Reading International Inc.
Annual Report 2014

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KREADING INTERNATIONAL INC - RDIFiled: March 17, 2015 (period: December 31, 2014)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, 2014 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 Drive, 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 13, 2015, there were 21,806,632 shares of class A non-voting common stock, par value$0.01 per share and 1,495,490 shares of class B voting common stock, par value $0.01 per share, outstanding. Theaggregate market value of voting and nonvoting stock held by non-affiliates of the Registrant was $154,288,323 as ofDecember 31, 2014. Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014INDEXPART I3Item 1 – Our Business3Item 1A – Risk Factors10Item 1B - Unresolved Staff Comments17Item 2 – Properties18Item 3 – Legal Proceedings26PART 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 Operations32Item 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, 2014 and 201356Consolidated Statements of Operations for the Three Years Ended December 31, 201458Consolidated Statements of Comprehensive Income (Loss) for the Three Years Ended December 31, 201459Consolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 201460Consolidated Statements of Cash Flows for the Three Years Ended December 31, 201461Notes to Consolidated Financial Statements63Schedule II – Valuation and Qualifying Accounts105Item 9 – Change in and Disagreements with Accountants on Accounting and Financial Disclosure106Item 9A – Controls and Procedures107PART III111PART IV112Item 15 – Exhibits, Financial Statement Schedules112SIGNATURES136CERTIFICATIONS138 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, California 90045.Our general telephone number is (213) 235-2240 and our website is www.readingrdi.com. It is our practice to makeavailable free of charge on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reportson Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Actas soon as reasonably practicable after we have electronically filed such material with or furnished it to the Securities andExchange 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 corporate predecessors.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 58 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, andcan be used not only to grow and develop our cinema business but also to help fund the front-end cash demands of ourreal estate development business.At December 31, 2014, the book value of our assets was $401.6 million, and, as of that same date, we had aconsolidated stockholders’ book equity of $132.3 million. Calculated based on book value, $107.7 million or 27%, ofour assets relate to our cinema exhibition activities and $219.7 million or 55%, of our assets relate to our real estateactivities. At December 31, 2014, we had cash and cash equivalents of $50.2 million, which is accounted for as acorporate asset. Our cash included $10.1 million denominated in U.S. dollars, $32.4 million (AUS$39.6 million) inAustralian dollars, and $7.7 million (NZ$9.9 million) in New Zealand dollars.For additional segment financial information, please see Note 22 – Business Segments and Geographic AreaInformation to our 2014 Consolidated Financial Statements. We have diversified our assets among three countries: the United States, Australia, and New Zealand. Based onbook value, at December 31, 2014, we had approximately 35% of our assets in the United States, 44% in Australia and21% in New Zealand compared to 29%, 51%, and 20% respectively, at the end of 2013. For 2014, our gross revenue inthese jurisdictions was $130.8 million, $97.3 million, and $26.6 million, respectively, compared to $131.5 million,$100.4 million, and $26.3 million for 2013. These changes are due primarily to fluctuations in the value of the USDollar compared to the relative values of the Australian Dollar and the New 3 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.Zealand Dollar. The exchange rate for the Australian Dollar and the New Zealand Dollar compared to the U.S. Dollar onDecember 31, 2014 and December 31, 2013 were 0.8173 and 0.8929 to US$1.00 and 0.7796 and 0.8229 to US$1.00,respectively.For additional financial information concerning the geographic distribution of our business, please see Note 22– Business Segments and Geographic Area Information to our 2014 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 oftheir entertainment dollar on entertainment outside of the home, and, that when compared to other forms of outside-the-home entertainment, movies continue to be a popular and competitively priced option. As we believe the cinemaexhibition business to be a mature business with most markets either adequately screened or over-screened, we seegrowth in our cinema business coming principally from (i) the enhancement of our current cinemas (for example, by theaddition of luxury seating and broadening our food and beverage offerings), (ii) the development in select markets ofspecialty cinemas, and (iii) the opportunistic acquisition of already existing cinemas, rather than from the developmentof new conventional cinemas. Our circuit has been completely converted to digital projection and sound systems. In 2013, we acquired the 50% interest in the Angelika Film Center in New York City that hadbeen previously held by a passive third party investor. In 2014, we took back, remodeled and upgradedto state-of-the-art status, an eight-screen cinema in New Zealand that, at the time we acquired theunderlying fee interest, was leased to a competitor in Dunedin, New Zealand, and finalized anagreement to lease a new state-of-the-art eight plex cinema in a shopping center in Auckland scheduledto open in late 2015. In 2014, we completed an upgrade of our Cinemas 1,2,3 in New York City,which included the installation of luxury recliner seats. In 2014, we executed a long-term lease for aluxury, state-of-the-art cinema, which will be operated under our Consolidated Theatres brand, in thenew Ka Makana Ali’i Shopping Center, a regional mall under development in Kapolei, Hawaii. It isexpected that this cinema will open in 2016. In 2013 and 2014, in the United States, we continued toexpand our Angelika Film Center brand: (i) in 2013, we acquired the leasehold interest of theAngelika Film Center in Plano, TX, which was previously operated as a managed cinema, (ii) enteredinto a long-term lease for a new, state-of-the-art Angelika Film Centerin the Union Market district ofWashington D.C., which is anticipated to open in 2016, and (iii) began the process of converting oneof our San Diego area cinemas to a state-of-the-art Angelika Film Center. In 2015, we intend toupgrade the food and beverage menu at a number of our U.S. cinemas.Given the substantial increase in Manhattan commercial real estate values in recent periods, weare currently advancing plans for the redevelopment of our Cinemas 1, 2, 3 property and of our UnionSquare property. We currently anticipate that these properties will be redeveloped into approximately94,000 square feet and 70,000 square feet, respectively, of net leasable area over the next 4 years. In2012, we acquired in a foreclosure auction as a long-term investment in developable land a 202-acreproperty, then zoned for the development of over 800 single-family residential units, located in the Cityof Coachella, California, for $5.5 million. Our then Chairman, Chief Executive Officer and controllingstockholder, participated in that transaction, and holds a 50% non-management interest in the subsidiarythat holds that investment. 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 pursuingthe development of the next phase of that center. Additionally, we have obtained the necessary landuse approvals and are working on plans to add a cinema to our Newmarket shopping center inBrisbane, Australia. 4 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.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 market conditions and our desire to free up capital and pay down debt, in2012, 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 Moonee Ponds for $21.4 million(AUS$23.0 million) which is scheduled to close on April 16, 2015 and is currently classified as land held for sale. In2014, we sold our undeveloped 50.6-acre parcel in Burwood, Victoria, Australia, to an affiliate of Australand HoldingsLimited for a purchase price of $59.1 million (AUS$65.0 million). We received $5.9 million (AUS$6.5 million) at theclosing. The balance of the purchase price is due on December 31, 2017, subject to mandatory pre-payments in the eventthat any of the land is sold, equal to the greater of (a) 90% of the net sale price or (b) the balance of the purchase pricemultiplied by a fraction the numerator of which is the square footage of property being sold by the buyer and thedenominator of which is the original square footage of the property being sold to the buyer. Because payment of 90% ofthe purchase price has not been received, the transaction has not been treated as a sale for U.S. GAAP purposes, andcontinues to be carried on our balance sheet as a long term asset. 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 however, somewhat limits our ability to move cash from one jurisdiction to another. 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 cash-consuming 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 retainedour properties through development, we continue to evaluate the sale of certain assets to provide capital to develop ourremaining properties.At December 31, 2014, our principal assets included:·interests in 57 currently operational cinemas comprising some 472 screens, plus interests in two additionalleasehold cinemas representing an additional 16 screens, currently under development in the United States, andan additional 8-screen complex being developed in Auckland, New Zealand;·fee interests in four live theaters (the Union Square, the Orpheum and Minetta Lane in Manhattan and the RoyalGeorge in Chicago) and one cinema (the Cinemas 1, 2, 3), in New York City;·In addition to the domestic fee interests described immediately above, fee ownership of approximately 21.6million square feet of developed and undeveloped real estate; and·cash and cash equivalents, aggregating $50.2 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 of cash flow on our realestate development and operating activities, to the extent that attractive cinema opportunities are not availableto us; and 5 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.·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 fee interests on Union Square and on Third Avenue (near 60 Street) in New York City, each of which isnow slated for redevelopment, were initially acquired as, and continue to be used as, entertainment properties.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 screensNone165 screensNew Zealand8 cinemasNone2 cinemasNone10 cinemas46 screensNone13 screensNone59 screensUnited States25 cinemas1 cinemaNone1 cinema27 cinemas245 screens3 screensNone4 screens252 screensTotals51 cinemas3 cinemas3 cinemas1 cinemas58 cinemas429 screens14 screens29 screens4 screens476 screens [1] Cinemas owned and operated through consolidated, but not wholly owned subsidiaries.[2] Cinemas owned and operated through unconsolidated associates.[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 interest. 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 certain markets, including New York City and particularly small town markets that will not support thedevelopment of a modern stadium design multiplex cinema, conventional sloped floor cinemas. We also have various premium class offerings, including luxury seating, premium audio, private lounges, cafésand bar service, and other amenities, in certain of our cinemas and are in the process of converting certain of our otherexisting cinemas to provide this premium offering as well.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 66% of their 2014 revenue from box office receipts. Ticket prices varyby location and we offer reduced rates for senior citizens, children and, in certain markets, military and students.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, 6 th12345Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.radio and television media, as well as on the internet and those costs are generally paid by distributors. In Australia andNew Zealand, the exhibitor typically pays the costs of local newspaper film advertisements, while the distributors areresponsible for the cost of any national advertising campaign. Additionally, we are increasing our presence in socialmedia and, thereby reducing our dependency on print advertising.Concession sales accounted for approximately 28% of our total 2014 cinema revenue. Although certaincinemas have licenses for the sale and consumption of alcoholic beverages, concession products are primarily popcorn,candy, and soda. Screen advertising and other revenue contribute approximately 6% of our total 2014 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 two-thirdsinterest is owned by the founders of Rialto Distribution, 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 2,378 individuals wereemployed (on a full time or part time basis) in our cinema operations in 2014. 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 New Zealand cinemas. In addition, we have a one-third interest in a 16-screen Brisbane cinema. Greater Unionmanages that cinema as well.Licensing/PricingFilm product is available from a variety of sources, ranging from the major film distributors such as ParamountPictures, Twentieth Century Fox, Warner Bros, Buena Vista Pictures (Disney), Sony Pictures Releasing, UniversalPictures and Lionsgate to a variety of smaller independent film distributors. In Australia and New Zealand, some of thosemajor distributors distribute through local unaffiliated distributors. The major film distributors dominate the market formainstream conventional films. Art and specialty film is distributed through the art and specialty divisions of thesemajor distributors, such as Fox Searchlight and Sony Pictures Classics, and through independent distributors such as TheWeinstein Company. Generally speaking, film payment terms are based upon an agreed upon percentage of box officereceipts that will vary from film-to-film as films are licensed in Australia, New Zealand and the United States on a film-by-film, theater-by-theater basis.In certain markets in the US, film may be allocated by the distributor among competitive cinemas, and in otherU.S. markets we have access to all available film. With respect to art and specialty film, we, from time-to-time, are unableto license every art and specialty film that we may desire to play. Generally, in the Australian and New Zealand markets,we generally have access to all available film product. The fact that our cinemas in certain markets have a film allocationhas not in recent 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 film products.If a particular film is only offered at one cinema in a given market, then customers wishing to see that film will, ofnecessity, go to that cinema. If two or more cinemas in the same market offer the same film, then customers will typicallytake into account factors such as the relative convenience and quality of the various cinemas. In certain markets,distributors typically take the position that they are free to provide or not provide their films to particular exhibitors, attheir complete and absolute discretion, even though the number of “digital prints” is theoretically unlimited. Somecompetitors, like AMC, are becoming increasing aggressive in their efforts to prevent competitors from access to filmproduct in film zones where they have cinemas.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, 7 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.and the limited number of screens we can supply to distributors. Moreover, in the United States, because of the dramaticconsolidation of screens into the hands of a few very large and powerful exhibitors such as Regal and AMC, these mega-exhibition companies are in a position to offer distributors access to many more screens in major markets than 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, regardlessof the 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 grossing films.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 ata limited number of locations, they will typically choose the film over the quality of the cinema and/or the convenienceof the 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 luxury seating and/orexpanded food and beverage service, including the sale of alcoholic beverages and food served to the seat. We have fora number of years offered alcoholic beverages in certain of our Australia and New Zealand cinemas and at certain of ourAngelika Film Centers in the U.S. We are currently working to upgrade the seating and food and beverage offerings(including the offering of alcoholic beverages) at a number of our existing locations.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 7,367screens in 574 cinemas), AMC (with 4,968 screens in 342 cinemas), Cinemark (with 5,603 screens in 488 cinemas), andCarmike (with 2,896 screens in 273 cinemas). As of December 31, 2014, we were the 11th largest exhibitor with 1% ofthe box office in the United States with 252 screens in 27 cinemas.The principal exhibitors in Australia are Greater Union, which does business under the Event name (a subsidiaryof Amalgamated Holdings Limited), Hoyts Cinemas (“Hoyts”), and Village. The major exhibitors control approximately65% of the total cinema box office: Event 30%, Hoyts 20%, and Village 15%. Event has 434 screens nationally, Hoyts333 screens, and Village 207 screens. By comparison, our 149 screens (excluding any partnership theaters) representapproximately 7% of the total box office.The principal exhibitors in New Zealand are Event with 98 screens nationally and Hoyts with 63screens. Reading has 46 screens (excluding partnerships). The major exhibitors in New Zealand control approximately57% of the total box office: Event 37% and Hoyts 20%. Reading has 12% of the market (Event and Reading marketshare figures exclude any partnership theaters).Greater Union is the owner of the Birch Carroll & Coyle chain in Australia and purchased Sky Cinemas in NewZealand during 2010. In addition, generally speaking, all new multiplex cinema projects announced by Village arebeing jointly developed by a joint venture comprised of Greater Union and Village. These companies have substantialcapital resources. Village had a publicly reported consolidated net worth of approximately $539.3 million (AUS$572.1million) at June 30, 2014. The Greater Union organization does not separately publish financial reports, but its parent,Amalgamated Holdings, had a publicly reported consolidated net worth of approximately $867.6 million (AUS$920.4million) at June 30, 2014. Hoyts is privately held and does not publish financial reports. Hoyts was sold in December2014 by Pacific Equity Partners to a Chinese private equity group, Sun Xishuang.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. Films produced or distributedby the majority of the local international independent producers are also distributed by Roadshow Film Distributors.Hoyts is also involved in film production and distribution.Digital Exhibition 8 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.After 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 ofour 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 qualityand affordability of in-home entertainment systems and in the accessibility to and quality of entertainment programmingthrough cable, satellite, internet distribution channels, and DVD. The success of these alternative distribution channelsput additional pressure on film distributors to reduce and/or eliminate the time period between theatrical and secondaryrelease dates. These are issues common to 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 75 full-time executive and administrative employees and approximately 2,378 cinema employees.Some of our cinema employees in Wellington, Rotorua, and Christchurch, New Zealand are unionized, as are ourprojectionists in Hawaii. None of our other employees are subject to union contracts. Our union contracts with respect toour New Zealand employees have been renewed through to 2015. None of our Australian-based employees is unionized.Overall, we are of the view that the existence of these contracts does not materially increase our costs of labor or ourability to compete. We believe our relations with our employees 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 that do not have any cinema or other entertainment component. As opportunitiesfor cinema development become more limited, it is likely that our real estate activities will continue to expand beyondthe 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 17, 2015Powered 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 detailin the context of specific discussions of our business plan, our operating results, and the various competitive forces thatwe face.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 bematerial to our involvement in each of these segments. We have discussed separately certain risks relating to theinternational nature of our business activities, our use of leverage, and our status as a controlled corporation. Pleasenote, that while we report the results of our live theater operations as real estate operations – since we are principally inthe business of renting space to producers rather than in licensing or producing plays ourselves – the cinema exhibitionand live theater businesses 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 cable and satellite television, Video on Demand (“VOD”), DVD, theinternet and other sources of entertainment, and video games. The quality of in-house entertainment systems, as well asprogramming available on an in-home basis has increased, while the cost to consumers of such systems (and suchprogramming) has decreased in recent periods, and some consumers may prefer the security of an ”in-home”entertainment experience to the more public experience offered by our cinemas and live theaters. Film distributors havebeen responding to these developments by, in some cases, decreasing or eliminating the period of time between cinemarelease and the date such product is made available to “in-home” forms of distribution. The narrowing and/or elimination of this so-called “window” for cinema exhibition may be problematic for thecinema exhibition industry. However, to date, indications by the major film distributors to continue to narrow oreliminate the window have been strenuously resisted by the cinema exhibition industry and we view the totalelimination of the cinema exhibition window by major film distributors, while theoretically possible, to be unlikely.However, there is the risk that, over time, distributors may move towards simultaneous release of motion pictureproduct in multiple channels of distribution. Also, some traditional in-home distributors have begun the production offull-length movies, specifically for the purpose of direct or simultaneous release to the in-home market. These factorsmay adversely affect the competitive advantage enjoyed by cinemas over “in-home” forms of entertainment, as it may bethat both the cinema market and the “in-home” market will have simultaneous access to the same motion pictureproduct. In 2014, a number of movies were released on a simultaneous basis to movie 10 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.exhibitors and to in-home markets. It is likely that this trend will continue, making it increasingly important forexhibitors to enhance the convenience and quality of the theater-going experience. 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.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,the continued ability of motion picture and live theater producers to produce films and plays that are attractive toaudiences, the amount of money spent by film distributors to promote their motion pictures, and the willingness of theseproducers to license their films on terms that are financially viable to our cinemas and to rent our theaters for thepresentation of their plays. To the extent that popular movies and plays are produced, our cinema and live theateractivities are ultimately dependent upon our ability, in the face of competition from other cinema and live theateroperators, to book these movies and plays into our facilities, and to provide a superior customer offering.We rely on film distributors to supply the films shown in our theatres. In the U.S., the film distribution businessis highly concentrated, with seven major film distributors accounting for approximately 89.1% of U.S. box officerevenues. Numerous antitrust cases and the consent decree resulting from these antitrust cases affect the distribution offilms. The consent decree binds major film distributors to license films to exhibitors on a theatre-by-theatre and film-by-film basis. 