2014 10K FY

Aggregate Square Footage

Approximate Range of Remaining Lease Terms (including renewals)

United States

New Zealand

PART I

Item 1 – Our Business

General Description of Our Business

Reading International, Inc., a Nevada corporation (“RDI”), was incorporated in 1999 incident to our reincorporation in Nevada. Our class A non-voting common stock (“Class A Stock”) and class B voting common stock (“Class B Stock”) are listed for trading on the NASDAQ Capital Market (Nasdaq-CM) under the symbols RDI and RDIB, respectively. Our principal executive offices are located at 6100 Center Drive, Suite 900, Los Angeles, California 90045. Our general telephone number is (213) 235-2240 and our website is www.readingrdi.com. It is our practice to make available free of charge on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we have electronically filed such material with or furnished it to the Securities and Exchange Commission. In this Annual Report, we from time to time use terms such as the “Company,” “Reading” and “we,” “us,” or “our” to refer collectively to RDI and our various consolidated subsidiaries and corporate predecessors.

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

Cinema Exhibition, through our 58 cinemas, and

Real Estate, including real estate development and the rental of retail, commercial and live theater assets.

We believe that these two business segments complement one another, as the comparatively consistent cash flows generated by our cinema operations allow us to be opportunistic in acquiring and holding real estate assets, and can be used not only to grow and develop our cinema business but also to help fund the front-end cash demands of our real estate development business.

At December 31, 2014, the book value of our assets was $401.6 million, and, as of that same date, we had a consolidated stockholders’ book equity of $132.3 million. Calculated based on book value, $107.7 million or 27%, of our assets relate to our cinema exhibition activities and $219.7 million or 55%, of our assets relate to our real estate activities. At December 31, 2014, we had cash and cash equivalents of $50.2 million, which is accounted for as a corporate asset. Our cash included $10.1 million denominated in U.S. dollars, $32.4 million (AUS$39.6 million) in Australian dollars, and $7.7 million (NZ$9.9 million) in New Zealand dollars.

For additional segment financial information, please see Note 22 – Business Segments and Geographic Area Information to our 2014 Consolidated Financial Statements.

We have diversified our assets among three countries: the United States, Australia, and New Zealand. Based on book value, at December 31, 2014, we had approximately 35% of our assets in the United States, 44% in Australia and 21% in New Zealand compared to 29%, 51%, and 20% respectively, at the end of 2013. For 2014, our gross revenue in these jurisdictions was $130.8 million, $97.3 million, and $26.6 million, respectively, compared to $131.5 million, $100.4 million, and $26.3 million for 2013. These changes are due primarily to fluctuations in the value of the US Dollar compared to the relative values of the Australian Dollar and the New

Zealand Dollar. The exchange rate for the Australian Dollar and the New Zealand Dollar compared to the U.S. Dollar on December 31, 2014 and December 31, 2013 were 0.8173 and 0.8929 to US$1.00 and 0.7796 and 0.8229 to US$1.00, respectively.

For additional financial information concerning the geographic distribution of our business, please see Note 22 – Business Segments and Geographic Area Information to our 2014 Consolidated Financial Statements.

In 2013, we acquired the 50% interest in the Angelika Film Center in New York City that had been previously held by a passive third party investor. In 2014, we took back, remodeled and upgraded to state-of-the-art status, an eight-screen cinema in New Zealand that, at the time we acquired the underlying fee interest, was leased to a competitor in Dunedin, New Zealand, and finalized an agreement to lease a new state-of-the-art eight plex cinema in a shopping center in Auckland scheduled to open in late 2015. In 2014, we completed an upgrade of our Cinemas 1,2,3 in New York City, which included the installation of luxury recliner seats. In 2014, we executed a long-term lease for a luxury, state-of-the-art cinema, which will be operated under our Consolidated Theatres brand, in the new Ka Makana Ali’i Shopping Center, a regional mall under development in Kapolei, Hawaii. It is expected that this cinema will open in 2016. In 2013 and 2014, in the United States, we continued to expand our Angelika Film Center brand: (i) in 2013, we acquired the leasehold interest of the Angelika Film Center in Plano, TX, which was previously operated as a managed cinema, (ii) entered into a long-term lease for a new, state-of-the-art Angelika Film Centerin the Union Market district of Washington D.C., which is anticipated to open in 2016, and (iii) began the process of converting one of our San Diego area cinemas to a state-of-the-art Angelika Film Center. In 2015, we intend to upgrade the food and beverage menu at a number of our U.S. cinemas.

Given the substantial increase in Manhattan commercial real estate values in recent periods, we are currently advancing plans for the redevelopment of our Cinemas 1, 2, 3 property and of our Union Square property. We currently anticipate that these properties will be redeveloped into approximately 94,000 square feet and 70,000 square feet, respectively, of net leasable area over the next 4 years. In 2012, we acquired in a foreclosure auction as a long-term investment in developable land a 202-acre property, then zoned for the development of over 800 single-family residential units, located in the City of Coachella, California, for $5.5 million. Our then Chairman, Chief Executive Officer and controlling stockholder, participated in that transaction, and holds a 50% non-management interest in the subsidiary that holds that investment. Overseas, in 2013, we entered into a lease agreement for a new grocery store anchor tenant in our Courtenay Central property in Wellington, New Zealand and are actively pursuing the development of the next phase of that center. Additionally, we have obtained the necessary land use approvals and are working on plans to add a cinema to our Newmarket shopping center in Brisbane, Australia.

Historically, it has not been our practice to sell assets, except in connection with the repositioning of such assets to a higher and better use. However, in light of market conditions and our desire to free up capital and pay down debt, in 2012, we sold our 24,000 square foot office building in Indooroopilly, Australia for $12.4 million (AUS$12.0 million). In 2013, we entered into a purchase and sale agreement to sell our 3.3-acre properties in Moonee Ponds for $21.4 million (AUS$23.0 million) which is scheduled to close on April 16, 2015 and is currently classified as land held for sale. In 2014, we sold our undeveloped 50.6-acre parcel in Burwood, Victoria, Australia, to an affiliate of Australand Holdings Limited for a purchase price of $59.1 million (AUS$65.0 million). We received $5.9 million (AUS$6.5 million) at the closing. The balance of the purchase price is due on December 31, 2017, subject to mandatory pre-payments in the event that any of the land is sold, equal to the greater of (a) 90% of the net sale price or (b) the balance of the purchase price multiplied by a fraction the numerator of which is the square footage of property being sold by the buyer and the denominator of which is the original square footage of the property being sold to the buyer. Because payment of 90% of the purchase price has not been received, the transaction has not been treated as a sale for U.S. GAAP purposes, and continues to be carried on our balance sheet as a long term asset.

Typically, we have endeavored to match the currency in which we have financed our development with the jurisdiction within which these developments are located. We have followed this approach to reduce our risk to currency fluctuations. This structure however, somewhat limits our ability to move cash from one jurisdiction to another.

In summary, while we do have operating company attributes, we see ourselves principally as a geographically diversified real estate and cinema company and intend to add to stockholder value by building the value of our portfolio of tangible real estate and entertainment-oriented assets. We endeavor to maintain a reasonable asset allocation between our U.S. and international assets and operations, and between our cash generating cinema operations and our cash-consuming real estate development activities. We believe that by blending the cash generating capabilities of a cinema operation with the investment and development opportunities of our real estate operation coupled with our international diversification of assets, our business strategy is unique among public companies. While historically we have retained our properties through development, we continue to evaluate the sale of certain assets to provide capital to develop our remaining properties.

At December 31, 2014, our principal assets included:

interests in 57 currently operational cinemas comprising some 472 screens, plus interests in two additional leasehold cinemas representing an additional 16 screens, currently under development in the United States, and an additional 8-screen complex being developed in Auckland, New Zealand;

fee interests in four live theaters (the Union Square, the Orpheum and Minetta Lane in Manhattan and the Royal George in Chicago) and one cinema (the Cinemas 1, 2, 3), in New York City;

In addition to the domestic fee interests described immediately above, fee ownership of approximately 21.6 million square feet of developed and undeveloped real estate; and

cash and cash equivalents, aggregating $50.2 million.

Our Cinema Exhibition Activities

General

We conduct our cinema operations on four basic and rather simple premises:

first, notwithstanding the enormous advances that have been made in home-entertainment technology, humans are essentially social beings and will continue to want to go beyond the home for their entertainment, provided that they are offered clean, comfortable and convenient facilities, with state of the art technology;

second, cinemas can be used as anchors for larger retail developments and our involvement in the cinema business can give us an advantage over other real estate developers or redevelopers who must identify and negotiate exclusively with third-party anchor tenants;

third, pure cinema operators can get themselves into financial difficulty as demands upon them to produce cinema-based earnings growth tempt them into reinvesting their cash flow into increasingly marginal cinema sites. While we believe that there will continue to be attractive opportunities to acquire cinema assets and/or to develop upper end specialty type theaters (like our Angelika Film Centers) in the future, we do not feel pressure to build or acquire cinemas for the sake of adding units. We intend to focus our use of cash flow on our real estate development and operating activities, to the extent that attractive cinema opportunities are not available to us; and

fourth, we are always open to the idea of converting an entertainment property to another use, if there is a higher and better use for the property, or to sell individual assets, if we are presented with an attractive opportunity. Our fee interests on Union Square and on Third Avenue (near 60th Street) in New York City, each of which is now slated for redevelopment, were initially acquired as, and continue to be used as, entertainment properties.

Our current cinema assets that we own and/or manage are as set forth in the following chart:



	Wholly Owned	Consolidated1	Unconsolidated2	Managed3	Totals
Australia	18 cinemas	2 cinemas	1 cinema4	None	21 cinemas
	138 screens	11 screens	16 screens	None	165 screens

New Zealand	8 cinemas	None	2 cinemas5	None	10 cinemas
	46 screens	None	13 screens	None	59 screens

United States	25 cinemas	1 cinema	None	1 cinema	27 cinemas
	245 screens	3 screens	None	4 screens	252 screens

Totals	51 cinemas	3 cinemas	3 cinemas	1 cinemas	58 cinemas
	429 screens	14 screens	29 screens	4 screens	476 screens

[1] Cinemas owned and operated through consolidated, but not wholly owned subsidiaries.

[2] Cinemas owned and operated through unconsolidated associates.

[3] Cinemas in which we have no ownership interest, but which are operated by us under management agreements.

[4] 33.3% unincorporated joint venture interest.

[5] 50% unincorporated joint venture interest.

We focus on the ownership and/or operation of three categories of cinemas:

first, modern stadium seating multiplex cinemas featuring conventional film product;

second, specialty and art cinemas, such as our Angelika Film Centers in Manhattan, Dallas, Plano, and Fairfax, Virginia and the Rialto cinema chain in New Zealand; and

third, in certain markets, including New York City and particularly small town markets that will not support the development of a modern stadium design multiplex cinema, conventional sloped floor cinemas.

