UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2022

OR

¨ 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

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 Number)
189 Second Avenue, Suite 2S New York, New York (Address of principal executive offices)	10003 (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Nonvoting Common Stock, $0.01 par value	RDI	NASDAQ
Class B Voting Common Stock, $0.01 par value	RDIB	NASDAQ

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 12 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 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, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer  þ Smaller Reporting Company þ Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 November 8, 2022, there were 20,363,234 shares of Class A Nonvoting Common Stock, $0.01 par value per share and 1,680,590 shares of Class B Voting Common Stock, $0.01 par value per share outstanding.
‎

1

READING INTERNATIONAL, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

	Page
PART I - Financial Information	3
Item 1 – Financial Statements	3
Consolidated Balance Sheets (Unaudited)	3
Consolidated Statements of Income (Unaudited)	4
Consolidated Statements of Comprehensive Income (Unaudited)	5
Consolidated Statements of Cash Flows (Unaudited)	6
Notes to Consolidated Financial Statements (Unaudited)	8
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3 – Quantitative and Qualitative Disclosure about Market Risk	47
Item 4 – Controls and Procedures	49
PART II – Other Information	50
Item 1 – Legal Proceedings	50
Item 1A – Risk Factors	50
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3 – Defaults Upon Senior Securities	50
Item 4 – Mine Safety Disclosure	50
Item 5 – Other Information	50
Item 6 – Exhibits	51
SIGNATURES	52
Certifications

‎

2

PART 1 – FINANCIAL INFORMATION

Item 1 - Financial Statements

READING INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share information)

	September 30,		December 31,
	2022		2021
ASSETS	(unaudited)
Current Assets:
Cash and cash equivalents	$	39,628	$	83,251
Restricted cash		6,222		5,320
Receivables		4,601		5,360
Inventories		1,355		1,408
Derivative financial instruments - current portion		1,318		96
Prepaid and other current assets		5,567		4,871
Total current assets		58,691		100,306
Operating property, net		281,910		306,657
Operating lease right-of-use assets		200,396		227,367
Investment and development property, net		7,853		9,570
Investment in unconsolidated joint ventures		4,352		4,993
Goodwill		24,131		26,758
Intangible assets, net		2,548		3,258
Deferred tax asset, net		2,316		2,220
Derivative financial instruments - non-current portion		21		112
Other assets		7,500		6,461
Total assets	$	589,718	$	687,702
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	38,497	$	39,678
Film rent payable		2,803		7,053
Debt - current portion		57,207		11,349
Subordinated debt - current portion		738		711
Derivative financial instruments - current portion		—		181
Taxes payable - current		2,038		10,655
Deferred revenue		7,958		9,996
Operating lease liabilities - current portion		22,950		23,737
Other current liabilities		6,717		3,619
Total current liabilities		138,908		106,979
Debt - long-term portion		132,345		195,198
Subordinated debt, net		26,894		26,728
Noncurrent tax liabilities		6,286		7,467
Operating lease liabilities - non-current portion		200,855		223,364
Other liabilities		15,196		22,906
Total liabilities	$	520,484	$	582,642
Commitments and contingencies (Note 14)
Stockholders’ equity:
Class A non-voting common shares, par value $0.01, 100,000,000 shares authorized,
33,299,344 issued and 20,363,234 outstanding at September 30, 2022 and
33,198,500 issued and 20,262,390 outstanding at December 31, 2021		234		233
Class B voting common shares, par value $0.01, 20,000,000 shares authorized and
1,680,590 issued and outstanding at September 30, 2022 and December 31, 2021		17		17
Nonvoting preferred shares, par value $0.01, 12,000 shares authorized and no issued
or outstanding shares at September 30, 2022 and December 31, 2021		—		—
Additional paid-in capital		153,275		151,981
Retained earnings/(deficits)		(35,599)		(12,632)
Treasury shares		(40,407)		(40,407)
Accumulated other comprehensive income		(8,979)		4,882
Total Reading International, Inc. stockholders’ equity		68,541		104,074
Noncontrolling interests		693		986
Total stockholders’ equity		69,234		105,060
Total liabilities and stockholders’ equity	$	589,718	$	687,702

See accompanying Notes to the Unaudited Consolidated Financial Statements.

3

READING INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; U.S. dollars in thousands, except per share data)

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenue
Cinema	$	48,359	$	28,751	$	147,476	$	79,580
Real estate		2,837		3,052		8,432		9,562
Total revenue		51,196		31,803		155,908		89,142
Costs and expenses
Cinema		(45,308)		(29,237)		(134,579)		(82,485)
Real estate		(2,352)		(2,683)		(6,715)		(7,902)
Depreciation and amortization		(5,010)		(5,560)		(15,781)		(17,011)
Impairment expense		—		—		(1,549)		—
General and administrative		(5,257)		(5,274)		(17,364)		(19,205)
Total costs and expenses		(57,927)		(42,754)		(175,988)		(126,603)
Operating income (loss)		(6,731)		(10,951)		(20,080)		(37,461)
Interest expense, net		(3,693)		(3,068)		(10,242)		(10,437)
Gain (loss) on sale of assets		(59)		2,559		(59)		92,345
Other income (expense)		5,455		440		8,445		2,236
Income (loss) before income tax expense and equity earnings of unconsolidated joint ventures		(5,028)		(11,020)		(21,936)		46,683
Equity earnings of unconsolidated joint ventures		61		(75)		233		158
Income (loss) before income taxes		(4,967)		(11,095)		(21,703)		46,841
Income tax benefit (expense)		(332)		895		(1,492)		(12,380)
Net income (loss)	$	(5,299)	$	(10,200)	$	(23,195)	$	34,461
Less: net income (loss) attributable to noncontrolling interests		(122)		(105)		(228)		2,889
Net income (loss) attributable to Reading International, Inc.	$	(5,177)	$	(10,095)	$	(22,967)	$	31,572
Basic earnings (loss) per share	$	(0.23)	$	(0.46)	$	(1.04)	$	1.45
Diluted earnings (loss) per share	$	(0.23)	$	(0.46)	$	(1.04)	$	1.41
Weighted average number of shares outstanding–basic		22,043,823		21,809,402		22,011,755		21,792,007
Weighted average number of shares outstanding–diluted		22,043,823		21,809,402		22,011,755		22,462,657

See accompanying Notes to the Unaudited Consolidated Financial Statements. 

4

READING INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; U.S. dollars in thousands)

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income (loss)	$	(5,299)	$	(10,200)	$	(23,195)	$	34,461
Foreign currency translation gain (loss)		(8,279)		(4,138)		(15,268)		(8,494)
Gain (loss) on cash flow hedges		60		57		1,253		173
Other		49		52		154		155
Comprehensive income (loss)		(13,469)		(14,229)		(37,057)		26,295
Less: net income (loss) attributable to noncontrolling interests		(122)		(105)		(228)		2,889
Less: comprehensive income (loss) attributable to noncontrolling interests		(3)		—		(1)		—
Comprehensive income (loss)	$	(13,344)		(14,124)	$	(36,828)	$	23,406

See accompanying Notes to the Unaudited Consolidated Financial Statements. 

‎

5

READING INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; U.S. dollars in thousands)

	Nine Months Ended
	September 30,
	2022		2021
Operating Activities
Net income (loss)	$	(23,195)	$	34,461
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity earnings of unconsolidated joint ventures		(233)		(158)
Distributions of earnings from unconsolidated joint ventures		283		—
(Gain) loss recognized on foreign currency transactions		(5,952)		(1,915)
Loss provision on impairment of asset		1,549		—
(Gain) Loss on sale of assets		59		(92,345)
Amortization of operating leases		17,342		17,473
Amortization of finance leases		30		37
Change in operating lease liabilities		(17,560)		(16,305)
Purchase of derivative instruments		(86)		—
Change in net deferred tax assets		(370)		(1,570)
Depreciation and amortization		15,781		17,011
Other amortization		1,225		965
Stock based compensation expense		1,379		1,521
Net changes in operating assets and liabilities:
Receivables		2,536		52
Prepaid and other assets		(1,768)		2,272
Payments for accrued pension		(513)		(513)
Accounts payable and accrued expenses		(2,333)		8,395
Film rent payable		(4,014)		(710)
Taxes payable		(8,131)		20,507
Deferred revenue and other liabilities		(2,143)		(6,938)
Net cash provided by (used in) operating activities		(26,114)		(17,760)
Investing Activities
Purchases of and additions to operating and investment properties		(6,387)		(11,511)
Contributions to unconsolidated joint ventures		(32)		—
Proceeds from sale of assets		—		145,165
Net cash provided by (used in) investing activities		(6,419)		133,654
Financing Activities
Repayment of borrowings		(7,535)		(79,357)
Repayment of finance lease principal		(32)		(37)
Proceeds from borrowings		—		45,337
Capitalized borrowing costs		(236)		(1,481)
(Cash paid) proceeds from the settlement of employee share transactions		(83)		(116)
Noncontrolling interest contributions		4		—
Noncontrolling interest distributions		(64)		(5,300)
Net cash provided by (used in) financing activities		(7,946)		(40,954)
Effect of exchange rate on cash and restricted cash		(2,242)		(4,732)
Net increase (decrease) in cash and cash equivalents and restricted cash		(42,721)		70,208
Cash and cash equivalents and restricted cash at the beginning of the year		88,571		26,834
Cash and cash equivalents and restricted cash at the end of the year	$	45,850	$	97,042
Cash and cash equivalents and restricted cash consists of:
Cash and cash equivalents	$	39,628	$	90,887
Restricted cash		6,222		6,155
	$	45,850	$	97,042
Supplemental Disclosures
Interest paid	$	9,082	$	9,677
Income taxes (refunded) paid		9,636		(6,265)
Non-Cash Transactions
Additions to operating and investing properties through accrued expenses		2,961		1,889

See accompanying Notes to the Unaudited Consolidated Financial Statements. 

6

READING INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 – Description of Business and Segment Reporting

Our 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, owned and operated through our various subsidiaries, consist primarily of:

the development, ownership, and operation of 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

Reported below are the operating segments of our Company for which separate financial information is available and evaluated regularly by the Chief Executive Officer, the chief operating decision-maker of our Company. As part of our real estate activities, we have historically held undeveloped land in urban and suburban centers in the United States, Australia, and New Zealand. However, in 2021, we monetized certain raw landholdings and other real estate assets as detailed at Note 6 – Property and Equipment.

