e5061712c4e44fd

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________

FORM 10-Q

(Mark One)

þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2013

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 1-8625

$C:\Users\matthew.elmshauser\Pictures\Reading International logo.jpg$

READING INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

95-3885184

(IRS Employer Identification No.)

6100 Center Drive, Suite 900

Los Angeles, CA

(Address of principal executive offices)

90045

(Zip Code)

Registrant’s telephone number, including area code: (213) 235-2240

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ 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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 8, 2013, there were 21,890,029 shares of Class A Nonvoting Common Stock, $0.01 par value per share and 1,495,490 shares of Class B Voting Common Stock, $0.01 par value per share outstanding.

READING INTERNATIONAL, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


	Page
PART I - Financial Information	3
Item 1 – Financial Statements	3
Condensed Consolidated Balance Sheets (Unaudited)	3
Condensed Consolidated Statements of Operations (Unaudited)	4
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	5
Condensed Consolidated Statements of Cash Flows (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3 – Quantitative and Qualitative Disclosure about Market Risk	44
Item 4 – Controls and Procedures	46
PART II – Other Information	47
Item 1 - Legal Proceedings	47
Item 1A - Risk Factors	47
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3 - Defaults Upon Senior Securities	47
Item 5 - Other Information	47
Item 6 - Exhibits	47
SIGNATURES	48
CERTIFICATIONS	49

PART 1 - Financial Information

Item 1 - Financial Statements

Reading International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(U.S. dollars in thousands)



	June 30, 2013		December 31, 2012
ASSETS
Current Assets:
Cash and cash equivalents	$	42,362	$	38,531
Time deposits		--		8,000
Receivables		8,548		8,514
Inventory		810		918
Investment in marketable securities		58		55
Restricted cash		788		2,465
Deferred tax asset		3,324		3,659
Prepaid and other current assets		3,409		3,576
Assets held for sale		11,344		--
Total current assets		70,643		65,718

Operating property, net		184,547		202,778
Investment and development property, net		74,119		94,922
Investment in unconsolidated joint ventures and entities		7,013		7,715
Investment in Reading International Trust I		838		838
Goodwill		21,702		22,898
Intangible assets, net		14,521		15,661
Deferred tax asset, net		6,920		8,989
Other assets		6,661		9,069
Total assets	$	386,964	$	428,588

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	16,309	$	18,909
Film rent payable		9,699		6,657
Notes payable – current portion		79,406		19,714
Notes payable to related party – current portion		--		9,000
Income taxes payable		13,398		15,234
Deferred current revenue		9,383		11,587
Other current liabilities		6,132		6,032
Total current liabilities		134,327		87,133

Notes payable – long-term portion		67,352		139,970
Subordinated debt		27,913		27,913
Noncurrent tax liabilities		8,803		8,859
Other liabilities		31,835		33,759
Total liabilities		270,230		297,634
Commitments and contingencies (Note 13)
Stockholders’ equity:
Class A non-voting common stock, par value $0.01, 100,000,000 shares authorized,
32,241,699 issued and 21,877,529 outstanding at June 30, 2013 and 31,951,945
issued and 21,587,775 outstanding at December 31, 2012		224		223
Class B voting common stock, par value $0.01, 20,000,000 shares authorized and
1,495,490 issued and outstanding at June 30, 2013 and at December 31, 2012		15		15
Nonvoting preferred stock, par value $0.01, 12,000 shares authorized and no issued
or outstanding shares at June 30, 2013 and December 31, 2012		--		--
Additional paid-in capital		136,984		136,754
Accumulated deficit		(63,525)		(66,993)
Treasury shares		(4,512)		(4,512)
Accumulated other comprehensive income		42,913		61,369
Total Reading International, Inc. stockholders’ equity		112,099		126,856
Noncontrolling interests		4,635		4,098
Total stockholders’ equity		116,734		130,954
Total liabilities and stockholders’ equity	$	386,964	$	428,588

See accompanying notes to consolidated financial statements.

