# Reading International Inc: Form 10-Q for the period ended Mar 31, 2023

- Company: [Reading International Inc](/companies/rdi.md) (CIK 716634)
- Form: 10-Q
- Filed: 2023-05-15
- Accepted by EDGAR: May 15, 2023, 21:01 ET
- Period: 2023-03-31
- Accession: 0000716634-23-000012
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/716634/000071663423000012/rdi-20230331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/716634/000071663423000012/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $45.8m | us-gaap:Revenues |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$7.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $4.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | −$480.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$11.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.50 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.50 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 22,897,990 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | −$11.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $1.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-03-31 | $14.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $32.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $560.2m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $127.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $509.2m | us-gaap:Liabilities |
| Current portion of debt | at 2023-03-31 | $48.1m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2023-03-31 | $50.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 70,314 characters.

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

### General COVID-19 Pandemic Overview & Updates

While COVID-19 related shutdowns, mask mandates and social distancing requirements appear to be behind us, the impacts of the pandemic have continuing effect. The number of major films being released to exhibitors has increased, but the rents for such films are also increasing while the cinema exhibition exclusivity periods are shortening. The pandemic released the streaming “genie” from the bottle and that genie is unlikely ever to return to the bottle. Cinema attendance is improving but has not returned to pre-pandemic levels. In particular, we believe that older patrons have been slow to return to the cinemas. Films which do not achieve “blockbuster” status are still not bringing out movie goers commensurate with historic levels.

COVID-19 and its aftermath have had ongoing adverse impacts on our profitability and cash flow. We have enhanced cleaning protocols and supply chain disruptions and inflation have adversely affected our costs of goods sold. Government mandates and post-pandemic labor shortages have increased our cost of labor. Utility costs, insurance premiums and costs of borrowing have increased dramatically. Also, we are now paying the rents we deferred during the periods that our cinema operations were restricted due to COVID-19. While these rents have been accrued, they are adversely impacting our cash flow during this recovery period.

Nevertheless, we believe that with the re-recognition by distributors of the importance of the cinema release to the overall economic performance of their films and the increasing quantity and quality of film being released to the cinemas, the future prospects for our industry are good. Still, it is generally recognized that there are too many cinemas in the U.S., and we are reviewing and culling our poor performers. Fortunately, most of our cinemas are in good markets which are not, in our view, over-screened and we believe that oversupply is less an issue in post-pandemic Australia and New Zealand. We continue to receive and review proposals for new or available existing cinemas, and currently have four new builds cinemas in our Australia pipeline.

The COVID-19 pandemic had a significant impact on our global operations, forcing us to shut down all cinemas and lay off U.S. cinema level personnel beginning March 2020. During 2021, a majority of our cinemas reopened (some with occupancy restrictions in place), but admissions continued to be down from pre-pandemic levels due to a weaker slate of movies from the major studios and distributors. To address our negative cash flow situation during the pandemic, in 2021 we monetized non-core real estate assets, generating net cash that we used to pay down debt, fund necessary capital expenditures. Although most of our tenants remained open for business during the COVID-19 crisis, we experienced trading restrictions affecting third-party tenants at our ETCs in Australia and New Zealand. When health and safety measures finally subsided in 2022, our cinemas reopened for business, and our operations began to experience a return to normalcy. While 2022 had fewer wide releases than pre-COVID periods, the industry box office results significantly rebounded with the release of blockbuster films such as *Top Gun: Maverick, Black Panther: Wakanda Forever, Doctor Strange: In The Multiverse of Madness*, and concluded with the December 2022 release of *Avatar: The Way of Water.*

We are working to address the challenges of the post-COVID world. We are increasing automation and self-service options at the cinema level to reduce labor costs. We are continuing to focus on our food and beverage offerings and now have liquor licenses in every U.S. cinema where we believe that such an offering makes sense. We are experimenting with alternative content intended to attract a broader and more diversified range of patrons. With the return of high quality film to our cinemas, we have confidence that, while we still must deal with COVID legacy issues, we will return to profitability and to use cinema cash flow to once again support our real estate development activities.

### Recent Box Office Improvements

The cinema industry continued its progressive recovery during the first quarter of 2023. The release of films such as *Ant-Man and The Wasp: Quantumania, Creed III*, and *Avatar: The Way of Water*, which continued to drive attendance levels in the first quarter despite being released in December 2022, continues to support our confidence in the long term viability of the global cinema business And, the success of these films reinforces the industry's resilience in the face of ongoing challenges such as labor shortages, supply chain constraints and rising costs. The continued enthusiasm of patrons for the movie-going experience and strong movie slates have been the driving forces behind this success. *Avatar: The Way of Water*, in particular, has shattered box office records, surpassing previous global box office records and to become the third highest grossing film of all time. These outstanding achievements are a testament to the continued enthusiasm of patrons for the magic of movies.

In recent weeks, the cinema industry has also benefitted from the release of the long anticipated Super Mario Brothers Movie, which was released on April 5, 2023. As of the date of this report, this title has achieved notable box office milestones such as the biggest worldwide opening of all time for an animated film and the second biggest opening of all time for a video game adaptation. Moreover, it became the first billion-dollar grossing film of 2023. The new year is off to a positive start and the release schedule for the remainder of the year gives us confidence that we will continue building on this box office momentum. The Q2 2023 movie slate is encouraging with *Guardians of the Galaxy Vol .3, Spider-Man: Across the Spider-Verse*, and a new *Indiana Jones* movie. Announced Q3 releases include, *Mission Impossible: Dead Reckoning, Barbie, Oppenheimer*, and *Teenage Mutant Ninja Turtles: Mutant Mayhem*. In the last quarter of 2023, *Kraven: The Hunter, The Marvels, Hunger Games, Wonka*, and *Aqua-Man: The Lost Kingdom* are scheduled to be released.

### Real Estate Developments

In the United States, during the first quarter of 2022, we leased to Petco Animal Supplies Stores, Inc. (“Petco”), the cellar, ground floor, and second floor of our 44 Union Square property, representing approximately 42 percent of the leasable area of that building. Petco is in possession of the space and began paying cash rent in December 2022. Petco’s 44 Union Square store is expected to open to the public in mid-2023.

Though our real estate team continues to work to secure one or more tenants for the remaining space at 44 Union Square, we believe that the pandemic’s impact on the office leasing market in New York City and the slow pace of the “return to office” effort in New York City have adversely impacted and will continue to adversely impact our efforts to locate an office tenant for the space at 44 Union Square. We have mortgage financing in place for this project to cover leasing and tenant improvement costs of such space. We are currently exploring non-office and alterative uses of the remainder of the building.

All of our tenants are currently open for business at our Australian and New Zealand properties (with the exception of one tenant in Australia completing a new fit out). Most of the rentable retail portions of our Courtenay Central location in New Zealand continue to be closed due to seismic concerns, however, two tenants remain open and trading.

### BUSINESS OVERVIEW

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

Cinema exhibition, through our 63 cinemas.

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

We believe these two business segments complement and support one another. Prior to COVID-19, we used cash flows generated by our cinema operations to fund the front-end cash demands of our real estate development business. As a result of COVID-19, we relied more upon income from our real estate assets, and tapped into the imbedded value in those assets, to support our Company through the COVID-19 crisis. As COVID-19 impacts decrease, government restrictions ease, quality film product improves, and patrons return to our cinemas, we believe we will once again be able to rely on the cash flows generated by our cinema portfolio. However, we are at the current time cash flow negative, and have been relying upon borrowings and have identified certain non-core assets to monetize to support our liquidity. We are steadfast in our belief that this two-pronged, diversified international business strategy will keep carrying our Company through these difficult times as we continue to navigate the uncertainty and challenges posed by the recent macroeconomic challenges.

### Key Performance Indicators

A key performance indicator utilized by management is Food and Beverage (“F&B”) Spend Per Patron (“SPP”), which is our total Food & Beverage Revenues divided into our attendance.

