years. While we attempt to choose productions that we believe will be successful, we have no control over the productionitself. At the current time, we have three single auditorium theaters in Manhattan:·the Minetta Lane (399 seats);·the Orpheum (347 seats); and·the Union Square (499 seats).We also own a four-auditorium theater complex, the Royal George in Chicago (main stage 452 seats, cabaret 199seats, great room 100 seats and gallery 60 seats). Two of the properties, the Union Square and the Royal George, haveancillary retail and office space.Liberty Theaters is primarily in the business of renting theater space. However, we may from time to timeparticipate as an investor in a play, which can help facilitate the production of the play at one of our facilities, and dofrom time to time rent space on a basis that allows us to share in a production’s revenue or profits. Revenue, expense, andprofits are reported as a part of the real estate segment of our business.Joint Venture Cinema InterestsWe also hold real estate through several unincorporated joint ventures, two 75% owned subsidiaries, and onemajority-owned subsidiary, as described below:·in Australia, we own a 75% interest in a subsidiary company that leases two cinemas with eleven screens in twoAustralian country towns, and a 33% unincorporated joint venture interest in a 16-screen leasehold cinema in asuburb of Brisbane. ·in New Zealand, we own a 50% unincorporated joint venture interest in two cinemas with 13 screens in the NewZealand cities of Auckland and Dunedin. ·In the United States, we own a 75% managing member interest in the limited liability company that owns ourCinemas 1, 2 & 3 property and a 50% managing member interest in Shadow View Land & Farming, LLC whichowns an approximately 202-acre property in Riverside County, California which, while zoned residential andapproved for 816 single family lots. 19 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Income Operating PropertyAs of December 31, 2013, we own fee interests in approximately 1.0 million square feet of income producingproperties (including certain properties principally occupied by our cinemas). Square Feet ofImprovementsPercentageGross Book ValueProperty(rental/entertainment)Leased(in U.S. Dollars)Auburn60000 / 57000100 Parramatta RoadPlus a 871-space100%$30,646,000Auburn, NSW, Australiaparking structureBelmontKnutsford Avenue and15000 / 45000100%$13,840,000Fulham StreetBelmont, WA, AustraliaCinemas 1, 2 & 31003 Third Avenue0 / 21000N/A$23,837,000Manhattan, NY, USACourtenay Central33000 / 76000100 Courtenay PlacePlus a 1,086-space70%$26,216,000Wellington, New Zealandparking structure [6] Rental square footage refers to the amount of area available to be rented to third parties and the percentage leased is the amount of suchrental square footage currently leased to third parties. A number of our real estate holdings include entertainment components rented to oneor more of our subsidiaries. The rental area to such subsidiaries is noted under the entertainment square footage. The gross book value refersto the gross carrying cost of the land and buildings of the property. Book value and rental information are as of December 31, 2013.[7] This property is owned by a limited liability company in which we hold a 75% managing interest. The remaining 25% is owned bySutton Hill Investments, LLC, a company owned in equal parts by our Chairman and Chief Executive Officer, Mr. James J. Cotter, and a thirdparty. 20 67 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Square Feet ofImprovementsPercentageGross Book ValueProperty(rental/entertainment)Leased(in U.S. Dollars)Invercargill Cinema29 Dee Street9000 / 2400069%$3,231,000Invercargill, New ZealandLake Taupo Motel138-140 Lake Terrace Road9000 / 0Short-term rentals$2,304,000Taupo, New ZealandMaitland CinemaKen Tubman Drive0 / 22000N/A$2,124,000Maitland, NSW, AustraliaMinetta Lane Theatre18-22 Minetta Lane0 / 9000N/A$8,679,000Manhattan, NY, USANapier Cinema154 Station Street12000 / 18000100%$3,530,000Napier, New ZealandNewmarket400 Newmarket Road93000 / 0Newmarket, Queensland,Plus a 436-space100%$38,951,000Australiaparking structureOrpheum Theatre126 2 Street1000 / 50000%$3,639,000Manhattan, NY, USARoyal George37000 / 230001633 N. Halsted StreetPlus a 55-space91%$3,485,000Chicago, IL, USAparking structureRotorua Cinema1281 Eruera Street0 / 19000N/A$3,030,000Rotorua, New ZealandUnion Square Theatre100 E. 17 Street21000 / 17000100%$8,923,000Manhattan, NY, USA 21 ndth Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Long-Term Leasehold Operating PropertyIn addition, in certain cases we have long-term leases that we view more akin to real estate investments thancinema leases. As of December 31, 2013, we had approximately 155,000 square foot of space subject to such long-termleases. Square Feet ofImprovementsPercentageGross Book ValueProperty(rental/entertainment)Leased(in U.S. Dollars)Manville0 / 53000N/A$2,321,000Tower0 / 16000N/A$1,017,000Village East4000 / 38000100%$8,454,000Waurn Ponds6000 / 38000100%$3,961,000 [8] Rental square footage refers to the amount of area available to be rented to third parties, and the percentage leased is the amount of rentalsquare footage currently leased to third parties. A number of our long-term leasehold operating property include entertainment componentsrented to one or more of our subsidiaries. The rental area to such subsidiaries is noted under the entertainment square footage. Book valueincludes the entire investment in the leased property, including any cinema fit-out. Rental and book value information is as of December 31,2013.[9] The lease of the Village East provides for a call option pursuant to which Reading may purchase the cinema ground lease for $5.9 millionat the end of the lease term in 2020. Additionally, the lease has a put option pursuant to which SHC may require Reading to purchase all or aportion of SHC's interest in the existing cinema lease and the cinema ground lease at any time between July 1, 2013 and December 4,2019. See Note 25 - Related Parties and Transactions to our 2013 Consolidated Financial Statements. 22 89Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Investment and Development PropertyWe are engaged in several investment and development projects relative to our currently undeveloped parcels ofland. In addition, we anticipate that redevelopment of one or more of our existing developed properties may also occur. Gross Book ValuePropertyAcreage(in U.S. Dollars)Status Auburn, Sydney, Australia2.6 acres$1,824,000We are actively pursuing the development of thenext phase of this property.Burwood, Victoria, Australia50.6 acres$46,528,000We continue to evaluate our options with regards tothis property.Coachella,CA, USA202 acres$4,047,000We continue to evaluate our options with regards tothis property.Courtenay Central, Wellington, New Zealand1.1 acres$6,953,000We are actively pursuing the development of thenext phase of this property having signed a leaseagreement for a Countdown (Woolworths)supermarket to be developed on this site.Lake Taupo, Taupo, NewZealand0.5 acre$2,304,000We are pursuing various options to dispose of thisproperty.Manukau, Auckland, New Zealand64 acres zoned agriculturaland 6.4 acres zoned lightindustrial$13,993,000The bulk of the land is zoned for agriculture and iscurrently used for horticulture commercialpurposes. A development plan has been filed torezone the property for warehouse, distribution andmanufacturing uses. We currently anticipate thatthis rezoning will be approved. In 2010, weacquired an adjacent property which is zonedindustrial, but is currently unimproved. Thisproperty links our existing parcel with the existingroad network.Moonee Ponds, Victoria,Australia3.3 acres$11,053,000In November 2013, we entered into a definitivepurchase and sale agreement to sell our propertieslocated in Moonee Ponds, Victoria, Australia witha scheduled closing date of April 16, 2015 [10] A number of our real estate holdings include additional land held for development. In addition, we have acquired certain parcels forfuture development. The gross book value includes, as applicable, the land, building, development costs, and capitalized interest.Some of our income operating property and our investment and development property carry various debtencumbrances based on their income streams and geographic locations. For an explanation of our debt and the associatedsecurity collateral please see Note 12 – Notes Payable to our 2013 Consolidated Financial Statements. 23 10Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Other Property Interests and InvestmentsWe own the fee interest in 11 parcels comprising 195 acres in Pennsylvania and Delaware. These acres consistprimarily of vacant land. With the exception of certain properties located in Philadelphia (including the raised railroadbed leading to the old Reading Railroad Station), the properties are principally located in rural areas of Pennsylvania andDelaware. Additionally, we own a condominium in the Los Angeles, California area that is used for offsite corporatemeetings and by our Chief Executive Officer when he is in town. Except for a negative pledge on the aforementioned LosAngeles condominium, these properties are unencumbered with any debt and are lien free. 24 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 3 – Legal Proceedings Tax Audit/LitigationThe Internal Revenue Service (the “IRS”) has examined the tax return of Reading Entertainment Inc. (“RDGE”)for its tax years ended December 31, 1996 through December 31, 1999 and the tax return of Craig Corporation (“CRG”)for its tax year ended June 30, 1997. These companies are both now wholly owned subsidiaries of the Company, but forthe time periods under audit, were not consolidated with the Company for tax purposes. CRG and the IRS agreed to compromise the claims made by the IRS against CRG and the Tax Court’s order wasentered on January 6, 2011. In the settlement, the IRS conceded 70% of its claimed adjustment to income. Instead of aclaim for unpaid taxes of $20.9 million plus interest, the effect of settlement on the Reading consolidated group was torequire a total federal income tax obligation of $5.4 million, reduced by a federal tax refund of $800,000 and increased byinterest of $9.3 million, for a net federal tax liability of $13.9 million as of January 6, 2011. On October 26, 2011, CRGreached an agreement with the IRS for an installment plan to pay off this federal tax liability, including additional interestaccruals at the prescribed IRS floating rate. The agreement requires monthly payments of $290,000 over a period ofapproximately five years. As of December 31, 2013 and 2012, after the payments made during 2013 and 2012,respectively, the remaining federal tax obligation was $8.3 million and $10.0 million, respectively, in tax and interest. Ofthe $8.3 million owed under the installment agreement as of December 31, 2013, $3.5 million was recorded as currenttaxes payable, with the remaining balance being recorded as non-current tax liability. Of the $10.0 million owed underthe installment agreement as of December 31, 2012, $3.5 million was recorded as current taxes payable, with theremaining balance being recorded as non-current tax liability. The impact of the settlement upon the state taxes of the Reading consolidated group, if the adjustment to incomeagreed with the IRS were reflected on state returns, would be an obligation of approximately $1.4 million in tax plusinterest and potential penalty. As of December 31, 2013, no deficiency has been asserted by the State of California, andwe have made no final decision as to the course of action to be followed if a deficiency is asserted.Environmental and Asbestos ClaimsCertain of our subsidiaries were historically involved in railroad operations, coal mining, andmanufacturing. Also, certain of these subsidiaries appear in the chain of title of properties that may suffer frompollution. Accordingly, certain of these subsidiaries have, from time to time, been named in and may in the future benamed in various actions brought under applicable environmental laws. Also, we are in the real estate developmentbusiness and may encounter from time to time unanticipated environmental conditions at properties that we haveacquired for development. These environmental conditions can increase the cost of such projects, and adversely affectthe value and potential for profit of such projects. We do not currently believe that our exposure under applicableenvironmental laws is material in amount.From time to time, we have claims brought against us relating to the exposure of former employees of ourrailroad operations to asbestos and coal dust. These are generally covered by an insurance settlement reached inSeptember 1990 with our insurance carriers. However, this insurance settlement does not cover litigation by people whowere not our employees and who may claim second hand exposure to asbestos, coal dust and/or other chemicals orelements now recognized as potentially causing cancer in humans. Our known exposure to these types of claims, assertedor probable of being asserted, is not material. 25 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In connection with the development of our 50.6 acre Burwood site, it will be necessary to address certainenvironmental issues. That property was at one time used as brickworks and we have discovered petroleum and asbestosat the site. During 2007, we developed a plan for the remediation of these materials, in some cases through removal andin other cases through encapsulation. As of December 31, 2013, we estimate that the total site preparation costsassociated with the removal of this contaminated soil will be $15.2 million (AUS$17.1 million) and as of that date we hadalready incurred a total of $7.4 million (AUS$8.3 million) of these costs. We do not believe that this has added materiallyto the overall development cost of the site, as it is anticipated that all of the work will be done in connection with theexcavation and other development activity already contemplated for the property. 26 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART II Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities(a) Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder MattersMarket InformationReading International, Inc., a Nevada corporation (“RDI” and collectively with our consolidated subsidiaries andcorporate predecessors, the “Company,” “Reading” and “we,” “us,” or “our”), was incorporated in 1999. Historically, wehave been listed on the AMEX and due to the 2008 purchase of the AMEX by the NYSE Alternext US; we were listed onthat exchange at December 31, 2008. During July 2009, we moved our listing from NYSE Alternext to NASDAQ.The following table sets forth the high and low closing prices of the RDI and RDIB common stock for each of thequarters in 2013 and 2012 as reported by NASDAQ:Class A StockClass B StockHighLowHighLow2013Fourth Quarter$7.49$6.15$9.00$6.99Third Quarter$6.58$6.15$7.99$6.52Second Quarter$6.36$5.50$7.40$6.00First Quarter$6.08$5.42$7.49$5.652012Fourth Quarter$6.23$5.48$7.40$5.64Third Quarter$6.58$4.73$7.95$5.00Second Quarter$5.88$4.62$6.75$4.53First Quarter$4.56$4.12$7.00$4.26The following table summarizes the securities authorized for issuance under our equity compensation plans:Plan categoryNumber ofsecurities to beissued uponexercise ofoutstandingoptions, warrants,and rightsWeighted-average exerciseprice ofoutstandingoptions,warrants, andrightsNumber ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplansEquity compensation plans approved by securityholders894,950 $7.33 1,829,436 Total894,950 $7.33 1,829,436 Performance GraphThe following line graph compares the cumulative total stockholder return on Reading International, Inc.’scommon stock for the years ended December 31, 2009, 2010, 2011, 2012, and 2013 against the cumulative total returnas calculated by the NASDAQ composite, the motion picture theater operator group, and the real estate operator group. 27 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Holders of RecordThe number of holders of record of our Class A Stock and Class B Stock in 2013 was approximately 3,500 and300, respectively. On March 6, 2014, the closing price per share of our Class A Stock was $7.54 and the closing price pershare of our Class B Stock was $10.23.Dividends on Common StockWe have never declared a cash dividend on our common stock and we have no current plans to declare adividend; however, we review this matter on an ongoing basis.(b) Recent Sales of Unregistered Securities; Use of Proceeds from Registered SecuritiesNone.(c) Purchases of Equity Securities by the Issuer and Affiliated PurchasersDuring 2011, we purchased 172,300 of Class A Nonvoting shares on the open market for $747,000. No shareswere purchased during either 2013 or 2012. 28 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 6 – Selected Financial DataThe table below sets forth certain historical financial data regarding our Company. This information is derivedin part from, and should be read in conjunction with our consolidated financial statements included in Item 8 of thisAnnual Report on Form 10-K for the year ended December 31, 2013 (the “2013 Annual Report”), and the related notes tothe consolidated financial statements (dollars in thousands, except per share amounts). At or for the Year Ended December 31, 20132012201120102009Revenue$258,221 $254,430 $244,979 $229,322 $216,740 Operating income$20,935 $19,127 $18,178 $13,069 $13,910 Income (loss) from discontinued operations$--$(405)$1,888 $97 $12 Net income (loss)$9,145 $(1,406)$10,896 $(12,034)$6,482 Net income (loss) attributable to ReadingInternational, Inc. shareholders$9,041 $(914)$9,956 $(12,650)$6,094 Basic earnings (loss) per share – continuingoperations$0.39 $(0.02)$0.36 $(0.56)$0.27 Basic earnings (loss) per share – discontinuedoperations$--$(0.02)$0.08 $--$--Basic earnings (loss) per share$0.39 $(0.04)$0.44 $(0.56)$0.27 Diluted earnings (loss) per share – continuingoperations$0.38 $(0.02)$0.35 $(0.56)$0.27 Diluted earnings (loss) per share – discontinuedoperations$--$(0.02)$0.08 $--$--Diluted earnings (loss) per share$0.38 $(0.04)$0.43 $(0.56)$0.27 Other Information:Shares outstanding23,083,265 23,083,265 22,806,838 22,804,313 22,588,403 Weighted average number of sharesoutstanding–basic23,348,003 23,028,596 22,764,666 22,781,392 22,580,942 Weighted average number of sharesoutstanding–diluted23,520,271 23,028,596 22,993,135 22,781,392 22,767,735 Total assets$386,807 $428,588 $430,764 $430,349 $406,417 Total debt$168,460 $196,597 $209,614 $228,821 $226,993 Working capital (deficit)$(71,794)$(21,415)$(12,844)$(57,634)$(16,229)Stockholders’ equity$121,747 $130,954 $124,987 $112,639 $110,263 EBIT$24,020 $20,416 $18,664 $13,900 $22,618 Depreciation and amortization$15,197 $16,049 $16,595 $15,563 $15,034 Add: Adjustments for discontinued operations$--$335 $365 $351 $134 EBITDA$39,217 $36,800 $35,624 $29,814 $37,786 Debt to EBITDA$4.30 $5.34 $5.88 $7.67 $6.01 Capital expenditure (including acquisitions)$20,082 $13,723 $9,376 $19,371 $5,686 Number of employees at 12/312,494 2,412 2,263 2,109 2,207 EBIT presented above represents net income (loss) adjusted for interest expense (calculated net of interestincome) and income tax expense. EBIT is presented for informational purposes to show the significance of depreciationand amortization in the calculation of EBITDA. We use EBIT in our evaluation of our operating results since we believethat it is useful as a measure of financial performance, particularly for us as a multinational company. We believe it is auseful measure of financial performance principally for the following reasons:·since we operate in multiple tax jurisdictions, we find EBIT removes the impact of the varying tax rates and taxregimes in the jurisdictions in which we operate.·in addition, we find EBIT useful as a financial measure that removes the impact from our effective tax rate offactors not directly related to our business operations, such as, whether we have acquired operating assets bypurchasing those assets directly, or indirectly by purchasing the stock of a company that might hold suchoperating assets. ·the use of EBIT as a financial measure also (i) removes the impact of tax timing differences which may vary fromtime to time and from jurisdiction to jurisdiction, (ii) allows us to compare our performance to 29 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.that achieved by other companies, and (iii) is useful as a financial measure that removes the impact of ourhistorically significant net loss carry-forwards.·the elimination of net interest expense helps us to compare our operating performance to those companies thatmay have more or less debt than we do.EBITDA presented above is net income (loss) adjusted for interest expense (again, calculated net of interestincome), income tax expense, and in addition depreciation and amortization expense. We use EBITDA in our evaluationof our performance since we believe that EBITDA provides a useful measure of financial performance and value. Webelieve this principally for the following reasons:·we believe that EBITDA is an industry comparative measure of financial performance. It is, in our experience, ameasure commonly used by analysts and financial commentators who report on the cinema exhibition and realestate industries and a measure used by financial institutions in underwriting the creditworthiness of companiesin these industries. Accordingly, our management monitors this calculation as a method of judging ourperformance against our peers and market expectations and our creditworthiness.·also, analysts, financial commentators, and persons active in the cinema exhibition and real estate industriestypically value enterprises engaged in these businesses at various multiples of EBITDA. Accordingly, we findEBITDA valuable as an indicator of the underlying value of our businesses.We expect that investors may use EBITDA to judge our ability to generate cash, as a basis of comparison to othercompanies engaged in the cinema exhibition and real estate businesses and as a basis to value our company against suchother companies.Neither EBIT nor EBITDA is a measurement of financial performance under accounting principles generallyaccepted in the United States of America and should not be considered in isolation or construed as a substitute for netincome or other operations data or cash flow data prepared in accordance with accounting principles generally acceptedin the United States for purposes of analyzing our profitability. The exclusion of various components such as interest,taxes, depreciation, and amortization necessarily limit the usefulness of these measures when assessing our financialperformance, as not all funds depicted by EBITDA are available for management’s discretionary use. For example, asubstantial portion of such funds are subject to contractual restrictions and functional requirements to service debt, tofund necessary capital expenditures and to meet other commitments from time to time as described in more detail in thisAnnual Report on Form 10-K.EBIT and EBITDA also fail to take into account the cost of interest and taxes. Interest is clearly a real cost thatfor us is paid periodically as accrued. Taxes may or may not be a current cash item but are nevertheless real costs that, inmost situations, must eventually be paid. A company that realizes taxable earnings in high tax jurisdictions may beultimately less valuable than a company that realizes the same amount of taxable earnings in a low taxjurisdiction. EBITDA fails to take into account the cost of depreciation and amortization and the fact that assets willeventually wear out and have to be replaced.EBITDA, as calculated by us, may not be comparable to similarly titled measures reported by othercompanies. A reconciliation of net income (loss) to EBIT and EBITDA is presented below (dollars in thousands): 20132012201120102009Net income (loss) attributable to ReadingInternational, Inc. shareholders$9,041 $(914)$9,956 $(12,650)$6,094 Add: Interest expense, net10,037 16,426 21,038 12,286 14,572 Add: Income tax (benefit) expense4,942 4,904 (12,330)14,264 1,952 EBIT$24,020 $20,416 $18,664 $13,900 $22,618 Add: Depreciation and amortization15,197 16,049 16,595 15,563 15,034 Adjustments for discontinued operations--335 365 351 134 EBITDA$39,217 $36,800 $35,624 $29,814 $37,786 30 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 7 – Management’s Discussions and Analysis of Financial Condition and Results of OperationsThe following review should be read in conjunction with the consolidated financial statements and related notesincluded in this 2013 Annual Report. Historical results and percentage relationships do not necessarily indicateoperating results for any future periods.OverviewWe are an internationally diversified company principally focused on the development, ownership, andoperation of entertainment and real property assets in the United States, Australia, and New Zealand. Currently, weoperate in two business segments:·Cinema Exhibition, through our 56 multiplex theaters, and·Real Estate, including investment, development, and the rental of retail, commercial and live theater assets.We believe that these two business segments complement one another, as the comparatively consistent cash flowsgenerated by our cinema operations can be used to fund new cinema business opportunities and the front-end cashdemands of our real estate investment and development business.We manage our worldwide cinema exhibition businesses under various different brands:·in the US, under the Reading, Angelika Film Center, Consolidated Amusements, and City Cinemas brands;·in Australia, under the Reading brand; and·in New Zealand, under the Reading and Rialto brands.While we do not believe the cinema exhibition business to be a growth business, we do believe it to be abusiness that will likely continue to generate fairly consistent cash flows in the years ahead even in recessionary orinflationary environment. This is based on our belief that people will continue to spend some reasonable portion of theirentertainment dollar on entertainment outside of the home and that, when compared to other forms of outside the homeentertainment, movies continue to be a popular and competitively priced option. Since we believe the cinema exhibitionbusiness to be a mature business with most markets either adequately screened or over-screened, we see growth in ourcinema business coming principally from the enhancement of our current cinemas, the development in select markets ofspecialty cinemas, and the opportunistic acquisition of already existing cinemas rather than from the development of newconventional cinemas. From time to time, we invest in the securities of other companies, where we believe the business orassets of those companies to be attractive or to offer synergies to our existing entertainment and real estate businesses. Inthe current environment, we intend to focus on the development and redevelopment of our existing assets (particularlyour New York assets and our Angelika Film Center chain), as well as to continue to be opportunistic in identifying andendeavoring to acquire undervalued assets, particularly assets with proven cash flow and which we believe to be resistantto current recessionary trends.In summary, while we do have operating company attributes, we see ourselves principally as a geographicallydiversified real estate company and intend to add to stockholder value by building the value of our portfolio of tangibleassets including both entertainment and other types of land and brick and mortar assets. We endeavor to maintain areasonable asset allocation between our domestic and international assets and operations, and between our cashgenerating cinema operations and our cash consuming real estate investment and development activities. We believe thatby blending the cash generating capabilities of a cinema operation with the investment and development opportunities ofour real estate operations, our business strategy is unique among public companies.Business ClimateCinema Exhibition - GeneralAfter years of uncertainty as to the future of digital exhibition and the impact of this technology on cinemaexhibition, it became clear in 2012 that the industry must go digital. We have now completed the conversion of all of ourU.S., Australia, and New Zealand cinema operations to digital projection. Over several years, we anticipate 31 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.that the cost of this conversion will be covered in substantial part by the receipt of Virtual Print Fees paid by filmdistributors for the use of such digital projection equipment.In the case of “in-home” entertainment alternatives, the industry has experienced significant leaps in recentperiods in both the quality and affordability of in-home entertainment systems and in the accessibility to entertainmentprogramming through cable, satellite, DVD, and internet distribution channels. These alternative distribution channelsare putting pressure on cinema exhibitors to reduce the time period between theatrical and secondary release dates, andcertain distributors are talking about possible simultaneous or near simultaneous releases in multiple channels ofdistribution. These issues are common to both our domestic and international cinema operations.Certain new entrants to the cinema exhibition market, as well as certain of our historic competitors, have begunto develop new and to reposition existing cinemas that offer a broader selection of premium seating and food andbeverage offerings. These include, in some cases, food service to the seat and the offering of alcoholic beverages. Wehave for some years offered premium seating and alcoholic beverages in certain of our overseas cinemas. We have alsooffered café food selections and alcoholic beverages domestically in certain of our Angelika Film Centers. Accordingly,we are experienced in and believe that we can compete effectively with this emerging competition. We are currentlyreviewing the potential for expanding our offerings at a variety of our domestic cinemas.Cinema Exhibition – Australia / New ZealandThe film exhibition industry in Australia and New Zealand is highly concentrated in that Village, Event, andHoyts (the “Major Exhibitors”) control approximately 65% of the cinema box office in Australia while Event and Hoytscontrol approximately 55% of New Zealand’s cinema box office. The industry is also vertically integrated in that one ofthe Major Exhibitors, Roadshow Film Distributors (part of Village), also serves as a distributor of film in Australia andNew Zealand for Warner Bros. and New Line. Films produced or distributed by the majority of the local internationalindependent producers are also distributed by Roadshow. Typically, the Major Exhibitors own the newer multiplex andmegaplex cinemas, while the independent exhibitors typically have older and smaller cinemas. In addition, the MajorExhibitors have in recent periods built a number of new multiplexes as joint venture partners or under shared facilityarrangements, and have historically not engaged in head-to-head competition. Cinema Exhibition – North AmericaIn North America, distributors may find it more commercially appealing to deal with major exhibitors, rather thanto deal with independents like us, which tends to compress the supply of screens in a very limited number ofmarkets. This competitive disadvantage has increased significantly in recent periods with the development of megacircuits like Regal and AMC who are able to offer distributors access to screens on a truly nationwide basis, or, on theother hand, to deny access if their desires with respect to film supply are not satisfied. These consolidations can adversely affect our ability to get film in certain U.S. markets where we competeagainst major exhibitors. With the restructuring and consolidation undertaken in the industry, and the emergence ofincreasingly attractive “in-home” entertainment alternatives, strategic cinema acquisitions by our U.S. operation have andcan continue to be a way to combat such a competitive disadvantage. Real Estate – Australia and New ZealandOver the past few years, there has been a noted stabilization in real estate market activity resulting in someincreases to commercial and retail property values in Australia and to a lesser extent in New Zealand. Both countries haverelatively stable economies with varying degrees of economic growth that are mostly influenced by global trends. Also,we have noted that our Australian and New Zealand developed properties have had consistent growth in rentals andvalues although project commencements have slowed. Once developed, we remain confident that our Australian and NewZealand holdings will continue to provide value and cash flows to our operations. Real Estate – North America 32 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The commercial real estate market has improved somewhat over the past two years and we have noted somestrong increases associated with our real estate located in large urban environments.Business SegmentsAs indicated above, our two primary business segments are cinema exhibition and real estate. These segmentsare summarized as follows:Cinema ExhibitionOne of our primary businesses consists of the ownership and operation of cinemas. For a breakdown of ourcurrent cinema assets that we own and/or manage please see Item 1 – Our Business of this 2013 Annual Report under thesubheading “Our Cinema Exhibition Activities.”On December 31, 2013, we acquired a 5-screen cinema in the U.S. that we previously had managed since 2003. In 2012, we opened one cinema with 8 screens and closed two cinemas having a total of 8 screens. In 2011, we purchasedone 17-screen cinema. Our cinema revenue consists of admissions, concessions, and advertising. The cinema operating expenseconsists of the costs directly attributable to the operation of the cinemas including film rent expense, operating costs, andoccupancy costs. Cinema revenue and expense fluctuate with the availability of quality first-run films and the numbers ofweeks the first–run films stay in the market.Real EstateFor fiscal 2013, our income operating property consisted of the following:·our Belmont, Western Australia ETRC, our Auburn, New South Wales ETRC and our Wellington, New ZealandETRC;·our Newmarket shopping center in Newmarket, Queensland, a suburb of Brisbane;·three single auditorium live theaters in Manhattan (Minetta Lane, Orpheum, and Union Square) and a fourauditorium live theater complex in Chicago (The Royal George) and, in the case of the Union Square and theRoyal George, their accompanying ancillary retail and commercial tenants;·a New Zealand commercial property located at Lake Taupo and Australian commercial properties rented tounrelated third parties, to be held for current income and long-term appreciation; and·the ancillary retail and commercial tenants at some of our non-ETRC cinema properties.In addition, we had various parcels of unimproved real estate held for development in Australia and New Zealandand certain unimproved land in the United States that was used in our historic activities. We also owned an 8,100 squarefoot commercial building in Melbourne, which serves as our administrative headquarters for Australia and New Zealand,approximately 36% of which is leased to an unrelated third party.AcquisitionsOperating AssetsOn December 31, 2013, we settled a management fee claim that we had against the owner of the Plano, Texascinema that we had managed since 2003 for a cash receipt of $1.9 million. As part of the settlement, we acquired thatentity, and through the purchase of that entity acquired the underlying cinema’s lease and the associated personalproperty, equipment, and trade fixtures. Because the fair value of the lease, in light of anticipated rent payments, resultedin a lease liability of $320,000 and the acquired net assets, including cash received in connection with the settlement,were valued at $1.7 million, we recorded a net gain on acquisition and settlement of $1.4 million which is included asother income in our statement of operating income for the year ended December 31, 2013. We also acquired in 2013 the50% interest we did not own in AFC LLC. In August 2011, we purchased the CalOaks Cinema, our largest multi-screenedcinema to date, for $4.2 million.Nonoperating Assets 33 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.On January 10, 2012, Shadow View Land and Farming, LLC, a limited liability company owned by our Company,acquired a 202-acre property, zoned for the development of up to 816 single-family residential units, located in the Cityof Coachella, California. The property was acquired at a foreclosure auction for $5.5 million. The property was acquiredas a long-term investment in developable land. Half of the funds used to acquire the land were provided by James J.Cotter, our Chairman, Chief Executive Officer and controlling shareholder. Upon the approval of our ConflictsCommittee, these funds were converted into a 50% interest in Shadow View Land and Farming, LLC. We are themanaging member of this company.DisposalsMoonee Ponds Properties – Held for SaleIn 2013, we entered into a purchase and sale agreement to sell our 3.3-acre properties in Moonee Ponds forAUS$23.0 million which is scheduled to close on April 16, 2015 and is classified as land held for sale on our December31, 2013 consolidated balance sheet.Indooroopilly PropertyOn November 20, 2012, we sold our Indooroopilly property for $12.4 million (AUS$12.0 million). As the bookvalue was $12.5 million (AUS$12.1 million) for this property, we recorded a loss on sale as an impairment expense of$318,000 (AUS$306,000) for the year ended December 31, 2012 which included the cost to sell the property.Taringa PropertiesOn February 21, 2012, we sold our three properties in the Taringa area of Brisbane, Australia of approximately1.1 acres for $1.9 million (AUS$1.8 million). Because the net carrying amounts of these properties were greater than thetotal sale price, we recorded an impairment expense for these properties of $369,000 (AUS$365,000) for the year endedDecember 31, 2011.Elsternwick CinemaOn April 14, 2011, we sold our 66.7% share of the 5-screen Elsternwick Classic cinema located in Melbourne,Australia to our joint venture partner for $1.9 million (AUS$1.8 million) and recognized a gain on sale of a discontinuedoperation of $1.7 million (AUS$1.6 million).Investment and Development PropertyWe are engaged in several real estate development projects. For a complete list of these properties with theirsize, status, and gross book values see Item 2 – Properties under the heading of “Investment and Development Property.”Critical Accounting PoliciesThe Securities and Exchange Commission defines critical accounting policies as those that are, in management’sview, most important to the portrayal of the company’s financial condition and results of operations and the mostdemanding in their calls on judgment. We believe our most critical accounting policies relate to:·impairment of long-lived assets, including goodwill and intangible assets;·tax valuation allowance and obligations; and·legal and environmental obligations. Impairment of long-lived assets, including goodwill and intangible assetsWe review long-lived assets, including goodwill and intangibles, for impairment as part of our annual budgetingprocess, at the beginning of the fourth quarter, and whenever events or changes in circumstances indicate that the carryingamount of the asset may not be fully recoverable. 