Reading International Inc RDI US Equity☆

Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

INDEX Page

Our Business 37

Results of Operations 41

Liquidity and Capital Resources 49

Contractual Obligations, Commitments and Contingencies 51

Financial Risk Management 51

Critical Accounting Estimates 52

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OUR BUSINESS

Impact of the COVID-19 Pandemic; Where have we been, and Where we go from here.

We have discussed in some detail under the heading “Business Description” in Part I of this Report our views as to the impact of the COVID-19 Pandemic impact (some of which is going) on our business and, while not repeating that disclosure here, incorporate it by reference. As a general matter, the COVID-19 pandemic caused considerable economic instability all over the world and greatly affected our Company’s global operations. But we have survived. We have preserved our people and our core assets. We are prepared to go forward.

Beginning in March 2020, we shut down all of our cinemas and laid off substantially all of our U.S. cinema level personnel. This cut off virtually all of the revenues typically derived from such operations, but we continued to incur fixed costs, such as rent, insurance, property taxes and utilities. The result: significant negative cash flow. We were able to work out some relief with various of our landlords but, in most cases, this has simply deferred our liability for these fixed occupancy costs. The impact on our real estate operations was less dramatic, but still material.

In 2021, we began to reopen our cinemas, but in many cases under strict operating guidelines, that typically did not allow us to recoup our costs of operations. Also, film availability was spotty, as major films were either diverted to streaming or video on demand or postponed to later release dates. Attendances were meager. Operating costs were adversely impacted by, among other things, stricter cleaning protocols which increased the time required to clean our theatres, thereby reducing the number of showtimes. On the real estate side, business began to return to normal in Australia and New Zealand.

To address our negative operating cash flow situation, we significantly cut back our capital expenditures and monetized five non-core real estate assets generating a net profit from such sales of $93.3 million and, more importantly, net cash of $144.8 million. We selected assets that were primarily non-cash flowing, had values that were not adversely impacted by the pandemic and that, if retained, would have required significant capital investment to achieve any material increase in value. In the two cases where we monetized properties with cinemas, we were able to lease back the cinema component, and consequently, suffered no loss in our cinema count. We used the cash from these monetizations to pay down debt ($59.1 million), and fund necessary capital expenditures ($24.2 million). At December 31, 2022, we had cash and cash equivalents of $ 29.9 million.

During 2022, our operations began to return to normal as health and safety restrictions loosened and as studio releases improved. Although cinema attendances are still below pre-pandemic levels, the industry box office results significantly rebounded in 2022, compared to the prior two years, as audiences embraced the shared community experience of movies on the big screen. The release of highly anticipated blockbuster films, such as Top Gun: Maverick, Black Panther: Wakanda Forever, Doctor Strange: In the Multiverse of Madness and Avatar: The Way of Water were among some of the highest grossing films since the start of the pandemic and have provided optimism for the cinema industry.

None of our cinemas are currently closed due to COVID-19 or other diseases. Our cinema in Wellington, New Zealand remains closed due to seismic concerns pending the redevelopment of that ETC. However, we still have approximately $9.4 million in deferred occupancy costs that must be repaid.

At the start of the spread of the COVID-19 pandemic, various trading restrictions, some enforced by the government, affected many of our unrelated third-party tenants at our ETCs in Australia and New Zealand. Although there were varied trading restrictions, most of these properties remained open for business through the COVID-19 crisis. 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 new fit outs). Most of the rentable retail portions of our Courtenay Central location in New Zealand continues to be closed due to seismic concerns, however, two tenants remain open and are trading.

Our cash flow situation, and decision to look to internal resources rather than layer on junk debt or sell securities, has meant that we have had to sell assets, constrain our capital expenditures, and slow down our real estate development endeavors.

With the impacts of COVID fading and with fewer disruptions to our global operations, we feel confident that the darkest days of the pandemic are behind us now. However, we have and will continue to experience into 2023, and most likely for the foreseeable future, adverse impacts on our cinema exhibition business as a result of the pandemic.

Our anticipated plans for 2023 and beyond are discussed in greater detail below.

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RECENT DEVELOPMENTS

Recent developments in our two business segments are discussed below. For an overview of our two business segments, including a breakdown of assets that we own and/or manage, please see Part I, Item 1 –Our Business of this 2022 Form 10-K.

Cinema Exhibition

Key Performance Indicators

A key performance indicator utilized by management is food and beverage Spend Per Patron (“SPP”).

One of our strategic priorities has been to continue upgrading the food and beverage menu at several of our global cinemas. As of December 31, 2022, we have a total of 38 theater locations with an all-new upgraded food and beverage menu. 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 Additions

The additions to our cinema portfolio during the 2020-2022 COVID years were as follows:

Australia and New Zealand

Traralgon, Victoria, Australia: On December 15, 2021, we opened a new state-of-the-art five-screen Reading Cinemas in Traralgon, Victoria.

Millers Junction, Victoria, Australia: On June 16, 2021, we opened a new state-of-the-art six screen Reading Cinemas at the expanded Millers Junction Village featuring two TITAN LUXE auditoriums with DOLBY ATMOS immersive sound, luxury recliner seating in all auditoriums, and an enhanced F&B offering.

Jindalee, Queensland, Australia: On December 22, 2020, we opened a new state-of-the-art six-screen Reading Cinemas at Jindalee featuring a TITAN LUXE with DOLBY ATMOS immersive sound, luxury recliner seating in all auditoriums, and newly curated enhanced food and beverage offering.

In addition, on January 13, 2023, we took over an existing 6-screen cinema in Armadale, Australia, a suburb of Perth in Western Australia.

Upgrades to our Film Exhibition Technology and Theater Amenities

Prior to COVID-19, we invested in both (i) the upgrading of our existing cinemas and (ii) the development of new cinemas to provide our customers with premium offerings, including state-of-the-art presentation (including sound, lounges, and bar service) and luxury recliner seating. As of December 31, 2022, all of the upgrades to our theater circuits’ film exhibition technology and amenities over the years are as summarized in the following table:

Location‎Count Screen‎Count

Screen Format

Digital (all cinemas in our theater circuit) 62 505

TITAN XC and LUXE 26 32

Dine-in Service

Gold Lounge (AU/NZ)(1) 10 26

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 in Use(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.