Reading International, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(U.S. dollars in thousands, except per share amounts)



		Three Months Ended June 30,				Six Months Ended June 30,
		2013		2012		2013		2012

Operating revenue
Cinema	$	64,659	$	57,988	$	119,429	$	115,390
Real estate		4,983		4,959		9,780		9,988
Total operating revenue		69,642		62,947		129,209		125,378

Operating expense
Cinema		51,095		46,465		97,130		92,798
Real estate		2,730		2,582		5,399		5,326
Depreciation and amortization		3,650		3,917		7,640		8,021
General and administrative		4,401		4,326		8,738		8,746
Total operating expense		61,876		57,290		118,907		114,891

Operating income		7,766		5,657		10,302		10,487

Interest income		199		193		248		393
Interest expense		(2,835)		(5,876)		(5,557)		(9,836)
Net loss on sale of assets		--		(2)		(7)		(2)
Other income		113		68		128		23
Income before income tax expense and equity earnings of unconsolidated joint ventures and entities		5,243		40		5,114		1,065
Income tax expense		(1,500)		(259)		(2,389)		(1,884)
Income (loss) before equity earnings of unconsolidated joint ventures and entities		3,743		(219)		2,725		(819)
Equity earnings of unconsolidated joint ventures and entities		432		399		779		812
Income (loss) before discontinued operations		4,175		180		3,504		(7)
Income from discontinued operations, net of tax		--		44		--		120
Net income	$	4,175	$	224	$	3,504	$	113
Net (income) loss attributable to noncontrolling interests		(40)		15		(36)		(116)
Net income (loss) attributable to Reading International, Inc. common shareholders	$	4,135	$	239	$	3,468	$	(3)

Basic earnings (loss) per common share attributable to Reading International, Inc. shareholders:
Earnings (loss) from continuing operations	$	0.18	$	0.01	$	0.15	$	(0.01)
Earnings from discontinued operations, net		0.00		0.00		0.00		0.01
Basic earnings per share attributable to Reading International, Inc. shareholders	$	0.18	$	0.01	$	0.15	$	0.00

Diluted earnings (loss) per common share attributable to Reading International, Inc. shareholders:
Earnings (loss) from continuing operations	$	0.18	$	0.01	$	0.15	$	(0.01)
Earnings from discontinued operations, net		0.00		0.00		0.00		0.01
Diluted earnings per share attributable to Reading International, Inc. shareholders	$	0.18	$	0.01	$	0.15	$	0.00
Weighted average number of shares outstanding–basic		23,344,057		23,009,209		23,305,466		22,969,392
Weighted average number of shares outstanding–diluted		23,447,250		23,177,815		23,408,659		22,969,392

See accompanying notes to consolidated financial statements.

Reading International, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(U.S. dollars in thousands)



		Three Months Ended June 30,				Six Months Ended June 30,
		2013		2012		2013		2012
Net income	$	4,175	$	224	$	3,504	$	113
Foreign currency translation gain (loss)		(19,874)		(3,206)		(18,863)		789
Realized gain on available for sale investments		--		--		--		(109)
Unrealized gain on available for sale investments		6		3		5		102
Amortization of pension prior service costs		165		76		330		152
Comprehensive loss		(15,528)		(2,903)		(15,024)		1,047
Net (income) loss attributable to noncontrolling interest		(40)		15		(36)		(116)
Comprehensive income attributable to noncontrolling interest		71		9		72		4
Comprehensive loss attributable to Reading International, Inc.	$	(15,497)	$	(2,879)	$	(14,988)	$	935

See accompanying notes to consolidated financial statements.

Reading International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(U.S. dollars in thousands)