34 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Pursuant to FASB ASC 360-35, we review internal management reports on a monthly basis as well as monitoringcurrent and potential future competition in film markets for indications of potential impairment. We evaluate our long-lived assets using historical and projected data of cash flow as our primary indicator of potential impairment and we takeinto consideration the seasonality of our business. If the sum of the estimated, undiscounted future cash flows is less thanthe carrying amount of the asset, then impairment is recognized for the amount by which the carrying value of the assetexceeds its estimated fair value based on an appraisal or a discounted cash flow calculation. For certain non-income producing properties, we obtain appraisals or other evidence to evaluate whether thereare impairment indicators for these assets. Based on calculations of current value from appraisals and a sales contract, werecorded impairment losses of $1.5 million and $369,000 relating to certain of our property and cinema locations for theyears ended December 31, 2012 and 2011, respectively. No impairment losses were recorded in 2013. For a furtherexplanation of our 2012 impairment losses see below under the heading “Coachella impairment” and see Note 7 –Investment and Development Property to our 2013 Consolidated Financial Statements.Pursuant to FASB ASC 350-35, goodwill and intangible assets are evaluated annually on a reporting unitbasis. The impairment evaluation is based on the present value of estimated future cash flows of the segment plus theexpected terminal value. There are significant assumptions and estimates used in determining the future cash flows andterminal value. The most significant assumptions include our cost of debt and cost of equity assumptions that comprisethe weighted average cost of capital for each reporting unit. Accordingly, actual results could vary materially from suchestimates. There was no impairment for the goodwill and intangible assets for the years ended December 31, 2013, 2012,and 2011, respectively.Tax valuation allowance and obligationsWe record our estimated future tax benefits and liabilities arising from the temporary differences between the taxbases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operatingloss carry-forwards. We estimate the recoverability of any tax assets recorded on the balance sheet and provide anynecessary allowances as required. As of December 31, 2013, we had recorded approximately $43.8 million of deferred taxassets related to the temporary differences between the tax bases of assets and liabilities and amounts reported in theaccompanying consolidated balance sheets, as well as operating loss carry-forwards and tax credit carry-forwards. Thesedeferred tax assets were offset by a valuation allowance of $35.0 million resulting in a net deferred tax asset of $8.8million. The recoverability of deferred tax assets is dependent upon our ability to generate future taxable income. Thereis no assurance that sufficient future taxable income will be generated to benefit from our tax loss carry-forwards and taxcredit carry-forwards.Legal and environmental obligationsCertain of our subsidiaries were historically involved in railroad operations, coal mining, andmanufacturing. Also, certain of these subsidiaries appear in the chain of title of properties that may suffer frompollution. Accordingly, certain of these subsidiaries have, from time to time, been named in and may in the future benamed in various actions brought under applicable environmental laws. Also, we are in the real estate developmentbusiness and may encounter from time to time unanticipated environmental conditions at properties that we haveacquired for development. These environmental conditions can increase the cost of such projects and adversely affect thevalue and potential for profit of such projects. We do not currently believe that our exposure under applicableenvironmental laws is material in amount.From time to time, we have claims brought against us relating to the exposure of former employees of ourrailroad operations to asbestos and coal dust. These are generally covered by an insurance settlement reached inSeptember 1990 with our insurance carriers. However, this insurance settlement does not cover litigation by people whowere not our employees and who may claim second hand exposure to asbestos, coal dust, and/or other chemicals orelements now recognized as potentially causing cancer in humans. Our known exposure to these types of claims, assertedor probable of being asserted, is not material.From time to time, we are involved with claims and lawsuits arising in the ordinary course of our business thatmay include contractual obligations, insurance claims, tax claims, employment matters, and anti-trust issues, among othermatters. 35 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2012 Coachella impairmentIn January 2012, we acquired in a foreclosure auction for $5.5 million a 202-acre property located in Coachella,California zoned for the development of up to 816 single-family residential units. The only other bidder was the holderof the mortgage on the property who bid $5.46 million for the property. At the time of the purchase, we knew, based onour due diligence that we were paying more for the property than would be supported by an appraisal done under theUniform Standards of Professional Appraisal Practice (“USPAP”). However, the amount that we bid was the lowest price atwhich we were able to acquire the property from the mortgagor. In valuing the property, we took into account a varietyof factors, including the fact that the property is located within the City of Coachella, the state of the land useentitlements, and the fact that the prior owner had invested considerable time and money in obtaining the entitlementsfrom the City of Coachella. Since an independent USPAP appraisal of the property produced an appraised value as ofDecember 2012 at $4.0 million, we wrote down the book value of the property by $1.5 million as of the end of our 2012fiscal year. As noted below, this property is owned by a limited liability company which is, in turn, 50% owned by Mr.James J. Cotter who, accordingly, shares in any impairment loss to the extent of his ownership interest.We acquired the property as a potentially long-term investment based on the expectation that ready-for-development residential real estate will recover in value. As we are not in the business of developing single familyresidences, it is anticipated that the property will eventually be sold to a developer of this type of property.We hold the property in a limited liability company, which we manage. This company is owned 50/50 byourselves and our Chairman and Chief Executive Officer, James J. Cotter. The opportunity to acquire the property wasoriginally presented to Mr. Cotter in his individual capacity and the transaction was approved by our ConflictsCommittee, comprised entirely of independent directors.Results of OperationsWe currently have two operating segments: Cinema Exhibition and Real Estate. Our cinema exhibition segmentincludes the operations of our consolidated cinemas. Our real estate segment includes the operating results of ourcommercial real estate holdings, cinema real estate, live theater real estate, and ETRC’s. The tables below summarize the results of operations for our principal business segments for the years endedDecember 31, 2013, 2012, and 2011 (dollars in thousands).Year Ended December 31, 2013CinemaExhibitionReal EstateIntersegmentEliminationsTotalRevenue$239,418 $26,456 $(7,653)$258,221 Operating expense200,859 10,830 (7,653)204,036 Depreciation and amortization10,741 4,023 --14,764 General and administrative expense3,273 644 --3,917 Segment operating income$24,545 $10,959 $--$35,504 Year Ended December 31, 2012CinemaExhibitionReal EstateIntersegmentEliminationsTotalRevenue$234,703 $27,256 $(7,529)$254,430 Operating expense198,040 11,163 (7,529)201,674 Depreciation and amortization11,154 4,441 --15,595 General and administrative expense2,598 718 --3,316 Impairment expense--1,463 --1,463 Segment operating income$22,911 $9,471 $--$32,382 36 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Year Ended December 31, 2011CinemaExhibitionReal EstateIntersegmentEliminationsTotalRevenue$225,849 $26,562 $(7,432)$244,979 Operating expense189,647 10,190 (7,432)192,405 Depreciation and amortization11,842 4,444 --16,286 General and administrative expense2,740 646 --3,386 Impairment expense--369 --369 Segment operating income$21,620 $10,913 $--$32,533 Reconciliation to net income attributableto Reading International, Inc. shareholders:201320122011Total segment operating income$35,504 $32,382 $32,533 Non-segment:Depreciation and amortization expense433 454 309 General and administrative expense14,136 12,801 14,046 Operating income20,935 19,127 18,178 Interest expense, net(10,037)(16,426)(21,038)Other income (loss)1,876 (563)1,157 Gain (loss) on sale of assets(56)144 (67)Income tax benefit (expense)(4,942)(4,904)12,330 Equity earnings (loss) of unconsolidated joint ventures andentities1,369 1,621 (1,552)Income (loss) from discontinued operations--(85)232 Gain (loss) on sale of discontinued operation--(320)1,656 Net income (loss)$9,145 $(1,406)$10,896 Net (income) loss attributable to noncontrolling interests(104)492 (940)Net income (loss) attributable to Reading International, Inc.common shareholders$9,041 $(914)$9,956 Cinema Exhibition SegmentThe following tables and discussion that follows detail our operating results for our 2013, 2012, and 2011cinema exhibition segment (dollars in thousands). All percentages below are expressed as a percent of total revenue,except film rent and advertising cost which is expressed as a percentage of admissions revenue and concession cost whichis expressed as a percentage of concessions revenue:Operating Income by Country for theYear Ended December 31, 2013United StatesAustraliaNew ZealandTotalAdmissions revenue$84,725 $61,741 $15,039 $161,505 Concessions revenue35,056 24,025 5,596 64,677 Advertising and other revenues6,540 5,655 1,041 13,236 Total revenues126,321 91,421 21,676 239,418 Film rent and advertising cost44,284 29,060 7,116 80,460 Concession cost5,924 4,847 1,438 12,209 Occupancy expense25,981 18,371 3,943 48,295 Other operating expense31,930 22,218 5,747 59,895 Total operating expense108,119 74,496 18,244 200,859 Depreciation and amortization6,181 3,603 957 10,741 General and administrative expense2,347 926 --3,273 Segment operating income$9,674 $12,396 $2,475 $24,545 37 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Operating Data as a Percentage ofRevenue for Year EndedDecember 31, 2013United StatesAustraliaNew ZealandTotalAdmissions revenue67.1% 67.5% 69.4% 67.5% Concessions revenue27.8% 26.3% 25.8% 27.0% Advertising and other revenue5.2% 6.2% 4.8% 5.5% Total revenue100.0% 100.0% 100.0% 100.0% Film rent and advertising cost52.3% 47.1% 47.3% 49.8% Concession cost16.9% 20.2% 25.7% 18.9% Occupancy expense20.6% 20.1% 18.2% 20.2% Other operating expense25.3% 24.3% 26.5% 25.0% Total operating cost and expense85.6% 81.5% 84.2% 83.9% Depreciation and amortization4.9% 3.9% 4.4% 4.5% General and administrative expense1.9% 1.0% 0.0% 1.4% Segment operating income7.7% 13.6% 11.4% 10.3% Operating Income by Country for theYear Ended December 31, 2012United StatesAustraliaNew ZealandTotalAdmissions revenue$78,745 $68,819 $13,897 $161,461 Concessions revenue32,219 24,564 4,266 61,049 Advertising and other revenues5,433 5,806 954 12,193 Total revenues116,397 99,189 19,117 234,703 Film rent and advertising cost40,690 32,953 6,517 80,160 Concession cost5,205 4,908 1,034 11,147 Occupancy expense26,143 19,233 3,503 48,879 Other operating expense29,870 23,024 4,960 57,854 Total operating expense101,908 80,118 16,014 198,040 Depreciation and amortization6,482 3,589 1,083 11,154 General and administrative expense1,937 661 --2,598 Segment operating income$6,070 $14,821 $2,020 $22,911 Operating Data as a Percentage ofRevenue for Year EndedDecember 31, 2012United StatesAustraliaNew ZealandTotalAdmissions revenue67.7% 69.4% 72.7% 68.8% Concessions revenue27.7% 24.8% 22.3% 26.0% Advertising and other revenue4.7% 5.9% 5.0% 5.2% Total revenue100.0% 100.0% 100.0% 100.0% Film rent and advertising cost51.7% 47.9% 46.9% 49.6% Concession cost16.2% 20.0% 24.2% 18.3% Occupancy expense22.5% 19.4% 18.3% 20.8% Other operating expense25.7% 23.2% 25.9% 24.6% Total operating cost and expense87.6% 80.8% 83.8% 84.4% Depreciation and amortization5.6% 3.6% 5.7% 4.8% General and administrative expense1.7% 0.7% 0.0% 1.1% Segment operating income5.2% 14.9% 10.6% 9.8% 38 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Operating Income by Country for theYear Ended December 31, 2011United StatesAustraliaNew ZealandTotalAdmissions revenue$73,062 $72,887 $12,622 $158,571 Concessions revenue28,225 23,306 3,446 54,977 Advertising and other revenues5,482 6,019 800 12,301 Total revenues106,769 102,212 16,868 225,849 Film rent and advertising cost37,360 34,390 5,878 77,628 Concession cost4,460 4,963 852 10,275 Occupancy expense25,210 19,107 3,157 47,474 Other operating expense27,033 22,274 4,963 54,270 Total operating expense94,063 80,734 14,850 189,647 Depreciation and amortization6,525 4,218 1,099 11,842 General and administrative expense1,973 691 76 2,740 Segment operating income$4,208 $16,569 $843 $21,620 Operating Data as a Percentage ofRevenue for Year EndedDecember 31, 2011United StatesAustraliaNew ZealandTotalAdmissions revenue68.4% 71.3% 74.8% 70.2% Concessions revenue26.4% 22.8% 20.4% 24.3% Advertising and other revenue5.1% 5.9% 4.7% 5.4% Total revenue100.0% 100.0% 100.0% 100.0% Film rent and advertising cost51.1% 47.2% 46.6% 49.0% Concession cost15.8% 21.3% 24.7% 18.7% Occupancy expense23.6% 18.7% 18.7% 21.0% Other operating expense25.3% 21.8% 29.4% 24.0% Total operating cost and expense88.1% 79.0% 88.0% 84.0% Depreciation and amortization6.1% 4.1% 6.5% 5.2% General and administrative expense1.8% 0.7% 0.5% 1.2% Segment operating income3.9% 16.2% 5.0% 9.6% Cinema Results for 2013 Compared to 2012·Cinema revenue increased in 2013 by $4.7 million or 2.0% compared to 2012. The geographic activity of ourrevenue can be summarized as follows:oUnited States - Revenue in the United States increased by $9.9 million or 8.5%. This increase inrevenue was predominately attributable to a 440,000 person increase in box office admissions and a2.6% increase in the average ticket price coupled with a commensurate increase in concessions revenue. Both of these increases were primarily related to the quality of film product in 2013 compared to thesame period in 2012.oAustralia - Revenue in Australia decreased by $7.8 million or 7.8%. This decrease in revenue wasprimarily related to a 5.1% decrease in the average ticket price resulting from a continued and expandedcompetitive ticket pricing model; offset in part by, a 60,000 person increase in box officeadmissions. As noted below, this decrease in revenue was exacerbated by a decrease in the value of theAustralian dollar compared to the U.S. dollar for the comparable periods (see below).oNew Zealand - Revenue in New Zealand increased by $2.6 million or 13.4%. This increase in revenuewas predominately attributable to a year over year 121,000 person increase in admissions; somewhatoffset by, a decrease in the average ticket price of 0.4%. The increase in New Zealand admissions wasprimarily as a result of increased revenues coming from our previously earthquake 39 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.damaged New Zealand multiplex. This increase in revenue was somewhat enhanced by an increase inthe value of the New Zealand dollar compared to the U.S. dollar (see below).·Operating expense increased in 2013 by $2.8 million or 1.4% compared to 2012. Year over year operatingexpense percentage decreased in relation to revenue from 84.4% to 83.9%. oUnited States - Operating expense in the United States increased by $6.2 million or 6.1% primarilyrelated to a $3.6 million increase in film rent and advertising primarily associated with theaforementioned increases in revenues from admissions and a $2.0 million increase in other operatingexpense including a $778,000 increase in projection costs primarily related to our new digitalequipment lease.oAustralia - Operating expense in Australia decreased by $5.6 million or 7.0%. This decrease was in linewith the above-mentioned decrease in cinema revenue which directly affects film rental costs andexacerbated by the year over year decrease in the value of the Australian dollar compared to the U.S.dollar (see below).oNew Zealand - Operating expense in New Zealand increased by $2.2 million or 13.9%. This increasewas in line with the above-mentioned increase in cinema revenue which directly affects film rental costsand with the above-mentioned year over year increase in the value of the New Zealand dollar comparedto the U.S. dollar (see below).·Depreciation expense decreased in 2013 by $413,000 or 3.7% compared to 2012. This decrease was primarilyrelated to several of our cinema assets reaching the end of their depreciable lives.·General and administrative expense increased in 2013 by $675,000 or 26.0% compared to 2012. This increasewas primarily related to an increase in labor expense from our U.S. and Australian cinema operations.·Australian average exchange rates decreased by 6.5% from 2012 to 2013 and the New Zealand average exchangerates increased by 1.2% from 2012 to 2013 both of which had an impact on our statements of operations.·As a result, cinema exhibition segment operating income increased in 2013 by $1.6 million compared to 2012primarily from the aforementioned increase in revenue from our U.S. and New Zealand cinema operations.Cinema Results for 2012 Compared to 2011·Cinema revenue increased in 2012 by $8.9 million or 3.9% compared to 2011. The geographic activity of ourrevenue can be summarized as follows:oUnited States - Revenue in the United States increased by $9.6 million or 9.0%. This increase inrevenue was predominately attributable to a 722,000 person increase in box office admissions and acommensurate increase in admissions and concessions revenue primarily from our 2011 acquisition ofthe CalOaks cinema in Murrieta, California and from our newly opened AFC Mosaic cinema in thegreater Washington D.C. metropolitan area; offset by, a 0.7% decrease in the average ticket price.oAustralia - Revenue in Australia decreased by $3.0 million or 3.0%. This decrease in revenue wasprimarily related to a 91,000 person decrease in box office admissions coupled with a 3.9% decrease inthe average ticket price resulting from a more competitive ticket pricing model. This decrease includedthe temporary closure of a cinema in Australia due to renovations during the second quarter. As notedbelow, there was only a nominal change in the Australian dollar compared to the U.S. dollar for thecomparable period (see below).oNew Zealand - Revenue in New Zealand increased by $2.2 million or 13.3%. This increase in revenuewas predominately attributable to a year over year 236,000 person increase in admissions; offset by, adecrease in the average ticket price of 7.6% resulting from a more competitive ticket pricing model. Theincrease in New Zealand admissions was primarily as a result of the reopening of an earthquakedamaged New Zealand multiplex in early January 2012. This increase in revenue was somewhatenhanced by an increase in the value of the New Zealand dollar compared to the U.S. dollar (see below).·Operating expense increased in 2012 by $8.4 million or 4.4% compared to 2011. Year over year operatingexpense percentage increased in relation to revenue from 84.0% to 84.4%.oUnited States - Operating expense in the United States increased by $7.8 million or 8.3% primarilyrelated to a $3.3 million increase in film rent and advertising and a $3.1 million increase in other 40 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.operating expense both of which were primarily associated with the aforementioned newly acquired andopened cinemas.oAustralia - Operating expense in Australia decreased by $616,000 or 0.8%. This decrease was in linewith the above-mentioned decrease in cinema revenue which directly affects film rental costs and withthe year over year nominal increase in the value of the Australian dollar compared to the U.S. dollar (seebelow).oNew Zealand - Operating expense in New Zealand increased by $1.2 million or 7.8%. This increase wasin line with the above-mentioned increase in cinema revenue which directly affects film rental costsoffset by the above-mentioned year over year increase in the value of the New Zealand dollar comparedto the U.S. dollar (see below).·Depreciation expense decreased in 2012 by $688,000 or 5.8% compared to 2011. This decrease was primarilyrelated to several of our cinema assets reaching the end of their depreciable lives.·General and administrative expense decreased in 2012 by $142,000 or 5.2% compared to 2011. This decreasewas primarily related to preopening costs in 2011 for a newly opened Australian cinema which did not recur in2012.·Australian and New Zealand monthly average exchange rates for 2012 increased by 0.3% and 2.4%,respectively, from those in 2011, which had an overall positive impact our statements of operations. ·As a result, cinema exhibition segment operating income increased in 2012 by $1.3 million compared to 2011primarily from the aforementioned increase in revenue from our Australian cinema operations. Real Estate SegmentAs discussed above, our other business segment is the development and management of real estate. Theseholdings include our rental live theaters, certain fee owned properties used in our cinema business, and unimproved realestate held for development. The tables and discussion that follow detail our operating results for our 2013, 2012, and 2011 real estatesegment (dollars in thousands). All percentages below are expressed as a percent of total revenue except live theater costwhich is expressed as a percentage of live theater rental and ancillary revenue, and property cost which is expressed as apercentage of property rental revenue:Operating Income by Country for theYear Ended December 31, 2013United StatesAustraliaNew ZealandTotalLive theater rental and ancillary income$3,500 $--$--$3,500 Property rental income1,692 14,424 6,840 22,956 Total revenues5,192 14,424 6,840 26,456 Live theater costs1,574 ----1,574 Property rental cost316 2,362 1,684 4,362 Occupancy expense946 3,139 809 4,894 Total operating expense2,836 5,501 2,493 10,830 Depreciation and amortization314 2,635 1,074 4,023 General and administrative expense67 527 50 644 Segment operating income$1,975 $5,761 $3,223 $10,959 Operating Data as a Percentage ofRevenue for Year EndedDecember 31, 2013United StatesAustraliaNew ZealandTotalLive theater rental and ancillary revenue67.4% 13.2% Property rental revenue32.6% 100.0% 100.0% 86.8% Total revenue100.0% 100.0% 100.0% 100.0% Live theater cost45.0% 45.0% 41 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Property cost18.7% 16.4% 24.6% 19.0% Occupancy expense18.2% 21.8% 11.8% 18.5% Total operating cost and expense54.6% 38.1% 36.4% 40.9% Depreciation and amortization6.0% 18.3% 15.7% 15.2% General and administrative expense1.3% 3.7% 0.7% 2.4% Impairment expense0.0% 0.0% 0.0% 0.0% Segment operating income38.0% 39.9% 47.1% 41.4% Operating Income by Country for theYear Ended December 31, 2012United StatesAustraliaNew ZealandTotalLive theater rental and ancillary income$3,416 $--$--$3,416 Property rental income1,690 14,536 7,614 23,840 Total revenues5,106 14,536 7,614 27,256 Live theater costs1,538 ----1,538 Property rental cost456 3,262 1,459 5,177 Occupancy expense857 2,815 776 4,448 Total operating expense2,851 6,077 2,235 11,163 Depreciation and amortization305 2,824 1,312 4,441 General and administrative expense100 535 83 718 Impairment expense1,463 ----1,463 Segment operating income$387 $5,100 $3,984 $9,471 Operating Data as a Percentage ofRevenue for Year Ended December 31, 2012United StatesAustraliaNew ZealandTotalLive theater rental and ancillary revenue66.9% 12.5% Property rental revenue33.1% 100.0% 100.0% 87.5% Total revenue100.0% 100.0% 100.0% 100.0% Live theater cost45.0% 45.0% Property cost27.0% 22.4% 19.2% 21.7% Occupancy expense16.8% 19.4% 10.2% 16.3% Total operating cost and expense55.8% 41.8% 29.4% 41.0% Depreciation and amortization6.0% 19.4% 17.2% 16.3% General and administrative expense2.0% 3.7% 1.1% 2.6% Impairment expense28.7% 0.0% 0.0% 5.4% Segment operating income7.6% 35.1% 52.3% 34.7% Operating Income by Country for theYear Ended December 31, 2011United StatesAustraliaNew ZealandTotalLive theater rental and ancillary income$3,507 $--$--$3,507 Property rental income1,714 13,850 7,491 23,055 Total revenues5,221 13,850 7,491 26,562 Live theater costs1,505 ----1,505 Property rental cost124 2,507 1,375 4,006 Occupancy expense845 3,121 713 4,679 Total operating expense2,474 5,628 2,088 10,190 42 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Depreciation and amortization326 2,848 1,270 4,444 General and administrative expense32 554 60 646 Impairment expense--369 --369 Segment operating income$2,389 $4,451 $4,073 $10,913 Operating Data as a Percentage ofRevenue for Year Ended December 31, 2011United StatesAustraliaNew ZealandTotalLive theater rental and ancillary revenue67.2% 13.2% Property rental revenue32.8% 100.0% 100.0% 86.8% Total revenue100.0% 100.0% 100.0% 100.0% Live theater cost42.9% 42.9% Property cost7.2% 18.1% 18.4% 17.4% Occupancy expense16.2% 22.5% 9.5% 17.6% Total operating cost and expense47.4% 40.6% 27.9% 38.4% Depreciation and amortization6.2% 20.6% 17.0% 16.7% General and administrative expense0.6% 4.0% 0.8% 2.4% Impairment expense0.0% 2.7% 0.0% 1.4% Segment operating income45.8% 32.1% 54.4% 41.1% Real Estate Results for 2013 Compared to 2012·Real estate revenue decreased by $800,000 or 2.9% compared to 2012. The decrease in revenue was primarilyrelated to the closure of our Courtenay Central parking structure in July 2013 as a result of an earthquake inWellington, New Zealand. Revenue was also affected by the aforementioned fluctuations in currency exchangerates (see below).·Operating expense for the real estate segment decreased by $333,000 or 3.0% compared to 2012. This decreaseresulted primarily from a decrease in professional fees from our 2012 legal work associated with protecting theproperty rights of our Burwood property and with our residual railroad properties and the aforementionedfluctuations in currency exchange rates (see below). These decreases were in part offset by additional costsassociated with the start of development work on our Wellington, New Zealand location in 2013.·General and administrative costs decreased by $74,000 or 10.3% compared to 2012 primarily due to an increasein our allowance for doubtful accounts for our U.S. properties in 2012 which did not recur in 2013.·Australian average exchange rates decreased by 6.5% from 2012 to 2013 and the New Zealand average exchangerates increased by 1.2% from 2012 to 2013 both of which had an impact on our statements of operations.·As a result of the above, real estate segment income increased by $1.5 million or 15.7% compared to 2012.Real Estate Results for 2012 Compared to 2011·Real estate revenue increased by $694,000 or 2.6% compared to 2011. The increase in revenue was primarilyrelated to an increase in rental income from our Australian and New Zealand ETRCs coupled with fluctuations incurrency exchange rates (see below); offset by, a decrease in rent from our live theater venues in the U.S.·Operating expense for the real estate segment increased by $973,000 or 9.5% compared to 2011. This increasein expense was primarily related to higher repair, maintenance, and insurance costs for our operating properties,from legal costs incurred in 2012 associated with protecting the property rights of our Burwood property andwith our residual railroad properties, and the aforementioned fluctuations in currency exchange rates (see below).·We recorded a real estate impairment loss in 2012 of $1.5 million related to our Coachella property (see Note 7 –Investment and Development Property to our 2012 Consolidated Financial Statements). As noted above, thisproperty is owned by a limited liability company which is, in turn, 50% owned by Mr. James J. 43 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Cotter who, accordingly, shares in any impairment loss to the extent of his ownership interest. In 2011, werecorded a $369,000 impairment loss related to our Taringa real estate property. We subsequently sold theTaringa property on February 21, 2012 for $1.9 million (AUS$1.8 million).·General and administrative costs increased by $72,000 or 11.1% compared to 2011 primarily due to an increasein our allowance for doubtful accounts for our U.S. properties in 2012.·Australian and New Zealand monthly average exchange rates for 2012 increased by 0.3% and 2.4%,respectively, from those in 2011, which had an overall positive impact on our statements of operations. ·As a result of the above, real estate segment income decreased by $1.4 million or 13.2% compared to 2011. Non-Segment ActivityNon-segment expense/income includes expense and/or income that is not directly attributable to our twooperating segments.2013 Compared to 2012·general and administrative expense increased by $1.3 million primarily related to an increase in compensationexpense, pension costs, and additional audit fees..·net interest expense decreased by $6.4 million compared to 2012. The decrease in interest expense during the2013 resulted from an overall decrease in our worldwide debt balances and a decrease in the interest rates on ourcorporate loans in the U.S. and Australia. Additionally, our interest expense was lower in the 2013 due to adecrease in the fair value of our interest rate swap liabilities in 2013 compared to an increase in these liabilitiesduring the same period in 2012 resulting in a comparative decrease in interest expense from 2012 to 2013. ·the $1.9 million in other income during 2013 was primarily related to a $1.4 million gain on the acquisition of acinema and the receipt of insurance proceeds from our business interruption claim for the temporary closure ofour cinema in Christchurch, New Zealand (see Note 26 – Casualty Loss to our 2013 Consolidated FinancialStatements). The $563,000 in other income during 2012 was primarily related to the write off of our GE Capitalloan costs at the time of the refinance of our U.S. Corporate Credit Facility with Bank of America; offset by,insurance proceeds from our business interruption claim for the temporary closure of our cinema in Christchurch,New Zealand due to the February 22, 2011 earthquake.·equity earnings from unconsolidated investments decreased by $252,000 primarily related to decrease in incomefrom our Mt. Gravatt investment. 2012 Compared to 2011·general and administrative expense decreased by $1.2 million primarily related to the one-time additional laborcosts incurred during 2011, associated with the transfer of our accounting functions from the U.S. and Australiato New Zealand not being repeated in 2012, as well as some cost savings resulting from the synergies gained as aresult of this move.·net interest expense decreased by $4.6 million compared to 2011. The decrease in interest expense during 2012was primarily due to a smaller increase in the fair value of our interest rate swaps in 2012 than that noted for thesame period in 2011 and to a decrease in interest rates specifically from our Trust Preferred Securities. EffectiveMay 1, 2012, that interest rate changed from a fixed rate of 9.22%, which was in effect for the past five years, to avariable rate of 3 month LIBOR plus 4.00%, which will reset each quarter through the end of the loan, unless wechoose to fix the rate again.·the $563,000 in other loss during 2012 was primarily related to the write off of our GE Capital loan costs at thetime of the refinance of our U.S. Corporate Credit Facility with Bank of America; offset by, additional insuranceproceeds from our business interruption claim for the temporary closure of our cinema in Christchurch, NewZealand due to the February 22, 2011 earthquake. The $1.2 million in other income during 2011 was primarilyrelated to insurance proceeds from a partial payment of our business interruption claim for the aforementionedtemporary closure of our cinema in Christchurch, New Zealand (see Note 26 – Casualty Loss to our 2012Consolidated Financial Statements).·the net income tax expense was $4.9 million during 2012 compared to a net income tax benefit of $12.3 millionduring 2011. The year over year change in 2012 was primarily related to a reduction in deferred 44 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.tax assets in Australia, caused by the sale of certain assets, plus a reduction in loss carryforwards available tooffset future Australia taxable income. For 2011, the change was primarily related to a one-time tax provisionadjustment of $14.4 million caused by a reduction in the valuation allowance related to our Australianoperations (see Note 14 – Income Tax to our 2012 Consolidated Financial Statements).·equity earnings from unconsolidated investments increased by $3.2 million primarily related to a 2011 $2.9million impairment to our interest in Rialto Entertainment not repeated in 2012.Income TaxesWe are subject to income taxation in several jurisdictions throughout the world. Our effective tax rate andincome tax liabilities will be affected by a number of factors, such as:·the amount of taxable income in particular jurisdictions;·the tax rates in particular jurisdictions;·tax treaties between jurisdictions;·the extent to which income is repatriated; and·future changes in law.Generally, we file consolidated or combined tax returns in jurisdictions that permit or require such filings. Forjurisdictions that do not permit such a filing, we may owe income, franchise, or capital taxes even though, on an overallbasis, we may have incurred a net loss for the tax year.Net Income Attributable to Reading International, Inc. Common ShareholdersFor the years ending 2013, 2012, and 2011, our consolidated business units produced a net income of $9.0million (primarily driven by a decrease in our interest expense as noted above), a net loss of $914,000, and a net incomeof $10.0 million (primarily driven by a decrease in our tax provision of $14.4 million caused by a reduction in thevaluation allowance related to our Australian operations), respectively, attributable to Reading International, Inc.common shareholders. For many of the years prior to 2013, we consistently experienced net losses. However, asexplained in the Cinema and Real Estate segment sections above, we have generally noted improvements in our segmentoperating income such that we have a positive segment operating income for each of the years of 2013, 2012, and 2011,that in years past has been negative. Although we cannot assure that this trend will continue, we are committed to theoverall improvement of earnings through good fiscal management.Business Plan, Liquidity, and Capital Resources of the CompanyBusiness PlanWhile we do not believe the cinema exhibition business to be a growth business, we do believe it to be abusiness that will likely continue to generate fairly consistent cash flows in the years ahead even in recessionary orinflationary environment. This is based on our belief that people will continue to spend some reasonable portion of theirentertainment dollar on entertainment outside of the home and that, when compared to other forms of outside the homeentertainment, movies continue to be a popular and competitively priced option. Since we believe the cinema exhibitionbusiness to be a mature business with most markets either adequately screened or over-screened, we see growth in ourcinema business coming principally from the enhancement of our current cinemas, the development in select markets ofspecialty cinemas, and the opportunistic acquisition of already existing cinemas rather than from the development of newconventional cinemas. From time to time, we invest in the securities of other companies, where we believe the business orassets of those companies to be attractive or to offer synergies to our existing entertainment and real estatebusinesses. Also, in the current environment, we intend to be opportunistic in identifying and endeavoring to acquireundervalued assets, particularly assets with proven cash flow and which we believe to be resistant to current recessionarytrends.In summary, while we do have operating company attributes, we see ourselves principally as a geographicallydiversified real estate company and intend to add to stockholder value by building the value of our portfolio of tangibleassets including both entertainment and other types of land and brick and mortar assets. We endeavor to maintain areasonable asset allocation between our domestic and international assets and operations, and between our cashgenerating cinema operations and our cash consuming real estate development activities. We 45 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.believe that by blending the cash generating capabilities of a cinema operation with the investment and developmentopportunities of our real estate development operation, our business strategy is unique among public companies.Liquidity and Capital ResourcesOur ability to generate sufficient cash flows from operating activities in order to meet our obligations andcommitments drives our liquidity position. This is further affected by our ability to obtain adequate, reasonablefinancing and/or to convert non-performing or non-strategic assets into cash. Currently, our liquidity needs continue to arise mainly from:·working capital requirements;·capital expenditures; and·debt servicing requirements.With the changes to the worldwide credit markets, the business community is concerned that credit will be moredifficult to obtain especially for potentially risky ventures like business and asset acquisitions. However, we believe thatour acquisitions over the past few years coupled with our strengthening operational cash flows demonstrate our ability toimprove our profitability. We believe that this business model will help us to demonstrate to lending institutions ourability not only to make strategic acquisitions but also to service the associated debt.Discussion of Our Statement of Cash FlowsThe following discussion compares the changes in our cash flows over the past three years. Operating Activities2013 Compared to 2012. Cash provided by operations was $25.2 million in 2013 compared to $25.5 million inthe 2012. The decrease in cash provided by operations of $313,000 was due primarily to a $5.1 million increase inoperational cash flows; offset by, a $5.4 million decrease in cash from changes in operating assets and liabilities2012 Compared to 2011. Cash provided by operations was $25.5 million in 2012 compared to $24.3 million inthe 2011. The increase in cash provided by operations of $1.2 million was due primarily to a $4.4 million increase inoperational cash flows; offset by, a $3.2 million decrease in cash from changes in operating assets and liabilities.Investing ActivitiesCash used in investing activities was $6.1 million in 2013, $6.1 million in 2012, and $3.8 million in 2011. Thefollowing summarizes our discretionary investing activities for each of the three years ending December 31, 2013:The $6.1 million cash used in 2013 was primarily related to:·$20.1 million in property enhancements to our existing properties;offset by·$1.6 million in cash provided from restricted cash;·$1.9 million in cash received associated with a cinema acquisition; ·$2.0 million of proceeds from a note receivable; and·$8.0 million of proceeds from time deposits;The $6.1 million cash used in 2012 was primarily related to:·$8.2 million in property enhancements to our existing properties;·$8.0 million to purchase time deposits; 46 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.