The table below summarizes the results of operations for each of our business segments for the quarter and nine months ended September 30, 2022, and 2021, respectively. Operating expense includes costs associated with the day-to-day operations of the cinemas and the management of rental properties, including our live theatre assets.

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
Revenue:
Cinema exhibition	$	48,359	$	28,751	$	147,476	$	79,580
Real estate		4,070		3,177		12,265		9,948
Inter-segment elimination		(1,232)		(125)		(3,833)		(386)
	$	51,197	$	31,803	$	155,908	$	89,142
Segment operating income (loss):
Cinema exhibition	$	(2,137)	$	(5,057)	$	(5,902)	$	(20,680)
Real estate		(145)		(1,485)		(125)		(3,907)
	$	(2,282)	$	(6,542)	$	(6,027)	$	(24,587)

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

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
Segment operating income (loss)	$	(2,282)	$	(6,542)	$	(6,027)	$	(24,587)
Unallocated corporate expense
Depreciation and amortization expense		(258)		(300)		(804)		(917)
General and administrative expense		(4,190)		(4,109)		(13,249)		(11,957)
Interest expense, net		(3,694)		(3,068)		(10,242)		(10,437)
Equity earnings of unconsolidated joint ventures		61		(75)		233		158
Gain (loss) on sale of assets		(59)		2,559		(59)		92,345
Other income (expense)		5,455		440		8,445		2,236
Income (loss) before income tax expense	$	(4,967)	$	(11,095)	$	(21,703)	$	46,841

‎

7

Note 2 – Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of our Company’s wholly-owned subsidiaries as well as majority-owned subsidiaries that our Company controls, and should be read in conjunction with our Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2021 (“2021 Form 10-K”). All significant intercompany balances and transactions have been eliminated on consolidation. These consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”). As such, they do not include all information and footnotes required by U.S. GAAP for complete financial statements. We believe that we have included all normal and recurring adjustments necessary for a fair presentation of the results for the interim period.

Operating results for the quarter and nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes thereto. Significant estimates include (i) projections we make regarding the recoverability and impairment of our assets (including goodwill and intangibles), (ii) valuations of our derivative instruments, (iii) recoverability of our deferred tax assets, (iv) estimation of breakage and redemption experience rates, which drive how we recognize breakage on our gift card and gift certificates, and revenue from our customer loyalty program, and (v) estimation of our Incremental Borrowing Rate (“IBR”) as relates to the valuation of our right-of-use assets and lease liabilities. Actual results may differ from those estimates.

New Accounting Standards and Accounting Changes

1)On December 15, 2021, we early adopted ASU 2021-10, Government Assistance: Disclosures by Business Entities about Government Assistance (Topic 832). This ASU applies to transactions with a government that are accounted for by analogizing to accounting standards such as International Accounting Standard 20 - Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”), which we adopted in the second quarter of 2020 in order to account for the receipt of certain government grants in Australia and New Zealand. The early adoption of the ASU has no material effect on our consolidated financial statements.

8

Note 3 – Impact of COVID-19 Pandemic and Liquidity

Continuing Operational Impact

The novel coronavirus, COVID-19, has progressed through several variants since its emergence in 2019. The current variant affecting the jurisdictions in which we do business is the Omicron variant, and as at the date of this report, a new subvariant of Omicron is emerging. Due to the Omicron variant appearing to be less severe than prior variants, and with vaccination programs substantially advanced, federal, state and local governments throughout the United States, Australia, New Zealand have largely lifted restrictions and returned to pre-COVID activities. There can be no assurances, however, that there will be no further variants of COVID-19 which could reverse the current trend.

Liquidity Impact

We believe that reticence to engage in outside the home activities, caused by the risk of contracting COVID-19, is abating. Top Gun: Maverick’s performance in the second quarter of 2022 demonstrated that patrons are willing to return to the movie theaters, if there is quality film product on offer. A lack of consistent, good quality film product is now the key cause of our Company’s revenues and earnings for the quarter ended September 30, 2022 being lower than those of pre-COVID-19. In addition to movie product, further pressures, including higher film rents and competition from streaming simply may be part of the competitive landscape going forward and will become, for us and our competitors, simply a cost of doing business. For these reasons, we cannot provide any assurances as to the nature or pace of a return of our cinema operations to prior operating levels.

Going Concern

We continue to evaluate the going concern assertion required by ASC 205-40 Going Concern as it relates to our Company. Management’s evaluation is informed by current liquidity positions, cashflow estimates, known capital and other expenditure requirements and commitments and management’s current business plan and strategies. Our forecasts and cash flow estimates are based on the current expectation that the global cinema industry will continue to recover in 2022 and 2023. Forecasts are by their nature inherently uncertain, and the effects of COVID-19 and its aftermath continue to cause greater forecasting difficulties than would otherwise exist in more stable economic times. While we are seeing substantial evidence of recovery, our forecasts regarding the cinema portion of our business rely upon the ability and desire of moviegoers to return to the movie theatres. Many factors influencing this are outside of management’s control, but are, nevertheless, material, individually and in the aggregate, to the realization of management’s forecasts and expectations. Regardless, we believe that our current financial position, forecasts and cash flow estimates based on our current expectations of industry performance and recovery, mean that our Company has sufficient resources to meet its obligations as they become due within one year after the issuance of this Report.

Impairment Considerations

Our Company considers that the events and factors described above constitute impairment indicators under ASC 360 Property, Plant and Equipment. At December 31, 2021, our Company performed a quantitative recoverability test of the carrying values of all its asset groups. Our Company estimated the undiscounted future cash flows expected to result from the use of these asset groups. No impairment charges were recorded for the year ending December 31, 2021. For the quarter and six months ended June 30, 2022, while our financial performance improved, certain sites had not improved commensurate with the wider group performance, and as such were no longer expected to be able to recover their asset group values. As a result, we reassessed these sites under our impairment testing methodology and determined that a $1.5 million impairment charge against these sites was necessary. No further impairment charges were deemed necessary for the quarter September 30, 2022. Actual performance against our forecasts is dependent on several variables and conditions, many of which are subject to the uncertainties associated with COVID-19 and as a result, actual results may materially differ from management’s estimates.

Our Company also considers that the events and factors described above constitute impairment indicators under ASC 350 Intangibles – Goodwill and Other. Our Company performed a quantitative goodwill impairment test and determined that its goodwill was not impaired as of December 31, 2021. The test was performed at a reporting unit level by comparing each reporting unit’s carrying value, including goodwill, to its fair value. The fair value of each reporting unit was assessed using a discounted cash flow model based on the budgetary revisions performed by management in response to COVID-19 and the developing market conditions. Given the improvements in trading conditions during 2021 and through the nine months of 2022, no impairment of goodwill has been recognized for the quarter ended September 30, 2022. The causes of the impairment of certain cinema assets do not materially impact our goodwill assessment. Actual performance against our forecasts is dependent on several variables and conditions, many of which are subject to the uncertainties associated with COVID-19 and as a result, actual results may materially differ from management’s estimates.

Note 4 – Operations in Foreign Currency

We have significant assets in Australia and New Zealand. Historically, we have conducted our Australian and New Zealand operations (collectively “foreign operations”) on a self-funding basis, where we use cash flows generated by our foreign operations to pay for the expenses of those foreign operations. Our Australian and New Zealand assets and liabilities are translated from their functional

9

currencies of Australian dollar (“AU$”) and New Zealand dollar (“NZ$”), respectively, to the U.S. dollar based on the exchange rate as of September 30, 2022. The carrying value of the assets and liabilities of our foreign operations fluctuates as a result of changes in the exchange rates between the functional currencies of the foreign operations and the U.S. dollar. The translation adjustments are accumulated in the Accumulated Other Comprehensive Income in the Consolidated Balance Sheets.

Due to the natural-hedge nature of our funding policy, we have not historically used derivative financial instruments to hedge against the risk of foreign currency exposure. We take a global view of our financial resources and are flexible in making use of resources from one jurisdiction in other jurisdictions.

Presented in the table below are the currency exchange rates for Australia and New Zealand:

	Foreign Currency / USD
	As of and ‎for the ‎quarter ‎ended	As of and for the nine months ended	As of and ‎for the ‎twelve months ‎ended	As of and ‎for the ‎quarter ‎ended	As of and for the nine months ended
	September 30, 2022		December 31, 2021	September 30, 2021
Spot Rate
Australian Dollar	0.6437		0.7260	0.7228
New Zealand Dollar	0.5642		0.6839	0.6899
Average Rate
Australian Dollar	0.6829	0.7071	0.7517	0.7344	0.7592
New Zealand Dollar	0.6127	0.6463	0.7077	0.7004	0.7117

Note 5 – Earnings Per Share

Basic earnings per share (“EPS”) is calculated by dividing the net income attributable to our Company by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated by dividing the net income attributable to our Company by the weighted average number of common and common equivalent shares outstanding during the period and is calculated using the treasury stock method for equity-based compensation awards.

The following table sets forth the computation of basic and diluted EPS and a reconciliation of the weighted average number of common and common equivalent shares outstanding:

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands, except share data)	2022		2021		2022		2021
Numerator:
Net income (loss) attributable to Reading International, Inc.	$	(5,177)		(10,095)	$	(22,967)	$	31,572
Denominator:
Weighted average number of common stock – basic		22,043,823		21,809,402		22,011,755		21,792,007
Weighted average dilutive impact of awards		—		—		—		670,650
Weighted average number of common stock – diluted		22,043,823		21,809,402		22,011,755		22,462,657
Basic earnings (loss) per share	$	(0.23)		(0.46)	$	(1.04)	$	1.45
Diluted earnings (loss) per share	$	(0.23)		(0.46)	$	(1.04)	$	1.41
Awards excluded from diluted earnings (loss) per share		911,732		492,344		911,732		517,344

Our weighted average number of common stock - basic increased, primarily as a result of the vesting of restricted stock units. During the first nine months of 2022 and 2021, we did not repurchase any shares of Class A Common Stock.

Certain shares issuable under stock options and restricted stock units were excluded from the computation of diluted net income (loss) per share in periods when their effect was anti-dilutive; either because our Company incurred a net loss for the period, or the exercise price of the options was greater than the average market price of the common stock during the period, or the effect was anti-dilutive as a result of applying the treasury stock method.