		Six Months Ended June 30,
		2013		2012
Operating Activities
Net income	$	3,504	$	113
Adjustments to reconcile net income to net cash provided by operating activities:
Gain (loss) recognized on foreign currency transactions		33		(19)
Equity earnings of unconsolidated joint ventures and entities		(779)		(812)
Distributions of earnings from unconsolidated joint ventures and entities		600		911
Loss on sale of assets		7		2
Change in valuation allowance on net deferred tax assets		1,007		373
Gain on sale of marketable securities		--		(109)
Depreciation and amortization		7,640		8,204
Amortization of prior service costs		330		152
Amortization of above and below market leases		183		204
Amortization of deferred financing costs		563		657
Amortization of straight-line rent		406		395
Stock based compensation expense		130		213
Changes in assets and liabilities:
(Increase) decrease in receivables		(569)		232
(Increase) decrease in prepaid and other assets		(692)		170
Decrease in accounts payable and accrued expenses		(1,600)		(302)
Increase (decrease) in film rent payable		3,492		(222)
Decrease in taxes payable		(2,070)		(1,921)
Decrease in deferred revenue and other liabilities		(2,697)		(1)
Net cash provided by operating activities		9,488		8,240
Investing Activities
Acquisition of property		--		(5,510)
Purchases of and additions to property and equipment		(3,424)		(3,188)
Change in restricted cash		1,657		33
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 entities		59		132
Proceeds from sale of property		--		1,862
Purchase of time deposits		--		(8,000)
Proceeds of time deposits		8,000		--
Net cash provided by (used in) investing activities		8,292		(13,497)
Financing Activities
Repayment of long-term borrowings		(22,097)		(22,510)
Proceeds from borrowings		12,500		15,945
Capitalized borrowing costs		(103)		(445)
Proceeds from the exercise of stock options		200		308
Noncontrolling interest contributions		263		3,275
Noncontrolling interest distributions		(2,016)		--
Net cash used in financing activities		(11,253)		(3,427)
Effect of exchange rate on cash		(2,696)		(235)

Increase (decrease) in cash and cash equivalents		3,831		(8,919)
Cash and cash equivalents at the beginning of the period		38,531		31,597
Cash and cash equivalents at the end of the period	$	42,362	$	22,678
Supplemental Disclosures
Cash paid during the period for:
Interest on borrowings	$	5,981	$	7,912
Income taxes		3,961		3,706
Non-Cash Transactions
Noncontrolling interest contribution in exchange for debt reduction - related party	$	2,250	$	--
Acquisition of noncontrolling interest		101		--
Noncontrolling interest contribution from bonus accrual		--		255

See accompanying notes to consolidated financial statements.

Reading International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Six Months Ended June 30, 2013

Note 1 – Basis of Presentation

Reading International, Inc., a Nevada corporation (“RDI” and collectively with our consolidated subsidiaries and corporate predecessors, the “Company,” “Reading” and “we,” “us,” or “our”), was founded in 1983 as a Delaware corporation and reincorporated in 1999 in Nevada. Our businesses consist primarily of:

·	the development, ownership, and operation of multiplex cinemas in the United States, Australia, and New Zealand; and

·	the development, ownership, and operation of retail and commercial real estate in Australia, New Zealand, and the United States.

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim reporting and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”) for interim reporting. As such, certain information and disclosures typically required by US GAAP for complete financial statements have been condensed or omitted. The financial information presented in this quarterly report on Form 10-Q for the period ended June 30, 2013 (the “June Report”) should be read in conjunction with our Annual Report filed on Form 10-K for the year ended December 31, 2012 (our “2012 Annual Report”) which contains the latest audited financial statements and related notes. The periods presented in this document are the three (“2013 Quarter”) and six (“2013 Six Months”) months ended June 30, 2013 and the three (“2012 Quarter”) and six (“2012 Six Months”) months ended June 30, 2012.

In the opinion of management, all adjustments of a normal recurring nature considered necessary to present fairly in all material respects our financial position as of June 30, 2013 and our results of our operations and cash flows for the three and six months ended June 30, 2013 and 2012 have been made. The results of operations for the three and six months ended June 30, 2013 are not necessarily indicative of the results of operations to be expected for the entire year.

Expiring Debt and Liquidity Requirements

Expiring Long-Term Debt

As indicated in our 2012 Annual Report, the term of our Australian NAB Corporate Term Loan matures on June 30, 2014. Accordingly, the outstanding balance of this debt of $62.3 million (AUS$68.0 million) is classified as current on our June 30, 2013 balance sheet. The Australian NAB Corporate Term Loan is secured by the majority of our theater and entertainment-themed retail center (“ETRC”) properties in Australia.

Additionally, the term of our US Cinema 1, 2, 3 Term Loan matures on June 27, 2014. Accordingly, the outstanding balance of this debt of $15.0 million is classified as current on our June 30, 2013 balance sheet.

We are currently in the process of renegotiating these loans with our current lenders while also seeking possible replacement loans with other lenders. While no assurances can be given that we will be successful, we currently anticipate that these loans will either be extended or replaced prior to their maturities.