·$1.8 million to purchase a note receivable; and·$5.5 million for the purchase of the Coachella land acquisition; offset by, ·$14.1 million of proceeds from the sale of our Taringa and Indooroopilly properties;·$382,000 in return of investment in unconsolidated entities; and·$3.0 million of proceeds from the sale of marketable securities.The $3.8 million cash used in 2011 was primarily related to:·$3.9 million for the purchase of the CalOaks cinema;·$5.5 million in property enhancements to our existing properties;·$168,000 of a change in restricted cash; and·$2.8 million for the purchase of mortgage notes receivable;offset by,·$1.9 million of net proceeds from the sale of our 66.7% share of the 5-screen Elsternwick Classic cinema locatedin Melbourne, Australia;·$143,000 of proceeds from the sale of marketable securities; and·$6.8 million of proceeds from the payoff of a long-term other receivable associated with our Malulaniinvestment.Financing ActivitiesCash used in financing activities was $17.8 million in 2013, $12.7 million in 2012 and $23.4 million in2011. The following summarizes our financing activities for each of the three years ending December 31, 2013:The $17.8 million cash used in 2013 was primarily related to:·$28.1 million of loan repayments including a $6.4 million payoff of our former Liberty Theaters Term Loan, a$6.8 million payoff of our Sutton Hill Capital Note, $5.5 million in payments on our Bank of America Revolverand Line of Credit, $8.6 million in payments on our NAB term debt, and a $592,000 payoff of the NationwideLoan 1; and ·$2.1 million in noncontrolling interests’ distributions; offset by, ·$12.5 million of new borrowing including $5.0 million from our Bank of America Revolver and $7.5 millionfrom our new loan on the Orpheum and Minetta Lane Theatres offset by $563,000 of borrowing costs;·$263,000 in noncontrolling interests’ contributions; and·$248,000 of proceeds from the exercise of employee stock options.The $12.7 million cash used in 2012 was primarily related to:·$62.6 million of loan repayments including $15.0 million to pay off our Eurohypo Cinemas 1, 2, 3 loan, $32.2million to pay off our GE Capital Loan, and $14.8 million in payments on our NAB term debt;offset by,·$47.0 million of new borrowing including $30.0 million of loan proceeds from our new Bank of America U.S.Credit Facility and $15.0 million of loan proceeds from our new Cinemas 1, 2, 3 loan (both offset by a total of$782,000 of capitalized borrowing cost) and $2.0 million of borrowing from our Bank of America line of credit; 47 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.·$3.4 million in noncontrolling interests’ contributions; and·$308,000 of proceeds from the exercise of employee stock options.The $23.4 million cash used in 2011 was primarily related to:·$126.8 million of loan repayments including the $105.8 million payoff of our Australian BOSI loan, $5.3million in loan repayment on our GE Capital Loan, $9.7 million payoff of our NAB revolver, $3.4 million loanrepayment of our NAB term debt, and $2.0 million pay down of our Nationwide Notes;·$747,000 to repurchase our Class A Nonvoting Common Stock; and·$654,000 in noncontrolling interests’ distributions.offset by,·$105.3 million of new borrowing including $104.2 million of loan proceeds from our new NAB loan net of$774,000 of capitalized borrowing costs and $1.1 million of borrowing from our New Zealand credit facility;and·$233,000 in noncontrolling interests’ contributions.Future Liquidity and Capital ResourcesDuring the past 24 months, we have put into place several measures that currently have or will have a positiveeffect on our overall liquidity, including:·refinancing our Liberty Theaters loan with a $7.5 million loan securitized by our Minetta and Orpheum theatreshaving a maturity date of June 1, 2018.·replacing our GE Capital Term Loan of $27.7 million with a new revolving line of credit from Bank of America(the “BofA Revolver”) of $30.0 million which has significantly lower principal payments than those of ourformer GE Capital Term Loan. On March 25, 2013, Bank of America increased the borrowing limit on our BofARevolver from $30.0 million to $35.0 million.·renewing and increasing our existing $3.0 million line of credit with Bank of America to $5.0 million.·replacing our Eurohypo AG, New York Branch loan with a new $15.0 million Sovereign Bank, N.A. term loanhaving a one-year term ending on June 27, 2013 one year extension option to June 27, 2014 which we exercisedin June 2013.·receiving, on February 8, 2012, an approved amendment from Westpac renewing our existing $36.9 million(NZ$45.0 million) New Zealand credit facility with a 3-year $32.8 million (NZ$40.0 million) credit facility.We believe that we have sufficient borrowing capacity to meet our short-term working capital requirements. Tomeet our current and future liquidity requirements, we have the following external sources of unused liquidity:·$9.9 million (NZ$12.0 million) is available on our New Zealand Corporate Credit facility;·$4.5 million (AUS$5.0 million) is available on our NAB revolver facility; and·$5.0 million is available on our Bank of America Line of Credit.Potential uses for funds during 2014 that would reduce our liquidity, other than those relating to working capitalneeds and debt service requirements include: ·payments on our legal settlement obligation for the Tax/Audit Litigation;·the selective development of our currently held for development projects; and·the acquisition of assets with proven cash flow that we believe to be resistant to the current recessionary trends. We are in the process of negotiating a renewal of our Australian NAB Corporate Term Loan and CorporateRevolver and are optimistic that a renewal will be consummated by May 31, 2014, on terms that are at least equal to thosethat are expiring at June 30, 2014. In addition we are seeking a further 12 to 24 month extension on our US 48 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Cinema 1, 2, 3 Term Loan which expires on June 27, 2014 and remain optimistic that this can be achieved by May 31,2014 as well.Our worldwide cash position at December 31, 2013 was $37.7 million including $16.4 million in the U.S., $12.1million in Australia, and $7.7 million in New Zealand. As part of our main credit facilities in Australia, New Zealand, andthe U.S., we are subject to certain debt covenants which limit the transfer or use of cash outside of the various regionalsubsidiaries in which the cash is held. As such, at December 31, 2013, we have approximately $15.8 million of cash thatis not restricted by loan covenants.Based upon the current levels of the consolidated operations, further anticipated cost savings and future growth,we believe our cash flow from operations, together with both the existing and anticipated lines-of-credit and other sourcesof liquidity (including future potential asset sales) will be adequate to meet our anticipated requirements for principalrepayments, interest payments, and short-term debt maturities plus any other debt service obligations, working capital,capital expenditures and other operating needs. There can be no assurance, however, that the business will continue to generate cash flow at or above currentlevels or that estimated cost savings or growth can be achieved. Future operating performance and our ability to serviceor refinance existing indebtedness will be subject to future economic conditions and to financial and other factors, suchas access to first-run films, many of which are beyond our control. If our cash flow from operations and/or proceeds fromanticipated borrowings should prove to be insufficient to meet our funding needs, our current intention is either:·to defer construction of projects currently slated for land presently owned by us;·to take on joint venture partners with respect to such development projects; and/or·to sell assets. Contractual ObligationsThe following table provides information with respect to the maturities and scheduled principal repayments ofour secured debt and lease obligations at December 31, 2013 (in thousands): 20142015201620172018ThereafterTotalDebt$75,538 $33,009 $3,500 $21,000 $7,500 $--$140,547 Subordinated notes (trust preferredsecurities)----------27,913 27,913 Tax settlement liability3,480 2,301 --------5,781 Pension liability14 32 50 633 607 7,191 8,527 Lease obligations33,676 31,431 27,777 25,188 21,427 58,410 197,909 Estimated interest on debt5,640 3,744 3,010 1,846 1,238 9,761 25,239 Total$118,348 $70,517 $34,337 $48,667 $30,772 $103,275 $405,916 Estimated interest on long-term debt is based on the anticipated loan balances for future periods calculatedagainst current fixed and variable interest rates.We adopted FASB ASC 740-10-25 – Income Taxes - Uncertain Tax Positions on January 1, 2007. As ofadoption, the total amount of gross unrecognized tax benefits for uncertain tax positions was $12.5 million increasing to$13.7 million, to $14.5 million, and to $15.3 million as of December 31, 2007, 2008, and 2009, respectively. As ofDecember 31 2010, the gross unrecognized tax benefit increased to $20.6 million, substantially as a result of havingsettled our Tax Audit/Litigation case (see Note 19 – Commitments and Contingencies to our 2013 Consolidated FinancialStatements). As of December 31, 2011, the gross unrecognized tax benefit decreased to $4.1 million largely because theTax Audit/Litigation matter is no longer in the nature of an uncertain tax position governed by FASB ASC 740-10-25,but is a fixed and determinable tax liability. As of December 31, 2012 and 2013, the gross unrecognized tax benefit was$5.3 million and $4.0 million, respectively. We do not expect a significant tax payment related to the $4.0 million inuncertain tax positions within the next 12 months.Unconsolidated Joint Venture Debt 49 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Total debt of unconsolidated joint ventures was $634,000 and $703,000 as of December 31, 2013 and December31, 2012, respectively. Our share of unconsolidated debt, based on our ownership percentage, was $211,000 and$234,000 as of December 31, 2013 and December 31, 2012, respectively. This loan is guaranteed by one of oursubsidiaries to the extent of our ownership percentage.Off-Balance Sheet ArrangementsThere are no off-balance sheet transactions, arrangements, or obligations (including contingent obligations) thathave, or are reasonably likely to have, a current or future material effect on our financial condition, changes in thefinancial condition, revenue or expense, results of operations, liquidity, capital expenditures, or capital resources.Financial Risk ManagementOur internally developed risk management procedure, seeks to minimize the potentially negative effects ofchanges in foreign exchange rates and interest rates on the results of operations. Our primary exposure to fluctuations inthe financial markets is currently due to changes in foreign exchange rates between U.S and Australia and New Zealand,and interest rates. If our operational focus shifts more to Australia and New Zealand, unrealized foreign currency translation gainsand losses could materially affect our financial position. Historically, we managed our currency exposure by creatingnatural hedges in Australia and New Zealand. This involves local country sourcing of goods and services as well asborrowing in local currencies. During 2012, we deviated somewhat from this practice by purchasing $8.0 million in timedeposits denominated in U.S. dollars and held by an Australian bank. As a consequence, at December 31, 2013, we hold$4.5 million in Australia and $495,000 in New Zealand denominated in U.S. dollars. Also, by paying off our NewZealand debt and paying down on our Australian debt with the proceeds of our TPS in 2007, we added an increasedelement of currency risk to our Company. We believe that this currency risk is mitigated by the long-term nature of thefully subordinated notes and our ability in 2009 to repurchase, at a discount, some of these securities.Our exposure to interest rate risk arises out of our long-term debt obligations. Consistent with our internallydeveloped guidelines, we seek to reduce the negative effects of changes in interest rates by changing the character of theinterest rate on our long-term debt, converting a fixed rate into a variable rate and vice versa. Our internal proceduresallow us to enter into derivative contracts on certain borrowing transactions to achieve this goal. Our Australian CreditFacility provides for floating interest rates based on the Bank Bill Swap Bid Rate (BBSY bid rate), but requires that notless than 75% of the loan be swapped into fixed rate obligations but we have elected to swap 100% of the balance. Although our Bank of America Revolver does not require a fixed interest swap agreement, we entered into an approximatethree-year $31.5 million fixed interest rate swap that has a balance reduction schedule which matches the contractionamortization of the Bank of America Revolver. Effective October 28, 2013, we entered into a three-year $27.9 millionfixed interest rate swap for our Trust Preferred Securities (see Note 13 –Derivative Instruments to our 2013 ConsolidatedFinancial Statements).In accordance with FASB ASC 815-20 – Derivatives and Hedging, we marked our interest swap instruments tomarket on the consolidated balance sheet resulting in a $2.0 million decrease to interest expense during 2013, a $1.1million increase to interest expense during 2012, and a $5.0 increase to interest expense during 2011. InflationWe continually monitor inflation and the effects of changing prices. Inflation increases the cost of goods andservices used. Competitive conditions in many of our markets restrict our ability to recover fully the higher costs ofacquired goods and services through price increases. We attempt to mitigate the impact of inflation by implementingcontinuous process improvement solutions to enhance productivity and efficiency and, as a result, lower costs andoperating expenses. In our opinion, the effects of inflation have been managed appropriately and as a result, have not hada material impact on our operations and the resulting financial position or liquidity.Accounting Pronouncements Adopted During 2013 50 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Please see Note 2 – Summary of Significant Accounting Policies to our 2013 Consolidated Financial Statements.New Accounting PronouncementsPlease see Note 2 – Summary of Significant Accounting Policies to our 2013 Consolidated Financial Statements.Forward-Looking StatementsOur statements in this annual report contain a variety of forward-looking statements as defined by the SecuritiesLitigation Reform Act of 1995. Forward-looking statements reflect only our expectations regarding future events andoperating performance and necessarily speak only as of the date the information was prepared. No guarantees can begiven that our expectation will in fact be realized, in whole or in part. You can recognize these statements by our use ofwords such as, by way of example, “may,” “will,” “expect,” “believe,” and “anticipate” or other similar terminology.These forward-looking statements reflect our expectation after having considered a variety of risks anduncertainties. However, they are necessarily the product of internal discussion and do not necessarily completely reflectthe views of individual members of our Board of Directors or of our management team. Individual Board members andindividual members of our management team may have different view as to the risks and uncertainties involved, and mayhave different views as to future events or our operating performance.Among the factors that could cause actual results to differ materially from those expressed in or underlying ourforward-looking statements are the following:·with respect to our cinema operations:othe number and attractiveness to movie goers of the films released in future periods;othe amount of money spent by film distributors to promote their motion pictures;othe licensing fees and terms required by film distributors from motion picture exhibitors in order toexhibit their films;othe comparative attractiveness of motion pictures as a source of entertainment and willingness and/orability of consumers (i) to spend their dollars on entertainment and (ii) to spend their entertainmentdollars on movies in an outside the home environment;othe extent to which we encounter competition from other cinema exhibitors, from other sources ofoutside of the home entertainment, and from inside the home entertainment options, such as “hometheaters” and competitive film product distribution technology such as, by way of example, cable,satellite broadcast, DVD and VHS rentals and sales, and so called “movies on demand;” andothe extent to and the efficiency with which, we are able to integrate acquisitions of cinema circuits withour existing operations.·with respect to our real estate development and operation activities:othe rental rates and capitalization rates applicable to the markets in which we operate and the quality ofproperties that we own;othe extent to which we can obtain on a timely basis the various land use approvals and entitlementsneeded to develop our properties;othe risks and uncertainties associated with real estate development;othe availability and cost of labor and materials;ocompetition for development sites and tenants;oenvironmental remediation issues;othe extent to which our cinemas can continue to serve as an anchor tenant who will, in turn, beinfluenced by the same factors as will influence generally the results of our cinema operations; andocertain of our activities are in geologically active areas, creating a risk of damage and/or disruption ofreal estate and/or cinema businesses from earthquakes.·with respect to our operations generally as an international company involved in both the development andoperation of cinemas and the development and operation of real estate; and previously engaged for many yearsin the railroad business in the United States: 51 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.oour ongoing access to borrowed funds and capital and the interest that must be paid on that debt and thereturns that must be paid on such capital;othe relative values of the currency used in the countries in which we operate;ochanges in government regulation, including by way of example, the costs resulting from theimplementation of the requirements of Sarbanes-Oxley;oour labor relations and costs of labor (including future government requirements with respect to pensionliabilities, disability insurance and health coverage, and vacations and leave);oour exposure from time to time to legal claims and to uninsurable risks such as those related to ourhistoric railroad operations, including potential environmental claims and health related claims relatingto alleged exposure to asbestos or other substances now or in the future recognized as being possiblecauses of cancer or other health related problems;ochanges in future effective tax rates and the results of currently ongoing and future potential audits bytaxing authorities having jurisdiction over our various companies; andochanges in applicable accounting policies and practices.The above list is not necessarily exhaustive, as business is by definition unpredictable and risky, and subject toinfluence by numerous factors outside of our control such as changes in government regulation or policy, competition,interest rates, supply, technological innovation, changes in consumer taste and fancy, weather, and the extent to whichconsumers in our markets have the economic wherewithal to spend money on beyond-the-home entertainment.Given the variety and unpredictability of the factors that will ultimately influence our businesses and our resultsof operation, it naturally follows that no guarantees can be given that any of our forward-looking statements willultimately prove to be correct. Actual results will undoubtedly vary and there is no guarantee as to how our securities willperform either when considered in isolation or when compared to other securities or investment opportunities.Finally, we undertake no obligation to update publicly or to revise any of our forward-looking statements,whether as a result of new information, future events or otherwise, except as may be required under applicablelaw. Accordingly, you should always note the date to which our forward-looking statements speak.Additionally, certain of the presentations included in this annual report may contain “non-GAAP financialmeasures.” In such case, a reconciliation of this information to our GAAP financial statements will be made available inconnection with such statements. 52 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 7A – Quantitative and Qualitative Disclosure about Market RiskThe Securities and Exchange Commission requires that registrants include information about potential effects ofchanges in currency exchange and interest rates in their Form 10-K filings. Several alternatives, all with some limitations,have been offered. The following discussion is based on a sensitivity analysis, which models the effects of fluctuations incurrency exchange rates and interest rates. This analysis is constrained by several factors, including the following:·it is based on a single point in time.·it does not include the effects of other complex market reactions that would arise from the changes modeled.Although the results of such an analysis may be useful as a benchmark, they should not be viewed as forecasts. At December 31, 2013, approximately 55% and 18% of our assets (determined by the book value of such assets)were invested in assets denominated in Australian dollars (Reading Australia) and New Zealand dollars (Reading NewZealand), respectively, including approximately $34.5 million in cash and cash equivalents. At December 31, 2012,approximately 51% and 18% of our assets were invested in assets denominated in Australian and New Zealand dollars,respectively, including approximately $15.8 million in cash and cash equivalents. Our policy in Australia and New Zealand is to match revenue and expenses, whenever possible, in localcurrencies. As a result, a majority of our expenses in Australia and New Zealand have been procured in localcurrencies. Due to the developing nature of our operations in Australia and New Zealand, our revenue is not yetsignificantly greater than our operating expense. The resulting natural operating hedge has led to a negligible foreigncurrency effect on our earnings. As we continue to progress our acquisition and development activities in Australia andNew Zealand, we cannot assure you that the foreign currency effect on our earnings will be insignificant in the future.Historically, our policy has been to borrow in local currencies to finance the development and construction ofour entertainment complexes in Australia and New Zealand whenever possible. As a result, the borrowings in localcurrencies have provided somewhat of a natural hedge against the foreign currency exchange exposure. Even so,approximately 63% and 48% of our Australian and New Zealand assets (based on book value), respectively, remainsubject to such exposure unless we elect to hedge our foreign currency exchange between the U.S. and Australian andNew Zealand dollars. If the foreign currency rates were to fluctuate by 10% the resulting change in Australian and NewZealand assets would be $14.9 million and $3.7 million, respectively, and the change in annual net income would be$23,000 and $21,000, respectively. At the present time, we have no plan to hedge such exposure. We believe that thiscurrency risk is mitigated by the long-term nature of the fully subordinated notes.We record unrealized foreign currency translation gains or losses that could materially affect our financialposition. We have accumulated unrealized foreign currency translation gains of approximately $65.6 million and $64.6million as of December 31, 2013 and 2012, respectively.Historically, we maintained most of our cash and cash equivalent balances in short-term money marketinstruments with original maturities of six months or less. Some of our money market investments may decline in value ifinterest rates increase. Due to the short-term nature of such investments, a change of 1% in short-term interest rates wouldnot have a material effect on our financial condition. The majority of our loans have fixed interest rates; however, one of our international loans has a variable interestrate and a change of approximately 1% in short-term interest rates would have resulted in approximately $660,000increase or decrease in our 2013 interest expense. 53 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 8 – Financial Statements and Supplementary DataTABLE OF CONTENTSReport of Independent Registered Public Accounting Firm55Consolidated Balance Sheets as of December 31, 2013 and 201256Consolidated Statements of Operations for the Three Years Ended December 31, 201357Consolidated Statements of Comprehensive Income (Loss) for the Three Years Ended December 31,201358Consolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 201359Consolidated Statements of Cash Flows for the Three Years Ended December 31, 201360Notes to Consolidated Financial Statements61 54 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Report of Independent Registered Public Accounting FirmBoard of Directors and StockholdersReading International, Inc.We have audited the accompanying consolidated balance sheets of Reading International, Inc. and subsidiaries(the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations,comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period endedDecember 31, 2013. Our audits of the consolidated financial statements included the financial statement schedule listedin the index appearing under Schedule II. These financial statements and financial statement schedule are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statementsbased on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of Reading International, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results oftheir operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity withaccounting principles generally accepted in the United States of America. Also in our opinion, the related financialstatement schedule, when considered in relation to the consolidated financial statements taken as a whole, present fairly,in all material respects, the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), the Company’s internal control over financial reporting as of December 31, 2013, based on criteriaestablished in the 1992 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO), and our report dated March 7, 2014 expressed an unqualified opinion thereon./s/ GRANT THORNTON LLPLos Angeles, CaliforniaMarch 7, 2014 55 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Reading International, Inc. and SubsidiariesConsolidated Balance Sheets as of December 31, 2013 and 2012(U.S. dollars in thousands) December 31, 20132012ASSETSCurrent Assets:Cash and cash equivalents$37,696 $38,531 Time deposits--8,000 Receivables9,087 8,514 Inventory941 918 Investment in marketable securities55 55 Restricted cash782 2,465 Deferred tax asset3,273 3,659 Prepaid and other current assets3,283 3,576 Total current assets55,117 65,718 Operating property, net191,660 202,778 Land held for sale11,052 --Investment and development property, net74,230 94,922 Investment in unconsolidated joint ventures and entities6,735 7,715 Investment in Reading International Trust I838 838 Goodwill22,159 22,898 Intangible assets, net13,440 15,661 Deferred tax asset, net5,566 8,989 Other assets6,010 9,069 Total assets$386,807 $428,588 LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts payable and accrued liabilities$18,608 $18,909 Film rent payable6,438 6,657 Notes payable – current portion75,538 19,714 Notes payable to related party – current portion--9,000 Taxes payable8,308 15,234 Deferred current revenue11,864 11,587 Other current liabilities6,155 6,032 Total current liabilities126,911 87,133 Notes payable – long-term portion65,009 139,970 Subordinated debt27,913 27,913 Noncurrent tax liabilities12,478 8,859 Other liabilities32,749 33,759 Total liabilities265,060 297,634 Commitments and contingencies (Note 19)Stockholders’ equity:Class A non-voting common stock, par value $0.01, 100,000,000 shares authorized,32,254,199 issued and 21,890,029 outstanding at December 31, 2013 and 31,951,945issued and 21,587,775 outstanding at December 31, 2012225 223 Class B voting common stock, par value $0.01, 20,000,000 shares authorized and1,495,490 issued and outstanding at December 31, 2013 and at December 31, 201215 15 Nonvoting preferred stock, par value $0.01, 12,000 shares authorized and no issuedor outstanding shares at December 31, 2013 and December 31, 2012----Additional paid-in capital137,849 136,754 Accumulated deficit(57,952)(66,993)Treasury shares(4,512)(4,512)Accumulated other comprehensive income41,515 61,369 Total Reading International, Inc. stockholders’ equity117,140 126,856 Noncontrolling interests4,607 4,098 Total stockholders’ equity121,747 130,954 Total liabilities and stockholders’ equity$386,807 $428,588 See accompanying notes to consolidated financial statement. 56 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Reading International, Inc. and SubsidiariesConsolidated Statements of Operations for the Three Years Ended December 31, 2013(U.S. dollars in thousands) Year Ended December 31, 201320122011 Operating revenueCinema$239,418 $234,703 $225,849 Real estate18,803 19,727 19,130 Total operating revenue258,221 254,430 244,979 Operating expenseCinema193,206 190,511 182,215 Real estate10,830 11,163 10,190 Depreciation and amortization15,197 16,049 16,595 General and administrative18,053 16,117 17,432 Impairment expense--1,463 369 Total operating expense237,286 235,303 226,801 Operating income20,935 19,127 18,178 Interest income407 800 1,482 Interest expense(10,444)(17,226)(22,520)Net gain (loss) on sale of assets(56)144 (67)Other income (expense)1,876 (563)1,157 Income (loss) before income tax expense and equity earnings of unconsolidatedjoint ventures and entities12,718 2,282 (1,770)Income tax benefit (expense)(4,942)(4,904)12,330 Income (loss) before equity earnings (loss) of unconsolidated joint venturesand entities7,776 (2,622)10,560 Equity earnings (loss) of unconsolidated joint ventures and entities1,369 1,621 (1,552)Income (loss) before discontinued operations9,145 (1,001)9,008 Income (loss) from discontinued operations, net of tax--(85)232 Gain (loss) on sale of discontinued operations--(320)1,656 Net income (loss)$9,145 $(1,406)$10,896 Net (income) loss attributable to noncontrolling interests(104)492 (940)Net income (loss) attributable to Reading International, Inc. commonshareholders$9,041 $(914)$9,956 Basic income (loss) per common share attributable to Reading International,Inc. shareholders:Earnings (loss) from continuing operations$0.39 $(0.02)$0.36 Earnings (loss) from discontinued operations, net--(0.02)0.08 Basic income (loss) per share attributable to Reading International, Inc.shareholders$0.39 $(0.04)$0.44 Diluted income (loss) per common share attributable to Reading International,Inc. shareholders:Earnings (loss) from continuing operations$0.38 $(0.02)$0.35 Earnings (loss) from discontinued operations, net--(0.02)0.08 Diluted income (loss) per share attributable to Reading International, Inc.shareholders$0.38 $(0.04)$0.43 Weighted average number of shares outstanding–basic23,348,003 23,028,596 22,764,666 Weighted average number of shares outstanding–diluted23,520,271 23,028,596 22,993,135 See accompanying notes to consolidated financial statements. 57 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Reading International, Inc. and SubsidiariesConsolidated Statements of Comprehensive Income (Loss) for the Three Years Ended December 31, 2013(U.S. dollars in thousands) Years Ended December 31, 201320122011Net income (loss)$9,145 $(1,406)$10,896 Cumulative foreign currency adjustment(19,368)4,419 1,028 Reclassification of realized gain on available for sale investments included innet income (loss)--(109)(25)Unrealized income (loss) on available for sale investments--107 (7)Accrued pension service benefit (costs)(593)(1,980)832 Comprehensive income (loss)$(10,816)$1,031 $12,724 Net (income) loss attributable to noncontrolling interests(104)492 (940)Comprehensive (income) loss attributable to noncontrolling interests107 (5)(11)Comprehensive income (loss) attributable to Reading International, Inc.$(10,813)$1,518 $11,773 See accompanying notes to consolidated financial statements. 58 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Reading International, Inc. and SubsidiariesConsolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 2013(In thousands) Common StockAccumulatedReading Class AClass BAdditionalOtherInternationalInc.Total Class AParClass BParPaid-InAccumulatedTreasuryComprehensiveStockholders’NoncontrollingStockholders’ SharesValueSharesValueCapitalDeficitStockIncome/(Loss)EquityInterestsEquityAt January 1, 201121,309 $216 1,495 $15 $134,236 $(76,035)$(3,765)$57,120 $111,787 $852 $112,639 Net income----------9,956 ----9,956 940 10,896 Other comprehensive income, net of tax--------------1,817 1,817 11 1,828 Stock option and restricted stockcompensation expense--4 ----935 ------939 --939 Purchase of treasury shares(172)----------(747)--(747)--(747)Class A common stock issued for stockbonuses and options exercised174 --------------------Cinema sale to noncontrolling shareholder------------------(147)(147)Contributions from noncontrollingshareholders------------------233 233 Distributions to noncontrolling shareholders------------------(654)(654)At December 31, 201121,311 $220 1,495 $15 $135,171 $(66,079)$(4,512)$58,937 $123,752 $1,235 $124,987 Net loss----------(914)----(914)(492)(1,406)Other comprehensive income, net of tax--------------2,432 2,432 5 2,437 Stock option and restricted stockcompensation expense--2 ----1,276 ------1,278 --1,278 Class A common stock issued for stockbonuses and options exercised277 1 ----307 ------308 --308 Contributions from noncontrollingshareholders------------------3,350 3,350 At December 31, 201221,588 $223 1,495 $15 $136,754 $(66,993)$(4,512)$61,369 $126,856 $4,098 $130,954 Net income----------9,041 ----9,041 104 9,145 Other comprehensive loss, net of tax--------------(19,854)(19,854)(107)(19,961)Stock option and restricted stockcompensation expense--2 ----948 ------950 --950 In-kind exchange of stock for the exercise ofoptions, net issued22 --------------------Class A common stock issued for stockbonuses and options exercised280 ------248 ------248 --248 Conversion of noncontrolling interest toequity--------(101)------(101)101 --Contributions from noncontrollingshareholders------------------2,513 2,513 Distributions to noncontrolling shareholders------------------(2,102)(2,102)At December 31, 201321,890 $225 1,495 $15 $137,849 $(57,952)$(4,512)$41,515 $117,140 $4,607 $121,747 See accompanying notes to consolidated financial statement. 59 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. XReading International, Inc. and SubsidiariesConsolidated Statements of Cash Flows for the Three Years Ended December 31, 2013(U.S. dollars in thousands) Year Ended December 31, 201320122011Operating ActivitiesNet income (loss)$9,145 $(1,406)$10,896 Adjustments to reconcile net income (loss) to net cash provided by operating activities:(Income) loss recognized on foreign currency transactions(415)(20)16 Equity (earnings) loss of unconsolidated joint ventures and entities(1,369)(1,621)1,552 Distributions of earnings from unconsolidated joint ventures and entities1,095 1,540 1,119 Loss provision on impairment of asset--1,463 369 (Gain) loss on sale of assets56 176 (1,589)Change in valuation allowance for net deferred tax assets2,198 1,929 (15,028)Gain on sale of marketable securities--(109)(25)Gain on cinema acquisition and settlement(1,359)----Depreciation and amortization15,197 16,384 16,960 Amortization of prior service costs660 304 832 Amortization of above and below market leases413 395 427 Amortization of deferred financing costs954 1,440 1,276 Amortization of straight-line rent574 1,213 782 Stock based compensation expense950 1,278 939 Changes in assets and liabilities:(Increase) decrease in receivables281 (1,449)(1,468)(Increase) decrease in prepaid and other assets(16)1,907 (7)Increase (decrease) in accounts payable and accrued expenses556 1,800 833 Increase in film rent payable133 435 361 Increase (decrease) in taxes payable(3,294)(2,965)908 Increase (decrease) in deferred revenue and other liabilities(576)2,802 5,100 Net cash provided by operating activities25,183 25,496 24,253 Investing ActivitiesCash paid for acquisitions--(5,510)(3,917)Acquisition deposit paid----(200)Cash received from cinema acquisition1,936 ----Purchases of and additions to operating property(20,082)(8,213)(5,459)Change in restricted cash1,609 (6)(168)Purchase of notes receivable--(1,800)(2,784)Proceeds from notes receivable2,000 ----Sale of marketable securities--2,974 143 Distributions of investment in unconsolidated joint ventures and entities395 382 --Proceeds from sale of property--14,078 6,750 Purchase of time deposits--(8,000)--Proceeds from time deposits8,000 ----Cinema sale proceeds from noncontrolling shareholder----1,867 Net cash used in investing activities(6,142)(6,095)(3,768)Financing ActivitiesRepayment of long-term borrowings(28,121)(62,602)(126,780)Proceeds from borrowings12,500 47,007 105,311 Capitalized borrowing costs(563)(782)(774)Repurchase of Class A Nonvoting Common Stock----(747)Proceeds from the exercise of stock options248 308 --Noncontrolling interest contributions263 3,350 233 Noncontrolling interest distributions(2,102)--(654)Net cash used in financing activities(17,775)(12,719)(23,411)Effect of exchange rate on cash(2,101)252 (45) Increase (decrease) in cash and cash equivalents(835)6,934 (2,971)Cash and cash equivalents at the beginning of the period38,531 31,597 34,568 Cash and cash equivalents at the end of the period$37,696 $38,531 $31,597 Supplemental DisclosuresCash paid during the period for:Interest on borrowings$6,953 $14,526 $16,957 Income taxes5,903 5,666 2,688 Non-Cash TransactionsContribution from noncontrolling shareholder in exchange for debt reduction - related party$2,250 $--$--Conversion of noncontrolling interest to equity101 ----In-kind exchange of stock for the exercise of options, net301 ----Contribution from noncontrolling shareholder from bonus accrual--255 --Foreclosure of a mortgage note to obtain title of the underlying property----1,984 See accompanying notes to consolidated financial statements. 