10

Note 6 – Property and Equipment

Operating Property, net

As of September 30, 2022, and December 31, 2021, property associated with our operating activities is summarized as follows:

	September 30,		December 31,
(Dollars in thousands)	2022		2021
Land	$	65,400	$	69,459
Building and improvements		205,901		219,580
Leasehold improvements		62,267		58,349
Fixtures and equipment		186,362		202,837
Construction-in-progress		6,347		5,395
Total cost		526,277		555,620
Less: accumulated depreciation		(244,367)		(248,963)
Operating property, net	$	281,910	$	306,657

Depreciation expense for operating property was $4.9 million and $15.5 million for the quarter and nine months ended September 30, 2022, and $5.1 million and $16.4 million for the quarter and nine months ended September 30, 2021.

Investment and Development Property, net

As of September 30, 2022, and December 31, 2021, our investment and development property is summarized below:

	September 30,		December 31,
(Dollars in thousands)	2022		2021
Land	$	3,431	$	4,193
Construction-in-progress (including capitalized interest)		4,422		5,377
Investment and development property	$	7,853	$	9,570

Construction-in-Progress – Operating and Investing Properties

Construction-in-Progress balances are included in both our operating and development properties. The balances of our major projects along with the movements for the nine months ended September 30, 2022, are shown below:

(Dollars in thousands)	Balance, ‎December 31, ‎2021		Additions during the period		Completed ‎during the ‎period		Foreign ‎currency ‎translation		Balance, September 30, 2022
Courtenay Central development		6,918		276		(268)		(1,217)		5,709
Cinema developments and improvements		2,942		2,807		(2,915)		(145)		2,689
Other real estate projects		912		1,986		(443)		(84)		2,371
Total	$	10,772	$	5,069	$	(3,626)	$	(1,446)	$	10,769

11

Real Estate Transactions - Sales

Beginning in 2020, we reviewed our various real estate holdings in light of the fact that our cash flow from cinema operations had been adversely affected by the governmentally mandated cinema closings ordered in response to the COVID-19 pandemic. As a result, for the foreseeable future, other sources of cash would be needed to support our operations and only very limited funds would be available for capital investment in our properties. Between the fourth quarter of 2020 and the second quarter of 2021, we classified as assets held for sale disposal groups and thereafter monetized the following real estate assets: The Auburn/Redyard Entertainment Themed Center (“ETC”) and ancillary land, the Royal George Theatre, Coachella (land), and Manukau (land). In addition, in the third quarter of 2021, we monetized our Invercargill, New Zealand, property, comprised of a cinema and ancillary land. A ‘disposal group’ represents assets to be disposed of in a single transaction. A disposal group may represent a single asset, or multiple assets. Each of these transactions is discussed separately below.

Auburn/Redyard, New South Wales

In January 2021, we classified our Auburn/Redyard ETC as held for sale, reflecting the fact that approximately 2.6 acres of this property was non-income producing land. This disposal group, which consists of land, the ETC building and related property, plant and equipment, was transferred to Land and Property Held for Sale at its book value of $30.2 million (AU$39.1 million), being the lower of cost and fair value less costs to sell. No adjustments to the book value of the assets contained within this disposal group were required.

The sale of Auburn/Redyard was completed on June 9, 2021, for $69.6 million (AU$90.0 million). As part of the transaction, we entered into a lease with the purchaser for the cinema portion of the Auburn/Redyard site.

The gain on sale of this property is calculated as follows:

	June 30
(Dollars in thousands)	2021
Sales price	$	69,579
Net book value		(30,231)
Gain on sale, gross of direct costs		39,348
Direct sale costs incurred		(622)
Gain on sale, net of direct costs	$	38,726

Manukau, New Zealand

In December 2020, we classified our non-income producing land at Manukau, New Zealand, as held for sale. This disposal group, which consists of land and certain improvements to that land, was transferred to Land Held for Sale at its book value of $13.6 million, being the lower of cost and fair value less costs to sell. No adjustments to the book value of this asset were required. The sale of this land was completed on March 4, 2021, for $56.1 million (NZ$77.2 million).

The gain on sale of this property is calculated as follows:

	March 31,
(Dollars in thousands)	2021
Sales price	$	56,058
Net book value		(13,618)
Gain on sale, gross of direct costs		42,440
Direct sale costs incurred		(1,514)
Gain on sale, net of direct costs	$	40,926

12

Coachella, California

In December 2020, we classified the non-income producing land at Coachella (held through Shadow View Land and Farming LLC) as held for sale. This disposal group, which consists of land and certain improvements to that land, was transferred to Land and Property Held for Sale at its book value of $4.4 million, being the lower of cost and fair value less costs to sell. No adjustments to the book value of this asset were required. The sale of this land was completed on March 5, 2021 for $11.0 million. As a 50% member in Shadow View Land and Farming LLC, our Company received the benefit of 50% of the sale proceeds, being $5.3 million. As the other 50% member was related to our controlling stockholder, these actions were approved by our Audit and Conflicts Committee.

The gain on sale of this property, including both our interests and those of the other 50% owner of Shadow View Land and Farming, LLC, is calculated as follows:

	March 31,
(Dollars in thousands)	2021
Sales price	$	11,000
Net book value		(4,351)
Gain on sale, gross of direct costs		6,649
Direct sale costs incurred		(301)
Gain on sale, net of direct costs	$	6,348

Royal George Theatre, Chicago

In February 2021, we classified our Royal George Theatre as held for sale as part of our strategy to monetize certain real estate assets. This disposal group, which consists of the Royal George Theatre building and the associated property, plant and equipment, was transferred to Land and Property Held for Sale at its book value of $1.8 million, being the lower of cost and fair value less costs to sell. No adjustments to the book value of the assets contained within this disposal group were required. On June 30, 2021, we received net sale proceeds of $6.8 million (net of closing costs).

The gain on sale of this property is calculated as follows:

	June 30
(Dollars in thousands)	2021
Sales price	$	7,075
Net book value		(1,824)
Gain on sale, gross of direct costs		5,251
Direct sale costs incurred		(295)
Gain on sale, net of direct costs	$	4,956

Invercargill, New Zealand

On August 30, 2021, we sold our cinema building and land in Invercargill for $3.8 million (NZ$5.4 million) to the owner of the adjacent property, which is currently undergoing a major redevelopment. This property, not then classified as held for sale, was monetized in a transaction whereby the purchaser leased back the Reading Cinema to our Company.

The gain on sale on this property is calculated as follows:

	September 30
(Dollars in thousands)	2021
Sales price	$	3,803
Net book value		(1,425)
Gain on sale, gross of direct costs		2,378
Direct sale costs incurred		(6)
Gain on sale, net of direct costs	$	2,372

13

Real Estate Transactions - Acquisitions

Exercise of Option to Acquire Ground Lessee’s Interest in Ground Lease and Improvements Constituting the Village East Cinema

On August 28, 2019, we exercised our option to acquire the ground lessee’s interest in the then 13-year ground lease underlying and the real property assets constituting our Village East Cinema in Manhattan. The purchase price under the option was $5.9 million. It was initially agreed that the transaction would close on or about May 31, 2021. On March 29, 2021, we extended the closing date to January 1, 2023. On November 4, 2022, we extended the closing date of this transaction to July 1, 2024.

Note 7 – Investments in Unconsolidated Joint Ventures

Our investments in unconsolidated joint ventures are accounted for under the equity method of accounting.

The table below summarizes our active investment holdings in two (2) unconsolidated joint ventures as of September 30, 2022, and December 31, 2021:

		September 30,		December 31,
(Dollars in thousands)	Interest	2022		2021
Rialto Cinemas	50.0%	$	810	$	1,017
Mt. Gravatt	33.3%		3,542		3,976
Total investments		$	4,352	$	4,993

For the quarter and nine months ended September 30, 2022 and 2021, the recognized share of equity earnings from our investments in unconsolidated joint ventures are as follows:

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
Rialto Cinemas	$	(15)	$	(49)	$	(68)	$	2
Mt. Gravatt		76		(26)		301		156
Total equity earnings	$	61	$	(75)	$	233	$	158

Note 8 – Goodwill and Intangible Assets

The table below summarizes goodwill by business segment as of September 30, 2022, and December 31, 2021.

(Dollars in thousands)	Cinema		Real Estate		Total
Balance at December 31, 2021	$	21,534	$	5,224	$	26,758
Foreign currency translation adjustment		(2,627)		—		(2,627)
Balance at September 30, 2022	$	18,907	$	5,224	$	24,131

Our Company is required to test goodwill and other intangible assets for impairment on an annual basis and, if current events or circumstances require, on an interim basis. Our next annual evaluation of goodwill and other intangible assets is scheduled during the fourth quarter of 2022. To test the impairment of goodwill, our Company compares the fair value of each reporting unit to its carrying amount, including the goodwill, to determine if there is potential goodwill impairment. A reporting unit is generally one level below the operating segment. As of September 30, 2022, we were not aware that any events indicating potential impairment of goodwill had occurred outside of those described at Note 3 – Impact of COVID-19 Pandemic and Liquidity.

The tables below summarize intangible assets other than goodwill, as of September 30, 2022, and December 31, 2021, respectively.

