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. 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 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.


	2017						2016						2015
(Dollars in thousands)	Cinema		Real Estate		Total		Cinema		Real Estate		Total		Cinema		Real Estate		Total
Revenue - Third party	$	263,464	$	16,270	$	279,734	$	256,922	$	13,551	$	270,473	$	242,823	$	15,042	$	257,865
Inter-segment Revenue (1)		--		7,573		7,573		--		7,366		7,366		--		6,537		6,537
Total Segment Revenue		263,464		23,843		287,307		256,922		20,917		277,839		242,823		21,579		264,402
Operating expense
Cost of services and products - Third party		(207,447)		(9,436)		(216,883)		(198,523)		(9,044)		(207,567)		(190,007)		(10,948)		(200,955)
Inter-segment Cost of services (1)		(7,573)		--		(7,573)		(7,366)		--		(7,366)		(6,537)		--		(6,537)
Total of services and products (excluding depreciation and amortization)		(215,020)		(9,436)		(224,456)		(205,889)		(9,044)		(214,933)		(196,544)		(10,948)		(207,492)
Depreciation and amortization		(12,213)		(4,256)		(16,469)		(11,772)		(3,522)		(15,294)		(11,161)		(3,107)		(14,268)
General and administrative expense		(3,261)		(2,140)		(5,401)		(3,763)		(1,422)		(5,185)		(3,000)		(728)		(3,728)
Total operating expense		(230,494)		(15,832)		(246,326)		(221,424)		(13,988)		(235,412)		(210,705)		(14,783)		(225,488)
Segment operating income	$	32,970	$	8,011	$	40,981	$	35,498	$	6,929	$	42,427	$	32,118	$	6,796	$	38,914

(1) Inter-segment Revenues and Cost of services relates to the internal charge between the two segments where the cinema operates within real estate owned within the group.

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


(Dollars in thousands)	2017		2016		2015
Segment operating income	$	40,981	$	42,427	$	38,914
Unallocated corporate expense:
Depreciation and amortization expense		(473)		(395)		(294)
General and administrative expense		(19,947)		(21,721)		(14,924)
Interest expense, net		(6,194)		(6,782)		(7,304)
Equity earnings of unconsolidated joint ventures		815		999		1,204
Gain on sale of assets		9,360		393		11,023
Casualty gain (loss)		9,217		(1,421)		--
Other income (expense)		588		(63)		(440)
Income before income taxes	$	34,347	$	13,437	$	28,179

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, 2017		December 31, 2016
By segment:
Cinema	$	135,184	$	133,057
Real estate		249,245		240,362
Corporate (1)		38,597		32,347
Total assets	$	423,026	$	405,766
By country:
United States	$	188,639	$	161,922
Australia		169,035		170,556
New Zealand		65,352		73,288
Total assets	$	423,026	$	405,766

(1) Corporate Assets includes cash and cash equivalents of $13.7 million and $19.0 million as of December 31, 2017 and 2016, respectively.

The following table sets forth our operating properties by country:


(Dollars in thousands)	December 31, 2017		December 31, 2016
United States	$	89,183	$	75,845
Australia		143,200		103,430
New Zealand		32,341		32,611
Total operating property	$	264,724	$	211,886

The table below summarizes capital expenditures for the three years ended December 31, 2017:


(Dollars in thousands)	2017		2016		2015
Segment capital expenditures	$	76,300	$	49,023	$	52,989
Corporate capital expenditures		408		143		130
Total capital expenditures	$	76,708	$	49,166	$	53,119