60 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Reading International, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2013_____________________________________________________________________________________________________________________________________ Note 1 – Nature of Business Reading International, Inc., a Nevada corporation (“RDI” and collectively with our consolidated subsidiaries andcorporate predecessors, the “Company,” “Reading” and “we,” “us,” or “our”), was incorporated in 1999, and, followingthe consummation of a consolidation transaction on December 31, 2001 (the “Consolidation”), is now the owner of theconsolidated businesses and assets of Reading Entertainment, Inc. (“RDGE”), Craig Corporation (“CRG”), and CitadelHolding Corporation (“CDL”). Our businesses consist primarily of:·the development, ownership and operation of multiplex cinemas in the United States, Australia, and NewZealand; and·the development, ownership, and operation of retail and commercial real estate in Australia, New Zealand, andthe United States.Note 2 – Summary of Significant Accounting PoliciesBasis of ConsolidationThe consolidated financial statements of RDI and its subsidiaries include the accounts of RDGE, CRG, andCDL. Also consolidated are Australia Country Cinemas Pty, Limited (“ACC”), a company in which we own a 75%interest and whose only assets are our leasehold cinemas in Townsville and Dubbo, Australia, Sutton Hill Properties, LLC,a company in which we own a 75% interest and whose only asset is the fee interest in the Cinemas 1, 2, 3, and ShadowView Land and Farming, LLC in which we own a 50% controlling membership interest and whose only asset is a 202 acreland parcel in Coachella, California.Our investment interests are accounted for as unconsolidated joint ventures and entities, and accordingly, ourunconsolidated joint ventures and entities in 20% to 50% owned companies are accounted for on the equitymethod. These investment interests include our·25% undivided interest in the unincorporated joint venture that owns 205-209 East 57th Street Associates, LLC(Place 57) a limited liability company formed to redevelop our former cinema site at 205 East 57th Street inManhattan;·33.3% undivided interest in the unincorporated joint venture that owns the Mt. Gravatt cinema in a suburb ofBrisbane, Australia;·33.3% undivided interest in Rialto Distribution, an unincorporated joint venture engaged in the business ofdistributing art film in New Zealand and Australia; and·50% undivided interest in the unincorporated joint venture that owns Rialto Cinemas.Refinancing Long-Term DebtAustralian Credit FacilityOur Australian NAB Corporate Term Loan matures on June 30, 2014. Accordingly, the outstanding balance ofthis debt of $56.7 million (AUS$63.5 million) is classified as current on our December 31, 2013 balance sheet. TheAustralian NAB Corporate Term Loan is secured by the majority of our theater and entertainment-themed retail center(“ETRC”) properties in Australia. While no assurances can be given that we will be successful, we are currently in theprocess of renewing this loan and anticipate that the refinancing will be completed at the latest by May 31, 2014. Cinemas 1, 2, 3 Term Loan 61 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our Cinemas 1, 2, 3 Term Loan matures on June 27, 2014. Accordingly, the outstanding balance of this debt of$15.0 million is classified as current on our December 31, 2013 balance sheet. While no assurances can be given that wewill be successful, we are currently in the process of negotiating an extension of this loan.Liberty Theatre Term LoansOn May 29, 2013, we replaced our Liberty Theater Term Loan with a loan securitized by our Orpheum andMinetta Lane theaters, thus releasing the Royal George from the securitization and leaving it unencumbered. This newloan, called the Minetta and Orpheum Theatres Loan, has a note balance of $7.5 million. See Note 12 – Notes Payable.U.S. Credit FacilityOn October 31, 2012, we replaced our GE Capital Term Loan of $27.7 million with a new credit facility fromBank of America of $30.0 million with an interest rate of between 2.50% and 3.00% above LIBOR and an expiration dateof October 31, 2017. In addition, Bank of America increased our existing $3.0 million line of credit to $5.0 million. OnMarch 25, 2013, Bank of America extended the borrowing limit on our BofA Revolver from $30.0 million to $35.0million. See Note 12 – Notes Payable.Cash PositionOur cash position at December 31, 2013 was $37.7 million including $17.9 million in the U.S., $12.1 million inAustralia, and $7.7 million in New Zealand. As part of our main credit facilities in Australia, New Zealand and the U.S.,we are subject to certain debt covenants which limit the transfer or use of cash outside of the various regional subsidiariesin which the cash is held. As such, at December 31, 2013, we have approximately $15.8 million of cash worldwide that isnot restricted by loan covenants.At December 31, 2013, we had undrawn funds of $4.5 million (AUS$5.0 million) available under our NAB lineof credit in Australia, $9.9 million (NZ$12.0 million) available under our New Zealand Corporate Credit facility, and $5.0million available under our BofA Revolver in the U.S. Accordingly, we believe that we have sufficient borrowingcapacity under our various credit facilities, together with our $37.7 million cash balance, to meet our anticipated short-term working capital requirements.Accounting PrinciplesOur consolidated financial statements have been prepared in accordance with accounting principles generallyaccepted in the United States of America (“US GAAP”).Cash and Cash EquivalentsWe consider all highly liquid investments with original maturities of three months or less when purchased to becash equivalents for which cost approximates fair value.Time DepositsTime deposits are cash depository investments in which the original maturity of the investments is greater than90 days. During May 2012, we purchased $8.0 million in U.S. dollar time deposits in Australia which matured on January3, 2013 having an interest rate of 0.48%. On December 31, 2013, we had the following funds in U.S. dollars: in Australia,$4.6 million and in New Zealand, $495,000.ReceivablesOur receivables balance is composed primarily of credit card receivables, representing the purchase price oftickets, concessions, or coupon books sold at our various businesses. Sales charged on customer credit cards are collectedwhen the credit card transactions are processed. The remaining receivables balance is primarily made up of the goods andservices tax (“GST”) refund receivable from our Australian taxing authorities and the management fee receivable from themanaged cinemas. We have no history of significant bad debt losses and we have established an allowance for accountsthat we deem uncollectible. 62 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. InventoryInventory is composed of concession goods used in theater operations and is stated at the lower of cost (first-in,first-out method) or net realizable value.Investment in Marketable SecuritiesWe account for investments in marketable debt and equity securities in accordance with Financial AccountingStandards Board (“FASB”) Accounting Standards Codification (“ASC”) 320-10 - Investments—Debt and EquitySecurities (“ASC 320-10”). Our investment in Marketable Securities includes equity instruments that are classified asavailable for sale and are recorded at market using the specific identification method. In accordance with ASC 320-10,available for sale securities are carried at their fair market value and any difference between cost and market value isrecorded as unrealized gain or loss, net of income taxes, and is reported as accumulated other comprehensive income inthe consolidated statement of stockholders’ equity. Premiums and discounts of any debt instruments are recognized ininterest income using the effective interest method. Realized gains and losses and declines in value expected to be other-than-temporary on available for sale securities are included in other expense. We evaluate our available for sale securitiesfor other than temporary impairments at the end of each reporting period. These investments have a cumulativeunrealized gain of $9,000 included in other comprehensive income at December 31, 2013. For the years ended December31, 2013, 2012, and 2011, our net unrealized losses were $0, $2,000, and $32,000, respectively. The cost of securitiessold is based on the specific identification method. Interest and dividends on securities classified as available for sale areincluded in interest income.Restricted CashWe classify restricted cash as those cash accounts for which the use of funds is restricted by contract or bankcovenant. At December 31, 2013 and 2012, our restricted cash balance was $782,000 and $2.5 million, respectively. Fair Value of Financial InstrumentsThe carrying amounts of our cash and cash equivalents, accounts receivable, restricted cash, and accountspayable approximate fair value due to their short-term maturities. See Note 16 – Fair Value of Financial Instruments.Derivative Financial InstrumentsIn accordance with FASB ASC 815-20 – Derivatives and Hedging (“ASC 815-20”), we carry all derivativefinancial instruments on our consolidated balance sheets at fair value. Derivatives are generally executed for interest ratemanagement purposes but are not designated as hedges in accordance with ASC 815-20. Therefore, changes in marketvalues are recognized in current earnings.Operating propertyOperating property consists of land, buildings and improvements, leasehold improvements, fixtures andequipment which we use to derive operating income associated with our two business segments, cinema exhibition andreal estate. Buildings and improvements, leasehold improvements, fixtures and equipment initially recorded at the lowerof cost or fair market value and depreciated over the useful lives of the related assets. In accordance with US GAAP, landis not depreciated.Investment and Development PropertyInvestment and development property consists of land, new buildings and improvements under development,and their associated capitalized interest and other development costs that we are either holding for development,currently developing, or holding for investment appreciation purposes. These properties are initially recorded at thelower of cost or fair market value. Within investment and development property are building and improvement costsdirectly associated with the development of potential cinemas (whether for sale or lease), the development ofentertainment themed retail centers (“ETRCs”), or other improvements to real property. As incurred, we expense start-upcosts (such as pre-opening cinema advertising and training expense) and other costs 63 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. not directly related to the acquisition and development of long-term assets. We cease capitalization on a developmentproperty when the property is complete and ready for its intended use, or if activities necessary to get the property readyfor its intended use have been substantially curtailed. During the year-ended December 31, 2009, we decided to curtailour current development progress on certain Australian and New Zealand land development projects. As a result, theseproperties are considered held for development and we have not capitalized interest for these projects and will not do so,until the development work recommences. Incident to the development of our Burwood property, in late 2006, we began various fill and earth movingoperations. In late February 2007, it became apparent that our cost estimates with respect to site preparation were low, asthe extent of the contaminated soil present at the site, a former brickworks site, was greater than we had originallybelieved. As we were not the source of this contamination, we are not currently under any legal obligation to remove thiscontaminated soil from the site. However, as a practical matter, we intend to address these issues in connection with ourplanned redevelopment of the site as a mixed-use retail, entertainment, commercial and residential complex. As ofDecember 31, 2013, we estimate that the total site preparation costs associated with the removal of this contaminated soilwill be $15.2 million (AUS$17.1 million) and as of that date we had incurred a total of $7.4 million (AUS$8.3 million) ofthese costs. In accordance with FASB ASC 410-30-25 – Environmental Obligations, contamination clean-up costs thatimprove the property from its original acquisition state are capitalized as part of the property’s overall development costs.Accounting for the Impairment of Long Lived AssetsWe review long-lived assets, including goodwill and intangibles, for impairment as part of our annual budgetingprocess, at the beginning of the fourth quarter, and whenever events or changes in circumstances indicate that the carryingamount of the asset may not be fully recoverable. Pursuant to FASB ASC 360-35, we review internal management reports on a monthly basis as well as monitoringcurrent and potential future competition in film markets for indications of potential impairment. We evaluate our long-lived assets using historical and projected data of cash flow as our primary indicator of potential impairment and we takeinto consideration the seasonality of our business. If the sum of the estimated, undiscounted future cash flows is less thanthe carrying amount of the asset, then impairment is recognized for the amount by which the carrying value of the assetexceeds its estimated fair value based on an appraisal or a discounted cash flow calculation. For certain non-income producing properties, we obtain appraisals or other evidence to evaluate whether thereare impairment indicators for these assets. Based on calculations of current value from appraisals and a sales contract, werecorded impairment losses of $1.5 million and $369,000 relating to certain of our property and cinema locations for theyears ended December 31, 2012 and 2011, respectively. No impairment losses were recorded in 2013. For a furtherexplanation of our 2012 impairment losses see below under the heading “Coachella impairment” and see Note 7 –Investment and Development Property to our 2013 Consolidated Financial Statements.Pursuant to FASB ASC 350-35, goodwill and intangible assets are evaluated annually on a reporting unitbasis. The impairment evaluation is based on the present value of estimated future cash flows of the segment plus theexpected terminal value. There are significant assumptions and estimates used in determining the future cash flows andterminal value. The most significant assumptions include our cost of debt and cost of equity assumptions that comprisethe weighted average cost of capital for each reporting unit. Accordingly, actual results could vary materially from suchestimates. There was no impairment for the goodwill and intangible assets for the years ended December 31, 2013, 2012,and 2011, respectively.Variable Interest EntityOur determination of the appropriate accounting method with respect to our investment in Reading InternationalTrust I, which is considered a Variable Interest Entity (“VIE”), is based on FASB ASC 810-10. We account for this VIE, ofwhich we are not the primary beneficiary, under the equity method of accounting.We determine if an entity is a VIE under FASB ASC 810-10 based on several factors, including whether theentity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additionalsubordinated financial support. We make judgments regarding the sufficiency of the equity at risk based 64 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. first on a qualitative analysis, then a quantitative analysis, if necessary. In a quantitative analysis, we incorporate variousestimates, including estimated future cash flows, asset hold periods and discount rates, as well as estimates of theprobabilities of various scenarios occurring. If the entity is a VIE, we then determine whether we consolidate the entity asthe primary beneficiary. We determine whether an entity is a VIE and, if so, whether it should be consolidated byutilizing judgments and estimates that are inherently subjective. If we made different judgments or utilized differentestimates in these evaluations, it could result in differing conclusions as to whether or not an entity is a VIE and whetheror not to consolidate such entity. Our investments in unconsolidated entities in which we have the ability to exercisesignificant influence over operating and financial policies, but do not control, or entities which are variable interestentities in which we are not the primary beneficiary are accounted for under the equity method.We carry our investment in the Reading International Trust I using the equity method of accounting because wehave the ability to exercise significant influence (but not control) over operating and financial policies of the entity. Weeliminate transactions with an equity method entity to the extent of our ownership in such an entity. Accordingly, ourshare of net income (loss) of this equity method entity is included in consolidated net income (loss). We have no implicitor explicit obligation to further fund our investment in Reading International Trust I.Goodwill and Intangible AssetsWe use the purchase method of accounting for all business combinations. Goodwill and intangible assets withindefinite useful lives are not amortized, but instead, tested for impairment at least annually. Prior to conducting ourgoodwill impairment analysis, we assess long-lived assets for impairment in accordance with FASB ASC 360-15 -Impairment or Disposal of Long-Lived Assets (“ASC 360-15”). We then perform the impairment analysis at the reportingunit level (one level below the operating segment level) (see Note 10 – Goodwill and Intangibles) as defined by FASBASC 350-35 – Goodwill Subsequent Measurement (“ASC 350-35”). This analysis requires management to make a seriesof critical assumptions to: (1) evaluate whether any impairment exists; and (2) measure the amount of impairment. Weestimate the fair value of our reporting units as compared with their current book value. If the estimated fair value of areporting unit is less than the book value, then impairment is deemed to have occurred. In estimating the fair value of ourreporting units, we primarily use the income approach (which uses forecasted, discounted cash flows to estimate the fairvalue of the reporting unit). Discontinued Operations and Properties Held for SaleIn accordance with ASC 360-15, the revenue, expenses and net gain on dispositions of operating properties andthe revenue and expenses on properties classified as held for sale are reported in the consolidated statements of operationsas discontinued operations for all periods presented through the date of the respective disposition. The net gain (loss) ondisposition is included in the period the property is sold. In determining whether the income and loss and net gain ondispositions of operating properties is reported as discontinued operations, we evaluate whether we have any significantcontinuing involvement in the operations, leasing or management of the sold property in accordance with FASB ASC205-20 – Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”). If we were to determine thatthere was any significant continuing involvement, the income and loss and net gain on dispositions of the operatingproperty would not be recorded in discontinued operations.A property is classified as held for sale when certain criteria, as set forth under ASC 360-15, are met. At suchtime, we present the respective assets and liabilities related to the property held for sale separately on the balance sheetand cease to record depreciation and amortization expense. Properties held for sale are reported at the lower of theircarrying value or their estimated fair value less the estimated costs to sell. For a description of the properties previouslyheld for sale see Note 9 – Transfer of Held for Sale Real Estate to Continuing Operations and Related Items. These assettransfers from held for sale to operating resulted in a reclassification of their operating results which is reflected in ourDecember 31, 2013, 2012, and 2011 Consolidated Statements of Operations.Revenue RecognitionRevenue from cinema ticket sales and concession sales are recognized when sold. Revenue from gift certificatesales is deferred and recognized when the certificates are redeemed. Rental revenue is recognized on a straight-line basisin accordance with FASB ASC 840-20-25 – Leases Having Both Scheduled Rent Increases and Contingent Rents (“ASC840-20-25”). 65 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Deferred Leasing/Financing CostsDirect costs incurred in connection with obtaining tenants and/or financing are amortized over the respectiveterm of the lease or loan on a straight-line basis. Direct costs incurred in connection with financing are amortized over therespective term of the loan utilizing the effective interest method, or straight-line method if the result is not materiallydifferent. In addition, interest on loans with increasing interest rates and scheduled principal pre-payments are alsorecognized on the effective interest method.Advertising ExpenseWe expense our advertising as incurred. The amount of our advertising expense was $3.4 million, $3.8 million,and $3.8 million for the years ended December 2013, 2012, and 2011, respectively.Legal Settlement Income/ExpenseFor the years ended December 31, 2013, 2012, and 2011, we recorded gains/(losses) on the settlement oflitigation of ($285,000), ($194,000), and $0, respectively, included in other income (expense). Also included in otherincome/expense for the year ended December 31, 2013 was a $1.4 million net gain on acquisition and settlement (seeNote 8 – Acquisitions, Disposals, and Assets Held for Sale).Depreciation and AmortizationDepreciation and amortization are provided using the straight-line method over the estimated useful lives of theassets. The estimated useful lives are generally as follows:Building and improvements15-40 yearsLeasehold improvementShorter of the life of the lease or useful life of the improvementTheater equipment7 yearsFurniture and fixtures5 – 10 yearsTranslation of Non-U.S. Currency AmountsThe financial statements and transactions of our Australian and New Zealand cinema and real estate operationsare reported in their functional currencies, namely Australian and New Zealand dollars, respectively, and are thentranslated into U.S. dollars. Assets and liabilities of these operations are denominated in their functional currencies andare then translated at exchange rates in effect at the balance sheet date. Revenue and expenses are translated at theaverage exchange rate for the reporting period. Translation adjustments are reported in “Accumulated OtherComprehensive Income,” a component of Stockholders’ Equity. The carrying value of our Australian and New Zealand assets fluctuates due to changes in the exchange ratebetween the U.S. dollar and the Australian and New Zealand dollars. The exchange rates of the U.S. dollar to theAustralian dollar were $0.8929 and $1.0393 as of December 31, 2013 and 2012, respectively. The exchange rates of theU.S. dollar to the New Zealand dollar were $0.8229 and $0.8267 as of December 31, 2013 and 2012, respectively.Income TaxesWe account for income taxes under FASB ASC 740-10 – Income Taxes (“ASC 740-10”), which prescribes anasset and liability approach. Under the asset and liability method, deferred tax assets and liabilities are recognized for theexpected future tax consequences attributable to differences between the financial statement carrying amounts of existingassets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax ratesexpected to apply to taxable income in the years in which those temporary differences are expected to be recovered orsettled. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to berealized. Income tax expense (benefit) is the tax payable (refundable) for the period and the change during the period indeferred tax assets and liabilities. 66 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise weconsider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projectedfuture taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, webegin with historical results adjusted for the results of discontinued operations and changes in accounting policies. Wethen include assumptions about the amount of projected future state, federal and foreign pretax operating income, thereversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. Theseassumptions require significant judgment about the forecasts of future taxable income and are consistent with the plansand estimates we use to manage the underlying businesses. In evaluating the objective evidence that historical resultsprovide, we consider three years of cumulative operating income (loss). In the event we were to determine that we wouldbe able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make anadjustment to the valuation allowance, which would reduce the provision for income taxes.ASC 740-10 provides that a tax benefit from an uncertain tax position may be recognized when it is more likelythan not that the position will be sustained upon examination, including resolutions of any related appeals or litigationprocesses, based on the technical merits.We recognize tax liabilities in accordance with ASC 740-10 and we adjust these liabilities when our judgmentchanges as a result of the evaluation of new information not previously available. Due to the complexity of some of theseuncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of thetax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in whichthey are determined.Earnings Per ShareBasic earnings per share is calculated using the weighted average number of shares of Class A and Class B Stockoutstanding during the years ended December 31, 2013, 2012, and 2011, respectively. Diluted earnings per share iscalculated by dividing net earnings available to common stockholders by the weighted average common sharesoutstanding plus the dilutive effect of stock options and unvested restricted stock. We had issued stock options topurchase 709,850, 672,350, and 622,350 shares of Class A Common Stock at December 31, 2013, 2012, and 2011,respectively, at a weighted average exercise price of $6.66, $6.24, and $5.65 per share, respectively. Stock options topurchase 185,100, 185,100, and 185,100 shares of Class B Common Stock were outstanding at the years ended December31, 2013, 2012, and 2011, respectively, at a weighted average exercise price of $9.90, $9.90, and $9.90 per share,respectively. In accordance with FASB ASC 260-10 – Earnings Per Share (“ASC 260-10”), for any years that we recordlosses from continuing operations before discontinued operations, the effect of the stock options and restricted stock areanti-dilutive and accordingly excluded from the diluted earnings per share computation (see Note 4 – Earnings (Loss) PerShare).Real Estate Purchase Price AllocationWe allocate the purchase price to tangible assets of an acquired property (which includes land, building andtenant improvements) based on the estimated fair values of those tangible assets assuming the building wasvacant. Estimates of fair value for land are based on factors such as comparisons to other properties sold in the samegeographic area adjusted for unique characteristics. Estimates of fair values of buildings and tenant improvements arebased on present values determined based upon the application of hypothetical leases with market rates and terms.We record above-market and below-market in-place lease values for acquired properties based on the presentvalue (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) thecontractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates forthe corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. Weamortize any capitalized above-market lease values as a reduction of rental income over the remaining non-cancelableterms of the respective leases. We amortize any capitalized below-market lease values as an increase to rental incomeover the initial term and any fixed-rate renewal periods in the respective leases. 67 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We measure the aggregate value of other intangible assets acquired based on the difference between (i) theproperty valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as ifvacant. Management’s estimates of value are made using methods similar to those used by independent appraisers (e.g.,discounted cash flow analysis). Factors considered by management in its analysis include an estimate of carrying costsduring hypothetical expected lease-up periods considering current market conditions, and costs to execute similarleases. We also consider information obtained about each property as a result of our pre-acquisition due diligence,marketing, and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimatingcarrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentalsat market rates during the expected lease-up periods. Management also estimates costs to execute similar leases includingleasing commissions, legal, and other related expenses to the extent that such costs are not already incurred in connectionwith a new lease origination as part of the transaction.The total amount of other intangible assets acquired is further allocated to in-place lease values and customerrelationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease andour overall relationship with that respective tenant. Characteristics considered by management in allocating these valuesinclude the nature and extent of our existing business relationships with the tenant, growth prospects for developing newbusiness with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under theterms of the lease agreement), among other factors.We amortize the value of in-place leases to expense over the initial term of the respective leases. The value ofcustomer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respectiveleases, but in no event may the amortization period for intangible assets exceed the remaining depreciable life of thebuilding. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customerrelationship intangibles would be charged to expense.These assessments have a direct impact on revenue and net income. If we assign more fair value to the in-placeleases versus buildings and tenant improvements, assigned costs would generally be depreciated over a shorter period,resulting in more depreciation expense and a lower net income on an annual basis. Likewise, if we estimate that more ofour leases in-place at acquisition are on terms believed to be above the current market rates for similar properties, thecalculated present value of the amount above market would be amortized monthly as a direct reduction to rental revenueand ultimately reduce the amount of net income.Business Acquisition ValuationsThe assets and liabilities of businesses acquired are recorded at their respective preliminary fair values as of theacquisition date in accordance with FASB ASC 805-10 – Business Combinations (“ASC 805-10”). Upon the acquisitionof real properties, we allocate the purchase price of such properties to acquired tangible assets, consisting of land andbuilding, and identified intangible assets and liabilities, consisting of the value of above market and below market leasesand the value of in-place leases, based in each case on their fair values. We use independent appraisals to assist in thedetermination of the fair values of the tangible assets of an acquired property (which includes land and building). Wealso perform valuations and physical counts of property, plant and equipment, valuations of investments and theinvoluntary termination of employees, as necessary. Costs in excess of the net fair values of assets and liabilities acquiredare recorded as goodwill.We record and amortize above-market and below-market operating leases assumed in the acquisition of abusiness in the same way as those under real estate acquisitions.The fair values of any other intangible assets acquired are based on the expected discounted cash flows of theidentified intangible assets. Finite-lived intangible assets are amortized using the straight-line method of amortizationover the expected period in which those assets are expected to contribute to our future cash flows. We do not amortizeindefinite lived intangibles and goodwill. Fair Value of Financial InstrumentsFASB ASC 820-10 – Fair Value Measurements and Disclosures (“ASC 820-10”) defines fair value, establishes aframework for measuring fair value in GAAP and provides for expanded disclosure about fair value 68 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. measurements. ASC 820-10 applies to all other accounting pronouncements that require or permit fair valuemeasurements. The fair value of our financial assets and liabilities are disclosed in Note 16 – Fair Value of FinancialInstruments to our consolidated financial statements. We generally determine or calculate the fair value of financialinstruments using quoted market prices in active markets when such information is available or using appropriate presentvalue or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rateinformation for similar types of instruments while estimating for non-performance and liquidity risk. These techniquesare significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cashflow.The financial assets and liabilities recorded at fair value in our consolidated financial statements are marketablesecurities and interest rate swaps/cap. The carrying amounts of our cash and cash equivalents, restricted cash andaccounts payable approximate fair value due to their short-term maturities. The remaining financial assets and liabilitiesthat are only disclosed at fair value are comprised of notes payable, TPS, and other debt instruments. We estimated thefair value of our secured mortgage notes payable, our unsecured notes payable, TPS and other debt instruments byperforming discounted cash flow analyses using an appropriate market discount rate. We calculated the market discountrate by obtaining period-end treasury rates for fixed-rate debt, or LIBOR rates for variable-rate debt, for maturities thatcorrespond to the maturities of our debt adding an appropriate credit spreads derived from information obtained fromthird-party financial institutions. These credit spreads take into account factors such as our credit standing, the maturityof the debt, whether the debt is secured or unsecured, and the loan-to-value ratios of the debt.Assets and liabilities typically recorded at fair value on a non-recurring basis to which ASC 820-10 appliesinclude:·Non-financial assets and liabilities initially measured at fair value in an acquisition or business combination;·Long-lived assets measured at fair value due to an impairment assessment under ASC 360-15; and·Asset retirement obligations initially measured under FASB ASC 410-20 – Asset Retirement Obligations (“ASC410-20”).Use of EstimatesThe preparation of financial statements in conformity with US GAAP requires us to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actualresults could differ from those estimates.Accounting Pronouncements Adopted During 2013No new pronouncements were adopted during the year ended December 31, 2013.New Accounting PronouncementsIn July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a NetOperating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"). ASU 2013-11 iseffective for the first interim or annual period beginning on or after December 15, 2013 with early adoption permitted.ASU 2013-11 amends ASC Topic 740, Income Taxes, to provide guidance and reduce diversity in practice on thefinancial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss,or a tax credit carryforward exists. We do not anticipate that the application of this standard will impact our company. 69 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 3 – Stock Based Compensation and Employee Stock Option PlanStock Based CompensationAs part of his compensation package, Mr. James J. Cotter, our Chairman of the Board and Chief ExecutiveOfficer, was granted $750,000, $950,000, and $750,000, respectively, of restricted Class A Non-voting Common Stock(“Class A Stock”) for each of the years ended December 31, 2013, 2012, and 2011, respectively. The 2013, 2012, and2011 stock grants of 125,209, 217,890, and 155,925 shares, respectively, were granted with stock grant prices of $5.99,$4.36, and $4.81, respectively. Mr. Cotter’s stock compensation is granted fully vested with a five-year restriction onsale. As of December 31, 2013, the 2013 stock grant had not yet been issued to Mr. Cotter. During 2013, we issued to Mr.Cotter 217,890 of Class A Stock for his 2012 vested stock grants which had a stock grant price of $4.36 and a grant datefair value of $950,000. During 2012, we issued 9,680 shares as a one-time stock grant of Class A Stock to our employees valued at$44,000. During the years ended December 31, 2013, 2012, and 2011, we recorded compensation expense of $750,000,$994,000, and $750,000, respectively, for the vesting of all our restricted stock grants. The following table details thegrants and vesting of restricted stock to our employees (dollars in thousands):Non-VestedRestricted StockWeightedAverage FairValue at GrantDateOutstanding – January 1, 2011--$--Granted155,925 750 Vested(155,925)(750)Outstanding – December 31, 2011--$--Granted227,570 994 Vested(227,570)(994)Outstanding – December 31, 2012--$--Granted125,209 750 Vested(125,209)(750)Outstanding – December 31, 2013--$-- Employee Stock Option Plan We have a long-term incentive stock option plan that provides for the grant to eligible employees, directors, andconsultants of incentive or nonstatutory options to purchase shares of our Class A Stock. Our 1999 Stock Option Planexpired in November 2009, and was replaced by our new 2010 Stock Incentive Plan, which was approved by the holdersof our Class B Voting Common Stock in May 2010. FASB ASC 718-10 – Stock Compensation (“ASC 718-10”) requires that all stock-based compensation berecognized as an expense in the financial statements and that such costs be measured at the fair value of the award. Weestimate the valuation of stock based compensation using a Black-Scholes option-pricing model.When our tax deduction from an option exercise exceeds the compensation cost resulting from the option, a taxbenefit is created. ASC 718-10 requires that excess tax benefits related to stock option exercises be reflected as financingcash inflows instead of operating cash inflows. For the years ended December 31, 2013, 2012, and 2011, there was noimpact to the consolidated statements of cash flows because there were no recognized tax benefits during these periods.ASC 718-10 requires companies to estimate forfeitures. Based on our historical experience, we did not estimateany forfeitures for the options granted during the years ended December 31, 2013, 2012, and 2011.In accordance with ASC 718-10, we estimate the fair value of our options using the Black-Scholes option-pricingmodel, which takes into account assumptions such as the dividend yield, the risk-free interest rate, the 70 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. expected stock price volatility, and the expected life of the options. The dividend yield is excluded from the calculation,as it is our present intention to retain all earnings. We estimated the expected stock price volatility based on ourhistorical price volatility measured using daily share prices back to the inception of the Company in its current formbeginning on December 31, 2001. We estimate the expected option life based on our historical share option exerciseexperience during this same period. We expense the estimated grant date fair values of options issued on a straight-linebasis over their vesting periods.No options were granted during 2011. For the 175,000 and 206,000 options granted during 2013 and 2012,respectively, we estimated the fair value of these options at the date of grant using a Black-Scholes option-pricing modelwith the following weighted average assumptions:20132012Stock option exercise price$6.19$5.94Risk-free interest rate2.25%1.71%Expected dividend yield----Expected option life5.00 yrs.7.20 yrs.Expected volatility31.80%32.15%Weighted average fair value$1.98$2.62 Using the above assumptions and based on our use of the modified prospective method, we recorded $199,000,$285,000, and $189,000 in compensation expense for the total estimated grant date fair value of stock options that vestedduring the years ended December 31, 2013, 2012, and 2011, respectively. At December 31, 2013, total unrecognizedestimated compensation cost related to non-vested stock options granted was $432,000 which is expected to berecognized over a weighted average vesting period of 2.15 years.For the stock options exercised during the years ended December 31, 2013 and 2012, we issued 62,500 and95,000 shares of Class A Stock for cash to employees of the corporation under this stock based compensation plan withweighted average exercise prices of $3.98 and $4.68, respectively. No options were exercised in 2011. The total realizedvalue of stock options exercised during the years ended December 31, 2013 and 2012 was $133,000 and $136,000,respectively. We recorded cash received from stock options exercised of $248,000 and $308,000 during the years endedDecember 31, 2013 and 2012, respectively. In 2013, 75,000 options were exercised having a realized value of $124,000for which we did not receive any cash but the employee elected to exchange 53,136 personally owned shares of thecompany with a market price of $5.66 for the 75,000 shares based on an exercise price of $4.01 for the related options. In2012, 41,000 options were exercised having a realized value of $103,000 for which we did not receive any cash but theemployee elected to receive the net incremental number of in-the-money shares of 15,822 based on an exercise price of$4.01 and a market price of $6.53. At December 31, 2013, the intrinsic, unrealized value of all options outstanding,vested and expected to vest, was $939,000 of which 68.8% were currently exercisable.Pursuant to both our 1999 Stock Option Plan and our 2010 Stock Incentive Plan, all stock options expire withinten years of their grant date. The aggregate total number of shares of Class A Stock and Class B voting common stockauthorized for issuance under our 2010 Stock Option Plan is 1,250,000. At the time that options are exercised, at thediscretion of management, we will either issue treasury shares or make a new issuance of shares to the employee or boardmember. Dependent on the grant letter to the employee or board member, the required service period for option vesting isbetween zero and four years. We had the following stock options outstanding and exercisable: 71 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. WeightedWeighted Average Common