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 seven 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 economyresulting in a decrease in discretionary income, or a perception of such a decline, may result in decreased discretionaryspending, which could adversely affect our cinema and live theater businesses. Adverse economic conditions can alsoaffect the supply 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 that are very risky due to the absence of any ability to recoup investmentin secondary markets like DVD, cable, satellite or internet distribution.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. Also, equipment is currently being developed for holographic or laser projection. The future of thesetechnologies 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 Drafthouse, 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 11 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.traditional cinema selection practices of moviegoers, as they seek out cinemas with such expanded offerings as apreferred alternative to traditional cinemas.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 and may be able to achieve greater economies of scale than wecan.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 marketsin which we operate and the quality of properties that we own, (v) competition from other properties, (vi) inability tocollect rent from tenants, (vii) increased operating costs, including labor, materials, real estate taxes, insurance premiums,and utilities, (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 or local law, all places of public accommodation (including cinemas and theaters) are required to meetcertain governmental requirements related to access and use by persons with disabilities. A determination that we are notin compliance with those governmental requirements with respect to any of our properties could result in the impositionof fines 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 theperformance of 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 andmaintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment andcompetitive factors may prevent the pass-through of such costs to tenants. Real estate development involves a variety of risks.Real estate development involves 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, 12 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.parking, traffic, noise levels and the historic or architectural nature of the building being replaced. If they areunsuccessful at the local governmental level, they may seek recourse to the courts or other tribunals. This candelay projects and increase 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”),the extent to which our cinemas can continue to serve as an anchor tenant will be influenced by the same factorsas will 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-termloans. Upon completion of the project, it may be necessary to find replacement financing for these loans. Thisprocess involves risk as to the availability of such permanent or other take-out financing, the interest rates, andthe payment 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” orother provisions 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,by way of example, asbestos), even though not deposited on the property by us), (v) relative illiquidity compared tosome other types of assets, and (vi) susceptibility of assets to uninsurable risks, such as biological, chemical or nuclearterrorism, or risks that are subject to caps tied to the concentration of such assets in certain geographic areas, such asearthquakes. Furthermore, as our properties are typically developed around an entertainment use, the attractiveness ofthese properties to tenants, sources of finance and real estate investors will be influenced by market perceptions of thebenefits and 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: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 ofthe Australian and New Zealand dollar compared to the US dollar. $32.4 million (AUS$39.6 million) of our Australiancash and $7.7 million (NZ$9.9 million) of our New Zealand cash is denominated in local currencies and subject to therisk of currency 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: 13 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 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. Any deterioration in labor relations could lead to an increased cost oflabor (including future government requirements with respect to pension liabilities, disability insurance andhealth coverage, and vacations and leave). 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 currentlyunknown problems may be discovered. These subsidiaries are also exposed to potential claims related to exposure offormer employees to coal dust, asbestos, and other materials now considered to be, or which in the future may be found tobe, 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 existingproperties, we have from time-to-time had negative working capital. This negative working capital is typical in thecinema exhibition industry because our short-term liabilities are in part financing our long-term assets instead of long-term liabilities 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 be reasonable. 14 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, as a counterbalance to this debt, we have significant unencumbered real property assets, which could be sold topay 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 downturn 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 2014 of only approximately 56,000 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 Pending disputes among the Cotter family raise uncertainty regarding control of our company, and maydistract the time and attention of our officers and directors from our business and operations or interfere withthe effective management of our company. As we have previously reported, the Reading Voting Trust established by James J. Cotter, Sr., our deceasedformer Chairman of the Board and Chief Executive Officer and former controlling stockholder, holds at least 696,080shares of our Class B Voting Stock (“Voting Stock”) constituting approximately 46.5% of the voting power of ouroutstanding capital stock. The Reading Voting Trust also may hold an additional 327,808 shares of Voting Stock,constituting approximately 21.9% of the voting power of our outstanding capital stock, based upon an assignment ofsuch shares purportedly executed by Mr. Cotter, Sr., prior to this death. We are informed that, in the event these shareswere not effectively transferred to the Reading Voting Trust, they would eventually pour over into the Trust. In themeantime, however, they may instead make up part of the Estate of James J. Cotter, Deceased (the “Estate” andcollectively with the Reading Voting Trust and the James J. Cotter Living Trust, the “Cotter Estate”) that is beingadministered in the State of Nevada. On December 22, 2014, the District Court of Clark County, Nevada, appointedEllen Cotter, the Chair of our Board of Directors and our Chief Operating Officer- Domestic Cinemas and MargaretCotter, Vice Chairman of our Board of Directors, as co-executors of the Estate. A 2013 amended and restated declaration of trust names Margaret Cotter as the sole trustee of the ReadingVoting Trust and names James J. Cotter, Jr., our President and Chief Executive Officer and a director of our company, asthe first alternate trustee in the event that Margaret Cotter is unable or unwilling to act as trustee. A 2014 partialamendment to the declaration of trust, however, names Margaret Cotter and James J. Cotter, Jr. as co-trustees of theReading Voting Trust and provides that, in the event they are unable to agree upon an important trust decision, theyshall rotate the trusteeship between them annually on each January 1st. It further directs the trustees of the ReadingVoting Trust to, among other things, vote such shares of our Voting Stock held by the Reading Voting Trust in favor ofthe election of Ellen Cotter, Margaret Cotter and James J. Cotter, Jr. to our board of directors. 15 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 February 6, 2015, Ellen Cotter and Margaret Cotter filed a Petition in the Superior Court of the State ofCalifornia, County of Los Angeles, captioned In re James J. Cotter Living Trust dated August 1, 2000 (Case No.BP159755). The Petition, among other things, seeks relief that could determine the validity of the 2014 partialamendment and who, as between Margaret Cotter and James J. Cotter Jr., has authority as trustee or co-trustees of theReading Voting Trust to vote the Reading Voting Trust’s shares of our Voting Stock (in whole or in part) and the scopeand extent of such authority. James J. Cotter, Jr. has advised us that he intends to file an opposition to the Petition. Although the company is not a party to this lawsuit and takes no position as to the claims asserted or the reliefsought therein, the matters raised in the Petition create uncertainty regarding control of our company. Until these matterscan be resolved, it is unclear whether the Reading Voting Trust owns a majority of our outstanding shares of VotingStock and, as such, can determine the outcome of the election of directors of our company and of any other matters thatmay be presented for approval by our stockholders. It also is unclear whether Margaret Cotter, or she and James J. Cotter,Jr., together, has authority as trustee or co-trustees of the Reading Voting Trust to vote the shares of our Voting Stockcurrently held by the Reading Voting Trust or any additional shares of our Voting Stock that may be determined to beheld by the Reading Voting Trust instead of the Estate. These pending matters may distract the Cotter family’s time and attention from the business and operations ofour Company and thus have an adverse effect on its effective management. The interests of our controlling stockholder may conflict with your interests.As of December 31, 2014, the Cotter Estate beneficially owns 70.4% of our outstanding Class B Stock. OurClass A Stock is non-voting, while our Class B Stock represents all of the voting power of our Company. For as long asthe Cotter Estate continues to own shares of common stock representing more than 50% of the voting power of ourcommon stock. The Cotter Estate will be able to elect all of the members of our board of directors and determine theoutcome of all matters submitted to a vote of our stockholders, including matters involving mergers or other businesscombinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additionalshares of common stock or other equity securities and the payment of dividends on common stock. The Cotter Estate willalso have the power to prevent or cause a change in control, and could take other actions that might be desirable to theCotter Estate but not to other stockholders. In addition, the Cotter Estate and its affiliates have controlling interests incompanies in related and unrelated industries. In the future, we may participate in transactions with these companies (seeNote 25 – Related Parties and Transactions to our 2014 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 ofour directors 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 17, 2015Powered 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 17, 2015Powered 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 ETRC. We occupy approximately 3,500square feet at our Village East leasehold property for administrative purposes. Entertainment PropertiesEntertainment Use Leasehold InterestsAs of December 31, 2014, 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 States942,0002015 – 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 inthe Plano, 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 have refurbished that cinema.The cinema was already leased to a competitor at the time we acquired it in May 2007. During the first quarter of 2014,we entered into a lease for a new state-of-the-art Angelika Film Center currently being developed by Edens in the UnionMarket area of Washington D.C. In December 2014, we entered into a lease for a new luxury cinema, under theConsolidated Theatres brand, at the new Ka Makana Ali'i Shopping Center being developed in Kapolei, Hawaii by anaffiliate of DeBartolo Development and finalized terms for a new 8-screen cinema complex in Auckland, New Zealand.Fee InterestsIn Australia, as of December 31, 2014, we own approximately 900,000 square feet of land at sevenlocations. Most of this land is located in the greater metropolitan areas of Brisbane, Melbourne, Perth, and Sydney. Thisfigure does not include our 50.6-acre Burwood site and our 3.3-acre Moonee Pond site, which in both cases have beensold (but have yet to be recognized as a sale under U.S. GAAP). Of these fee interests, approximately 138,000 square feetare currently improved with cinemas. In New Zealand, as of December 31, 2014, 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 four cinemas in New Zealand, which properties include approximately 21,000 square feet of ancillary retailspace.In the United States, as of December 31, 2014, we own approximately 134,000 square feet of improved realestate comprised of four live theater buildings, which include approximately 58,000 square feet of leasable space, andthe fee interest in our Cinemas 1, 2, 3 in Manhattan (held through a limited liability company in which we have a 75%managing member interest). We also own 202 acres of unimproved land in Coachella Valley, California, held through alimited liability company in which the Cotter Estate has a 50% non-managing interest.Live Theaters (“Liberty Theaters”) 18 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.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 productionsand provide various box office and concession services. The terms of our licenses are, naturally, principally dependentupon the commercial success of our tenants. STOMP has been playing at our Orpheum Theatre in excess of 20 years.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,and profits 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 that is currently zoned for residentialand approved for over 800 single-family lots. 19 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 PropertyAs of December 31, 2014, 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%$27,998,657Auburn, NSW, Australiaparking structureBelmontKnutsford Avenue and15000 / 45000100%$12,758,425Fulham StreetBelmont, WA, AustraliaBundaberg1 Johanna Boulevard0 / 52840N/A$1,790,443Bundaberg, QLD, AustraliaCinemas 1, 2, 31003 Third Avenue0 / 21000N/A$24,999,953Manhattan, NY, USACourtenay Central33000 / 76000100 Courtenay PlacePlus a 1,086-space70%$36,021,239Wellington, New Zealandparking structure 20 67 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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)Dunedin Cinema33 The Octagon0 / 25295N/A$8,186,274Dunedin, New ZealandInvercargill Cinema29 Dee Street9000 / 2400069%$3,060,830Invercargill, New ZealandLA Doheny Condominium9255 Doheny Road0 / 1650N/A$552,449Los Angeles, CA, USALake Taupo Motel138-140 Lake Terrace Road9000 / 0Short-term rentals$1,084,539Taupo, New ZealandMaitland CinemaKen Tubman Drive0 / 22000N/A$1,944,346Maitland, NSW, AustraliaMinetta Lane Theatre18-22 Minetta Lane0 / 9000N/A$8,617,669Manhattan, NY, USANapier Cinema154 Station Street12000 / 18000100%$3,344,521Napier, New ZealandNewmarket400 Newmarket Road93000 / 0Newmarket, QLD,Plus a 436-space100%$35,681,345Australiaparking structureOrpheum Theatre126 2 Street1000 / 5000100%$3,565,021Manhattan, NY, USARoyal George37000 / 230001633 N. Halsted StreetPlus a 55-space91%$3,491,119 21 89ndSource: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.Chicago, IL, USAparking structureRotorua Cinema1281 Eruera Street0 / 19000N/A$2,879,638Rotorua, New ZealandUnion Square Theatre100 E. 17 Street21000 / 17000100%$9,721,163Manhattan, NY, USAYork Street Office98 York Street2906/10271N/A$2,411,318South Melbourne, VIC,Australia [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 at fair market rent. The rental area to such subsidiaries is noted under the entertainment square footage. The grossbook value refers to the gross carrying cost of the land and buildings of the property. Book value and rental information are as of December31, 2014.[7] This property is owned by a limited liability company in which we hold a 75% managing member interest. The remaining 25% is ownedby Sutton Hill Capital, LLC (“SHC”), a company owned in equal parts by the Cotter Estate and a third party.[8] This property has been sold as of February 25, 2015 for $3.0 million. At December 31, 2014 this asset was classified as an Asset Heldfor Sale.[9] On February 21, 2015 this property received an unsolicited purchase offer. The potential purchaser is currently performing due diligenceprocedures. 22 thSource: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014, 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$2,341,078Tower0 / 16000N/A$1,014,352Village East4000 / 38000100%$8,922,022Waurn Ponds6000 / 38000100%$5,781,143 [10] Rental square footage refers to the amount of area available to be rented to third parties, and the percentage leased is the amount ofrental square footage currently leased to third parties. A number of our long-term leasehold operating property includes entertainmentcomponents rented to one or more of our subsidiaries. The rental area to such subsidiaries is noted under the entertainment squarefootage. Book value includes the entire investment in the leased property, including any cinema fit-out. Rental and book value informationis as of December 31, 2014.[11] The lease of the Village East provides for a call option pursuant to which Reading may purchase the cinema ground lease for $5.9million at the end of the lease term in 2020. Additionally, the lease has a put option pursuant to which SHC may require Reading topurchase all or a portion of SHC's interest in the existing cinema lease and the cinema ground lease at any time between July 1, 2013 andDecember 4, 2019. See Note 25 - Related Parties and Transactions to our 2014 Consolidated Financial Statements. 23 1011Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 parcelsof land. In addition, we anticipate that redevelopment of one or more of our existing developed properties may alsooccur. Gross Book ValuePropertyAcreage(in U.S. Dollars)Status Auburn, Sydney, NSW, Australia2.6 acres$1,902,000We are actively pursuing the development of the nextphase of this property.Burwood, VIC, Australia50.6 acres$42,588,114Property was contracted to sell in 2014. Currentlyclassified as an Asset Held for Sale.Coachella,CA, USA202 acres$5,510,000We continue to evaluate our options with regards to thisproperty.Courtenay Central, Wellington, New Zealand(Including Wakefield andTaranaki)1.1 acres$7,086,587We are actively pursuing the development of the nextphase of this property having signed a lease agreementfor a Countdown (Woolworths) supermarket to bedeveloped on this site.Lake Taupo, Taupo, NewZealand0.5 acre$1,100,000On February 21, 2015 this property received anunsolicited purchase offer. The potential purchaser iscurrently performing due diligence procedures.Manukau, Auckland, New Zealand64 acres zonedagricultural and 6.4 acreszoned light industrial$13,363,008The bulk of the land is zoned for agriculture and iscurrently used for horticulture commercial purposes. Adevelopment plan has been filed to rezone the propertyfor warehouse, distribution and manufacturinguses. We currently anticipate that this rezoning will beapproved. In 2010, we acquired an adjacent propertythat is zoned industrial, but is currentlyunimproved. That property links our existing parcelwith the existing road network. 24 12Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.Moonee Ponds, Victoria,Australia3.3 acres$10,111,562In November 2013, we entered into a definitivepurchase and sale agreement to sell our propertieslocated in Moonee Ponds, Victoria, Australia, with ascheduled closing date of April 16, 2015. Currentlyclassified as an Asset Held for SaleNewmarket Queensland,Australia0.62 acres$4,649,275We are actively pursuing the development of thisproperty. [12] 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 theassociated security collateral please see Note 12 – Notes Payable to our 2014 Consolidated Financial Statements. 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 Pennsylvaniaand Delaware. These properties are unencumbered by any debt. 25 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 increasedby interest of $9.3 million, for a net federal tax liability of $13.9 million as of January 6, 2011. On October 26, 2011,CRG reached an agreement with the IRS for an installment plan to pay off this federal tax liability, including additionalinterest accruals at the prescribed IRS floating rate. The agreement requires monthly payments of $290,000 over a periodof approximately five years. As of December 31, 2014 and 2013, after the payments made during 2014 and 2013,respectively, the remaining federal tax obligation was $5.32 million and $8.3 million, respectively, in tax andinterest. Of the $5.32 million owed to the IRS as of December 31, 2014, $3.5 million was recorded as current taxespayable, with the remaining balance being recorded as non-current tax liability. Of the $8.3 million owed to the IRS asof December 31, 2013, $3.5 million was recorded as current taxes payable, with the remaining balance being recorded asnon-current tax liability.The impact of the settlement upon the state taxes of the Reading consolidated group, if the adjustment toincome agreed with the IRS were reflected on state returns, would be an obligation of approximately $1.4 million in taxplus interest. As of December 31, 2014, no deficiency has been asserted by the State of California, and we have made nofinal 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. 26 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 subsidiariesand corporate predecessors, the “Company,” “Reading” and “we,” “us,” or “our”), was incorporated in1999. Historically, we have been listed on the AMEX and due to the 2008 purchase of the AMEX by the NYSEAlternext US; we were listed on that exchange at December 31, 2008. During July 2009, we moved our listing fromNYSE Alternext to NASDAQ.The following table sets forth the high and low closing prices of the RDI and RDIB common stock for each ofthe quarters in 2014 and 2013 as reported by NASDAQ:Class A StockClass B StockHighLowHighLow2014Fourth Quarter$13.26$8.31$13.00$9.50Third Quarter$8.84$8.00$11.50$9.70Second Quarter$8.92$6.96$10.87$8.11First Quarter$7.60$7.15$10.23$9.002013Fourth 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$5.65The following table summarizes the securities authorized for issuance under our equity compensation plans:Plan categoryNumber ofsecurities to beissued uponexercise ofoutstandingoptions,warrants, andrightsWeighted-average exerciseprice ofoutstandingoptions,warrants, andrightsNumber ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplansEquity compensation plans approved bysecurity holders753,350 $7.63 1,328,737 Total753,350 $7.63 1,328,737 Performance GraphThe following line graph compares the cumulative total stockholder return on Reading International, Inc.’scommon stock for the years ended December 31, 2010, 2011, 2012, 2013, and 2014 against the cumulative total 27 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.return as calculated by the NASDAQ composite, the motion picture theater operator group, and the real estate operatorgroup.Holders of RecordThe number of holders of record of our Class A Stock and Class B Stock in 2014 was approximately 3,500 and300, respectively. On March 13, 2015, the closing price per share of our Class A Stock was $13.47 and the closing priceper share of our Class B Stock was $16.00.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 2014, we purchased 432,252 of Class A Non-voting shares on the open market for $4,069,756. Noshares were purchased during 2013. 28 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 (the “2014 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, 20142013201220112010Revenue$254,748 $258,221 $254,430 $244,979 $229,322 Operating income$22,173 $20,935 $19,127 $18,178 $13,069 Income (loss) from discontinued operations$--$--$(405)$1,888 $97 Net income (loss)$25,644 $9,145 $(1,406)$10,896 $(12,034)Net income (loss) attributable to ReadingInternational, Inc. shareholders$25,701 $9,041 $(914)$9,956 $(12,650) Basic earnings (loss) per share – continuingoperations$1.10 $0.39 $(0.02)$0.36 $(0.56)Basic earnings (loss) per share – discontinuedoperations$--$--$(0.02)$0.08 $--Basic earnings (loss) per share$1.10 $0.39 $(0.04)$0.44 $(0.56)Diluted earnings (loss) per share – continuingoperations$1.08 $0.38 $(0.02)$0.35 $(0.56)Diluted earnings (loss) per share – discontinuedoperations$--$--$(0.02)$0.08 $--Diluted earnings (loss) per share$1.08 $0.38 $(0.04)$0.43 $(0.56) Other Information:Shares outstanding23,237,076 23,385,519 23,083,265 22,806,838 22,804,313 Weighted average number of sharesoutstanding–basic23,431,855 23,348,003 23,028,596 22,764,666 22,781,392 Weighted average number of sharesoutstanding–diluted23,749,221 23,520,271 23,028,596 22,993,135 22,781,392 Total assets$401,586 $386,807 $428,588 $430,764 $430,349 Total debt$164,036 $168,460 $196,597 $209,614 $228,821 Working capital (deficit)$(8,819)$(71,794)$(21,415)$(12,844)$(57,634)Stockholders’ equity$132,298 $121,747 $130,954 $124,987 $112,639 EBIT$24,916 $24,020 $20,416 $18,664 $13,900 Depreciation and amortization$15,468 $15,197 $16,049 $16,595 $15,563 Add: Adjustments for discontinued operations$--$--$335 $365 $351 EBITDA$40,384 $39,217 $36,800 $35,624 $29,814 Debt to EBITDA$4.06 $4.30 $5.34 $5.88 $7.67 Capital expenditure (including acquisitions)$14,914 $20,082 $13,723 $9,376 $19,371 Number of employees at 12/312,596 2,494 2,412 2,263 2,109 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: 29 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.