	As of September 30, 2022
(Dollars in thousands)	Beneficial ‎Leases		Trade ‎Name		Other ‎Intangible ‎Assets		Total
Gross carrying amount	$	12,122	$	9,059	$	4,838	$	26,019
Less: Accumulated amortization		(11,852)		(7,795)		(3,784)		(23,431)
Less: Impairments		—		—		(40)		(40)
Net intangible assets other than goodwill	$	270	$	1,264	$	1,014	$	2,548

14

	As of December 31, 2021
(Dollars in thousands)	Beneficial ‎Leases		Trade ‎Name		Other ‎Intangible ‎Assets		Total
Gross carrying amount	$	12,335	$	9,058	$	4,996	$	26,389
Less: Accumulated amortization		(12,002)		(7,660)		(3,452)		(23,114)
Less: Impairments		—		—		(17)		(17)
Net intangible assets other than goodwill	$	333	$	1,398	$	1,527	$	3,258

Beneficial leases obtained in business combinations where we are the landlord are amortized over the life of the relevant leases. Trade names are amortized based on the accelerated amortization method over their estimated useful life of 30 years, and other intangible assets are amortized over their estimated useful lives of up to 30 years (except for transferrable liquor licenses, which are indefinite-lived assets). The table below summarizes the amortization expense of intangible assets for the quarter and nine months ended September 30, 2022

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
Beneficial lease amortization	$	21	$	28	$	65	$	87
Other amortization		286		262		397		518
Total intangible assets amortization	$	307	$	290	$	461	$	605

Note 9 – Prepaid and Other Assets

Prepaid and other assets are summarized as follows:

	September 30,		December 31,
(Dollars in thousands)	2022		2021
Prepaid and other current assets
Prepaid expenses	$	2,359	$	1,185
Prepaid taxes		1,667		1,929
Income taxes receivable		61		52
Prepaid rent		1,226		1,438
Deposits		236		244
Investments in marketable securities		18		23
Total prepaid and other current assets	$	5,567	$	4,871
Other non-current assets
Other non-cinema and non-rental real estate assets		1,134		1,134
Investment in Reading International Trust I		838		838
Straight-line rent asset		5,520		4,477
Long-term deposits		8		12
Total other non-current assets	$	7,500	$	6,461

Note 10 – Income Taxes

The interim provision for income taxes is different from the amount determined by applying the U.S. federal statutory rate to consolidated income or loss before taxes.  The differences are attributable to foreign tax rate differential, unrecognized tax benefits, and change in valuation allowance. Our tax rate effective was (6.9%) and 26.4% for the nine months ended September 30, 2022 and 2021, respectively.  The difference is primarily due to the increase in valuation allowance and unrecognized tax benefits as well as a decrease in Global Intangible Low-Taxed Income ("GILTI") tax in 2022.  The forecasted effective tax rate is updated each quarter as new information becomes available.

‎

15

Note 11 – Borrowings

Our Company’s borrowings at September 30, 2022 and December 31, 2021, net of deferred financing costs and including the impact of interest rate derivatives on effective interest rates, are summarized below:

	As of September 30, 2022
(Dollars in thousands)	Maturity Date	Contractual ‎Facility		Balance, ‎Gross		Balance, ‎Net(1)		Stated ‎Interest Rate	Effective ‎Interest ‎Rate
Denominated in USD
Trust Preferred Securities (US)	April 30, 2027	$	27,913	$	27,913	$	26,894	6.78%	6.78%
Bank of America Credit Facility (US)	March 6, 2023		34,500		34,500		34,445	8.75%	8.75%
Cinemas 1, 2, 3 Term Loan (US)	April 1, 2023		22,583		22,583		22,266	4.25%	4.25%
Minetta & Orpheum Theatres Loan (US)(2)	November 1, 2023		8,000		8,000		7,968	3.11%	5.15%
U.S. Corporate Office Term Loan (US)	January 1, 2027		8,741		8,741		8,677	4.64% / 4.44%	4.61%
Union Square Financing (US)(3)	May 6, 2024		55,000		43,000		42,360	9.91%	7.40%
Purchase Money Promissory Note (US)	September 18, 2024		1,514		1,514		1,514	5.00%	5.00%
Denominated in foreign currency ("FC") (4)
NAB Corporate Term Loan (AU)	December 31, 2023		65,336		65,336		65,251	4.51%	4.51%
Westpac Bank Corporate (NZ)	January 1, 2024		7,809		7,809		7,809	5.70%	5.70%
		$	231,396	$	219,396	$	217,184

(1)Net of deferred financing costs amounting to $2.2 million.

(2)The interest rate derivative associated with the Minetta & Orpheum loan provides for an effective fixed rate of 5.15%.

(3)The interest rate derivative associated with the Union Square loan provides for a maximum effective rate of 7.40%.

(4)The contractual facilities and outstanding balances of the foreign currency denominated borrowings were translated into U.S. dollars based on the applicable exchange rates as of September 30, 2022.

	As of December 31, 2021
(Dollars in thousands)	Maturity Date	Contractual ‎Facility		Balance, ‎Gross		Balance, ‎Net(1)		Stated ‎Interest ‎Rate	Effective ‎Interest ‎Rate
Denominated in USD
Trust Preferred Securities (US)	April 30, 2027	$	27,913	$	27,913	$	26,728	4.13%	4.13%
Bank of America Credit Facility (US)	March 6, 2023		39,500		39,500		39,364	5.75%	5.75%
Cinemas 1, 2, 3 Term Loan (US)	April 1, 2022		24,039		24,039		23,680	4.25%	4.25%
Minetta & Orpheum Theatres Loan (US)(2)	November 1, 2023		8,000		8,000		7,944	2.14%	5.15%
U.S. Corporate Office Term Loan (US)	January 1, 2027		8,936		8,936		8,860	4.64% / 4.44%	4.64%
Union Square Financing (US)(3)	May 6, 2024		55,000		43,000		42,002	7.00%	7.00%
Purchase Money Promissory Note (US)	September 18, 2024		2,043		2,043		2,043	5.00%	5.00%
Denominated in foreign currency ("FC") (4)
NAB Corporate Term Loan (AU)	December 31, 2023		74,052		74,052		73,900	1.82%	1.82%
Westpac Bank Corporate (NZ)	January 1, 2024		9,465		9,465		9,465	3.45%	3.45%
Total		$	248,948	$	236,948	$	233,986

(1)Net of deferred financing costs amounting to $3.0 million.

(2)The interest rate derivative associated with the Minetta & Orpheum loan provides for an effective fixed rate of 5.15%.

(3)The interest rate derivative associated with the Union Square loan provides for an effective fixed rate of 7.00%.

(4)The contractual facilities and outstanding balances of the foreign currency denominated borrowings were translated into U.S. dollars based on the applicable exchange rates as of December 31, 2021.

Our loan arrangements are presented, net of the deferred financing costs, on the face of our consolidated balance sheet as follows:

	September 30,		December 31,
Balance Sheet Caption (Dollars in thousands)	2022		2021
Debt - current portion	$	57,207	$	11,349
Debt - long-term portion		132,345		195,198
Subordinated debt - current portion		738		711
Subordinated debt - long-term portion		26,894		26,728
Total borrowings	$	217,184	$	233,986

Bank of America Credit Facility

Our $55.0 million credit facility with Bank of America matures on March 6, 2023. The interest rate on borrowings under this facility is fixed at 3.0% above the “Eurodollar” rate, which itself has a floor of 1.0%.

16

On November 8, 2021, and effective in Q4 of 2021, Bank of America replaced all of our covenants with a single liquidity test and converted the line of credit into a term loan with scheduled repayments.

Minetta and Orpheum Theatres Loan

On October 12, 2018, we refinanced our $7.5 million loan with Santander Bank, which is secured by our Minetta and Orpheum Theatres, with a loan for a five year term of $8.0 million. Such modification was not considered to be substantial under U.S. GAAP.

U.S. Corporate Office Term Loan

On December 13, 2016, we obtained a ten year $8.4 million mortgage loan on our Culver City building at a fixed annual interest rate of 4.64%. This loan provided for a second loan upon completion of certain improvements. On June 26, 2017, we obtained a further $1.5 million under this provision at a fixed annual interest rate of 4.44%.

Cinemas 1,2,3 Term Loan

On March 13, 2020, Sutton Hill Properties LLC (“SHP”), a 75% subsidiary of RDI, refinanced its $20.0 million term loan with Valley National Bank with a new term loan of $25.0 million, an interest rate of 4.25%, and maturity date of April 1, 2022, with two six month options to extend. We executed the first extension option on March 3, 2022, and the second extension option on September 1, 2022, taking the maturity to April 1, 2023. We have no remaining extension options.

Union Square Financing

On May 7, 2021, we closed on a new three-year $55.0 million loan facility with Emerald Creek Capital secured by our 44 Union Square property and certain limited guarantees. The facility bears a variable interest rate of one month LIBOR plus 6.9% with a floor of 7.0 % and includes provisions for a prepaid interest and property tax reserve fund. The loan has two 12-month options to extend, and may be repaid at any time, without the payment of any premium.

Purchase Money Promissory Note

On September 18, 2019, we purchased for $5.5 million 407,000 shares of our Class A Common Stock in a privately negotiated transaction under our Share Repurchase Program. Of this amount, $3.5 million was paid by the issuance of a Purchase Money Promissory Note, which bears an interest rate of 5.0% per annum, payable in equal quarterly payments of principal plus accrued interest. The Purchase Money Promissory Note matures on September 18, 2024.

Westpac Bank Corporate Credit Facility (NZ)

Our Westpac Corporate Credit Facility for NZ$13.8 million matures on January 1, 2024. The facility currently carries an interest rate and line of credit charge of 2.40% above the Bank Bill Bid Rate and 1.65% respectively.

Westpac has waived the requirement to test certain covenants for each quarter since the third quarter of 2020, including the third quarter of 2022. Our third quarter waiver also removes the requirement to test certain covenants up to and including the first quarter of 2023, with testing resuming for the second quarter of 2023. Certain covenant ratios were also adjusted.

Australian NAB Corporate Term Loan (AU)

Our Revolving Corporate Markets Loan Facility with National Australia Bank (“NAB”) matures on December 31, 2023. It currently consists of (i) a AU$100.0 million Corporate Loan facility at 1.75% above BBSY with a due date of December 31, 2023, of which AU$60.0 million is revolving and AU$40.0 million is core, (ii) a Bank Guarantee Facility of AU$5.0 million at a rate of 1.85% per annum and (iii) a further AU$3.0 million of core debt added in December 2020, relating to the funding of our cinema at Jindalee, Queensland, which is repayable in semi-annual installments of AU$500,000, the first installment being April 30, 2021, until fully repaid on October 31, 2023.

On November 2, 2021, NAB modified our Fixed Charge Cover Ratio and Leverage Ratio covenants, reducing the measurement requirements and in some instances removing the requirement to test.