We also have various premium class offerings, including luxury seating, premium audio, private lounges, cafés and bar service, and other amenities, in certain of our cinemas and are in the process of converting certain of our other existing cinemas to provide this premium offering as well.

Although we operate cinemas in three jurisdictions, the general nature of our operations and operating strategies does not vary materially from jurisdiction to jurisdiction. In each jurisdiction, our gross receipts are primarily from box office receipts, concession sales, and screen advertising. Our ancillary revenue is created principally from theater rentals (for example, for film festivals and special events), ancillary programming (such as concerts and sporting events), and internet advertising and ticket sales.

Our cinemas generated approximately 66% of their 2014 revenue from box office receipts. Ticket prices vary by location and we offer reduced rates for senior citizens, children and, in certain markets, military and students.

Show times and features are placed in advertisements in local newspapers, internet sites, and on our various websites. In the United States, film distributors may also advertise certain feature films in various print,

radio and television media, as well as on the internet and those costs are generally paid by distributors. In Australia and New Zealand, the exhibitor typically pays the costs of local newspaper film advertisements, while the distributors are responsible for the cost of any national advertising campaign. Additionally, we are increasing our presence in social media and, thereby reducing our dependency on print advertising.

Concession sales accounted for approximately 28% of our total 2014 cinema revenue. Although certain cinemas have licenses for the sale and consumption of alcoholic beverages, concession products are primarily popcorn, candy, and soda.

Screen advertising and other revenue contribute approximately 6% of our total 2014 cinema revenue. With the exception of certain rights that we have retained to sell to local advertisers, generally speaking, we are not in the screen advertising business and nationally recognized screen-advertising companies provide such advertising for us.

In New Zealand, we also own a one-third interest in Rialto Distribution Rialto Distribution, an unincorporated joint venture, is engaged in the business of distributing art film in New Zealand and Australia. The remaining two-thirds interest is owned by the founders of Rialto Distribution, who have been in the art film distribution business since 1993.

Management of Cinemas

With the exception of our three unconsolidated cinemas, we manage all of our cinemas with executives located in Los Angeles, Manhattan, Melbourne, Australia, and Wellington, New Zealand. Approximately 2,378 individuals were employed (on a full time or part time basis) in our cinema operations in 2014. Our two New Zealand Rialto cinemas are owned by a joint venture in which Reading New Zealand is a 50% joint venture partner. While we are principally responsible for the booking of the cinemas, our joint venture partner, Greater Union, manages the day-to-day operations of these New Zealand cinemas. In addition, we have a one-third interest in a 16-screen Brisbane cinema. Greater Union manages that cinema as well.

Licensing/Pricing

Film product is available from a variety of sources, ranging from the major film distributors such as Paramount Pictures, Twentieth Century Fox, Warner Bros, Buena Vista Pictures (Disney), Sony Pictures Releasing, Universal Pictures and Lionsgate to a variety of smaller independent film distributors. In Australia and New Zealand, some of those major distributors distribute through local unaffiliated distributors. The major film distributors dominate the market for mainstream conventional films. Art and specialty film is distributed through the art and specialty divisions of these major distributors, such as Fox Searchlight and Sony Pictures Classics, and through independent distributors such as The Weinstein Company. Generally speaking, film payment terms are based upon an agreed upon percentage of box office receipts that will vary from film-to-film as films are licensed in Australia, New Zealand and the United States on a film-by-film, theater-by-theater basis.

In certain markets in the US, film may be allocated by the distributor among competitive cinemas, and in other U.S. markets we have access to all available film. With respect to art and specialty film, we, from time-to-time, are unable to license every art and specialty film that we may desire to play. Generally, in the Australian and New Zealand markets, we generally have access to all available film product. The fact that our cinemas in certain markets have a film allocation has not in recent periods been a major impediment to our operations.

Competition

In each of the United States, Australia, and New Zealand, film patrons typically select the cinema that they are going to go to first by selecting the film they want to see, and then by selecting the cinema in which they would prefer to see it. Accordingly, the principal factor in the success or failure of a particular cinema is access to popular film products. If a particular film is only offered at one cinema in a given market, then customers wishing to see that film will, of necessity, go to that cinema. If two or more cinemas in the same market offer the same film, then customers will typically take into account factors such as the relative convenience and quality of the various cinemas. In certain markets, distributors typically take the position that they are free to provide or not provide their films to particular exhibitors, at their complete and absolute discretion, even though the number of “digital prints” is theoretically unlimited. Some competitors, like AMC, are becoming increasing aggressive in their efforts to prevent competitors from access to film product in film zones where they have cinemas.

Competition for films can be intense, depending upon the number of cinemas in a particular market. Our ability to obtain top grossing first run feature films may be adversely impacted by our comparatively small size,

and the limited number of screens we can supply to distributors. Moreover, in the United States, because of the dramatic consolidation of screens into the hands of a few very large and powerful exhibitors such as Regal and AMC, these mega-exhibition companies are in a position to offer distributors access to many more screens in major markets than we can. Accordingly, distributors may decide to give preference to these mega-exhibitors when it comes to licensing top grossing films, rather than deal with independents such as ourselves. The situation is different in Australia and New Zealand, where typically every major multiplex cinema has access to all of the film currently in distribution, regardless of the ownership of that multiplex cinema. However, we have suffered somewhat in these markets from competition from boutique operators, who are able to book top grossing commercial films for limited runs, thus increasing competition for customers wishing to view such top grossing films.

Once a patron has selected the film, the choice of cinema is typically impacted by the quality of the cinema experience offered, weighed against convenience and cost. For example, most cinema patrons seem to prefer a modern stadium design multiplex to an older sloped floor cinema, and to prefer a cinema that either offers convenient access to free parking (or public transport) over a cinema that does not. However, if the film they desire to see is only available at a limited number of locations, they will typically choose the film over the quality of the cinema and/or the convenience of the cinema. Generally speaking, our cinemas are modern multiplex cinemas with good and convenient parking. As discussed further below, the availability of 3D or digital technology and/or premium class seating can also be a factor in the preference of one cinema over another.

In recent periods, a number of cinemas have been opened or re-opened featuring luxury seating and/or expanded food and beverage service, including the sale of alcoholic beverages and food served to the seat. We have for a number of years offered alcoholic beverages in certain of our Australia and New Zealand cinemas and at certain of our Angelika Film Centers in the U.S. We are currently working to upgrade the seating and food and beverage offerings (including the offering of alcoholic beverages) at a number of our existing locations.

The film exhibition markets in the United States, Australia, and New Zealand are to a certain extent dominated by a limited number of major exhibition companies. The principal exhibitors in the United States are Regal (with 7,367 screens in 574 cinemas), AMC (with 4,968 screens in 342 cinemas), Cinemark (with 5,603 screens in 488 cinemas), and Carmike (with 2,896 screens in 273 cinemas). As of December 31, 2014, we were the 11th largest exhibitor with 1% of the box office in the United States with 252 screens in 27 cinemas.

The principal exhibitors in Australia are Greater Union, which does business under the Event name (a subsidiary of Amalgamated Holdings Limited), Hoyts Cinemas (“Hoyts”), and Village. The major exhibitors control approximately 65% of the total cinema box office: Event 30%, Hoyts 20%, and Village 15%. Event has 434 screens nationally, Hoyts 333 screens, and Village 207 screens. By comparison, our 149 screens (excluding any partnership theaters) represent approximately 7% of the total box office.

The principal exhibitors in New Zealand are Event with 98 screens nationally and Hoyts with 63 screens. Reading has 46 screens (excluding partnerships). The major exhibitors in New Zealand control approximately 57% of the total box office: Event 37% and Hoyts 20%. Reading has 12% of the market (Event and Reading market share figures exclude any partnership theaters).

Greater Union is the owner of the Birch Carroll & Coyle chain in Australia and purchased Sky Cinemas in New Zealand during 2010. In addition, generally speaking, all new multiplex cinema projects announced by Village are being jointly developed by a joint venture comprised of Greater Union and Village. These companies have substantial capital resources. Village had a publicly reported consolidated net worth of approximately $539.3 million (AUS$572.1 million) at June 30, 2014. The Greater Union organization does not separately publish financial reports, but its parent, Amalgamated Holdings, had a publicly reported consolidated net worth of approximately $867.6 million (AUS$920.4 million) at June 30, 2014. Hoyts is privately held and does not publish financial reports. Hoyts was sold in December 2014 by Pacific Equity Partners to a Chinese private equity group, Sun Xishuang.

In Australia, the industry is somewhat vertically integrated in that Roadshow Film Distributors, a subsidiary of Village, serves as a distributor of film in Australia and New Zealand for Warner Brothers. Films produced or distributed by the majority of the local international independent producers are also distributed by Roadshow Film Distributors. Hoyts is also involved in film production and distribution.

Digital Exhibition

After years of uncertainty as to the future of digital exhibition and the impact of this technology on cinema exhibition, it became clear in 2012 that the industry must go digital. We have now completed the conversion of all of our U.S., Australian, and New Zealand cinema operations to digital projection. We anticipate that the cost of this conversion, over time, will be covered in substantial part by the receipt of “virtual print fees” paid by film distributors for the use of such digital projection equipment.

In-Home Competition

The “in-home” entertainment industry has experienced significant leaps in recent periods in both the quality and affordability of in-home entertainment systems and in the accessibility to and quality of entertainment programming through cable, satellite, internet distribution channels, and DVD. The success of these alternative distribution channels put additional pressure on film distributors to reduce and/or eliminate the time period between theatrical and secondary release dates. These are issues common to both our U.S. and international cinema operations.

Competitive issues are discussed in greater detail above under the caption, Competition, and under the caption, Item 1A - Risk Factors.

Seasonality

Major films are generally released to coincide with holidays. With the exception of Christmas and New Year’s Days, this fact provides some balancing of our revenue because there is no material overlap between holidays in the United States and those in Australia and New Zealand. Distributors will delay, in certain cases, releases in Australia and New Zealand to take advantage of Australian and New Zealand holidays that are not celebrated in the United States.

Employees

We have 75 full-time executive and administrative employees and approximately 2,378 cinema employees. Some of our cinema employees in Wellington, Rotorua, and Christchurch, New Zealand are unionized, as are our projectionists in Hawaii. None of our other employees are subject to union contracts. Our union contracts with respect to our New Zealand employees have been renewed through to 2015. None of our Australian-based employees is unionized. Overall, we are of the view that the existence of these contracts does not materially increase our costs of labor or our ability to compete. We believe our relations with our employees to be generally good.

Our Real Estate Activities

Our real estate activities have historically consisted principally of:

the ownership of fee or long-term leasehold interests in properties used in our cinema exhibition activities or which were acquired for the development of cinemas or cinema based real estate development projects;

the acquisition of fee interests in land for general real estate development;

the leasing to production companies of our live theaters; and

the redevelopment of our existing fee-owned cinema or live theater sites to their highest and best use.