·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 that may vary fromtime-to-time and from jurisdiction-to-jurisdiction, (ii) allows us to compare our performance to that achieved byother companies, and (iii) is useful as a financial measure that removes the impact of our historically significantnet 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 toother companies engaged in the cinema exhibition and real estate businesses and as a basis to value our company againstsuch other 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): 20142013201220112010Net income (loss) attributable to ReadingInternational, Inc. shareholders$25,701 $9,041 $(914)$9,956 $(12,650)Add: Interest expense, net9,000 10,037 16,426 21,038 12,286 Add: Income tax (benefit) expense(9,785)4,942 4,904 (12,330)14,264 EBIT$24,916 $24,020 $20,416 $18,664 $13,900 30 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.Add: Depreciation and amortization15,468 15,197 16,049 16,595 15,563 Adjustments for discontinued operations----335 365 351 EBITDA$40,384 $39,217 $36,800 $35,624 $29,814 31 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 relatednotes included in this 2014 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 58 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 Cinemas, Angelika Film Centers, Consolidated Theatres, and City Cinemasbrands;·in Australia, under the Reading Cinemas brand; and·in New Zealand, under the Reading Cinemas 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 a 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 (i) the enhancement of our current cinemas (for example, by the addition ofluxury seating and broadening our food and beverage offerings), (ii) the development in select markets of specialtycinemas, and (iii) 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 businessor assets of those companies to be attractive or to offer synergies to our existing entertainment and real estate businesses.We continue to focus on the development and redevelopment of our existing assets (particularly our New York assetsand our Angelika Film Center chain), as well as to continue to be opportunistic in identifying and endeavoring toacquire undervalued assets, particularly assets with proven cash flow and that we believe to be resistant to 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 oftangible assets, including both entertainment and other types of land and “brick and mortar” assets. We endeavor tomaintain a reasonable asset allocation between our domestic and international assets and operations, and between ourcash-generating cinema operations and our cash-consuming real estate investment and development activities. Webelieve that by blending the cash generating capabilities of a cinema operation with the investment and developmentopportunities of our 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 ofour U.S., Australia, and New Zealand cinema operations to digital projection. Over several years, we anticipate 32 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.The “in-home” entertainment industry has experienced significant leaps in recent periods in both the qualityand affordability of in-home entertainment systems and in the accessibility to and quality of entertainment programmingthrough cable, satellite, internet distribution channels, and DVD. The success of these alternative distribution channelsput additional pressure on film distributors to reduce and/or eliminate the time period between theatrical and secondaryrelease dates. These are issues common to both our U.S. 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 57% 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. Films produced or distributed by the majority of the local international independentproducers are also distributed by Roadshow. Typically, the Major Exhibitors own the newer multiplex and megaplexcinemas, while the independent exhibitors typically have older and smaller cinemas. In addition, the Major Exhibitorshave in recent periods built a number of new multiplexes as joint venture partners or under shared facility arrangements,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, ratherthan to 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 mega-circuits 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 haveand can 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 countrieshave relatively stable economies with varying degrees of economic growth that are mostly influenced by globaltrends. Also, we have noted that our Australian and New Zealand developed properties have had consistent growth inrentals and values although project commencements have slowed. Once developed, we remain confident that ourAustralian and New Zealand holdings will continue to provide value and cash flows to our operations. Real Estate – North AmericaThe commercial real estate market has improved significantly over the past three years and we have notedstrengthening rental income associated with our real estate located in large urban environments.Business Segments 33 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 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 2014 Annual Report under thesubheading “Our Cinema Exhibition Activities.”During 2014, we opened a 3-screen Angelika Pop-Up! at Union Market in Washington, D.C. as well as a 6-screen complex in Dunedin, New Zealand.On December 31, 2013, we acquired a 5-screen cinema in the U.S. that we previously had managed since2003. In 2012, we opened one cinema with 8-screens and closed two cinemas having a total of 8 screens. Our cinema revenue consists primarily of admissions, concessions, advertising and theater rentals. The cinemaoperating expense consists of the costs directly attributable to the operation of the cinemas including film rent expense,operating costs, and occupancy costs. Cinema revenue and expense fluctuate with the availability of quality first-runfilms and the numbers of weeks the first–run films stay in the market.Real EstateFor fiscal 2014, 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 4-auditorium 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 NewZealand and certain unimproved land in the United States that was used in our historic activities. We also own an 8,100square foot commercial building in Melbourne, which serves as our administrative headquarters for Australia and NewZealand, 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 as“other income” in our statement of operating income for the year ended December 31, 2013. We also acquired in 2013the 50% interest we did not own in Angelika Film Centers, LLC.Non-operating AssetsOn January 10, 2012, Shadow View Land and Farming, LLC, a limited liability company owned by our Company,acquired a 202-acre property, currently zoned for the development of over 800 single-family residential units, located inthe City of Coachella, California. The property was acquired at a foreclosure auction for $5.5 million. The property wasacquired as a long-term investment in developable land. Half of the funds used to acquire the land were provided byJames J. Cotter, Sr. our late Chairman, Chief Executive Officer and controlling shareholder. Upon the approval of ourConflicts Committee, these funds were converted into a 50% interest in Shadow View Land and Farming, LLC. We arethe managing member of this company. 34 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.DisposalsLand Held for Sale – BurwoodOn May 12, 2014, we entered into a contract to sell our undeveloped 50.6-acre parcel in Burwood, Victoria, Australia, toan affiliate of Australand Holdings Limited for a purchase price of $54.6 million (AUS$65.0 million). Reading received$5.9 million (AUS$6.5 million) on May 23, 2014 closing. The balance of the purchase price is due on December 31,2017.Land Held for Sale – Moonee PondsIn 2013, we entered into a purchase and sale agreement to sell our 3.3-acre properties in Moonee Ponds forUS$21.4 million (AUS$23.0 million) which is scheduled to close on April 16, 2015 and is classified under current assetsas land held for sale on our December 31, 2014 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).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, inmanagement’s view, most important to the portrayal of the company’s financial condition and results of operations andthe most demanding 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 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 annualbudgeting process, at the beginning of the fourth quarter, and whenever events or changes in circumstances indicate thatthe carrying amount 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 asmonitoring current and potential future competition in film markets for indications of potential impairment. Weevaluate our long-lived assets using historical and projected data of cash flow as our primary indicator of potentialimpairment and we take into consideration the seasonality of our business. If the sum of the estimated, undiscountedfuture cash flows is less than the carrying amount of the asset, then impairment is recognized for the amount by which thecarrying value of the asset exceeds 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 an impairment of $1.5 million relating to certain of our property and cinema locations for the year endedDecember 31, 2012. No impairment losses were recorded in 2013 or 2014. For a further explanation of 35 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 2012 impairment losses see below under the heading “Coachella impairment” and see Note 7 – Investment andDevelopment Property to our 2014 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 present value. Themost significant assumptions include our estimated future cash flow, cost of debt and cost of equity assumptions thatcomprise the weighted average cost of capital for each reporting unit. Accordingly, actual results could vary materiallyfrom such estimates. There was no impairment for the goodwill and intangible assets for the years ended December 31,2014, 2013, and 2012, respectively.Tax valuation allowance and obligationsWe record our estimated future tax benefits and liabilities arising from the temporary differences between thetax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well asoperating loss carry-forwards. We estimate the recoverability of any tax assets recorded on the balance sheet and provideany necessary allowances as required. As of December 31, 2014, we had recorded approximately $39.0 million ofdeferred tax assets related to the temporary differences between the tax bases of assets and liabilities and amountsreported in the accompanying consolidated balance sheets, as well as operating loss carry-forwards and tax credit carry-forwards. These deferred tax assets were offset by a valuation allowance of $16.8 million resulting in a net deferred taxasset of $22.2 million. The recoverability of deferred tax assets is dependent upon our ability to generate future taxableincome. There is no assurance that sufficient future taxable income will be generated to benefit from our tax loss carry-forwards and tax credit 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 fromcontamination. Accordingly, certain of these subsidiaries have, from time to time, been named in and may in the futurebe named 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.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, amongother matters.2012 Coachella impairmentIn January 2012, we acquired in a foreclosure auction for $5.5 million a 202-acre property located in Coachella,California then zoned for the development of over 800 single-family residential units. The only other bidder was theholder of the mortgage on the property, who bid $5.46 million for the property. At the time of the purchase, we knew,based on our due diligence, that we were paying more for the property than would be supported by an appraisal doneunder the Uniform Standards of Professional Appraisal Practice (“USPAP”). However, the amount that we bid was thelowest price at which we were able to acquire the property from the mortgagor. In valuing the property, we took intoaccount a variety of factors, including the fact that the property is located within the City of Coachella, the state of theland use entitlements, and the fact that the prior owner had invested considerable time and money in obtaining theentitlements from the City of Coachella. Since an independent USPAP appraisal of the property produced an appraisedvalue as of December 2012 of $4.0 million, we wrote down the book value of the property by $1.5 million as of the endof our 2012 fiscal year. As noted below, this property is owned by a limited liability company which was at that time,50% owned by Mr. James J. Cotter, Sr. who, accordingly, shared in any impairment loss to the extent of his ownershipinterest. 36 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 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 the Cotter Estate. The opportunity to acquire the property was originally presented to Mr. Cotter, Sr. in hisindividual capacity and the transaction was approved by our Conflicts Committee, comprised entirely of independentdirectors.Results of OperationsWe currently have two operating segments: Cinema Exhibition and Real Estate. Our cinema exhibitionsegment includes the operations of our consolidated cinemas. Our real estate segment includes the operating results ofour commercial 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, 2014, 2013, and 2012 (dollars in thousands).Year Ended December 31, 2014CinemaExhibitionReal EstateIntersegmentEliminationsTotalRevenue$237,861 $24,348 $(7,461)$254,748 Operating expense195,896 9,770 (7,461)198,205 Depreciation and amortization11,047 4,061 --15,108 General and administrative expense3,575 1,042 --4,617 Segment operating income$27,343 $9,475 $--$36,818 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 Reconciliation to net income attributableto Reading International, Inc. shareholders:201420132012Total segment operating income$36,818 $35,504 $32,382 Non-segment:Depreciation and amortization expense360 433 454 General and administrative expense14,285 14,136 12,801 37 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 income22,173 20,935 19,127 Interest expense, net(9,000)(10,037)(16,426)Other income (loss)1,646 1,876 (563)Gain (loss) on sale of assets25 (56)144 Income tax benefit (expense)9,785 (4,942)(4,904)Equity earnings of unconsolidated joint ventures and entities1,015 1,369 1,621 Income (loss) from discontinued operations----(85)Gain (loss) on sale of discontinued operation----(320)Net income (loss)$25,644 $9,145 $(1,406)Net (income) loss attributable to noncontrolling interests57 (104)492 Net income (loss) attributable to Reading International, Inc.common shareholders$25,701 $9,041 $(914) Cinema Exhibition SegmentThe following tables and discussion that follows detail our operating results for our 2014, 2013, and 2012cinema 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 costwhich is expressed as a percentage of concessions revenue:Operating Income by Country for theYear Ended December 31, 2014United StatesAustraliaNew ZealandTotalAdmissions revenue$83,197 $58,148 $15,908 $157,253 Concessions revenue35,580 24,278 6,475 66,333 Advertising and other revenue6,942 6,068 1,265 14,275 Total revenue125,719 88,494 23,648 237,861 Film rent and advertising cost43,511 26,677 7,355 77,543 Concession cost6,145 4,781 1,661 12,587 Occupancy expense25,701 16,995 4,459 47,155 Other operating expense34,073 19,026 5,512 58,611 Total operating expense109,430 67,479 18,987 195,896 Depreciation and amortization5,118 4,669 1,260 11,047 General and administrative expense2,475 1,054 46 3,575 Segment operating income$8,696 $15,292 $3,355 $27,343 Operating Data as a Percentage ofRevenue for Year EndedDecember 31, 2014United StatesAustraliaNew ZealandTotalAdmissions revenue66.2% 65.7% 67.3% 66.1% Concessions revenue28.3% 27.4% 27.4% 27.9% Advertising and other revenue5.5% 6.9% 5.3% 6.0% Total revenue100.0% 100.0% 100.0% 100.0% Film rent and advertising cost52.3% 45.9% 46.2% 49.3% Concession cost17.3% 19.7% 25.7% 19.0% Occupancy expense20.4% 19.2% 18.9% 19.8% Other operating expense27.1% 21.5% 23.3% 24.6% Total operating cost and expense87.0% 76.3% 80.3% 82.4% 38 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 amortization4.1% 5.3% 5.3% 4.6% General and administrative expense2.0% 1.2% 0.2% 1.5% Segment operating income6.9% 17.3% 14.2% 11.5% 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 revenue6,540 5,655 1,041 13,236 Total revenue126,321 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 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 revenue5,433 5,806 954 12,193 Total revenue116,397 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 39 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 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% Cinema Results for 2014 Compared to 2013·Cinema revenue decreased in 2014 by $1.6 million or 0.7% compared to 2013. The geographic activity of ourrevenue can be summarized as follows:oUnited States - Revenue in the United States decreased by $602,000 or 0.5%. This decrease waspartially driven by a reduction in box office revenue of $1.5 million, in turn driven by an 82,000 admitreduction together with a 1.0% reduction in average ticket price, offset by increased concession andcafé revenues of approximately $524,000.oAustralia - Revenue in Australia decreased by $2.9 million or 3.2%. This decrease was primarily due tothe strengthening of the U.S. dollar against the Australian dollar in 2014 (refer below). Local currencybox office was consistent with 2013, with a decrease in average ticket price of 4.5% being offset byincreased ticket sales of 4.9%. Excluding currency effects, concession revenue was up 7.0%, reflectingincreased admission volume and spend per admit.oNew Zealand - Revenue in New Zealand increased by $2.0 million or 9.1%. Attendance increased by88,000 or 5.1%. The majority of this increase was achieved through the opening of our Dunedincinema. The attendance increase more than offset local currency reduction in average ticket price of1.8%. Concession revenue increased by $879,000 due to the combined positive effect of increasedadmission volumes, improved spend per patron, and a positive U.S. dollar to N.Z. dollar exchange ratemovement.·Operating expense decreased in 2014 by $5.0 million or 2.5% compared to 2013. Year-over-year operatingexpense percentage decreased in relation to revenue from 83.9% to 82.4%.oUnited States - Operating expense in the United States increased by $1.3 million or 1.2% primarilyrelated to a $773,000 decrease in film rent and advertising together with a decrease of $280,000 inoccupancy related costs offset by an increase of $2.1 million in other operating expense which includesnot only increases in labor related costs, but also increases in insurance and utilities.oAustralia - Operating expense in Australia decreased by $7.0 million or 9.4%. As with revenue, asignificant contributor to the decrease was the strengthening of the U.S. dollar against the Australiandollar in 2014 (see below). Film rental costs were also lower due to a lower film rental percentage beingachieved. Other operating costs were reduced by $3.2 million or 14.4%, with many incremental costimprovements most notably a reduction in marketing costs.oNew Zealand - Operating expense in New Zealand increased by $743,000 or 4.1%. This increase was inline with the above-mentioned increase in cinema revenue, which directly affects film rental costs andwith the above-mentioned year-over-year increase in the value of the New Zealand dollar compared tothe U.S. dollar (see below).·Depreciation expense increased in 2014 by $306,000 or 2.8% compared to 2013. This primarily related todigital projection assets receiving their first full year of depreciation in 2014 in Australia and New Zealand.·General and administrative expense increased in 2014 by $302,000 or 9.2% compared to 2013. This increasewas primarily related to an increase in labor expense from our U.S. cinema operations. 40 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.·Australian average exchange rates decreased by 6.8% in 2014 from 2013. Conversely New Zealand averageexchange rates increased by 1.2% from 2013 to 2014. Both had an impact on our statements of operations.·As a result of the above, cinema exhibition segment operating income increased in 2014 by $2.8 million or11.4% compared to 2013.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 concessionsrevenue. Both of these increases were primarily related to the quality of film product in 2013 comparedto the same 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 andexpanded competitive 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 damaged NewZealand multiplex. This increase in revenue was somewhat enhanced by an increase in the value of theNew 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 and wasexacerbated 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 rentalcosts and with the above-mentioned year-over-year increase in the value of the New Zealand dollarcompared to 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 averageexchange rates increased by 1.2% from 2012 to 2013, both of which had an impact on our statements ofoperations.·As a result, cinema exhibition segment operating income increased in 2013 by $1.6 million compared to 2012,primarily from the aforementioned increase in revenue from our U.S. and New Zealand cinema operations. Real Estate Segment 41 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 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 2014, 2013, and 2012 real estatesegment (dollars in thousands). All percentages below are expressed as a percent of total revenue, except live theatercost, which is expressed as a percentage of live theater rental and ancillary revenue, and property cost, which is expressedas a percentage of property rental revenue:Operating Income by Country for theYear Ended December 31, 2014 United States Australia New Zealand TotalLive theater rental and ancillary income$3,343 $--$--$3,343 Property rental income1,785 13,702 5,517 21,004 Total revenue5,128 13,702 5,517 24,347 Live theater cost1,591 ----1,591 Property rental cost(2)2,229 1,599 3,826 Occupancy expense974 2,532 846 4,352 Total operating expense2,563 4,761 2,445 9,769 Depreciation and amortization327 2,785 949 4,061 General and administrative expense14 973 55 1,042 Segment operating income$2,224 $5,183 $2,068 $9,475 Operating Data as a Percentage ofRevenue for Year EndedDecember 31, 2014 United States Australia New Zealand TotalLive theater rental and ancillary revenue65.2% 0.0% 0.0% 13.7% Property rental revenue34.8% 100.0% 100.0% 86.3% Total revenue100.0% 100.0% 100.0% 100.0% Live theater cost47.6% 0.0% 0.0% 47.6% Property cost-0.1%16.3% 29.0% 18.2% Occupancy expense19.0% 18.5% 15.3% 17.9% Total operating cost and expense50.0% 34.7% 44.3% 40.1% Depreciation and amortization6.4% 20.3% 17.2% 16.7% General and administrative expense0.3% 7.1% 1.0% 4.3% Segment operating income43.4% 37.8% 37.5% 38.9% 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 42 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 Ended December 31, 2013United StatesAustraliaNew ZealandTotalLive theater rental and ancillary revenue67.4% 0.0% 0.0% 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% 0.0% 0.0% 45.0% 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% 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% 0.0% 0.0% 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% 0.0% 0.0% 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% Real Estate Results for 2014 Compared to 2013·Real estate revenue decreased by $2.1 million or 8.0% compared to 2013. The geographic activity of ourrevenue can be summarized as follows:oUnited States – revenue was consistent with 2013. 43 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.oAustralia – local market improvements in rental of 4.1% were offset by depreciation in the value of theAustralian dollar against the U.S. dollar (see below).oNew Zealand – revenue was impacted by our Courtenay Central Carpark which only reopened inNovember 2014 after the 2013 earthquake.