17

Note 12 – Other Liabilities

Other liabilities are summarized as follows:

	September 30,		December 31,
(Dollars in thousands)	2022		2021
Current liabilities
Lease liability	$	5,900	$	—
Liability for demolition costs		—		2,783
Accrued pension		684		684
Security deposit payable		67		69
Finance lease liabilities		33		40
Other		33		43
Other current liabilities	$	6,717	$	3,619
Other liabilities
Lease make-good provision		7,367		7,766
Accrued pension		3,257		3,605
Deferred rent liability		2,901		3,930
Environmental reserve		1,656		1,656
Lease liability		—		5,900
Acquired leases		12		21
Finance lease liabilities		3		28
Other non-current liabilities	$	15,196	$	22,906

Pension Liability – Supplemental Executive Retirement Plan

On August 29, 2014, the Supplemental Executive Retirement Plan (“SERP”) that has been effective since March 1, 2007, was ended and replaced in accordance with the terms of a pension annuity. As a result of the termination of the SERP program, the accrued pension liability of $7.6 million was reversed and replaced with this pension annuity liability of $7.5 million. The valuation of the liability is based on the present value of $10.2 million discounted at a rate of 4.25% over a 15-year term, resulting in a monthly payment of $57,000. The discounted value of $2.7 million (which is the difference between the estimated payout of $10.2 million and the present value of $7.5 million) as of August 29, 2014, will be amortized and expensed based on the 15-year term. In addition, the accumulated actuarial loss of $3.1 million recorded, as part of other comprehensive income will also be amortized based on the 15-year term.

In February 2018, we made a payment of $2.4 million relating to the annuity representing payments for the 42 months outstanding at the time. Monthly ongoing payments of $57,000 are now being made.

As a result of the above, included in our current and non-current liabilities are accrued pension costs of $3.9 million at September 30, 2022. The benefits of our pension plan are fully vested and therefore no service costs were recognized for the nine months ended September 30, 2022, and 2021. Our pension plan is unfunded.

During the quarter and nine months ended September 30, 2022, the interest cost was $53,000, and $165,000, respectively, and the actuarial loss was $52,000 and $155,000, respectively. During the quarter and nine months ended September 30, 2021, the interest cost was $59,000 and $182,000, respectively, and the actuarial loss was $52,000 and $156,000, respectively.

18

Note 13 – Accumulated Other Comprehensive Income

The following table summarizes the changes in each component of accumulated other comprehensive income attributable to RDI:

(Dollars in thousands)	Foreign ‎Currency ‎Items		Unrealized ‎Gain (Losses) ‎on Available- ‎for-Sale ‎Investments		Accrued ‎Pension ‎Service Costs		Hedge ‎Accounting ‎Reserve		Total
Balance at January 1, 2022	$	6,842	$	(14)	$	(1,969)	$	23	$	4,882
Change related to derivatives
Total change in hedge fair value recorded in Other Comprehensive Income		—		—		—		1,457		1,457
Amounts reclassified from accumulated other comprehensive income		—		—		—		(204)		(204)
Net change related to derivatives		—		—		—		1,253		1,253
Net current-period other comprehensive income (loss)		(15,268)		(1)		155		1,253		(13,861)
Balance at September 30, 2022	$	(8,426)	$	(15)	$	(1,814)	$	1,276	$	(8,979)

Note 14 – Commitments and Contingencies

Litigation General

Insofar as our Company is aware, there are no claims, arbitration proceedings, or litigation proceedings that constitute material contingent liabilities of our Company. Such matters require significant judgments based on the facts known to us. These judgments are inherently uncertain and can change significantly when additional facts become known. We provide accruals for matters that have probable likelihood of occurrence and can be properly estimated as to their expected negative outcome. We do not record expected gains until the proceeds are received by us. However, we typically make no accruals for potential costs of defense, as such amounts are inherently uncertain and dependent upon the scope, extent and aggressiveness of the activities of the applicable plaintiff.

Discussed below are certain litigation matters which, however, have been significant to our Company.

Litigation Matters

We are currently involved in certain legal proceedings and, as required, have accrued estimates of probable and estimable losses for the resolution of these claims, including legal costs.

Where we are the plaintiffs, we accrue legal fees as incurred on an on-going basis and make no provision for any potential settlement amounts until received. In Australia, the prevailing party is usually entitled to recover its attorneys’ fees, which recoveries typically work out to be approximately 60% of the amounts actually spent where first-class legal counsel is engaged at customary rates. Where we are a plaintiff, we have likewise made no provision for the liability for the defendant’s attorneys’ fees in the event we are determined not to be the prevailing party.

Where we are the defendants, we accrue for probable damages that insurance may not cover as they become known and can be reasonably estimated, as permitted under ASC 450-20 Loss Contingencies. In our opinion, any claims and litigation in which we are currently involved are not reasonably likely to have a material adverse effect on our business, results of operations, financial position, or liquidity. It is possible, however, that future results of the operations for any particular quarterly or annual period could be materially affected by the ultimate outcome of the legal proceedings. From time to time, we are involved with claims and lawsuits arising in the ordinary course of our business that may include contractual obligations, insurance claims, tax claims, employment matters, and anti-trust issues, among other matters.

19

Environmental and Asbestos Claims on Reading Legacy Operations

Certain of our subsidiaries were historically involved in railroad operations, coal mining, and manufacturing. Also, certain of these subsidiaries appear in the chain-of-title of properties that may suffer from pollution. Accordingly, certain of these subsidiaries have, from time to time, been named in and may in the future be named in various actions brought under applicable environmental laws. Also, we are in the real estate development business and may encounter from time to time environmental conditions at properties that we have acquired for development and which will need to be addressed in the future as part of the development process. These environmental conditions can increase the cost of such projects and adversely affect the value and potential for profit of such projects. We do not currently believe that our exposure under applicable environmental laws is material in amount.

From time to time, there are claims brought against us relating to the exposure of former employees to asbestos and/or coal dust. These are generally covered by an insurance settlement reached in September 1990 with our insurance providers. However, this insurance settlement does not cover litigation by people who were not employees of our historic railroad operations and who may claim direct or second-hand exposure to asbestos, coal dust and/or other chemicals or elements now recognized as potentially causing cancer in humans. Our known exposure to these types of claims, asserted or probable of being asserted, is not material.

California Employment Litigation

Our Company is currently a defendant in certain California employment matters which include substantially overlapping wage and hour claims relating to our California cinema operations as described below. Taylor Brown, individually, and on behalf of other members of the general public similarly situated vs. Reading Cinemas et al. Superior Court of the State of California for the County of Kern, Case No. BCV-19-1000390 (“Brown v. RC,” and the “Brown Class Action Complaint”) was initially filed in December 2018, as an individual action and refiled as a putative class action in February 2019, but not served until June 24, 2019. Peter M. Wagner, Jr., an individual, vs. Consolidated Entertainment, Inc. et al., Superior Court of the State of California for the County of San Diego, Case NO. 37-2019-00030695-CU-WT-CTL (“Wagner v. CEI,” and the “Wagner Individual Complaint”) was filed as a discrimination and retaliation lawsuit in June 2019. The following month, in July 2019, a notice was served on us by separate counsel for Mr. Wagner under the California Private Attorney General Act of 2004 (Cal. Labor Code Section 2698, et seq) (the “Wagner PAGA Claim”) purportedly asserting in a representational capacity claims under the PAGA statute, overlapping, in substantial part, the allegations set forth in the Brown Class Action Complaint. On March 6, 2020, Wagner filed a purported class action in the Superior Court of California, County of San Diego, again covering basically the same allegations as set forth in the Brown Class Action Complaint, and titled Peter M. Wagner, an individual, on behalf of himself and all others similarly situated vs. Reading International, Inc., Consolidated Entertainment, Inc. and Does 1 through 25, Case No. 37-2020-000127-CU-OE-CTL (the “Wagner Class Action” and the “Wagner Class Action Complaint”). Following mediation, the Wagner Individual Complaint was settled, and final judgment entered on February 10, 2021, at what we believe to have been its nuisance value.

On July 13, 2021, following a mediation, the parties agreed to settle the claims set forth in the remaining lawsuits (specifically, the Brown Class Action Complaint, the Wagner PAGA Claim and the Wagner Class Action Complaint) for the Company’s payment of $4.0 million (the “Settlement Amount”).   The final settlement agreement has been executed and delivered by the parties, but remains contingent upon final court approval.  No date has yet been set for that hearing. The Settlement Amount is to be paid in two installments, one-half within 30 days of final court approval and the balance nine-months thereafter.   A court hearing on the settlement is not expected prior to the fourth quarter of 2022. We accrued the Settlement Amount in 2021 as a cinema segment administrative expense.

General Distributors Limited v. Reading Wellington Properties Arbitration

On June 18, 2021, General Distributors Limited (“GDL”), an owner and operator of supermarkets in New Zealand, filed an arbitration statement of claim (the “Statement of Claim”) in Auckland, New Zealand, against our wholly owned subsidiary, Reading Wellington Properties, Limited (“RWPL”), relating to the enforceability of an Agreement to Lease (the “ATL”) entered into between the parties in February 2013, contemplating the construction by RWPL and the lease by GDL of a supermarket in Wellington, New Zealand on property owned by RWPL. Effective August 26, 2022, this matter was resolved by the parties’ written settlement agreement to the effect that the ATL has terminated and is at an end and that any and all rights or claims arising under or in respect of the ATL have lapsed or are, by such settlement, waived and abandoned, including any and all right or claims against the any of our Company’s properties in Wellington, New Zealand. No amounts in settlement were paid by either party, and each party bore its own legal costs and expenses. The cost of the arbitrator were shared equally by the parties. The matter is now at an end.

20

Note 15 – Non-controlling Interests

These are composed of the following enterprises:

Australia Country Cinemas Pty Ltd. - 25% noncontrolling interest owned by Panorama Group International Pty Ltd.:

Shadow View Land and Farming, LLC - 50% noncontrolling membership interest owned by the estate of Mr. James J. Cotter, Sr. (the “Cotter Estate”); and,

Sutton Hill Properties, LLC - 25% noncontrolling interest owned by Sutton Hill Capital, LLC (which in turn is 50% owned by the Cotter Estate).

The components of noncontrolling interests are as follows:

	September 30,		December 31,
(Dollars in thousands)	2022		2021
Australian Country Cinemas, Pty Ltd	$	54	$	48
Shadow View Land and Farming, LLC		(3)		(4)
Sutton Hill Properties, LLC		642		942
Noncontrolling interests in consolidated subsidiaries	$	693	$	986

The components of income attributable to noncontrolling interests are as follows:

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
Australian Country Cinemas, Pty Ltd	$	15	$	6	$	76	$	48
Shadow View Land and Farming, LLC		(3)		—		(4)		3,166
Sutton Hill Properties, LLC		(134)		(111)		(300)		(325)
Net income (loss) attributable to noncontrolling interests	$	(122)	$	(105)	$	(228)	$	2,889

On March 5, 2021, Shadow View Land and Farming, LLC, sold its only asset, being certain land holdings in Coachella, California, for $11.0 million and is currently in the process of winding up and liquidating. See Note 6.