Liberty Theatre Term Loans

On May 29, 2013, we replaced our Liberty Theater Term Loan with a loan securitized by our Orpheum and Minetta Lane theaters with a note balance of $7.5 million. For more details on this new loan, see Note 11 – Notes Payable.

Tax Settlement Liability

As indicated in our 2012 Annual Report, in accordance with the agreement between the U.S. Internal Revenue Service and our subsidiary, Craig Corporation, we are obligated to pay $290,000 per month, $3.5 million per year, in settlement of our tax liability for the tax year ended June 30, 1997.

For the abovementioned liabilities, we believe that we have sufficient borrowing capacity under our various credit facilities, together with our $42.4 million of cash and cash equivalents, to meet our anticipated short-term working capital requirements for the next twelve months.

Marketable Securities

We had investments in marketable securities of $58,000 and $55,000 at June 30, 2013 and December 31, 2012, respectively. We account for these investments as available for sale investments. We assess our investment in marketable securities for other-than-temporary impairments in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320-10 for each applicable reporting period. These investments have a cumulative gain of $14,000 included in accumulated other comprehensive income at June 30, 2013. For the three and six months ended June 30, 2013, our net unrealized gain on marketable securities was $6,000 and $5,000, respectively. For the three and six months ended June 30, 2012, our net unrealized gain (loss) on marketable securities was $3,000 and ($7,000), respectively. During the six months ended June 30, 2012, we sold $3.0 million of our marketable securities with a realized gain of $3,000. During the six months ended June 30, 2013, we did not buy or sell any marketable securities.

Deferred Leasing Costs

We amortize direct costs incurred in connection with obtaining tenants over the respective term of the lease on a straight-line basis.

Deferred Financing Costs

We amortize direct costs incurred in connection with obtaining financing over the term of the loan using the effective interest method, or the straight-line method, if the result is not materially different. In addition, interest on loans with increasing interest rates and scheduled principal pre-payments, is also recognized using the effective interest method.

Accounting Pronouncements Adopted During 2013

No new pronouncements were adopted during the six months ended June 30, 2013.

New Accounting Pronouncements

No new pronouncements were made pertaining to our Company’s accounting during the six months ended June 30, 2013.

Note 2 – Equity and Stock Based Compensation

Stock-Based Compensation

During the six months ended June 30, 2013 and 2012, we issued 217,890 and 155,925, respectively, of Class A Nonvoting shares to an executive employee associated with the vesting of his prior years’ stock grants. During the three and six months ended June 30, 2013, we accrued $188,000 and $376,000, respectively, in compensation expense associated with the vesting of executive employee stock grants. During the three and six months ended June 30, 2012, we accrued $238,000 and $476,000, respectively, in compensation expense associated with the vesting of executive employee stock grants.

Employee/Director Stock Option Plan

We have a long-term incentive stock option plan that provides for the grant to eligible employees, directors, and consultants of incentive or nonstatutory options to purchase shares of our Class A Nonvoting Common Stock and Class B Voting Common Stock. Currently we issue options under our 2010 Stock Incentive Plan.

When the Company’s tax deduction from an option exercise exceeds the compensation cost resulting from the option, a tax benefit is created. FASB ASC 718-20 relating to Stock-Based Compensation (“FASB ASC 718-20”), requires that excess tax benefits related to stock option exercises be reflected as financing cash inflows instead of operating cash inflows. For the three and six months ended June 30, 2013 and 2012, there was no impact to the unaudited condensed consolidated statement of cash flows because there were no recognized tax benefits from stock option exercises during these periods.

FASB ASC 718-20 requires companies to estimate forfeitures. Based on our historical experience and the relative market price to strike price of the options, we do not currently estimate any forfeitures of vested or unvested options.

In accordance with FASB ASC 718-20, we estimate the fair value of our options using the Black-Scholes option-pricing model, which takes into account assumptions such as the dividend yield, the risk-free interest rate, the expected stock price volatility, and the expected life of the options. As we intend to retain all earnings, we exclude the dividend yield from the calculation. We expense the estimated grant date fair values of options issued on a straight-line basis over the vesting period.