One of our strategic priorities has been to continue upgrading the food and beverage menu at several of our global cinemas. As of March 31, 2023, we have a total of 37 theater locations with elevated food and beverage menus (i.e. beyond traditional popcorn, soda and candy). We use SPP as a measure of our performance as compared to the performance of our competitors, as well as a measure of the performance of our food and beverage operations. While ultimately, the profitability of our food and beverage operations depends on a variety of factors, including labor cost and cost of goods sold, we think that this calculation is important to show how well we are doing on a top line basis.

### Cinema Exhibition Overview

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

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

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

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

Shown in the following table are the number of locations and screens in our cinema circuit in each country, by state/territory/region, our cinema brands, and our interest in the underlying assets as of March 31, 2023.

| Country | State / Territory / Region | Location Count(3) | Screen Count | Interest in Asset ‎Underlying the Cinema Leased | Owned | Operating Brands |
| --- | --- | ---: | ---: | ---: | ---: | --- |
| **United States** | Hawaii | 8 | 88 | 8 |  | Consolidated Theatres |
|  | California | 7 | 88 | 7 |  | Reading Cinemas, Angelika Film Center |
|  | New York | 3 | 16 | 2 | 1 | Angelika Film Center |
|  | Texas | 2 | 13 | 2 |  | Angelika Film Center |
|  | New Jersey | 1 | 12 | 1 |  | Reading Cinemas |
|  | Virginia | 1 | 8 | 1 |  | Angelika Film Center |
|  | Washington, D.C. | 1 | 3 | 1 |  | Angelika Film Center |
|  | **U.S. Total** | **23** | **228** | **22** | **1** |  |
| **Australia** | Victoria | 9 | 62 | 9 |  | Reading Cinemas, State Cinema by Angelika |
|  | New South Wales | 6 | 44 | 5 | 1 | Reading Cinemas |
|  | Queensland | 6 | 56 | 3 | 3 | Reading Cinemas, Event Cinemas(1) |
|  | Western Australia | 3 | 22 | 2 | 1 | Reading Cinemas |
|  | South Australia | 2 | 15 | 2 |  | Reading Cinemas |
|  | Tasmania | 2 | 14 | 2 |  | Reading Cinemas, State Cinema |
|  | **Australia Total** | **28** | **213** | **23** | **5** |  |
| **New Zealand** | Wellington | 3 | 18 | 2 | 1 | Reading Cinemas |
|  | Otago | 3 | 15 | 2 | 1 | Reading Cinemas, Rialto Cinemas(2) |
|  | Auckland | 2 | 15 | 2 |  | Reading Cinemas, Rialto Cinemas(2) |
|  | Canterbury | 1 | 8 | 1 |  | Reading Cinemas |
|  | Southland | 1 | 5 | 1 |  | Reading Cinemas |
|  | Bay of Plenty | 1 | 5 |  | 1 | Reading Cinemas |
|  | Hawke's Bay | 1 | 4 |  | 1 | Reading Cinemas |
|  | **New Zealand Total** | **12** | **70** | **8** | **4** |  |
| **GRAND TOTAL** |  | **63** | **511** | **53** | **10** |  |

(1) Our Company has a 33.3% unincorporated joint venture interest in a 16-screen cinema located in Mt. Gravatt, Queensland managed by Event Cinemas.

(2) Our Company is a 50% joint venture partner in two New Zealand Rialto Cinemas, with a total of 13 screens. We are responsible for the booking of these cinemas and our joint venture partner, Event Cinemas, manages their day-to-day operations.

(3) Our total location counts as of March 31, 2023, reflects all operating cinemas, plus the Reading Cinemas at Courtenay Central in New Zealand which remains closed while we address certain seismic issues.

Our cinema revenues consist primarily of cinema ticket sales, F&B sales, screen advertising, gift card purchases, cinema rentals, and online convenience fee revenue generated by the sale of our cinema tickets through our websites and mobile apps. Cinema operating expenses consist of the costs directly attributable to the operation of the cinemas, including (i) film rent expense, (ii) operating costs, such as employment costs and utilities, and (iii) occupancy costs. Cinema revenues and certain expenses fluctuate with the availability of quality first run films and the number of weeks such first run films stay in the market. For a breakdown of our current cinema assets that we own and/or manage, please refer to *Part I, Item 1 – Our Business* of our 2022 Form 10-K. We now present a discussion of recent material developments.

### Cinema Additions and Pipeline

The latest additions to our cinema portfolio as of March 31, 2023, were as follows:

*Armadale, Western Australia, Australia:* On January 13, 2023, we took over an existing 6-screen cinema in Armadale, Australia, a suburb of Perth in Western Australia.

By the end of 2023, we anticipate adding two new cinemas, totaling 13 screens, to our Australian cinema circuit. South City Square in Brisbane, QLD is an eight-screen complex, which will operate under the Angelika Film Center brand, and Busselton in Western Australia is a five-screen Reading Cinema with TITAN LUXE. Both new cinema complexes are part of broader shopping center developments currently under construction. Each will be a state-of-the-art facility, with recliner seating and elevated food and beverage offerings (including alcoholic beverages). Each will open in a market which we believe is currently underserved. In addition, our Board has authorized management to proceed with the negotiation of leases for two new state-of-the-art cinemas, one of which is in Australia and the other is in New Zealand.

### Cinema Upgrades

As of March 31, 2023, the upgrades to our cinema circuits’ film exhibition technology and amenities over the years are as summarized in the following table:

| Screen Format | Location Count(6) | Screen ‎Count |
| --- | ---: | ---: |
| Digital (all cinemas in our cinema circuit) | 63 | 511 |
| IMAX | 1 | 1 |
| TITAN XC and LUXE | 26 | 32 |
| Dine-in Service |  |  |
| Gold Lounge (AU/NZ)(1) | 10 | 26 |
| Premium (AU/NZ)(2) | 16 | 41 |
| Spotlight (U.S.)(3) | 1 | 6 |
| Upgraded Food & Beverage menu (U.S.)(4) | 18 | n/a |
| Premium Seating (features recliner seating) | 31 | 190 |
| Liquor Licenses (5) | 42 | n/a |

(1) **Gold Lounge**: This is our "First Class Full Dine-in Service" in our Australian and New Zealand cinemas, which includes an upgraded F&B menu (with alcoholic beverages), luxury recliner seating features (intimate 25-50 seat cinemas) and waiter service.

(2) **Premium Service**: This is our "Business Class Dine-in Service" in our Australian and New Zealand cinemas, which typically includes upgraded F&B menu (some with alcoholic beverages) and may include luxury recliner seating features (less intimate 80-seat cinemas), but no waiter service.

(3) **Spotlight Service**: Our first dine-in cinema concept in the U.S. at Reading Cinemas in Murrieta, California. Six of our 17 auditoriums at this cinema feature waiter service before the movie begins with a full F&B menu, luxury recliner seating, and laser focus on customer service. Our Spotlight service has been temporarily suspended since the initial COVID-19 shutdown.

(4) **Upgraded Food & Beverage Menu:** Features an elevated F&B menu including a menu of locally inspired and freshly prepared items that go beyond traditional concessions, which we have worked with former Food Network executives to create. The elevated menu also includes beer, wine and/or spirits at most of our locations.

(5) **Liquor Licenses:** Licenses are applicable at each cinema location, rather than each cinema auditorium. As of today, we have liquor licenses in 100% of the cinemas in the U.S. that we intend to operate long-term. Two of these licenses will be activated shortly. In Australia, we have one liquor licenses pending, and in New Zealand we have one liquor license pending.

### Recent Enhancements:

#### United States

*Renovation Work*: As of March 31, 2023, we have converted 110 of our 238 U.S. auditoriums to luxury recliner seating. We have an agreement in place with our landlord at the Dallas Angelika for a complete remodel of that cinema, which we anticipate will be completed in Q1 of 2024.

#### Australia and New Zealand

*Invercargill renovation*: On July 25, 2022, we closed our Reading Cinemas in Invercargill, New Zealand for renovation. In conjunction with the development of a new shopping center, we renovated our Reading Cinemas to improve the lobby, add facilities for an elevated F&B offer, convert one screen to electric recliner seats, and integrate the cinema foyer into the new state-of-art shopping center. The renovated Reading Cinema re-opened on November 24, 2022 in conjunction with the launch of the shopping center.