Summary of Controlling and Noncontrolling Stockholders’ Equity

A summary of the changes in controlling and noncontrolling stockholders’ equity is as follows:

	Common Stock								Retained				Accumulated		Reading
	Class A	Class A		Class B	Class B		Additional		Earnings				Other		International Inc.				Total
	Non-Voting	Par		Voting	Par		Paid-In		(Accumulated		Treasury		Comprehensive		Stockholders’		Noncontrolling		Stockholders’
(Dollars in thousands, except shares)	Shares	Value		Shares	Value		Capital		Deficit)		Shares		Income (Loss)		Equity		Interests		Equity
At January 1, 2022	20,260	$	233	1,680	$	17	$	151,981	$	(12,632)	$	(40,407)	$	4,882	$	104,074	$	986	$	105,060
Net income (loss)	—		—	—		—		—		(15,354)		—		—		(15,354)		(99)		(15,453)
Other comprehensive income, net	—		—	—		—		—		—		—		3,524		3,524		1		3,525
Share-based compensation expense	—		—	—		—		415		—		—		—		415		—		415
Restricted Stock Units	52		1	—		—		(32)		—		—		—		(31)		—		(31)
Distributions to noncontrolling stockholders	—		—	—		—		—		—		—		—		—		(22)		(22)
At March 31, 2022	20,312	$	234	1,680	$	17	$	152,364	$	(27,986)	$	(40,407)	$	8,406	$	92,628	$	866	$	93,494
Net income	—		—	—		—		—		(2,436)		—		—		(2,436)		(7)		(2,443)
Other comprehensive income, net	—		—	—		—		—		—		—		(9,218)		(9,218)		1		(9,217)
Share-based compensation expense	—		—	—		—		466		—		—		—		466		—		466
Restricted Stock Units	49		—	—		—		(52)		—		—		—		(52)		—		(52)
Distributions to noncontrolling stockholders	—		—	—		—		—		—		—		—		—		(21)		(21)
At June 30, 2022	20,361	$	234	1,680	$	17	$	152,778	$	(30,422)	$	(40,407)	$	(812)	$	81,388	$	839	$	82,227
Net income	—		—	—		—		—		(5,177)		—		—		(5,177)		(122)		(5,299)
Other comprehensive income, net	—		—	—		—		—		—		—		(8,167)		(8,167)		(3)		(8,170)
Share-based compensation expense	—		—	—		—		497		—		—		—		497		—		497
Distributions to noncontrolling stockholders	—			—		—		—		—		—		—		—		(21)		(21)
At September 30, 2022	20,361	$	234	1,680	$	17	$	153,275	$	(35,599)	$	(40,407)	$	(8,979)	$	68,541	$	693	$	69,234

21

	Common Stock								Retained				Accumulated		Reading
	Class A	Class A		Class B	Class B		Additional		Earnings				Other		International Inc.				Total
	Non-Voting	Par		Voting	Par		Paid-In		(Accumulated		Treasury		Comprehensive		Stockholders’		Noncontrolling		Stockholders’
(Dollars in thousands, except shares)	Shares	Value		Shares	Value		Capital		Deficit)		Shares		Income (Loss)		Equity		Interests		Equity
At January 1, 2021	20,069	$	231	1,680	$	17	$	149,979	$	(44,553)	$	(40,407)	$	12,502	$	77,769	$	3,404	$	81,173
Net income (loss)	—		—	—		—		—		18,965		—		—		18,965		3,102		22,067
Other comprehensive income, net	—		—	—		—		—		—		—		(2,545)		(2,545)		—		(2,545)
Share-based compensation expense	—		—	—		—		464		—		—		—		464		—		464
Restricted Stock Units	52		1	—		—		(111)		—		—		—		(110)		—		(110)
Distributions to noncontrolling stockholders	—		—	—		—		—		—		—		—		—		(5,300)		(5,300)
At March 31, 2021	20,121	$	232	1,680	$	17	$	150,332	$	(25,588)	$	(40,407)	$	9,957	$	94,543	$	1,206	$	95,749
Net income	—		—	—		—		—		22,702		—		—		22,702		(108)		22,594
Other comprehensive income, net	—		—	—		—		—		—		—		(1,592)		(1,592)		—		(1,592)
Share-based compensation expense	—		—	—		—		450		—		—		—		450		—		450
Restricted Stock Units	4		—	—		—		(2)		—		—		—		(2)		—		(2)
At June 30, 2021	20,125	$	232	1,680	$	17	$	150,780	$	(2,886)	$	(40,407)	$	8,365	$	116,101	$	1,098	$	117,199
Net income	—		—	—		—		—		(10,095)		—		—		(10,095)		(105)		(10,200)
Other comprehensive income, net	—		—	—		—		—		—		—		(4,029)		(4,029)		--		(4,029)
Share-based compensation expense	—		—	—		—		606		—		—		—		606		--		606
Restricted Stock Units	2		—	—		—		(3)		—		—		—		(3)		--		(3)
At September 30, 2020	20,127	$	232	1,680	$	17	$	151,383	$	(12,981)	$	(40,407)	$	4,336	$	102,580	$	993	$	103,573

Note 16 – Stock-Based Compensation and Stock Repurchases

Employee and Director Stock Incentive Plan

2010 Stock Incentive Plan

Our 2010 Stock Incentive Plan (as amended, the “2010 Plan”) under which our Company has granted stock options and other share-based payment awards of our Common Stock to eligible employees, directors, and consultants has expired. In total, 1,315,481 shares of Class A Common Stock were issued or reserved for issuance pursuant to the previously granted options or restricted stock units under that plan.

2020 Stock Incentive Plan

On November 4, 2020, the Company enacted the 2020 Stock Incentive Plan, which was also approved by the Company’s stockholders on December 8, 2020 (the “2020 Plan”). Under the 2020 Plan, the Company may grant stock options and other share-based payment awards of our Class A Common Stock to eligible employees, directors and consultants. The aggregate total number of shares of Class A Common Stock authorized for issuance under the 2020 Plan at September 30, 2022, was 1,250,000, of which 308,638 remain available for future issuance. In addition, if any awards that were outstanding under the 2010 Plan are subsequently forfeited or if the related shares are repurchased, a corresponding number of shares will automatically become available for issuance under the 2020 Plan, thus resulting in a potential increase in the number of shares available for issuance under the 2020 Plan. At September 30, 2022, this potential increase in the number of shares eligible for issuance under the 2020 Plan was 422,248 Class A Common Stock.

Stock options are granted at exercise prices equal to the grant-date market prices and typically expire no later than five years from the grant date. In contrast to a stock option where the grantee buys our Company’s share at an exercise price determined on the grant date, a restricted stock unit (“RSU”) entitles the grantee to receive one share for every RSU based on a vesting plan, typically between one year and four years from grant. As discussed further below, a performance component has been added to certain of the RSUs granted to management. At the time the options are exercised or RSUs vest and are settled, at the discretion of management, we will issue treasury shares or make a new issuance of shares to the option or RSU holder.

Stock Options

We have estimated the grant-date fair value of our stock options using the Black-Scholes option-valuation 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. We expensed the estimated grant-date fair values of options over the vesting period on a straight-line basis. Based on our historical experience, the “deemed exercise” of expiring in-the-money options and the relative market price to strike price of the options, we have not estimated any forfeitures of vested or unvested options.

No stock options were issued in the nine months ended September 30, 2022.

For the quarters ended September 30, 2022, and 2021, we recorded compensation expense of $53,000 and $101,000, respectively, with respect to our prior stock option grants. For the nine months ended September 30, 2022, and September 30, 2021, we recorded compensation expense of $159,000 and $302,000, respectively. At September 30, 2022, the total unrecognized estimated compensation expense related to non-vested stock options was $0.1 million, which we expect to recognize over a weighted average vesting period of 0.65 years. The intrinsic, unrealized value of all options outstanding vested and expected to vest, at September 30, 2022, was $nil, as the closing price of our Common Stock on that date was $3.29.

22

The following table summarizes the number of options outstanding and exercisable as of September 30, 2022, and December 31, 2021:

	Outstanding Stock Options - Class A Shares
	Number ‎of Options	Weighted ‎Average ‎Exercise Price		Weighted ‎Average ‎Remaining ‎Years of ‎Contractual ‎Life	Aggregate ‎Intrinsic ‎Value
	Class A	Class A		Class A	Class A
Balance - December 31, 2020	713,479	$	14.64	2.18	$	13,969
Granted	—		—	—		—
Exercised	(38,803)		4.66	—		63,831
Forfeited	(157,332)		11.87	—		—
Balance - December 31, 2021	517,344	$	15.42	1.66	$	—
Granted	—		—	—		—
Exercised	—		—	—		—
Forfeited	(189,846)		12.19	—		—
Balance - September 30, 2022	327,498	$	15.75	1.33	$	—

Restricted Stock Units

The following table summarizes the status of unvested RSUs granted to date as of September 30, 2022:

	Outstanding Restricted Stock Units
	RSU Grants (in units)			Vested,	Unvested,	Forfeited,
Grant Date	Directors	Management	Total ‎Grants	September 30, 2022	September 30, 2022	September 30, 2022
Opening balance	118,231	118,060	236,291	231,804	—	4,487
March 13, 2019	—	24,366	24,366	15,947	5,315	3,104
March 14, 2019	—	23,327	23,327	17,496	5,831	—
May 7, 2019	11,565	—	11,565	11,565	—	—
March 10, 2020	—	287,163	287,163	96,828	189,517	818
December 14, 2020	—	43,260	43,260	42,084	—	1,176
December 16, 2020	60,084	11,459	71,543	71,543	—	—
April 5, 2021	—	262,830	262,830	45,403	217,427	—
April 19, 2021	—	22,888	22,888	5,536	16,276	1,076
August 11, 2021	26,924	—	26,924	26,924	—	—
December 8, 2021	48,951	—	48,951	—	48,951	—
April 18, 2022	—	428,899	428,899	—	428,415	484
Total	265,755	1,222,252	1,488,007	565,130	911,732	11,145

RSU awards to management vest 25% on the anniversary of the grant date over a period of four years. Beginning in 2020, a performance component has been added to certain of the RSUs granted to management, which vest on the third anniversary of their grant date based on the achievement of certain performance metrics. On March 10, 2020, RSUs covering 287,163 shares were issued to members of executive management and other employees of our Company. Between December 14, 2020, and December 16, 2020, RSUs covering 114,803 shares were issued to members of executive management and other employees of our Company, all of which vested 100% on December 14 and 16, 2021, as applicable. In addition, we granted non-employee directors 60,084 RSUs (as well as 38,803 options) on December 16, 2020. In April 2021, RSUs covering 262,830 shares were issued to members of executive management. These RSUs have two structures, which include time vesting and performance vesting. The majority of RSUs vest 75% evenly over a period of four years, with the remaining 25% contingent upon the achievement of certain performance metrics, vesting in full on the third anniversary of the date of the grant. In the case of our Chief Executive Officer, RSUs vest 50% evenly over a period of four years with the remaining 50%, contingent upon the achievement of certain performance metrics, vesting in full on the third anniversary of the grant date. RSUs covering 22,888 shares were also issued to other employees of our Company. These awards vest 25% on the anniversary of the grant date over a period of four years. On August 11, 2021, and December 8, 2021, RSUs covering 26,924 and 48,951 shares, respectively, were issued to non-employee directors. On April 18, 2022, RSUs covering 428,899 shares were issued to members of executive management and other employees of our company.