For the 50,000 and 40,000 options granted during the six months ended June 30, 2013 and 2012, respectively, we estimated the fair value of these options at the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions:



	2013	2012
Stock option exercise price	$5.89	$4.99
Risk-free interest rate	2.260%	1.710%
Expected dividend yield	--	--
Expected option life in years	5	10
Expected volatility	31.89%	31.87%
Weighted average fair value	$1.89	$2.19

Based on the above calculation and prior years’ assumptions, and, in accordance with the FASB ASC 718-20, we recorded compensation expense for the total estimated grant date fair value of $77,000 and $130,000 for the three and six months ended June 30, 2013, respectively, and $89,000 and $169,000 for the three and six months ended June 30, 2012, respectively. At June 30, 2013, the total unrecognized estimated compensation cost related to non-vested stock options granted was $241,000, which we expect to recognize over a weighted average vesting period of 2.16 years. 50,000 options were exercised during the six months ended June 30, 2013 having an intrinsic value of $99,500 for which we received $200,500

of cash and 95,000 options were exercised during the six months ended June 30, 2012 having an intrinsic value of $136,000 for which we received $308,000 of cash. Additionally, 75,000 options were exercised during the six months ended June 30, 2013 having an intrinsic value of $124,000 for which we did not receive any cash but the employee elected to exchange 53,136 personally owned shares of the company at a market price of $5.66 per share for the 75,000 shares based on an exercise price of $4.01 for the related options. The intrinsic, unrealized value of all options outstanding, vested and expected to vest, at June 30, 2013 was $372,000 of which 92.8% are currently exercisable.

Pursuant to both our 1999 Stock Option Plan and our 2010 Stock Incentive Plan, all stock options expire within ten years of their grant date. The aggregate total number of shares of Class A Nonvoting Common Stock and Class B Voting Common Stock authorized for issuance under our 2010 Stock Incentive Plan is 1,250,000. At the discretion of our Compensation and Stock Options Committee, the vesting period of stock options is usually between zero and four years.

We had the following stock options outstanding and exercisable as of June 30, 2013 and December 31, 2012:



			Weighted							Weighted Average
	Common Stock		Average Exercise				Common Stock			Price of
	Options		Price of Options				Exercisable			Exercisable
	Outstanding		Outstanding				Options			Options
	Class A	Class B	Class A		Class B		Class A	Class B	Class A		Class B
Outstanding - January 1, 2012	622,350	185,100	$	5.65	$	9.90	544,383	167,550	$	5.86	$	10.05
Granted	206,000	--	$	5.94	$	--
Exercised	(136,000)	--	$	4.68	$	--
Expired	(20,000)	--	$	3.75	$	--
Outstanding - December 31, 2012	672,350	185,100	$	6.24	$	9.90	546,350	185,100	$	6.26	$	9.90
Granted	50,000	--	$	5.89	$	--
Exercised	(125,000)	--	$	4.01	$	--
Outstanding - June 30, 2013	597,350	185,100	$	6.67	$	9.90	471,350	185,100	$	6.81	$	9.90

The weighted average remaining contractual life of all options outstanding, vested, and expected to vest at June 30, 2013 and December 31, 2012 was approximately 5.19 and 5.32 years, respectively. The weighted average remaining contractual life of the exercisable options outstanding at June 30, 2013 and December 31, 2012 was approximately 3.99 and 4.28 years, respectively.

Note 3 – Business Segments

We organize our operations into two reportable business segments within the meaning of FASB ASC 280-10 - Segment Reporting. Our reportable segments are (1) cinema exhibition and (2) real estate. The cinema exhibition segment is engaged in the development, ownership, and operation of multiplex cinemas. The real estate segment is engaged in the development, ownership, and operation of commercial properties. Incident to our real estate operations we have acquired, and continue to hold, raw land in urban and suburban centers in Australia, New Zealand, and the United States.