·Operating expense for the real estate segment decreased by $1.1 million or 9.8% compared to 2013: oUnited States –costs were down due to the continuing capitalization of costs relating to thedevelopment of our Union Square site.oAustralia - the main reduction in real estate operating expense was achieved in Australia and was as aresult of the sale of our Burwood property, which led to significantly reduced property taxes comparedto 2013. oNew Zealand – operating expense was consistent with 2013.·General and administrative costs increased by $398,000 or 61.8% compared to 2013 due mainly to personnelchanges in the Australian real estate department.·Australian average exchange rates decreased by 6.8% from 2013 to 2014. New Zealand average exchange ratesincreased by 1.2% in 2014 from 2013. Both had an impact on our statements of operations.·As a result of the above, real estate segment income decreased in 2014 by $1.5 million or 13.5% compared to2013.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 averageexchange rates increased by 1.2% from 2012 to 2013 both of which had an impact on our statements ofoperations.·As a result of the above, real estate segment income increased by $1.5 million or 15.7% compared to 2012. Non-Segment ActivityNon-segment expense/income includes expense and/or income that is not directly attributable to our twooperating segments.2014 Compared to 2013·general and administrative expenses for 2014 increased marginally by $149,000 or 1.1% from 2013. ·net interest expense decreased by $1.0 million compared to 2013. The decrease in interest expense during 2014resulted from our ability to refinance certain debt obligations at favorable rates in comparison to the existingrates. Additionally, our interest expense was lower in the 2014 due to a decrease in the fair value of our interestrate swap liabilities in 2014 compared to 2013.·the $1.6 million in other income during 2014 was primarily related to the receipt of insurance proceeds receivedduring 2014 for the Courtenay Central parking structure business interruption recovery claim. The $1.9 millionin other income during 2013 was primarily related to a $1.4 million gain on the acquisition of a cinema and thereceipt of insurance proceeds from our business interruption claim for the temporary closure of our cinema inChristchurch, New Zealand due to the February 22, 2011 earthquake (see Note 26 – Casualty Loss to our 2014Consolidated Financial Statements). 44 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 income tax benefit of $9.8 million in 2014 compared to a $4.9 million expense in 2013 was a result of thereversal of the valuation allowance in the United States. The valuation allowance reversal is a result of the taxbenefit that we now expect to realize.·equity earnings from unconsolidated investments decreased by $354,000 primarily related to decrease inincome from our Mt. Gravatt investment. 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 2013resulted 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 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 ofa cinema 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 2014 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 inChristchurch, New Zealand due to the February 22, 2011 earthquake.·equity earnings from unconsolidated investments decreased by $252,000 primarily related to decrease inincome from our Mt. Gravatt investment.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 and projected taxable income in particular jurisdictions;·the tax rates in particular jurisdictions;·tax treaties between jurisdictions;·the extent to which income is repatriated;·future changes in law; and·any future reassessment of valuation allowance.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 2014, 2013, and 2012, our consolidated business units produced a net income of $25.7million; a net income of $9.0 million and a net loss of $914,000 respectively, attributable to Reading International, Inc.common shareholders. For many of the years prior to 2013 we experienced a net loss. However, as explained in theCinema and Real Estate segment sections above, we have generally noted improvements in our segment operatingincome such that we have a positive segment operating income for each of the years of 2014, 2013, and 2012, that inyears past has been negative. Although we cannot assure that this trend will continue, we are committed to the overallimprovement 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 environments. This is based on our belief that people will continue to spend some reasonable portion oftheir entertainment dollar on entertainment outside of the home and that, when compared to other forms of outside-the-home entertainment, movies continue to be a popular and competitively priced option. As we believe the 45 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 exhibition business to be a mature business with most markets either adequately screened or over-screened, wesee growth in our cinema business coming principally from the enhancement of our current cinemas (for example, by theaddition of luxury seating and broadening our food and beverage offerings), the development in select markets ofspecialty cinemas, and the opportunistic acquisition of already existing cinemas, rather than from the development ofnew conventional cinemas. From time-to-time, we invest in the securities of other companies, where we believe thebusiness or assets of those companies to be attractive or to offer synergies to our existing entertainment and real estatebusinesses. In the current environment, we continue to focus on the development and redevelopment of our existingassets (particularly our New York assets and our Angelika Film Center chain), as well as to continue to be opportunisticin identifying and endeavoring to acquire undervalued assets, particularly assets with proven cash flow and that webelieve to be resistant to 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 development activities. We believe that by blendingthe cash generating capabilities of a cinema operation with the investment and development opportunities of our realestate 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 on-going changes to the worldwide credit markets, the business community continues to haveconcerns that credit will be more difficult to obtain especially for potentially risky ventures like business and assetacquisitions. However, we believe that our acquisitions over the past few years coupled with our strengtheningoperational cash flows demonstrate our ability to improve our profitability. This is evidenced by our ability to renewtwo major debt tranches during 2014 at preferential rates, amounts and duration. We believe that our business model willhelp to demonstrate to lending institutions our ability not only to make strategic acquisitions but also to service theassociated debt.Discussion of Our Statement of Cash FlowsThe following discussion compares the changes in our cash flows over the past three years. Operating Activities2014 Compared to 2013. Cash provided by operations was $28.3 million in 2014 compared to $25.2 million inthe 2013. The increase in cash provided by operations of $3.2 million was due primarily to a $2.3 million increase inoperational cash flows; and a $0.9 million increase in cash from changes in operating assets and liabilities.2013 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 liabilities Investing ActivitiesCash used in investing activities was $9.9 million in 2014, $6.1 million in 2013, and $6.1 million in 2012. Thefollowing summarizes our discretionary investing activities for each of the three years ending December 31, 2014: 46 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 $9.9 million cash used in 2014 was primarily related to:·$14.9 million in property enhancements to our existing properties;offset by·$5.4 million in deposit proceeds from the sale of our Burwood property. 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;·$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.Financing ActivitiesCash used in financing activities was $3.3 million in 2014, $17.8 million in 2013 and $12.7 million in2012. The following summarizes our financing activities for each of the three years ending December 31, 2014:The $3.3 million cash used in 2014 was primarily related to:·$7.1 million of loan repayments, including $2.0 million in payments on our Bank of America Revolver andLine of Credit and $5.0 million in payments on our NAB term debt; and ·$4.1 million spent on repurchasing our Class A Non-Voting Common Stock. offset by ·$8.2 million proceeds from the NAB revolver; and·$978,000 of proceeds from the exercise of employee stock options. 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; 47 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.·$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;·$3.4 million in noncontrolling interests’ contributions; and·$308,000 of proceeds from the exercise of employee stock options. 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 existing three-tiered credit facility with National Australia Bank (“NAB”). The facility is nowcomprised of (1) the Bank Bill Discount Facility with a facility limit of AUS $61.3 million, an interest rate of2.35% above the Bank Bill Swap Bid Rate (“BBSY”), and amortization at AUS$2.0 million per year; (2) theBill Discount Facility – Revolving with a facility limit of AUS$10.0 million and an interest rate of 1.50%above the BBSY on any undrawn portion and (3) the Bank Guarantee Facility with a facility limit of AUS$5.0million. All three have a due date of June 30, 2019.·refinancing our Cinema 1, 2, 3 term loan of $15.0 million with an additional $6.0 million for the acquisition ofair rights to add additional density to any redevelopment of the property. The loan is held by Sovereign Bank. The loan is collateralized by our Cinema 1, 2, 3 property (including any air rights we may acquire). The newloan has a two-year term commencing June 27, 2014. The $15.0 million Sovereign loan had been extended onJuly 1, 2013 for a one year period.·refinancing our Bank of America revolver on November 28, 2014. Increasing the borrowing limits from $35.0million to $55.0 million with no loan amortization required during the term. The loan has a 5-year term,maturing on December 1, 2019, with an interest rate at LIBOR plus applicable margin rate (ranging from 3.0%to 2.5%) adjusted quarterly. Previously, on March 25, 2013, Bank of America increased the borrowing limit onour BofA Revolver from $30.0 million to $35.0 million.·refinancing our Liberty Theaters loan with a Sovereign Bank $7.5 million loan securitized by our Minetta andOrpheum with a term of five years commencing May 29, 2013 with an interest rate of 2.94%.As a result of the above our working capital deficit has reduced from December 31, 2013 $71.8 million to $8.8million at December 31, 2014. We believe that we have sufficient borrowing capacity to meet our short-term workingcapital requirements. To meet our current and future liquidity requirements, we have the following external sources ofunused liquidity:·$25.3 million is available on our Bank of America revolver.·$9.4 million (NZ$12.0 million) is available on our Westpac New Zealand Corporate Credit facility.·$6.0 million available on our Sovereign Line of Credit for acquisition of air rights for the Cinemas 1,2,3.·$5.0 million is available on our Bank of America Line of Credit.Potential uses for funds during 2015 that would reduce our liquidity, other than those relating to workingcapital needs 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 48 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 acquisition of assets with proven cash flow that we believe to be resistant to the current recessionary trends. Our worldwide cash position at December 31, 2014 was $50.2 million including $30.4 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,and the U.S., we are subject to certain debt covenants that limit the transfer or use of cash outside of the various regionalsubsidiaries in which the cash is held. As such, at December 31, 2014, we have approximately $26.2 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 othersources of liquidity (including future potential asset sales), will be adequate to meet our anticipated requirements forprincipal repayments, interest payments, and short-term debt maturities, plus any other debt service obligations, workingcapital, 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 do one or moreof the following:·to defer construction of projects currently slated for land we presently own;·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, 2014 (in thousands): 20152016201720182019ThereafterTotalTerm Debt$38,104 16,634 1,635 9,135 70,615 --136,123 Subordinated Notes----------27,913 27,913 Tax settlement liability2,900 ----------2,900 Pension liability855 684 684 684 684 4,004 7,595 Lease obligations33,790 29,944 27,016 20,440 16,594 64,424 192,208 Estimated interest on debt5,834 4,975 4,608 4,388 3,028 8,786 31,619 Total$81,483 52,237 33,943 34,647 90,921 $105,127 398,358 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 2014 ConsolidatedFinancial Statements). As of December 31, 2011, the gross unrecognized tax benefit decreased to $4.1 million largelybecause the Tax Audit/Litigation matter is no longer in the nature of an uncertain tax position governed by FASB ASC740-10-25, but is a fixed and determinable tax liability. As of December 31, 2012, 2013 and 2014, the grossunrecognized tax benefit was $5.3 million, $4.0 million and $9.2 million respectively. We do not expect a significanttax payment related to the $9.2 million in uncertain tax positions within the next 12 months.Unconsolidated Joint Venture Debt 49 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 $592,000 and $634,000 as of December 31, 2014 andDecember 31, 2013, respectively. Our share of unconsolidated debt, based on our ownership percentage, was $197,000and $211,000 as of December 31, 2014 and December 31, 2013, 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 the U.S. and Australia and NewZealand, 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. At December 31, 2014, we hold $1.1 million inAustralia denominated in U.S. dollars. Also, by paying off our New Zealand debt and paying down on our Australiandebt with the proceeds of our TPS in 2007, we added an increased element of currency risk to our Company. We believethat this currency risk is mitigated by the long-term nature of the fully subordinated notes and our ability in 2009 torepurchase, 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 BBSY, but required at that time that not less than 75% of theloan be swapped into fixed rate obligations. We elected, however, to swap 100% of the balance. Under the June 27,2014 refinancing, the requirement that 75% of the loan balance be swapped into fixed rate obligations was no longerrequired. Although our Bank of America Revolver does not require a fixed interest swap agreement, we entered into anapproximate three-year $28.0 million fixed interest rate swap that has a balance reduction schedule matching the loanamortization of the Bank of America Revolver. Under the November 28, 2014 refinancing there is no loan amortizationrequired during the term of the loan. Effective October 28, 2013, we entered into a three-year $27.9 million fixed interestrate swap for our Trust Preferred Securities (see Note 13 –Derivative Instruments to our 2014 Consolidated FinancialStatements).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 $1.0 million decrease to interest expense during 2014, a $2.0million decrease to interest expense during 2013, and a $1.1 million increase to interest expense during 2012.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, to lower costs andoperating expenses. In our opinion, the effects of inflation have been managed appropriately, and as a result, have nothad a material impact on our operations and the resulting financial position or liquidity.Accounting Pronouncements Adopted During 2014Please see Note 2 – Summary of Significant Accounting Policies to our 2014 Consolidated FinancialStatements. 50 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.New Accounting PronouncementsPlease see Note 2 – Summary of Significant Accounting Policies to our 2014 Consolidated FinancialStatements. 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 a different view as to the risks and uncertainties involved, andmay have 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-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 and DVD 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 that 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:oour ongoing access to borrowed funds and capital and the interest that must be paid on that debt andthe returns that must be paid on such capital;othe relative values of the currency used in the countries in which we operate; 51 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.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 topension liabilities, 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 claimsrelating to alleged exposure to asbestos or other substances now or in the future recognized as beingpossible causes 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 securitieswill perform 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 17, 2015Powered 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 effectsof changes in currency exchange and interest rates in their Form 10-K filings. Several alternatives, all with somelimitations, have been offered. The following discussion is based on a sensitivity analysis, which models the effects offluctuations in currency exchange rates and interest rates. This analysis is constrained by several factors, including thefollowing:·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, 2014, approximately 44% and 20% of our assets (determined by the book value of such assets)were invested in assets denominated in Australian dollars (Reading US and Reading Australia) and New Zealand dollars(Reading New Zealand), respectively, including approximately $40.1 million in cash and cash equivalents. AtDecember 31, 2013, approximately 55% and 18% of our assets were invested in assets denominated in Australian andNew Zealand dollars, respectively, including approximately $34.5 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 58% and 49% 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 $10.3 million and $4.0 million, respectively, and the change in annual net income would be$750,000 and $165,000, respectively. At the present time, we have no plan to hedge such exposure. We believe thatthis currency 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 $31.1 million and $45.3million as of December 31, 2014 and 2013, 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 valueif interest rates increase. Due to the short-term nature of such investments, a change of 1% in short-term interest rateswould not 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 variableinterest rate and a change of approximately 1% in short-term interest rates would have resulted in approximately$647,000 increase or decrease in our 2014 interest expense. 53 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 and 201356Consolidated Statements of Operations for the Three Years Ended December 31, 201458Consolidated Statements of Comprehensive Income (Loss) for the Three Years Ended December 31,201459Consolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 201460Consolidated Statements of Cash Flows for the Three Years Ended December 31, 201461Notes to Consolidated Financial Statements63 54 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 FIRM Board 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, 2014 and 2013, and the related consolidated statements of operations, comprehensiveincome (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2014.Our audits of the consolidated financial statements included the financial statement schedule listed in the indexappearing under Schedule II. These financial statements and financial statement schedule are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements and financialstatement schedule based 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, 2014 and 2013, and the results of theiroperations and their cash flows for each of the three years in the period ended December 31, 2014 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 basic consolidated financial statements taken as a whole, presentsfairly, 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, 2014, based on criteriaestablished in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizationsof the Treadway Commission (COSO), and our report dated March 16, 2015 expressed an adverse opinion./s/ GRANT THORNTON LLPLos Angeles, CaliforniaMarch 16, 2015 55 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 and 2013(U.S. dollars in thousands) December 31, 20142013ASSETSCurrent Assets:Cash and cash equivalents$50,248 $37,696 Receivables11,348 9,087 Inventory1,010 941 Investment in marketable securities54 55 Restricted cash1,433 782 Deferred tax asset6,300 3,273 Prepaid and other current assets3,426 3,283 Land held for sale-current10,112 --Total current assets83,931 55,117 Operating property, net186,889 191,660 Land held for sale-non current42,588 11,052 Investment and development property, net26,124 74,230 Investment in unconsolidated joint ventures and entities6,169 6,735 Investment in Reading International Trust I838 838 Goodwill21,281 22,159 Intangible assets, net11,486 13,440 Deferred tax asset, net15,967 5,566 Other assets6,313 6,010 Total assets$401,586 $386,807 LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts payable and accrued liabilities$18,107 $18,608 Film rent payable9,328 6,438 Notes payable – current portion38,104 75,538 Taxes payable6,003 8,308 Deferred current revenue14,239 11,864 Other current liabilities6,969 6,155 Total current liabilities92,750 126,911 Notes payable – long-term portion98,019 65,009 Subordinated debt27,913 27,913 Noncurrent tax liabilities10,029 12,478 Other liabilities40,577 32,749 Total liabilities269,288 265,060 Commitments and contingencies (Note 19)Stockholders’ equity:Class A non-voting common stock, par value $0.01, 100,000,000 shares authorized,32,537,008 issued and 21,741,586 outstanding at December 31, 2014 and 32,254,199issued and 21,890,029 outstanding at December 31, 2013228 225 Class B voting common stock, par value $0.01, 20,000,000 shares authorized and1,495,490 issued and outstanding at December 31, 2014 and at December 31, 201315 15 Nonvoting preferred stock, par value $0.01, 12,000 shares authorized and no issuedor outstanding shares at December 31, 2014 and December 31, 2013----Additional paid-in capital140,237 137,849 56 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 deficit(32,251)(57,952)Treasury shares(8,582)(4,512)Accumulated other comprehensive income28,039 41,515 Total Reading International, Inc. stockholders’ equity127,686 117,140 Noncontrolling interests4,612 4,607 Total stockholders’ equity132,298 121,747 Total liabilities and stockholders’ equity$401,586 $386,807 See accompanying notes to consolidated financial statement. 57 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014(U.S. dollars in thousands) Year Ended December 31, 201420132012 Operating revenueCinema$237,861 $239,418 $234,703 Real estate16,887 18,803 19,727 Total operating revenue254,748 258,221 254,430 Operating expenseCinema188,435 193,206 190,511 Real estate9,770 10,830 11,163 Depreciation and amortization15,468 15,197 16,049 General and administrative18,902 18,053 16,117 Impairment expense----1,463 Total operating expense232,575 237,286 235,303 Operating income22,173 20,935 19,127 Interest income662 407 800 Interest expense(9,662)(10,444)(17,226)Net gain (loss) on sale of assets25 (56)144 Other income (expense)1,646 1,876 (563)Income before income tax expense and equity earnings of unconsolidated jointventures and entities14,844 12,718 2,282 Income tax benefit (expense)9,785 (4,942)(4,904)Income (loss) before equity earnings (loss) of unconsolidated joint venturesand entities24,629 7,776 (2,622)Equity earnings of unconsolidated joint ventures and entities1,015 1,369 1,621 Income (loss) before discontinued operations25,644 9,145 (1,001)(Loss) from discontinued operations, net of tax----(85)(Loss) on sale of discontinued operations----(320)Net income (loss)$25,644 $9,145 $(1,406)Net (income) loss attributable to noncontrolling interests57 (104)492 Net income (loss) attributable to Reading International, Inc. commonshareholders$25,701 $9,041 $(914) Basic income (loss) per common share attributable to Reading International,Inc. shareholders:Earnings (loss) from continuing operations$1.10 $0.39 $(0.02)Earnings (loss) from discontinued operations, net----(0.02)Basic income (loss) per share attributable to Reading International, Inc.shareholders$1.10 $0.39 $(0.04) Diluted income (loss) per common share attributable to ReadingInternational, Inc. shareholders:Earnings (loss) from continuing operations$1.08 $0.38 $(0.02)Earnings (loss) from discontinued operations, net----(0.02)Diluted income (loss) per share attributable to Reading International, Inc.shareholders$1.08 $0.38 $(0.04)Weighted average number of shares outstanding–basic23,431,855 23,348,003 23,028,596 Weighted average number of shares outstanding–diluted23,749,221 23,520,271 23,028,596 See accompanying notes to consolidated financial statements. 