NOTE 1 – Description of Business and Segment Reporting

The Company

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 incorporated in 1999, and, following the consummation of a consolidation transaction on December 31, 2001, is now the owner of the consolidated businesses and assets of Reading Entertainment, Inc. (“RDGE”), Craig Corporation (“CRG”), and Citadel Holding Corporation (“CDL”). 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 the United States, Australia, and New Zealand.

Business Segments

Our business is comprised of two operating segments, as follows: (i) cinema exhibition and (ii) real estate. Each of these segments has discrete and separate financial information and for which operating results are evaluated regularly by our Chief Executive Officer, the chief operating decision-maker of the Company. As part of our real estate segment, 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 business segments. 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.


	2016						2015(2)						2014(2)
(Dollars in thousands)	Cinema		Real Estate		Total		Cinema		Real Estate		Total		Cinema		Real Estate		Total
Revenue	$	256,922	$	20,917	$	277,839	$	242,823	$	21,579	$	264,402	$	238,355	$	24,348	$	262,703
Inter-segment elimination(1)		--		--		(7,366)		--		--		(6,537)		--		--		(7,461)
Total revenue		256,922		20,917		270,473		242,823		21,579		257,865		238,355		24,348		255,242
Operating expense
Cost of services and products (excluding depreciation and amortization)		(205,889)		(9,044)		(214,933)		(196,544)		(10,948)		(207,492)		(195,896)		(9,770)		(205,666)
Inter-segment elimination(1)		--		--		7,366		--		--		6,537		--		--		7,461
Total cost of services and products		(205,889)		(9,044)		(207,567)		(196,544)		(10,948)		(200,955)		(195,896)		(9,770)		(198,205)
Depreciation and amortization		(11,772)		(3,522)		(15,294)		(11,161)		(3,107)		(14,268)		(11,047)		(4,061)		(15,108)
General and administrative expense		(3,763)		(1,422)		(5,185)		(3,000)		(728)		(3,728)		(3,575)		(1,042)		(4,617)
Total operating expense		(221,424)		(13,988)		(228,046)		(210,705)		(14,783)		(218,951)		(210,518)		(14,873)		(217,930)
Segment operating income	$	35,498	$	6,929	$	42,427	$	32,118	$	6,796	$	38,914	$	27,837	$	9,475	$	37,312

(1) Inter-segment eliminations relate to the internal charge between the two segments where the cinema operates within real estate owned within the group.

(2) Balances relating to Cinema segment included the restatement impact as a result of a change in accounting principle (see Note 2 – Summary of Significant Accounting Policies – Accounting Changes).

A reconciliation of segment operating income to income before income taxes is as follows:


(Dollars in thousands)	2016		2015(1)		2014(1)
Segment operating income	$	42,427	$	38,914	$	37,312
Unallocated corporate expense:
Depreciation and amortization expense		(395)		(294)		(360)
General and administrative expense		(21,721)		(14,924)		(14,285)
Interest expense, net		(6,782)		(7,304)		(9,000)
Equity earnings of unconsolidated joint ventures		999		1,204		1,015
Gain on sale of assets		393		11,023		25
Casualty loss		(1,421)		--		--
Other income (expense)		(63)		(440)		1,646
Income before income taxes	$	13,437	$	28,179	$	16,353

(1) 2015 and 2014 balances included the restatement impact as a result of a change in accounting principle (see Note 2 – Summary of Significant Accounting Policies – Accounting Changes).

Assuming cash and cash equivalents are accounted for as corporate assets, total assets by business segment and by country are presented as follows:


(Dollars in thousands)	December 31, 2016		December 31, 2015(2)(3)
By segment:
Cinema	$	133,057	$	106,201
Real estate		240,362		219,497
Corporate (1)		32,347		46,500
Total assets	$	405,766	$	372,198
By country:
United States	$	161,922	$	129,254
Australia		170,556		173,045
New Zealand		73,288		69,899
Total assets	$	405,766	$	372,198

(1) Corporate Assets includes cash and cash equivalents of $19.0 million and $19.7 million as of December 31, 2016 and 2015, respectively.

(2) The balance as of December 31, 2015 included the reclassification adjustment relating to netting of deferred financing costs amounting to $1.8 million, as discussed in Note 2 – Summary of Significant Accounting Policies – Recently Adopted and Issued Accounting Pronouncements.

(3) The balances as of December 31, 2015 included the restatement impact as a result of a change in accounting principle (see Note 2 – Summary of Significant Accounting Policies – Accounting Changes).

The following table sets forth our operating properties by country:


(Dollars in thousands)	December 31, 2016		December 31, 2015
United States	$	75,845	$	66,787
Australia		103,430		106,985
New Zealand		32,611		36,526
Total operating property	$	211,886	$	210,298

The table below summarizes capital expenditures for the three years ended December 31, 2016:


(Dollars in thousands)	2016		2015		2014
Segment capital expenditures	$	49,023	$	52,989	$	14,310
Corporate capital expenditures		143		130		604
Total capital expenditures	$	49,166	$	53,119	$	14,914