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(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 December 31, 2022, we have pending applications for additional liquor licenses for five cinemas in the U.S, two in Australia, and one in New Zealand. As of today, we have received 3 of the 5 liquor licenses.

United States

Kapolei renovation: During the fourth quarter of 2021, we commenced the renovation of our Consolidated Theatre in Kapolei, in Western Oahu, Hawaii, which relaunched on March 3, 2022, with eight screens featuring recliner seating and a renovation of the lobby areas.

As of the date of this 2022 Annual Report, we have converted 110 of our 228 U.S. auditoriums to luxury recliner seating.

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, by the Invercargill city council, 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: During the three-year period 2020 to 2022, we improved four Reading Cinemas: Belmont, Charlestown, Sunbury, and Harbour Town in Australia.

Plans for 2023 and Our Cinema Business

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. 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, we recently took over an existing 6-screen cinema in Armadale, Australia, a suburb of Perth in Western Australia, previously operated by a competitor.

We are proactively adjusting our operating, programming and marketing strategies to take into account the wide-ranging impacts of the pandemic. We want to grow our cinema-based business through a disciplined approach to renovations and new opportunities globally.

Our focus with respect to new cinemas includes state-of-the-art projection and sound, luxury recliner seating, enhanced F&B (typically including alcohol service), and typically at least one major TITAN-type presentation screen. Our focus is on providing best-in-class services and amenities that will differentiate us from in-home and mobile viewing options. We believe that a night at the movies should be a special and premium experience and, indeed, that it must be able to compete with the variety of options being offered to consumers through other platforms. To supplement the release schedule and improve overall seat occupancy percentages, our global programming teams will continue to create exclusive content programs or series to keep our audiences engaged with our brands.

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.

Expanding our online capabilities, in the third quarter of 2020 and fourth quarter of 2021, respectively, we launched the online ordering of a full F&B menu for our Angelika brand in the U.S. and launched a full F&B menu for our Reading Cinemas in Australia and New Zealand. In December 2020 and December 2021, respectively, we launched our very own streaming service, Angelika Anywhere, in the U.S. and Australia, which is curated for film lovers of independent and foreign film, documentaries, and the more specialized movies from the major studios. Currently our US based website and mobile app have the function which allow guests to instantly book Private Watch Parties online and such function will be added to our Australia and New Zealand based website and mobile app by 2023.

2022 benefited from strong performers including Top Gun: Maverick, and ended the year strongly with Avatar: The Way Of Water, but only delivered three titles grossing over $1.0 billion – also including Jurassic World Dominion. For 2023, cinema operators are more optimistic. The year will offer three Marvel titles, a new Indiana Jones, a new Mission: Impossible (with a Maverick-boosted Tom Cruise), a second Dune, the Hunger Games prequel plus the likes of Wonka, Super Mario Bros, Barbie and Christopher Nolan’s Oppenheimer.

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Real Estate

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 December 31, 2022, we own the fee interests in both of our live theatres in Manhattan, in 10 of our cinemas (as presented in the table under Cinema Exhibition Overview) and in two office buildings in which we maintain administrative offices.

Strategic Asset Monetizations

In 2021 we monetized four non-core real estate assets, consisting of approximately 202-acre raw land holdings in Coachella, California for $11.0 million , and as a 50% owner, we received 50% of the sale proceeds, or $5.3 million; our Royal George Theatre property in Chicago for $7.1 million; our Auburn/Redyard Center (including 114,000 square feet of undeveloped land) located in Auburn, New South Wales for $69.6 million (AU$90.0 million)(As part of the transaction, we entered into a lease with the purchaser to continue to operate the cinema at that location.); two industrial properties adjacent to the Auckland Airport in Manukau/Wiri in New Zealand, representing 70.4 acres, for $56.1 million (NZ $77.2 million); and our cinema building and land in Invercargill for $3.8 million (NZ$5.4 million).

Value-creating Opportunities

The implementation of most of our real estate development plans was delayed due to COVID-19 and the need to conserve capital. However, we continue to believe that our Company’s strong real estate asset base can provide (i) increased financial security through the potential sale of certain non-core real estate assets or (ii) provide collateral for strategic re-financing, in each case to meet liquidity demands. We intend to continue to emphasize the prudent development of our real estate assets. However, we do not anticipate material investment in such properties in 2023, other than pre-development planning soft costs.

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 lower level, ground floor, and second floor of the building, representing 42% of the leasable area. While the tenant is still in the process of constructing tenant improvements, it is now in occupancy of the premises on a full rent paying basis. CBRE is currently engaged as our exclusive broker for the remaining space. While we cannot guarantee the successful leasing of the remaining space, our leasing team continues to actively pursue potential tenants.

Sepulveda Office Building (Culver City, C.A.)–On May 27, 2020, we leased on a multi-year basis the entire second floor of our office building in Culver City, California (approximately 12,000 usable square feet) to WWP Beauty (wwpinc.com), a global company with over 35 years of experience providing the cosmetics and personal care industries with a range of packaging needs. On the date of the lease, possession of the space was turned over to WWP Beauty, which was responsible for building out its space. This work was completed in October 2021. The tenant is currently in occupancy on a full rent paying basis.

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 of 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, is anticipated to begin performances in May 2023.

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.