*Other Cinema Upgrades:* In addition, during the three-year period 2021 to 2023, we also improved Sunbury and State Cinema in Australia, with further renovation plans for Rouse Hill in New South Wales Australia and The Palms in New Zealand.

During 2023, we will continue to focus on the enhancement of our proprietary online ticketing capabilities and social media interfaces. These are intended to enhance the convenience of our offerings and to promote guest affinity with the experiences and products that we are offering. We will also be focusing on post-COVID-19 technology improvements and contactless experiences.

### Cinema Closures

None of our cinemas are currently closed due to COVID-19 or other contagious diseases. Our cinema in Wellington, New Zealand remains closed due to seismic concerns pending the redevelopment of that ETC. However, we still have approximately $9.5 million in deferred occupancy costs that must be repaid.

Ko’Olau was permanently closed on November 9, 2022. We are currently working on potentially closing two additional cinemas, neither of which we believe can be operated profitably in the current environment on any meaningful rent paying basis.

### Real Estate Overview

Through our various subsidiaries, we engage in the real estate business through the development, ownership, rental or licensing to third parties of retail, commercial, and live theatre assets. Our real estate business creates long-term value for our stockholders through the continuous improvement and development of our investment and operating properties, including our ETCs. As of March 31, 2023, we own the fee interests in both of our live theatres in Manhattan and in 10 of our cinemas (as presented in the table under *Cinema Exhibition Overview).* In addition, we:

own our 44 Union Square property in Manhattan comprised of retail and office space which is currently in the lease-up phase. The cellar, ground floor, and second floor of the building are now fully leased to Petco, which is in occupancy of its premises on a full rent paying basis.

own and operate four ETCs known as Newmarket Village (in a suburb of Brisbane), The Belmont Common (in a suburb of Perth), and Cannon Park (in Townsville) in Australia, and Courtenay Central (in Wellington) in New Zealand;

own and operate our administrative office building in Culver City, California;

own and operate our administrative office building in South Melbourne, Australia;

own and operate the fee interests in two developed commercial properties in Manhattan improved with live theatres comprised of two stages;

own a 75% managing member interest in a limited liability company which in turn owns the fee interest in and improvements constituting our Cinemas 1,2,3 located in Manhattan;

own an approximately 26.6 acre property in Williamsport, Pennsylvania, currently leased to Transco Railway Products, Inc;

own approximately 201-acres principally in Pennsylvania from our legacy railroad business, including the Reading Viaduct in downtown Philadelphia; and

exercised our option to purchase the improvements and ground lease comprising our cinema, Village East by Angelika cinema, and headquarters building at 189 Second Avenue in Manhattan, such sale scheduled to close in July 2024.

For a breakdown of our real estate assets, made current by our discussion below, please refer to *Part I, Item 1 – Our Business* of our 2022 Form 10-K. We now present a discussion of recent material developments.

### Value-creating Opportunities

The implementation of most of our Company’s real estate development plans have remained delayed due to the effects of the COVID-19 pandemic on the global cinema industry and the need to conserve capital and fund our cinema operation. However, we intend to continue to emphasize the prudent development of our real estate assets as we emerge from the pandemic.

#### United States:

*44 Union Square Redevelopment (New York, N.Y.) –* We have made significant progress in the development of our 44 Union Square property in Manhattan. On January 27, 2022, we entered a long-term lease with Petco for the cellar, ground floor, and second floor of the building, representing 42% of the leasable area. While Petco is still in the process of constructing tenant improvements, it is now in occupancy of its premises on a full rent cash paying basis and we anticipate that this flagship store will be open for business to the public in the second quarter of this year. CBRE is currently engaged as our exclusive broker for the remaining space. While the space was originally designed for office uses, given the dramatic presence of the property on Union Square, the rebound in foot traffic being enjoyed by Union Square and our building’s great branding potential, we are considering, a range of uses beyond traditional office tenants, including short term and special purpose uses. While we cannot guarantee the successful leasing of the remaining space, our leasing team continues to actively pursue potential tenants.

*Minetta Lane Theatre (New York, N.Y.) –* Prior to COVID-19, our theatre was used by Audible, to present plays featuring a limited cast of one or two characters and special live performance engagements on the Audible streaming service. Due to COVID-19, no shows were presented between March 2020 and October 8, 2021, the date on which public performances resumed, and during this period we provided certain abatements. Audible has resumed full operations at the theatre and extended its license arrangement with us through March 15, 2024.

*Orpheum Theatre (New York, N.Y.) –* Prior to COVID-19, our theatre was the home to STOMP. Due to COVID-19, no shows were presented between April 2020 and June 2021. Thereafter, performances were intermittent. During this period, we provided certain abatements. STOMP ultimately closed (after 30 years at our theatre) on January 8, 2023. Under our termination agreement with the producers of STOMP, we have certain rights to provide the New York City venue for any future production of that show. A new show, *The Empire Strips Back*, has opened at the theatre and to date, has very strong advanced ticket sales by industry standards.

*Cinemas 1,2,3 Redevelopment (New York, N.Y.) –* We have received the consent of the 25% minority member of the ownership entity for the redevelopment of the property. We continue to evaluate the potential to redevelop the property as a mixed-use property. As our negotiations with our neighbor for a joint development did not bear fruit and given the closure of our two cinemas in New York City’s Upper East Side, we have determined to continue to operate this location as a cinema for at least the near term. All other redevelopment activity related to this location has been suspended, until we are able to develop a better understanding of the ongoing effects of COVID-19 on our assets and the market.

*The Philadelphia Viaduct and Adjacent Properties (Philadelphia, Pennsylvania) –* This will be an area of focus for us in 2023. We have, in recent periods, begun the process of demolishing obsolete structures on the viaduct or on our properties adjacent to the Viaduct. These properties are currently carried on our balance sheet at $0 value.

Australia:

*Newmarket Village ETC, (Brisbane, Australia) –* We continue to work on the expansion and upgrading of our Newmarket Village ETC. Our site includes a 23,000 square foot parcel adjacent to the center, improved with an office building. Over the next few years, we will be evaluating development options for this space. The center is currently 97% leased.

*Cannon Park Center ETC, (Queensland, Australia) –* We own two adjoining properties in Townsville, Queensland, Australia, Cannon Park City Center and Cannon Park Discount Center) comprising approximately 9.4-acres which we operate as our Cannon Park Center ETC. The total gross leasable area of the two properties is 105,000 square feet. Our multiplex cinema is the anchor tenant. These properties are currently 92% leased.

*The Belmont Common, (Belmont, Perth, Australia):* The total gross leasable area of the Belmont Common is 60,117 Sq ft. Our multiplex cinema is the anchor tenant with five third-party tenants and our Reading Cinemas, the site is currently 100% leased.

#### New Zealand:

*Courtenay Central Redevelopment (Wellington) –* Comprised of four parcels representing approximately 60,000 square feet of land in the entertainment core of Wellington, we anticipate that this redevelopment opportunity will be a principal focus over the next few years Progress on this site has been delayed due to a combination of Kaikoura earthquake (which necessitated the demolition of the nine-story parking garage comprising a part of the assemblage), seismic issues with the existing center, the COVID-19 pandemic, the cloud on title created by claims made by the counter party to a now terminated agreement to lease with respect to a portion of the property and recent economic headwinds from increasing interest rates, inflationary pressures and increasing labor and construction costs. Most recently, Cyclone Gabrielle hit the island nation on February 6, 2023, and has increased demands for (and as a result, the cost of) building materials and labor and may have a cooling effect on real estate development activities in New Zealand. Nevertheless, we remain optimistic about the development potential for our Courtenay Central property, given, among other things, the anticipated completion this year of the Takina Wellington Convention and Exhibition Center (wcec.co.nz), the capital’s first premium conference and exhibition space, the loosening of certain height and density restrictions, and the lack of comparable building sites..