23

The RSUs issued to non-employee directors on May 7, 2019, vested on May 6, 2020. The RSUs issued to non-employee directors on August 11, 2021, vested on December 8, 2021. The RSUs issued to non-employee directors on December 8, 2021, will vest on the first to occur of (i) 5:00 pm, Los Angeles, CA time on the last business day prior to the one-year anniversary of the Grant Date or (ii) the date on which the Recipient has served such Recipient’s full term as a Director (December 8, 2022).

For the quarters ended September 30, 2022, and 2021, we recorded compensation expense of $444,000 and $505,000, respectively. For the nine months ended September 30, 2022, and September 30, 2021, we recorded compensation expense of $1.2 million and $1.3 million, respectively. The total unrecognized compensation expense related to the non-vested RSUs was $3.5 million as of September 30, 2022, which we expect to recognize over a weighted average vesting period of 1.65 years.

Stock Repurchase Program

On March 2, 2017, our Company’s Board of Directors authorized management, at its discretion, to spend up to an aggregate of $25.0 million to acquire shares of Reading’s Class A Common Stock.  On March 14, 2019, the Board of Directors extended this stock buy-back program for two years, through March 2, 2021. On March 10, 2020, the Board increased the authorized amount by $25.0 million and extended it to March 2, 2022. At the present time, the amount available under the repurchase program authorization is $26.0 million. On May 5, 2022, the Board extended the program for two years, to March 10, 2024, making no changes to the available amount.

The repurchase program allows Reading to repurchase its shares in accordance with the requirements of the SEC on the open market, in block trades and in privately negotiated transactions, depending on market conditions and other factors.  All purchases are subject to the availability of shares at prices that are acceptable to Reading, and accordingly, no assurances can be given as to the timing or number of shares that may ultimately be acquired pursuant to this authorization.

Under the stock repurchase program, as of September 30, 2022, our Company had acquired a total of 1,792,819 shares of Class A Common Stock for $24.0 million at an average price of $13.39 per share (excluding transaction costs). No shares of Class A Common Stock were purchased in the quarter ended September 30, 2022. The last share repurchase made by our Company was made on March 5, 2020, at which time 25,000 shares were purchased at an average cost per share of $7.30. This leaves $26.0 million available under the March 2, 2017, program, as extended, to March 10, 2024.

Note 17 – Leases

In all leases, whether we are the lessor or lessee, we define lease term as the non-cancellable term of the lease plus any renewals covered by renewal options that are reasonably certain of exercise based on our assessment of economic factors relevant to the lessee. The non-cancellable term of the lease commences on the date the lessor makes the underlying property in the lease available to the lessee, irrespective of when lease payments begin under the contract.

As Lessee

We have operating leases for certain cinemas, and finance leases for certain equipment assets. Our leases have remaining lease terms of 1 to 25 years, with certain leases having options to extend to up to a further 20 years. Lease payments for our cinema operating leases consist of fixed base rent, and for certain leases, variable lease payments consisting of contracted percentages of revenue, changes in the relevant CPI, and/or other contracted financial metrics.

The components of lease expense were as follows:

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	8	$	12	$	30	$	37
Interest on lease liabilities		1		1		2		4
Operating lease cost		8,160		8,591		24,475		25,151
Variable lease cost		181		(2,064)		270		(4,751)
Total lease cost	$	8,350	$	6,540	$	24,777	$	20,441

24

Supplemental cash flow information related to leases is as follows:

	Nine Months Ended
	September 30,
(Dollars in thousands)	2022		2021
Cash flows relating to lease cost
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for finance leases	$	33	$	40
Operating cash flows for operating leases		26,034		16,666
Right-of-use assets obtained in exchange for new operating lease liabilities		6,720		32,956

Supplemental balance sheet information related to leases is as follows:

	September 30,		December 31,
(Dollars in thousands)	2022		2021
Operating leases
Operating lease right-of-use assets	$	200,396	$	227,367
Operating lease liabilities - current portion		22,950		23,737
Operating lease liabilities - non-current portion		200,855		223,364
Total operating lease liabilities	$	223,805	$	247,101
Finance leases
Property plant and equipment, gross		352		374
Accumulated depreciation		(320)		(311)
Property plant and equipment, net	$	32	$	63
Other current liabilities		33		40
Other long-term liabilities		3		28
Total finance lease liabilities	$	36	$	68
Other information
Weighted-average remaining lease term - finance leases		1		2
Weighted-average remaining lease term - operating leases		11		11
Weighted-average discount rate - finance leases		5.21%		5.24%
Weighted-average discount rate - operating leases		4.56%		4.47%

The maturities of our leases were as follows:

(Dollars in thousands)	Operating ‎leases		Finance ‎leases
2022	$	7,932	$	9
2023		32,915		28
2024		31,544		—
2025		29,579		—
2026		27,702		—
Thereafter		159,221		—
Total lease payments	$	288,893	$	37
Less imputed interest		(65,088)		(1)
Total	$	223,805	$	36

As of September 30, 2022, we have an additional cinema operating lease that has not yet commenced operations of approximately $6.8 million. It is anticipated that this operating lease will commence in 2023 with a lease term of 15 to 20 years.

As Lessor

We have entered into various leases as a lessor for our owned real estate properties. These leases vary in length between 1 and 20 years, with certain leases containing options to extend at the behest of the applicable tenants. Lease components consist of fixed base rent, and for certain leases, variable lease payments consisting of contracted percentages of revenue, changes in the relevant CPI, and/or other contracted financial metrics. None of our leases grant any right to the tenant to purchase the underlying asset.

25

Lease income relating to operating lease payments was as follows:

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2022		2021		2022		2021
Components of lease income
Lease payments	$	2,046		2,230	$	6,065	$	7,601
Variable lease payments		333		273		598		642
Total lease income	$	2,379	$	2,503	$	6,663	$	8,243

The book value of underlying assets under operating leases from owned assets was as follows:

	September 30,		December 31,
(Dollars in thousands)	2022		2021
Building and improvements
Gross balance	$	133,488	$	140,028
Accumulated depreciation		(23,862)		(23,923)
Net Book Value	$	109,626	$	116,105

The Maturity of our leases were as follows:

(Dollars in thousands)	Operating ‎leases
2022	$	1,683
2023		6,427
2024		5,786
2025		4,989
2026		2,548
Thereafter		2,757
Total	$	24,190

Note 18 – Hedge Accounting

As of September 30, 2022, and December 31, 2021, our Company held interest rate derivatives in the total notional amount of $51.0 million.

The derivatives are recorded on the balance sheet at fair value and are included in the following line items:

	Asset Derivatives
	September 30,			December 31,
	2022			2021
(Dollars in thousands)	Balance sheet location	Fair value		Balance sheet location	Fair value
Interest rate contracts	Derivative financial instruments - current portion	$	1,318	Derivative financial instruments - current portion	$	96
	Derivative financial instruments - non-current portion		21	Derivative financial instruments - non-current portion		112
Total derivatives designated as hedging instruments		$	1,339		$	208
Total derivatives		$	1,339		$	208
	Liability Derivatives
	September 30,			December 31,
	2022			2021
(Dollars in thousands)	Balance sheet location	Fair value		Balance sheet location	Fair value
Interest rate contracts	Derivative financial instruments - current portion	$	—	Derivative financial instruments - current portion	$	181
	Derivative financial instruments - non-current portion		—	Derivative financial instruments - non-current portion		—
Total derivatives designated as hedging instruments		$	—		$	181
Total derivatives		$	—		$	181

26

The changes in fair value are recorded in Other Comprehensive Income and released into interest expense in the same period(s) in which the hedged transactions affect earnings. In the quarter and nine months ended September 30, 2022 and September 30, 2021, respectively, the derivative instruments affected Comprehensive Income as follows:

(Dollars in thousands)	Location of Loss Recognized in Income on Derivatives	Amount of Loss (Gain) Recognized in Income on Derivatives
		Quarter Ended September 30				Nine Months Ended September 30
			2022		2021		2022		2021
Interest rate contracts	Interest expense	$	(252)	$	61	$	(204)	$	181
Total		$	(252)	$	61	$	(204)	$	181

	Loss (Gain) Recognized in OCI on Derivatives (Effective Portion)
(Dollars in thousands)	Amount				Amount
	Quarter Ended September 30				Nine Months Ended September 30
		2022		2021		2022		2021
Interest rate contracts	$	(312)	$	4	$	(1,457)	$	9
Total	$	(312)	$	4	$	(1,457)	$	9
	Loss (Gain) Reclassified from OCI into Income (Effective Portion)
Line Item	Amount				Amount
	Quarter Ended September 30				Nine Months Ended September 30
		2022		2021		2022		2021
Interest expense	$	(252)	$	61	$	(204)	$	181
Total	$	(252)	$	61	$	(204)	$	181

 The derivatives have no ineffective portion, and consequently no losses have been recognized directly in income.

Note 19 – Fair Value Measurements

ASC 820, Fair Value Measurement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The statement requires that assets and liabilities carried 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: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and,

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

As of September 30, 2022, and December 31, 2021, we had derivative financial assets carried and measured at fair value on a recurring basis of $1.3 million and $208,000, respectfully. As of September 30, 2022, we had no derivates in a liability position. As at December 31, 2021, we had derivative financial liabilities carried and measured at fair value on a recurring basis of $181,000.