StockAverage ExerciseCommon StockPrice of OptionsPrice of OptionsExercisableExercisable OutstandingOutstandingOptionsOptions Class AClass BClass AClass BClass AClass BClass AClass BOutstanding-January 1, 2011622,350 185,100 $5.65 $9.90 449,750 150,000 $6.22 $10.24 No activity during the period----$--$--Outstanding-December 31, 2011622,350 185,100 $5.65 $9.90 544,383 167,550 $5.86 $10.05 Granted206,000 --$5.94 $--Exercised(136,000)--$4.68 $--Expired(20,000)--$3.75 $--Outstanding - December 31, 2012672,350 185,100 $6.24 $9.90 546,350 185,100 $6.26 $9.90 Granted175,000 --$6.19 $--Exercised(137,500)--$4.00 $--Outstanding - December 31, 2013709,850 185,100 $6.66 $9.90 490,350 185,100 $6.85 $9.90 The weighted average remaining contractual life of all options outstanding, vested and expected to vest, atDecember 31, 2013 and 2012 were approximately 4.70 and 5.32 years, respectively. The weighted average remainingcontractual life of the exercisable options outstanding at December 31, 2013 and 2012 was approximately 3.63 and 4.28years, respectively. Note 4 – Earnings (Loss) Per ShareFor the three years ended December 31, 2013, we calculated the following earnings (loss) per share (dollars inthousands, except per share amounts): 201320122011Income (loss) from continuing operations$9,041 $(509)$8,068 Income (loss) from discontinued operations--(405)1,888 Net income (loss) attributable to Reading International, Inc. common shareholders9,041 (914)9,956 Basic income (loss) per common share attributable to Reading International,Inc. shareholders:Earnings (loss) from continuing operations$0.39 $(0.02)$0.36 Earnings (loss) from discontinued operations, net--(0.02)0.08 Basic income (loss) per share attributable to Reading International, Inc.shareholders$0.39 $(0.04)$0.44 Diluted income (loss) per common share attributable to ReadingInternational, Inc. shareholders:Earnings (loss) from continuing operations$0.38 $(0.02)$0.35 Earnings (loss) from discontinued operations, net--(0.02)0.08 Diluted income (loss) per share attributable to Reading International, Inc.shareholders$0.38 $(0.04)$0.43 Weighted average shares of common stock – basic23,348,003 23,028,596 22,764,666 Weighted average shares of common stock – diluted23,520,271 23,028,596 22,993,135 For the years ended December 31, 2013 and 2011, the weighted average common stock – dilutive included172,268 and 228,469, respectively, of incremental shares of exercisable in-the-money stock options and unissuedrestricted Class A Stock. For the year ended December 31, 2012, we recorded a loss from continuing operations. As such,the 284,054 of incremental shares of exercisable in-the-money stock options and unissued restricted Class A Stock wereexcluded from the computation of diluted loss per share because they were anti-dilutive in that period. In addition,847,891, 791,286, and 734,906 of out-of-the-money stock options were excluded from the computation of dilutedearnings (loss) per share for the years ended December 31, 2013, 2012, and 2011, respectively. The total number of in-the-money stock options, out-of-the-money stock options, and unissued restricted Class A Stock that 72 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. could potentially dilute basic earnings per share was 1,020,159, 1,075,340, and 963,375 for the years ended December 31,2013, 2012, and 2011, respectively.Note 5 – Prepaid and Other AssetsPrepaid and other assets are summarized as follows (dollars in thousands): December 31,20132012Prepaid and other current assetsPrepaid expenses$1,079 $1,150 Prepaid taxes623 855 Prepaid rent1,210 1,044 Deposits368 373 Other3 154 Total prepaid and other current assets$3,283 $3,576 Other non-current assetsOther non-cinema and non-rental real estate assets$1,134 $1,134 Long-term deposits144 212 Deferred financing costs, net1,833 2,230 Interest rate cap at fair value75 --Note receivable--2,000 Tenant inducement asset512 716 Straight-line rent asset2,310 2,775 Other2 2 Total non-current assets$6,010 $9,069 Note 6 – Operating PropertyProperty associated with our operating activities is summarized as follows (dollars in thousands):December 31,Operating property20132012Land$65,578 $69,370 Building and improvements123,061 136,225 Leasehold improvements46,330 45,391 Fixtures and equipment106,099 108,169 Total cost341,068 359,155 Less: accumulated depreciation(149,408)(156,377)Operating property, net$191,660 $202,778 Depreciation expense for operating property was $14.0 million, $14.9 million, and $14.9 million for the threeyears ended December 31, 2013, 2012, and 2011, respectively.In 2011, we recorded impairment losses totaling $65,000 on two of our cinema properties. We did not record animpairment charge for our operating assets during 2013 or 2012. Note 7 – Investment and Development PropertyInvestment and development property is summarized as follows (dollars in thousands): 73 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. December 31,Investment and Development Property20132012Land$59,550 $77,020 Construction-in-progress (including capitalized interest)14,680 17,902 Investment and development property, net$74,230 $94,922 During the year-ended December 31, 2009, we decided to curtail our current development progress on certainAustralian and New Zealand land development projects. As a result, we did not capitalize interest on these projectsduring 2013, 2012, and 2011 and we will not capitalize interest for these projects until development work recommences.Coachella, California LandBased on a December 2012 appraisal, the fair value of our Coachella property was $4.0 million resulting in a$1.5 million impairment to the carrying value of the asset. As noted below, this property is 50% owned by Mr. James J.Cotter who shares in any impairment loss to the extent of his ownership interest. Note 8 – Acquisitions, Disposals, and Assets Held for Sale2013 TransactionsPlano CinemaOn December 31, 2013, we settled a management fee claim that we had against the owner of the Plano, Texascinema that we had managed since 2003 for a cash receipt of $1.9 million. As part of the settlement, we acquired thatentity, and through the purchase of that entity acquired the underlying cinema’s lease and the associated personalproperty, equipment, and trade fixtures. Because the fair value of the lease, in light of anticipated rent payments, resultedin a lease liability of $320,000 and the acquired net assets, including cash received in connection with the settlement,were valued at $1.7 million, we recorded a net gain on acquisition and settlement of $1.4 million.Property Held for Sale – Moonee Ponds On October 15, 2013, we entered into a definitive purchase and sale agreement with Moonee Ponds Pty Ltd, anaffiliate of Leighton Properties Pty Ltd, for the sale of our properties located in Moonee Ponds, Victoria, Australia. Theagreement calls for a sale price of AUS$23.0 million payable in full on April 16, 2015. Leighton Properties Pty Ltd. hasguaranteed the purchaser’s performance. Our attorney has received from the purchaser bank guaranties and checks to thevalue of AUS$2.3 million representing the agreed upon 10% deposit. These amounts will be held by our attorney andreleased to us upon settlement on April 16, 2015. Prior to settlement, Reading retains title to the properties, is responsiblefor their costs (including taxes and utilities), and is entitled to receive all of their revenues (the properties are currentlyused as a parking lot). The properties comprise approximately 3.3 acres and are carried on our books at $11.6 million(AUS$12.4 million) at December 31, 2013 which is classified as land held for sale on our December 31, 2013consolidated balance sheet. The historical operations of this property were as an non-attendant parking lot which are notmaterial and thus not separately presented as discontinued operations. 2012 Transactions Indooroopilly - Sale 74 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On November 20, 2012, we sold our Indooroopilly property for $12.4 million (AUS$12.0 million). As its bookvalue at the time of sale was $12.5 million (AUS$12.1 million), we recorded a loss on sale in the form of an impairmentexpense of $318,000 (AUS$306,000) for the year ended December 31, 2012 which included the cost to sell the property. The operational results are included in income (loss) from discontinued operations on our Consolidated Statements ofOperations for the years ended December 31, 2012, and 2011, respectively. The condensed statement of operations forIndooroopilly is as follows (dollars in thousands):20122011Revenue$793 $825 Less: operating expense560 593 Less: impairment expense318 --Income (loss) from discontinued operations, net of tax$(85)$232 Taringa - SaleOn February 21, 2012, we sold our three properties of approximately 1.1 acres in the Taringa area of Brisbane,Australia for $1.9 million (AUS$1.8 million). Because the net carrying amounts of these properties were greater than thetotal sale price, we recorded an impairment expense for these properties of $369,000 (AUS$365,000) for the year endedDecember 31, 2011.Coachella, California Land - AcquisitionOn January 10, 2012, Shadow View Land and Farming, LLC, a limited liability company owned by ourCompany, acquired a 202-acre property, zoned for the development of up to 816 single-family residential units, locatedin the City of Coachella, California. The property was acquired at a foreclosure auction for $5.5 million. The propertywas acquired as a long-term investment in developable land. Half of the funds used to acquire the land were provided byMr. James J. Cotter, our Chairman, Chief Executive Officer and controlling shareholder. Upon the approval of ourConflicts Committee, these funds were converted on January 18, 2012 into a 50% interest in Shadow View Land andFarming, LLC. We are the managing member of this company. See Note 20 – Noncontrolling Interests.2011 TransactionsCal Oaks Cinema - AcquisitionOn August 25, 2011, we purchased a 17-screen multiplex in Murrieta, California (the “CalOaks Cinema”) for$4.2 million.Elsternwick Classic Cinema - SaleOn April 14, 2011, we sold our 66.7% share of the 5-screen Elsternwick Classic cinema located in Melbourne,Australia to our joint venture partner for $1.9 million (AUS$1.8 million) and recognized a gain on sale of a discontinuedoperation of $1.7 million (AUS$1.6 million).Note 9 – Transfer of Held for Sale Real Estate to Continuing Operations and Related Items2013 and 2012 TransactionsThere were no transfers of held for sale real estate to continuing operations or related items in 2013 or 2012.2011 TransactionsLake Taupo MotelDuring the fourth quarter of 2010, we listed for sale the residential units of our Lake Taupo property and theadjoining 1.0-acre parcel located in Lake Taupo, New Zealand. A portion of this property was previously 75 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. improved with a motel in which we recently renovated the property’s units to be condominiums and have enhanced theproperty value with residential apartment entitlements for the adjoining vacant land. At December 31, 2011, we had notyet sold the property. Pursuant to ASC 360-10-45, as twelve months had passed since this announcement and we did notmeet the criteria to classify this property as held for sale. As a result of the transfer of the asset from held for sale tocontinuing operations, we recorded a loss for 2011 of $37,000 (NZ$48,000) to measure the property at the lower of itscarrying amount, adjusted for depreciation and amortization expense that would have been recognized had the asset beencontinuously classified as a continuing operational asset, or its fair value at the date of the decision not to sell. Wecontinue to discuss with potential buyers and plan to monetize the property in time.Burwood Development PropertyIn May 2010, we announced our intent to sell and began actively marketing our 50.6-acre Burwooddevelopment site in suburban Melbourne. At June 30, 2011, we had not yet achieved that aim. Pursuant to ASC 360-10-45, as twelve months had passed since this announcement and we did not meet the criteria to classify this property as heldfor sale, we reclassified the current carrying value of this property of $53.4 million (AUS$52.1 million) from assets heldfor sale to investment and development property on our December 31, 2011 consolidated balance sheet. We continue toevaluate our options concerning this property.Note 10 – Goodwill and Intangible AssetsGoodwill associated with our business combinations is tested for impairment at the beginning of the fourthquarter with continued evaluation through the end of the fourth quarter of every year. The fair value estimates of each ofour reporting units is based on the projected profits and cash flows of the related assets using each reporting unit’sweighted average cost of capital as a discount rate. As a result of this test, whereby the Step 1 Test was passed for allreporting units, it was determined that there is no impairment to our goodwill as of December 31, 2013 or 2012. At December 31, 2013 or 2012, our goodwill consisted of the following (dollars in thousands):2013CinemaReal EstateTotalBalance as of January 1, 2013$17,674 $5,224 $22,898 Foreign currency translation adjustment(739)--(739)Balance at December 31, 2013$16,935 $5,224 $22,159 2012CinemaReal EstateTotalBalance as of January 1, 2012$17,053 $5,224 $22,277 Foreign currency translation adjustment621 --621 Balance at December 31, 2012$17,674 $5,224 $22,898 We have intangible assets other than goodwill that are subject to amortization which are being amortized overvarious periods (dollars in thousands):As of December 31, 2013BeneficialLeasesTrade NameOtherIntangibleAssetsTotalGross carrying amount$24,223 $7,254 $455 $31,932 Less: Accumulated amortization14,520 3,517 455 18,492 Total, net$9,703 $3,737 $--$13,440 As of December 31, 2012BeneficialLeasesTrade NameOtherIntangibleAssetsTotalGross carrying amount$24,284 $7,254 $458 $31,996 Less: Accumulated amortization12,873 3,059 403 16,335 Total, net$11,411 $4,195 $55 $15,661 76 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We amortize our beneficial leases over the lease period, the longest of which is approximately 30 years; our tradename using an accelerated amortization method over its estimated useful life of 45 years; and our option fee and otherintangible assets over 10 years. For the years ended December 31, 2013, 2012, and 2011, our amortization expense was$2.2 million, $2.2 million, and $2.4 million, respectively. The estimated amortization expense in the five succeedingyears and thereafter is as follows (dollars in thousands): Year Ending December 31,2014$1,994 20151,921 20161,724 20171,327 20181,211 Thereafter5,263 Total future amortization expense$13,440 Note 11 – Investments in and Advances to Unconsolidated Joint Ventures and EntitiesInvestments in and advances to unconsolidated joint ventures and entities are accounted for under the equitymethod of accounting except for Rialto Distribution as described below. As of December 31, 2013 and 2012, theseinvestments in and advances to unconsolidated joint ventures and entities include the following (dollars in thousands):December 31,Interest20132012Rialto Distribution33.3%$--$--Rialto Cinemas50.0%1,571 1,561 205-209 East 57 Street Associates, LLC25.0%--60 Mt. Gravatt33.3%5,164 6,094 Total investments$6,735 $7,715 For the years ended December 31, 2013, 2012, and 2011, we recorded our earnings (loss) from ourunconsolidated joint ventures and entities as follows (dollars in thousands):Year Ended December 31,201320122011Rialto Distribution$159 $199 $383 Rialto Cinemas221 209 (72)205-209 East 57 Street Associates, LLC(1)27 33 Mt. Gravatt990 1,186 1,038 Total investor share of earnings1,369 1,621 1,382 Rialto Cinemas impairment recorded at investor level----(2,934)Total equity earnings$1,369 $1,621 $(1,552)Rialto DistributionDue to significant losses in years past, we determined that the goodwill associated with Rialto Distribution’sinvestment in the film distribution business was fully impaired. As a result of these losses, as of January 1, 2010, we treatour interest as a cost method interest in an unconsolidated joint venture. For the years ended December 31, 2013, 2012,and 2011 we received $159,000 (NZ$195,000), $199,000 (NZ$245,000), and $383,000 (NZ$500,000), respectively, indistributions from our interest in Rialto Distribution which we recorded as earnings at the time of receipt.Rialto Cinemas 77 ththSource: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We own an undivided 50% interest in the assets and liabilities of the Rialto Entertainment joint venture and treatour interest as an equity method interest in an unconsolidated joint venture. Subsequent to the February 22, 2011earthquake in Christchurch, the joint venture obtained a termination agreement with the landlord associated with theChristchurch cinema lease (see Note 26 – Casualty Loss). As of December 31, 2013, following the closure of threecinemas with 15 screens, the joint venture owned two cinemas with 13 screens in the New Zealand cities of Auckland andDunedin. As part of our investment impairment analysis for 2011, we determined that the value of our investment wasimpaired. For this reason, we recorded an impairment charge to our investment in Rialto Cinemas of $2.9 million (NZ$3.8million) during December 31, 2011 and included it in our equity loss from unconsolidated joint ventures and entities forthe year ended December 31, 2011.205-209 East 57th Street Associates, LLCWe own a non-managing 25% membership interest in 205-209 East 57th Street Associates, LLC a limitedliability company formed to redevelop our former cinema site at 205 East 57th Street in Manhattan. During the fourth quarter of 2010, the last residential condominium was sold for $900,000 from which werecorded earnings of $64,000 and received distributions totaling $293,000. During 2012, as a consequence of apurchaser’s dispute, a condominium which was previously sold was repurchased, renovated, and resold for a small gainresulting in additional earnings to us of $27,000. We do not anticipate any further income or expense from thisinvestment.Mt. GravattWe own an undivided 33.3% interest in Mt. Gravatt, an unincorporated joint venture that owns and operates a16-screen multiplex cinema in Australia. The condensed balance sheets and statements of operations of Mt. Gravatt are asfollows (dollars in thousands):Mt. Gravatt Condensed Balance Sheet InformationDecember 31,20132012Current assets$887 $1,318 Noncurrent assets3,288 4,078 Current liabilities751 1,111 Noncurrent liabilities30 43 Members’ equity3,394 4,242 Mt. Gravatt Condensed Statements of Operations InformationDecember 31,201320122011Total revenue$12,949 $15,236 $14,097 Net income2,923 3,513 3,045 Malulani Investments, LimitedOn June 26, 2006, we acquired for $1.8 million, an 18.4% interest in a private real estate company. On July 2,2009, Magoon Acquisition and Development, LLC (“Magoon LLC”) and we entered into a settlement agreement (the“Settlement Terms”) with respect to a lawsuit against certain officers and directors of Malulani Investments, Limited(“MIL”). Under the Settlement Terms, Magoon LLC and we received $2.5 million in cash, a $6.8 million three-year6.25% secured promissory note issued by The Malulani Group (“TMG”), and a ten-year “tail interest” in MIL and TMG inexchange for the transfer of all ownership interests in MIL and TMG held by both Magoon, LLC and RDI and for therelease of all claims against the defendants in this matter. A gain on the transfer of our ownership interest in MIL of$268,000 was recognized during 2009 as a result of this transaction. The tail interest allows us to participate in certaindistributions made or received by MIL, TMG, and in certain cases, the shareholders of TMG. The tail interest, however,continues only for a period of ten years and we cannot assure that we will receive any distributions from this tailinterest. During 2011, we received $191,000 in interest on the 78 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. promissory note, and, on June 14, 2011, we received $6.8 million of principal and interest owed on this note. We believethat further amounts are owed under the note and we have begun litigation to collect such amounts. Any furthercollections will be recognized when received.Combined Condensed Financial InformationThe combined condensed financial information for all of the above unconsolidated joint ventures and entitiesaccounted for under the equity method is as follows; therefore, these financials only exclude Rialto Distribution (dollarsin thousands):Condensed Balance Sheet InformationDecember 31,20132012Current assets$3,255 $3,488 Noncurrent assets5,934 6,621 Current liabilities2,516 2,197 Noncurrent liabilities670 751 Members’ equity6,002 7,161 Condensed Statements of Operations InformationDecember 31,201320122011Total revenue$23,070 $26,138 $28,017 Net income3,598 4,590 4,021 Note 12 - Notes PayableNotes payable are summarized as follows (dollars in thousands): Name of Note Payable or SecurityDecember 31,2013December 31,2012Maturity DateDecember 31,2013December 31,2012Trust Preferred Securities4.24%4.31%April 30, 2027$27,914 $27,913 Australian NAB Corporate Term Loan5.09%5.82%June 30, 201456,699 75,349 Australian NAB Corporate Revolver5.09%5.82%June 30, 2014----Australian Shopping Center Loans----November 1, 201489 208 New Zealand Corporate Credit Facility4.80%4.70%March 31, 201523,041 23,148 US Bank of America Revolver2.67%3.26%October 31, 201731,500 30,000 US Bank of America Line of Credit3.17%3.21%October 31, 2017--2,007 US Cinema 1, 2, 3 Term Loan5.21%5.24%June 27, 201415,000 15,000 US Liberty Theaters Term Loan--6.20%April 1, 2013--6,429 US Minetta & Orpheum Theatres Loan2.91%--June 1, 20187,500 --US Nationwide Loan 1--8.50%February 21, 2013--593 US Sutton Hill Capital Note – Related Party--8.25%June 18, 2013--9,000 US Union Square Theatre Term Loan5.92%5.92%May 1, 20156,717 6,950 Total$168,460 $196,597 Trust Preferred SecuritiesOn February 5, 2007, we issued $51.5 million in 20-year fully subordinated notes to a trust that we control,which in turn issued $51.5 million in securities. Of the $51.5 million, $50.0 million in TPS were issued to unrelatedinvestors in a private placement and $1.5 million of common trust securities were issued by the trust to Reading called“Investment in Reading International Trust I” on our balance sheet. Effective May 1, 2012, the interest rate on our TrustPreferred Securities changed from a fixed rate of 9.22%, which was in effect for five years, to a 79 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. variable rate of three month LIBOR plus 4.00%, which will reset each quarter through the end of the loan unless weexercise our right to refix the rate at the current market rate at that time. Effective October 28, 2013, we entered into afixed interest rate swap of $27.9 million at 1.20% plus the 4.00% margin, expiring on October 31, 2017, see Note 13 –Derivative Instruments. There are no principal payments due until maturity in 2027 when the notes and the trustsecurities are scheduled to be paid in full. We may pay off the debt after the first five years at 100% of the principalamount without any penalty. The trust is essentially a pass through, and the transaction is accounted for on our books asthe issuance of fully subordinated notes. The credit facility includes a number of affirmative and negative covenantsdesigned to monitor our ability to service the debt. The most restrictive covenant of the facility requires that we mustmaintain a fixed charge coverage ratio at a certain level. However, on December 31, 2008, we secured a waiver of allfinancial covenants with respect to our TPS for a period of nine years (through December 31, 2017), in consideration ofthe payment of $1.6 million, consisting of an initial payment of $1.1 million, a payment of $270,000 made in December2011, and a contractual obligation to pay $270,000 in December 2014.During the first quarter of 2009, we took advantage of the then current market illiquidity for securities such asour TPS to repurchase $22.9 million in face value of those securities through an exchange of $11.5 million worth ofmarketable securities purchased during the period for the express purpose of executing this exchange transaction with thethird party holder of these TPS. During the twelve months ended 2009, we amortized $106,000 of discount to interestincome associated with the holding of these securities prior to their extinguishment. On April 30, 2009, we extinguished$22.9 million of these TPS, which resulted in a gain on retirement of subordinated debt (TPS) of $10.7 million net of losson the associated write-off of deferred loan costs of $749,000 and a reduction in our Investment in Reading InternationalTrust I from $1.5 million to $838,000.During the years ended December 31, 2013, 2012, and 2011, we paid $1.2 million, $1.9 million, and $2.5million, respectively, in preferred dividends to the unrelated investors that are included in interest expense. At December31, 2013 and 2012, we had preferred dividends payable of $191,000 and $198,000, respectively. Interest payments forthis loan are required every three months.AustraliaNAB Australian Corporate Term LoanOn June 24, 2011, we replaced our Australian Corporate Credit Facility of $115.8 million (AUS$110.0 million)with BOS International (“BOSI”) with a new credit facility from National Australia Bank (“NAB”) of $110.5 million(AUS$105.0 million). NAB provided us term debt of $94.7 million (AUS$90.0 million) and $9.5 million (AUS$9.0million) in line of credit which we used combined with our cash of $1.6 million (AUS$1.5 million) to pay off our $105.8million (AUS$100.5 million) of outstanding BOSI debt. The NAB three-tiered credit facility (the “NAB Credit Facility”) has a term of three years, due and payable June30, 2014, and comprised of a term loan with a December 31, 2013 balance of $56.7 million (AUS$63.5 million); a $4.5million (AUS$5.0 million) revolving facility for which we do not have a balance at December 31, 2013; and a $8.9million (AUS$10.0 million) guarantee facility. During 2013, to support a guarantee on the Australian digital projectionconversion, we transferred $4.5 million (AUS$5.0 million) of our revolving facility to the guarantee facility. This transferwill remain in place until we refinance the NAB Credit Facility during 2014. This loan to Reading EntertainmentAustralia commenced on June 24, 2011 with an interest rate of between 2.90% and 2.15% above the BBSY bid rate. Thiscredit facility is secured by substantially all of our cinema assets in Australia and is only guaranteed by several of ourwholly owned Australian subsidiaries. The NAB Credit Facility requires annual principal payments of between $6.3million (AUS$7.0 million) and $8.0 million (AUS$9.0 million) which we anticipate will be paid from ReadingEntertainment Australia operating cash flows. The covenants of the NAB Credit Facility include a fixed charge coverageratio, a debt service cover ratio, an operating leverage ratio, a loan to value ratio, and other financialcovenants. Additionally, the NAB Credit Facility allows us to transfer only $3.6 million (AUS$4.0 million) per yearoutside of Australia. In December 2012, as part of the sale of our Indooroopilly property, we paid down $6.3 million(AUS$6.0 million) on our NAB term loan.In conjunction with this NAB Credit Facility, we entered into a five-year interest swap agreement which swapsover 100% of our $56.7 million (AUS$63.5 million) variable rate term loan (decreasing in line with scheduled principalrepayments) based on BBSY, for a 5.50% fixed rate. For further information regarding our swap agreements, see Note 13 –Derivative Instruments. 80 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. As indicated above, this NAB Credit Facility matures on June 30, 2014. Accordingly, the outstanding balance ofthis debt of $56.7 million (AUS$63.5 million) is classified as current on our December 31, 2013 balance sheet. While noassurances can be given that we will be successful, we are currently in the process of renewing this loan and anticipatethat the refinancing will be completed at the latest by May 31, 2014.Australian Shopping Center LoansIn July 2004, as part of the acquisition of the Anderson Cinema Circuit, we assumed the three loans on theEpping, Rhodes, and West Lakes properties. The total amount assumed on the transaction date was $1.5 million(AUS$2.1 million) and the loans carry no interest as long as we make timely principal payments of approximately$89,000 (AUS$100,000) per year. Early repayment is possible without penalty. The only recourse on default of theseloans is the security on the properties. New ZealandNew Zealand Corporate Credit FacilityOn February 8, 2012, we received an approved amendment from Westpac renewing our existing $36.9 million(NZ$45.0 million) New Zealand credit facility with a 3-year credit facility. The renewed facility called for a decrease inthe overall facility by $4.1 million ($5.0 million) to $32.8 million (NZ$40.0 million), an increase in the facility margin of0.55% to 2.00%, and the line of credit charge increase from 0.30% to 0.40%. The facility is secured by substantially all ofour New Zealand assets, but has not been guaranteed by any entity other than several of our New Zealandsubsidiaries. The facility includes various affirmative and negative financial covenants designed to protect the bank’ssecurity regarding capital expenditures and the repatriation of funds out of New Zealand. Also included in the restrictivecovenants of the facility is the restriction of transferring funds from subsidiary to parent.USBank of America RevolverOn October 31, 2012, we replaced our GE Capital Term Loan of $27.7 million with a new credit facility fromBank of America (the “BofA Revolver”) of $30.0 million with an interest rate of between 2.50% and 3.00% above LIBORand an expiration date of October 31, 2017. Although the new credit facility does not require a fixed interest swapagreement, we have continued to use the existing fixed interest rate swap of $29.1 million until its term date of December31, 2013. Effective December 31, 2013, we replaced this swap with a $31.5 million fixed interest rate swap, see Note 13 –Derivative Instruments. The BofA Revolver requires borrowing limit reductions of $3.0 million per year with a balloonpayment of $18.0 million at the expiration date. The BofA Revolver contains other customary terms and conditions,including representations and warranties, affirmative and negative covenants, events of default and indemnityprovisions. The most restrictive covenant of the facility requires that we must maintain a fixed charge coverage ratio at acertain level.On March 25, 2013, Bank of America extended the borrowing limit on our BofA Revolver from $30.0 million to$35.0 million and we borrowed $5.0 million on this revolver. On April 1, 2013, we used $2.3 million of the revolverproceeds to partially repay our US Liberty Theaters Term Loan.As part of the negotiations of the BofA Revolver, we entered into a master operating equipment lease financingagreement with Banc of America Leasing & Capital, LLC to finance the acquisition of up to $15.5 million in digitalprojection equipment for our U.S. cinema operations. See Note 17 – Lease Agreements. Bank of America Line of CreditOn October 31, 2012, Bank of America renewed and increased our existing $3.0 million line of credit to $5.0million. The LOC carries an interest rate equal to BBA LIBOR floating plus a 3.50% margin and an unused line fee of0.03%. The agreement is in effect till October 31, 2017 and is potentially renewable at that date. The undrawn balance ofthis LOC is $5.0 million at December 31, 2013. 81 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Cinemas 1, 2, 3 Term LoanOn June 28, 2012, Sutton Hill Properties LLC (“SHP”), one of our consolidated subsidiaries, paid off itsEurohypo AG, New York Branch loan with a new $15.0 million term loan (the “Sovereign Bank Loan”) from SovereignBank, N.A. The Sovereign Bank Loan had a one-year term ending on June 27, 2013, with a one-year extension option toJune 27, 2014 subject to an extension fee equal to 1.00% of the ending principal balance and a compliance requirementwith certain special covenants. We exercised this option in June 2013. As the extensions mature on June 27, 2014, wehave classified the $15.0 million as a current liability. While no assurances can be given that we will be successful, weare currently in the process of renegotiating this loan. The terms of the loan require interest only payments at LIBOR plusa 5.00% margin to be calculated and paid monthly. This loan is secured by SHP’s interest in the Cinemas 1, 2, & 3 landand building. Covenants include maintaining a loan to value ratio of at least 50% of fair market value and an 11% debtyield (with a numerator of the cash available for debt service and a denominator of the outstanding principal balance ofthe loan). The Sovereign Bank Loan is further secured by a guaranty provided by Reading International, Inc. and by itsnoncontrolling interest member, Sutton Hill Capital, LLC.Minetta and Orpheum Theatres LoanOn May 29, 2013, we refinanced our Liberty Theaters loan with a $7.5 million loan securitized by our Minettaand Orpheum theatres, thus releasing the Royal George from the securitization and leaving it unencumbered. This newloan has a maturity date of June 1, 2018, and an interest rate of LIBOR plus a 2.75% margin with a LIBOR rate cap of4.00% plus the 2.75% margin. See Note 13 – Derivative Instruments.Nationwide Loan 1On February 22, 2008, our subsidiary entered into a five-year promissory note (the “Nationwide Note 1”) withNationwide Theatres Corp of $21.0 million associated with the acquisition of 15 motion picture theaters and theater-related assets from Pacific Theatres Exhibition Corp. The Nationwide Note 1 was subject to certain purchase price relatedadjustments. Through December 31, 2010, these adjustments resulted in a net reduction in principal of $20.4 millioncomprised of a reduction in the amount of $6.3 million in 2008, a further reduction of $226,000 during the first quarter of2009, an additional advance of $3.0 million in 2009 (such advance was used to pay down a portion of the GE CapitalTerm Loan discussed above), a $4.4 million reduction during the first quarter of 2010 in which Nationwide Theaters Corp.and Reading agreed to reduce the seller’s note, and finally a $12.5 million reduction in September 2010. The Nationwide Note 1 had an interest (i) as to $4.5 million of principal at the annual rates of 7.50% for the firstthree years and 8.50% thereafter and (ii) as to $13.0 million of principal at the annual rates of 6.50% through July 31,2009 and 8.50% thereafter. Accrued interest was due and payable on February 21, 2011 and thereafter on the last day ofeach calendar quarter, commencing on June 30, 2011. Pursuant to the Nationwide Note 1 agreement, we paid off the$593,000 balance of this loan on February 21, 2013.Sutton Hill Capital NoteOn June 18, 2013, we repaid the SHC Note 2 for $9.0 million. As the debtor on this note was Sutton HillProperties, LLC, in which we have a 75% interest, the note was, in effect, paid $6.75 million by us and $2.25 million byour co-investor.Union Square Theatre Term LoanOn April 30, 2010, we refinanced the loan secured by our Union Square property with another lender. The newloan for $7.5 million has a five-year term with a fixed interest rate of 5.92% per annum and an amortization paymentschedule of 20 years with a balloon payment of approximately $6.4 million at the end of the loan term. Summary of Notes PayableOur aggregate future principal loan payments are as follows (dollars in thousands): 82 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Year Ending December 31,2014$75,538 201533,009 20163,500 201721,000 20187,500 Thereafter27,913 Total future principal loan payments$168,460 Since approximately $79.8 million of our total debt of $168.5 million at December 31, 2013 consisted of debtdenominated in Australian and New Zealand dollars, the U.S dollar amounts of these repayments will fluctuate inaccordance with the relative values of these currencies.Note 13 – Derivative InstrumentsWe are exposed to interest rate changes from our outstanding floating rate borrowings. We manage our fixed tofloating rate debt mix to mitigate the impact of adverse changes in interest rates on earnings and cash flows and on themarket value of our borrowings. From time to time, we may enter into interest rate hedging contracts, which effectivelyconvert a portion of our variable rate debt to a fixed rate over the term of the interest rate swap. For our Australian borrowings, we are presently required to swap no less than 75% of our drawdowns under ourAustralian Corporate Credit Facility into fixed interest rate obligations. In conjunction with this NAB Credit Facility, weentered into a five-year interest swap agreement, which swaps more than 100% of our variable rate term loan based onBBSY for a 5.50% fixed rate loan which steps down commensurate with the payments of the loan balance. At the time ofentering into this NAB swap, our existing BOSI swap was “in-the-money” by $160,000. In lieu of a cash payment for thein-the-money BOSI swap, we negotiated a slightly lower fixed swap rate by 0.05% for our new NAB fixed rate swap. Although our Bank of America Revolver does not require a fixed interest swap agreement, effective December31, 2013, we entered into an approximate three-year $31.5 million fixed interest rate swap that has a balance reductionschedule which matches the contraction amortization of the Bank of America Revolver.Effective October 28, 2013, we entered into a three-year $27.9 million fixed interest rate swap for our TrustPreferred Securities.As a result of these swap and loan agreements, we pay a total fixed interest rate of 7.90% (5.50% swap contractrate plus a 2.40% margin under the loan) for our NAB Loan, a total fixed interest rate of 3.65% ( 1.15% swap contract rateplus a 2.50% margin under the loan) for our BofA Loan, and a total fixed interest rate of 5.20% ( 1.20% swap contract rateplus a 4.00% margin under the loan) for our Trust Preferred Securities instead of the obligatorily disclosed loan rates of5.09%, 2.67%, and 4.24%, respectively, as indicated in Note 12 – Notes Payable. Finally, as part of our new US Minetta and Orpheum Theatres Loan, we entered into a five-year LIBOR rate capof 4.00% with a loan margin of 2.75% (see Note 12 – Notes Payable). The following table sets forth the terms of our interest rate swap derivative instruments at December 31, 2013:Type of InstrumentNotional AmountPay Fixed RateReceive VariableRateMaturity DateInterest rate swap$62,057,0005.500%2.690%June 30, 2016Interest rate swap$31,500,0001.150%0.169%October 31, 2017Interest rate swap$27,913,0001.200%0.236%October 31, 2017Interest rate cap$7,500,0004.000%n/aJune 1, 2018 In accordance with FASB ASC 815-20 – Derivatives and Hedging, we marked our interest swap instruments tomarket on the consolidated balance sheet resulting in a $2.0 million decrease to interest expense 83 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. during 2013, a $1.1 million increase to interest expense during 2012, and a $5.0 increase to interest expense during2011. At December 31, 2013 and 2012, we recorded the fair market value of our interest rate swaps of $3.3 million and$5.9 million, respectively, as other long-term liabilities. In accordance with FASB ASC 815-20, we have not designatedany of our current interest rate swap positions as financial reporting hedges. Note 14 - Income TaxesIncome (loss) before income tax expense includes the following (dollars in thousands):Year Ended December 31,201320122011United States$8,745 $836 $(1,391)Foreign3,973 1,446 (379)Income (loss) before income tax expense and equity earnings ofunconsolidated joint ventures and entities$12,718 $2,282 $(1,770)Net (income) expense attributable to noncontrolling interests:United States24 578 (604)Foreign(128)(86)(336)Equity earnings and gain on sale of unconsolidated subsidiary:United States(1)27 33 Foreign1,370 1,594 (1,585)Gain on sale of discontinued operation:United States------Foreign--(405)1,888 Income (loss) before income tax expense$13,983 $3,990 $(2,374)Significant components of the provision for income taxes are as follows (dollars in thousands):Year Ended December 31,201320122011Current income tax expenseFederal$1,121 $964 $1,332 State432 584 531 Foreign1,283 1,370 1,067 Total2,836 2,918 2,930 Deferred income tax expense (benefit)Federal------State------Foreign2,106 1,986 (15,260)Total2,106 1,986 (15,260)Total income tax expense (benefit)$4,942 $4,904 $(12,330)Deferred income taxes reflect the “temporary differences” between the financial statement carrying amounts ofassets and liabilities for financial reporting purposes and the amounts used for income tax purposes, adjusted by therelevant tax rate. The components of the deferred tax assets and liabilities are as follows (dollars in thousands):December 31,Components of Deferred Tax Assets20132012Deferred Tax Assets:Net operating loss carry-forwards$21,228 $31,040 Impairment reserves2,915 3,578 Alternative minimum tax credit carry-forwards3,291 3,118 84 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Compensation and employee benefits3,867 3,242 Deferred revenue and expense2,398 2,688 Land, tangible assets, and option real properties5,477 2,882 Other3,685 4,003 Total Deferred Tax Assets42,861 50,551 Valuation allowance(34,022)(37,903)Net deferred tax asset$8,839 $12,648 In accordance with FASB ASC 740-10 – Income Taxes (“ASC 740-10”), we record net deferred tax assets to theextent we believe these assets will more likely than not be realized. In making such determination, we consider allavailable positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected futuretaxable income, tax planning strategies and recent financial performance. ASC 740-10 presumes that a valuationallowance is required when there is substantial negative evidence about realization of deferred tax assets, such as a patternof losses in recent years, coupled with facts that suggest such losses may continue. Because of such negative evidenceavailable for the U.S., Puerto Rico, and New Zealand, as of December 31, 2013, we recorded a valuation allowance of$34.0 million. After consideration of a number of factors for the Reading Australia group, including its recent history offinancial income, its expected future earnings, the increase in market value of its real estate assets, and having executed acredit facility of over $100.0 million to resolve potential liquidity issues, the Company determined as of July 1, 2011 thatit was more likely than not that deferred tax assets in Reading Australia group will be realized. Accordingly, we reversedthe full valuation allowance in Australia, resulting in a net deferred tax asset of $14.4 million as of December 31, 2011,with approximately $3.4 million classified as current and $11.0 million as non-current.As of December 31, 2013, we had U.S. net operating loss carry-forwards of $15.2 million, of which $8.7 millionexpire between 2025 and 2030, while $6.5 million expire between 2030 and 2035.In addition to the above net operating loss carry-forwards having expiration dates, we have the following carry-forwards that have no expiration date at December 31, 2013:·approximately $3.3 million in U.S. alternative minimum tax credit carry-forwards;·approximately $26.0 million in Australian ordinary and capital loss carry-forwards, including accrued butunpaid interest on loans from its US parent company; and ·approximately $11.8 million in New Zealand loss carry-forwards.We disposed of our Puerto Rico operations during 2005 and plan no further investment in Puerto Rico for theforeseeable future. We have approximately $14.1 million in Puerto Rico loss carry-forwards expiring no later than2018. No material future tax benefits from Puerto Rico loss carry-forwards can be recognized by the Company unless itre-enters the Puerto Rico market for which the Company has no current plans. We expect no other substantial limitations on the future use of U.S. or foreign loss carry-forwards except as mayoccur for certain losses occurring in New Zealand related to the Landplan operations, which may only be used to offsetincome and gains from those particular activities, and cannot be shared with their respective consolidated group.U.S. income taxes have not been recognized on the temporary differences between book value and tax basis ofinvestment in foreign subsidiaries. These differences become taxable upon a sale of the subsidiary or upon distribution ofassets from the subsidiary to U.S. shareholders. We expect neither of these events will occur in the foreseeable future forany of our foreign subsidiaries.The provision for income taxes is different from amounts computed by applying U.S. statutory rates toconsolidated losses before taxes. The significant reason for these differences follows (dollars in thousands):Year Ended December 31,201320122011Expected tax provision (benefit)$4,894 $1,397 $(831)Increase (decrease) in tax expense resulting from: 85 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Change in valuation allowance(3,882)(558)(15,260)Expired foreign loss carry-forward----1,100 Foreign tax provision3,389 3,356 1,067 Tax effect of foreign tax rates on current income(294)(126)24 State and local tax provision296 408 361 Tax/Audit Litigation Settlement1,140 1,140 1,375 Effect of tax rate change------Other items(601)(713)(166)Actual tax provision (benefit)$4,942 $4,904 $(12,330)Pursuant to ASC 740-10, a provision should be made for the tax effect of earnings of foreign subsidiaries that arenot permanently invested outside the United States. Our intent is that earnings of our foreign subsidiaries are notpermanently invested outside the United States. Current earnings were available for distribution in the Reading Australiaconsolidated group of subsidiaries as of December 31, 2013. There is no withholding tax on dividends paid by anAustralian company to its 80% or more U.S. public company shareholder, thus we have not provided foreign withholdingtaxes for these current retained earnings. We believe the U.S. tax impact of a dividend from our Australian subsidiary, netof loss carry forward and potential foreign tax credits, would not have a material effect on the tax provision as ofDecember 31 2013.We have accrued $20.8 million in income tax liabilities as of December 31, 2013, of which $8.3 million has beenclassified as current taxes payable and $12.5 million have been classified as non-current tax liabilities. As part of currenttaxes payable, we have accrued $3.5 million in connection with federal and state liabilities arising from the “Tax/AuditLitigation” matter which has now been settled (see Note 19 – Commitments and Contingencies). As part of noncurrent taxliabilities, we have accrued an additional $11.5 million related to the “Tax Audit/Litigation” matter. Amounts assessedby the IRS and expected to be assessed by state income tax agencies in connection with the “Tax Audit/Litigation”matter are no longer recorded under the cumulative probability approach prescribed by FASB ASC 740-10-25 butare recorded as a fixed and determinable liability. We believe the $20.8 million in tax liabilities represents an adequateprovision for our income tax exposures.The following table is a summary of the activity related to unrecognized tax benefits, excluding interest andpenalties, for the years ending December 31, 2013, December 31, 2012, and December 31, 2011 (dollars in thousands):Year EndedYear EndedYear EndedDecember 31,December 31,December 31,201320122011Unrecognized tax benefits – gross beginning balance$2,171 $1,974 $8,058 Gross increases – prior period tax provisions(11)197 --Gross increases – current period tax positions----151 Settlements----(6,235)Statute of limitations lapse------Unrecognized tax benefits – gross ending balance$2,160 $2,171 $1,974 In accordance with FASB ASC 740-10-25 – Income Taxes - Uncertain Tax Positions (“ASC 740-10-25”) weelected to record interest and penalties related to income tax matters as part of income tax expense.We had approximately $10.8 million and $11.4 million of gross tax benefits as of the adoption date andDecember 31, 2007, respectively, plus $1.7 million and $2.3 million of tax interest unrecognized on the financialstatements as of each date, respectively. The gross tax benefits mostly reflect operating loss carry-forwards and the IRSTax Audit/Litigation case described below. We recorded a reduction to our gross unrecognized tax benefits of approximately $3.4 million and an increase totax interest of approximately $8.8 million during the period January 1, 2010 to December 31, 2010 and the total balanceat December 31, 2010 was approximately $20.6 million (of which approximately $12.6 million represents IRSinterest). Having settled the Tax Audit/Litigation matter described in Note 19 – Commitments and 86 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Contingencies, we further recorded a net reduction to our gross unrecognized tax benefits of approximately $6.1 millionand a reduction to tax interest of approximately $10.4 million during the period January 1, 2011 to December 31, 2011,resulting in a total balance at December 31, 2011 of approximately $4.1 million, consisting of $1.9 million tax and $2.2million interest. Of the $4.1 million gross unrecognized tax benefit at December 31, 2011, approximately $3.0 millionwould impact the effective tax rate if recognized. During the period January 1, 2012 to December 31, 2012 we recordedan increase of $0.2 million to our gross unrecognized tax benefits and an increase to tax interest of approximately $1.1million, resulting in a total balance of $5.3 million consisting of $2.1 million in tax and $3.2 million in interest. Of the$5.3 million gross unrecognized tax benefit at December 31, 2012, approximately $4.3 million would impact theeffective rate if recognized. During the period January 1, 2013 to December 31, 2013 we recorded no material change toour gross unrecognized tax benefits and a decrease to tax interest of approximately $1.4 million, resulting in a totalbalance of $3.9 million consisting of $2.1 million in tax and $1.8 million in interest. Of the $3.9 million grossunrecognized tax benefit at December 31, 2013, approximately $2.9 million would impact the effective rate if recognized.It is difficult to predict the timing and resolution of uncertain tax positions. Based upon the Company’sassessment of many factors, including past experience and judgments about future events, it is probable that within thenext 12 months the reserve for uncertain tax positions will increase within a range of $0.5 million to $1.5 million. Thereasons for such change include but are not limited to tax positions expected to be taken during 2013, revaluation ofcurrent uncertain tax positions, and expiring statutes of limitation.Our company and subsidiaries are subject to U.S. federal income tax, income tax in various U.S. states, andincome tax in Australia, New Zealand, and Puerto Rico.Generally, changes to our federal and most state income tax returns for the calendar year 2007 and earlier arebarred by statutes of limitations. Certain U.S. subsidiaries filed federal and state tax returns for periods before theseentities became consolidated with us. These subsidiaries were examined by IRS for the years 1996 to 1999 andsignificant tax deficiencies were assessed for those years. Those deficiencies have been settled, as discussed in “TaxAudit/Litigation,” Note 19 – Commitments and Contingencies. Our income tax returns for Australia filed since inceptionin 1995 are generally open for examination. The income tax returns filed in New Zealand and Puerto Rico for calendaryear 2007 and afterward remain open for examination as of December 31, 2013. 87 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 15 – Other LiabilitiesOther liabilities are summarized as follows (dollars in thousands):December 31,20132012Current liabilitiesLease liability$5,900 $5,855 Security deposit payable246 174 Other9 3 Other current liabilities$6,155 $6,032 Other liabilitiesForeign withholding taxes$6,748 $6,480 Straight-line rent liability9,259 8,893 Environmental reserve1,656 1,656 Accrued pension8,527 6,976 Interest rate swap3,288 5,855 Acquired leases1,797 2,078 Other payable875 1,191 Other599 630 Other liabilities$32,749 $33,759 Village East Purchase OptionOn June 29, 2010, we agreed to extend our existing lease from SHC of the Village East Cinema in New York Cityby 10 years, with a new termination date of June 30, 2020. The Village East lease includes a sub-lease of the groundunderlying the cinema that is subject to a longer-term ground lease between SHC and an unrelated third party that expiresin June 1, 2031 (the “cinema ground lease”). The extended lease provides for a call option pursuant to which Readingmay purchase the cinema ground lease for $5.9 million at the end of the lease term. Additionally, the lease has a putoption pursuant to which SHC may require Reading to purchase all or a portion of SHC’s interest in the existing cinemalease and the cinema ground lease at any time between July 1, 2013 and December 4, 2019. SHC’s put option may beexercised on one or more occasions in increments of not less than $100,000 each. Because our Chairman, ChiefExecutive Officer, and controlling shareholder, Mr. James J. Cotter, is also the managing member of SHC, RDI and SHCare considered entities under common control. As a result, we have recorded the Village East Cinema building as aproperty asset of $4.7 million on our balance sheet based on the cost carry-over basis from an entity under commoncontrol with a corresponding lease liability of $5.9 million presented under other liabilities which accreted up to the $5.9million liability till July 1, 2013 (see Note 25 – Related Parties and Transactions). As the option is able to be exercisedstarting on July 1, 2013, we classified the $5.9 million lease liability as a current liability.Note 16 – Fair Value of Financial InstrumentsASC 820-10 applies to existing accounting pronouncements in which fair value measurements are alreadyrequired and defines fair value, establishes a framework for measuring fair value in accordance with accounting principlesgenerally accepted in the United States, and expands disclosures about fair value measurements. ASC 820-10 (see Note 2 –Summary of Significant Accounting Policies) establishes a fair value hierarchy thatprioritizes the inputs to valuation techniques used to measure fair value. The statement requires that assets and liabilitiescarried at fair value be classified and disclosed in one of the following three categories:Level 1: Quoted market prices in active markets for identical assets or liabilities.Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.Level 3: Unobservable inputs that are not corroborated by market data. 88 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We use appropriate valuation techniques based on the available inputs to measure the fair values of our assetsand liabilities. When available, we measure fair value using Level 1 inputs because they generally provide the mostreliable evidence of fair value. Level 1 Fair Value Measurements – are based on market quotes of our marketable securities.Level 2 Fair Value Measurements – Interest Rate Swaps and cap – The fair value of interest rate swaps and cap areestimated using internal discounted cash flow calculations based upon forward interest rate curves, which arecorroborated by market data, and quotes obtained from counterparties to the agreements.Level 3 Fair Value Measurements – Impaired Property – For assets measured on a non-recurring basis, such as real estateassets that are required to be recorded at fair value as a result of an impairment, our estimates of fair value are based onmanagement’s best estimate derived from evaluating market sales data for comparable properties developed by a thirdparty appraiser and arriving at management’s estimate of fair value based on such comparable data primarily based onproperties with similar characteristics. For the years ended December 31, 2012 and 2011, the fair value of our impairedproperties was estimated to be $4.1 million and $1.9 million, respectively, which we used to record our impairmentexpense and was based on level 3 inputs in developing management’s estimate of fair value. For the year endedDecember 31, 2011, the fair value of our Rialto Cinemas investment was $1.6 million (NZ$2.0 million) resulting in animpairment charge of $2.9 million (NZ$3.8 million). We did not record an impairment charge for our properties during2013. As of December 31, 2013, we held certain items that are required to be measured at fair value on a recurringbasis. These included available for sale securities and interest rate derivative contracts. Derivative instruments arerelated to our economic hedge of interest rates. Our available-for-sale securities primarily consist of investmentsassociated with the ownership of marketable securities in Australia.The fair values of the interest rate swap and cap agreements are determined using the market standardmethodology of discounting the future expected cash receipts or payments that would occur if variable interest rate fellabove or below the strike rate of the interest rate swap and cap agreements. The variable interest rates used in thecalculation of projected receipts or payments on the interest rate swap and cap agreements are based on an expectation offuture interest rates derived from observable market interest rate curves and volatilities. To comply with the provisions ofASC 820-10, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk andthe respective counterparty's nonperformance risk in the fair value measurements. Although we have determined that themajority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuationadjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluatethe likelihood of default by us and our counterparties. However, as of December 31, 2013, we have assessed thesignificance of the impact of the credit valuation adjustments on the overall valuation and determined that the creditvaluation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined thatour derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We have consistentlyapplied these valuation techniques in all periods presented and believe we have obtained the most accurate informationavailable for the types of derivative contracts we hold.On a recurring basis, we used the above methods and assumptions on the following items to measure fair valuesubject to the disclosure requirements of ASC 820-10 at December 31, 2013 and 2012, respectively (dollars inthousands):Book ValueFair ValueFinancial InstrumentLevel2013201220132012Investment in marketable securities1$55 $55 $55 $55 Interest rate cap asset2$75 $--$75 $--Interest rate swap liabilities2$3,288 $5,855 $3,288 $5,855 89 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Financial Instruments Disclosed at Fair ValueThe following table sets forth the carrying value and the fair value of our financial assets and liabilities atDecember 31, 2013 and 2012 (dollars in thousands):Book ValueFair ValueFinancial InstrumentLevel2013201220132012Cash1$37,696 $38,531 $37,696 $38,531 Time deposits1$--$8,000 $--$8,000 Accounts receivable1$9,087 $8,514 $9,087 $8,514 Other assets - notes receivable1$--$2,000 $--$2,000 Restricted cash1$782 $2,465 $782 $2,465 Accounts and film rent payable1$25,046 $25,566 $25,046 $25,566 Notes payable3$140,547 $159,684 $121,411 $154,795 Notes payable to related partyN/A$--$9,000 $N/A$N/ASubordinated debt3$27,913 $27,913 $11,067 $12,268 For purposes of this fair value disclosure, we based our fair value estimate for notes payable and subordinateddebt on our internal valuation whereby we apply the discounted cash flow method to our expected cash flow paymentsdue under our existing debt agreements based on a representative sample of our lenders’ market interest rate quotes as ofDecember 31, 2013 and 2012, respectively, for debt with similar risk characteristics and maturities.Note 17 – Lease AgreementsMost of our cinemas conduct their operations in leased facilities. Sixteen of our twenty operating multiplexes inAustralia, four of our seven cinemas in New Zealand, and all but one of our cinemas in the United States are in leasedfacilities. These cinema leases have remaining terms inclusive of options of 1 to 37 years. Certain of our cinema leasesprovide for contingent rentals based upon a specified percentage of theater revenue with a guaranteedminimum. Substantially all of our leases require the payment of property taxes, insurance, and other costs applicable tothe property. We also lease office space and equipment under non-cancelable operating leases. All of our leases areaccounted for as operating leases and accordingly, we have no leases of facilities that require capitalization.We determine the annual base rent expense of our cinemas by amortizing total minimum lease obligations on astraight-line basis over the lease terms. Base rent expense and contingent rental expense under the operating leasestotaled approximately $32.1 million and $1.3 million for 2013, respectively; $32.6 million and $1.7 million for 2012,respectively; and $31.2 million and $1.6 million for 2011, respectively. Future minimum lease payments by year and, inthe aggregate, under non-cancelable operating leases consisted of the following at December 31, 2013 (dollars inthousands): Minimum GroundMinimum PremisesEquipmentTotal Minimum Lease PaymentsLease PaymentsLeaseLease Payments2014$2,592 $28,381 $2,703 $33,676 20152,591 26,137 2,703 31,431 20162,656 22,427 2,694 27,777 20172,751 19,744 2,693 25,188 20182,759 16,054 2,614 21,427 Thereafter8,671 49,739 --58,410 Total minimum lease payments$22,020 $162,482 $13,407 $197,909 Since approximately $75.7 million of our total minimum lease payments of $197.9 million as of December 31,2013 consisted of lease obligations denominated in Australian and New Zealand dollars, the U.S dollar amounts of theseobligations will fluctuate in accordance with the relative values of these currencies. See Note 25 – Related Parties andTransactions for the amount of leases associated with any related party leases. 90 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Digital Projection Equipment LeaseEffective December 1, 2012, we entered into a 5-year digital projection equipment lease obligation with Banc ofAmerica Leasing & Capital, LLC enabling us to convert substantially all of our U.S. cinemas to digital projection. Theequipment lease agreement requires that we make lease payments of $218,000 per month for the next 60 months afterwhich we can either purchase the equipment at a market price or renew the lease for an undetermined length of time. Thislease qualifies as an operating lease and is recorded accordingly.Note 18 – Pension LiabilitiesSupplemental Executive Retirement PlanIn March 1, 2007, the Board of Directors of Reading International, Inc. (“Reading”) approved a SupplementalExecutive Retirement Plan (“SERP”) pursuant to which Reading has agreed to provide James J. Cotter, its ChiefExecutive Officer and Chairman of the Board of Directors, supplemental retirement benefits effective March 1,2007. Under the SERP, Mr. Cotter will receive a monthly payment of the greater of (i) 40% of the average monthlyearnings over the highest consecutive 36-month period of earnings prior to Mr. Cotter’s separation from service withReading or (ii) $25,000 per month for the remainder of his life, with a guarantee of 180 monthly payments following hisseparation from service with Reading or following his death. The beneficiaries under the SERP may be designated by Mr.Cotter or by his beneficiary following his or his beneficiary’s death. The benefits under the SERP are fully vested as ofMarch 1, 2007.The SERP initially will be unfunded, but Reading may choose to establish one or more grantor trusts from whichto pay the SERP benefits. As such, the SERP benefits are unsecured, general obligations of Reading. The SERP isadministered by the Compensation Committee of the Board of Directors of Reading. In accordance with FASB ASC 715-30-05 – Defined Benefit Pension Plans (“ASC 715-30-05”), the initial pension benefit obligation of $2.7 million wasincluded in our other liabilities with a corresponding amount of unrecognized prior service cost included in accumulatedother comprehensive income on March 1, 2007. The initial benefit obligation was based on a discount rate of 5.75% anda compensation increase rate of 3.5%. The $2.7 million is being amortized as a prior service cost over the estimatedservice period of 10 years combined with an annual interest cost. For the years ended December 31, 2013, 2012, and2011, we recognized $202,000, $149,000, and $195,000, respectively, of interest cost and $304,000 of amortized priorservice cost per year. For the years ended December 31, 2013 and 2012, we recognized $356,000 and $0 of amortized netgains. The balance of the other liability for this pension plan was $7.4 million and $5.9 million at December 31, 2013and 2012, respectively, and the accumulated unrecognized prior service costs included in other comprehensive incomebalance was $3.8 and $3.2 million at December 31, 2013 and 2012, respectively. The December 31, 2013 and 2012values of the SERP are based on a discount rate of 4.25% and 3.40%, respectively, and an annual compensation growthrate of 7.50% and 3.50%, respectively. The change in the SERP pension benefit obligation and the funded status for the year ending December 31, 2013and 2012 are as follows (dollars in thousands):For the year endingChange in Benefit ObligationDecember 31, 2013Benefit obligation at January 1, 2013$5,944 Interest cost202 Actuarial gain1,252 Benefit obligation at December 31, 20137,398 Funded status at December 31, 2013$(7,398)For the year endingChange in Benefit ObligationDecember 31, 2012Benefit obligation at January 1, 2012$3,511 Interest cost149 Actuarial gain2,284 Benefit obligation at December 31, 20125,944 Funded status at December 31, 2012$(5,944) 91 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Amount recognized in balance sheet consists of (dollars in thousands):At December 31,2013At December 31,2012Current liabilities$15 $14 Noncurrent liabilities7,383 5,930 Items not yet recognized as a component of net periodic pension cost consist of (dollars in thousands): At December 31,2013At December 31,2012Unamortized actuarial loss$3,166 $2,269 Prior service costs627 931 Accumulated other comprehensive loss3,793 3,200 The components of the net periodic benefit cost and other amounts recognized in other comprehensive incomeare as follows (dollars in thousands):Net periodic benefit costFor the year endingDecember 31, 2013For the year endingDecember 31, 2012Interest cost$202 $149 Amortization of prior service costs304 304 Amortization of net gain356 --Net periodic benefit cost$862 $453 Other changes in plan assets and benefit obligations recognized inother comprehensive incomeNet loss$1,253 $2,284 Amortization of prior service cost(304)(304)Amortization of net loss(356)--Total recognized in other comprehensive income$593 $1,980 Total recognized in net periodic benefit cost and othercomprehensive income$1,455 $2,433 The estimated net loss and prior service cost for the defined benefit pension plan that will be amortized fromaccumulated other comprehensive income into net periodic benefit cost over the next fiscal year will be $356,000 and$304,000, respectively. 92 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The following weighted average assumptions were used to determine the plan benefit obligations at December31, 2013 and 2012: 20132012Discount rate4.25%3.40%Rate of compensation increase7.50%3.50%The following weighted-average assumptions were used to determine net periodic benefit cost for the year endedDecember 31, 2013 and 2012: 20132012Discount rate3.40%4.25%Expected long-term return on plan assets0.00%0.00%Rate of compensation increase3.50%3.50%Other Pension LiabilitiesIn addition to the aforementioned SERP, we have defined contribution pension plans for selected current andformer executives of our corporation resulting in a pension liability of $1.1 million and $1.0 million at December 31,2013 and 2012, respectively. These pensions accrued $95,000 and $204,000 of pension expense for the years endedDecember 31, 2013 and 2012, respectively. The benefit payments for all of our pensions, which reflect expected future service, as appropriate, are expectedto be paid over the following periods (dollars in thousands): Pension Payments2014$14 201532 201650 2017633 2018607 Thereafter7,191 Total pension payments$8,527 Note 19 - Commitments and ContingenciesUnconsolidated Joint Venture LoansThe following section describes any loans associated with our investments in unconsolidated joint ventures. Asthese investments are unconsolidated, any associated bank loans are not reflected in our Consolidated Balance Sheet atDecember 31, 2013. Each loan is without recourse to any assets other than our interests in the individual joint venture.Rialto Distribution. We are the 33.3% co-owners of the assets of Rialto Distribution. At December 31, 2013 and 2012,Rialto Distribution had a bank line of credit of $1.6 million (NZ$2.0 million) and $1.7 million (NZ$2.0 million),respectively, and had an outstanding balance of $634,000 (NZ $770,000) and $703,000 (NZ$850,000),respectively. This loan is guaranteed by one of our subsidiaries to the extent of our ownership percentage.Tax Audit/LitigationThe Internal Revenue Service (the “IRS”) has examined the tax return of Reading Entertainment Inc. (“RDGE”)for its tax years ended December 31, 1996 through December 31, 1999 and the tax return of Craig Corporation (“CRG”), aNevada Corporation with no operating assets, for its tax year ended June 30, 1997. These 93 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. companies are both now wholly owned subsidiaries of the Company, but for the time periods under audit, were notconsolidated with the Company for tax purposes. CRG and the IRS agreed to compromise the claims made by the IRS against CRG and the Tax Court’s order wasentered on January 6, 2011. In the settlement, the IRS conceded 70% of its claimed adjustment to income. Instead of aclaim for unpaid taxes of $20.9 million plus interest, the effect of settlement on the Reading consolidated group was torequire a total federal income tax obligation of $5.4 million, reduced by a federal tax refund of $800,000 and increased byinterest of $9.3 million, for a net federal tax liability of $13.9 million as of January 6, 2011. On October 26, 2011, CRGreached an agreement with the IRS for an installment plan to pay off this federal tax liability, including additional interestaccruals at the prescribed IRS floating rate. The agreement requires monthly payments of $290,000 over a period ofapproximately five years. As of December 31, 2013 and 2012, after the payments made during 2013 and 2012,respectively, the remaining federal tax obligation was $8.3 million and $10.0 million, respectively, in tax and interest. Ofthe $8.3 million owed under the installment agreement as of December 31, 2013, $3.5 million was recorded as currenttaxes payable, with the remaining balance being recorded as non-current tax liability. Of the $10.0 million owed underthe installment agreement as of December 31, 2012, $3.5 million was recorded as current taxes payable, with theremaining balance being recorded as non-current tax liability.The impact of the settlement upon the state taxes of the Reading consolidated group, if the adjustment to incomeagreed with the IRS were reflected on state returns, would be an obligation of approximately $1.4 million in tax plusinterest and potential penalty. As of December 31, 2013, no deficiency has been asserted by the State of California, andwe have made no final decision as to the course of action to be followed when a deficiency is asserted.Environmental and Asbestos ClaimsCertain of our subsidiaries were historically involved in railroad operations, coal mining, andmanufacturing. Also, certain of these subsidiaries appear in the chain of title of properties that may suffer frompollution. Accordingly, certain of these subsidiaries have, from time to time, been named in and may in the future benamed in various actions brought under applicable environmental laws. Also, we are in the real estate developmentbusiness and may encounter from time to time unanticipated environmental conditions at properties that we haveacquired for development. These environmental conditions can increase the cost of such projects, and adversely affectthe value and potential for profit of such projects. We do not currently believe that our exposure under applicableenvironmental laws is material in amount.From time to time, we have claims brought against us relating to the exposure of former employees of ourrailroad operations to asbestos and coal dust. These are generally covered by an insurance settlement reached inSeptember 1990 with our insurance carriers. However, this insurance settlement does not cover litigation by people whowere not our employees and who may claim second hand exposure to asbestos, coal dust and/or other chemicals orelements now recognized as potentially causing cancer in humans. Our known exposure to these types of claims, assertedor probable of being asserted, is not material.In connection with the development of our 50.6 acre Burwood site, it will be necessary to address certainenvironmental issues. That property was at one time used as a brickworks and we have discovered petroleum and asbestosat the site. During 2007, we developed a plan for the remediation of these materials, in some cases through removal andin other cases through encapsulation. As of December 31, 2013, we estimate that the total site preparation costsassociated with the removal of this contaminated soil will be $15.2 million (AUS$17.1 million) and as of that date we hadincurred a total of $7.4 million (AUS$8.3 million) of these costs. We do not believe that this has added materially to theoverall development cost of the site, as it is anticipated that all of the work will be done in connection with theexcavation and other development activity already contemplated for the property. 94 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 20 – Noncontrolling interestsAs of December 31, 2013, the noncontrolling interests in our consolidated subsidiaries are comprised of thefollowing:·25% noncontrolling interest in Australian Country Cinemas by 21st Century Pty, Ltd;·50% noncontrolling membership interest in Shadow View Land and Farming, LLC owned by Mr. James J.Cotter, Sr.; and·25% noncontrolling interest in the Sutton Hill Properties, LLC owned by Sutton Hill Capital, LLC.The components of noncontrolling interest are as follows (dollars in thousands):December 31,20132012AFC LLC$--$1,737 Australian Country Cinemas532 601 Shadow View Land and Farming, LLC1,862 1,912 Sutton Hill Properties2,213 (152)Noncontrolling interests in consolidated subsidiaries$4,607 $4,098 The components of income attributable to noncontrolling interests are as follows (dollars in thousands): Year Ended December 31,201320122011AFC LLC$173 $612 $909 Australian Country Cinemas129 86 311 Elsternwick unincorporated joint venture----25 Shadow View Land and Farming, LLC(50)(843)--Sutton Hill Properties(148)(347)(305)Net income attributable to noncontrolling interest$104 $(492)$940 AFC LLC Acquisition of Noncontrolling InterestOn June 28, 2013, we acquired the interest in AFC LLC that we did not already own in consideration of therelease of certain claims we held against the owner of that interest under a guaranty agreement. The removal of the AFCLLC noncontrolling interest balance of $101,000 was reflected as a change in our additional paid in capital pursuant toFASB ASC 810-10-45.Sutton Hill PropertiesOn June 18, 2013, our co-investor, having a 25% interest in our Sutton Hill Properties subsidiary, contributed$2.25 million toward the payoff of our SHC Note 2 for $9.0 million resulting in a $2.25 million contribution of capital toSutton Hill Properties (See Note 12 – Notes Payable).Shadow View Land and Farming, LLC During the 2012, Mr. James J. Cotter, our Chairman, Chief Executive Officer and controlling shareholder,contributed $2.5 million of cash and $255,000 of his 2011 bonus as his 50% share of the purchase price of a land parcelin Coachella, California and to cover his 50% share of certain costs associated with that acquisition. This land is held inShadow View Land and Farming, LLC, in which Mr. Cotter owns a 50% interest. We are the managing member ofShadow View Land and Farming, LLC. However, as Mr. Cotter is considered to be our controlling shareholder, pursuantto FASB ASC 810-10-05, we have consolidated Mr. Cotter’s interest in the 95 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. property and its expenses with that of our interest and shown his interest as a noncontrolling interest. Note 8 –Acquisitions, Disposals, and Assets Held for Sale.Elsternwick SaleOn April 14, 2011, we sold our 66.7% share of the 5-screen Elsternwick Classic cinema located in Melbourne,Australia to our joint venture partner for $1.9 million (AUS$1.8 million) and recognized a gain on sale of a discontinuedoperation of $1.7 million (AUS$1.6 million). Note 21 – Total Reading International, Inc. Stockholders’ EquityOur common stock trades on the NASDAQ under the symbols RDI and RDIB which are our Class A (non-voting)and Class B (voting) stock, respectively. Our Class A (non-voting) has preference over our Class B (voting) shares uponliquidation. No dividends have ever been issued for either share class.2013 Common Stock ActivityDuring 2013, we issued 217,890 of Class A Stock to an executive employee associated with his prior years’ stockgrants. 62,500 options were exercised during 2013 having an intrinsic value of $133,000 for which we received$248,000 of cash. Additionally, 75,000 options were exercised during 2013 having an intrinsic value of $124,000 forwhich we did not receive any cash but the employee elected to exchange 53,136 personally owned shares of the companyat a market price of $5.66 per share for the 75,000 shares based on an exercise price of $4.01 for the related options.2012 Common Stock ActivityDuring 2012, we issued 155,925 of Class A Stock to an executive employee associated with his prior years’ stockgrant, and, during 2012, we issued 9,680 as a one-time stock grant of Class A Stock to our employees valued at $44,000which we accounted for as compensation expense. 95,000 options were exercised during 2012 having a realized value of $136,000 for which we received $308,000of cash. Additionally, 41,000 options were exercised during 2012 having a realized value of $103,000 for which we didnot receive any cash but the employee elected to receive the net incremental number of in-the-money shares of 15,822based on a $4.01 and a market price of $6.53.2011 Common Stock ActivityDuring 2011, we issued 174,825 of Class A Stock to certain executive employee associated with his prior years’stock grants.During 2011, we purchased 172,300 of Class A Stock on the open market for $747,000. 