For a complete list of our principal properties, see *Part I, Item 2 – Properties* under the heading “*Investment and Development Property.”*

### Corporate Matters

Refer to *Part I – Financial Information, Item 1 – Notes to Consolidated Financial Statements-- Note 17 – Stock-Based Compensation and Stock Repurchases* for details regarding our stock repurchase program and Board, Executive and Employee stock-based remuneration programs.

*Please refer to our 2022 Form 10-K for more details on our cinema and real estate segments.*

### RESULTS OF OPERATIONS

The table below summarizes the results of operations for each of our principal business segments along with the non-segment information for the quarter and three months ended March 31, 2023, and March 31, 2022, respectively:

*(Dollars in thousands)*

| SEGMENT RESULTS Revenue | Three Months Ended March 31, ‎2023 | March 31, ‎2022 | % Change Fav/ ‎(Unfav) |
| --- | ---: | ---: | ---: |
| Cinema exhibition | $41,987 | $37,347 | 12% |
| Real estate | 5,065 | 4,162 | 22% |
| Inter-segment elimination | (1,245) | (1,309) | 5% |
| Total revenue | 45,807 | 40,200 | 14% |
| **Operating expense** |  |  |  |
| Cinema exhibition | (42,899) | (39,812) | (8)% |
| Real estate | (2,215) | (2,157) | (3)% |
| Inter-segment elimination | 1,245 | 1,309 | (5)% |
| Total operating expense | (43,869) | (40,660) | (8)% |
| **Depreciation and amortization** |  |  |  |
| Cinema exhibition | (2,873) | (3,575) | 20% |
| Real estate | (1,587) | (1,672) | 5% |
| Total depreciation and amortization | (4,460) | (5,247) | 15% |
| **General and administrative expense** |  |  |  |
| Cinema exhibition | (827) | (1,176) | 30% |
| Real estate | (257) | (229) | (12)% |
| Total general and administrative expense | (1,084) | (1,405) | 23% |
| **Segment operating income** |  |  |  |
| Cinema exhibition | (4,612) | (7,216) | 36% |
| Real estate | 1,006 | 104 | \>100% |
| **Total segment operating income (loss)** | $(3,606) | $(7,112) | 49% |
| **NON-SEGMENT RESULTS** |  |  |  |
| Depreciation and amortization expense | (179) | (277) | 35% |
| General and administrative expense | (4,095) | (4,391) | 7% |
| Interest expense, net | (4,117) | (3,205) | (28)% |
| Equity earnings of unconsolidated joint ventures | 19 | (65) | \>100% |
| Gain (loss) on sale of assets | — | — | -% |
| Other income (expense) | 174 | (781) | \>100% |
| Income before income taxes | (11,804) | (15,831) | 25% |
| Income tax benefit (expense) | 480 | 378 | 27% |
| **Net income (loss)** | (11,324) | (15,453) | 27% |
| Less: net income (loss) attributable to noncontrolling interests | (213) | (99) | (\>100)% |
| **Net income (loss) attributable to Reading International, Inc.** | **$(11,111)** | **$(15,354)** | **28%** |
| **Basic earnings (loss) per share** | **$(0.50)** | **$(0.70)** | **29%** |

### Consolidated and Non-Segment Results:

### First Quarter Net Results

### Revenue

Revenue for the quarter ended March 31, 2023, increased by $5.6 million, to $45.8 million, when compared to the same period in the prior year. This increase was attributable to a stronger and diversified film slate, along with rent income related to our tenant at our 44 Union Square property beginning November 2022.

### Segment Operating Income/(Loss)

Our total segment operating loss for the quarter ended March 31, 2023, decreased by $3.5 million, from a loss of $7.1 million to a loss of $3.6 million, primarily due to our patrons returning to the theaters as a result of a stronger and more diversified film slate during the current reporting period, along with rent received from our tenant at our 44 Union Square property that did not occur in the first quarter of 2022.

During the first quarter 2023, both the Australia and New Zealand dollars devalued against the U.S. dollar. The average Australia dollar exchange rate against the U.S. dollar for the three months in Q1 2023 decreased 5.5% compared to the same period in 2022. The average New Zealand dollar exchange rate against the U.S. dollar for the three months in Q1 2023 decreased 6.9% compared to the same period in 2022. The devaluation of the Australia and New Zealand currencies negatively impacts segment operating income and positively impacts segment operating loss in U.S. dollar terms.

### Net Income/(Loss)

Our net loss attributable to Reading International, Inc. for the quarter ended March 31, 2023, decreased by $4.2 million, from a loss of $15.4 million to a loss of $11.1 million, when compared to the same period in the prior year. This change is largely due to our increased cinema revenue from a stronger and more diversified movie slate, along with rent received from our tenant at our 44 Union Square property that did not occur in the first quarter of 2022.

### Income Tax Expense

Income tax benefit for the three months ended March 31, 2023, increased by $0.1 million compared to the equivalent prior-year period. The change between 2023 and 2022 is primarily related to a decrease in reserve for valuation allowance.

### Business Segment Results

### Cinema Exhibition

The following table details our cinema exhibition segment operating results for the quarter and three months ended March 31, 2023, and March 31, 2022, respectively:

*(Dollars in thousands)*

| REVENUE | Three Months Ended March 31, ‎2023 | % of Revenue | March 31, ‎2022 | % of Revenue | Three Months Ended |
| --- | ---: | ---: | ---: | ---: | ---: |
| **United States** Admissions revenue | $12,044 | 29% | $9,648 | 26% | 25% |
| Food & beverage revenue | 7,448 | 18% | 6,097 | 16% | 22% |
| Advertising and other revenue | 2,319 | 6% | 1,772 | 5% | 31% |
|  | **$21,811** | **52%** | **$17,517** | **47%** | **25%** |
| **Australia** Admissions revenue | $10,371 | 25% | $10,181 | 27% | 2% |
| Food & beverage revenue | 5,634 | 13% | 5,717 | 15% | (1)% |
| Advertising and other revenue | 1,207 | 3% | 1,083 | 3% | 11% |
|  | **$17,212** | **41%** | **$16,981** | **45%** | **1%** |
| **New Zealand** Admissions revenue | $1,805 | 4% | $1,746 | 5% | 3% |
| Food & beverage revenue | 991 | 2% | 942 | 3% | 5% |
| Advertising and other revenue | 168 | 0% | 161 | 0% | 4% |
|  | **$2,964** | **7%** | **$2,849** | **8%** | **4%** |
| **Total revenue** | **$41,987** | **100%** | **$37,347** | **100%** | **12%** |
| **OPERATING EXPENSE** |  |  |  |  |  |
| **United States** Film rent and advertising cost | $(6,238) | 15% | $(5,231) | 14% | (19)% |
| Food & beverage cost | (1,981) | 5% | (1,574) | 4% | (26)% |
| Occupancy expense | (6,113) | 15% | (6,050) | 16% | (1)% |
| Other operating expense | (9,899) | 24% | (8,306) | 22% | (19)% |
|  | **$(24,231)** | **58%** | **$(21,161)** | **57%** | **(15)%** |
| **Australia** Film rent and advertising cost | $(4,366) | 10% | $(4,440) | 12% | 2% |
| Food & beverage cost | (1,209) | 3% | (1,196) | 3% | (1)% |
| Occupancy expense | (4,292) | 10% | (4,328) | 12% | 1% |
| Other operating expense | (5,822) | 14% | (5,755) | 15% | (1)% |
|  | **$(15,689)** | **37%** | **$(15,719)** | **42%** | **-%** |
| **New Zealand** Film rent and advertising cost | $(772) | 2% | $(720) | 2% | (7)% |
| Food & beverage cost | (192) | 0% | (170) | 0% | (13)% |
| Occupancy expense | (789) | 2% | (850) | 2% | 7% |
| Other operating expense | (1,226) | 3% | (1,192) | 3% | (3)% |
|  | **$(2,979)** | **7%** | **$(2,932)** | **8%** | **(2)%** |
| **Total operating expense** | **$(42,899)** | **102%** | **$(39,812)** | **107%** | **(8)%** |
| **DEPRECIATION, AMORTIZATION, IMPAIRMENT AND GENERAL AND ADMINISTRATIVE EXPENSE** |  |  |  |  |  |
| **United States** Depreciation and amortization | $(1,483) | 4% | $(1,900) | 5% | 22% |
| General and administrative expense | (423) | 1% | (776) | 2% | 45% |
|  | **$(1,906)** | **5%** | **$(2,676)** | **7%** | **29%** |
| **Australia** Depreciation and amortization | $(1,244) | 3% | $(1,434) | 4% | 13% |
| General and administrative expense | (404) | 1% | (400) | 1% | (1)% |
|  | **$(1,648)** | **4%** | **$(1,834)** | **5%** | **10%** |
| **New Zealand** Depreciation and amortization | $(146) | 0% | $(242) | 1% | 40% |
| General and administrative expense | — | 0% | — | 0% | -% |
|  | **$(146)** | **0%** | **$(242)** | **1%** | **40%** |
| **Total depreciation, amortization, general and administrative expense** | **$(3,700)** | **9%** | **$(4,752)** | **13%** | **22%** |
| **OPERATING INCOME (LOSS) – CINEMA** |  |  |  |  |  |
| **United States** | $(4,326) | (10)% | $(6,320) | (17)% | 32% |
| **Australia** | (125) | (0)% | (572) | (2)% | 78% |
| **New Zealand** | (161) | (0)% | (325) | (1)% | 50% |
| **Total Cinema operating income (loss)** | **$(4,612)** | **(11)%** | **$(7,217)** | **(19)%** | **36%** |