58 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014(U.S. dollars in thousands) Years Ended December 31, 201420132012Net income (loss)$25,644 $9,145 $(1,406)Cumulative foreign currency adjustment(14,214)(19,368)4,419 Reclassification of realized gain on available for sale investments included innet income (loss)----(109)Unrealized income (loss) on available for sale investments----107 Accrued pension service benefit (costs)738 (593)(1,980)Comprehensive income (loss)$12,168 $(10,816)$1,031 Net (income) loss attributable to noncontrolling interests57 (104)492 Comprehensive (income) loss attributable to noncontrolling interests(41)107 (5)Comprehensive income (loss) attributable to Reading International, Inc.$12,184 $(10,813)$1,518 See accompanying notes to consolidated financial statements. 59 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014(In thousands) Common StockAccumulatedReading Class AClass BAdditionalOtherInternationalInc.Total Class AParClass BParPaid-InAccumulatedTreasuryComprehensiveStockholders’NoncontrollingStockholders’ SharesValueSharesValueCapitalDeficitStockIncome/(Loss)EquityInterestsEquityAt January 1, 201221,311 $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--------------2,432 2,432 5 2,437 Stock option and restricted stock compensationexpense--2 ----1,276 ------1,278 --1,278 Class A common stock issued for stock bonusesand 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--------------(19,854)(19,854)(107)(19,961)Stock option and restricted stock compensationexpense--2 ----948 ------950 --950 Class A common stock issued for stock bonusesand options exercised280 ------248 ------248 --248 Conversion of noncontrolling interest to equity--------(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 Net income----------25,701 ----25,701 (57)25,644 Other comprehensive loss--------------(13,476)(13,476)(41)(13,517)Stock option and restricted stock compensationexpense--3 ----1,410 ------1,413 --1,413 Stock repurchase plan(432)----------(4,070)--(4,070)--(4,070)Class A common stock issued for stock bonusesand options exercised283 ------978 ------978 --978 Contributions from noncontrollingshareholders------------------327 327 Distributions to noncontrolling shareholders(224)(224)At December 31, 201421,741 $228 1,495 $15 $140,237 $(32,251)$(8,582)$28,039 $127,686 $4,612 $132,298 See accompanying notes to consolidated financial statement. 60 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014(U.S. dollars in thousands) Year Ended December 31, 201420132012Operating ActivitiesNet income (loss)$25,644 $9,145 $(1,406)Adjustments to reconcile net income (loss) to net cash provided by operating activities:(Income) loss recognized on foreign currency transactions--(415)(20)Equity (earnings) loss of unconsolidated joint ventures and entities(1,015)(1,369)(1,621)Distributions of earnings from unconsolidated joint ventures and entities857 1,095 1,540 Loss provision on impairment of asset----1,463 (Gain) loss on sale of assets(25)56 176 Change in valuation allowance for net deferred tax assets(14,029)2,198 1,929 Gain on sale of marketable securities----(109)Gain on cinema acquisition and settlement--(1,359)--Depreciation and amortization15,468 15,197 16,384 Amortization of prior service costs738 660 304 Amortization of above and below market leases292 413 395 Amortization of deferred financing costs737 954 1,440 Amortization of straight-line rent310 574 1,213 Stock based compensation expense1,413 950 1,278 Changes in assets and liabilities:(Increase) decrease in receivables(2,753)281 (1,449)(Increase) decrease in prepaid and other assets(493)(16)1,907 Increase (decrease) in accounts payable and accrued expenses148 556 1,800 Increase in film rent payable3,117 133 435 Increase (decrease) in taxes payable(4,743)(3,294)(2,965)Increase (decrease) in deferred revenue and other liabilities2,677 (576)2,802 Net cash provided by operating activities28,343 25,183 25,496 Investing ActivitiesCash paid for acquisitions----(5,510)Cash received from cinema acquisition--1,936 --Purchases of and additions to operating property(14,914)(20,082)(8,213)Change in restricted cash(614)1,609 (6)Purchase of notes receivable----(1,800)Proceeds from notes receivable--2,000 --Sale of marketable securities----2,974 Distributions of investment in unconsolidated joint ventures and entities208 395 382 Proceeds from sale of property5,422 --14,078 Purchase of time deposits----(8,000) 61 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Proceeds from time deposits--8,000 --Net cash used in investing activities(9,898)(6,142)(6,095)Financing ActivitiesRepayment of long-term borrowings(7,140)(28,121)(62,602)Proceeds from borrowings8,173 12,500 47,007 Capitalized borrowing costs(1,320)(563)(782)Repurchase of Class A Nonvoting Common Stock(4,070)----Proceeds from the exercise of stock options978 248 308 Noncontrolling interest contributions327 263 3,350 Noncontrolling interest distributions(223)(2,102)--Net cash used in financing activities(3,275)(17,775)(12,719)Effect of exchange rate on cash(2,618)(2,101)252 Increase (decrease) in cash and cash equivalents12,552 (835)6,934 Cash and cash equivalents at the beginning of the period37,696 38,531 31,597 Cash and cash equivalents at the end of the period$50,248 $37,696 $38,531 Supplemental DisclosuresCash paid during the period for:Interest on borrowings$9,504 $6,953 $14,526 Income taxes6,407 5,903 5,666 Non-Cash TransactionsLease make-good accrual$4,637 $--$--Contribution from noncontrolling shareholder in exchange for debt reduction - relatedparty$--$2,250 $--Conversion of noncontrolling interest to equity--101 --In-kind exchange of stock for the exercise of options, net--301 --Contribution from noncontrolling shareholder from bonus accrual----255 See accompanying notes to consolidated financial statements. 62 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014_____________________________________________________________________________________________________________________________________ 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 equity method.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.Notes Payable RefinancingAustralian NAB Corporate Term Loan and RevolverOn June 27, 2014, we refinanced our existing three-tiered credit facility with NAB. It is comprised of (1) the Bank BillDiscount Facility with a facility limit of AUS$61.3 million, an interest rate of 2.35% above the BBSY, and amortization atAUS$2.0 million per year; (2) the Bill Discount Facility – Revolving with a facility limit of AUS$10.0 million and aninterest rate of 1.50% above the BBSY on any undrawn portion and (3) the Bank Guarantee Facility with a facility limit ofAUS$5.0 million. All three have a due date of June 30, 2019. The modification of this particular term loan was notconsidered to be substantial as defined by ASC 740. New Zealand Corporate Credit Facility 63 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 New Zealand bank loan with Westpac comes due for repayment on March 31, 2015. This loan has beenclassified as a short term liability on the consolidated balance sheet as of December 31, 2014. The loan is expected to berefinanced at terms similar or better to the existing Credit Facility.Cinemas 1, 2, 3 Term LoanOn June 26, 2014, our controlled subsidiary Sutton Hill Properties, LLC, entered into an agreement withSovereign Bank, refinancing the current loan on the property and providing an additional $6.0 million for the acquisitionof air rights to add additional density to any redevelopment of the property (“air rights”).We replaced an existing termloan of $15.0 million that was scheduled to mature on the following day. The new loan has a 2-year term, payable interestonly, commencing June 27, 2014, all principal and unpaid interest due and payable on maturity.U.S. Credit FacilityOn November 28, 2014, we refinanced our Bank of America revolver, which increased the borrowing limits from$35.0 million to $55.0 million with no loan amortization required during the term. The loan has a 5-year term, maturingon December 1, 2019. Interest rate at Libor plus applicable margin rate (ranging from 2.5% to 3.0%) adjusted quarterly.On March 25, 2013, Bank of America increased the borrowing limit on our BofA Revolver from $30.0 million to $35.0million. In addition, Bank of America increased our existing $3.0 million line of credit to $5.0 million. On October 31,2012, we replaced our GE Capital Term Loan of $27.7 million with a credit facility from Bank of America of $30.0million with an interest rate of between 2.50% and 3.00% above LIBOR and an expiration date of October 31, 2017. SeeNote 12 – Notes Payable.U.S Minetta and Orpheum Theatres LoanOn May 29, 2013, we replaced our Liberty Theater Term Loan with a loan secured by our Orpheum and MinettaLane theaters, thus releasing the Royal George from the security and leaving it unencumbered. This new loan has a notebalance of $7.5 million bearing an interest rate of LIBOR plus a 2.5% margin and having a LIBOR rate cap of 4.00%. SeeNote 12 – Notes Payable.Cash PositionOur cash position at December 31, 2014 was $50.2 million, including $30.4 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., weare subject to certain debt covenants that limit the transfer or use of cash outside of the various regional subsidiaries inwhich the cash is held. As such, at December 31, 2014, we have approximately $26.2 million of cash worldwide that is notrestricted by loan covenants.At December 31, 2014, $25.3 million is available on our Bank of America revolver in the U.S.; $9.4 million(NZ$12.0 million) available under our New Zealand Corporate Credit facility; $5.0 million available under our BofARevolver in the U.S and $6.0 million available under our Sovereign Line of Credit in the US to be used for the acquisitionof the air rights for the Cinemas 1,2,3. Accordingly, we believe that we have sufficient borrowing capacity under ourvarious credit facilities, together with our $50.2 million cash balance, and continuing generation of cash throughoperations, 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 Deposits 64 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Time 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 $1.1 million US dollars held on deposit inAustralia. We had no time deposits at December 31, 2014.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 and property damage insurance recovery proceeds. We have no history of significant bad debt lossesand we have established an allowance for accounts that we deem uncollectible.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 cumulative unrealizedgain of $10,000 included in other comprehensive income at December 31, 2014. For the years ended December 31, 2014,2013, and 2012, our net unrealized losses were $1,000, $0, and $2,000, respectively. The cost of securities sold is basedon the specific identification method. Interest and dividends on securities classified as available for sale are included ininterest 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, 2014 and 2013, our restricted cash balance was $1,433,000 and $782,000, 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 65 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. and real estate. Buildings and improvements, leasehold improvements, fixtures and equipment initially recorded at thelower of cost or fair market value and depreciated over the useful lives of the related assets. In accordance with US GAAP,land is 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 not directly related to the acquisitionand development of long-term assets. We cease capitalization on a development property when the property is completeand ready for its intended use, or if activities necessary to get the property ready for its intended use have beensubstantially curtailed. During the year-ended December 31, 2009, we decided to curtail our current developmentprogress on certain Australian and New Zealand land development projects. As a result, these properties are consideredheld for development and we have not capitalized interest for these projects since 2009 and will not do so, until thedevelopment work recommences. 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. No impairment losses were recorded in 2014 or 2013. In 2012, an impairmentloss of $1.5 million was recorded.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, 2014, 2013,and 2012, 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 first on aqualitative 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 66 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 entity as the primary beneficiary. We determine whether an entity is a VIE and, if so, whether it should beconsolidated by utilizing judgments and estimates that are inherently subjective. If we made different judgments orutilized different estimates in these evaluations, it could result in differing conclusions as to whether or not an entity is aVIE and whether or not to consolidate such entity. Our investments in unconsolidated entities in which we have theability to exercise significant influence over operating and financial policies, but do not control, or entities which arevariable interest entities 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 such time,we present the respective assets and liabilities related to the property held for sale separately on the balance sheet andcease to record depreciation and amortization expense. Properties held for sale are reported at the lower of their carryingvalue or their estimated fair value less the estimated costs to sell. For a description of the properties previously held forsale see Note 9 – Transfer of Held for Sale Real Estate to Continuing Operations and Related Items. These asset transfersfrom held for sale to operating resulted in a reclassification of their operating results which is reflected in our December31, 2014, 2013, and 2012 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”). 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 67 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. amortized over the respective term of the loan utilizing the effective interest method, or straight-line method if the resultis not materially different. In addition, interest on loans with increasing interest rates and scheduled principal pre-payments are also recognized on the effective interest method.Advertising ExpenseWe expense our advertising as incurred. The amount of our advertising expense was $2.1 million, $3.4 million,and $3.8 million for the years ended December 2014, 2013, and 2012, respectively.Legal Settlement Income/ExpenseFor the years ended December 31, 2014, 2013, and 2012, we recorded losses on the settlement of litigation of($83,000), ($285,000), and ($194,000), 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 $0.8173 and $0.8929 as of December 31, 2014 and 2013, respectively. The exchange rates of theU.S. dollar to the New Zealand dollar were $0.7796 and $0.8229 as of December 31, 2014 and 2013, 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.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 68 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. are consistent with the plans and estimates we use to manage the underlying businesses. In evaluating the objectiveevidence that historical results provide, we consider three years of cumulative operating income (loss). In the event wewere to determine that we would be able to realize our deferred income tax assets in the future in excess of their netrecorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for incometaxes.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, 2014, 2013, and 2012, 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 568,250, 709,850, and 672,350 shares of Class A Common Stock at December 31, 2014, 2013, and 2012,respectively, at a weighted average exercise price of $6.88, $6.66, and $6.24 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, 2014, 2013, and 2012, 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 income overthe initial term and any fixed-rate renewal periods in the respective leases.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 69 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. execute similar leases including leasing commissions, legal, and other related expenses to the extent that such costs arenot already incurred in connection with 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). We alsoperform valuations and physical counts of property, plant and equipment, valuations of investments and the involuntarytermination of employees, as necessary. Costs in excess of the net fair values of assets and liabilities acquired arerecorded 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 measurements. ASC820-10 applies to all other accounting pronouncements that require or permit fair value measurements. 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. 70 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 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 spread derived from information obtained from third-party financial institutions. These credit spreads take into account factors such as our credit standing, the maturity of thedebt, 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 2014No new pronouncements were adopted during the year ended December 31, 2014.New Accounting PronouncementsIn April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures ofDisposals of Components of an Entity. The amendments in this update change the criteria for determining whichdisposals can be presented as discontinued operations and modify related disclosure requirements. The guidance appliesprospectively to new disposals and new classifications of disposal groups as held for sale after the effective date, and iseffective for the Company as of January 1, 2015. However, all entities may adopt the guidance early for new disposals (ornew classifications as held for sale) that have not been reported in financial statements previously issued or available forissuance.In May 2014, the Financial Accounting Standards Board issued a new standard to achieve a consistentapplication of revenue recognition within the U.S. resulting in a single revenue model to be applied by reportingcompanies under U.S. generally accepted accounting principles. Under the new model, recognition of revenues occurswhen a customer obtains control of promised goods or services in an amount that reflects the consideration to which theentity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reportingcompanies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts withcustomers. The new standard is effective for us beginning in the first quarter of 2017; early adoption is prohibited. Thenew standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with thecumulative effect of initially applying it recognized at the date of initial application. We have not yet selected atransition method nor have we determined the impact of the new standard on our consolidated condensed financialstatements. 71 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, Sr. our now deceased Chairman of the Board and ChiefExecutive Officer, was granted $1,200,000, $750,000, and $950,000, of restricted Class A Non-voting Common Stock(“Class A Stock”) for each of the years ended December 31, 2014, 2013, and 2012, respectively. The 2014, 2013, and2012 stock grants of 160,643, 125,209, and 217,890 shares, respectively, were granted with stock grant prices of $7.47,$5.99, and $4.36, respectively. Mr. Cotter, Sr.’s stock compensation was granted fully vested with a five-year restrictionon sale. As of December 31, 2014, the 2014 stock grant had not yet been issued. During 2014, we issued to Mr. Cotter, Sr.125,209 of Class A Stock for his 2013 vested stock grants which had a stock grant price of $5.99 and a grant date fairvalue of $750,000. 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, 2014, 2013, and 2012, we recorded compensation expense of $1,200,000,$750,000, and $994,000, respectively, for the vesting of all our restricted stock grants. The following table details thegrants and vesting of restricted stock to our employees (dollars in thousands):Non-VestedRestricted StockWeightedAverage FairValue at GrantDateOutstanding – January 1, 2012--$--Granted227,570 994 Vested(227,570)(994)Outstanding – December 31, 2012--$--Granted125,209 750 Vested(125,209)(750)Outstanding – December 31, 2013--$--Granted160,643 1,200 Vested(160,643)(1,200)Outstanding – December 31, 2014--$-- 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, 2014, 2013, and 2012, there was noimpact to the consolidated statements of cash flows because there were no material recognized tax benefits during theseperiods.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, and 2012. However 72 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 2014, we had forfeitures of 64,000 options for the Class A common stock as a result of employee terminations. It isthe company’s policy, unless adjusted by the Compensation Committee, to give the terminated employees three monthsfrom their termination date to exercise their options. If the options are not exercised within the three month period, theyare considered forfeited.