While we report our real estate as a separate segment, it has historically operated as an integral portion of our overall business and, again historically, has principally been in support of that business. In recent periods, however, we have acquired or developed properties that do not have any cinema or other entertainment component. As opportunities for cinema development become more limited, it is likely that our real estate activities will continue to expand beyond the development of entertainment-oriented properties.

Our real estate activities, holdings and developments are described in greater detail in Item 2 – Properties.

Item 1A – Risk Factors

Investing in our securities involves risk. Set forth below is a summary of various risk factors that you should consider in connection with your investment in our company. This summary should be considered in the context of our overall Annual Report on Form 10K, as many of the topics addressed below are discussed in significantly greater detail in the context of specific discussions of our business plan, our operating results, and the various competitive forces that we face.

Business Risk Factors

We are currently engaged principally in the cinema exhibition and real estate businesses. Since we operate in two business segments (cinema exhibition and real estate), we discuss separately below the risks we believe to be material to our involvement in each of these segments. We have discussed separately certain risks relating to the international nature of our business activities, our use of leverage, and our status as a controlled corporation. Please note, that while we report the results of our live theater operations as real estate operations – since we are principally in the business of renting space to producers rather than in licensing or producing plays ourselves – the cinema exhibition and live theater businesses share certain risk factors and are, accordingly, discussed together below.

Cinema Exhibition and Live Theater Business Risk Factors

We operate in a highly competitive environment with many competitors who are significantly larger and may have significantly better access to funds than do we.

We are a comparatively small cinema operator and face competition from much larger cinema exhibitors. These larger exhibitors are able to offer distributors more screens in more markets – including markets where they may be the exclusive exhibitor – than can we. In some cases, faced with such competition, we may not be able to get access to all of the films we want, which may adversely affect our revenue and profitability.

These larger competitors may also enjoy (i) greater cash flow, which can be used to develop additional cinemas, including cinemas that may be competitive with our existing cinemas, (ii) better access to equity capital and debt, and (iii) better visibility to landlords and real estate developers, than do we.

In the case of our live theaters, we compete for shows not only with other “for profit” off-Broadway theaters, but also with not-for-profit operators and, increasingly, with Broadway theaters. We believe our live theaters are generally competitive with other off-Broadway venues. However, due to the increased cost of staging live theater productions, we are seeing an increasing tendency for plays that would historically have been staged in an off-Broadway theater, moving directly to larger Broadway venues.

We face competition from other sources of entertainment and other entertainment delivery systems.

Both our cinema and live theater operations face competition from developing “in-home” sources of entertainment. These include competition from cable and satellite television, Video on Demand (“VOD”), DVD, the internet and other sources of entertainment, and video games. The quality of in-house entertainment systems, as well as programming available on an in-home basis has increased, while the cost to consumers of such systems (and such programming) has decreased in recent periods, and some consumers may prefer the security of an ”in-home” entertainment experience to the more public experience offered by our cinemas and live theaters. Film distributors have been responding to these developments by, in some cases, decreasing or eliminating the period of time between cinema release and the date such product is made available to “in-home” forms of distribution.

The narrowing and/or elimination of this so-called “window” for cinema exhibition may be problematic for the cinema exhibition industry. However, to date, indications by the major film distributors to continue to narrow or eliminate the window have been strenuously resisted by the cinema exhibition industry and we view the total elimination of the cinema exhibition window by major film distributors, while theoretically possible, to be unlikely.

However, there is the risk that, over time, distributors may move towards simultaneous release of motion picture product in multiple channels of distribution. Also, some traditional in-home distributors have begun the production of full-length movies, specifically for the purpose of direct or simultaneous release to the in-home market. These factors may adversely affect the competitive advantage enjoyed by cinemas over “in-home” forms of entertainment, as it may be that both the cinema market and the “in-home” market will have simultaneous access to the same motion picture product. In 2014, a number of movies were released on a simultaneous basis to movie

exhibitors and to in-home markets. It is likely that this trend will continue, making it increasingly important for exhibitors to enhance the convenience and quality of the theater-going experience.

We also face competition from various other forms of “beyond-the-home” entertainment, including sporting events, concerts, restaurants, casinos, video game arcades, and nightclubs. Our cinemas also face competition from live theaters and vice versa.

Our cinema operations depend upon access to film that is attractive to our patrons and our live theater operations depend upon the continued attractiveness of our theaters to producers.

Our ability to generate revenue and profits is largely dependent on factors outside of our control, specifically, the continued ability of motion picture and live theater producers to produce films and plays that are attractive to audiences, the amount of money spent by film distributors to promote their motion pictures, and the willingness of these producers to license their films on terms that are financially viable to our cinemas and to rent our theaters for the presentation of their plays. To the extent that popular movies and plays are produced, our cinema and live theater activities are ultimately dependent upon our ability, in the face of competition from other cinema and live theater operators, to book these movies and plays into our facilities, and to provide a superior customer offering.

We rely on film distributors to supply the films shown in our theatres. In the U.S., the film distribution business is highly concentrated, with seven major film distributors accounting for approximately 89.1% of U.S. box office revenues. Numerous antitrust cases and the consent decree resulting from these antitrust cases affect the distribution of films. The consent decree binds major film distributors to license films to exhibitors on a theatre-by-theatre and film-by-film basis. Consequently, we cannot guarantee a supply of films by entering into long-term arrangements with major distributors. We are therefore required to negotiate licenses for each film and for each theatre. A deterioration in our relationship with any of the seven major film distributors could adversely affect our ability to obtain commercially successful films and to negotiate favorable licensing terms for such films, both of which could adversely affect our business and operating results.

Adverse economic conditions could materially affect our business by reducing discretionary income and by limiting or reducing sources of film and live theater funding.

Cinema and live theater attendance is a luxury, not a necessity. Accordingly, a decline in the economy resulting in a decrease in discretionary income, or a perception of such a decline, may result in decreased discretionary spending, which could adversely affect our cinema and live theater businesses. Adverse economic conditions can also affect the supply side of our business, as reduced liquidity can adversely affect the availability of funding for movies and plays. This is particularly true in the case of Off-Broadway plays, which are often times financed by high net worth individuals (or groups of such individuals) and that are very risky due to the absence of any ability to recoup investment in secondary markets like DVD, cable, satellite or internet distribution.

Our screen advertising revenue may decline.

Over the past several years, cinema exhibitors have been looking increasingly to screen advertising as a way to boost income. No assurances can be given that this source of income will be continuing or that the use of such advertising will not ultimately prove to be counterproductive by giving consumers a disincentive to choose going to the movies over “in-home” entertainment alternatives.

We face uncertainty as to the timing and direction of technological innovations in the cinema exhibition business and as to our access to those technologies.

We have converted all of our cinema auditoriums to digital projection. However, no assurances can be given that other technological advances will not require us to make further material investments in our cinemas or face loss of business. Also, equipment is currently being developed for holographic or laser projection. The future of these technologies in the cinema exhibition industry is uncertain.

We face competition from new competitors offering food and beverage as an integral part of their cinema offerings.

A number of new entrants, such as Alamo Drafthouse, offering an expanded food and beverage menu (including the sale of alcoholic beverages) have emerged in recent periods. In addition, some competitors are converting existing cinemas to provide such expanded menu offerings. The existence of such cinemas may alter

traditional cinema selection practices of moviegoers, as they seek out cinemas with such expanded offerings as a preferred alternative to traditional cinemas.

Real Estate Development and Ownership Business Risks

We operate in a highly competitive environment, in which we must compete against companies with much greater financial and human resources than we have.

We have limited financial and human resources, compared to our principal real estate competitors. In recent periods, we have relied heavily on outside professionals in connection with our real estate development activities. Many of our competitors have significantly greater resources and may be able to achieve greater economies of scale than we can.

Risks Related to the Real Estate Industry Generally

Our financial performance will be affected by risks associated with the real estate industry generally.

Events and conditions generally applicable to developers, owners, and operators of real property will affect our performance as well. These include (i) changes in the national, regional and local economic climate, (ii) local conditions such as an oversupply of, or a reduction in demand, for commercial space and/or entertainment-oriented properties, (iii) reduced attractiveness of our properties to tenants, (iv) the rental rates and capitalization rates applicable to the markets in which we operate and the quality of properties that we own, (v) competition from other properties, (vi) inability to collect rent from tenants, (vii) increased operating costs, including labor, materials, real estate taxes, insurance premiums, and utilities, (viii) costs of complying with changes in government regulations, (ix) the relative illiquidity of real estate investments, and (x) decreases in sources of both construction and long-term lending as traditional sources of such funding leave or reduce their commitments to real estate-based lending. In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in declining rents or increased lease defaults.

We may incur costs complying with the Americans with Disabilities Act and similar laws.

Under the Americans with Disabilities Act and similar statutory regimes in Australia and New Zealand or under applicable state or local law, all places of public accommodation (including cinemas and theaters) are required to meet certain governmental requirements related to access and use by persons with disabilities. A determination that we are not in compliance with those governmental requirements with respect to any of our properties could result in the imposition of fines or an award of damages to private litigants. The cost of addressing these issues could be substantial.

Illiquidity of real estate investments could impede our ability to respond to adverse changes in the performance of our properties.

Real estate investments are relatively illiquid and, therefore, tend to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. Many of our properties are either (i) “special purpose” properties that could not be readily converted to general residential, retail or office use, or (ii) undeveloped land. In addition, certain significant expenditures associated with real estate investment, such as real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment and competitive factors may prevent the pass-through of such costs to tenants.

Real estate development involves a variety of risks.

Real estate development involves a variety of risks, including the following:

The identification and acquisition of suitable development properties. Competition for suitable development properties is intense. Our ability to identify and acquire development properties may be limited by our size and resources. Also, as we and our affiliates are considered to be “foreign owned” for purposes of certain Australian and New Zealand statutes, we have been in the past, and may in the future be, subject to regulations that are not applicable to other persons doing business in those countries.

The procurement of necessary land use entitlements for the project. This process can take many years, particularly if opposed by competing interests. Competitors and community groups (sometimes funded by such competitors) may object based on various factors, including, for example, impacts on density,

parking, traffic, noise levels and the historic or architectural nature of the building being replaced. If they are unsuccessful at the local governmental level, they may seek recourse to the courts or other tribunals. This can delay projects and increase costs.

The construction of the project on time and on budget. Construction risks include the availability and cost of finance; the availability and costs of material and labor; the costs of dealing with unknown site conditions (including addressing pollution or environmental wastes deposited upon the property by prior owners); inclement weather conditions; and the ever-present potential for labor-related disruptions.