The following tables summarize our financial liabilities that are carried at cost and measured at fair value on a non-recurring basis as of September 30, 2022, and December 31, 2021, by level within the fair value hierarchy.

			Fair Value Measurement at September 30, 2022
(Dollars in thousands)	Carrying ‎Value(1)		Level 1		Level 2		Level 3		Total
Notes payable	$	189,969	$	—	$	—	$	188,019	$	188,019
Subordinated debt		29,427		—		—		23,434		23,434
	$	219,396	$	—	$	—	$	211,453	$	211,453

			Fair Value Measurement at December 31, 2021
(Dollars in thousands)	Carrying ‎Value(1)		Level 1		Level 2		Level 3		Total
Notes payable	$	206,992	$	—	$	—	$	207,817	$	207,817
Subordinated debt		29,956		—		—		20,494		20,494
	$	236,948	$	—	$	—	$	228,311	$	228,311

27

(1)These balances are presented before any deduction for deferred financing costs.

Following is a description of the valuation methodologies used to estimate the fair value of our financial assets and liabilities. There have been no changes in the methodologies used as of September 30, 2022, and December 31, 2021.

Level 1 investments in marketable securities primarily consist of investments associated with the ownership of marketable securities in U.S. and New Zealand. These investments are valued based on observable market quotes on the last trading date of the reporting period.

Level 2 derivative financial instruments are valued based on discounted cash flow models that incorporate observable inputs such as interest rates and yield curves from the derivative counterparties. The credit valuation adjustments associated with our non-performance risk and counterparty credit risk are incorporated in the fair value estimates of our derivatives. As of September 30, 2022, and December 31, 2021, we concluded that the credit valuation adjustments were not significant to the overall valuation of our derivatives.

Level 3 borrowings include our secured and unsecured notes payable, trust preferred securities and other debt instruments. The borrowings are valued based on discounted cash flow models that incorporate appropriate market discount rates. We calculated the market discount rate by obtaining period-end treasury rates for fixed-rate debt, or LIBOR for variable-rate debt, for maturities that correspond to the maturities of our debt, adding appropriate credit spreads derived from information obtained from third-party financial institutions. These credit spreads take into account factors such as our credit rate, debt maturity, types of borrowings, and the loan-to-value ratios of the debt.

Our Company’s financial instruments also include cash, cash equivalents, receivables and accounts payable. The carrying values of these financial instruments approximate the fair values due to their short maturities. Additionally, there were no transfers of assets and liabilities between levels 1, 2, or 3 during the quarter and nine months ended September 30, 2022, and September 30, 2021.

Note 20 – Subsequent Events

On November 4, 2022, we extended the closing date of the purchase of the Village East ground lease to July 1, 2024.

‎

28

This MD&A should be read in conjunction with the accompanying unaudited consolidated financial statements included in Part I, Item 1 (Financial Statements). The foregoing discussions and analyses contain certain forward-looking statements. Please refer to the “Cautionary Statement Regarding Forward-Looking Statements” included at the conclusion of this section and our “Risk Factors” set forth in our 2021 Form 10-K, Part 1 – Financial Information, Item 1A and the Risk Factors set out below.

Item 2 – Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations

The MD&A should be read in conjunction with our consolidated financial statements and related notes in this Report.

General COVID-19 Pandemic Overview & Updates

The cinema exhibition industry has endured significant challenges over the past couple of years. During this time, our Company has

been tested in various ways, including: (i) the COVID-19 pandemic forcing us to temporarily close our cinemas worldwide, (ii) the emergence of COVID-19 variants prolonging our recovery and putting a strain on our liquidity needs, (iii) increasing relevance of streaming services creating more competition, and (iv) significant portions of the populations avoiding public spaces.

Despite these challenges, our Company continues to persevere. Attendances for the quarter and nine months are up compared to the same time periods 2021. Comparing to the same time period in 2019, our business is starting to slowly climb back up to pre-pandemic levels. Our real estate tenants, with the exception of one completing fitout works, are all open and paying rent. The pandemic has been a testament to the durability of our two-pronged, diversified international business strategy and has increased our faith in the future longevity of our Company.

Naturally, the future is not foreseeable and there is always the risk that new COVID-19 strains or other issues may emerge. However, with a majority of the population vaccinated against COVID-19, it is safe to be cautiously optimistic. We are envisioning a return to the time where our cinema revenues can support our real estate acquisition and development activities.

Recent Box Office Improvements

The cinema exhibition industry typically experiences a slowdown in terms of blockbuster releases during the third quarter of the year. This is a typical seasonal occurrence year after year, due to unwillingness among production houses to release their blockbuster films outside of peak seasons. However, during the third quarter of 2022, the highest grossing films Thor: Love and Thunder, Minions, the Rise of Gru, Top Gun: Maverick, Bullet Train and Elvis significantly surpassed the top film releases during the same time period of the prior year. Although the overall third quarter of 2022 experienced a weaker film slate than in the prior quarter of this year, recent box office numbers, and patrons' increasing willingness to return to big screen venues, reinforce a rebounding cinema industry and an improved quality of film product from the studios. Looking towards the fourth quarter of 2022, we expect the release of films such as Black Panther: Wakanda Forever, Avatar 2: Way of the Water, and Strange World to drive improved admissions and cinema revenues.

All of our cinemas were open during the current reporting period (excluding those temporarily closed unrelated to the pandemic related government closures).

We continue to experience challenges, similar to our competitors and those in the hospitality and food and beverage service industries, with labor shortages, cost increases and uncertainties. Also, our dependance on blockbuster films has adversely affected the film rent paid to distributors. Operating costs, fueled by inflation, continue to increase as well. However, our Company continues to overcome and adapt to the existing challenges.

Real Estate Developments

In the United States, during the first quarter of 2022, we completed a long-term lease of those floors, representing approximately 42 percent of the leasable area in the building, to a national retailer. We have now completed the landlord’s work for our lower level, ground floor and second floor of our 44 Union Square property in Manhattan and turned them over to the tenant for the construction of its tenant improvements. CBRE has been engaged as our exclusive broker for the remainder of the space and while no assurances can be given, we are pleased that they have presented to us in recent months proposals from qualified prospects looking to lease the remainder of the building

In Australia and New Zealand, all of our tenants remained open and trading with the exception of one tenant completing fit out works as of the date of this report. We have one active retail tenant in Courtenay Central, which continues to be closed due to seismic concerns, and one digital signage tenant located on an exterior surface parking lot.

‎

29

BUSINESS OVERVIEW

We are an internationally diversified company principally focused on the development, ownership, and operation of entertainment and real estate assets in the United States, Australia, and New Zealand. Currently, we operate in two business segments:

Cinema exhibition, through our 63 cinemas.

Real estate, including real estate development and the rental of retail, commercial, and live theatre assets.

We believe these two business segments complement and support one another. Prior to COVID-19, we used cash flows generated by our cinema operations to fund the front-end cash demands of our real estate development business. As a result of COVID-19, we relied more upon income from our real estate assets, and tapped the imbedded value in those assets, to support our Company through the COVID-19 crisis. As COVID-19 impacts decrease, government restrictions ease, quality film product, and patrons return to our cinemas, we believe we are able to once again rely on the cash flows generated by our cinema portfolio. We are steadfast in our belief that this two-pronged, diversified international business strategy will keep carrying our Company through these difficult times as we continue to navigate the uncertainty and challenges posed by the global COVID-19 pandemic, including the emergence of new variants.

Key Performance Indicators

A key performance indicator utilized by management is Food and Beverage (“F&B”) Spend Per Patron (“SPP”).

One of our strategic priorities has been and continues to be upgrading the food and beverage menu at a number of our global cinemas. We use SPP as a measure of our performance as compared to the performance of our competitors, as well as a measure of the performance of our food and beverage operations. While ultimately, the profitability of our food and beverage operations depends on a variety of factors, including labor cost and cost of goods sold, we think that this calculation is important to show how well we are doing on a top line basis.

Due to factors discussed in our Cautionary Statement Regarding Forward-Looking Statements that continue to adversely impact cinema attendances, we do not currently believe that a discussion of Reading’s key performance indicators will serve as a useful metric for stockholders. However, we intend to resume providing a discussion of our key performance indicators in future filings.

‎

30

Cinema Exhibition Overview

We operate our worldwide cinema exhibition businesses through various subsidiaries under various brands:

in the U.S., under the Reading Cinemas, Angelika Film Centers, and Consolidated Theatres brands.

in Australia, under the Reading Cinemas, the State Cinema by Angelika, and for our one unconsolidated joint venture theatre, Event Cinemas brands.

in New Zealand, under the Reading Cinemas and our two unconsolidated joint venture theatres, Rialto Cinemas brands.

Shown in the following table are the number of locations and screens in our cinema circuit in each country, by state/territory/region, our cinema brands, and our interest in the underlying assets as of September 30, 2022.

	State / Territory /	Location	Screen	Interest in Asset ‎Underlying the Cinema
Country	Region	Count(3)	Count	Leased	Owned	Operating Brands
United States	Hawaii	9	98	9		Consolidated Theatres
	California	7	88	7		Reading Cinemas, Angelika Film Center
	New York	3	16	2	1	Angelika Film Center
	Texas	2	13	2		Angelika Film Center
	New Jersey	1	12	1		Reading Cinemas
	Virginia	1	8	1		Angelika Film Center
	Washington, D.C.	1	3	1		Angelika Film Center
	U.S. Total	24	238	23	1
Australia	Victoria	9	62	9		Reading Cinemas
	New South Wales	6	44	5	1	Reading Cinemas
	Queensland	6	56	3	3	Reading Cinemas, Event Cinemas(1)
	Western Australia	2	16	1	1	Reading Cinemas
	South Australia	2	15	2		Reading Cinemas
	Tasmania	2	14	2		Reading Cinemas, State Cinema by Angelika
	Australia Total	27	207	22	5
New Zealand	Wellington	3	18	2	1	Reading Cinemas
	Otago	3	15	2	1	Reading Cinemas, Rialto Cinemas(2)
	Auckland	2	15	2		Reading Cinemas, Rialto Cinemas(2)
	Canterbury	1	8	1		Reading Cinemas
	Southland