The tables below summarize the results of operations for each of our principal business segments for the three and six months ended June 30, 2013 and 2012, respectively. Operating expense includes costs associated with the day-to-day operations of the cinemas and the management of rental properties including our live theater assets (dollars in thousands):



Three Months Ended June 30, 2013	Cinema Exhibition		Real Estate		Intersegment Eliminations		Total
Revenue	$	64,659	$	6,896	$	(1,913)	$	69,642
Operating expense		53,008		2,730		(1,913)		53,825
Depreciation and amortization		2,525		1,015		--		3,540
General and administrative expense		801		214		--		1,015
Segment operating income	$	8,325	$	2,937	$	--	$	11,262

Three Months Ended June 30, 2012	Cinema Exhibition		Real Estate		Intersegment Eliminations		Total
Revenue	$	57,988	$	6,841	$	(1,882)	$	62,947
Operating expense		48,347		2,582		(1,882)		49,047
Depreciation and amortization		2,733		1,087		--		3,820
General and administrative expense		782		146		--		928
Segment operating income	$	6,126	$	3,026	$	--	$	9,152



Reconciliation to net income attributable to Reading International, Inc. shareholders:		2013 Quarter		2012 Quarter
Total segment operating income	$	11,262	$	9,152
Non-segment:
Depreciation and amortization expense		110		97
General and administrative expense		3,386		3,398
Operating income		7,766		5,657
Interest expense, net		(2,636)		(5,683)
Other income		113		68
Loss on sale of assets		--		(2)
Income tax expense		(1,500)		(259)
Equity earnings of unconsolidated joint ventures and entities		432		399
Income from discontinued operations		--		44
Net income	$	4,175	$	224
Net (income) loss attributable to noncontrolling interests		(40)		15
Net income attributable to Reading International, Inc. common shareholders	$	4,135	$	239



Six Months Ended June 30, 2013	Cinema Exhibition		Real Estate		Intersegment Eliminations		Total
Revenue	$	119,429	$	13,606	$	(3,826)	$	129,209
Operating expense		100,956		5,399		(3,826)		102,529
Depreciation and amortization		5,285		2,134		--		7,419
General and administrative expense		1,571		334		--		1,905
Segment operating income	$	11,617	$	5,739	$	--	$	17,356

Six Months Ended June 30, 2012	Cinema Exhibition		Real Estate		Intersegment Eliminations		Total
Revenue	$	115,390	$	13,753	$	(3,765)	$	125,378
Operating expense		96,563		5,326		(3,765)		98,124
Depreciation and amortization		5,563		2,222		--		7,785
General and administrative expense		1,484		325		--		1,809
Segment operating income	$	11,780	$	5,880	$	--	$	17,660



Reconciliation to net income attributable		2013 Six		2012 Six
to Reading International, Inc. shareholders:		Months		Months
Total segment operating income	$	17,356	$	17,660
Non-segment:
Depreciation and amortization expense		221		236
General and administrative expense		6,833		6,937
Operating income		10,302		10,487
Interest expense, net		(5,309)		(9,443)
Other income		128		23
Loss on sale of assets		(7)		(2)
Income tax expense		(2,389)		(1,884)
Equity earnings of unconsolidated joint ventures and entities		779		812
Income from discontinued operations		--		120
Net income	$	3,504	$	113
Net income attributable to noncontrolling interests		(36)		(116)
Net income (loss) attributable to Reading International, Inc. common shareholders	$	3,468	$	(3)

Note 4 – Operations in Foreign Currency

We have significant assets in Australia and New Zealand. To the extent possible, we conduct our Australian and New Zealand operations on a self-funding basis. The carrying value of our Australian and New Zealand assets and liabilities fluctuate due to changes in the exchange rates between the U.S. dollar and the functional currency of Australia (Australian dollar) and New Zealand (New Zealand dollar). We have no derivative financial instruments to hedge against the risk of foreign currency exposure.

Presented in the table below are the currency exchange rates for Australia and New Zealand as of June 30, 2013 and December 31, 2012:



	U.S. Dollar
	June 30, 2013	December 31, 2012
Australian Dollar	0.9165	1.0393
New Zealand Dollar	0.7755	0.8267

Note 5 – Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to Reading International, Inc. common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing the net income (loss) attributable to Reading International, Inc. common shareholders by the weighted average number of common shares outstanding during the period after giving effect to all potentially dilutive common shares that would have been outstanding if the dilutive common shares had been issued. Stock options and non-vested stock awards give rise to potentially dilutive common shares. In accordance with FASB ASC 260-10 - Earnings Per Share, these shares are included in the diluted earnings per share calculation under the treasury stock method. The following is a calculation of earnings (loss) per share (dollars in thousands, except share data):