The leasing or sell-out of the project. Ultimately, there are risks involved in the leasing of a rental property or the sale of a condominium or built-for-sale property. For our entertainment-themed retail centers (“ETRCs”), the extent to which our cinemas can continue to serve as an anchor tenant will be influenced by the same factors as will influence generally the results of our cinema operations. Leasing or sale can be influenced by economic factors that are neither known nor knowable at the commencement of the development process and by local, national, and even international economic conditions, both real and perceived.

The refinancing of completed properties. Properties are often developed using relatively short-term loans. Upon completion of the project, it may be necessary to find replacement financing for these loans. This process involves risk as to the availability of such permanent or other take-out financing, the interest rates, and the payment terms applicable to such financing, which may be adversely influenced by local, national, or international factors. To date, we have been successful in negotiating development loans with “roll over” or other provisions mitigating our need to refinance immediately upon completion of construction.

The ownership of properties involves risk.

The ownership of investment properties involves risks, such as: (i) ongoing leasing and re-leasing risks, (ii) ongoing financing and re-financing risks, (iii) market risks as to the multiples offered by buyers of investment properties, (iv) risks related to the ongoing compliance with changing governmental regulation (including, without limitation, environmental laws and requirements to remediate environmental contamination that may exist on a property (such as, by way of example, asbestos), even though not deposited on the property by us), (v) relative illiquidity compared to some other types of assets, and (vi) susceptibility of assets to uninsurable risks, such as biological, chemical or nuclear terrorism, or risks that are subject to caps tied to the concentration of such assets in certain geographic areas, such as earthquakes. Furthermore, as our properties are typically developed around an entertainment use, the attractiveness of these properties to tenants, sources of finance and real estate investors will be influenced by market perceptions of the benefits and detriments of such entertainment type properties.

A number of our assets are in geologically active areas, presenting risk of earthquake and land movement.

We have cinemas in California and New Zealand, areas which present a greater risk of earthquake and/or land movement than other locations. New Zealand has in recent periods had several major earthquakes damaging our facilities in Christchurch and Wellington. The ability to insure for such casualties is limited and may become more difficult and/or more expensive in future periods.

International Business Risks

Our international operations are subject to a variety of risks, including the following:

Risk of currency fluctuations. While we report our earnings and assets in US dollars, substantial portions of our revenue and of our obligations are denominated in either Australian or New Zealand dollars. The value of these currencies can vary significantly compared to the US dollar and compared to each other. We typically have not hedged against these currency fluctuations, but rather have relied upon the natural hedges that exist as a result of the fact that our film costs are typically fixed as a percentage of the box office, and our local operating costs and obligations are likewise typically denominated in local currencies. However, we do have debt at our parent company level that is serviced by our overseas cash flow and our ability to service this debt could be adversely impacted by declines in the relative value of the Australian and New Zealand dollar compared to the US dollar. $32.4 million (AUS$39.6 million) of our Australian cash and $7.7 million (NZ$9.9 million) of our New Zealand cash is denominated in local currencies and subject to the risk of currency exchange rate fluctuations. Also, our use of local borrowings to mitigate the business risk of currency fluctuations has reduced our flexibility to move cash between jurisdictions. Set forth below is a chart of the exchange ratios between these three currencies over the past twenty years:

Risk of adverse government regulation. At the present time, we believe that relations between the United States, Australia, and New Zealand are good. However, no assurances can be given that this relationship will continue and that Australia and New Zealand will not in the future seek to regulate more highly the business done by US companies in their countries.

Risk of adverse labor relations. Any deterioration in labor relations could lead to an increased cost of labor (including future government requirements with respect to pension liabilities, disability insurance and health coverage, and vacations and leave).

Risks Associated with Certain Discontinued Operations

Certain of our subsidiaries were previously in industrial businesses. As a consequence, properties that are currently owned or may have in the past been owned by these subsidiaries may prove to have environmental issues. Where we have knowledge of such environmental issues and are in a position to make an assessment as to our exposure, we have established what we believe to be appropriate reserves, but we are exposed to the risk that currently unknown problems may be discovered. These subsidiaries are also exposed to potential claims related to exposure of former employees to coal dust, asbestos, and other materials now considered to be, or which in the future may be found to be, carcinogenic or otherwise injurious to health.

Operating Results, Financial Structure and Borrowing Risk

From time to time, we may have negative working capital.

In recent years, as we have invested our cash in new acquisitions and the development of our existing properties, we have from time-to-time had negative working capital. This negative working capital is typical in the cinema exhibition industry because our short-term liabilities are in part financing our long-term assets instead of long-term liabilities financing short-term assets as is the case in other industries such as manufacturing and distribution.

We have substantial short to medium term debt.

Generally speaking, we have historically financed our operations through relatively short-term debt. No assurances can be given that we will be able to refinance this debt, or if we can, that the terms will be reasonable.

However, as a counterbalance to this debt, we have significant unencumbered real property assets, which could be sold to pay debt or encumbered to assist in the refinancing of existing debt, if necessary.

In February 2007, we issued $50.0 million in 20-year Trust Preferred Securities (“TPS”), and utilized the net proceeds principally to retire short-term bank debt in New Zealand and Australia. The interest rate on our TPS was only fixed for five years. Additionally, we used US dollar denominated obligations to retire debt denominated in New Zealand and Australian dollars, which has increased our exposure to currency risk. In the first quarter of 2009, we repurchased $22.9 million of our TPS at a 50% discount.

At the present time, corporate borrowers both domestically and internationally are facing greater than normal constraints on liquidity. No assurances can be given that we will be able to refinance these debts as they become due.

We have substantial lease liabilities.

Most of our cinemas operate in leased facilities. These leases typically have “cost of living” or other rent adjustment features and require that we operate the properties as cinemas. A downturn in our cinema exhibition business might, depending on its severity, adversely affect the ability of our cinema operating subsidiaries to meet these rental obligations. Even if our cinema exhibition business remains relatively constant, cinema level cash flow will likely be adversely affected unless we can increase our revenue sufficiently to offset increases in our rental liabilities. Unlike property rental leases, our newly added digital equipment leases do not have “cost of living” or other lease adjustment features.

Our stock is thinly traded.

Our stock is thinly traded, with an average daily volume in 2014 of only approximately 56,000 shares. This can result in significant volatility, as demand by buyers and sellers can easily get out of balance.

Ownership and Management Structure, Corporate Governance, and Change of Control Risks

Pending disputes among the Cotter family raise uncertainty regarding control of our company, and may distract the time and attention of our officers and directors from our business and operations or interfere with the effective management of our company.

As we have previously reported, the Reading Voting Trust established by James J. Cotter, Sr., our deceased former Chairman of the Board and Chief Executive Officer and former controlling stockholder, holds at least 696,080 shares of our Class B Voting Stock (“Voting Stock”) constituting approximately 46.5% of the voting power of our outstanding capital stock. The Reading Voting Trust also may hold an additional 327,808 shares of Voting Stock, constituting approximately 21.9% of the voting power of our outstanding capital stock, based upon an assignment of such shares purportedly executed by Mr. Cotter, Sr., prior to this death. We are informed that, in the event these shares were not effectively transferred to the Reading Voting Trust, they would eventually pour over into the Trust. In the meantime, however, they may instead make up part of the Estate of James J. Cotter, Deceased (the “Estate” and collectively with the Reading Voting Trust and the James J. Cotter Living Trust, the “Cotter Estate”) that is being administered in the State of Nevada. On December 22, 2014, the District Court of Clark County, Nevada, appointed Ellen Cotter, the Chair of our Board of Directors and our Chief Operating Officer- Domestic Cinemas and Margaret Cotter, Vice Chairman of our Board of Directors, as co-executors of the Estate.

A 2013 amended and restated declaration of trust names Margaret Cotter as the sole trustee of the Reading Voting Trust and names James J. Cotter, Jr., our President and Chief Executive Officer and a director of our company, as the first alternate trustee in the event that Margaret Cotter is unable or unwilling to act as trustee. A 2014 partial amendment to the declaration of trust, however, names Margaret Cotter and James J. Cotter, Jr. as co-trustees of the Reading Voting Trust and provides that, in the event they are unable to agree upon an important trust decision, they shall rotate the trusteeship between them annually on each January 1st. It further directs the trustees of the Reading Voting Trust to, among other things, vote such shares of our Voting Stock held by the Reading Voting Trust in favor of the election of Ellen Cotter, Margaret Cotter and James J. Cotter, Jr. to our board of directors.

On February 6, 2015, Ellen Cotter and Margaret Cotter filed a Petition in the Superior Court of the State of California, County of Los Angeles, captioned In re James J. Cotter Living Trust dated August 1, 2000 (Case No. BP159755). The Petition, among other things, seeks relief that could determine the validity of the 2014 partial amendment and who, as between Margaret Cotter and James J. Cotter Jr., has authority as trustee or co-trustees of the Reading Voting Trust to vote the Reading Voting Trust’s shares of our Voting Stock (in whole or in part) and the scope and extent of such authority. James J. Cotter, Jr. has advised us that he intends to file an opposition to the Petition.

Although the company is not a party to this lawsuit and takes no position as to the claims asserted or the relief sought therein, the matters raised in the Petition create uncertainty regarding control of our company. Until these matters can be resolved, it is unclear whether the Reading Voting Trust owns a majority of our outstanding shares of Voting Stock and, as such, can determine the outcome of the election of directors of our company and of any other matters that may be presented for approval by our stockholders. It also is unclear whether Margaret Cotter, or she and James J. Cotter, Jr., together, has authority as trustee or co-trustees of the Reading Voting Trust to vote the shares of our Voting Stock currently held by the Reading Voting Trust or any additional shares of our Voting Stock that may be determined to be held by the Reading Voting Trust instead of the Estate.

These pending matters may distract the Cotter family’s time and attention from the business and operations of our Company and thus have an adverse effect on its effective management.

The interests of our controlling stockholder may conflict with your interests.

As of December 31, 2014, the Cotter Estate beneficially owns 70.4% of our outstanding Class B Stock. Our Class A Stock is non-voting, while our Class B Stock represents all of the voting power of our Company. For as long as the Cotter Estate continues to own shares of common stock representing more than 50% of the voting power of our common stock. The Cotter Estate will be able to elect all of the members of our board of directors and determine the outcome of all matters submitted to a vote of our stockholders, including matters involving mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional shares of common stock or other equity securities and the payment of dividends on common stock. The Cotter Estate will also have the power to prevent or cause a change in control, and could take other actions that might be desirable to the Cotter Estate but not to other stockholders. In addition, the Cotter Estate and its affiliates have controlling interests in companies in related and unrelated industries. In the future, we may participate in transactions with these companies (see Note 25 – Related Parties and Transactions to our 2014 Consolidated Financial Statements).

Since we are a Controlled Company, our Directors have determined to take advantage of certain exemptions provide by the NASDAQ from the corporate governance rules adopted by that Exchange.