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Australia:

Newmarket Village ETC, (Brisbane, Australia) – We continue to work on the expansion and upgrading of our Newmarket Village ETC. The 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 ETC, (Queensland, Australia) – We acquired two adjoining properties in Townsville, Queensland, Australia comprising of approximately 9.4-acres in 2015. The total gross leasable area of the Cannon Park City Center and the Cannon Park Discount Center is 105,000 square feet. Our multiplex cinema is the anchor tenant at the Cannon Park City Center, which we continue to work on and improve. This site is 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, New Zealand) – Damage from the 2016 Kaikoura earthquake necessitated demolition of our nine-story parking garage at the site, and unrelated seismic issues caused us to close major portions of the existing cinema and retail structure in early 2019. Prior to the COVID-19 pandemic, our real estate team had developed a comprehensive plan featuring a variety of uses to complement and build upon the “destination quality” of the Courtenay Central location. Notwithstanding the COVID-19 pandemic, our real estate team is continuing to work with our consultants, tenants, potential tenants, and city representatives to advance our redevelopment plans for this property. Given the uncertainty surrounding the COVID-19 pandemic, we have no fixed time frame for the commencement of the redevelopment of this property. We believe that relatively recent developments, including the near completion of the future 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, have enhanced the value of the assemblage. However, New Zealand is currently experiencing increased demands for building materials and labor following Cyclone Gabrielle, which hit the nation on Feb 6, 2023, in addition to inflationary pressures, which may have a cooling effect on real estate development activities in that country.

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

Corporate Matters

Stock Repurchase Program – On March 10, 2020, our Board of Directors authorized a $25.0 million increase to our 2017 stock repurchase program, bringing our total authorized repurchase amount remaining to $26.0 million, and extended the program to March 2, 2022. Through December 31, 2022, we have repurchased 1,792,819 shares of Class A Non-Voting Common Stock at an average price of $13.39 per share (excluding transaction costs). No shares were purchased during the year ended December 31, 2022. Due to the COVID-19 pandemic and its impact on our overall liquidity, our stock repurchase program has and will likely continue to take a lower capital allocation priority for the foreseeable future.

Board Compensation and Stock Options Committee – Refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements--Note 16 – Share-Based Compensation and Repurchase Plans for details regarding our Board, Executive and Employee stock-based remuneration programs.

OVERALL RESULTS OF OPERATIONS

In this section, we discuss the results of our operations for the year ended December 31, 2022, compared to the year ended December 31, 2021. For a discussion of the year ended December 31, 2021, compared to the year ended December 31, 2020, please refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.

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The following table sets forth the overall results of operations for the three years ended December 31, 2022:

% Change - ‎Favorable/‎(Unfavorable)

SEGMENT RESULTS

NON-SEGMENT RESULTS

CONSOLIDATED RESULTS

2022 vs. 2021

Net Loss attributable to Reading International, Inc. was $36.2 million for the year ended December 31, 2022, a decrease of $68.1 million from a Net Income of $31.9 million for year ended December 31, 2021. This decrease was primarily due to (i) the one-time $92.3 million of gains on sales of assets related to the strategic monetization of our Coachella and Manukau landholdings, Royal George property, Auburn/Redyard Center, and Invercargill property in 2021 in response to the liquidity needs resulting primarily from closure of our cinemas due to the COVID-19 pandemic, (ii) the 2021 resolution of an insurance claim related to damage done by the Kaikoura earthquake.

The decrease was offset by a (i) a $7.2 million improvements in our cinema segment operation results attributable to no COVID-19 business disruptions and better film product in 2022, (ii) a percentage rent revenue increase due to increase third party tenant trading performance, reduced vacancy rate and savings in external leasing commission due to our internal leasing programs (iii) $5.1 million decrease in income tax expense to $0.8 million, as a result of increased income tax in 2021 from the monetization of certain real estate assets, and (iv) the establishment of a $4.0 million expense accrual of the settlement of certain U.S. wage and hour claims in 2021.

BUSINESS SEGMENT RESULTS –2022 vs. 2021

Presented below is the comparison of the segment operating income of our two business segments for the years ended December 31, 2022 and 2021, respectively:

2022 2021 % Change ‎Favorable/‎(Unfavorable)

(Dollars in thousands) Cinema Real Estate Cinema Real Estate Cinema Real Estate

Segment Operating Expenses

Impairment of long-lived assets (1,549) — — — - % — %

Breakdown by country:

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A discussion for each segment follows:

Cinema Exhibition – The following table details our Cinema Exhibition segment operating results for the years ended

December 31, 2022 and 2021, respectively:

REVENUE

OPERATING EXPENSE

DEPRECIATION, AMORTIZATION, GENERAL AND ADMINISTRATIVE EXPENSE

Impairment of long-lived assets (1,549) (2) % — — % 1,549 (>100) %

General and administrative expense — — % — — % — — %

OPERATING INCOME (LOSS)

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Cinema Exhibition – The following table details our Cinema Exhibition segment operating results for the quarters ended December 31, 2022 and 2021, respectively:

REVENUE

OPERATING EXPENSE

DEPRECIATION, AMORTIZATION, IMPAIRMENT AND GENERAL AND ADMINISTRATIVE EXPENSE

Impairment of long-lived assets — — % — — % — — %

General and administrative expense (628) (3) % (634) (3) % (6) 1 %

General and administrative expense (358) (2) % (389) (2) % (31) 8 %

New Zealand Depreciation and amortization $ (159) (5) % $ (260) (7) % (101) 39 %

General and administrative expense — — % — — % — — %

OPERATING INCOME (LOSS)

Cinema Exhibition Segment Operating Income

Cinema exhibition segment operating loss decreased by $6.9 million, to a loss of $11.7 million for the year ended December 31, 2022, compared to December 31, 2021, primarily driven by a significant increase in total revenue. As the COVID-19 impacts have lessened, major movie studios released blockbuster movies, such as Top Gun: Maverick, Black Panther: Wakanda Forever, Doctor Strange: In the Multiverse of Madness, and Avatar: The Way of Water, have driven higher admissions and box office revenue.

Cinema exhibition segment operating loss for the fourth quarter of 2022 was $5.8 million, a decrease of $7.9 million from an operating income of $2.0 million in the same time period of 2021 primarily attributable to: (i) a stronger movie slate in the fourth quarter of 2021, including the blockbuster hit, Spider-Man: No Way Home, (ii) occupancy expenses increase due to the resumption of

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intercompany cinema rent, which was abated in 2021, and (iii) Labor, Utilities and Food & Beverage costs increasing due to minimum wage increases and inflation.