		Three Months Ended June 30,				Six Months Ended June 30,
		2013		2012		2013		2012
Net income (loss) from continuing operations	$	4,135	$	195	$	3,468	$	(123)
Income from discontinued operations		--		44		--		120
Net income (loss) attributable to Reading International, Inc. common shareholders		4,135		239		3,468		(3)
Basic earnings (loss) per common share attributable to Reading International, Inc. shareholders:
Earnings (loss) from continuing operations	$	0.18	$	0.01	$	0.15	$	(0.01)
Earnings from discontinued operations, net		0.00		0.00		0.00		0.01
Basic earnings per share attributable to Reading International, Inc. shareholders	$	0.18	$	0.01	$	0.15	$	0.00
Diluted earnings (loss) per common share attributable to Reading International, Inc. shareholders:
Earnings (loss) from continuing operations	$	0.18	$	0.01	$	0.15	$	(0.01)
Earnings from discontinued operations, net		0.00		0.00		0.00		0.01
Diluted earnings per share attributable to Reading International, Inc. shareholders	$	0.18	$	0.01	$	0.15	$	0.00
Weighted average shares of common stock – basic		23,344,057		23,009,209		23,305,466		22,969,392
Weighted average shares of common stock – diluted		23,447,250		23,177,815		23,408,659		22,969,392

For the three and six months ended June 30, 2013, the weighted average common stock – diluted included 103,193 of common stock compensation and in-the-money incremental stock options and for the three months ended June 30, 2012, the weighted average common stock – diluted included 168,606 of common stock compensation and in-the-money incremental stock options. For the six months ended June 30, 2012, we recorded losses from continuing operations; therefore, we excluded 168,606 of in-the-money incremental stock options from the computation of diluted loss per share because they were anti-dilutive. In addition, 741,861 of out-of-the-money stock options were excluded from the computation of diluted earnings (loss) per share for the three and six months ended June 30, 2013, and 692,789 of out-of-the-money stock options were excluded from the computation of diluted earnings (loss) per share for the three and six months ended June 30, 2012.

Note 6 – Property and Equipment

Acquisitions

Coachella, California Land Acquisition

On January 10, 2012, Shadow View Land and Farming, LLC, a limited liability company owned by our Company, acquired a 202-acre property, zoned for the development of up to 843 single-family residential units, located in the City of Coachella, California. The property was acquired at a foreclosure auction for $5.5 million which currently has a net carrying value of $4.0 million. The property was acquired as a long-term investment in developable land. Half of the funds used to acquire the land were provided by Mr. James J. Cotter, our Chairman, Chief Executive Officer and controlling shareholder. Upon the approval of our Conflicts Committee, these funds were converted on January 18, 2012 into a 50% interest in Shadow View Land and Farming, LLC. We are the managing member of this company.

Disposals

Indooroopilly Sale

On November 20, 2012, we sold our Indooroopilly property for $12.4 million (AUS$12.0 million). This property’s operational results are included in income (loss) from discontinued operations on our Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012. The condensed statement of operations for Indooroopilly is as follows (dollars in thousands):



		Three Months Ended June 30,				Six Months Ended June 30,
		2013		2012		2013		2012
Revenue	$	--	$	196	$	--	$	418
Less: operating expense		--		152		--		298
Income (loss) from discontinued operations, net of tax	$	--	$	44	$	--	$	120

Taringa Sale

On February 21, 2012, we sold our three properties in the Taringa area of Brisbane, Australia consisting of approximately 1.1 acres for $1.9 million (AUS$1.8 million).

Property Held for Sale – Moonee Ponds

In May 2013, we announced our intent to sell and began actively marketing our 3.3-acre Moonee Pond property in Australia. The current carrying value of this property on our books is $11.3 million (AUS$12.4 million) which has been reclassified from property held for development to land held for sale on our June 30, 2013 condensed consolidated balance sheet.