### First Quarter Results

### Revenue

For the quarter ended March 31, 2023, cinema revenue increased by $4.6 million, to $42.0 million compared to the same period in the prior year. This increase is primarily driven by a higher quality and quantity of film product, such as *Avatar: The Way of Water, Ant-Man and The Wasp: Quantumania*, and *Creed III*, and continued willingness from patrons to return to the in-person experience of the big screen.

### Cinema Segment Operating Income/(Loss)

Cinema segment operating loss for the quarter ended March 31, 2023, decreased by $2.6 million, to a loss of $4.6 million when compared to the same period in the prior year, due to a higher quantity and quality of tentpole films released during the first three months of 2023 and a decrease in depreciation and amortization and general and administrative expense of $1.1 million, partially offset by increased film rent as a result of tentpole movies, other increased operating expenses and the discontinuation of virtual print fees (VPFs) that were paid by the film companies to help finance the costs of converting our 35mm projectors to digital projector technology.

### Operating expense

Operating expense for the quarter ended March 31, 2023, increased by $3.1 million, to $42.9 million, compared to the same quarter in the prior year. These increases are due to, as discussed above, increased film rent and other operating expenses and the negative impacts of the discontinuation of VPFs.

### Depreciation, amortization, impairment, general and administrative expense

Depreciation, amortization, impairment and general and administrative expense for the three months ended March 31, 2023, decreased by $1.1 million, to $3.7 million, compared to the same period in the prior year. This decrease is due to a decrease in general and administrative expense which is attributable to recovery of doubtful debt that had previously been written off and a reduction in depreciation and amortization in the U.S. due to no replacement of aged assets in the first quarter of 2023.

### Real Estate

The following table details our real estate segment operating results for the quarter and three months ended March 31, 2023 and March 31, 2022, respectively:

*(Dollars in thousands)*

| REVENUE | Three Months Ended March 31, ‎2023 | % of ‎Revenue | March 31, ‎2022 | % of ‎Revenue | Three Months Ended |
| --- | ---: | ---: | ---: | ---: | ---: |
| **United States** Live theatre rental and ancillary income | $339 | 7% | $516 | 12% | (34)% |
| Property rental income | 1,215 | 24% | 160 | 4% | \>100% |
|  | **1,554** | **31%** | **676** | **16%** | **\>100%** |
| **Australia** Property rental income | **3,137** | **62%** | **3,130** | **75%** | -% |
| **New Zealand** Property rental income | **374** | **7%** | **356** | **9%** | 5% |
| **Total revenue** | **$5,065** | **100%** | **$4,162** | **100%** | **22%** |
| **OPERATING EXPENSE** |  |  |  |  |  |
| **United States** Live theatre cost | $(172) | 3% | $(177) | 4% | 3% |
| Property cost | (441) | 9% | (325) | 8% | (36)% |
| Occupancy expense | (243) | 5% | (256) | 6% | 5% |
|  | **(856)** | **17%** | **(758)** | **18%** | **(13)%** |
| **Australia** Property cost | (512) | 10% | (470) | 11% | (9)% |
| Occupancy expense | (483) | 10% | (522) | 13% | 7% |
|  | **(995)** | **20%** | **(992)** | **24%** | **-%** |
| **New Zealand** Property cost | (262) | 5% | (306) | 7% | 14% |
| Occupancy expense | (102) | 2% | (101) | 2% | (1)% |
|  | **(364)** | **7%** | **(407)** | **10%** | **11%** |
| **Total operating expense** | **$(2,215)** | **44%** | **$(2,157)** | **52%** | **(3)%** |
| **DEPRECIATION, AMORTIZATION, GENERAL AND ADMINISTRATIVE EXPENSE** |  |  |  |  |  |
| **United States** Depreciation and amortization | $(739) | 15% | $(754) | 18% | 2% |
| General and administrative expense | (176) | 3% | (227) | 5% | 22% |
|  | **(915)** | **18%** | **(981)** | **24%** | 7% |
| **Australia** Depreciation and amortization | $(648) | 13% | $(692) | 17% | 6% |
| General and administrative expense | (81) | 2% | (2) | 0% | (\>100)% |
|  | **(729)** | **14%** | **(694)** | **17%** | **(5)%** |
| **New Zealand** Depreciation and amortization | (200) | 4% | (226) | 5% | 12% |
| General and administrative expense | — | 0% | — | 0% | -% |
|  | **(200)** | **4%** | **(226)** | **5%** | **12%** |
| **Total depreciation, amortization, general and administrative expense** | **$(1,844)** | **36%** | **$(1,901)** | **46%** | **3%** |
| **OPERATING INCOME (LOSS) - REAL ESTATE** |  |  |  |  |  |
| **United States** | $(217) | (4)% | $(1,063) | (26)% | 80% |
| **Australia** | 1,413 | 28% | 1,444 | 35% | (2)% |
| **New Zealand** | (190) | (4)% | (277) | (7)% | 31% |
| **Total real estate operating income (loss)** | **$1,006** | **20%** | **$104** | **2%** | **\>100%** |

### First Quarter Results

### Revenue

Real estate revenue for the quarter ended March 31, 2023, increased by $0.9 million to $5.1 million, compared to the same period in the prior year. This increase was due to the recognition of rental income from our tenant at our 44 Union Square property, which did not occur in the same period of prior year.

### Real Estate Segment Income/(Loss)

Real estate segment operating income for the quarter ended March 31, 2023, increased by $0.9 million, to $1.0 million, compared to the same period in the prior year. This change is attributable to rent recognized in Q1 2023 from our tenant at our 44 Union Square property, that did not occur in the same period of the prior year.

### Operating Expense

Operating expense for the quarter ended March 31, 2023, increased by $0.1 million, to $2.2 million. This increase in expenses is related to increases in utilities, insurance, and security.

### LIQUIDITY AND CAPITAL RESOURCES

### Our Financing Strategy

Prior to the interruption to our revenues caused by the COVID-19 pandemic, we used cash generated from operations and other excess cash to the extent not needed to fund capital investments contemplated by our business plan, to pay down our loans and credit facilities. This provided us with availability under our loan facilities for future use and thereby, reduced interest charges. On a periodic basis, we reviewed the maturities of our borrowing arrangements and negotiated renewals and extensions where necessary.

However, disruptions to our cinema cash flow caused by the COVID-19 pandemic, government efforts to address the pandemic, and the resulting aftermath of the pandemic and those efforts have made it necessary for us to defer capital expenditures and to rely on borrowings and the proceeds of asset monetizations to cover our costs of operations.

