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

the development, ownership, operation and/or rental of retail, commercial and live venue real estate assets in Australia, New Zealand, and the United States.

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, Australia 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.



	2018						2017						2016
(Dollars in thousands)	Cinema		Real Estate		Total		Cinema		Real Estate		Total		Cinema		Real Estate		Total
Revenue - Third party	$	294,177	$	15,208	$	309,385	$	263,464	$	16,415	$	279,879	$	256,922	$	13,944	$	270,866
Inter-segment Revenue (1)		—		9,027		9,027		—		7,573		7,573		—		7,366		7,366
Total Segment Revenue		294,177		24,235		318,412		263,464		23,988		287,452		256,922		21,310		278,232
Operating expense
Cost of services and products - Third party		(225,791)		(9,904)		(235,695)		(207,447)		(9,436)		(216,883)		(198,523)		(9,044)		(207,567)
Inter-segment Cost of services (1)		(9,027)		—		(9,027)		(7,573)		—		(7,573)		(7,366)		—		(7,366)
Total of services and products (excluding depreciation and amortization)		(234,818)		(9,904)		(244,722)		(215,020)		(9,436)		(224,456)		(205,889)		(9,044)		(214,933)
Depreciation and amortization		(16,314)		(5,567)		(21,881)		(12,213)		(4,256)		(16,469)		(11,772)		(3,522)		(15,294)
General and administrative expense		(3,724)		(2,326)		(6,050)		(3,261)		(2,140)		(5,401)		(3,763)		(1,422)		(5,185)
Total operating expense		(254,856)		(17,797)		(272,653)		(230,494)		(15,832)		(246,326)		(221,424)		(13,988)		(235,412)
Segment operating income	$	39,321	$	6,438	$	45,759	$	32,970	$	8,156	$	41,126	$	35,498	$	7,322	$	42,820

(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)	2018		2017		2016
Segment operating income	$	45,759	$	41,126	$	42,820
Unallocated corporate expense:
Depreciation and amortization expense		(394)		(473)		(395)
General and administrative expense		(21,287)		(19,947)		(21,721)
Interest expense, net		(6,837)		(6,194)		(6,782)
Equity earnings of unconsolidated joint ventures		974		815		999
(Loss) gain on sale of assets		(41)		9,360		393
Casualty gain (loss)		—		9,217		(1,421)
Other (expense) income		(256)		588		(63)
Income before income taxes	$	17,918	$	34,492	$	13,830

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



	December 31,
(Dollars in thousands)	2018		2017
By segment:
Cinema	$	138,850	$	135,184
Real estate		263,783		249,622
Corporate (1)		36,395		38,597
Total assets	$	439,028	$	423,403
By country:
United States	$	220,777	$	188,639
Australia		156,768		169,412
New Zealand		61,483		65,352
Total assets	$	439,028	$	423,403

(1)

Corporate Assets includes cash and cash equivalents of $13.1 million and $13.7 million as of December 31, 2018 and 2017, respectively.

The following table sets forth our operating properties by country:



	December 31,
(Dollars in thousands)	2018		2017
United States	$	95,710	$	89,183
Australia		132,624		143,200
New Zealand		29,333		32,341
Total operating property	$	257,667	$	264,724

The table below summarizes capital expenditures for the three years ended December 31, 2018:



(Dollars in thousands)	2018		2017		2016
Segment capital expenditures	$	56,795	$	76,300	$	49,023
Corporate capital expenditures		32		408		143
Total capital expenditures	$	56,827	$	76,708	$	49,166