Generally speaking, the NASDAQ requires listed companies to meet certain minimum corporate governance provisions. However, a “Controlled Corporation”, such as we, may elect not to be governed by certain of these provisions. Our board of directors has elected to exempt our Company from requirements that (i) at least a majority of our directors be independent, (ii) nominees to our board of directors be nominated by a committee comprised entirely of independent directors or by a majority of our Company’s independent directors, and (iii) the compensation of our chief executive officer be determined or recommended to our board of directors by a compensation committee comprised entirely of independent directors or by a majority of our Company’s independent directors. Notwithstanding the determination by our board of directors to opt-out of these NASDAQ requirements, a majority of our board of directors is nevertheless currently comprised of independent directors, and our compensation committee is nevertheless currently comprised entirely of independent directors.

We depend on key personnel for our current and future performance.

Our current and future performance depends to a significant degree upon the continued contributions of our senior management team and other key personnel. The loss or unavailability to us of any member of our senior management team or a key employee could significantly harm us. We cannot assure you that we would be able to locate or employ qualified replacements for senior management or key employees on acceptable terms.

Item 1B - Unresolved Staff Comments

None.

Item 2 – Properties

Executive and Administrative Offices

We lease approximately 11,700 square feet of office space in Los Angeles, California to serve as our executive headquarters. We own an 8,100 square foot office building in Melbourne, Australia, approximately 5,200 square feet of which serves as the headquarters for our Australian and New Zealand operations (the remainder being leased to an unrelated third party). We maintain our accounting personnel and certain IT and operational personnel in approximately 5,900 square foot of offices located in our Wellington Courtenay Central ETRC. We occupy approximately 3,500 square feet at our Village East leasehold property for administrative purposes.

Entertainment Properties

Entertainment Use Leasehold Interests

As of December 31, 2014, we lease approximately 1.8 million square feet of completed cinema space in the United States, Australia, and New Zealand as follows:

On December 31, 2013, we settled a management fee claim that we had with the owner of the lease interest in the Plano, Texas cinema that we had managed since 2003. As part of the settlement, we acquired that entity. Also, in September 2013, we took back a cinema at one of our fee properties in New Zealand and have refurbished that cinema. The cinema was already leased to a competitor at the time we acquired it in May 2007. During the first quarter of 2014, we entered into a lease for a new state-of-the-art Angelika Film Center currently being developed by Edens in the Union Market area of Washington D.C. In December 2014, we entered into a lease for a new luxury cinema, under the Consolidated Theatres brand, at the new Ka Makana Ali'i Shopping Center being developed in Kapolei, Hawaii by an affiliate of DeBartolo Development and finalized terms for a new 8-screen cinema complex in Auckland, New Zealand.

Fee Interests

In Australia, as of December 31, 2014, we own approximately 900,000 square feet of land at seven locations. Most of this land is located in the greater metropolitan areas of Brisbane, Melbourne, Perth, and Sydney. This figure does not include our 50.6-acre Burwood site and our 3.3-acre Moonee Pond site, which in both cases have been sold (but have yet to be recognized as a sale under U.S. GAAP). Of these fee interests, approximately 138,000 square feet are currently improved with cinemas.

In New Zealand, as of December 31, 2014, we own approximately 3.4 million square feet of land at seven locations. This includes the Courtney Central ETRC in Wellington, the 70.3-acre Manukau site, and the fee interests underlying four cinemas in New Zealand, which properties include approximately 21,000 square feet of ancillary retail space.

In the United States, as of December 31, 2014, we own approximately 134,000 square feet of improved real estate comprised of four live theater buildings, which include approximately 58,000 square feet of leasable space, and the fee interest in our Cinemas 1, 2, 3 in Manhattan (held through a limited liability company in which we have a 75% managing member interest). We also own 202 acres of unimproved land in Coachella Valley, California, held through a limited liability company in which the Cotter Estate has a 50% non-managing interest.

Live Theaters (“Liberty Theaters”)

Included among our real estate holdings are four “Off Broadway” style live theaters, operated through our Liberty Theaters subsidiary. We license theater auditoriums to the producers of “Off Broadway” theatrical productions and provide various box office and concession services. The terms of our licenses are, naturally, principally dependent upon the commercial success of our tenants. STOMP has been playing at our Orpheum Theatre in excess of 20 years. While we attempt to choose productions that we believe will be successful, we have no control over the production itself. At the current time, we have three single auditorium theaters in Manhattan:

the Minetta Lane (399 seats);

the Orpheum (347 seats); and

the Union Square (499 seats).

We also own a four-auditorium theater complex, the Royal George in Chicago (main stage 452 seats, cabaret 199 seats, great room 100 seats and gallery 60 seats). Two of the properties, the Union Square and the Royal George, have ancillary retail and office space.

Liberty Theaters is primarily in the business of renting theater space. However, we may from time-to-time participate as an investor in a play, which can help facilitate the production of the play at one of our facilities, and do from time-to-time rent space on a basis that allows us to share in a production’s revenue or profits. Revenue, expense, and profits are reported as a part of the real estate segment of our business.

Joint Venture Cinema Interests

We also hold real estate through several unincorporated joint ventures, two 75%-owned subsidiaries, and one majority-owned subsidiary, as described below:

in Australia, we own a 75% interest in a subsidiary company that leases two cinemas with eleven screens in two Australian country towns, and a 33% unincorporated joint venture interest in a 16-screen leasehold cinema in a suburb of Brisbane.

in New Zealand, we own a 50% unincorporated joint venture interest in two cinemas with 13 screens in the New Zealand cities of Auckland and Dunedin.

In the United States, we own a 75% managing member interest in the limited liability company that owns our Cinemas 1, 2, 3 property and a 50% managing member interest in Shadow View Land & Farming, LLC which owns an approximately 202-acre property in Riverside County, California that is currently zoned for residential and approved for over 800 single-family lots.

Operating Property

As of December 31, 2014, we own fee interests in approximately 1.0 million square feet of income-producing properties (including certain properties principally occupied by our cinemas).



	Square Feet of
	Improvements	Percentage	Gross Book Value
Property6	(rental/entertainment)	Leased	(in U.S. Dollars)

Auburn	60000 / 57000
100 Parramatta Road	Plus a 871-space	100%	$27,998,657
Auburn, NSW, Australia	parking structure


Belmont
Knutsford Avenue and	15000 / 45000	100%	$12,758,425
Fulham Street
Belmont, WA, Australia


Bundaberg
1 Johanna Boulevard	0 / 52840	N/A	$1,790,443
Bundaberg, QLD, Australia


Cinemas 1, 2, 37
1003 Third Avenue	0 / 21000	N/A	$24,999,953
Manhattan, NY, USA


Courtenay Central	33000 / 76000
100 Courtenay Place	Plus a 1,086-space	70%	$36,021,239
Wellington, New Zealand	parking structure



	Square Feet of
	Improvements	Percentage	Gross Book Value
Property	(rental/entertainment)	Leased	(in U.S. Dollars)

Dunedin Cinema
33 The Octagon	0 / 25295	N/A	$8,186,274
Dunedin, New Zealand

Invercargill Cinema
29 Dee Street	9000 / 24000	69%	$3,060,830
Invercargill, New Zealand

LA Doheny Condominium8
9255 Doheny Road	0 / 1650	N/A	$552,449
Los Angeles, CA, USA

Lake Taupo Motel9
138-140 Lake Terrace Road	9000 / 0	Short-term rentals	$1,084,539
Taupo, New Zealand
Maitland Cinema
Ken Tubman Drive	0 / 22000	N/A	$1,944,346
Maitland, NSW, Australia
Minetta Lane Theatre
18-22 Minetta Lane	0 / 9000	N/A	$8,617,669
Manhattan, NY, USA
Napier Cinema
154 Station Street	12000 / 18000	100%	$3,344,521
Napier, New Zealand
Newmarket
400 Newmarket Road	93000 / 0
Newmarket, QLD,	Plus a 436-space	100%	$35,681,345
Australia	parking structure
Orpheum Theatre
126 2nd Street	1000 / 5000	100%	$3,565,021
Manhattan, NY, USA
Royal George	37000 / 23000
1633 N. Halsted Street	Plus a 55-space	91%	$3,491,119

Chicago, IL, USA	parking structure
Rotorua Cinema
1281 Eruera Street	0 / 19000	N/A	$2,879,638
Rotorua, New Zealand
Union Square Theatre
100 E. 17th Street	21000 / 17000	100%	$9,721,163
Manhattan, NY, USA
York Street Office
98 York Street	2906/10271	N/A	$2,411,318
South Melbourne, VIC,
Australia

[6] Rental square footage refers to the amount of area available to be rented to third parties and the percentage leased is the amount of such rental square footage currently leased to third parties. A number of our real estate holdings include entertainment components rented to one or more of our subsidiaries at fair market rent. The rental area to such subsidiaries is noted under the entertainment square footage. The gross book value refers to the gross carrying cost of the land and buildings of the property. Book value and rental information are as of December 31, 2014.

[7] This property is owned by a limited liability company in which we hold a 75% managing member interest. The remaining 25% is owned by Sutton Hill Capital, LLC (“SHC”), a company owned in equal parts by the Cotter Estate and a third party.

[8] This property has been sold as of February 25, 2015 for $3.0 million. At December 31, 2014 this asset was classified as an Asset Held for Sale.

[9] On February 21, 2015 this property received an unsolicited purchase offer. The potential purchaser is currently performing due diligence procedures.

Long-Term Leasehold Operating Property

In addition, in certain cases we have long-term leases that we view more akin to real estate investments than cinema leases. As of December 31, 2014, we had approximately 155,000 square foot of space subject to such long-term leases.



	Square Feet of
	Improvements	Percentage	Gross Book Value
Property10	(rental/entertainment)	Leased	(in U.S. Dollars)

Manville	0 / 53000	N/A	$2,341,078


Tower	0 / 16000	N/A	$1,014,352


Village East11	4000 / 38000	100%	$8,922,022


Waurn Ponds	6000 / 38000	100%	$5,781,143

[10] Rental square footage refers to the amount of area available to be rented to third parties, and the percentage leased is the amount of rental square footage currently leased to third parties. A number of our long-term leasehold operating property includes entertainment components rented to one or more of our subsidiaries. The rental area to such subsidiaries is noted under the entertainment square footage. Book value includes the entire investment in the leased property, including any cinema fit-out. Rental and book value information is as of December 31, 2014.

[11] The lease of the Village East provides for a call option pursuant to which Reading may purchase the cinema ground lease for $5.9 million at the end of the lease term in 2020. Additionally, the lease has a put option pursuant to which SHC may require Reading to purchase all or a portion of SHC's interest in the existing cinema lease and the cinema ground lease at any time between July 1, 2013 and December 4, 2019. See Note 25 - Related Parties and Transactions to our 2014 Consolidated Financial Statements.