Our bank loans with Bank of America, NAB, and Westpac require that our Company comply with certain covenants. Furthermore, our Company’s use of loan funds from NAB and Westpac is limited due to limitations on the expatriation of funds from Australia and New Zealand to the United States. We believe that our lenders understand that the current situation, relating to the COVID-19 pandemic, is not of our making, that we are doing everything that can reasonably be done, and that, generally speaking, our relationship with our lenders is good.

Our Company remains focused on the various economic factors affecting us as the markets in which we operate emerge from the worst effects of the COVID-19 pandemic, including financial, economic, competitive, regulatory, and other factors, many of which are beyond our control. If our Company is unable to generate sufficient cash flow in the upcoming months or if its cash needs exceed our Company’s borrowing capacity under its available facilities, we could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling additional assets, or restructuring debt.

For more information about our borrowings, please refer to *Part I – Financial Information, Item 1 – Notes to Consolidated Financial Statements-- Note 12 – Borrowings*. For more information about our efforts to manage our liquidity issues, see *Part I- Financial Information, Item 1 – Notes to Consolidated Financial Statements – Note 3 – Impact of COVID-19 Pandemic and Liquidity.*

The changes in cash and cash equivalents for the three months ended March 31, 2023, and March 31, 2022, respectively, are discussed as follows:

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| Net cash provided by (used in) operating activities | $(11,552) | $(14,062) | 18% |
| Net cash provided by (used in) investing activities | (1,527) | (1,775) | 14% |
| Net cash provided by (used in) financing activities | (1,409) | (1,606) | 12% |
| Effect of exchange rate on cash and restricted cash | (114) | 687 | (\>100)% |
| Increase (decrease) in cash and cash equivalents and restricted cash | $(14,602) | $(16,756) | 13% |

### Operating activities

Cash used in operating activities for the three months ended March 31, 2023, decreased by $2.5 million, to $11.6 million. This was driven by an improved cinema operating performance compared to the prior year period and recognition of rental income from our tenant, at our 44 Union Square property, which did not occur in the same period of prior year.

### Investing activities

Cash used in investing activities during the three months ended March 31, 2023, was $1.5 million, an increase of $0.2 million compared to the same period of prior year.

### Financing activities

Cash used in financing activities for the three months ended March 31, 2023, decreased by $0.2 million, to $1.4 million due to higher debt repayments in Q1 2022 when compared to Q1 2023, discussed in *Part 1 – Financial Information, Item 1 – Notes to Consolidated Financial Statements-- Note 12 – Borrowings.*

The table below presents the changes in our total available resources (cash and borrowings), debt-to-equity ratio, working capital, and other relevant information addressing our liquidity for the first quarter ended March 31, 2023, and preceding four years:

*($ in thousands)*

| Total Resources (cash and borrowings) | As of and for the 3-Months Ended March 31, 2023 | Year Ended December 31 2022 | 2021 | 2020 | 2019 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Cash and cash equivalents (unrestricted) | $14,628 | $29,947 | $83,251 | $26,826 | $12,135 |
| Unused borrowing facility | 12,000 | 12,000 | 12,000 | 15,490 | 73,920 |
| Restricted for capital projects | 12,000 | 12,000 | 12,000 | 9,377 | 13,952 |
| Unrestricted capacity | — | — | — | 6,113 | 59,968 |
| Total resources at period end | 26,628 | 41,947 | 95,251 | 42,316 | 86,055 |
| Total unrestricted resources at period end | 14,628 | 29,947 | 83,251 | 32,939 | 72,103 |
| **Debt-to-Equity Ratio** |  |  |  |  |  |
| Total contractual facility | $225,401 | $227,633 | $248,948 | $300,449 | $283,138 |
| Total debt (gross of deferred financing costs) | 213,401 | 215,633 | 236,948 | 284,959 | 209,218 |
| Current | 48,101 | 38,026 | 12,060 | 42,299 | 37,380 |
| Non-current | 165,300 | 177,607 | 224,888 | 242,660 | 171,838 |
| Finance lease liabilities | 20 | 28 | 209 | — | — |
| Total book equity | 50,972 | 63,279 | 105,060 | 81,173 | 139,616 |
| Debt-to-equity ratio | 4.19 | 3.41 | 2.26 | 3.51 | 1.50 |
| **Changes in Working Capital** |  |  |  |  |  |
| Working capital (deficit)(2) | $(94,195) | $(74,152) | $(6,673) | $(64,140) | $(84,138) |
| Current ratio | 0.26 | 0.39 | 0.94 | 0.47 | 0.24 |
| **Capital Expenditures (including acquisitions)** | $1,527 | $9,780 | $14,428 | $16,759 | $47,722 |

(1) Please refer to *Part II – Notes to Consolidated Financial Statements-- Note 2 – Summary of Significant Accounting Policies – Prior Period Financial Statements Correction of Immaterial Errors* of the 2022 Form 10-K for the prior period adjustments for accounting for accrued sales tax deemed not material.

(2) Our working capital is reported as a deficit, as we receive revenue from our cinema business ahead of the time that we have to pay our associated liabilities. We use the money we receive to pay down our borrowings in the first instance.

As of March 31, 2023, we had $14.6 million in cash and cash equivalents compared to $29.9 million on December 31, 2022. On March 31, 2023, our total outstanding borrowings were $213.4 million compared to $215.6 million on December 31, 2022.

We manage our cash, investments, and capital structure to meet the short-term and long-term obligations of our business, while maintaining financial flexibility and liquidity. We forecast, analyze, and monitor our cash flows to enable investment and financing within the overall constraints of our financial strategy. In the past, we used cash generated from operations and other excess cash to the extent not needed for any capital expenditures, to pay down our loans and credit facilities providing us some flexibility on our available loan facilities for future use and thereby, reducing interest charges.

### CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES

The following table provides information with respect to the maturities and scheduled principal repayments of our recorded contractual obligations and certain of our commitments and contingencies, either recorded or off-balance sheet, as of March 31, 2023:

*(Dollars in thousands)*

|  | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Debt(1) | $39,192 | $137,031 | $300 | $314 | $7,502 | $— | $184,339 |
| Operating leases, including imputed interest | 25,120 | 32,128 | 30,157 | 28,218 | 25,879 | 136,670 | 278,172 |
| Finance leases, including imputed interest | 20 | — | — | — | — | — | 20 |
| Subordinated debt(1) | 563 | 586 | — | — | 27,913 | — | 29,062 |
| Pension liability | 855 | 684 | 684 | 684 | 684 | 110 | 3,701 |
| Estimated interest on debt (2) | 12,596 | 7,922 | 2,751 | 2,737 | 1,220 | — | 27,226 |
| Village East purchase option(3) | — | 5,900 | — | — | — | — | 5,900 |
| Total | $78,346 | $184,251 | $33,892 | $31,953 | $63,198 | $136,780 | $528,420 |

(1) Information is presented gross of deferred financing costs.

(2) Estimated interest on debt is based on the anticipated loan balances for future periods and current applicable interest rates.

(3) Represents the lease liability of the option associated with the ground lease purchase of the Village East Cinema, which on November 4, 2022, we modified to settle on or before July 1, 2024.

### Litigation

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

Please refer to *Part I, Item 3 – Legal Proceedings* in our 2022 Form 10-K for more information. There have been no material changes to our litigation since our 2022 Form 10-K, except as set forth in *Notes to Consolidated Financial Statements-- Note 14 – Commitments and Contingencies* included herein in *Part I – Financial Information, Item 1 – Financial Statements* on this Quarterly Report on Form 10-Q. This note sets out our litigation accounting policies.

### Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements or obligations (including contingent obligations) that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in the financial condition, revenue or expense, results of operations, liquidity, capital expenditures or capital resources.

### CRITICAL ACCOUNTING POLICIES

We believe that the application of the following accounting policies requires significant judgments and estimates in the preparation of our Consolidated Financial Statements and hence, are critical to our business operations and the understanding of our financial results:

*(i) Impairment of Long-lived Assets (other than Goodwill and Intangible Assets with indefinite lives) –* we evaluate our long-lived assets and finite-lived intangible assets using historical and projected data of cash flows 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 an 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 or for those assets with no consistent historical or projected cash flows, we obtain appraisals or other evidence to evaluate whether there are impairment indicators for these assets.