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 expected stockprice volatility, and the expected life of the options. The dividend yield is excluded from the calculation, as it is ourpresent intention to retain all earnings. We estimated the expected stock price volatility based on our historical pricevolatility measured using daily share prices back to the inception of the Company in its current form beginning onDecember 31, 2001. We estimate the expected option life based on our historical share option exercise experience duringthis same period. We expense the estimated grant date fair values of options issued on a straight-line basis over theirvesting periods.For the 80,000 175,000 and 206,000 options granted during 2014, 2013 and 2012 respectively, we estimated thefair value of these options at the date of grant using a Black-Scholes option-pricing model with the following weightedaverage assumptions:20142013Stock option exercise price$8.56$6.19Risk-free interest rate2.51%2.25%Expected dividend yield----Expected option life5.00 yrs.5.00 yrs.Expected volatility31.33%31.80%Weighted average fair value$2.76$1.98 Using the above assumptions and based on our use of the modified prospective method, we recorded $146,000,$199,000, and $285,000 in compensation expense for the total estimated grant date fair value of stock options that vestedduring the years ended December 31, 2014, 2013, and 2012, respectively. At December 31, 2014 total unrecognizedestimated compensation cost related to non-vested stock options granted was $446,000 which is expected to berecognized over a weighted average vesting period of 2.50 years.For the stock options exercised during the years ended December 31, 2014, 2013 and 2012 we issued 157,600, 62,500 and 95,000 shares of Class A Stock for cash to employees of the corporation under this stock based compensationplan with weighted average exercise prices of $6.21, $3.98 and $4.68 respectively. The total realized value of stockoptions exercised during the years ended December 31, 2014 and 2013 was $321,200 and $133,000, respectively. Werecorded cash received from stock options exercised of $978,000 and $248,000 during the years ended December 31,2014 and 2013, respectively. In 2013, 75,000 options were exercised having a realized value of $124,000 for which wedid not receive any cash but the employee elected to receive the net incremental number of in-the-money shares of 53,136based on an exercise price of $4.01 and a market price of $5.66. In 2012, 41,000 options were exercised having a realizedvalue of $103,000 for which we did not receive cash but the employee elected to receive the net incremental number ofin-the-money shares of 15,822 based on an exercise price of $4.01 and a market price of $6.53. At December 31, 2014, theintrinsic, unrealized value of all options outstanding, vested and expected to vest, was $ 4,197,000 of which 59.0% werecurrently 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: 73 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2012622,350 185,100 $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 Granted80,000 --8.56 ----------Exercised(157,600)--6.21 ----------Expired(64,000)--6.83 ----------Outstanding - December 31, 2014568,250 185,100 $6.88 $9.90 348,000 185,100 $6.82 $9.90 The weighted average remaining contractual life of all options outstanding, vested and expected to vest, atDecember 31, 2014 and 2013 were approximately 2.44 and 4.70 years, respectively. The weighted average remainingcontractual life of the exercisable options outstanding at December 31, 2014 and 2013 was approximately 3.11 and 3.63years, respectively. Note 4 – Earnings (Loss) Per ShareFor the three years ended December 31, 2014, we calculated the following earnings (loss) per share (dollars inthousands, except per share amounts): 201420132012Income (loss) from continuing operations$25,701 $9,041 $(509)Income (loss) from discontinued operations----(405)Net income (loss) attributable to Reading International, Inc. common shareholders25,701 9,041 (914)Basic income (loss) per common share attributable to Reading International,Inc. shareholders:Earnings (loss) from continuing operations$1.10 $0.39 $(0.02)Earnings (loss) from discontinued operations, net----(0.02)Basic income (loss) per share attributable to Reading International, Inc. shareholders$1.10 $0.39 $(0.04)Diluted income (loss) per common share attributable to ReadingInternational, Inc. shareholders:Earnings (loss) from continuing operations$1.08 $0.38 $(0.02)Earnings (loss) from discontinued operations, net----(0.02) 74 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Diluted income (loss) per share attributable to Reading International, Inc.shareholders$1.08 $0.38 $(0.04)Weighted average shares of common stock – basic23,431,855 23,348,003 23,028,596 Weighted average shares of common stock – diluted23,749,221 23,520,271 23,028,596 For the years ended December 31, 2014 and 2013 the weighted average common stock – dilutive included317,366 and 172,268, 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,596,627, 847,891, and 791,286 of out-of-the-money stock options were excluded from the computation of dilutedearnings (loss) per share for the years ended December 31, 2014, 2013, and 2012, respectively. The total number of in-the-money stock options, out-of-the-money stock options, and unissued restricted Class A Stock that could potentiallydilute basic earnings per share was 1,953,350, 1,020,159, and 1,075,340 for the years ended December 31, 2014, 2013,and 2012, respectively.Note 5 – Prepaid and Other AssetsPrepaid and other assets are summarized as follows (dollars in thousands): December 31,20142013Prepaid and other current assetsPrepaid expenses$1,166 $1,079 Prepaid taxes855 623 Prepaid rent1,033 1,210 Deposits369 368 Other3 3 Total prepaid and other current assets$3,426 $3,283 Other non-current assetsOther non-cinema and non-rental real estate assets$1,134 $1,134 Long-term deposits97 144 Deferred financing costs, net2,515 1,833 Interest rate cap at fair value--75 Tenant inducement asset--512 Straight-line rent asset2,547 2,310 Other20 2 Total non-current assets$6,313 $6,010 Note 6 – Operating PropertyProperty associated with our operating activities is summarized as follows (dollars in thousands):December 31,Operating property20142013Land$62,024 $65,578 Building and improvements120,913 123,061 75 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Leasehold improvements51,494 46,330 Fixtures and equipment107,286 106,099 Total cost341,717 341,068 Less: accumulated depreciation(154,828)(149,408)Operating property, net$186,889 $191,660 Depreciation expense for operating property was $14.4 million, $14.0 million, and $14.9 million for the threeyears ended December 31, 2014, 2013, and 2012, respectively. Note 7 – Investment and Development PropertyInvestment and development property is summarized as follows (dollars in thousands):December 31,Investment and Development Property20142013Land$23,833 $59,550 Construction-in-progress (including capitalized interest)2,291 14,680 Investment and development property, net$26,124 $74,230 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 projects during2014, 2013, and 2012 and we will not capitalize interest for these projects until development work recommences.During 2014, our Burwood property was transferred to Held for Sale as an outcome of our successful saletransaction, which has not been treated as a sale, under U.S. GAAP. Note 8 – Acquisitions, Disposals, and Assets Held for Sale2014 TransactionsLand held for Sale - BurwoodOn May 12, 2014, we entered into a contract to sell our undeveloped 50.6 acre parcel in Burwood, Victoria,Australia, to an affiliate of Australand Holdings Limited for a purchase price of $54.6 million (AUS$65.0 million). Reading received $5.9 million (AUS$6.5 million) on the May 23, 2014 closing. The balance of the purchaseprice is due on December 31, 2017. The agreement provides for mandatory pre-payments in the event that any of the landis sold by the buyer, any such prepayment being in an amount equal to the greater of (a) 90% of the net sale price or (b)the balance of the purchase price multiplied by a fraction the numerator of which is the square footage of property beingsold by the buyer and the denominator of which is the original square footage of the property being sold to thebuyer. The agreement does not provide for the payment of interest on the balance owed. Our book value in the property is $42.6 million (AUS$52.1 million) and while the transactionwas treated as a current sale for tax purposes [tax basis $37.4 million (AUS$45.3 million)], it does notqualify as a sale under US GAAP until the receipt of the payment of the balance of the purchase pricedue on December 31, 2017 (or earlier depending upon whether any prepayment obligation istriggered). The asset has been listed as a long term asset. 2013 Transactions Plano Cinema 76 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 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.Land 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 in theamount 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, 2014 which is classified as land held for sale on our December 31, 2014consolidated 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 - SaleOn 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 theproperty. The operational results are included in income (loss) from discontinued operations on our ConsolidatedStatements of Operations for the year ended December 31, 2012 The condensed statement of operations for Indooroopillyis as follows (dollars in thousands):2012Revenue$793 Less: operating expense560 Less: impairment expense318 Income (loss) from discontinued operations, net of tax$(85) 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, then zoned for the development of over 800 single-family residential units,located in the City of Coachella, California. The property was acquired at a foreclosure auction for $5.5 million. Theproperty was acquired as a long-term investment in developable land. Half of the funds used to acquire the land wereprovided by the Mr. James J. Cotter, Sr. our former Chairman, Chief Executive Officer and controlling shareholder. Uponthe approval of our Conflicts Committee, these funds were converted on January 18, 2012 into a 77 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. 50% interest in Shadow View Land and Farming, LLC. We are the managing member of this company. See Note 20 –Noncontrolling Interests.Note 9 – Transfer of Held for Sale Real Estate to Continuing Operations and Related ItemsThere were no transfers of held for sale real estate to continuing operations or related items in 2014, 2013 or2012.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, 2014 or 2013. At December 31, 2014 and 2013, our goodwill consisted of the following (dollars in thousands):2014CinemaReal EstateTotalBalance as of January 1, 2014$16,935 $5,224 $22,159 Foreign currency translation adjustment(878)--(878)Balance at December 31, 2014$16,057 $5,224 $21,281 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 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, 2014BeneficialLeasesTrade NameOtherIntangibleAssetsTotalGross carrying amount$24,150 $7,254 $423 $31,827 Less: Accumulated amortization15,989 3,929 423 20,341 Total, net$8,161 $3,325 $--$11,486 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 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, 2014, 2013, and 2012, our amortization expense was$2.0 million, $2.2 million, and $2.2 million, respectively. The estimated amortization expense in the five succeedingyears and thereafter is as follows (dollars in thousands): 78 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 31,2015$1,919 20161,722 20171,326 20181,318 2019776 Thereafter4,425 Total future amortization expense$11,486 Note 11 – Investments in and Advances to Unconsolidated Joint Ventures and EntitiesInvestments in and advances to unconsolidated joint ventures and entities are accounted for under the equitymethod of accounting except for Rialto Distribution as described below. As of December 31, 2014 and 2013, theseinvestments in and advances to unconsolidated joint ventures and entities include the following (dollars in thousands):December 31,Interest20142013Rialto Distribution33.3%$--$--Rialto Cinemas50.0%1,564 1,571 205-209 East 57 Street Associates, LLC25.0%----Mt. Gravatt33.3%4,605 5,164 Total investments$6,169 $6,735 For the years ended December 31, 2014, 2013, and 2012, we recorded our earnings (loss) from ourunconsolidated joint ventures and entities as follows (dollars in thousands):Year Ended December 31,201420132012Rialto Distribution$120 $159 $199 Rialto Cinemas297 221 209 205-209 East 57 Street Associates, LLC--(1)27 Mt. Gravatt598 990 1,186 Total equity earnings$1,015 $1,369 $1,621 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, 2014, 2013,and 2012 we received $120,000 (NZ$140,000), $159,000 (NZ$195,000), and $199,000 (NZ$245,000), respectively, indistributions from our interest in Rialto Distribution which we recorded as earnings at the time of receipt.Rialto Cinemas 79 ththSource: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.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 2012, as a consequence of a purchaser’s dispute, a condominium which was previously sold wasrepurchased, renovated, and resold for a small gain resulting in additional earnings to us of $27,000. We do notanticipate any further income or expense from this investment.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 31,20142013Current assets$903 $887 Noncurrent assets2,621 3,288 Current liabilities753 751 Noncurrent liabilities68 30 Members’ equity2,703 3,394 Mt. Gravatt Condensed Statements of Operations InformationDecember 31,201420132012Total revenue$10,503 $12,949 $15,236 Net income1,775 2,923 3,513 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-year 6.25%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 tail interest.During 2012, we received $191,000 in interest on the promissory note, and, on June 14, 2011, we received $6.8 million ofprincipal and interest owed on this note. We believe that further amounts are owed under the note and we have begunlitigation to collect such amounts. Any further collections will be recognized when received.Combined Condensed Financial Information 80 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 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 31,20142013Current assets$3,146 $3,255 Noncurrent assets5,128 5,934 Current liabilities2,427 2,516 Noncurrent liabilities673 670 Members’ equity5,174 6,002 Condensed Statements of Operations InformationDecember 31,201420132012Total revenue$21,036 $23,070 $26,138 Net income2,774 3,598 4,590 Note 12 - Notes PayableNotes payable are summarized as follows (dollars in thousands): Name of Note Payable or SecurityDecember 31,2014December 31,2013Maturity DateDecember 31,2014December 31,2013Trust Preferred Securities4.23%4.24%April 30, 2027$27,913 $27,914 Australian NAB Corporate Term Loan5.04%5.09%June 30, 201947,403 56,699 Australian NAB Corporate Revolver5.04%5.09%June 30, 20198,173 --Australian Shopping Center Loans----November 1, 2014--89 New Zealand Corporate Credit Facility5.80%4.80%March 31, 201521,829 23,041 US Bank of America Credit Facility2.67%2.67%December 1, 201929,750 31,500 US Bank of America Line of Credit3.17%3.17%October 31, 2017----US Cinema 1, 2, 3 Term Loan3.69%5.21%July 1, 201615,000 15,000 US Minetta & Orpheum Theatres Loan2.94%2.91%June 1, 20187,500 7,500 US Union Square Theatre Term Loan5.92%5.92%May 1, 20156,468 6,717 Total$164,036 $168,460 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 variable rate of three monthLIBOR plus 4.00%, which will reset each quarter through the end of the loan unless we 81 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. exercise our right to re-fix 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 trust securitiesare scheduled to be paid in full. We may pay off the debt after the first five years at 100% of the principal amount withoutany penalty. The trust is essentially a pass through, and the transaction is accounted for on our books as the issuance offully subordinated notes. The credit facility includes a number of affirmative and negative covenants designed to monitorour ability to service the debt. The most restrictive covenant of the facility requires that we must maintain a fixed chargecoverage ratio at a certain level. However, on December 31, 2008, we secured a waiver of all financial covenants withrespect to our TPS for a period of nine years (through December 31, 2017), in consideration of the payment of $1.6million, consisting of an initial payment of $1.1 million, a payment of $270,000 made in December 2011, and a paymentof $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, 2014, 2013, and 2012, we paid $1.4 million, $1.2 million, and $1.9million, respectively, in preferred dividends to the unrelated investors that are included in interest expense. At December31, 2014 and 2013, we had preferred dividends payable of $194,000 and $191,000, respectively. Interest payments forthis loan are required every three months.AustraliaAustralian NAB Corporate Term Loan and RevolverOn June 27, 2014, we refinanced our existing three-tiered credit facility with NAB. It is comprised of (1) theBank Bill Discount Facility with a facility limit of AUS$61.3 million, an interest rate of 2.35% above the BBSY, andamortization at AUS$2.0 million per year; (2) the Bill Discount Facility – Revolving with a facility limit of AUS$10.0million and an interest rate of 1.50% above the BBSY on any undrawn portion. As of December 31, 2014, the revolver hasbeen fully drawn; and (3) the Bank Guarantee Facility with a facility limit of AUS$5.0 million. All three have an expirydate of June 30, 2019. The modification of this particular term loan was not considered to be substantial as defined byASC 740.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$2.1million) and the loans carry no interest as long as we make timely principal payments of approximately $82,000(AUS$100,000) per year. Early repayment is possible without penalty. The only recourse on default of these loans is thesecurity on the properties. The last of the three loans (Rhodes) was paid in full in November of 2014.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 with a due date of March 31, 2015.The facility called for a decrease in the overall facility by $4.1 million (NZ$5.0 million) to $32.8 million(NZ$40.0 million), an increase in the facility margin of 0.55% to 2.00%, and the line of credit charge increase from 0.30%to 0.40%. The facility is secured by substantially all of our New Zealand assets, but has not been guaranteed by any entityother than several of our New Zealand subsidiaries. The facility includes various affirmative and 82 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. negative financial covenants designed to protect the bank’s security regarding capital expenditures and the repatriationof funds out of New Zealand. Also included in the restrictive covenants of the facility is the restriction of transferringfunds from subsidiary to parent.As indicated above this credit facility matures on March 31, 2015. Accordingly the outstanding balance of thisdebt of $21.8 million (NZ$28.0 million) is classified as current on our December 31, 2014 balance sheet. While noassurances can be given that we will be successful, we are currently in the process of renewing this loan at similar or betterterms to the existing credit facility and anticipate that the refinancing will be completed before the loan matures.USBank of America RevolverOn November 28, 2014 our Bank of America revolver was refinanced from $35.0 million to $55.0 million withno loan amortization required during the term. As of December 31, 2014 we have drawn $29.8 million on the newrevolver. The loan has a 5 year term maturing on December 1, 2019. Interest rate at LIBOR plus applicable margin rate(ranging from 3.0% to 2.5%) adjusted quarterly. 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, 2014.Cinemas 1, 2, 3 Term LoanOn June 26, 2014, our controlled subsidiary Sutton Hill Properties, LLC, entered into an agreement withSovereign Bank, refinancing the current loan on the property and providing an additional $6.0 million for the acquisitionof air rights to add additional density to any redevelopment of the property (“air rights”).We replaced an existing termloan of $15.0 million that was scheduled to mature on the following day. The new loan has a 2-year term, payable interestonly, commencing June 27, 2014, all principal and unpaid interest due and payable on maturity. The loan iscollateralized by our Cinemas 1,2,3 property (including any air rights that we may acquire). The loan has an interest rateof 3.50% over the 30-day LIBOR. The modification of this particular term loan was not considered to be substantial asdefined by ASC 740.Minetta and Orpheum Theatres LoanOn May 29, 2013, we refinanced our Liberty Theaters loan with a $7.5 million loan secured by our Minetta andOrpheum theatres, thus releasing the Royal George from the security and leaving it unencumbered. This new loan has amaturity date of June 1, 2018, and an interest rate of LIBOR plus a 2.75% margin with a LIBOR rate cap of 4.00% plus the2.75% margin. See Note 13 – Derivative Instruments.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 maturity date of May 1, 2015, with a fixed interest rate of 5.92% perannum and an amortization payment schedule of 20 years with a balloon payment of approximately $6.5 million at theend of the loan term. 83 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 credit facility matures on May 1, 2015. Accordingly the outstanding balance of this debtof $6.5 million is classified as current on our December 31, 2014 balance sheet. While no assurances can be given that wewill be successful, we are currently in the process of renewing this loan at similar or better terms to the existing loan andanticipate that the refinancing will be completed at the latest by March 31, 2015.Sutton Hill Capital Note-Related PartyOn 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. Summary of Notes PayableOur aggregate future principal loan payments are as follows (dollars in thousands):Year Ending December 31,2015$38,104 201616,635 20171,635 20189,135 201970,615 Thereafter27,912 Total future principal loan payments$164,036 Since approximately $77.4 million of our total debt of $164.0 million at December 31, 2014 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 were required to swap no less than 75% of our drawdowns under ourAustralian Corporate Credit Facility into fixed interest rate obligations. Under the June 27, 2014 refinancing the 75% ofthe loan balance be swapped into fixed rate obligations was no longer required. In conjunction with the NAB CreditFacility, we entered into a five-year interest swap agreement, which swaps more than 100% of our variable rate term loanbased on BBSY for a 5.50% fixed rate loan which steps down commensurate with the payments of the loan balance. Atthe time of entering into this NAB swap, our existing BOSI swap was “in-the-money” by $160,000. In lieu of a cashpayment for the in-the-money BOSI swap, we negotiated a slightly lower fixed swap rate by 0.05% for our new NAB fixedrate 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 $28.0 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% 84 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. (1.20% swap contract rate plus a 4.00% margin under the loan) for our Trust Preferred Securities instead of theobligatorily disclosed loan rates of 5.04%, 2.67%, and 4.23%, 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, 2014:Type of InstrumentNotional AmountPay Fixed RateReceive VariableRateMaturity DateInterest rate swap$49,446,6505.500%2.688%June 30, 2016Interest rate swap$28,000,0001.150%0.169%October 31, 2017Interest rate swap$27,913,0001.200%0.233%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 $1.0 million decrease to interest expense during 2014, a $2.0million decrease to interest expense during 2013, and a $1.1 million increase to interest expense during 2012. AtDecember 31, 2014 2013 and 2012 we recorded the fair market value of our interest rate swaps of $2.3 million, $3.3million and $5.9 million respectively, as other long-term liabilities. In accordance with FASB ASC 815-20, we have notdesignated any of our current interest rate swap positions as financial reporting hedges. Note 14 - Income TaxesIncome before income tax expense includes the following (dollars in thousands):Year Ended December 31,201420132012United States$2,778 $8,745 $836 Foreign12,066 3,973 1,446 Income before income tax expense and equity earnings ofunconsolidated joint ventures and entities$14,844 $12,718 $2,282 Net (income) expense attributable to noncontrolling interests:United States200 24 578 Foreign(143)(128)(86)Equity earnings and gain on sale of unconsolidated subsidiary:United States--(1)27 Foreign1,015 1,370 1,594 Gain on sale of discontinued operation:United States------Foreign----(405)Income before income tax expense$15,916 $13,983 $3,990 Significant components of the provision for income taxes are as follows (dollars in thousands):Year Ended December 31, 85 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. 201420132012Current income tax expenseFederal$827 $1,121 $964 State511 432 584 Foreign1,251 1,283 1,370 Total2,589 2,836 2,918 Deferred income tax expense (benefit)Federal(14,341)----State(1,234)----Foreign3,201 2,106 1,986 Total(12,374)2,106 1,986 Total income tax expense (benefit)$(9,785)$4,942 $4,904 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 Assets20142013Deferred Tax Assets:Net operating loss carry-forwards$9,902 $21,228 Impairment reserves2,967 2,915 Alternative minimum tax credit carry-forwards3,546 3,291 Compensation and employee benefits2,560 3,867 Deferred revenue and expense3,970 2,398 Land, tangible assets, and option real properties11,461 5,477 Other4,696 3,685 Total Deferred Tax Assets39,102 42,861 Valuation allowance(16,835)(34,022)Net deferred tax asset$22,267 $8,839 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 Puerto Rico and New Zealand, as of December 31, 2014, we recorded a valuation allowance of$16.8 million.After consideration of a number of factors for the Reading U.S. group, including its recent history of financialincome its expected future earnings, increase in the market value of its underlying real estate assets and its ability tocontinue to refinance operations as needed, the Company determined as of December 31, 2014 that it was more likelythan not that deferred tax assets of the Reading U.S. group will be realized. Accordingly we reversed the full valuationallowance in the U.S. resulting in an overall net deferred tax asset of $22.3 million as of December 31, 2014, withapproximately $6.3 million classified as current and $16.0 million classified as non-current. 86 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 of December 31, 2014, we had U.S. net operating loss carry-forwards of $700,000, expiring in 2031. Inaddition to the above net operating loss carry-forwards having expiration dates, we have the following carry-forwards thathave no expiration date at December 31, 2014:·approximately $3.5 million in U.S. alternative minimum tax credit carry-forwards;·approximately $3.8 million in Australia loss carry-forwards·approximately $11.3 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.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 31,201420132012Expected tax provision (benefit)$5,571 $4,894 $1,397 Increase (decrease) in tax expense resulting from:Change in valuation allowance(17,187)(3,882)(558)Foreign tax provision1,252 3,389 3,356 Tax effect of foreign tax rates on current income--(294)(126)State and local tax provision375 296 408 Tax/Audit Litigation Settlement700 1,140 1,140 Other items(496)(601)(713)Actual tax provision (benefit)$(9,785)$4,942 $4,904 U.S. income taxes have not been recognized on the temporary differences between book value and tax basis ofinvestment which is permanently invested in foreign subsidiaries. These differences become taxable upon a sale of thesubsidiary or upon distribution of assets from the subsidiary to U.S. shareholders. We expect neither of these events willoccur in the foreseeable future for any of our foreign subsidiaries.