Investment and Development Property

We are engaged in several investment and development projects relative to our currently undeveloped parcels of land. In addition, we anticipate that redevelopment of one or more of our existing developed properties may also occur.




		Gross Book Value
Property12	Acreage	(in U.S. Dollars)	Status

Auburn, Sydney, NSW, Australia	2.6 acres	$1,902,000	We are actively pursuing the development of the next phase of this property.
Burwood, VIC, Australia	50.6 acres	$42,588,114	Property was contracted to sell in 2014. Currently classified as an Asset Held for Sale.
Coachella, CA, USA	202 acres	$5,510,000	We continue to evaluate our options with regards to this property.
Courtenay Central, Wellington, New Zealand (Including Wakefield and Taranaki)	1.1 acres	$7,086,587	We are actively pursuing the development of the next phase of this property having signed a lease agreement for a Countdown (Woolworths) supermarket to be developed on this site.
Lake Taupo, Taupo, New Zealand	0.5 acre	$1,100,000	On February 21, 2015 this property received an unsolicited purchase offer. The potential purchaser is currently performing due diligence procedures.
Manukau, Auckland, New Zealand	64 acres zoned agricultural and 6.4 acres zoned light industrial	$13,363,008	The bulk of the land is zoned for agriculture and is currently used for horticulture commercial purposes. A development plan has been filed to rezone the property for warehouse, distribution and manufacturing uses. We currently anticipate that this rezoning will be approved. In 2010, we acquired an adjacent property that is zoned industrial, but is currently unimproved. That property links our existing parcel with the existing road network.

Moonee Ponds, Victoria, Australia	3.3 acres	$10,111,562	In November 2013, we entered into a definitive purchase and sale agreement to sell our properties located in Moonee Ponds, Victoria, Australia, with a scheduled closing date of April 16, 2015. Currently classified as an Asset Held for Sale
Newmarket Queensland, Australia	0.62 acres	$4,649,275	We are actively pursuing the development of this property.

[12] A number of our real estate holdings include additional land held for development. In addition, we have acquired certain parcels for future development. The gross book value includes, as applicable, the land, building, development costs, and capitalized interest.

Some of our income operating property and our investment and development property carry various debt encumbrances based on their income streams and geographic locations. For an explanation of our debt and the associated security collateral please see Note 12 – Notes Payable to our 2014 Consolidated Financial Statements.

Other Property Interests and Investments

We own the fee interest in 11 parcels comprising 195 acres in Pennsylvania and Delaware. These acres consist primarily of vacant land. With the exception of certain properties located in Philadelphia (including the raised railroad bed leading to the old Reading Railroad Station), the properties are principally located in rural areas of Pennsylvania and Delaware. These properties are unencumbered by any debt.

Item 3 – Legal Proceedings

Tax Audit/Litigation

The Internal Revenue Service (the “IRS”) has examined the tax return of Reading Entertainment Inc. (“RDGE”) for its tax years ended December 31, 1996 through December 31, 1999 and the tax return of Craig Corporation (“CRG”) for its tax year ended June 30, 1997. These companies are both now wholly owned subsidiaries of the Company, but for the time periods under audit, were not consolidated with the Company for tax purposes.

CRG and the IRS agreed to compromise the claims made by the IRS against CRG and the Tax Court’s order was entered on January 6, 2011. In the settlement, the IRS conceded 70% of its claimed adjustment to income. Instead of a claim for unpaid taxes of $20.9 million plus interest, the effect of settlement on the Reading consolidated group was to require a total federal income tax obligation of $5.4 million, reduced by a federal tax refund of $800,000 and increased by interest of $9.3 million, for a net federal tax liability of $13.9 million as of January 6, 2011. On October 26, 2011, CRG reached an agreement with the IRS for an installment plan to pay off this federal tax liability, including additional interest accruals at the prescribed IRS floating rate. The agreement requires monthly payments of $290,000 over a period of approximately five years. As of December 31, 2014 and 2013, after the payments made during 2014 and 2013, respectively, the remaining federal tax obligation was $5.32 million and $8.3 million, respectively, in tax and interest. Of the $5.32 million owed to the IRS as of December 31, 2014, $3.5 million was recorded as current taxes payable, with the remaining balance being recorded as non-current tax liability. Of the $8.3 million owed to the IRS as of December 31, 2013, $3.5 million was recorded as current taxes payable, with the remaining balance being recorded as non-current tax liability.

The impact of the settlement upon the state taxes of the Reading consolidated group, if the adjustment to income agreed with the IRS were reflected on state returns, would be an obligation of approximately $1.4 million in tax plus interest. As of December 31, 2014, no deficiency has been asserted by the State of California, and we have made no final decision as to the course of action to be followed if a deficiency is asserted.

Environmental and Asbestos Claims

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 unanticipated environmental conditions at properties that we have acquired for development. 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, we have claims brought against us relating to the exposure of former employees of our railroad operations to asbestos and coal dust. These are generally covered by an insurance settlement reached in September 1990 with our insurance carriers. However, this insurance settlement does not cover litigation by people who were not our employees and who may claim 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.

PART II

Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market Price of, and Dividends on, the Registrant’s Common Equity and Related Stockholder Matters

Market Information

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. Historically, we have been listed on the AMEX and due to the 2008 purchase of the AMEX by the NYSE Alternext US; we were listed on that exchange at December 31, 2008. During July 2009, we moved our listing from NYSE Alternext to NASDAQ.

The following table sets forth the high and low closing prices of the RDI and RDIB common stock for each of the quarters in 2014 and 2013 as reported by NASDAQ:



			Class A Stock				Class B Stock
			High		Low		High		Low

2014	Fourth Quarter	$	13.26	$	8.31	$	13.00	$	9.50
	Third Quarter	$	8.84	$	8.00	$	11.50	$	9.70
	Second Quarter	$	8.92	$	6.96	$	10.87	$	8.11
	First Quarter	$	7.60	$	7.15	$	10.23	$	9.00

2013	Fourth Quarter	$	7.49	$	6.15	$	9.00	$	6.99
	Third Quarter	$	6.58	$	6.15	$	7.99	$	6.52
	Second Quarter	$	6.36	$	5.50	$	7.40	$	6.00
	First Quarter	$	6.08	$	5.42	$	7.49	$	5.65

The following table summarizes the securities authorized for issuance under our equity compensation plans:



Plan category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights		Weighted-average exercise price of outstanding options, warrants, and rights	Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders	753,350	$	7.63	1,328,737
Total	753,350	$	7.63	1,328,737

Performance Graph

The following line graph compares the cumulative total stockholder return on Reading International, Inc.’s common stock for the years ended December 31, 2010, 2011, 2012, 2013, and 2014 against the cumulative total

return as calculated by the NASDAQ composite, the motion picture theater operator group, and the real estate operator group.

Holders of Record

The number of holders of record of our Class A Stock and Class B Stock in 2014 was approximately 3,500 and 300, respectively. On March 13, 2015, the closing price per share of our Class A Stock was $13.47 and the closing price per share of our Class B Stock was $16.00.

Dividends on Common Stock

We have never declared a cash dividend on our common stock and we have no current plans to declare a dividend; however, we review this matter on an ongoing basis.

(b) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

None.

During 2014, we purchased 432,252 of Class A Non-voting shares on the open market for $4,069,756. No shares were purchased during 2013.

Item 6 – Selected Financial Data

The table below sets forth certain historical financial data regarding our Company. This information is derived in part from, and should be read in conjunction with our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Annual Report”), and the related notes to the consolidated financial statements (dollars in thousands, except per share amounts).



		At or for the Year Ended December 31,
		2014		2013		2012		2011		2010
Revenue	$	254,748	$	258,221	$	254,430	$	244,979	$	229,322
Operating income	$	22,173	$	20,935	$	19,127	$	18,178	$	13,069
Income (loss) from discontinued operations	$	--	$	--	$	(405)	$	1,888	$	97
Net income (loss)	$	25,644	$	9,145	$	(1,406)	$	10,896	$	(12,034)
Net income (loss) attributable to Reading International, Inc. shareholders	$	25,701	$	9,041	$	(914)	$	9,956	$	(12,650)

Basic earnings (loss) per share – continuing operations	$	1.10	$	0.39	$	(0.02)	$	0.36	$	(0.56)
Basic earnings (loss) per share – discontinued operations	$	--	$	--	$	(0.02)	$	0.08	$	--
Basic earnings (loss) per share	$	1.10	$	0.39	$	(0.04)	$	0.44	$	(0.56)
Diluted earnings (loss) per share – continuing operations	$	1.08	$	0.38	$	(0.02)	$	0.35	$	(0.56)
Diluted earnings (loss) per share – discontinued operations	$	--	$	--	$	(0.02)	$	0.08	$	--
Diluted earnings (loss) per share	$	1.08	$	0.38	$	(0.04)	$	0.43	$	(0.56)

Other Information:
Shares outstanding		23,237,076		23,385,519		23,083,265		22,806,838		22,804,313
Weighted average number of shares outstanding–basic		23,431,855		23,348,003		23,028,596		22,764,666		22,781,392
Weighted average number of shares outstanding–diluted		23,749,221		23,520,271		23,028,596		22,993,135		22,781,392

Total assets	$	401,586	$	386,807	$	428,588	$	430,764	$	430,349
Total debt	$	164,036	$	168,460	$	196,597	$	209,614	$	228,821
Working capital (deficit)	$	(8,819)	$	(71,794)	$	(21,415)	$	(12,844)	$	(57,634)
Stockholders’ equity	$	132,298	$	121,747	$	130,954	$	124,987	$	112,639
EBIT	$	24,916	$	24,020	$	20,416	$	18,664	$	13,900
Depreciation and amortization	$	15,468	$	15,197	$	16,049	$	16,595	$	15,563
Add: Adjustments for discontinued operations	$	--	$	--	$	335	$	365	$	351
EBITDA	$	40,384	$	39,217	$	36,800	$	35,624	$	29,814
Debt to EBITDA	$	4.06	$	4.30	$	5.34	$	5.88	$	7.67
Capital expenditure (including acquisitions)	$	14,914	$	20,082	$	13,723	$	9,376	$	19,371
Number of employees at 12/31		2,596		2,494		2,412		2,263		2,109

EBIT presented above represents net income (loss) adjusted for interest expense (calculated net of interest income) and income tax expense. EBIT is presented for informational purposes to show the significance of depreciation and amortization in the calculation of EBITDA. We use EBIT in our evaluation of our operating results since we believe that it is useful as a measure of financial performance, particularly for us as a multinational company. We believe it is a useful measure of financial performance principally for the following reasons:

since we operate in multiple tax jurisdictions, we find EBIT removes the impact of the varying tax rates and tax regimes in the jurisdictions in which we operate.

in addition, we find EBIT useful as a financial measure that removes the impact from our effective tax rate of factors not directly related to our business operations, such as, whether we have acquired operating assets by purchasing those assets directly, or indirectly by purchasing the stock of a company that might hold such operating assets.

the use of EBIT as a financial measure also (i) removes the impact of tax timing differences that may vary from time-to-time and from jurisdiction-to-jurisdiction, (ii) allows us to compare our performance to that achieved by other companies, and (iii) is useful as a financial measure that removes the impact of our historically significant net loss carry-forwards.

the elimination of net interest expense helps us to compare our operating performance to those companies that may have more or less debt than we do.