No impairment losses were recorded for long-lived and finite-lived intangible assets for the first quarter and three months ended March 31, 2023.

*(ii) Impairment of Goodwill and Intangible Assets with indefinite lives –* goodwill and intangible assets with indefinite useful lives are not amortized, but instead, tested for impairment at least annually on a reporting unit basis. The impairment evaluation is based on the present value of estimated future cash flows of each reporting unit plus the expected terminal value. There are significant assumptions and estimates used in determining the future cash flows and terminal value. The most significant assumptions include our 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.

No impairment losses were recorded for goodwill and indefinite-lived intangible assets for the first quarter and three months ended March 31, 2023.

### CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Our statements in this quarterly report, including the documents incorporated herein by reference, contain a variety of forward-looking statements as defined by the Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "may," "will," "expect," "believe," "intend," "future," and "anticipate" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding the closures and reopening of our cinemas and theatres, including our expectations regarding renovations and addition of cinemas; our expectations regarding the long-term impacts of the COVID-19 pandemic on customers’ desires for social interaction our expected operating results, including the long-term impact of the COVID-19 pandemic and our ultimate return to pre-pandemic type results; our expectations regarding the recovery and future of the cinema exhibition industry, including the strength of movies anticipated for release in the future; our expectations regarding people returning to our theatres and continuing to use discretionary funds on entertainment outside of the home; our expectations regarding the commencement of operations of certain cinemas; our expectations regarding the timing of new cinemas being added to the circuit; our expectations regarding the timing of *The Empire Strips Back* beginning performances; our expectations regarding the impact of streaming and mobile video services on the cinema exhibition industry; our belief regarding the attractiveness of 44 Union Square to potential tenants and ability to lease space on acceptable terms; our expectations regarding the timing of the completions our renovation projects, our expectations regarding credit facility covenant compliance and our ability to continue to obtain necessary covenant waivers and loan extensions on terms acceptable to us; and our expectations of our liquidity and capital requirements and the allocation of funds.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

with respect to our cinema and live theatre operations:

reduced consumer demand due to recessionary pressures;

the adverse continuing impact of the COVID-19 pandemic, and other contagious diseases and the adverse effects on our anticipated cinema operations should there be further closings or restrictions mandated as a result of other pandemics or diseases;

the adverse continuing effects of the COVID-19 pandemic or other contagious diseases on our Company’s results from operations, liquidity, cash flows, financial condition, and access to credit markets;

the adverse continuing impact of the COVID-19 pandemic or other contagious diseases on short-term and/or long-term entertainment, leisure and discretionary spending habits and practices of our patrons;

the decrease in attendance at our cinemas and theatres due to (i) continued health and safety concerns, (ii) a change in consumer behavior in favor of alternative forms or mediums of entertainment, and (iii) additional regulatory requirements limiting our seating capacity;

reduction in operating margins (or negative operating margins) due to the implementation of health and safety protocols;

potentially uninsurable liability exposure to customers and staff should they become (or allege that they have become) infected with COVID-19 or other contagious diseases while at one of our facilities;

unwillingness of employees to report to work due to the adverse effects of the COVID-19 pandemic or other contagious diseases or to otherwise conduct work under any revised work environment protocols;

the continuing adverse impact that the COVID-19 pandemic or other contagious diseases may continue to have on the national and global macroeconomic environment;

competition from cinema operators who have successfully used debtor laws or government grants to reduce their debt and/or rent exposure;

the uncertainty as to the scope and extent of government responses to the COVID-19 pandemic or other contagious diseases;

the disruptions or reductions in the utilization of entertainment, shopping, and hospitality venues, as well as in our operations, due to pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases or to changing consumer tastes and habits;

the number and attractiveness to moviegoers of the films released in future periods, and potential changes in release dates for motion pictures;

the lack of availability of films in the short- or long-term as a result of (i) major film distributors releasing scheduled films on alternative channels or (ii) disruptions of film production;

the amount of money spent by film distributors to promote their motion pictures;

the licensing fees and terms required by film distributors from motion picture exhibitors in order to exhibit their films;

the comparative attractiveness of motion pictures as a source of entertainment and willingness and/or ability of consumers (i) to spend their dollars on entertainment and (ii) to spend their entertainment dollars on movies in an outside-the-home environment;

the extent to which we encounter competition from other cinema exhibitors, from other sources of outside-the-home entertainment, and from inside-the-home entertainment options, such as “home cinemas” and competitive film product distribution technology, such as, streaming, cable, satellite broadcast, video on demand platforms, and Blu-ray/DVD rentals and sales;

our ability to continue to obtain, to the extent needed, waivers or other financial accommodations from our lenders and landlords;

the impact of major movies being released directly to one of the multitudes of streaming services available;

the impact of certain competitors’ subscription or advance pay programs;

the failure of our new initiatives to gain significant customer acceptance and use or to generate meaningful profits;

the cost and impact of improvements to our cinemas, such as improved seating, enhanced F&B offerings, and other improvements;

the ability to negotiate favorable rent abatement, deferral and repayment terms with our landlords (which may include lenders who have foreclosed on the collateral held by our prior landlords);

disruptions during cinema improvements;

in the U.S., the impact of the termination and phase-out of the so called “Paramount Decree;”

the risk of damage and/or disruption of cinema businesses from earthquakes as certain of our operations are in geologically active areas;

the impact of protests, demonstrations, and civil unrest on, among other things, government policy, consumer willingness to go to the movies, and

labor shortages and increased labor costs related to such shortages and to increasingly costly labor laws and regulations applicable to part time non-exempt workers.

with respect to our real estate development and operation activities:

the increased costs of wages, supplies, services and other development expenses from inflation;

the impact on tenants from recessionary pressures;

the impact of the COVID-19 pandemic or other contagious diseases may continue to affect many of our tenants at our real estate operations in the United States, Australia, and New Zealand, their ability to pay rent, and to stay in business;

the impact of the COVID-19 pandemic or other contagious diseases on our construction projects and on our ability to open construction sites and to secure needed labor and materials;

the impact of the COVID-19 pandemic or other contagious diseases on real estate valuations in major urban centers, such as New York;

uncertainty as to governmental responses to COVID-19 or other contagious diseases;

the rental rates and capitalization rates applicable to the markets in which we operate and the quality of properties that we own;

the ability to negotiate and execute lease agreements with material tenants;

the extent to which we can obtain on a timely basis the various land use approvals and entitlements needed to develop our properties;

the risks and uncertainties associated with real estate development;

the availability and cost of labor and materials;

the ability to obtain all permits to construct improvements;

the ability to finance improvements, including, but not limited to increased cost of borrowing and tightened lender credit policies;

the disruptions to our business from construction and/or renovations;

the possibility of construction delays, work stoppage, and material shortage;

competition for development sites and tenants;

environmental remediation issues;

the extent to which our cinemas can continue to serve as an anchor tenant that will, in turn, be influenced by the same factors as will influence generally the results of our cinema operations;

the increased depreciation and amortization expense as construction projects transition to leased real property;

the ability to negotiate and execute joint venture opportunities and relationships;

the risk of damage and/or disruption of real estate businesses from earthquakes as certain of our operations are in geologically active areas;

the disruptions or reductions in the utilization of entertainment, shopping and hospitality venues, as well as in our operations, due to pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases, or to changing consumer tastes and habits; and

the impact of protests, demonstrations, and civil unrest on government policy, consumer willingness to visit shopping centers.