Revenue

Cinema revenue increased by $64.5 million, to $191.3 million for the year ended December 31, 2022,compared to 2021. Our cinema circuit experienced a higher number of days in operation in 2022 when compared to the same period in the prior year. Fading COVID impacts led to no mandated closures and large gatherings began to see a resurgence. As a result, major studios started to release much stronger movies, such as Top Gun: Maverick, Black Panther: Wakanda Forever, Doctor Strange: In the Multiverse of Madness and Avatar: The Way of Water.

The table below is the revenue breakdown, by country, for the years ended December 31, 2022, and 2021, respectively:

Below are the changes in our cinema revenue by market:

In the United States, cinema revenues increased by $37.2 million, to $97.1 million for the year ended December 31, 2022, compared to 2021. As of December 31, 2022, 100% of our U.S. cinemas were open compared to 92% in 2021.

In Australia, cinema revenues increased by $24.6 million, to $79.9 million for the year ended December 31, 2022, compared to 2021.

In New Zealand, cinema revenues increased by $2.7 million, to $14.3 million for the year ended December 31, 2022, compared to 2021.

For the quarter ended December 31, 2022, Cinema segment revenue decreased by $3.4 million against the fourth quarter of 2021, to $43.8 million, which was primarily attributable to a weaker film slate in 2022 vs 2021 when Spider-Man: No Way Home was released. This blockbuster movie was the highest grossing film of 2021 for our cinemas.

Operating Expense

Operating expensefor the full year 2022 increased by $60.4 million, to $183.8 million when compared to 2021 due to higher film rent associated with increased ticket sales and the release of more major tentpole films, higher food & beverage costs, and higher utility expenses, along with increased occupancy expenses.

For the quarter ended December 31, 2022, operating expenses increased by $4.8 million, to $45.4 million when compared to the fourth quarter of 2021 due to increased intercompany rent abated in 2021 and other operating expense increases such as labor and utilities.

Depreciation, Amortization, General and Administrative Expense

Depreciation, amortization, general and administrative expense for the year-ended December 31, 2022 decreased by $2.8 million, to $19.2 million compared to 2021 primarily driven by the one-time $4.0 million accrual of the settlement of certain U.S. wage and hour claims in 2021, partially offset by $1.5 million impairment against certain cinema assets in 2022.

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Real Estate – The following table details our Real Estate segment operating results for the years ended December 31, 2022 and 2021, respectively:

REVENUE

OPERATING EXPENSE

DEPRECIATION, AMORTIZATION, GENERAL AND ADMINISTRATIVE EXPENSE

General and administrative expense (695) (23) % (712) (37) % (17) 2 %

General and administrative expense (174) (1) % (206) (2) % (32) 16 %

General and administrative expense — (1) % (2) (0) % (2) 100 %

OPERATING INCOME (LOSS)

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Real Estate – The following table details our Real Estate segment operating results for the quarters ended December 31, 2022 and 2021, respectively:

REVENUE

OPERATING EXPENSE

United States Live theatre cost $ (196) (16) % $ (167) (24) % 29 (17) %

DEPRECIATION, AMORTIZATION, GENERAL AND ADMINISTRATIVE EXPENSE

General and administrative expense (52) (4) % (217) (32) % (165) 76 %

Australia Depreciation and amortization $ (641) (22) % $ (744) (40) % (103) 14 %

General and administrative expense (62) (2) % (42) (2) % 20 (48) %

General and administrative expense — — % (2) (1) % (2) 100 %

OPERATING INCOME (LOSS)

Real Estate Segment Operating Income

Real estatesegment operating income was $0.5 million for the year ended December 31, 2022, which was an increase of $5.9 million from a loss of $5.4 million for the year ended December 31, 2022. These results reflect (i) an increase in intercompany rent income from some of our fee-interest cinemas, which was abated in 2021 (ii) reduced vacancy rate, (iii) an increase in percentage rent revenue due to increase in third party tenant sales, and (iv) our Live Theatres in New York City increasing in operating income during the year ended December 31, 2022 as both the Orpheum and Minetta Lane theatres were open and holding public performances for the full year 2022.

Real estatesegment operating income was $0.6 million for the quarter ended December 31, 2022, which was an increase of $2.1 million from a loss of $1.5 million for the year ended December 31, 2021. These results are due to (i) increased intercompany rent income from some of our fee-interest cinemas, which was abated in 2021, (ii) reduced vacancy rate, and (iii) an increase in a percentage rent revenue from third party tenant sales increase.

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Revenue

The table below is the revenue breakdown by country for each year:

Real estate revenues for the year ended December 31, 2022, increased by $4.1 million, to $16.8 million compared to 2021. This increase is attributable toan increase in property rental income in all three countries primarily in Australia, our Live Theaters being open for the full year, as well as rent received from Petco, our new retail tenant at 44 Union Square offset by the lost income from the sale of our Auburn property.

For the quarter ended December 31, 2022, real estate revenue increased by $1.7 million, to $4.6 million compared to the fourth quarter 2021. This increase is attributable toan increase in property rental income (both from interco and third-party percentage rent) in all three countries primarily in Australia and rent received from Petco, our new Union Square tenant starting in December 2022.

Operating Expense

Operating expense for the year ended December 31, 2022, decreased by $1.2 million, to $8.9 million when compared to the same period in 2021 due to (i) the weakening of the Australian dollar and New Zealand dollar against the U.S. dollar, and (ii) the reduction of costs related to the monetization of the Auburn property during 2021.

NON-SEGMENT RESULTS –2022 vs. 2021

For more information about the legal expense, please refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements--Note 14 – Commitments and Contingencies.

Income Tax Expense

Income tax expense decreased by $5.1 million, to $0.8 million, when compared to 2021, mainly due to the increase in pretax income in 2021 as a result of the monetization of certain of our real estate assets. Please refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements--Note 11 – Income Taxes for further information.

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LIQUIDITY AND CAPITAL RESOURCES

Our Financing Strategy

Prior to the interruption to our revenues caused by the COVID-19 pandemic, we had 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 have reviewed the maturities of our borrowing arrangements and negotiated renewals and extensions where necessary.