96 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Accumulated Other Comprehensive Income ForeignCurrenecyItemsUnrealizedGain andLosses onAvailable-for-SaleInvestmentsAccruedPensionService CostsTotalBeginning balance$64,558 $9 $(3,200)$61,369 Net current-period other comprehensive income(19,259)--(593)(19,854)Ending balance45,299 9 (3,793)41,515 Note 22 – Business Segments and Geographic Area InformationThe table below sets forth certain information concerning our cinema operations and our real estate operations(which includes information relating to both our real estate development, retail rental and live theater rental activities) forthe three years ended December 31, 2013 (dollars in thousands): Year Ended December 31, 2013CinemaExhibitionReal EstateIntersegmentEliminationsTotalRevenue$239,418 $26,456 $(7,653)$258,221 Operating expense200,859 10,830 (7,653)204,036 Depreciation and amortization10,741 4,023 --14,764 General and administrative expense3,273 644 --3,917 Segment operating income$24,545 $10,959 $--$35,504 Year Ended December 31, 2012CinemaExhibitionReal EstateIntersegmentEliminationsTotalRevenue$234,703 $27,256 $(7,529)$254,430 Operating expense198,040 11,163 (7,529)201,674 Depreciation and amortization11,154 4,441 --15,595 General and administrative expense2,598 718 --3,316 Impairment expense--1,463 --1,463 Segment operating income$22,911 $9,471 $--$32,382 Year Ended December 31, 2011CinemaExhibitionReal EstateIntersegmentEliminationsTotalRevenue$225,849 $26,562 $(7,432)$244,979 Operating expense189,647 10,190 (7,432)192,405 Depreciation and amortization11,842 4,444 --16,286 General and administrative expense2,740 646 --3,386 Impairment expense--369 --369 Segment operating income$21,620 $10,913 $--$32,533 Reconciliation to net income attributableto Reading International, Inc. shareholders:201320122011Total segment operating income$35,504 $32,382 $32,533 Non-segment:Depreciation and amortization expense433 454 309 General and administrative expense14,136 12,801 14,046 Operating income20,935 19,127 18,178 Interest expense, net(10,037)(16,426)(21,038)Other income (loss)1,876 (563)1,157 Gain (loss) on sale of assets(56)144 (67)Income tax benefit (expense)(4,942)(4,904)12,330 Equity earnings (loss) of unconsolidated joint ventures andentities1,369 1,621 (1,552) 97 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Income (loss) from discontinued operations--(85)232 Gain (loss) on sale of discontinued operation--(320)1,656 Net income (loss)$9,145 $(1,406)$10,896 Net (income) loss attributable to noncontrolling interests(104)492 (940)Net income (loss) attributable to Reading International, Inc.common shareholders$9,041 $(914)$9,956 December 31,Summary of assets:201320122011Segment assets$347,637 $408,667 $414,608 Corporate assets39,170 19,921 16,156 Total Assets$386,807 $428,588 $430,764 December 31,Summary of capital expenditures:201320122011Segment capital expenditures$19,910 $13,390 $8,419 Corporate capital expenditures172 333 957 Total capital expenditures$20,082 $13,723 $9,376 The cinema results shown above include revenue and operating expense directly linked to our cinemaassets. The real estate results include rental income from our properties and live theater venues and operating expensedirectly linked to our property assets. The following table sets forth the book value of our operating property by geographical area (dollars inthousands):December 31,20132012Australia$97,240 $106,020 New Zealand36,319 35,456 United States58,101 61,302 Total operating property$191,660 $202,778 The following table sets forth our revenue by geographical area (dollars in thousands):December 31,201320122011Australia$100,399 $108,320 $110,742 New Zealand26,310 24,608 22,247 United States131,512 121,502 111,990 Total revenue$258,221 $254,430 $244,979 98 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 23 – Unaudited Quarterly Financial Information (dollars in thousands, except per share amounts)FirstSecondThirdFourth2013QuarterQuarterQuarterQuarterRevenue$59,567 $69,642 $65,472 $63,540 Net income (loss)$(671)$4,176 $2,431 $3,209 Net income (loss) attributable to Reading International, Inc.shareholders$(668)$4,135 $2,393 $3,181 Basic earnings (loss) per share$(0.03)$0.18 $0.10 $0.14 Diluted earnings (loss) per share$(0.03)$0.18 $0.10 $0.13 2012Revenue$62,431 $62,948 $63,934 $65,117 Net income (loss)$(109)$224 $396 $(1,917)Net income (loss) attributable to Reading International, Inc.shareholders$(239)$239 $363 $(1,277)Basic earnings (loss) per share$(0.01)$0.01 $0.02 $(0.06)Diluted earnings (loss) per share$(0.01)$0.01 $0.02 $(0.06) Note 24 - Future Minimum Rental IncomeReal estate revenue amounted to $18.8 million, $19.7 million, and $19.1 million, for the years ended December31, 2013, 2012, and 2011, respectively. Future minimum rental income under all contractual operating leases issummarized as follows (dollars in thousands): Year Ending December 31,2014$8,605 20157,934 20166,662 20175,216 20184,125 Thereafter21,203 Total future minimum rental income$53,745 Note 25 – Related Parties and TransactionsSutton Hill CapitalIn 2001, we entered into a transaction with Sutton Hill Capital, LLC (“SHC”) regarding the leasing with anoption to purchase of certain cinemas located in Manhattan including our Village East and Cinemas 1, 2 & 3 theaters. Inconnection with that transaction, we also agreed to lend certain amounts to SHC, to provide liquidity in its investment,pending our determination whether or not to exercise our option to purchase and to manage the 86th Street Cinema on afee basis. SHC is a limited liability company owned in equal shares by James J. Cotter and a third party and of which Mr.Cotter is the managing member. The Village East is the only cinema that remains subject to this lease and during 2013,2012, and 2011, we paid rent to SHC for this cinema in the amount of $590,000, $590,000, and $590,000, respectively.On June 29, 2010, we agreed to extend our existing lease from SHC of the Village East Cinema in New York Cityby 10 years, with a new termination date of June 30, 2020. The Village East lease includes a sub-lease of the groundunderlying the cinema that is subject to a longer-term ground lease between SHC and an unrelated third party that expiresin June 2031 (the “cinema ground lease”). The extended lease provides for a call option pursuant to which Reading maypurchase the cinema ground lease for $5.9 million at the end of the lease term. Additionally, the lease has a put optionpursuant to which SHC may require Reading to purchase all or a portion of SHC’s interest in the existing cinema leaseand the cinema ground lease at any time between July 1, 2013 and December 4, 2019. 99 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SHC’s put option may be exercised on one or more occasions in increments of not less than $100,000 each. Because ourChairman, Chief Executive Officer, and controlling shareholder, Mr. James J. Cotter, is also the managing member ofSHC, RDI and SHC are considered entities under common control. As a result, we recorded the Village East Cinemabuilding as a property asset of $4.7 million on our balance sheet based on the cost carry-over basis from an entity undercommon control with a corresponding capital lease liability of $5.9 million presented under other liabilities (see Note 15– Other Liabilities).In 2005, we acquired from a third party the fee interest and from SHC its interest in the ground lease estateunderlying and the improvements constituting the Cinemas 1, 2 & 3. In connection with that transaction, we granted toSHC an option to acquire a 25% interest in the special purpose entity formed to acquire these interests at cost. On June28, 2007, SHC exercised this option, paying the option exercise price through the application of their $3.0 milliondeposit plus the assumption of its proportionate share of SHP’s liabilities giving it a 25% non-managing membershipinterest in SHP.OBI Management AgreementPursuant to a Theater Management Agreement (the “Management Agreement”), our live theater operations aremanaged by OBI LLC (“OBI Management”), which is wholly owned by Ms. Margaret Cotter who is the daughter of JamesJ. Cotter and a member of our Board of Directors.The Management Agreement generally provides that we will pay OBI Management a combination of fixed andincentive fees, which historically have equated to approximately 21% of the net cash flow received by us from our livetheaters in New York. Since the fixed fees are applicable only during such periods as the New York theaters are booked,OBI Management receives no compensation with respect to a theater at any time when it is not generating revenue forus. This arrangement provides an incentive to OBI Management to keep the theaters booked with the best availableshows, and mitigates the negative cash flow that would result from having an empty theater. In addition, OBIManagement manages our Royal George live theater complex in Chicago on a fee basis based on theater cash flow. In2013, OBI Management earned $401,000, which was 20.1% of net cash flows for the year. In 2012, OBI Managementearned $390,000, which was 19.7% of net cash flows for the year. In 2011, OBI Management earned $398,000, which was19.4% of net cash flows for the year. In each year, we reimbursed travel related expenses for OBI Management personnelwith respect to travel between New York City and Chicago in connection with the management of the Royal Georgecomplex. OBI Management conducts its operations from our office facilities on a rent-free basis, and we share the cost ofone administrative employee of OBI Management. Other than these expenses and travel-related expenses for OBIManagement personnel to travel to Chicago as referred to above, OBI Management is responsible for all of its costs andexpenses related to the performance of its management functions. The Management Agreement renews automaticallyeach year unless either party gives at least six months’ prior notice of its determination to allow the ManagementAgreement to expire. In addition, we may terminate the Management Agreement at any time for cause.Live Theater Play InvestmentFrom time to time, our officers and directors may invest in plays that lease our live theaters. The play STOMPhas been playing in our Orpheum Theatre since prior to the time we acquired the theater in 2001. Messrs. James J. Cotterand Michael Forman own an approximately 5% interest in that play, an interest that they have held since prior to ouracquisition of the theater.Shadow View Land and Farming LLC During 2012, Mr. James J. Cotter, our Chairman, Chief Executive Officer and controlling shareholder, contributed $2.5million of cash and $255,000 of his 2011 bonus as his 50% share of the purchase price of a land parcel in Coachella,California and to cover his 50% share of certain costs associated with that acquisition. This land is held in Shadow ViewLand and Farming, LLC, in which Mr. Cotter owns a 50% interest. We are the managing member of Shadow View Landand Farming, LLC (see Note 20 – Noncontrolling Interests). 100 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 26 – Casualty LossWellington, New Zealand Parking StructureOn July 21, 2013, Wellington, New Zealand experienced a strong earthquake that damaged our parking structureadjacent to our Courtenay Central shopping center. The parking structure has been closed pending repairs to thestructure. We estimate the cost to repair the structure will be approximately $2.0 million (NZ$2.5 million) of which ourearthquake insurance will cover approximately $1.5 million (NZ$1.8 million) after our $584,000 (NZ$710,000) insurancedeductible. For the year ended December 31, 2013, we recorded a casualty loss of $49,000 (NZ$59,000) based on theassociated net book value of the property as an other income (expense) and a $1.5 million (NZ$1.8 million) insurancereceivable in our current receivables at December 31, 2013. Our reduction in operating income will also be offsetsomewhat by our business interruption insurance subject to the relevant deductible.Christchurch, New Zealand CinemasOur 8-screen complex in Christchurch, New Zealand, was damaged as a result of the devastating earthquakesuffered by that city on February 22, 2011. We have earthquake and lost profits insurance on that facility for which wehave received to date $1.1 million (NZ$1.3 million) which is included in our 2011 other income (expense). We areawaiting a final settlement payment on this claim for a nominally estimated amount to be received in 2014. This cinemawas reopened on November 17, 2011, but, as a result of a December 23, 2011 earthquake, the cinema was againtemporarily closed for approximately two weeks.Additionally, the 3-screen complex in Christchurch, New Zealand owned by our Rialto Cinemas joint ventureentity (“Rialto Cinemas”), was damaged as a result of the devastating earthquake suffered by that city on February 22,2011, and has been closed since that date. Pursuant to the lease on the property, in May 2011, Rialto Cinemas gavenotice to the landlord that Rialto Cinemas would be terminating the cinema lease. Rialto Cinemas and the landlord haveterminated the lease under agreeable terms and did not result in a significant reduction to the value of our investment inthe Rialto Cinemas joint venture relative to its carrying value. 101 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Schedule II – Valuation and Qualifying Accounts DescriptionBalance atbeginning ofyearAdditionscharged tocosts andexpensesDeductionsBalance atend of yearAllowance for doubtful accountsYear-ended December 31, 2013 – Allowance fordoubtful accounts$209 $505 $339 $375 Year-ended December 31, 2012 – Allowance fordoubtful accounts$53 $367 $211 $209 Year-ended December 31, 2011 – Allowance fordoubtful accounts$58 $153 $158 $53 Tax valuation allowanceYear-ended December 31, 2013 – Tax valuationallowance$37,903 $--$2,920 $34,983 Year-ended December 31, 2012 – Tax valuationallowance$38,461 $--$558 $37,903 Year-ended December 31, 2011 – Tax valuationallowance$54,513 $--$16,052 $38,461 102 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 9 – Change in and Disagreements with Accountants on Accounting and Financial DisclosureNone. 103 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 9A — Controls and ProceduresManagement’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financialreporting, as such term is defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f), including maintenance of(i) records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, and(ii) policies and procedures that provide reasonable assurance that (a) transactions are recorded as necessary to permitpreparation of financial statements in accordance with accounting principles generally accepted in the United States ofAmerica, (b) our receipts and expenditures are being made only in accordance with authorizations of management and ourBoard of Directors and (c) we will prevent or timely detect unauthorized acquisition, use, or disposition of our assets thatcould have a material effect on the financial statements.Internal control over financial reporting cannot provide absolute assurance of achieving financial reportingobjectives because of the inherent limitations of any system of internal control. Internal control over financial reportingis a process that involves human diligence and compliance and is subject to lapses of judgment and breakdowns resultingfrom human failures. Internal control over financial reporting also can be circumvented by collusion or improperoverriding of controls. As a result of such limitations, there is risk that material misstatements may not be prevented ordetected on a timely basis by internal control over financial reporting. However, these inherent limitations are knownfeatures of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, thoughnot eliminate, this risk.Under the supervision and with the participation of our management, including our Chief Executive Officer andChief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reportingbased on the criteria established in Internal Control—Integrated Framework issued by the Committee of SponsoringOrganizations (COSO) of the Treadway Commission. Based on our evaluation under the COSO framework, ourmanagement concluded that our internal control over financial reporting was effective as of December 31, 2013. Theeffectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by Grant ThorntonLLP, an independent registered public accounting firm, as stated in their report, which is included herein.Disclosure Controls and Procedures We have formally adopted a policy for disclosure controls and procedures that provides guidance on theevaluation of disclosure controls and procedures and is designed to ensure that all corporate disclosure is complete andaccurate in all material respects and that all information required to be disclosed in the periodic reports submitted by usunder the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods andin the manner specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls andprocedures include, without limitation, controls and procedures designed to ensure that information required to bedisclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer'smanagement, including its principal executive and principal financial officers, or persons performing similar functions, asappropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, wecarried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of our disclosure controls and procedures. A disclosure committee consisting of theprincipal accounting officer, general counsel, senior officers of each significant business line and other select employeesassisted the Chief Executive Officer and the Chief Financial Officer in this evaluation. Based upon that evaluation, ourChief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effectiveas required by the Securities Exchange Act Rule 13a-15(e) and 15d – 15(e) as of the end of the period covered by thisreport.Changes in Internal Controls Over Financial Reporting No changes in internal control over financial reporting occurred during the quarter ended December 31, 2013,that have materially affected, or are likely to materially affect, our internal control over financial reporting. 104 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Report of Independent Registered Public Accounting FirmBoard of Directors and StockholdersReading International, Inc. We have audited the internal control over financial reporting of Reading International, Inc. and subsidiaries (the“Company”) as of December 31, 2013, based on criteria established in the 1992 Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’smanagement is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Management’s Report on InternalControl Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control overfinancial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing suchother procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basisfor our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reporting includesthose policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactionsare recorded as necessary to permit preparation of financial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detectionof unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financialstatements.Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controlsmay become inadequate because of changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financialreporting as of December 31, 2013, based on criteria established in the 1992 Internal Control—Integrated Frameworkissued by COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated financial statements of the Company as of and for the year ended December 31, 2013and our report dated March 7, 2014 expressed an unqualified opinion on those financial statements. /s/ Grant Thornton LLPLos Angeles, CaliforniaMarch 7, 2014 105 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART III Items 10, 11, 12, 13 and 14Information required by Part II (Items 10, 11, 12, 13 and 14) of this From 10-K is hereby incorporated byreference from the Reading International, Inc.’s definitive Proxy Statement for its 2014 Annual Meeting of Stockholders,which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 daysafter the end of the fiscal year. 106 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IV Item 15 – Exhibits, Financial Statement Schedules(a) The following documents are filed as a part of this report:1.Financial StatementsThe following financial statements are filed as part of this report under Item 8 – Financial Statements andSupplementary Data.DescriptionReports of Independent Registered Accounting Firm (page 55)Consolidated Balance Sheets as of December 31, 2013 and 2012 (page 56)Consolidated Statements of Operations for the Three Years Ended December 31, 2013 (page 57)Consolidated Statements of Comprehensive Income (Loss) for the Three Years Ended December 31, 2012 (page 58)Consolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 2013 (page 59)Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2013 (page 60)Notes to Consolidated Financial Statements (page 61)2.Financial Statements and Schedules for the years ended December 31, 2013, 2012, and 2011Schedule II – Valuation and Qualifying Accounts (page 102)Financial Statements of Mt. Gravatt Cinemas Joint Venture (page 108)3.Exhibits (Listed by numbers corresponding to Item 601 of Regulation S-K (page 125)(b) Exhibits Required by Item 601 of Regulation S-KSee Item (a) 3. above.(c) Financial Statement ScheduleSee Item (a) 2. above. 107 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Following are financial statements and notes of Mt. Gravatt Cinemas Joint Venture for the periods indicated. We arerequired to include in our Report on Form 10-K audited financial statements for the years ended December 31, 2012, and2011. The financial statements for 2013 are unaudited.Mt. Gravatt Cinemas Joint VentureStatements of Comprehensive IncomeFor the Years Ended December 31, 2013, 2012 and 2011 In AUS$Note2013(unaudited)20122011Revenue from rendering services5$9,765,087 $10,689,440 $10,022,854 Revenue from sale of concession3,605,822 4,015,329 3,625,410 Total revenue13,370,909 14,704,769 13,648,264 Film expenses(3,797,873)(4,311,436)(3,974,267)Personnel expenses6(1,681,870)(1,845,515)(1,925,190)Occupancy expenses(1,603,302)(1,584,751)(1,521,307)House expenses(1,174,667)(1,260,328)(1,159,484)Cost of concession(853,553)(944,355)(851,575)Depreciation and amortization expenses11(544,270)(597,349)(555,594)Advertising and marketing costs(285,815)(313,791)(334,325)Management fees(267,902)(261,004)(253,914)Repairs and maintenance expense(155,198)(217,289)(182,566) Results for operating activities3,006,459 3,368,951 2,890,042 Finance income11,922 21,256 58,301 Net finance income711,922 21,256 58,301 Profit for the period$3,018,381 $3,390,207 $2,948,343 Other comprehensive incomeOther comprehensive income for the period------Total comprehensive income for the period$3,018,381 $3,390,207 $2,948,343 The accompanying notes are an integral part of these financial statements. 108 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Mt. Gravatt Cinemas Joint VentureStatements of Changes in EquityFor the Years Ended December 31, 2013, 2012 and 2011 In AUS$BirchCarroll &CoyleLimitedReadingExhibitionPty LtdVillageRoadshowExhibitionPty LtdTotalMembers’ Equity at December 31, 2010$1,297,924 $1,297,924 $1,297,924 $3,893,772 Member distributions(700,000)(700,000)(700,000)(2,100,000)Total other comprehensive income--------Profit for the period982,781 982,781 982,781 2,948,343 Total comprehensive income for the period982,781 982,781 982,781 2,948,343 Members’ Equity at December 31, 2011$1,580,705 $1,580,705 $1,580,705 $4,742,115 Member distributions(1,350,000)(1,350,000)(1,350,000)(4,050,000)Total other comprehensive income--------Profit for the period1,130,069 1,130,069 1,130,069 3,390,207 Total comprehensive income for the period1,130,069 1,130,069 1,130,069 3,390,207 Members’ Equity at December 31, 2012$1,360,774 $1,360,774 $1,360,774 $4,082,322 Member distributions (unaudited)(1,100,000)(1,100,000)(1,100,000)(3,300,000)Total other comprehensive income (unaudited)--------Profit for the period (unaudited)1,006,127 1,006,127 1,006,127 3,018,381 Total comprehensive income for the period (unaudited)1,006,127 1,006,127 1,006,127 3,018,381 Members’ Equity at December 31, 2013 (unaudited)$1,266,901 $1,266,901 $1,266,901 $3,800,703 The accompanying notes are an integral part of these financial statements. 109 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Mt. Gravatt Cinemas Joint VentureStatements of Financial PositionAs at December 31, 2013 and 2012 In AUS$Note2013(unaudited)2012ASSETSCash and cash equivalents8$694,392 $898,217 Trade receivables9172,293 196,598 Inventories10126,947 173,411 Total current assets993,632 1,268,226 Property, plant and equipment113,681,951 3,923,871 Total non-current assets3,681,951 3,923,871 Total assets$4,675,583 $5,192,097 Trade and other payables12$636,832 $878,026 Employee benefits13172,496 162,961 Deferred revenue1432,297 27,683 Total current liabilities841,625 1,068,670 Employee benefits1333,255 41,105 Total non-current liabilities33,255 41,105 Total liabilities874,880 1,109,775 Net assets$3,800,703 $4,082,322 EquityContributed equity202,593 202,593 Retained earnings3,598,110 3,879,729 Total equity$3,800,703 $4,082,322 The accompanying notes are an integral part of these financial statements. 110 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Mt. Gravatt Cinemas Joint VentureStatements of Cash FlowsFor the Years Ended December 31, 2013, 2012 and 2011 In AUS$Note2013(unaudited)20122011Cash flows from operating activitiesCash receipts from customers$14,986,613 $16,091,198 $14,889,678 Cash paid to suppliers and employees(11,600,009)(11,971,304)(11,450,521)Net cash provided from operating activities183,386,604 4,119,894 3,439,157 Cash flows from investing activitiesAcquisition of property, plant and equipment11(302,351)(783,266)(1,309,432)Interest received711,922 21,256 58,301 Net cash used in investing activities(290,429)(762,010)(1,251,131)Cash flows from financing activitiesDistributions to Joint Venturers(3,300,000)(4,050,000)(2,100,000)Net cash used in financing activities(3,300,000)(4,050,000)(2,100,000)Net increase/ (decrease) in cash and cash equivalents(203,825)(692,116)88,024 Cash and cash equivalents at 1 January898,217 1,590,333 1,502,309 Cash and cash equivalents at 31 December8$694,392 $898,217 $1,590,333 The accompanying notes are an integral part of these financial statements. 111 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Mt. Gravatt Cinemas Joint VentureNotes to Financial StatementsDecember 31, 2013 1. Reporting entityMt. Gravatt Cinemas Joint Venture (the “Joint Venture”) is a legal joint venture between Birch Carrol & CoyleLtd, Reading Exhibition Pty Ltd and Village Roadshow Exhibition Pty Ltd. The Joint Venture is domiciled and providesservices solely in Australia. The address of the Joint Venture’s registered office is 227 Elizabeth Street, Sydney NSW2000. The Joint Venture primarily is involved in the exhibition of motion pictures at one cinema site.The joint venture is to continue in existence until the Joint Venture is terminated and associated underlyingassets have been sold and the proceeds of sale distributed upon agreement of the members. All distributions of earningsare required to be agreed upon and distributed evenly to the three Joint Venturers. The three Joint Venturers will evenlycontribute any future required contributions.2. Basis of presentation(a) Statement of complianceThese financial statements are general purpose financial statements which have been prepared in accordancewith the International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board.The financial year end of the Joint Venture is 30 June. For purposes of the use of these financial statements byone of the Joint Venturers, these financial statements have been prepared on a 12-month period basis ending on 31December. (b) Basis of measurementThe financial statements have been prepared on the historical cost basis. The methods used to measure fair values arediscussed further in Note 4, Determination of fair values.(c) Functional and presentation currencyThese financial statements are presented in Australian dollars, which is also the Joint Venture’s functionalcurrency. Amounts in the financial statements have been rounded to the nearest dollar, unless otherwise stated.(d) Use of estimates and judgmentsThe preparation of financial statements in accordance with IFRS requires management to make judgements,estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,income and expenses. Actual results may differ from these estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognised in the period in which the estimate is revised and in any future periods affected.In particular, information about significant areas of estimation uncertainty and critical judgements in applyingaccounting policies that have the most significant effect on the amount recognised in the financial statements aredescribed in Note 15 Financial instruments.3. Significant accounting policiesThe accounting policies set out below have been applied consistently to all periods presented in these financialstatements.The Joint Venture has not elected to early adopt any accounting standards and amendments. See Note 3(n). 112 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (a) Financial instrumentsNon-derivative financial instruments comprise trade receivables, cash and cash equivalents, and trade payables.Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair valuethrough profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivativefinancial instruments are measured as described below.A financial instrument is recognised if the Joint Venture becomes a party to the contractual provisions of theinstrument. Financial assets are derecognised if the Joint Venture’s contractual rights to the cash flows from the financialassets expire or if the Joint Venture transfers the financial asset to another party without retaining control or substantiallyall risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e.,the date that the Joint Venture commits itself to purchase or sell the asset. Financial liabilities are derecognised if theJoint Venture’s obligations specified in the contract expire, are discharged or cancelled.Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable ondemand and form an integral part of the Joint Venture’s cash management are included as a component of cash and cashequivalents for the purpose of the statement of cash flows.Accounting for finance income and expense is discussed in Note 3(k), Finance income.(b) Property, plant and equipment(i) Recognition and measurementItems of property, plant and equipment are measured at cost less accumulated depreciation.Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing theasset to a working condition for its intended use. Costs also may include purchases of property, plant andequipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of thatequipment. Borrowing costs related to the acquisition or construction of qualifying assets are capitalised as part of thecost of that asset.When parts of an item of property, plant and equipment have different useful lives, they are accounted for asseparate items (major components) of property, plant and equipment.(ii) Subsequent costsThe cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of theitem if it is probable that the future economic benefits embodied within the part will flow to the Joint Venture and its costcan be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicingof property, plant and equipment are recognised in profit or loss as incurred.(iii) DepreciationDepreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part ofan item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their usefullives. Land is not depreciated.The estimated useful lives for the current and comparative periods are as follows:Leasehold improvementsShorter of estimated useful life and term of leasePlant and equipment3 to 20 yearsDepreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted ifappropriate. 113 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) Leased assetsLeases in which the Joint Venture assumes substantially all the risks and rewards of ownership are classified asfinance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value andthe present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for inaccordance with the accounting policy applicable to that asset.Other leases are operating leases and are not recognised on the Joint Venture’s statement of financial position.(d) InventoriesInventories are measured at the lower of cost and net realisable value. The cost of inventories is based on thefirst-in first-out principle, and includes expenditure incurred in acquiring the inventories, and other costs incurred inbringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinarycourse of business, less the estimated costs of completion and selling expenses.(e) Impairment(i) Financial assetsA financial asset is assessed at each reporting date to determine whether there is any objective evidence that it isimpaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initialrecognition of the asset, and that loss event had a negative effect on the estimated future cash flows of that asset that canbe estimated reliably.An impairment loss in respect of a financial asset measured at amortised cost is calculated as the differencebetween its carrying amount, and the present value of the estimated future cash flows discounted at the original effectiveinterest rate. Losses are recognised in profit or loss and reflected in an allowance against the relevant asset. When asubsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed throughprofit or loss.(ii) Non-financial assetsThe carrying amounts of the Joint Venture’s non-financial assets, other than inventories, are reviewed at eachreporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’srecoverable amount is estimated.The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value lesscosts to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds itsrecoverable amount. Impairment losses are recognised in profit or loss.In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for anyindications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change inthe estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’scarrying amount does not exceed the carrying amount that would have been determined, net of depreciation oramortisation, if no impairment loss had been recognised. 114 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (f) Employee benefits(i) Long-term employee benefitsThe Joint Venture’s net obligation in respect of long-term employee benefits is the amount of future benefit thatemployees have earned in return for their service in the current and prior periods plus related on-costs; that benefit isdiscounted to determine its present value and the fair value of any related assets is deducted.(ii) Termination benefitsTermination benefits are recognised as an expense when the Joint Venture is demonstrably committed, withoutrealistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirementdate, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Terminationbenefits for voluntary redundancies are recognised as an expense if the Joint Venture has made an offer of voluntaryredundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.(iii) Short-term benefitsLiabilities for employee benefits for wages, salaries, and annual leave represent present obligations resultingfrom employees’ services provided to reporting date and are calculated at undiscounted amounts based on remunerationwage and salary rates that the Joint Venture expects to pay as at reporting date including related on-costs, such as workerscompensation insurance and payroll tax. (g) ProvisionsA provision is recognised if, as a result of a past event, the Joint Venture has a present legal or constructiveobligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settlethe obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflectscurrent market assessments of the time value of money and the risks specific to the liability.(h) Contributed equityThe Joint Venture is comprised of three parties who share an equal ownership over the Joint Venture. TheContributed Equity amount represents the initial investment in the partnership. Distribution to the partners are made onbehalf of the Joint Venture and are recognised through retained earnings.(i) RevenueRendering of service/sale of concessionsRevenue is measured at the fair value of the consideration received or receivable, net of returns, trade discountsand value rebates. Revenues are generated principally through admissions and concession sales with proceeds receivedin cash at the point of sale. Service revenue also includes product advertising and other ancillary revenues, such asbooking fees, which are recognised as income in the period earned. The Joint Venture recognises payments receivedattributable to the advertising services provided by the Joint Venture under certain vendor programs as revenue in theperiod in which services are delivered.(j) Lease paymentsPayments made under operating leases are recognised in profit or loss on a straight-line basis over the term of thelease on a basis that is representative of the pattern of benefit derived from the leased property.(k) Finance incomeFinance income comprises interest income on cash held in financial institutions. Interest income is recognised asit accrues in profit or loss using the effective interest method. 115 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (l) Taxes(i) Goods and service taxRevenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where theamount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised aspart of the cost of acquisition of the asset or as part of the expense.Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from,or payable to, the ATO is included as a current asset or liability in the balance sheet.Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flowsarising from investing and financing activities which are recoverable from, or payable to, the ATO are classified asoperating cash flows.(ii) Income taxUnder applicable Australian law, the Joint Venture is not subject to tax on earnings generated. Accordingly theJoint Venture does not recognise any income tax expense, or deferred tax balances. Earnings of the Joint Venture aretaxed at the Joint Venturer level.(m) Film expenseFilm expense is incurred based on a contracted percentage of box office results for each film. The Joint Venturenegotiates terms with each film distributor on a film-by-film basis. Percentage terms are based on a sliding scale, with theJoint Venture subject to a higher percentage of box office results when the film is initially released and declining eachsubsequent week. Different films have different rates dependent upon the expected popularity of the film, and forecastedsuccess.(n) New standards and interpretations not yet adoptedThe Joint Venture does not consider that any standards of interpretations issued by IASB or the IFRIC, eitherapplicable in the current year or not yet applicable, have, or will have, a significant impact on the financial statements.(o) Amounts paid or payable to the auditorThe amounts paid or payable to the auditor for the audit of these financial statements has been borne by one ofthe Joint Venturers for which these financial statements have been prepared. The auditor provided non-audit service inthe current period to the value of $19,700 (unaudited). 116 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In AUS$2013(unaudited)2012Audit fees$--$57,500 4. Determination of fair valuesA number of the Joint Venture’s accounting policies and disclosures require the determination of fair value, forboth financial and non-financial assets and liabilities. Fair values have been determined for measurement and disclosurepurposes based on the following methods. Where applicable, further information about the assumptions made indetermining fair values is disclosed in the notes specific to that asset or liability.(i) Trade and other receivablesThe fair value of trade and other receivables is estimated as the present value of future cash flows, discounted atthe market rate of interest at the reporting date.