EBITDA presented above is net income (loss) adjusted for interest expense (again, calculated net of interest income), income tax expense, and in addition depreciation and amortization expense. We use EBITDA in our evaluation of our performance since we believe that EBITDA provides a useful measure of financial performance and value. We believe this principally for the following reasons:

we believe that EBITDA is an industry comparative measure of financial performance. It is, in our experience, a measure commonly used by analysts and financial commentators who report on the cinema exhibition and real estate industries and a measure used by financial institutions in underwriting the creditworthiness of companies in these industries. Accordingly, our management monitors this calculation as a method of judging our performance against our peers and market expectations and our creditworthiness.

also, analysts, financial commentators, and persons active in the cinema exhibition and real estate industries typically value enterprises engaged in these businesses at various multiples of EBITDA. Accordingly, we find EBITDA valuable as an indicator of the underlying value of our businesses.

We expect that investors may use EBITDA to judge our ability to generate cash, as a basis of comparison to other companies engaged in the cinema exhibition and real estate businesses and as a basis to value our company against such other companies.

Neither EBIT nor EBITDA is a measurement of financial performance under accounting principles generally accepted in the United States of America and should not be considered in isolation or construed as a substitute for net income or other operations data or cash flow data prepared in accordance with accounting principles generally accepted in the United States for purposes of analyzing our profitability. The exclusion of various components such as interest, taxes, depreciation, and amortization necessarily limit the usefulness of these measures when assessing our financial performance, as not all funds depicted by EBITDA are available for management’s discretionary use. For example, a substantial portion of such funds are subject to contractual restrictions and functional requirements to service debt, to fund necessary capital expenditures and to meet other commitments from time-to-time as described in more detail in this Annual Report on Form 10-K.

EBIT and EBITDA also fail to take into account the cost of interest and taxes. Interest is clearly a real cost that for us is paid periodically as accrued. Taxes may or may not be a current cash item but are nevertheless real costs that, in most situations, must eventually be paid. A company that realizes taxable earnings in high tax jurisdictions may be ultimately less valuable than a company that realizes the same amount of taxable earnings in a low tax jurisdiction. EBITDA fails to take into account the cost of depreciation and amortization and the fact that assets will eventually wear out and have to be replaced.

EBITDA, as calculated by us, may not be comparable to similarly titled measures reported by other companies. A reconciliation of net income (loss) to EBIT and EBITDA is presented below (dollars in thousands):



		2014		2013		2012		2011		2010
Net income (loss) attributable to Reading International, Inc. shareholders	$	25,701	$	9,041	$	(914)	$	9,956	$	(12,650)
Add: Interest expense, net		9,000		10,037		16,426		21,038		12,286
Add: Income tax (benefit) expense		(9,785)		4,942		4,904		(12,330)		14,264
EBIT	$	24,916	$	24,020	$	20,416	$	18,664	$	13,900

Add: Depreciation and amortization		15,468		15,197		16,049		16,595		15,563
Adjustments for discontinued operations		--		--		335		365		351
EBITDA	$	40,384	$	39,217	$	36,800	$	35,624	$	29,814

Item 7 – Management’s Discussions and Analysis of Financial Condition and Results of Operations

The following review should be read in conjunction with the consolidated financial statements and related notes included in this 2014 Annual Report. Historical results and percentage relationships do not necessarily indicate operating results for any future periods.

Overview

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

Cinema Exhibition, through our 58 multiplex theaters, and

Real Estate, including investment, development, and the rental of retail, commercial and live theater assets.

We believe that these two business segments complement one another, as the comparatively consistent cash flows generated by our cinema operations can be used to fund new cinema business opportunities and the front-end cash demands of our real estate investment and development business.

We manage our worldwide cinema exhibition businesses under various different brands:

in the US, under the Reading Cinemas, Angelika Film Centers, Consolidated Theatres, and City Cinemas brands;

in Australia, under the Reading Cinemas brand; and

in New Zealand, under the Reading Cinemas and Rialto brands.

While we do not believe the cinema exhibition business to be a growth business, we do believe it to be a business that will likely continue to generate fairly consistent cash flows in the years ahead, even in a recessionary or inflationary environment. This is based on our belief that people will continue to spend some reasonable portion of their entertainment dollar on entertainment outside of the home and that, when compared to other forms of outside-the-home entertainment, movies continue to be a popular and competitively priced option. Since we believe the cinema exhibition business to be a mature business with most markets either adequately screened or over-screened, we see growth in our cinema business coming principally from (i) the enhancement of our current cinemas (for example, by the addition of luxury seating and broadening our food and beverage offerings), (ii) the development in select markets of specialty cinemas, and (iii) the opportunistic acquisition of already existing cinemas, rather than from the development of new conventional cinemas. From time-to-time, we invest in the securities of other companies, where we believe the business or assets of those companies to be attractive or to offer synergies to our existing entertainment and real estate businesses. We continue to focus on the development and redevelopment of our existing assets (particularly our New York assets and our Angelika Film Center chain), as well as to continue to be opportunistic in identifying and endeavoring to acquire undervalued assets, particularly assets with proven cash flow and that we believe to be resistant to recessionary trends.

In summary, while we do have operating company attributes, we see ourselves principally as a geographically diversified real estate company and intend to add to stockholder value, by building the value, of our portfolio of tangible assets, including both entertainment and other types of land and “brick and mortar” assets. We endeavor to maintain a reasonable asset allocation between our domestic and international assets and operations, and between our cash-generating cinema operations and our cash-consuming real estate investment and development activities. We believe that by blending the cash generating capabilities of a cinema operation with the investment and development opportunities of our real estate operations, our business strategy is unique among public companies.

Business Climate

Cinema Exhibition - General

that the cost of this conversion will be covered in substantial part by the receipt of “virtual print fees” paid by film distributors for the use of such digital projection equipment.

Certain new entrants to the cinema exhibition market, as well as certain of our historic competitors, have begun to develop new and to reposition existing cinemas that offer a broader selection of premium seating and food and beverage offerings. These include, in some cases, food service to the seat and the offering of alcoholic beverages. We have for some years offered premium seating and alcoholic beverages in certain of our overseas cinemas. We have also offered café food selections and alcoholic beverages domestically in certain of our Angelika Film Centers. Accordingly, we are experienced in and believe that we can compete effectively with this emerging competition. We are currently reviewing the potential for expanding our offerings at a variety of our domestic cinemas.

Cinema Exhibition – Australia / New Zealand

The film exhibition industry in Australia and New Zealand is highly concentrated in that Village, Event, and Hoyts (the “Major Exhibitors”) control approximately 65% of the cinema box office in Australia, while Event and Hoyts control approximately 57% of New Zealand’s cinema box office. The industry is also vertically integrated in that one of the Major Exhibitors, Roadshow Film Distributors (part of Village), also serves as a distributor of film in Australia and New Zealand for Warner Bros. Films produced or distributed by the majority of the local international independent producers are also distributed by Roadshow. Typically, the Major Exhibitors own the newer multiplex and megaplex cinemas, while the independent exhibitors typically have older and smaller cinemas. In addition, the Major Exhibitors have in recent periods built a number of new multiplexes as joint venture partners or under shared facility arrangements, and have historically not engaged in head-to-head competition.

Cinema Exhibition – North America

In North America, distributors may find it more commercially appealing to deal with major exhibitors, rather than to deal with independents like us, which tends to compress the supply of screens in a very limited number of markets. This competitive disadvantage has increased significantly in recent periods with the development of mega-circuits like Regal and AMC who are able to offer distributors access to screens on a truly nationwide basis, or, on the other hand, to deny access if their desires with respect to film supply are not satisfied.

These consolidations can adversely affect our ability to get film in certain U.S. markets where we compete against major exhibitors. With the restructuring and consolidation undertaken in the industry, and the emergence of increasingly attractive “in-home” entertainment alternatives, strategic cinema acquisitions by our U.S. operation have and can continue to be a way to combat such a competitive disadvantage.

Real Estate – Australia and New Zealand

Over the past few years, there has been a noted stabilization in real estate market activity resulting in some increases to commercial and retail property values in Australia and to a lesser extent in New Zealand. Both countries have relatively stable economies with varying degrees of economic growth that are mostly influenced by global trends. Also, we have noted that our Australian and New Zealand developed properties have had consistent growth in rentals and values although project commencements have slowed. Once developed, we remain confident that our Australian and New Zealand holdings will continue to provide value and cash flows to our operations.

Real Estate – North America

The commercial real estate market has improved significantly over the past three years and we have noted strengthening rental income associated with our real estate located in large urban environments.

Business Segments

As indicated above, our two primary business segments are cinema exhibition and real estate. These segments are summarized as follows:

Cinema Exhibition

One of our primary businesses consists of the ownership and operation of cinemas. For a breakdown of our current cinema assets that we own and/or manage please see Item 1 – Our Business of this 2014 Annual Report under the subheading “Our Cinema Exhibition Activities.”

During 2014, we opened a 3-screen Angelika Pop-Up! at Union Market in Washington, D.C. as well as a 6-screen complex in Dunedin, New Zealand.

On December 31, 2013, we acquired a 5-screen cinema in the U.S. that we previously had managed since 2003. In 2012, we opened one cinema with 8-screens and closed two cinemas having a total of 8 screens.

Our cinema revenue consists primarily of admissions, concessions, advertising and theater rentals. The cinema operating expense consists of the costs directly attributable to the operation of the cinemas including film rent expense, operating costs, and occupancy costs. Cinema revenue and expense fluctuate with the availability of quality first-run films and the numbers of weeks the first–run films stay in the market.

Real Estate

For fiscal 2014, our income operating property consisted of the following:

our Belmont, Western Australia ETRC, our Auburn, New South Wales ETRC and our Wellington, New Zealand ETRC;

our Newmarket shopping center in Newmarket, Queensland, a suburb of Brisbane;

three single auditorium live theaters in Manhattan (Minetta Lane, Orpheum, and Union Square) and a 4-

auditorium live theater complex in Chicago (The Royal George) and, in the case of the Union Square and the Royal George, their accompanying ancillary retail and commercial tenants;

a New Zealand commercial property located at Lake Taupo and Australian commercial properties rented to unrelated third parties, to be held for current income and long-term appreciation; and

the ancillary retail and commercial tenants at some of our non-ETRC cinema properties.