Our bank loans with Bank of America, NAB, and Westpac require that our Company comply with certain covenants. Furthermore, our Company’s use of these loan funds 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, including loan modifications and modifications to waivers of certain covenants, please refer to Part II, Item 8 – Financial Statements and Supplementary Data—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 last five years:

Total Resources (cash and borrowings)

Debt-to-Equity Ratio

Changes in Working Capital

(1)This relates to the construction facilities specifically negotiated for 44 Union Square redevelopment project.

(2)Certain 2018 balances included the restatement impact as a result of a prior period financial statement correction of immaterial errors (see Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements--Note 2 – Summary of Significant Accounting Policies – Prior Period Financial Statement Correction of Immaterial Errors).

(3)Typically, 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.

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. Before the COVID-19 pandemic, our treasury management has been focused on aggressive cash management using cash balances to reduce debt and minimize interest expense. 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. As a result of the

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COVID-19 pandemic, we chose to fully draw down on all of our available lines of credit in order to provide liquidity for the Company during a time of minimal revenues.

Refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements--Note 12 – Borrowings for further details on our various borrowing arrangements.

On December 31, 2022, our consolidated cash and cash equivalents totaled $29.9 million. Of this amount, $24.0 million, $4.9 million and $1.1 million were held by our U.S., Australian and New Zealand operations, respectively. The funds held in Australia and New Zealand are, under our applicable bank lending arrangement, subject to limitations on their use outside of Australia or New Zealand as applicable. Due to the impact of the COVID-19 pandemic, we no longer intend to indefinitely reinvest offshore any earnings derived from our Australian and New Zealand operations.

We have historically funded our working capital requirements, capital expenditures and investments in individual properties primarily from a combination of internally generated cash flows and debt. During 2022 and into 2023 the need for such funding, apart from working capital, has been and will be substantially reduced, due to the COVID-19 pandemic. The funding that has been required, has been funded predominantly from cost reductions, debt and strategic asset sales. As noted in the preceding table, we had no unused available unrestricted corporate credit facilities at December 31, 2022.

The change in cash and cash equivalents for the three years ended December 31, 2022 is as follows:

% Change

Operating Activities

2022 vs. 2021

Cash used in operating activities for 2022 increased by $12.9 million, to cash used of $26.4 million, driven by a $26.1 million increase in net changes in operating assets and liabilities primarily resulting from taxes payable, accounts payable and film rent payable, offset by a $13.2 million decrease mainly attributed to improved cinema operating performance compared to the prior year period.

Investing Activities

2022 vs. 2021

Cash used in investing activities during the twelve months ended December 31, 2022, was $9.5 million. There was no repeat of the monetization of certain assets in the twelve months to December 31, 2021, which led to the raising of $129.6 million of cash from investing activities in this period.

Financing Activities

2022 vs. 2021

Cash used in financing activities for the twelve months ended December 31, 2022, decreased by $33.7 million, to $16.6 million due to prior year debt repayments.

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CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES

The following table provides information with respect to the future 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 December 31, 2022:

Finance leases, including imputed interest 28 — — — — — 28

Village East purchase option(2) — 5,900 — — — — 5,900

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

(2)Represents the lease liability of the option associated with the ground lease purchase of the Village East Cinema.

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

Please refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements--Note 14 – Commitments and Contingencies for more information.

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.

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

Where we are the defendants, we accrue for probable damages that insurance may not cover as they become known and can be reasonably estimated. In our opinion, any claims and litigation in which we are currently involved are not reasonably likely to have a material adverse effect on our business, results of operations, financial position, or liquidity. It is possible, however, that future results of the operations for any particular quarterly or annual period could be materially affected by the ultimate outcome of the legal proceedings.

Please refer to Part I,Item 3 – Legal Proceedings for more information. There have been no material changes to our litigation, except as set forth in Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements--Note14 – Commitments and Contingencies.

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.

FINANCIAL RISK MANAGEMENT

Currency and Interest Rate Risk

Our Company’s objective in managing exposure to foreign currency and interest rate fluctuations is to reduce volatility of earnings and cash flows in order to allow management to focus on core business issues and challenges.

Historically, we have managed our currency exposure by creating, whenever possible, natural hedges in Australia and New Zealand. This involves local country sourcing of goods and services, as well as borrowing in local currencies to match revenues and expenses. We have also historically paid management fees to the U.S. to cover a portion of our domestic overhead. The decrease in the value of the Australian and New Zealand currencies as compared to the U.S. dollar combined with the limitations under our bank loans in

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Australia and New Zealand to move funds into the U.S., however, have negatively impacted and are expected in 2023 to continue to negatively impact, our ability to rely on such funding for ongoing support of our domestic overhead.

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 certainfloating-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. We are currently facing additional risk as approximately $177.7 million of our current borrowings mature over the next 24 months. We believe it unlikely that we will be able to refinance this debt at their current interest rates.

Inflation

We continually monitor inflation and the effects of changing prices. Inflation increases the cost of goods and services used. Competitive conditions in many of our markets restrict our ability to recover fully the higher costs of acquired goods and services through price increases. We attempt to mitigate the impact of inflation by implementing continuous process improvement solutions to enhance productivity and efficiency and, as a result, lower costs and operating expenses. Inflation may also adversely impact the rent we pay for our leased cinemas, as many have cost of living adjustment features.

CRITICAL ACCOUNTING ESTIMATES

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:

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.

(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.

$1.5 million of impairment losses were recorded against certain cinema assets in the second quarter of the year ended December 31, 2022. No impairment losses were recorded for long-lived and finite-lived intangible assets for the year ended December 31, 2021. $217,000 of impairment losses were recorded for long-lived and finite-lived intangible assets for the year ended December 31, 2020, based on historical information and projected cash flow.

(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 years ended December 31, 2022, 2021, or 2020.