with respect to our operations generally as an international company involved in both the development and operation of cinemas and the development and operation of real estate and previously engaged for many years in the railroad business in the United States:

our ability to renew, extend, renegotiate or replace our loans that mature in 2023 and beyond, and the impact of increasing interest rates;

our ability to grow our Company and provide value to our stockholders;

our ongoing access to borrowed funds and capital and the interest that must be paid on that debt and the returns that must be paid on such capital, and our ability to borrow funds to help cover the cessation of cash flows we experienced during the COVID-19 pandemic;

our ability to reallocate funds among jurisdictions to meet short-term liquidity needs;

the relative values of the currency used in the countries in which we operate;

the impact that any discontinuance, modification or other reform of London Inter-Bank Offered Rate (LIBOR), or the establishment of alternative reference rates, may have on our LIBOR-based debt instruments;

changes in government regulation, including by way of example, the costs resulting from the requirements of Sarbanes-Oxley and other increased regulatory requirements;

our labor relations and costs of labor (including future government requirements with respect to minimum wages, shift scheduling, the use of consultants, pension liabilities, disability insurance and health coverage, and vacations and leave);

our exposure from time to time to legal claims and to uninsurable risks, such as those related to our historic railroad operations, including potential environmental claims and health-related claims relating to alleged exposure to asbestos or other substances now or in the future recognized as being possible causes of cancer or other health related problems, and class actions and private attorney general wage and hour and/or safe workplace-based claims;

our exposure to cybersecurity risks, including misappropriation of customer information or other breaches of information security;

the impact of major outbreaks of contagious diseases;

the availability of employees and/or their ability or willingness to conduct work under any revised work environment protocols;

the increased risks related to employee matters, including increased employment litigation and claims relating to terminations or furloughs caused by cinema and ETC closures;

our ability to generate significant cash flow from operations if our cinemas and/or ETCs continue to experience demand at levels significantly lower than historical levels, which could lead to a substantial increase in indebtedness and negatively impact our ability to comply with the financial covenants, if applicable, in our debt agreements;

our ability to comply with credit facility covenants and our ability to obtain necessary covenant waivers and necessary credit facility amendments;

changes in future effective tax rates and the results of currently ongoing and future potential audits by taxing authorities having jurisdiction over our various companies;

inflationary pressures on labor and supplies, and supply chain disruptions;

changes in applicable accounting policies and practices;

changes in future effective tax rates and the results of currently ongoing and future potential audits by taxing authorities having jurisdiction over our various companies; and

the impact of the conflict events occurring in Eastern Europe and the threats of potential conflicts in the Asia-Pacific region.

The above list is not necessarily exhaustive, as business is by definition unpredictable and risky, and subject to influence by numerous factors outside of our control, such as changes in government regulation or policy, competition, interest rates, supply, technological innovation, changes in consumer taste and fancy, weather, earthquakes, pandemics, and the extent to which consumers in our markets have the economic wherewithal to spend money on beyond-the-home entertainment. Refer to *Item 1A - Risk Factors*, as well as the risk factors set forth in any other filings made under the Securities Act of 1934, as amended, including any of our Quarterly Reports on Form 10-Q, for more information.

Given the variety and unpredictability of the factors that will ultimately influence our businesses and our results of operation, no guarantees can be given that any of our forward-looking statements will ultimately prove to be correct. Actual results will undoubtedly vary and there is no guarantee as to how our securities will perform either when considered in isolation or when compared to other securities or investment opportunities.

Forward-looking statements made by us in this quarter report are based only on information currently available to us and are current only as of the date of this Quarterly Report on Form 10-Q for the period ended March 31, 2023. We undertake no obligation to publicly update or to revise any of our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law. Accordingly, you should always note the date to which our forward-looking statements speak.

## Market risk

As filed, 6,389 characters.

The SEC requires that registrants include information about potential effects of changes in currency exchange and interest rates in their filings. Several alternatives, all with some limitations, have been offered. We base the following discussion on a sensitivity analysis that models the effects of fluctuations in currency exchange rates and interest rates. This analysis is constrained by several factors, including the following:

It is based on a single point in time; and

It does not include the effects of other complex market reactions that would arise from the changes modeled.

Although the results of such an analysis may be useful as a benchmark, they should not be viewed as forecasts.

### Currency Risk

While we report our earnings and net assets in U.S. 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 U.S. dollar and compared to each other. We do not hedge the currency risk, 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 intercompany debt and our ability to service this debt could be adversely impacted by declines in the relative value of the Australian and New Zealand dollars compared to the U.S. dollar. 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 since 1996:

In recent periods, we have paid material intercompany dividends and have repaid intercompany debt, using these proceeds to fund capital investment in the United States. Accordingly, our debt levels in Australia are higher than they would have been if funds had not been returned for such purposes. On a company wide basis, this means that a reduction in the relative strength of the U.S. dollar versus the Australian dollar and/or the New Zealand dollar would effectively raise the overall cost of our borrowing and capital and make it more expensive to return funds from the United States to Australia and New Zealand.

Our Company transacts business in Australia and New Zealand and is subject to risks associated with fluctuating foreign currency exchange rates. During the first quarter of 2023, the average Australian dollar and New Zealand dollar weakened against the U.S. dollar by 5.5% and 6.9%, respectively, compared to the same period prior year.

At March 31, 2023, approximately 34.3% and 8.6% of our assets were invested in assets denominated in Australian dollars (Reading Australia) and New Zealand dollars (Reading New Zealand), respectively, including approximately $3.7 million in cash and cash equivalents. At December 31, 2022, approximately 34.1% and 8.4% of our assets were invested in assets denominated in Australian dollars (Reading Australia) and New Zealand dollars (Reading New Zealand), respectively, including approximately ($14.6) million in cash and cash equivalents.

Our policy in Australia and New Zealand is to match revenues and expenses, whenever possible, in local currencies. As a result, we have procured a majority of our expenses in Australia and New Zealand in local currencies. Despite this natural hedge, recent movements in foreign currencies and the current holding of U.S. dollars by certain Australian and New Zealand subsidiaries have had an effect on our current earnings. The effect of the translation adjustment on our assets and liabilities noted in our other comprehensive income was a decrease of $0.8 million and $0.8 million for the quarter and three months ended March 31, 2023, respectively. As we continue to progress our acquisition and development activities in Australia and New Zealand, no assurances can be given that the foreign currency effect on our earnings will not be material in the future.

Historically, our policy has been to borrow in local currencies to finance the development and construction of our long-term assets in Australia and New Zealand. As a result, the borrowings in local currencies have provided somewhat of a natural hedge against the foreign currency exchange exposure. We have also historically paid management fees to the U.S. to cover a portion of our domestic overhead. The fluctuations of the Australian and New Zealand currencies, however, may impact our ability to rely on such funding for ongoing support of our domestic overhead.

We record unrealized foreign currency translation gains or losses that could materially affect our financial position. As of March 31, 2023, and December 31, 2022, the balance of cumulative foreign currency translation adjustments were approximately a $1.5 million loss and a $0.7 million gain, respectively.

### Interest Rate Risk

Our exposure to interest rate risk arises out of our long-term floating-rate borrowings. To manage the risk, we utilize interest rate derivative contracts to convert certain floating-rate borrowings into fixed-rate borrowings. It is our Company’s policy to enter into interest rate derivative transactions only to the extent considered necessary to meet its objectives as stated above. Our Company does not enter into these transactions or any other hedging transactions for speculative purposes.

Historically, we maintain most of our cash and cash equivalent balances in short-term money market instruments with original maturities of three months or less. Due to the short-term nature of such investments, a change of 1% in short-term interest rates would not have a material effect on our financial condition. The negative spread between our borrowing costs and earned interest will exacerbate as we hold cash to provide a safety net to meet our expenses.

We have a combination of fixed and variable interest rate loans. In connection with our variable interest rate loans, a change of approximately 1% in short-term interest rates would have resulted in approximately $413,000 increase or decrease in our quarterly interest expense.

For further discussion on market risks, please refer to *Part I, Item 1A – Risk Factors* included on our 2022 Form 10-K.

## Controls and procedures

As filed, 1,746 characters.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Company’s reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such, term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Based upon that evaluation, we concluded that, as of March 31, 2023, our disclosure controls and procedures were effective.

### Changes in Internal Control over Financial Reporting

There were no other changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the first quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 124 characters.

In addition to the risk factors previously disclosed in our 2022 Form 10-K, the following risk factor was identified:

None.

Filed May 15, 2023.
Source: SEC EDGAR, the filing index for accession 0000716634-23-000012. Last ingested by Listed: Oct 24, 2026, 14:56 ET. No prices; not investment advice.