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. Cumulative earnings were available for distribution in the ReadingAustralia consolidated group of subsidiaries as of December 31, 2014. We have provided approximately $3.1 million intax in connection with these earnings as of December 31, 2014. 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 retained earnings.We have accrued $16.0 million in income tax liabilities as of December 31, 2014, of which $6.0 million has beenclassified as current taxes payable and $10.0 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 $8.8 million related to the “Tax Audit/Litigation” matter. Amounts assessed bythe IRS in connection with the “Tax Audit/Litigation” matter are no longer recorded under the cumulative probabilityapproach prescribed by FASB ASC 740-10-25 – Income Taxes - Uncertain Tax Positions (“ASC 740-10-25”) butare recorded as a fixed and determinable liability. As of December 87 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014, amounts which may be assessed by state income tax agencies in connection with the “Tax Audit/Litigation”matter are recorded under the cumulative probability approach prescribed by FASB ASC 740-10-25. We believe the $16.0million in tax liabilities represents an adequate provision 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, 2014, December 31, 2013, and December 31, 2012 (dollars in thousands):Year EndedYear EndedYear EndedDecember 31,December 31,December 31,201420132012Unrecognized tax benefits – gross beginning balance$2,160 $2,171 $1,974 Gross increases – prior period tax provisions1,600 (11)197 Gross increases – current period tax positions------Settlements------Statute of limitations lapse------Unrecognized tax benefits – gross ending balance$3,760 $2,160 $2,171 In accordance with FASB ASC 740-10-25 we elected to record interest and penalties related to income taxmatters 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.During the period January 1, 2012 to December 31, 2012 we recorded an increase of $200,000to our gross unrecognized tax benefits and an increase to tax interest of $1.1 million, resulting in a totalbalance of $5.3 million consisting of $2.1 million in tax and $3.2 million in interest. Of the $5.3 milliongross 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 nomaterial change to our gross unrecognized tax benefits and a decrease to tax interest of approximately$1.4 million, resulting in a total balance of $3.9 million consisting of $2.1 million in tax and $1.8 millionin interest. Of the $3.9 million gross unrecognized tax benefit at December 31, 2013, $2.9 million wouldimpact the effective rate if recognized. During the period January 1, 2014 to December 31, 2014 werecorded an increase of $1.6 million to our gross unrecognized tax benefits and an increase to tax interestof $3.6 million, resulting in a total balance of $9.2 million consisting of $3.7 million in tax and $5.4million in interest. Of the $9.2 million gross unrecognized tax benefit at December 31, 2014,approximately $8.1 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 $500,000 to $1.5 million. Thereasons for such change include but are not limited to tax positions expected to be taken during 2014, revaluation ofcurrent uncertain tax positions, and expiring statutes of limitations.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 2010 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 and significanttax 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 88 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. inception in 1995 are generally open for examination. The income tax returns filed in New Zealand and Puerto Rico forcalendar year 2009 and afterward remain open for examination as of December 31, 2014.Note 15 – Other LiabilitiesOther liabilities are summarized as follows (dollars in thousands):December 31,20142013Current liabilitiesLease liability$5,900 $5,900 Accrued pension855 --Security deposit payable202 246 Other12 9 Other current liabilities$6,969 $6,155 Other liabilitiesForeign withholding taxes$7,016 $6,748 Straight-line rent liability9,246 9,259 Environmental reserve1,656 1,656 Accrued pension6,740 8,527 Interest rate swap2,177 3,288 Acquired leases1,265 1,797 Other payable484 875 Other6,910 599 Deferred Revenue - Real Estate (Burwood sale deposit)5,083 --Other liabilities$40,577 $32,749 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 expiresJune 1, 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. SHC’s put option may be exercisedon one or more occasions in increments of not less than $100,000 each. Because our late Chairman, Chief ExecutiveOfficer, and controlling shareholder, Mr. James J. Cotter, Sr. was also the managing member of SHC, RDI and SHC areconsidered entities under common control. As a result, we have recorded the Village East Cinema building as a propertyasset of $4.7 million on our balance sheet based on the cost carry-over basis from an entity under common control with acorresponding lease liability of $5.9 million presented under other liabilities which accreted up to the $5.9 millionliability till July 1, 2013 (see Note 25 – Related Parties and Transactions). As the option is able to be exercised startingon July 1, 2013, by SHC 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. 89 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. 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.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 year ended December 31, 2012, the fair value of our impaired properties wasestimated to be $4.1 million, which we used to record our impairment expense and was based on level 3 inputs indeveloping management’s estimate of fair value. We did not record an impairment charge for our properties during 2014and 2013. As of December 31, 2014, we held certain items that are required to be measured at fair value on a recurring basis.These included available for sale securities and interest rate derivative contracts. Derivative instruments are related toour economic hedge of interest rates. Our available-for-sale securities primarily consist of investments associated with theownership 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 the variable interest ratefell above 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, 2014, 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, 2014 and 2013, respectively (dollars inthousands):Book ValueFair ValueFinancial InstrumentLevel2014201320142013 90 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 in marketable securities1$54 $55 $54 $55 Interest rate cap asset2$--$75 $--$75 Interest rate swap liabilities2$2,177 $3,288 $2,177 $3,288 91 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 and 2013 (dollars in thousands):Book ValueFair ValueFinancial InstrumentLevel2014201320142013Cash1$50,248 $37,696 $50,248 $37,696 Accounts receivable1$11,348 $9,087 $11,348 $9,087 Restricted cash1$1,433 $782 $1,433 $782 Accounts and film rent payable1$27,435 $25,046 $27,435 $25,046 Notes payable3$136,123 $140,547 $116,115 $121,411 Subordinated debt3$27,913 $27,913 $10,096 $11,067 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, 2014 and 2013, 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, three of our eight 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 $30.9 million and $1.2 million for 2014, respectively; $32.1 million and $1.3 million for 2013,respectively; and $32.6 million and $1.7 million for 2012, respectively. Future minimum lease payments by year and, inthe aggregate, under non-cancelable operating leases consisted of the following at December 31, 2014 (dollars inthousands): Minimum GroundMinimum PremisesEquipmentTotal Minimum Lease PaymentsLease PaymentsLease PaymentsLease Payments2015$3,490 $27,597 $2,703 $33,790 20163,526 23,724 2,694 29,944 20173,621 20,730 2,665 27,016 20183,629 16,811 --20,440 20193,691 12,903 --16,594 Thereafter12,758 51,666 --64,424 Total minimum lease payments$30,715 $153,431 $8,062 $192,208 Since approximately $62.5 million of our total minimum lease payments of $192.2 million as of December 31,2014 consisted of lease obligations denominated in Australian and New Zealand dollars, the U.S dollar amounts 92 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 these obligations will fluctuate in accordance with the relative values of these currencies. See Note 25 – RelatedParties and Transactions for the amount of leases associated with any related party leases.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 PlanMarch 1, 2007, the Board of Directors of Reading International, Inc. (“Reading”) approved a SupplementalExecutive Retirement Plan (“SERP”) pursuant to which Reading agreed to provide James J. Cotter, Sr., its then ChiefExecutive Officer and Chairman of the Board of Directors, supplemental retirement benefits effective March 1, 2007.Under the SERP, Mr. James J. Cotter, Sr. receives guaranteed 180 monthly payments following his separation from servicewith Reading. Following his death, this passes to his designated beneficiaries. The benefits under the SERP are fullyvested as of March 1, 2007.On August 7 2014 Mr. James J. Cotter, Sr. announced his retirement from the Company due to failing health andsubsequently, on September 132014, he passed away. According to the SERP agreement, he was entitled to the higherof either a guaranteed $25,000 a month, or 40% of the average monthly earnings over the highest consecutive 36-monthperiod of earnings (period ending August 2014). 40% of the average monthly earnings over the highest consecutive 36-month period of earnings calculated to $56,944 per month. Accordingly the guaranteed 180 month period obligation is$10.2 million. Using a discount rate of 4.25%, the Company recorded a $7.5 million liability; simultaneously releasing a$7.6 million accrued pension liability at August 31 2014. The resulting $58,000 over accrual reduced amounts not yetrecognized as a component of net periodic pension cost (the unamortized actuarial loss) to $3.1 million at August 312014.The change in the SERP pension benefit obligation and the funded status for the year ending December 31, 2014and 2013 are as follows (dollars in thousands):For the year endingChange in Benefit ObligationDecember 31, 2014Benefit obligation at January 1, 2014$7,398 Interest cost255 Actuarial gain(58)Benefit obligation at December 31, 20147,595 Funded status at December 31, 2014$(7,595)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)Amount recognized in balance sheet consists of (dollars in thousands): 93 thth ststSource: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. At December 31,2014At December 31,2013Current liabilities$855 $15 Noncurrent liabilities6,740 7,383 Items not yet recognized as a component of net periodic pension cost consist of (dollars in thousands): At December 31,2014At December 31,2013Unamortized actuarial loss$3,055 $3,166 Prior service costs--627 Accumulated other comprehensive loss3,055 3,793 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, 2014For the year endingDecember 31, 2013Interest cost$209 $202 Amortization of prior service costs254 304 Amortization of net gain426 356 Net periodic benefit cost$889 $862 Other changes in plan assets and benefit obligations recognized inother comprehensive incomeNet loss$(58)$1,253 Amortization of prior service cost(254)(304)Amortization of net loss(426)(356)Total recognized in other comprehensive income$(738)$593 Total recognized in net periodic benefit cost and othercomprehensive income$151 $1,455 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 $0 and $207,000,respectively. 94 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 and 2013: 20142013Discount rate4.25%4.25%Rate of compensation increase0.00%7.50%The following weighted-average assumptions were used to determine net periodic benefit cost for the year endedDecember 31, 2014 and 2013: 20142013Discount rate4.25%3.40%Expected long-term return on plan assets0.00%0.00%Rate of compensation increase0.00%3.50% The benefit payments for all of our pensions, which reflect expected future service, as appropriate, are expected to be paidover the following periods (dollars in thousands): Pension Payments2015$855 2016684 2017684 2018684 2019684 Thereafter4,004 Total pension payments$7,595 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, 2014. 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, 2014 and 2013,Rialto Distribution had a bank line of credit of $1.6 million (NZ$2.0 million) and $1.6 million (NZ$2.0 million),respectively, and had an outstanding balance of $592,000 (NZ$760,000) and $634,000 (NZ$770,000), respectively. Thisloan is guaranteed by one of our subsidiaries to the extent of our ownership percentage.Tax Audit/Litigation The 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 companies are both now whollyowned subsidiaries of the Company, but for the time periods under audit, were not consolidated with the Company for taxpurposes. 95 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. 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, 2014 and 2013, after the payments made during 2014 and 2013,respectively, the remaining federal tax obligation was $5.3 million and $8.3 million, respectively, in tax and interest. Ofthe $5.3 million owed to the IRS as of December 31, 2014, $3.5 million was recorded as current taxes payable, with theremaining balance being recorded as non-current tax liability. Of the $8.3 million owed to the IRS as of December 31,2013, $3.5 million was recorded as current taxes payable, with the remaining balance being recorded as non-current taxliability.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. As of December 31, 2014, no deficiency has been asserted by the State of California, and we have made no finaldecision 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. 96 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014, the noncontrolling interests in our consolidated subsidiaries are comprised of thefollowing:·25% noncontrolling interest in Australian Country Cinemas by Panorama Group International Pty, Ltd;·50% noncontrolling membership interest in Shadow View Land and Farming, LLC owned by the Cotter Estate;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 31,20142013AFC LLC$--$--Australian Country Cinemas410 532 Shadow View Land and Farming, LLC2,000 1,862 Sutton Hill Properties2,202 2,213 Noncontrolling interests in consolidated subsidiaries$4,612 $4,607 The components of income attributable to noncontrolling interests are as follows (dollars in thousands): Year Ended December 31,201420132012AFC LLC$--$173 $612 Australian Country Cinemas143 129 86 Shadow View Land and Farming, LLC(64)(50)(843)Sutton Hill Properties(136)(148)(347)Net income (loss) attributable to noncontrolling interest$(57)$104 $(492) 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 Sr., our then Chairman, Chief Executive Officer and controllingshareholder, contributed $2.5 million of cash and $255,000 of his 2011 bonus as his 50% share of the purchase price of aland parcel in Coachella, California and to cover his 50% share of certain costs associated with that acquisition. Thisland is held in Shadow View Land and Farming, LLC, in which the Cotter Estate now owns a 50% interest. We are themanaging member of Shadow View Land and Farming, LLC. However, as Mr. James J. Cotter, Sr. was 97 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. at that time considered to be our then controlling shareholder, pursuant to FASB ASC 810-10-05, we have consolidatedthe Cotter Estate’s interest in the property and its expenses with that of our interest and shown his interest as anoncontrolling interest. Note 8 – Acquisitions, Disposals, and Assets Held for Sale. 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.2014 Common Stock ActivityDuring 2014, we issued 125,209 of Class A Stock to an executive employee associated with his prior years’ stockgrants. During 2014, we purchased 432,252 of Class A Stock on the open market for $4,069,756.During 2014, 157,600 options were exercised having an intrinsic value of $374,022; for which we received$978,000 of cash.2013 Common Stock ActivityDuring 2013, we issued 217,890 of Class A Stock to an executive employee associated with his prior years’ stockgrant.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 a realized value of $124,000 forwhich we did not receive any cash but the employee elected to exchange for 53,136 personally owned shares of thecompany at a market price of $5.66 per share for the 75,000 shares based on an exercise price of $4.01 for the relatedoptions.2012 Common Stock ActivityDuring 2012, we issued 155,925 of Class A Stock to certain executive employee associated with his prior years’stock grant, and during 2012, we issued 9,680 as a one-time stock grant of Class A Stock to our employees valued at$44,000 which we accounted for as compensation expense.95,000 options were exercised during 2012 having an intrinsic value of $321,200 for which we received$308,000 of cash. Additionally, 41,000 options were exercised during 2012 having a realized value of $103,000 forwhich we did not receive any cash but the employee elected to receive the net incremental number of in-the-money sharesof 15,822 based on an option price of $4.01 a market price of $6.53 per share. 98 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 ForeignCurrencyItemsUnrealizedGain andLosses onAvailable-for-SaleInvestmentsAccruedPensionService CostsTotalBeginning balance$45,299 $9 $(3,793)$41,515 Net current-period other comprehensive income(14,215)1 738 (13,476)Ending balance31,084 10 (3,055)28,039 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, 2014 (dollars in thousands): Year Ended December 31, 2014CinemaExhibitionReal EstateIntersegmentEliminationsTotalRevenue$237,861 $24,348 $(7,461)$254,748 Operating expense195,896 9,770 (7,461)198,205 Depreciation and amortization11,047 4,061 --15,108 General and administrative expense3,575 1,042 --4,617 Segment operating income$27,343 $9,475 $--$36,818 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 99 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Reconciliation to net income attributableto Reading International, Inc. shareholders:201420132012Total segment operating income$36,818 $35,504 $32,382 Non-segment:Depreciation and amortization expense360 433 454 General and administrative expense14,285 14,136 12,801 Operating income22,173 20,935 19,127 Interest expense, net(9,000)(10,037)(16,426)Other income (loss)1,646 1,876 (563)Gain (loss) on sale of assets25 (56)144 Income tax benefit (expense)9,785 (4,942)(4,904)Equity earnings of unconsolidated joint ventures and entities1,015 1,369 1,621 Income (loss) from discontinued operations----(85)Gain (loss) on sale of discontinued operation----(320)Net income (loss)$25,644 $9,145 $(1,406)Net (income) loss attributable to noncontrolling interests57 (104)492 Net income (loss) attributable to Reading International, Inc.common shareholders$25,701 $9,041 $(914) December 31,Summary of assets:201420132012Segment assets$327,432 $347,637 $408,667 Corporate assets74,154 39,170 19,921 Total Assets$401,586 $386,807 $428,588 December 31,Summary of capital expenditures:201420132012Segment capital expenditures$14,310 $19,910 $13,390 Corporate capital expenditures604 172 333 Total capital expenditures$14,914 $20,082 $13,723 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 31,20142013 100 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Australia$87,536 $97,240 New Zealand39,800 36,319 United States59,553 58,101 Total operating property$186,889 $191,660 The following table sets forth our revenue by geographical area (dollars in thousands):December 31,201420132012Australia$97,329 $100,399 $108,320 New Zealand26,572 26,310 24,608 United States130,847 131,512 121,502 Total revenue$254,748 $258,221 $254,430 101 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 shareamounts)FirstSecondThirdFourth2014QuarterQuarterQuarterQuarterRevenue$58,053 $69,922 $65,031 $61,742 Net income (loss)$(251)$4,773 $3,939 $17,183 Net income (loss) attributable to Reading International, Inc.shareholders$(215)$4,757 $3,939 $17,220 Basic earnings (loss) per share$(0.01)$0.20 $0.17 $0.74 Diluted earnings (loss) per share$(0.01)$0.20 $0.17 $0.72 2013Revenue$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 Note 24 - Future Minimum Rental IncomeReal estate revenue amounted to $16.9 million, $18.8 million, and $19.7 million, for the years ended December31, 2014, 2013, and 2012, respectively. Future minimum rental income under all contractual operating leases issummarized as follows (dollars in thousands): Year Ending December 31,2015$8,112 20166,286 20174,804 20183,857 20193,042 Thereafter15,234 Total future minimum rental income$41,335 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 the Cotter Estate and a third party and of which theCotter Estate is the managing member. The Village East is the only cinema that remains subject to this lease and during2014, 2013, and 2012, 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 102 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 ground underlying the cinema that is subject to a longer-term ground lease between SHC and an unrelated third partythat expires in June 2031 (the “cinema ground lease”). The extended lease provides for a call option pursuant to whichReading may purchase the cinema ground lease for $5.9 million at the end of the lease term. Additionally, the lease has aput option pursuant to which SHC may require Reading to purchase all or a portion of SHC’s interest in the existingcinema lease and the cinema ground lease at any time between July 1, 2013 and December 4, 2019. SHC’s put optionmay be exercised on one or more occasions in increments of not less than $100,000 each. Because our late Chairman,Chief Executive Officer, and controlling shareholder, Mr. James J. Cotter, Sr. was also the managing member of SHC, RDIand SHC are considered entities under common control. As a result, we 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 capital lease liability of $5.9 million presented under other liabilities (see Note 15 – OtherLiabilities).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 June 28,2007, SHC exercised this option, paying the option exercise price through the application of their $3.0 million depositplus the assumption of its proportionate share of Sutton Hill Properties, LLC’s (“SHP”) liabilities giving it a 25% non-managing membership interest in SHP.OBI Management AgreementPursuant to a Theater Management Agreement (the “Management Agreement”), our live theater operations aremanaged by Off Broadway Investments, LLC (“OBI Management”), which is wholly owned by Ms. Margaret Cotter whois the daughter of the late Mr. James J. Cotter, Sr. 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. In2014, OBI Management earned $397,000, which was 20.9% of net cash flows for the year. In 2013, OBI Managementearned $401,000, which was 20.1% of net cash flows for the year. In 2012, OBI Management earned $390,000, which was19.7% 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 STOMP hasbeen playing in our Orpheum Theatre since prior to the time we acquired the theater in 2001. The Cotter Estate and Mr.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, Sr., our then 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 103 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. land is held in Shadow View Land and Farming, LLC, in which the Cotter Estate owns a 50% interest. We are themanaging member of Shadow View Land and Farming, LLC (see Note 20 – Noncontrolling Interests). 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 ETRC. The parking structure reopened in November 2014. We estimate the cost torepair the structure will be approximately $1.9 million (NZ$2.5 million) of which our earthquake insurance will coverapproximately $1.4 million (NZ$1.8 million) after our $554,000 (NZ$710,000) insurance deductible. For the year endedDecember 31, 2013, we recorded a casualty loss of $46,000 (NZ$59,000) based on the associated net book value of theproperty as an other income (expense) and a $1.4 million (NZ$1.8 million) insurance receivable in our current receivablesat December 31, 2014 and December 31, 2013. Our reduction in operating income will also be offset somewhat by ourbusiness interruption insurance subject to the relevant deductible. Note 27 – Subsequent EventsLos Angeles Doheny CondominiumAs part of a rationalization of our office space, in early December 2014 we listed our Los Angeles DohenyCondominium for sale. At December 31, 2014, this property was classified as an Asset Held for Sale. On February 25,2015, we consummated a sale contract for this property for a sale price of $3.0 million.Union Square PropertyOn March 10, 2015, the New York Landmark Preservation Society approved our design to the landmarkedUnion Square property allowing a new glass dome on the roof plus additional entrances, windows and signage addingover 23,000 square feet of rentable space. 