Tax Valuation Allowance and Deferred Taxes

We record our estimated future tax benefits and liabilities arising from the temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss carryforwards. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results and incorporate assumptions about the amount of future federal, state, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider

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three years of cumulative operating income (loss). As of December 31, 2022, we had recorded approximately $51.2 million of deferred tax assets (net of $54.7 million deferred tax liabilities) 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 carryforwards and tax credit carryforwards. These deferred tax assets were offset by a valuation allowance of $50.8 million resulting in a net deferred tax asset of $0.4 million. The recoverability of deferred tax assets is dependent upon our ability to generate future taxable income.

Recognition of Gift Card Breakage Income

Generally, our revenue recognition is not assessed as an area requiring significant judgment or estimation. Revenues from ticket and food and beverage sales are recognized when the service is provided – that is when the show has commenced, or the food has been provided. Transaction fees from online sales are recorded at the time of the online transaction. In regard to our real estate business, we execute lease contracts for existing tenancies, but revenue is recognized on a straight-line basis over the lease term.

In contrast, recognition of gift card breakage income requires certain estimates and judgements to be made in regarding the pattern of customer behavior at our cinemas. This policy is described in detail in the section Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements-- Note 2 – Summary of Significant Accounting Policies – Accounting Changes.

Contingencies

For loss contingencies, we record any loss contingencies when there is a probable likelihood that the liability has been incurred and the amount of the loss can be reasonably estimated.

For other contingencies,

(i)for recoveries through an insurance claim, we record a recoverable asset (not to exceed the amount of the total losses incurred) only when the collectability of such claim is considered probable. To evaluate the probable collectability of an insurance claim, we consider communications with our insurance company.

(ii)for gain contingencies resulting from legal settlements, we record those settlements in our consolidated statements of operations when cash or other forms of payments are received.

Legal contingencies

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. We provide accruals for matters that have probable likelihood of occurrence and can be properly estimated as to their expected negative outcome. We do not record expected gains until the proceeds (either in cash or other forms of payments) are received by us. Please refer to Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements--Note 14 – Commitments and Contingencies for more information on legal matters.

For a summary of our significant accounting policies, including the critical accounting estimates discussed above, see Part II, Item 8 – Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements--Note 2.

Item 7A – Quantitative and Qualitative Disclosure about Market Risk

The SEC requires that registrants include information about potential effects of changes in currency exchange and interest rates in their Form 10-K filings. Several alternatives, all with some limitations, have been offered. The following discussion is based on a sensitivity analysis, which 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.

At December 31, 2022, approximately 34% and 8% 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. At December 31, 2021, approximately 40% and 11% of our assets were invested in assets denominated in Australian and New Zealand dollars, respectively, including approximately $51.8 million in cash and cash equivalents.

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Our policy in Australia and New Zealand is to match revenues and expenses, whenever possible, in local currencies. As a result, we have procured in local currencies a majority of our expenses in Australia and New Zealand. Despite this natural hedge, recent movements in foreign currencies 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 an increase of $7.5 million for the year ended December 31, 2022. 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. Even so, and as a result of our issuance of fully subordinated Trust Preferred Securities in 2007, and their subsequent partial repayment, approximately 18% and 40% of our Australian and New Zealand assets, respectively, remain subject to such exposure, unless we elect to hedge our foreign currency exchange between the U.S. and Australian and New Zealand dollars. If the foreign currency rates were to fluctuate by 10%, the resulting change in Australian and New Zealand assets would result in an increase or decrease of $3.6 million and $2.0 million, respectively, and the change in our net income for the year would be $0.3 million and $0.0 million, respectively. Presently, we have no plans to hedge such exposure.

With changes in the tax landscape caused by the Tax Cuts and Jobs Act of 2017, we may reconsider our strategy for financing operations and redevelopment projects in the three countries we are invested in, which may include increased borrowings from banks in higher-tax countries, and dividends to the U.S. from foreign subsidiaries, being mindful of withholding taxes on interest, and thin capitalization limitations on interest deduction in Australia and New Zealand. However, our ability to adopt such strategies will naturally be limited by our results of operation and the value of our assets in these various jurisdictions.

We record unrealized foreign currency translation gains or losses that could materially affect our financial position. We have accumulated unrealized foreign currency translation gains of approximately ($0.7) million and $6.8 million as of December 31, 2022 and 2021, respectively.

Historically, we maintained 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 while some of our cinema operations remain closed and some of our tenant income curtailed.

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 $2.2 million increase or decrease in our 2022 interest expense.

For further discussion on market risks, please refer to International Business Risks included in Item 1A –Risk Factors.

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Item 8 – Financial Statements and Supplementary Data

READING INTERNATIONAL, INC.TABLE OF CONTENTS Page

Management’s Report on Internal Control over Financial Reporting 56

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) 57

Consolidated Balance Sheets as of December 31, 2022 and 2021 58

Notes to Consolidated Financial Statements 64

Note 1 – Description of Business and Segment Reporting 64

Note 2 – Summary of Significant Accounting Policies 65

Note 3 – Impact of COVID-19 Pandemic and Liquidity 74

Note 4 – Earnings (Loss) Per Share 75

Note 5 – Real Estate Transactions 76

Note 6 – Properties and Equipment 78

Note 7 – Leases 79

Note 8 – Investments in Unconsolidated Joint Ventures 81

Note 9 – Goodwill and Intangible Assets 82

Note 10 – Prepaid and Other Assets 83

Note 11 – Income Taxes 83

Note 12 – Borrowings 86

Note 13 – Pension and Other Liabilities 89

Note 14 – Commitments and Contingencies 91

Note 15 – Noncontrolling Interests 94

Note 16 – Share-based Compensation and Repurchase Plans 94

Note 17 – Accumulated Other Comprehensive Income 97

Note 18 – Fair Value Measurements 98

Note 19 – Hedge Accounting 99

Note 20 – Related Parties 100

Note 21 – Subsequent Events 102

Schedule II – Valuation and Qualifying Accounts 103

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MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Stockholders

Reading International, Inc.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with U.S. GAAP. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on this assessment, our management believes that the Company’s internal control over financial reporting is effective as of December 31, 2022.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Reading International, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Reading International, Inc. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2011.