Operating Property

As of June 30, 2013 and December 31, 2012, property associated with our operating activities is summarized as follows (dollars in thousands):



Operating property		June 30, 2013		December 31, 2012
Land	$	65,582	$	69,370
Building and improvements		124,507		136,225
Leasehold interests		43,762		45,391
Fixtures and equipment		101,806		108,169
Total cost		335,657		359,155
Less: accumulated depreciation		(151,110)		(156,377)
Operating property, net	$	184,547	$	202,778

Depreciation expense for property and equipment was $3.5 million and $7.1 million for the three and six months ended June 30, 2013, respectively, and $4.0 million and $7.5 million for the three and six months ended June 30, 2012, respectively.

Investment and Development Property

As of June 30, 2013 and December 31, 2012, our investment and development property is summarized as follows (dollars in thousands):



Investment and Development Property		June 30, 2013		December 31, 2012
Land	$	59,869	$	77,020
Construction-in-progress (including capitalized interest)		14,250		17,902
Investment and development property	$	74,119	$	94,922

At the beginning of 2010, we curtailed the development activities of our properties under development and are not currently capitalizing interest expense. As a result, we did not capitalize any interest during the three and six months ended June 30, 2013 or 2012.

Note 7 – Investments in Unconsolidated Joint Ventures and Entities

Our investments in unconsolidated joint ventures and entities are accounted for under the equity method of accounting except for Rialto Distribution, which is accounted for as a cost method investment, and, as of June 30, 2013 and December 31, 2012, included the following (dollars in thousands):



	Interest		June 30, 2013		December 31, 2012
Rialto Distribution	33.3%	$	--	$	--
Rialto Cinemas	50.0%		1,528		1,561
205-209 East 57^th Street Associates, LLC	25.0%		--		60
Mt. Gravatt	33.3%		5,485		6,094
Total investments		$	7,013	$	7,715

For the three and six months ended June 30, 2013 and 2012, we recorded our share of equity earnings from our investments in unconsolidated joint ventures and entities as follows (dollars in thousands):



		Three Months Ended June 30,				Six Months Ended June 30,
		2013		2012		2013		2012
Rialto Distribution	$	20	$	51	$	41	$	112
Rialto Cinemas		40		26		68		57
205-209 East 57^th Street Associates, LLC		--		--		(1)		--
Mt. Gravatt		372		322		671		643
Total equity earnings	$	432	$	399	$	779	$	812

Note 8 – Goodwill and Intangible Assets

In accordance with FASB ASC 350-20-35, Goodwill - Subsequent Measurement and Impairment, we perform an annual impairment review in the fourth quarter of our goodwill and other intangible assets on a reporting unit basis, or earlier if changes in circumstances indicate an asset may be impaired. No such circumstances existed during the 2013 Quarter. As of June 30, 2013 and December 31, 2012, we had goodwill consisting of the following (dollars in thousands):



		Cinema		Real Estate		Total
Balance as of December 31, 2012	$	17,674	$	5,224	$	22,898
Foreign currency translation adjustment		(1,196)		--		(1,196)
Balance at June 30, 2013	$	16,478	$	5,224	$	21,702

We have intangible assets other than goodwill that are subject to amortization, which we amortize over various periods. We amortize our beneficial leases over the lease period, the longest of which is 30 years; our trade name using an accelerated amortization method over its estimated useful life of 45 years; and our other intangible assets over 10 years. For the three and six months ended June 30, 2013, the amortization expense of intangibles totaled $457,000 and $1.0 million, respectively, and, for the three and six months ended June 30, 2012, the amortization expense of intangibles totaled $572,000 and $1.2 million, respectively. The accumulated amortization of intangibles includes $517,000 and $540,000 of the amortization of acquired leases which are recorded in operating expense for the six months ended June 30, 2013 and 2012, respectively.

Intangible assets subject to amortization consist of the following (dollars in thousands):



As of June 30, 2013		Beneficial Leases		Trade name		Other Intangible Assets		Total
Gross carrying amount	$	24,185	$	7,254	$	453	$	31,892
Less: Accumulated amortization		13,631		3,288		452		17,371
Total, net	$	10,554	$	3,966	$	1	$	14,521

As of December 31, 2012		Beneficial Leases		Trade name		Other Intangible Assets		Total
Gross carrying amount	$	24,284	$	7,254	$	458	$	31,996
Less: Accumulated amortization		12,873		3,059		403		16,335
Total, net	$	11,411	$	4,195	$	55	$	15,661