In addition, we had various parcels of unimproved real estate held for development in Australia and New Zealand and certain unimproved land in the United States that was used in our historic activities. We also own an 8,100 square foot commercial building in Melbourne, which serves as our administrative headquarters for Australia and New Zealand, approximately 36% of which is leased to an unrelated third party.

Acquisitions

Operating Assets

On December 31, 2013, we settled a management fee claim that we had against the owner of the Plano, Texas cinema that we had managed since 2003 for a cash receipt of $1.9 million. As part of the settlement, we acquired that entity, and through the purchase of that entity acquired the underlying cinema’s lease and the associated personal property, equipment, and trade fixtures. Because the fair value of the lease, in light of anticipated rent payments, resulted in a lease liability of $320,000 and the acquired net assets, including cash received in connection with the settlement, were valued at $1.7 million, we recorded a net gain on acquisition and settlement of $1.4 million which is included as “other income” in our statement of operating income for the year ended December 31, 2013. We also acquired in 2013 the 50% interest we did not own in Angelika Film Centers, LLC.

Non-operating Assets

On January 10, 2012, Shadow View Land and Farming, LLC, a limited liability company owned by our Company, acquired a 202-acre property, currently zoned for the development of over 800 single-family residential units, located in the City of Coachella, California. The property was acquired at a foreclosure auction for $5.5 million. The property was acquired as a long-term investment in developable land. Half of the funds used to acquire the land were provided by James J. Cotter, Sr. our late Chairman, Chief Executive Officer and controlling shareholder. Upon the approval of our Conflicts Committee, these funds were converted into a 50% interest in Shadow View Land and Farming, LLC. We are the managing member of this company.

Disposals

Land Held for Sale – Burwood

On May 12, 2014, we entered into a contract to sell our undeveloped 50.6-acre parcel in Burwood, Victoria, Australia, to an affiliate of Australand Holdings Limited for a purchase price of $54.6 million (AUS$65.0 million). Reading received $5.9 million (AUS$6.5 million) on May 23, 2014 closing. The balance of the purchase price is due on December 31, 2017.

Land Held for Sale – Moonee Ponds

In 2013, we entered into a purchase and sale agreement to sell our 3.3-acre properties in Moonee Ponds for US$21.4 million (AUS$23.0 million) which is scheduled to close on April 16, 2015 and is classified under current assets as land held for sale on our December 31, 2014 consolidated balance sheet.

Indooroopilly Property

On November 20, 2012, we sold our Indooroopilly property for $12.4 million (AUS$12.0 million). As the book value was $12.5 million (AUS$12.1 million) for this property, we recorded a loss on sale as an impairment expense of $318,000 (AUS$306,000) for the year ended December 31, 2012 which included the cost to sell the property.

Taringa Properties

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

Investment and Development Property

We are engaged in several real estate development projects. For a complete list of these properties with their size, status, and gross book values see Item 2 – Properties under the heading of “Investment and Development Property.”

Critical Accounting Policies

The Securities and Exchange Commission defines critical accounting policies as those that are, in management’s view, most important to the portrayal of the company’s financial condition and results of operations and the most demanding in their calls on judgment. We believe our most critical accounting policies relate to:

impairment of long-lived assets, including goodwill and intangible assets;

tax valuation allowance and obligations; and

legal obligations.

Impairment of long-lived assets, including goodwill and intangible assets

We review long-lived assets, including goodwill and intangibles, for impairment as part of our annual budgeting process, at the beginning of the fourth quarter, and whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable.

Pursuant to FASB ASC 360-35, we review internal management reports on a monthly basis as well as monitoring current and potential future competition in film markets for indications of potential impairment. We evaluate our long-lived assets using historical and projected data of cash flow as our primary indicator of potential impairment and we take into consideration the seasonality of our business. If the sum of the estimated, undiscounted future cash flows is less than the carrying amount of the asset, then impairment is recognized for the amount by which the carrying value of the asset exceeds its estimated fair value based on an appraisal or a discounted cash flow calculation.

For certain non-income producing properties, we obtain appraisals or other evidence to evaluate whether there are impairment indicators for these assets. Based on calculations of current value from appraisals and a sales contract, we recorded an impairment of $1.5 million relating to certain of our property and cinema locations for the year ended December 31, 2012. No impairment losses were recorded in 2013 or 2014. For a further explanation of

our 2012 impairment losses see below under the heading “Coachella impairment” and see Note 7 – Investment and Development Property to our 2014 Consolidated Financial Statements.

Pursuant to FASB ASC 350-35, goodwill and intangible assets are evaluated annually on a reporting unit basis. The impairment evaluation is based on the present value of estimated future cash flows of the segment plus the expected terminal value. There are significant assumptions and estimates used in determining the present value. The most significant assumptions include our estimated future cash flow, cost of debt and cost of equity assumptions that comprise the weighted average cost of capital for each reporting unit. Accordingly, actual results could vary materially from such estimates. There was no impairment for the goodwill and intangible assets for the years ended December 31, 2014, 2013, and 2012, respectively.

Tax valuation allowance and obligations

We record our estimated future tax benefits and liabilities arising from the temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss carry-forwards. We estimate the recoverability of any tax assets recorded on the balance sheet and provide any necessary allowances as required. As of December 31, 2014, we had recorded approximately $39.0 million of deferred tax assets related to the temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss carry-forwards and tax credit carry-forwards. These deferred tax assets were offset by a valuation allowance of $16.8 million resulting in a net deferred tax asset of $22.2 million. The recoverability of deferred tax assets is dependent upon our ability to generate future taxable income. There is no assurance that sufficient future taxable income will be generated to benefit from our tax loss carry-forwards and tax credit carry-forwards.

Legal and environmental obligations

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 contamination. 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 unanticipated environmental conditions at properties that we have acquired for development. 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, we have claims brought against us relating to the exposure of former employees of our railroad operations to asbestos and coal dust. These are generally covered by an insurance settlement reached in September 1990 with our insurance carriers. However, this insurance settlement does not cover litigation by people who were not our employees and who may claim 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.

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.

2012 Coachella impairment

In January 2012, we acquired in a foreclosure auction for $5.5 million a 202-acre property located in Coachella, California then zoned for the development of over 800 single-family residential units. The only other bidder was the holder of the mortgage on the property, who bid $5.46 million for the property. At the time of the purchase, we knew, based on our due diligence, that we were paying more for the property than would be supported by an appraisal done under the Uniform Standards of Professional Appraisal Practice (“USPAP”). However, the amount that we bid was the lowest price at which we were able to acquire the property from the mortgagor. In valuing the property, we took into account a variety of factors, including the fact that the property is located within the City of Coachella, the state of the land use entitlements, and the fact that the prior owner had invested considerable time and money in obtaining the entitlements from the City of Coachella. Since an independent USPAP appraisal of the property produced an appraised value as of December 2012 of $4.0 million, we wrote down the book value of the property by $1.5 million as of the end of our 2012 fiscal year. As noted below, this property is owned by a limited liability company which was at that time, 50% owned by Mr. James J. Cotter, Sr. who, accordingly, shared in any impairment loss to the extent of his ownership interest.

We acquired the property as a potentially long-term investment based on the expectation that ready-for-development residential real estate will recover in value. As we are not in the business of developing single-family residences, it is anticipated that the property will eventually be sold to a developer of this type of property.

We hold the property in a limited liability company, which we manage. This company is owned 50/50 by ourselves and the Cotter Estate. The opportunity to acquire the property was originally presented to Mr. Cotter, Sr. in his individual capacity and the transaction was approved by our Conflicts Committee, comprised entirely of independent directors.

Results of Operations

We currently have two operating segments: Cinema Exhibition and Real Estate. Our cinema exhibition segment includes the operations of our consolidated cinemas. Our real estate segment includes the operating results of our commercial real estate holdings, cinema real estate, live theater real estate, and ETRC’s.

The tables below summarize the results of operations for our principal business segments for the years ended December 31, 2014, 2013, and 2012 (dollars in thousands).



Year Ended December 31, 2014	Cinema Exhibition		Real Estate		Intersegment Eliminations		Total
Revenue	$	237,861	$	24,348	$	(7,461)	$	254,748
Operating expense		195,896		9,770		(7,461)		198,205
Depreciation and amortization		11,047		4,061		--		15,108
General and administrative expense		3,575		1,042		--		4,617
Segment operating income	$	27,343	$	9,475	$	--	$	36,818



Year Ended December 31, 2013	Cinema Exhibition		Real Estate		Intersegment Eliminations		Total
Revenue	$	239,418	$	26,456	$	(7,653)	$	258,221
Operating expense		200,859		10,830		(7,653)		204,036
Depreciation and amortization		10,741		4,023		--		14,764
General and administrative expense		3,273		644		--		3,917
Segment operating income	$	24,545	$	10,959	$	--	$	35,504



Year Ended December 31, 2012	Cinema Exhibition		Real Estate		Intersegment Eliminations		Total
Revenue	$	234,703	$	27,256	$	(7,529)	$	254,430
Operating expense		198,040		11,163		(7,529)		201,674
Depreciation and amortization		11,154		4,441		--		15,595
General and administrative expense		2,598		718		--		3,316
Impairment expense		--		1,463		--		1,463
Segment operating income	$	22,911	$	9,471	$	--	$	32,382




Reconciliation to net income attributable
to Reading International, Inc. shareholders:		2014		2013		2012
Total segment operating income	$	36,818	$	35,504	$	32,382
Non-segment:
Depreciation and amortization expense		360		433		454
General and administrative expense		14,285		14,136		12,801

Operating income		22,173		20,935		19,127
Interest expense, net		(9,000)		(10,037)		(16,426)
Other income (loss)		1,646		1,876		(563)
Gain (loss) on sale of assets		25		(56)		144
Income tax benefit (expense)		9,785		(4,942)		(4,904)
Equity earnings of unconsolidated joint ventures and entities		1,015		1,369		1,621
Income (loss) from discontinued operations		--		--		(85)
Gain (loss) on sale of discontinued operation		--		--		(320)
Net income (loss)	$	25,644	$	9,145	$	(1,406)
Net (income) loss attributable to noncontrolling interests		57		(104)		492
Net income (loss) attributable to Reading International, Inc. common shareholders	$	25,701	$	9,041	$	(914)

Cinema Exhibition Segment

The following tables and discussion that follows detail our operating results for our 2014, 2013, and 2012 cinema exhibition segment (dollars in thousands). All percentages below are expressed as a percent of total revenue, except film rent and advertising cost which is expressed as a percentage of admissions revenue and concession cost which is expressed as a percentage of concessions revenue:



Operating Income by Country for the Year Ended December 31, 2014		United States		Australia		New Zealand		Total
Admissions revenue	$	83,197	$	58,148	$	15,908	$	157,253
Concessions revenue		35,580		24,278		6,475		66,333
Advertising and other revenue		6,942		6,068		1,265


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