Los Angeles, California

‎March 31, 2023

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READING INTERNATIONAL, INC. and SUBSIDIARIES

Consolidated Balance Sheets as of December 31, 2022 and 2021

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

December 31,

ASSETS

Current Assets:

Derivative financial instruments - current portion 907 96

Prepaid and other current assets 3,804 4,871

Investment and development properties, net 8,792 9,570

Investment in unconsolidated joint ventures 4,756 4,993

Derivative financial instruments - non-current portion — 112

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable and accrued liabilities $ 42,590 $ 39,678

Subordinated debt - current portion 747 711

Derivative financial instruments - current portion — 181

Operating lease liabilities - current portion 23,971 23,737

Subordinated debt - non-current portion 26,950 26,728

Operating lease liabilities - non-current portion 200,037 223,364

Commitments and Contingencies

Stockholders’ Equity:

Class B voting common shares, par value $0.01, 20,000,000 shares authorized and

or outstanding shares at December 31, 2022 and 2021 — —

Retained earnings (accumulated deficit) (48,816) (12,632)

Accumulated other comprehensive income (1,957) 4,882

Total Reading International, Inc. ("RDI") Stockholders’ Equity 62,856 104,074

Noncontrolling Interests 423 986

Total Liabilities and Stockholders’ Equity $ 587,055 $ 687,702

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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READING INTERNATIONAL, INC. and SUBSIDIARIES

Consolidated Statements of Operations for the Three Years Ended December 31, 2022

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

Revenues

Costs and expenses

Impairment of long-lived assets (1,549) — (217)

Gain (loss) on sale of assets (54) 92,219 (1)

Equity earnings of unconsolidated joint ventures 271 258 (449)

Basic earnings (loss) per share $ (1.64) $ 1.46 $ (3.00)

Diluted earnings (loss) per share $ (1.64) $ 1.42 $ (3.00)

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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READING INTERNATIONAL, INC. and SUBSIDIARIES

Consolidated Statements of Comprehensive Income for the Three Years Ended December 31, 2022

(U.S. dollars in thousands)

Foreign currency translation gain (loss) (7,543) (8,123) 6,837

Gain (loss) on cash flow hedges 557 340 (65)

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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READING INTERNATIONAL, INC. and SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 2022

(In thousands)

Common Shares Retained Accumulated Reading

Share-based compensation expense — — — — 1,421 — — — 1,421 — 1,421

Share repurchase plan (75) — — — — — (670) — (670) — (670)

In-kind exchange of share for the exercise of options, net issued — —

Restricted Stock Units 41 — — — (44) — — — (44) — (44)

Retirements — — — — — — — — — — —

Contributions from noncontrolling stockholders — — — — — — — — — 55 55

Distributions to noncontrolling stockholders — — — — — — — — — (250) (250)

Other comprehensive income, net — — — — — — — (7,620) (7,620) 1 (7,619)

Share-based compensation expense — — — — 2,152 — — — 2,152 — 2,152

Share repurchase plan — — — — — — — — — — —

In-kind exchange of share for the exercise of options, net issued — —

Retirements — — — — — — — — — — —

Contributions from noncontrolling stockholders — — — — — — — — — 3 3

Distributions to noncontrolling stockholders — — — — — — — — — (5,315) (5,315)

Other comprehensive income, net — — — — — — — (6,839) (6,839) (4) (6,843)

Share-based compensation expense — — — — 1,888 — — — 1,888 — 1,888

Share repurchase plan — — — — — — — — — — —

Restricted Stock Units 150 2 — — (85) — — — (83) — (83)

Retirements — — — — — — — — — — —

Contributions from noncontrolling stockholders — — — — — — — — — 4 4

Distributions to noncontrolling stockholders — — — — — — — — — (87) (87)

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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READING INTERNATIONAL, INC. and SUBSIDIARIES

Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2022

(U.S. dollars in thousands)

Operating Activities

Adjustments to reconcile net income to net cash flows from operating activities:

Equity earnings of unconsolidated joint ventures (271) (258) 449

Distributions of earnings from unconsolidated joint ventures 278 — 240

Gain recognized on foreign currency transactions (3,338) (2,085) —

Net loss (gain) on sale of assets 54 (92,219) 1

Amortization of finance leases 38 49 93

Interest on hedged derivatives — (56) —

Purchase of derivative instruments (86) (62) —

Impairment of long-lived assets 1,549 — 217

Net changes in operating assets and liabilities:

Payments for accrued pension (683) (683) (683)

Deferred revenue and other liabilities (889) (3,368) 2,626

Net cash provided by (used in) operating activities (26,351) (13,498) (30,200)

Investing Activities

Proceeds from sale of assets — 145,165 —

Contributions to unconsolidated joint ventures (95) — (245)

Net cash provided by (used in) investing activities (9,486) 129,610 (18,771)

Financing Activities

Repayment of finance lease principal (40) (49) (92)

Capitalized borrowing costs (371) (1,691) (97)

Repurchase of Class A nonvoting common stock — — (670)

Proceeds (payments) from stock option exercises (83) (148) (43)

Noncontrolling interest contributions 4 3 55

Noncontrolling interest distributions (87) (5,315) (250)

Net cash provided by (used in) financing activities (16,557) (50,280) 59,330

Effect of exchange rate on cash and restricted cash (1,198) (4,095) 4,333

Cash and cash equivalents and restricted cash consists of:

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Supplemental Disclosures

Non-Cash Transactions

Additions to long-term borrowings — — —

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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READING INTERNATIONAL, INC. and SUBSIDIARIES

Notes to Consolidated Financial Statements

As of and for Three Years Ended December 31, 2022

________________________________________________________________________________________________________

NOTE 1 – DESCRIPTION OF BUSINESS AND SEGMENT REPORTING

The Company

Reading International, Inc., a Nevada corporation (“RDI” and collectively with our consolidated subsidiaries and corporate predecessors, the “Company,” “Reading,” and “we,” “us,” or “our”), was incorporated in 1999. Our businesses consist primarily of:

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

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

Business Segments

Our business is comprised of two operating segments, as follows: (i) cinema exhibition and (ii) real estate. Each of these segments has discrete and separate financial information and for which operating results are evaluated regularly by our Chief Executive Officer, the chief operating decision-maker of the Company. As part of our real estate activities, we have historically held undeveloped land in urban and suburban centers in the United States, Australia, and New Zealand. However, in 2021, we monetized certain raw landholdings and other real estate assets as detailed at Note 5 – Real Estate Transactions.