(ii) Non-derivative financial liabilitiesFair value, which is determined for disclosure purposes, is calculated based on the present value of futureprincipal and interest cash flows, discounted at the market rate of interest at the reporting date.5. Revenue from rendering of servicesIn AUS$2013(unaudited)20122011Box office revenue8,526,341 9,508,154 9,019,423 Screen advertising331,472 286,501 249,524 Booking fees218,025 268,180 200,017 Other cinema services689,249 626,605 553,890 $9,765,087 $10,689,440 $10,022,854 6. Personnel expensesIn AUS$2013(unaudited)20122011Wages and salaries1,603,620 1,767,789 1,846,267 Change in liability for annual leave56,011 65,274 57,628 Change in liability for long-service leave22,239 12,452 21,295 $1,681,870 $1,845,515 $1,925,190 7. Finance incomeIn AUS$2013(unaudited)20122011Interest income on cash at bank:11,922 21,256 58,301 $11,922 $21,256 $58,301 117 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 8. Cash and cash equivalentsIn AUS$Note2013(unaudited)2012Cash at bank and on hand15694,392 898,217 Cash and cash equivalents in the statement of cash flows$694,392 $898,217 The Joint Venture’s exposure to interest rate risk is disclosed in Note 15(e), Financial instruments, Market risk.9. Trade and other receivablesIn AUS$Note2013(unaudited)2012Trade receivables15172,293 196,598 $172,293 $196,598 The Joint Venture’s trade receivables relate mainly to the Joint Venture’s screen advertiser and credit cardcompanies.The Joint Venture’s exposure to credit risk and impairment losses related to trade receivables is disclosed in Note15(c), Financial instruments, Credit risk.10. InventoriesIn AUS$2013(unaudited)2012Concession stores at cost126,947 173,411 $126,947 $173,411 11. Property, Plant, and EquipmentIn AUS$Plant andEquipmentLeaseholdImprovementsCapital WIPTotalCostBalance at January 1, 201210,458,263 2,787,784 242,446 13,488,493 Additions----783,266 783,266 Transfers94,123 4,900 (99,023)--Balance at December 31, 2012$10,552,386 $2,792,684 $926,689 $14,271,759 Balance at January 1, 2013 (unaudited)10,552,386 2,792,684 926,689 14,271,759 Additions (unaudited)1,106,833 118,843 --1,225,676 Transfers (unaudited)----(923,325)(923,325)Balance at December 31, 2013 (unaudited)$11,659,219 $2,911,527 $3,364 $14,574,110 In AUS$Plant andEquipmentLeaseholdImprovementsCapital WIPTotalAccumulated depreciationBalance at January 1, 2012(8,688,701)(1,061,838)--(9,750,539)Depreciation and amortisation(492,890)(104,459)--(597,349)Balance at December 31, 2012$(9,181,591)$(1,166,297)$--$(10,347,888) 118 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Balance at January 1, 2013 (unaudited)(9,181,591)(1,166,297)--(10,347,888)Depreciation and amortisation (unaudited)(436,407)(107,864)--(544,271)Balance at December 31, 2013 (unaudited)$(9,617,998)$(1,274,161)$--$(10,892,159)In AUS$Plant andEquipmentLeaseholdImprovementsCapital WIPTotalCarrying amountsAt January 1, 2012$1,769,563 $1,725,946 $242,446 $3,737,955 At December 31, 20121,370,795 1,626,387 926,689 3,923,871 At January 1, 2013 (unaudited)1,370,795 1,626,387 926,689 3,923,871 At December 31, 2013 (unaudited)2,041,221 1,637,366 3,364 3,681,951 12. Trade and other payablesIn AUS$Note2013(unaudited)2012Trade payables221,732 413,082 Non-trade payables and accruals415,100 464,944 15$636,832 $878,026 The Joint Venture’s exposure to liquidity risk related to trade and other payables is disclosed in Note 15(d),Financial instruments, Liquidity risk. Trade payables represents payments to trade creditors. The Joint Venture makesthese payments through the managing party’s shared service centre and is charged a management fee for theseservices. Disclosure regarding the management fee is made in Note 19, Related parties.13. Employee benefitsCurrentIn AUS$2013(unaudited)2012Liability for annual leave96,527 102,540 Liability for long-service leave75,969 60,421 $172,496 $162,961 Non-currentIn AUS$2013(unaudited)2012Liability for long-service leave33,255 41,105 $33,255 $41,105 119 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 14. Deferred revenueIn AUS$2013(unaudited)2012Deferred revenue32,297 27,683 $32,297 $27,683 Deferred revenue mainly consists of advance funds received from vendors for the exclusive rights to supplycertain concession items. Revenue is recognised over the term of the related contract on a straight-line basis and isclassified as service revenue.15. Financial instruments(a) OverviewThis note presents information about the Joint Venture’s exposure to financial risks, its objectives, policies, andprocesses for measuring and managing risk, and the management of capital.The Joint Venture’s activities expose it to the following financial risks;·credit risk;·liquidity risk; and·market risk.(b) Risk management frameworkThe Joint Venturers’ have overall responsibility for the establishment and oversight of the risk managementframework and are also responsible for developing and monitoring risk management policies.Risk management policies are established to identify and analyse the risks faced by the Joint Venture to setappropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systemsare reviewed regularly to reflect changes in market conditions and the Joint Venture’s activities. The Joint Venture,through its training and management standards and procedures, aims to develop a disciplined and constructive controlenvironment in which all employees understand their roles and obligations.The Joint Venturers’ oversee how management monitors compliance with the Joint Venture’s risk managementpolicies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by theJoint Venture.There were no changes in the Joint Venture’s approach to capital management during the year.(c) Credit riskCredit risk is the risk of financial loss to the Joint Venture if a customer or counterparty to a financial instrumentfails to meet its contractual obligations, and arises principally from the Joint Venture’s receivables from customers. The Joint Venture’s exposure to credit risk is influenced mainly by the individual characteristics of eachcustomer. The demographics of the Joint Venture’s customer base, including the default risk of the industry and country,in which customers operate, has less of an influence on credit risk.Customers that are graded as “high risk” are placed on a restricted customer list, and monitored by the JointVenturers. The Joint Venture operates under the managing Joint Venturer’s credit policy under which each new customer isanalysed individually for creditworthiness before the Joint Venture’s standard payment and delivery terms and conditionsare offered. The Joint Venture’s review includes external ratings, when available, and in some 120 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. cases bank references. Purchase limits are established for each customer. These limits are reviewedperiodically. Customers that fail to meet the Joint Venture’s benchmark creditworthiness may transact with the JointVenture only on a prepayment basis.Exposure to credit riskThe carrying amount of the Joint Venture’s financial assets represents the maximum credit exposure. The JointVenture’s maximum exposure to credit risk at the reporting date was:Carrying AmountIn AUS$Note2013(unaudited)2012Trade receivables9$172,293 $196,598 Cash and cash equivalents8694,392 898,217 The Joint Venture’s maximum exposure to credit risk for trade receivables at the reporting date by type ofcustomer was:Carrying AmountIn AUS$2013(unaudited)2012Screen advertisers109,310 72,181 Credit card companies56,537 114,418 Games, machine and merchandising companies6,446 9,999 $172,293 $196,598 Impairment lossesNone of the Company’s trade receivables are past due (2012: $nil). There were no allowances for impairment at31 December 2013 (unaudited) or 2012.(d) Liquidity riskLiquidity risk is the risk that the Joint Venture will encounter difficulties in meeting its financial obligations asthey fall due. The Joint Venture’s approach to managing liquidity is to ensure, as far as possible, that it will havesufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurringunacceptable losses or risking damage to the Joint Venture’s reputation.The only financial liabilities are trade and other payables all of which are contractually due within 12months. The carrying value of such liabilities at 31 December 2013 is $636,830 (unaudited) and 2012: $878,026.(e) Market riskMarket risk is the risk that changes in market prices, such as interest rates, will affect the Joint Venture’sincome. The objective of market risk management is to manage and control market risk exposures within acceptableparameters, while optimising the return. The Joint Venture is not subject to market risks relating to foreign exchange ratesor equity prices. Furthermore, the Joint Venture does not use derivative, financial instruments to hedge fluctuations ininterest rates.Interest rate riskAt the reporting date the interest rate profile of the Joint Venture’s interest-bearing financial instruments was: 121 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Variable rate instrumentsCarrying amountIn AUS$2013(unaudited)2012Cash at bank$694,392 $855,715 The Joint Venture held no fixed rate instruments during financial years 2013 (unaudited) or 2012. (f) Fair valuesFair values versus carrying amountsThe fair values of financial assets and liabilities, together with the carrying amounts shown in the statement offinancial position, are as follows:2013 (unaudited)2012In AUS$CarryingamountFair valueCarryingamountFair valueTrade receivables$172,293 $172,293 $196,598 $196,598 Cash and cash equivalents694,392 694,392 898,217 898,217 Trade and other payables636,830 636,830 878,026 878,026 The basis for determining fair values is disclosed in Note 4, Determination of fair values. (g) CapitalCapital consists of contributed equity and retained earnings. The contributed equity amount represents theinitial investment in the partnership. The Managing Committee’s policy is to maintain a strong capital base so as tomaintain creditor confidence and to sustain future development of the business. There were no externally imposed capitalrequirements during the financial years 2013 (unaudited) or 2012.16. Operating leasesLeases as lesseeNon-cancellable operating lease rentals are payable as follows:In AUS$2013(unaudited)2012Less than one year1,277,755 1,277,754 Between one and five years5,083,014 5,111,016 More than five years--1,225,244 Total$6,360,769 $7,614,014 The Joint Venture leases the cinema property under a long term operating lease.17. Contingencies and capital commitmentsThe nature of the Joint Venture’s operations results in claims for personal injuries (including public liability andworkers compensation) being received from time to time. As at period end there were no material current or ongoingoutstanding claims. 122 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Joint Venture has no capital commitments at 31 December 2013 (unaudited); (2012: $nil). 18. Reconciliation of cash flows from operating activitiesIn AUS$Note2013(unaudited)20122011Cash flows from operating activitiesProfit for the period3,018,381 3,390,207 2,948,343 Adjustments for:Depreciation and amortisation11544,271 597,349 555,594 Interest received7(11,922)(21,256)(58,301)Operating profit before changes in working capital$3,550,730 $3,966,300 $3,445,636 Change in trade receivables924,305 (53,110)(53,892)Change in inventories1046,464 (19,512)81,620 Change in trade and other payables12(241,194)220,135 7,388 Change in employee benefits131,685 17,466 9,195 Change in deferred revenue144,614 (11,385)(50,790)Net cash from operating activities$3,386,604 $4,119,894 $3,439,157 19. Related partiesEntities with joint control or significant influence over the Joint Venture.The managing Joint Venturer is paid an annual management fee, which is presented separately in the statementof comprehensive income. The management fee paid is as per the Joint Venture agreement and is to cover the costs ofmanaging and operating the cinema complex and providing all relevant accounting and support services. Themanagement fee is based on a contracted base amount, increased by the Consumer Price Index for the City of Brisbane aspublished by the Australian Bureau of Statistics on an annual basis. Such management fee agreement is binding over thelife of the agreement which shall continue in existence until the Joint Venture is terminated under agreement by the JointVenturers.As of 31 December 2013 (unaudited) the management fee payable was $26,040 (2012: Nil).20. Subsequent eventsSubsequent to 31 December 2013 (unaudited), there were no events which would have a material effect on thesefinancial statements. 123 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Independent Auditors’ ReportThe Management Committee and Joint VenturersMt. Gravatt Cinemas Joint Venture:Report on the Financial StatementsWe have audited the accompanying financial statements of Mt. Gravatt Cinemas Joint Venture, which comprise thestatement of financial position as of December 31, 2012 and the related statements of comprehensive income, changes inequity, and cash flows for the years ended December 31, 2012 and 2011, and the related notes to the financial statements.Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance withInternational Financial Reporting Standards as issued by the International Accounting Standards Board; this includes thedesign, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether due to fraud or error.Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits inaccordance with auditing standards generally accepted in the United States of America. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free from materialmisstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of materialmisstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity's preparation and fair presentation of the financial statements in order todesign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluatingthe appropriateness of accounting policies used and the reasonableness of significant accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position ofMt. Gravatt Cinemas Joint Venture as of December 31, 2012 and the results of its operations and its cash flows for theyears ended December 31, 2012 and 2011, in conformity with International Financial Reporting Standards as issued bythe International Accounting Standards Board./s/ KPMGSydney, AustraliaMarch 4, 2013 124 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibits3.1Certificate of Amendment and Restatement of Articles of Incorporation of Reading International, Inc., aNevada corporation, as filed with the Nevada Secretary of State on May 22, 2003 (filed as Exhibit 3.8 tothe Company’s report on Form 10-Q for the period ended June 30, 2009, and incorporated herein byreference).3.2.1Amended and Restated Bylaws of Reading International, Inc., a Nevada corporation (filed as Exhibit 3.6to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, and incorporatedherein by reference).3.2.2Amended Article V of the Amended and Restated Bylaws of Reading International, Inc. (filed as exhibit3.2 to the Company’s report on Form 8-K dated December 27, 2007, and incorporated herein byreference).3.3Articles of Merger of Craig Merger Sub, Inc. with and into Craig Corporation (filed as Exhibit 3.4 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 2001).3.4Articles of Merger of Reading Merger Sub, Inc. with and into Reading Entertainment, Inc. (filed asExhibit 3.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001).4.1*1999 Stock Option Plan of Reading International, Inc., as amended on December 31, 2001 (filed asExhibit 4.1 to the Company’s Registration Statement on Form S-8 filed on January 21, 2004, andincorporated herein by reference). 4.2Form of Preferred Securities Certificate evidencing the preferred securities of Reading InternationalTrust I (filed as Exhibit 4.1 to the Company’s report on Form 8-K filed on February 9, 2007, andincorporated herein by reference).4.3Form of Common Securities Certificate evidencing common securities of Reading International Trust I(filed as Exhibit 4.2 to the Company’s report on Form 8-K filed on February 9, 2007, and incorporatedherein by reference).4.4Form of Reading International, Inc. and Reading New Zealand, Limited, Junior Subordinated Note due2027 (filed as Exhibit 4.3 to the Company’s report on Form 8-K filed on February 9, 2007, andincorporated herein by reference).4.5Form of Indenture (filed as Exhibit 4.4 to the Company’s report on Form S-3 on October 20, 2009, andincorporated herein by reference).4.6*2010 Stock Incentive Plan (filed as Exhibit 4.1 to the Company’s report on Form S-8 on May 26, 2010,and incorporated herein by reference).4.7*Form of Stock Option Agreement (filed as Exhibit 4.2 to the Company’s report on Form S-8 on May 26,2010, and incorporated herein by reference).4.8*Form of Stock Bonus Agreement (filed as Exhibit 4.3 to the Company’s report on Form S-8 on May 26,2010, and incorporated herein by reference).4.9*Form of Restricted Stock Agreement (filed as Exhibit 4.4 to the Company’s report on Form S-8 on May26, 2010, and incorporated herein by reference).4.10*Form of Stock Appreciation Right Agreement (filed as Exhibit 4.5 to the Company’s report on Form S-8on May 26, 2010, and incorporated herein by reference).4.11*Amendment to the 2010 Stock Incentive Plan (filed as Appendix A of the Company’s proxy statementon April 29, 2011, and incorporated here by reference).10.1*Employment Agreement, dated October 28, 1999, among Craig Corporation, Citadel HoldingCorporation, Reading Entertainment, Inc., and Andrzej Matyczynski (filed as Exhibit 10.37 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated hereinby reference).10.2Amended and Restated Lease Agreement, dated as of July 28, 2000, as amended and restated as ofJanuary 29, 2002, between Sutton Hill Capital, L.L.C. and Citadel Cinemas, Inc. (filed as Exhibit 10.40to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporatedherein by reference). 125 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.3Amended and Restated Citadel Standby Credit Facility, dated as of July 28, 2000, as amended andrestated as of January 29, 2002, between Sutton Hill Capital, L.L.C. and Reading International, Inc.(filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31,2002 and incorporated herein by reference).10.4Amended and Restated Security Agreement dated as of July 28, 2000 as amended and restated as ofJanuary 29, 2002 between Sutton Hill Capital, L.L.C. and Reading International, Inc. (filed as Exhibit10.42 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 andincorporated herein by reference).10.5Amended and Restated Pledge Agreement dated as of July 28, 2000 as amended and restated as ofJanuary 29, 2002 between Sutton Hill Capital, L.L.C. and Reading International, Inc. (filed as Exhibit10.43 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 andincorporated herein by reference). 10.6Amended and Restated Intercreditor Agreement dated as of July 28, 2000 as amended and restated as ofJanuary 29, 2002 between Sutton Hill Capital, L.L.C. and Reading International, Inc. and NationwideTheatres Corp. (filed as Exhibit 10.44 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2002 and incorporated herein by reference). 10.7Guaranty dated July 28, 2000 by Michael R. Forman and James J. Cotter in favor of Citadel Cinemas,Inc. and Citadel Realty, Inc. (filed as Exhibit 10.45 to the Company’s Annual Report on Form 10-K forthe year ended December 31, 2002 and incorporated herein by reference).10.8Theater Management Agreement, effective as January 1, 2002, between Liberty Theaters, Inc. and OBILLC (filed as Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2002 and incorporated herein by reference).10.9Omnibus Amendment Agreement, dated as of October 22, 2003, between Citadel Cinemas, Inc., SuttonHill Capital, L.L.C., Nationwide Theatres Corp., Sutton Hill Associates, and Reading International, Inc.(filed as Exhibit 10.49 to the Company’s report on Form 10-Q for the period ended September 30, 2003,and incorporated herein by reference).10.10Assignment and Assumption of Lease between Sutton Hill Capital L.L.C. and Sutton Hill Properties,LLC dated as of September 19, 2005 (filed as exhibit 10.56 to the Company’s report on Form 8-K filedon September 21, 2005, and incorporated herein by reference).10.11License and Option Agreement between Sutton Hill Properties, LLC and Sutton Hill Capital L.L.C.dated as of September 19, 2005 (filed as exhibit 10.57 to the Company’s report on Form 8-K filed onSeptember 21, 2005, and incorporated herein by reference).10.12Second Amendment to Amended and Restated Master Operating Lease dated as of September 1, 2005(filed as exhibit 10.58 to the Company’s report on Form 8-K filed on September 21, 2005, andincorporated herein by reference). Purchase Agreement, dated February 5, 2007, among Reading International, Inc., Reading InternationalTrust I, and Kodiak Warehouse JPM LLC (filed as Exhibit 10.1 to the Company’s report on Form 8-Kfiled on February 9, 2007, and incorporated herein by reference).10.14Amended and Restated Declaration of Trust, dated February 5, 2007, among Reading International Inc.,as sponsor, the Administrators named therein, and Wells Fargo Bank, N.A., as property trustee, and WellsFargo Delaware Trust Company as Delaware trustee (filed as Exhibit 10.2 to the Company’s report onForm 8-K dated February 5, 2007, and incorporated herein by reference).10.15Indenture among Reading International, Inc., Reading New Zealand Limited, and Wells Fargo Bank,N.A., as indenture trustee (filed as Exhibit 10.4 to the Company’s report on Form 8-K dated February 5,2007, and incorporated herein by reference).10.16*Employment Agreement, dated December 28, 2006, between Reading International, Inc. and JohnHunter (filed as Exhibit 10.66 to the Company’s report on Form 10-K for the year ended December 31,2006, and incorporated herein by reference).10.17Reading Guaranty Agreement dated February 21, 2008 among Consolidated Amusement Theatres, Inc.,a Nevada corporation, General Electric Capital Corporation, and GE Capital Markets, Inc. (filed asExhibit 10.73 to the Company’s report on Form 10-K for the year ended December 31, 2007, andincorporated herein by reference).10.18Pledge and Security Agreement dated February 22, 2008 by Reading Consolidated Holdings, Inc. infavor of Nationwide Theatres Corp (filed as Exhibit 10.74 to the Company’s report on Form 10-K for theyear ended December 31, 2007, and incorporated herein by reference). 126 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.19Promissory Note dated February 22, 2008 by Reading Consolidated Holdings, Inc. in favor ofNationwide Theatres Corp. (filed as Exhibit 10.75 to the Company’s report on Form 10-K for the yearended December 31, 2007, and incorporated herein by reference).10.20*Form of Indemnification Agreement, as routinely granted to the Company’s officers and directors (filedas Exhibit 10.77 to the Company’s report on Form 10-Q for the period ended September 30, 2008, andincorporated herein by reference).10.21Third Amendment to Amended and Restated Master Operating Lease Agreement, dated June 29, 2010,between Sutton Hill Capital, L.L.C. and Citadel Cinemas, Inc. (filed as Exhibit 10.21 to the Company’sreport on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).10.22Amended and Restated Purchase Money Installment Sale Note, dated September 19, 2005, as amendedand restated as of June 29, 2010, by Sutton Hill Properties, LLC in favor of Sutton Hill Capital, L.L.C.(filed as Exhibit 10.22 to the Company’s report on Form 10-K for the year ended December 31, 2010,and incorporated herein by reference).10.23Amended and Restated Credit Agreement dated February 21, 2008, as amended and restated as ofNovember 30, 2010, among Consolidated Entertainment, Inc., General Electric Capital Corporation, andGE Capital Markets, Inc. (filed as Exhibit 10.23 to the Company’s report on Form 10-K for the yearended December 31, 2010, and incorporated herein by reference).10.24Bill Acceptance and Discount & Bank Guarantee Facility Agreement dated June 24, 2011, amongReading Entertainment Australia Pty Ltd and National Australia Bank Limited (filed as Exhibit 10.24 tothe Company’s report on Form 10-K for the year ended December 31, 2011, and incorporated herein byreference).10.25Property Finance Wholesale Term Loan Facility dated June 20, 2007, among Reading CourtenayCentral Limited and Westpac New Zealand Limited (filed as Exhibit 10.25 to the Company’s report onForm 10-K for the year ended December 31, 2011, and incorporated herein by reference).10.26Letter dated May 6, 2009, amending Property Finance Wholesale Term Loan Facility dated June 20,2007, among Reading Courtenay Central Limited and Westpac New Zealand Limited (filed as Exhibit10.26 to the Company’s report on Form 10-K for the year ended December 31, 2011, and incorporatedherein by reference).10.27Letter dated February 8, 2012, amending Property Finance Wholesale Term Loan Facility dated June 20,2007, among Reading Courtenay Central Limited and Westpac New Zealand Limited (filed as Exhibit10.27 to the Company’s report on Form 10-K for the year ended December 31, 2011, and incorporatedherein by reference).10.28Amended and Restated Note dated June 28, 2012 among Sutton Hill Properties, LLC in favor ofSovereign Bank, N.A., amending Promissory Note dated June 27, 2007, by Sutton Hill Properties, LLCin favor of Eurohypo AG, New York Branch (filed as Exhibit 10.1 to the Company’s report on Form 10-Q for the period ended June 30, 2012, and incorporated herein by reference).10.29Amended and Restated Mortgage, Assignment of Leases and Rents, Security Agreement, and FixtureFiling (“Agreement”) dated June 28, 2012 among Sutton Hill Properties, LLC in favor of SovereignBank, N.A., amending Agreement dated June 27, 2007, by Sutton Hill Properties, LLC in favor ofEurohypo AG, New York Branch (filed as Exhibit 10.2 to the Company’s report on Form 10-Q for theperiod ended June 30, 2012, and incorporated herein by reference).10.30Credit Agreement entered into as of October 31, 2012, among Consolidated Entertainment, LLC andBank of America (filed as Exhibit 99.1 to the Company’s report on Form 8-K dated October 31, 2012,and incorporated herein by reference).10.31Master Lease Agreement dated October 26, 2012, between Consolidated Cinema Services LLC andBanc of America Leasing & Capital, LLC (filed herewith).10.32Amendment dated October 31, 2012 to the Master Lease Agreement dated October 26, 2012, betweenConsolidated Cinema Services LLC and Banc of America Leasing & Capital, LLC (filed herewith).10.33John Hunter Separation Agreement (filed as Exhibit 10.1 to the Company’s report on Form 10-Q for theperiod ended June 30, 2013).10.34James J Cotter, Jr. Employment Agreement (filed as Exhibit 10.2 to the Company’s report on Form 10-Qfor the period ended June 30, 2013).21List of Subsidiaries (filed herewith).23.1Consent of Independent Registered Public Accounting Firm, Grant Thornton LLP (filed herewith).23.2Consent of Independent Auditors, KPMG (filed herewith). 127 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 31.1Certification of Principal Executive Officer dated March 7, 2014 pursuant to Section 302 of theSarbanes-Oxley Act of 2002 (filed herewith).31.2Certification of Principal Financial Officer dated March 7, 2014 pursuant to Section 302 of theSarbanes-Oxley Act of 2002 (filed herewith).32.1Certification of Principal Executive Officer dated March 7, 2014 pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).32.2Certification of Principal Financial Officer dated March 7, 2014 pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema101.CALXBRL Taxonomy Extension Calculation101.DEFXBRL Taxonomy Extension Definition101.LABXBRL Taxonomy Extension Labels101.PREXBRL Taxonomy Extension Presentation*These exhibits constitute the executive compensation plans and arrangements of the Company. 128 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to besigned on its behalf by the undersigned thereunto duly authorized.READING INTERNATIONAL, INC.(Registrant) Date:March 7, 2014By:/s/ Andrzej Matyczynski Andrzej Matyczynski Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of Registrant and in the capacities and on the dates indicated. SignatureTitle(s)Date/s/ James J. CotterChairman of the Board and Director and Chief Executive OfficerMarch 7, 2014James J. Cotter/s/ Andrzej MatyczynskiPrincipal Financial and Accounting OfficerMarch 7, 2014Andrzej Matyczynski/s/ Guy W. AdamsDirectorMarch 7, 2014Guy Adams/s/ Ellen M. CotterDirectorMarch 7, 2014Ellen Cotter/s/ James J. Cotter, Jr.DirectorMarch 7, 2014James J. Cotter, Jr./s/ Margaret CotterDirectorMarch 7, 2014Margaret Cotter/s/ William D. GouldDirectorMarch 7, 2014William D. Gould/s/ Edward L. KaneDirectorMarch 7, 2014Edward L Kane/s/ Douglas J. McEachernDirectorMarch 7, 2014Douglas J. McEachern/s/ Tim StoreyDirectorMarch 7, 2014Tim Storey/s/ Alfred VillaseñorDirectorMarch 7, 2014Alfred Villaseñor 129 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CERTIFICATIONS EXHIBIT 31.1CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, James J. Cotter, certify that:1)I have reviewed this Form 10-K of Reading International, Inc.;2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report;3)Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report;4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reportingto be designed under our supervision, to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period coveredby this report based on such evaluation; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controlover financial reporting; and5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (orpersons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarizeand report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role inthe registrant’s internal control over financial reporting./s/ James J. CotterJames J. CotterChief Executive Officer March 7, 2014 130 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 31.2CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Andrzej Matyczynski, certify that:1)I have reviewed this Form 10-K of Reading International, Inc.;2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report;3)Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report;4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reportingto be designed under our supervision, to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period coveredby this report based on such evaluation; andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controlover financial reporting; and5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (orpersons performing the equivalent functions):a)all significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarizeand report financial information; andb)any fraud, whether or not material, that involves management or other employees who have a significant role inthe registrant’s internal control over financial reporting./s/ Andrzej MatyczynskiAndrzej MatyczynskiChief Financial OfficerMarch 7, 2014 131 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.1CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the accompanying Annual Report of Reading International, Inc. (the “Company”) on Form10-K for the fiscal year ended December 31, 2013 (the “Report”), I, James J. Cotter, Chief Executive Officer of theCompany, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:1.The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company./s/ James J. CotterJames J. CotterChief Executive Officer March 7, 2014 132 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.2CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002(18 U.S.C. SECTION 1350)In connection with the accompanying Annual Report of Reading International, Inc. (the “Company”) on Form10-K for the fiscal year ended December 31, 2013 (the “Report”), I, Andrzej Matyczynski, Chief Financial Officer of theCompany, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:1.The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company./s/ Andrzej MatyczynskiAndrzej MatyczynskiChief Financial OfficerMarch 7, 2014 133 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 21 READING INTERNATIONAL, INC. – LIST OF SUBSIDIARIESSubsidiary (Jurisdiction of Incorporation) A.C.N. 143 633 096 Pty Ltd (Australia)AHGP, Inc. (Delaware)AHLP, Inc. (Delaware)Angelika Film Center Mosaic, LLC (Nevada)Angelika Film Centers (Dallas), Inc. (Texas)Angelika Film Centers (Plano) LP (Nevada)Angelika Plano Beverage LLC (Texas)Australia Country Cinemas Pty Ltd (Australia)Australian Equipment Supply Pty Ltd (Australia)Bayou Cinemas LP (Delaware)Bogart Holdings Ltd (New Zealand)Burwood Developments Pty Ltd (Australia)Carmel Theatres, LLC (Nevada)Citadel Agriculture, Inc. (California)Citadel Cinemas, Inc. (Nevada)Citadel Realty, Inc. (Nevada)City Cinemas, LLC (Nevada)Consolidated Amusement Holdings, LLC (Nevada)Consolidated Cinema Services, LLC (Nevada)Consolidated Cinemas Kapolei, LLC (New Zealand)Consolidated Entertainment, LLC (Nevada)Courtenay Car Park Ltd (New Zealand)Craig Corporation (Nevada)Darnelle Enterprises Ltd (New Zealand)Dimension Specialty, Inc. (Delaware)Epping Cinemas Pty Ltd (Australia)Gaslamp Theatres, LLC (Nevada)Hope Street Hospitality, LLC (Delaware)Hotel Newmarket Pty Ltd (Australia)Kaahumanu Cinemas, LLC (Nevada)Kahala Cinema Company LLC (Nevada)Liberty Live, LLC (Nevada)Liberty Theaters, LLC (Nevada)Liberty Theatricals, LLC (Nevada)Minetta Live, LLC (Nevada)Movieland Cinemas (NZ) Ltd (New Zealand)New Zealand Equipment Supply Limited (New Zealand)Newmarket Properties #3 Pty Ltd (Australia)Newmarket Properties No. 2 Pty Ltd (Australia)Newmarket Properties Pty Ltd (Australia)Orpheum Live, LLC (Nevada)Port Reading Co (New Jersey)Queenstown Land Holdings Ltd (New Zealand)RDI Employee Investment Fund LLC (California)Reading Arthouse Distribution Ltd (New Zealand)Reading Auburn Pty Ltd (Australia)Reading Australia Leasing (E&R) Pty Ltd (Australia)Reading Belmont Pty Ltd (Australia)Reading Capital Corporation (Delaware) Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Reading Center Development Corporation (Pennsylvania)Reading Charlestown Pty Ltd (Australia)Reading Cinemas Courtenay Central Ltd (New Zealand)Reading Cinemas Management Pty Ltd (Australia)Reading Cinemas NJ, Inc. (Delaware)Reading Cinemas of Puerto Rico, Inc. (Puerto Rico)Reading Cinemas Pty Ltd (Australia)Reading Cinemas Puerto Rico LLC (Nevada)Reading Cinemas USA LLC (Nevada)Reading Colac Pty Ltd (Australia)Reading Company (Pennsylvania)Reading Consolidated Holdings (Hawaii), Inc. (Hawaii)Reading Consolidated Holdings, Inc. (Nevada)Reading Courtenay Central Limited (New Zealand)Reading Dandenong Pty Ltd (Australia)Reading Dunedin Limited (New Zealand)Reading Elizabeth Pty Ltd (Australia)Reading Entertainment Australia Pty Ltd (Australia)Reading Exhibition Pty Ltd (Australia)Reading Foundation, LTD (Nevada)Reading Holdings, Inc. (Nevada)Reading International Cinemas LLC (Delaware)Reading International Services Company (California)Reading Licenses Pty Ltd (Australia)Reading Maitland Pty Ltd (Australia)Reading Malulani, LLC (Nevada)Reading Management NZ Limited (New Zealand)Reading Melton Pty Ltd (Australia)Reading Moonee Ponds Pty Ltd (Australia)Reading Murrieta Theater, LLC (Nevada)Reading New Lynn Limited (New Zealand)Reading New Zealand Ltd (New Zealand)Reading Pacific LLC (Nevada)Reading Properties Indooroopilly Pty Ltd (Australia)Reading Properties Lake Taupo Ltd (New Zealand)Reading Properties Manukau Ltd (New Zealand)Reading Properties New Zealand Ltd (New Zealand)Reading Properties Pty Ltd (Australia)Reading Properties Taringa Pty Ltd (Australia)Reading Property Holdings Pty Ltd (Australia)Reading Queenstown Ltd (New Zealand)Reading Real Estate Company (Pennsylvania)Reading Restaurants New Zealand Limited (New Zealand)Reading Rouse Hill Pty Ltd (Australia)Reading Royal George, LLC (Delaware)Reading Sunbury Pty Ltd (Australia)Reading Theaters, Inc. (Delaware)Reading Wellington Properties Ltd (New Zealand)Rhodes Peninsula Cinema Pty Ltd (Australia)Rialto Brands Ltd (New Zealand)Rialto Cinemas Ltd (New Zealand)Rialto Distribution Ltd (New Zealand)Rialto Entertainment Ltd (New Zealand)Ronwood Investments Ltd (New Zealand)Rydal Equipment Co. (Pennsylvania)S Note Liquidation Company, LLC (Nevada) Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Sails Apartments Management Ltd (New Zealand)Shadow View Land and Farming, LLC (Nevada)Sutton Hill Properties, LLC (Nevada)Tobrooke Holdings Ltd (New Zealand)Trans-Pacific Finance Fund I, LLC (Delaware)Trenton-Princeton Traction Company (New Jersey)Twin Cities Cinemas, Inc. (Delaware)US Agricultural Investors, LLC (Delaware)US Development, LLC (Nevada)US International Property Finance Pty Ltd (Australia)Washington and Franklin Railway Company (Pennsylvania)Westlakes Cinema Pty Ltd (Australia)Wilmington and Northern Railroad Company (Pennsylvania)Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 23.1 Consent of Independent Registered Public Accounting FirmWe have issued our reports dated March 7, 2014, with respect to the consolidated financial statements, schedule andinternal control over financial reporting included in the Annual Report of Reading International, Inc. on Form 10-K forthe year ended December 31, 2013. We hereby consent to the incorporation by reference of said reports in theRegistration Statements of Reading International, Inc on Form S-8 (File No. 333-36277) and on Form S-3 (File No. 333-162581)./s/ GRANT THORNTON LLP Los Angeles, CaliforniaMarch 7, 2014 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 23.2Consent of Independent Auditor The Management Committee and Joint VenturersMt. Gravatt Cinemas Joint Venture:We consent to the incorporation by reference in the registration statements No. 333-167101 on Form S-8 of ReadingInternational, Inc., of our report dated March 4, 2013 with respect to the statement of financial position of Mt. GravattCinemas Joint Venture as of December 31, 2012 and the related statements of comprehensive income, changes in equity,and cash flows for years ended December 31, 2012 and 2011, which report appears in the December 31, 2013, annualreport on Form 10-K of Reading International, Inc. /s/ KPMGSydney, AustraliaMarch 7, 2014Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.1CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, James J. Cotter, certify that: 1) I have reviewed this Form 10-K of Reading International, Inc.;2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly presentin all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;b) designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered bythis report based on such evaluation; andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) thathas materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or personsperforming the equivalent functions):a) all significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarizeand report financial information; andb) any fraud, whether or not material, that involves management or other employees who have a significant rolein the registrant’s internal control over financial reporting. /s/ James J. Cotter James J. CotterChief Executive Officer March 7, 2014 Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.2CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Andrzej Matyczynski, certify that: 1) I have reviewed this Form 10-K of Reading International, Inc.;2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly presentin all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;b) designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles;c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered bythis report based on such evaluation; andd) disclosed in this report any change in the registrant’s internal control over financial reporting that occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) thathas materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or personsperforming the equivalent functions):a) all significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarizeand report financial information; andb) any fraud, whether or not material, that involves management or other employees who have a significant rolein the registrant’s internal control over financial reporting. /s/ Andrzej Matyczynski Andrzej MatyczynskiChief Financial OfficerMarch 7, 2014Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002(18 U.S.C. SECTION 1350) In connection with the accompanying Annual Report of Reading International, Inc. (the “Company”) on Form10-K for the fiscal year ended December 31, 2013 (the “Report”), I, James J. Cotter, Chief Executive Officer of theCompany, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and2. The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company. /s/ James J. Cotter James J. CotterChief Executive Officer March 7, 2014Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32.2CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002(18 U.S.C. SECTION 1350) In connection with the accompanying Annual Report of Reading International, Inc. (the “Company”) on Form10-K for the fiscal year ended December 31, 2013 (the “Report”), I, Andrzej Matyczynski, Chief Financial Officer of theCompany, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and2. The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company. /s/ Andrzej Matyczynski Andrzej MatyczynskiChief Financial OfficerMarch 7, 2014Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: READING INTERNATIONAL INC, 10-K, March 07, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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