104 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 – Allowance fordoubtful accounts$375 $297 $86 $586 Year-ended December 31, 2013 – Allowance fordoubtful accounts$209 $505 $339 $375 Year-ended December 31, 2012 – Allowance fordoubtful accounts$53 $367 $211 $209 Tax valuation allowanceYear-ended December 31, 2014 – Tax valuationallowance$34,022 $--$17,187 16,835 Year-ended December 31, 2013 – Tax valuationallowance$37,903 $--$3,881 $34,022 Year-ended December 31, 2012 – Tax valuationallowance$38,461 $--$558 $37,903 105 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. 106 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 reporting isa 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 2013 Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations (COSO) of the Treadway Commission. In our evaluation and as reported in our September 30,2014 filing, our management, identified a material weakness in our internal control over financial reporting based on ourdiscovery that our audited consolidated financial statements for the fiscal year ended December 31, 2013 and unauditedconsolidated financial statements for the quarters ended March 31, 2014 and June 30, 2014 erroneously omitted a $1.4million tax effect of a 2013 year-end transaction by one of our Reading Australia subsidiaries. Properly included, the taxeffect would have resulted in an increase in our deferred tax asset and total assets and a corresponding increase in ourother consolidated income and total liabilities and shareholders’ equity, but would not have had a material effect on ourfinancial condition or results of operations as reflected in our prior financial statements.In light of the foregoing, as of December 31, 2014, our management concluded that our internal controls overfinancial reporting were not effective to ensure that the tax effect of transactions in our foreign jurisdictions was reported. As a means of remediating the material weakness and improving our controls and procedures, we determined to engagetax advisors to support our accounting for taxes in countries in which we have no employees experienced in taxmatters. As the remediation efforts are ongoing, the material weakness disclosure remains in place until we have sufficientefficacy of such remediation.Our evaluation, carried out under the COSO framework of 2013, found no other instances where our internal control overfinancial reporting was ineffective as of December 31, 2014. The effectiveness of our internal control over financialreporting as of December 31, 2014 has been audited by Grant Thornton LLP, an independent registered public accountingfirm, 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 107 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. and communicated to the issuer's management, including its principal executive and principal financial officers, orpersons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the endof the period covered by this report, we carried out an evaluation, under the supervision and with the participation of ourChief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Adisclosure committee consisting of the principal accounting officer, and senior officers of each significant business lineand other select employees assisted the Chief Executive Officer and the Chief Financial Officer in this evaluation. Basedupon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls andprocedures were effective as required by the Securities Exchange Act Rule 13a-15(e) and 15d – 15(e) as of the end of theperiod covered by this report.Changes in Internal Controls Over Financial Reporting No changes in internal control over financial reporting occurred during the quarter ended December 31, 2014, except as to the remediation procedure mentioned above that have materially affected, or are likely to materially affect,our internal control over financial reporting. 108 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 Stockholders Reading International, Inc. We have audited the internal control over financial reporting of Reading International, Inc. and subsidiaries (the“Company”) as of December 31, 2014, based on criteria established in the 2013 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.A material weakness is a deficiency, or combination of control deficiencies, in internal control over financialreporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interimfinancial statements will not be prevented or detected on a timely basis. The following material weakness has beenidentified and included in management’s assessment.The Company identified a material weakness related to the inadequate design, implementation and operatingeffectiveness of internal controls over the accounting for income taxes. In our opinion, because of the effect of thematerial weakness described above on the achievement of the objectives of the control criteria, the Company has notmaintained effective internal control over financial reporting as of December 31, 2014, based on criteria established in the2013 Internal Control—Integrated Framework issued by COSOWe 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, 2014, The material weakness identified above was considered in determining the nature, timing, and extent of audit testsapplied in our audit of the 2014 consolidated financial statements, and this report does not affect our report dated March16, 2015 which expressed an unqualified opinion on those financial statements. 109 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. /s/ Grant Thornton LLPLos Angeles, CaliforniaMarch 16, 2015 110 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 2015 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. 111 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 and 2013 (Page 56)Consolidated Statements of Operations for the Three Years Ended December 31, 2014 (Page 58)Consolidated Statements of Comprehensive Income (Loss) for the Three Years Ended December 31, 2014 (page 59)Consolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 2014 (Page 60)Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2014 (Page 61)Notes to Consolidated Financial Statements (page 63)2.Financial Statements and Schedules for the years ended December 31, 2014, 2013, and 2012Schedule II – Valuation and Qualifying Accounts (page 105)Financial Statements of Mt. Gravatt Cinemas Joint Venture (page 113)3.Exhibits (Listed by numbers corresponding to Item 601 of Regulation S-K (page 132)(b) Exhibits Required by Item 601 of Regulation S-KSee Item (a) 3. above.(c) Financial Statement ScheduleSee Item (a) 2. above. 112 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 year ended December 31, 2012. Thefinancial statements for 2013 and 2014 are unaudited.Mt. Gravatt Cinemas Joint VentureStatements of Comprehensive IncomeFor the Years Ended December 31, 2014, 2013 and 2012 In AUS$Note2014(unaudited)2013(unaudited)2012Revenue from rendering services5$8,297,767 $9,765,087 $10,689,440 Revenue from sale of concession3,336,351 3,605,822 4,015,329 Total revenue11,634,118 13,370,909 14,704,769 Film expenses(3,185,233)(3,797,873)(4,311,436)Personnel expenses6(1,649,662)(1,681,870)(1,845,515)Occupancy expenses(1,627,915)(1,603,302)(1,584,751)House expenses(1,220,587)(1,174,667)(1,260,328)Cost of concession(714,911)(853,553)(944,355)Depreciation and amortization expenses11(510,627)(544,271)(597,349)Advertising and marketing costs(289,525)(285,815)(313,791)Management fees(277,092)(267,901)(261,004)Repairs and maintenance expense(201,217)(155,198)(217,289) Results for operating activities1,957,349 3,006,459 3,368,951 Finance income8,726 11,922 21,256 Net finance income78,726 11,922 21,256 Profit for the period$1,966,075 $3,018,381 $3,390,207 Other comprehensive incomeOther comprehensive income for the period------Total comprehensive income for the period$1,966,075 $3,018,381 $3,390,207 The accompanying notes are an integral part of these financial statements. 113 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Mt. Gravatt Cinemas Joint VentureStatements of Changes in EquityFor the Years Ended December 31, 2014, 2013 and 2012 In AUS$BirchCarroll &CoyleLimitedReadingExhibitionPty LtdVillageRoadshowExhibitionPty LtdTotalMembers’ Equity at January 1, 2012$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 Member distributions (unaudited)(820,000)(820,000)(820,000)(2,460,000)Total other comprehensive income (unaudited)--------Profit for the period (unaudited)655,358 655,358 655,359 1,966,075 Total comprehensive income for the period(unaudited)655,358 655,358 655,359 1,966,075 Members’ Equity at December 31, 2014 (unaudited)$1,102,259 $1,102,259 $1,102,260 $3,306,778 The accompanying notes are an integral part of these financial statements. 114 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Mt. Gravatt Cinemas Joint VentureStatements of Financial PositionAs at December 31, 2014 and 2013 In AUS$Note2014(unaudited)2013(unaudited)ASSETSCash and cash equivalents8$880,026 $694,392 Trade receivables9145,056 172,293 Inventories1079,809 126,947 Total current assets1,104,891 993,632 Property, plant and equipment113,207,150 3,681,951 Total non-current assets3,207,150 3,681,951 Total assets$4,312,041 $4,675,583 Trade and other payables12$633,418 $636,832 Employee benefits13184,102 172,496 Deferred revenue14141,067 32,297 Total current liabilities958,587 841,625 Employee benefits1346,676 33,255 Total non-current liabilities46,676 33,255 Total liabilities1,005,263 874,880 Net assets$3,306,778 $3,800,703 EquityContributed equity202,593 202,593 Retained earnings3,104,185 3,598,110 Total equity$3,306,778 $3,800,703 The accompanying notes are an integral part of these financial statements. 115 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Mt. Gravatt Cinemas Joint VentureStatements of Cash FlowsFor the Years Ended December 31, 2014, 2013 and 2012 In AUS$Note2014(unaudited)2013(unaudited)2012Cash flows from operating activitiesCash receipts from customers$12,817,888 $14,986,613 $16,091,198 Cash paid to suppliers and employees(10,145,154)(11,600,009)(11,971,304)Net cash provided from operating activities182,672,734 3,386,604 4,119,894 Cash flows from investing activitiesAcquisition of property, plant and equipment11(39,190)(1,225,676)(684,242)Transfer out property, plant and equipment113,364 923,325 (99,024)Interest received78,726 11,922 21,256 Net cash used in investing activities(27,100)(290,429)(762,010)Cash flows from financing activitiesDistributions to Joint Venturers(2,460,000)(3,300,000)(4,050,000)Net cash used in financing activities(2,460,000)(3,300,000)(4,050,000)Net increase/ (decrease) in cash and cash equivalents185,634 (203,825)(692,116)Cash and cash equivalents at 1 January694,392 898,217 1,590,333 Cash and cash equivalents at 31 December8$880,026 $694,392 $898,217 The accompanying notes are an integral part of these financial statements. 116 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 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).(a) Financial instruments 117 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Non-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.(c) Leased assets 118 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Leases 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. 119 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.(l) Taxes 120 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. (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 $20,290 (unaudited). 121 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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$2014(unaudited)2013(unaudited)Audit fees$--$--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$2014(unaudited)2013(unaudited)2012Box office revenue7,168,705 8,526,341 9,508,154 Screen advertising301,772 331,472 286,501 Booking fees189,279 218,025 268,180 Other cinema services638,011 689,249 626,605 $8,297,767 $9,765,087 $10,689,440 6. Personnel expensesIn AUS$2014(unaudited)2013(unaudited)2012Wages and salaries1,559,179 1,603,620 1,767,789 Change in liability for annual leave58,599 56,011 65,274 Change in liability for long-service leave31,884 22,239 12,452 $1,649,662 $1,681,870 $1,845,515 7. Finance incomeIn AUS$2014(unaudited)2013(unaudited)2012Interest income on cash at bank:8,726 11,922 21,256 $8,726 $11,922 $21,256 122 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 123 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 8. Cash and cash equivalentsIn AUS$Note2014(unaudited)2013(unaudited)Cash at bank and on hand15880,026 694,392 Cash and cash equivalents in the statement of cash flows$880,026 $694,392 The Joint Venture’s exposure to interest rate risk is disclosed in Note 15(e), Financial instruments, Market risk.9. Trade and other receivablesIn AUS$Note2014(unaudited)2013(unaudited)Trade receivables15145,056 172,293 $145,056 $172,293 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$2014(unaudited)2013(unaudited)Concession stores at cost79,809 126,947 $79,809 $126,947 11. Property, Plant, and EquipmentIn AUS$Plant andEquipmentLeaseholdImprovementsCapital WIPTotalCostBalance 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 Balance at January 1, 2014 (unaudited)11,659,219 2,911,527 3,364 14,574,110 Additions (unaudited)35,490 --3,700 39,190 Transfers (unaudited)----(3,364)(3,364)Balance at December 31, 2014 (unaudited)$11,694,709 $2,911,527 $3,700 $14,609,936 124 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In AUS$Plant andEquipmentLeaseholdImprovementsCapital WIPTotalAccumulated depreciationBalance 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)Balance at January 1, 2014 (unaudited)(9,617,998)(1,274,161)--(10,892,159)Depreciation and amortisation (unaudited)(397,853)(112,774)--(510,627)Balance at December 31, 2014 (unaudited)$(10,015,851)$(1,386,935)$--$(11,402,786)In AUS$Plant andEquipmentLeaseholdImprovementsCapital WIPTotalCarrying amountsAt January 1, 2013 (unaudited)$1,370,795 1,626,387 926,689 3,923,871 At December 31, 2013 (unaudited)2,041,221 1,637,366 3,364 3,681,951 At January 1, 2014 (unaudited)2,041,221 1,637,366 3,364 3,681,951 At December 31, 2014 (unaudited)1,678,858 1,524,592 3,700 3,207,150 12. Trade and other payablesIn AUS$Note2014(unaudited)2013(unaudited)Trade payables1,425 221,732 Non-trade payables and accruals631,993 415,100 15$633,418 $636,832 The Joint Venture’s exposure to liquidity risk related to trade and other payables is disclosed in Note15(d), Financial instruments, Liquidity risk. Trade payables represents payments to trade creditors. The Joint Venturemakes these 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$2014(unaudited)2013(unaudited)Liability for annual leave103,004 96,527 Liability for long-service leave81,098 75,969 $184,102 $172,496 Non-currentIn AUS$2014(unaudited)2013(unaudited) 125 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Liability for long-service leave46,676 33,255 $46,676 $33,255 14. Deferred revenueIn AUS$2014(unaudited)2013(unaudited)Deferred revenue141,067 32,297 $141,067 $32,297 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 (unaudited).(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. 126 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. 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 cases bankreferences. Purchase limits are established for each customer. These limits are reviewed periodically. Customers that failto meet the Joint Venture’s benchmark creditworthiness may transact with the Joint Venture 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$Note2014(unaudited)2013(unaudited)Trade receivables9$145,056 $172,293 Cash and cash equivalents8880,026 694,392 The Joint Venture’s maximum exposure to credit risk for trade receivables at the reporting date by type ofcustomer was:Carrying AmountIn AUS$2014(unaudited)2013(unaudited)Screen advertisers64,598 109,310 Credit card companies74,547 56,537 Games, machine and merchandising companies5,911 6,446 $145,056 $172,293 Impairment lossesNone of the Company’s trade receivables are past due (unaudited) (2013: $nil, unaudited). There were noallowances for impairment at 31 December 2014 or 2013.(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 2014 is $633,418 (unaudited) and 2013: $636,832(unaudited).(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 acceptable 127 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. parameters, 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:Variable rate instrumentsCarrying amountIn AUS$2014(unaudited)2013(unaudited)Cash at bank$880,026 $694,392 The Joint Venture held no fixed rate instruments during financial years 2014 or 2013 (unaudited). (f) Fair valuesFair values versus carrying amountsThe fair values of financial assets and liabilities, together with the carrying amounts shown in the statement offinancial position, are as follows:2014(unaudited)2013(unaudited)In AUS$CarryingamountFair valueCarryingamountFair valueTrade receivables$145,056 $145,056 $172,293 $172,293 Cash and cash equivalents880,026 880,026 694,392 694,392 Trade and other payables633,418 633,418 636,830 636,830 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 2014 or 2013 (unaudited).16. Operating leasesLeases as lesseeNon-cancellable operating lease rentals are payable as follows:In AUS$2014(unaudited)2013(unaudited)Less than one year1,277,755 1,277,755 128 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Between one and five years3,780,755 5,083,014 More than five years----Total$5,058,510 $6,360,769 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 (unaudited).The Joint Venture has no capital commitments at 31 December 2014 (unaudited); (2013: $nil) (unaudited). 18. Reconciliation of cash flows from operating activitiesIn AUS$Note2014(unaudited)2013(unaudited)2012Cash flows from operating activitiesProfit for the period1,966,075 3,018,381 3,390,207 Adjustments for:Depreciation and amortisation11510,627 544,271 597,349 Interest received7(8,726)(11,922)(21,256)Operating profit before changes in working capital$2,467,976 $3,550,730 $3,966,300 Change in trade receivables927,237 24,305 (53,110)Change in inventories1047,138 46,464 (19,512)Change in trade and other payables12(3,414)(241,194)220,135 Change in employee benefits1325,027 1,685 17,466 Change in deferred revenue14108,770 4,614 (11,385)Net cash from operating activities$2,672,734 $3,386,604 $4,119,894 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 2014 the management fee payable was $34,458 (unaudited) (2013: $26,040) (unaudited).20. Subsequent events 129 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. Subsequent to 31 December 2014, there were no events which would have a material effect on these financialstatements (unaudited). 130 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 comprehensive income, changes in equity, and cash flows for the year ended December 31, 2012, and therelated 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 audit. We conducted our audit 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 results of Mt. GravattCinemas Joint Venture and its operations and its cash flows for the year ended December 31, 2012, in conformity withInternational Financial Reporting Standards as issued by the International Accounting Standards Board./s/ KPMGSydney, AustraliaMarch 4, 2013 131 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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). 132 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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). 133 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 as Exhibit 10.31 to the Company’s report on Form 10-Kfor the year ended December 31, 2013, and incorporated herein by reference)..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 as Exhibit10.32 to the Company’s report on Form 10-K for the year ended December 31, 2013, and incorporatedherein by reference).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). 134 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. 23.2Consent of Independent Auditors, KPMG (filed herewith).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. 135 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 16, 2015By:/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. CotterPresident, Chief Executive Officer and DirectorMarch 16, 2015James J. Cotter/s/ Andrzej MatyczynskiPrincipal Financial and Accounting OfficerMarch 16, 2015Andrzej Matyczynski/s/ Ellen M. CotterChairman of the Board and DirectorMarch 16, 2015Ellen M. Cotter/s/ Margaret CotterVice Chairman of the Board and DirectorMarch 16, 2015Margaret Cotter/s/ Guy W. AdamsDirectorMarch 16, 2015Guy W. Adams/s/ William D. GouldDirectorMarch 16, 2015William D. Gould/s/ Edward L. KaneDirectorMarch 16, 2015Edward L Kane/s/ Douglas J. McEachernDirectorMarch 16, 2015Douglas J. McEachern/s/ Tim StoreyDirectorMarch 16, 2015Tim Storey 136 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. 137 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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. CotterPresident and Chief Executive Officer March 16, 2015 138 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 16, 2015 139 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 (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. CotterPresident and Chief Executive Officer March 16, 2015 140 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 (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 16, 2015 141 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 Centers, LLC (Delaware)Angelika Film Center Mosaic, LLC (Nevada)Angelika Film Center Union Market, LLC (Nevada)Angelika Film Centers (Dallas), Inc. (Texas)Angelika Film Centers (Plano) LP (Nevada)Angelika Plano Beverage LLC (Texas)Angelika Plano Holdings, LLC (Nevada)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 Limited (New Zealand)Dimension Specialty, Inc. (Delaware)Epping Cinemas Pty Ltd (Australia)Garden Walk Cinema, LLC (Nevada)Gaslamp Theatres, LLC (Nevada)Hope Street Hospitality, LLC (Delaware)Hotel Newmarket Pty Ltd (Australia)Kaahumanu Cinemas, LLC (Nevada)Kahala Cinema Company LLC (Nevada)KMA Cinemas, LLC (Nevada)Liberty Live, LLC (Nevada)Liberty Theaters, LLC (Nevada)Liberty Theatres Properties LLC (Nevada)Liberty Theatricals, LLC (Nevada)Minetta Live, LLC (Nevada)Movieland Cinemas (NZ) Ltd (New Zealand)NZ 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)Queenstown Land Holdings Ltd (New Zealand)RCPA LLC (Pennsylvania) Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.RDI Employee Investment Fund LLC (California)Reading Arthouse Limited (New Zealand)Reading Auburn Pty Ltd (Australia)Reading Australia Leasing (E&R) Pty Ltd (Australia)Reading Belmont Pty Ltd (Australia)Reading Capital Corporation (Delaware)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 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 Restaurants NZ 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) Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.Rialto Entertainment Ltd (New Zealand)Ronwood Investments Ltd (New Zealand)RREC LLC (Pennsylvania)Rydal Equipment Co. (Pennsylvania)S Note Liquidation Company, LLC (Nevada)Sails Apartments Management Ltd (New Zealand)Shadow View Land and Farming, LLC (Nevada)Sutton Hill Properties, LLC (Nevada)The Port Reading Railroad Company (New Jersey)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 17, 2015Powered 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 Firm We have issued our reports dated March 16, 2015, 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, 2014. 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 LLPLos Angeles, CaliforniaMarch 16, 2015 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 AuditorThe Management Committee and Joint VenturersMt. Gravatt Cinemas Joint Venture: We consent to the incorporation by reference in the registration statement No. 333-167101 on Form S-8of Reading International, Inc., of our report dated March 4, 2013 with respect to the statement offinancial position of Mt. Gravatt Cinemas Joint Venture as of December 31, 2012 and the relatedstatements of comprehensive income, changes in equity, and cash flows for the year ended December31, 2012, which report appears in the December 31, 2014, annual report on Form 10-K of ReadingInternational, Inc. KPMG Sydney, Australia March 9, 2015 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 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. CotterPresident and Chief Executive Officer March 16, 2015 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 16, 2015 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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, 2014 (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. CotterPresident and Chief Executive Officer March 16, 2015 Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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.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, 2014 (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 16, 2015Source: READING INTERNATIONAL INC, 10-K, March 17, 2015Powered 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 17, 2015Powered 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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