The tables below summarize the results of operations for each of our business segments. Operating expense includes costs associated with the day-to-day operations of the cinemas and the management of rental properties, including our live theatre assets.

Operating expense

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

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

Unallocated corporate expense:

Depreciation and amortization expense (1,072) (1,232) (970)

Equity earnings (loss) of unconsolidated joint ventures 271 258 (449)

Gain (loss) on sale of assets (54) 92,219 (1)

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

December 31,

By segment:

By country:

(1)Corporate Assets includes cash and cash equivalents of $29.9 million and $83.3 million as of December 31, 2022 and 2021, respectively.

The following table sets forth our operating properties by country:

December 31,

The table below summarizes capital expenditures for the three years ended December 31, 2022:

Corporate capital expenditures — — 73

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

Basis of Consolidation

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).These consolidated financial statements include the accounts of our wholly owned subsidiaries, which are RDGE, CRG, and CDL. We have also consolidated the following entities that are not wholly owned for which we have control:

Australia Country Cinemas Pty, Limited, a company in which we own a 75% interest and whose only assets are our leasehold cinema at Dubbo, Australia and our owned cinema at Townsville, Australia;

Sutton Hill Properties, LLC (“SHP”), a company based in New York in which we own a 75% interest and whose only asset is the fee interest in the Cinemas 1,2,3; and,

Shadow View Land and Farming, LLC in which we own a 50% controlling membership interest and whose only asset was a 202-acre land parcel in Coachella, California as of December 31, 2020. This land was sold in March 2021, and the company is now in the process of winding up.

Our investment interests in certain joint venture arrangements, for which we own between 20% to 50% and for which we have no control over the operations, are accounted for as unconsolidated joint ventures, and hence, recorded in the consolidated financial statements under the equity method. These investment interests include our:

33.3% undivided interest in the unincorporated joint venture that owns the Mt. Gravatt cinema in a suburb of Brisbane, Australia;

50% undivided interest in the unincorporated joint venture that owns Rialto Cinemas in New Zealand.

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We consider that we have control over our partially owned subsidiaries and joint venture interests (collectively “investee”) when these conditions exist:

(i)we own a majority of the voting rights or interests of the investee (typically above 50%), or

(ii)in the case when we own less than the majority voting rights or interests, we have the power over the investee when the voting rights or interests are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.

The Company considers all relevant facts and circumstances in assessing whether or not our voting rights in the investee are sufficient to give it power, including:

(i)the size of our voting rights and interests relative to the size and dispersion of holdings of other vote holders;

(ii)potential voting rights and interests held by us;

(iii)rights and interests arising from other contractual arrangements; and,

(iv)any additional other relevant facts.

All intercompany balances and transactions have been eliminated on the consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes thereto. Hence, actual results may differ from those estimates. Significant estimates and assumptions include, but are not limited to:

(i)projections we make regarding the recoverability and impairment of our assets (including goodwill and intangibles);

(ii)valuations of our derivative instruments;

(iii)allocation of insurance proceeds to various recoverable components;

(iv)recoverability of our deferred tax;

(v)estimation of our Incremental Borrowing Rate (“IBR”) as relates to the valuation of our right-of-use assets and lease liabilities; and,

(vi)estimation of gift card and gift certificate breakage where we have concluded that the likelihood of redemption is remote.

Revenue Recognition

(i)Cinema ExhibitionSegment (all net of related taxes):

Sales of Cinema tickets (excluding bulk and advanced ticket sales) and food and beverage (“F&B”) sales – recognized when sold and collected, either in cash or credit card at our theatre locations and through our online selling channels;

Sales of Bulk and Advanced Cinema Ticket Sales – deferred and recognized as revenue when the promised performance or movie that the ticket has been purchased for is shown;

Gift Cards and Gift Certificate Sales – deferred and recognized as revenue when redeemed, except for the breakage portion, as described below;

Breakage Income – recognized for unredeemed cards and certificates using the proportional method, whereby breakage revenue is recognized in proportion to the pattern of rights exercised by the customer when the Company expects that it is probable that a significant revenue reversal would not occur for any estimated breakage amounts. This is based on a breakage ‘experience rate’ which is determined by historical redemption data;

Loyalty Income - a component of revenue from members of our loyalty programs relating to the earning of loyalty rewards is deferred until such a time as members redeem rewards, or until we believe the likelihood of redemption by the member is remote. Deferral is based on the progress made toward the next reward, the fair value of that reward, and the likelihood of redemption, determined by historical redemption data, and;

Advertising Revenues – recognized based on contractual arrangements or relevant admissions information, as appropriate, when the related performance obligation is satisfied.

(ii)Real EstateSegment:

Property Rentals –we contractually retain substantially all of the risks and benefits of ownership of our real estate properties and therefore, we account for our tenant leases as operating leases. Accordingly, rental revenue is recognized on a straight-line basis over the lease term; and,

Live Theatre License Fees – we have real property interest in, and license theatre space to third parties for, the presentation of theatrical productions. Revenue is recognized in accordance with the license agreement and is typically recorded on a weekly basis after the performance of a show has occurred.

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Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less at the time of purchase as cash equivalents for which cost approximates fair value.

Receivables

Our receivables balance is composed primarily of credit card and booking agent receivables, representing the purchase price of tickets, food & beverage items, or coupon books sold at our various businesses. Sales charged on customer credit cards are collected when the credit card transactions are processed. The remaining receivables balance is primarily made up of the net Goods and Service Tax (“GST”) receivable from our Australian taxing authorities, rents receivable from our third-party tenants, and the management fee receivable from the managed cinemas. We have no history of significant bad debt losses but we have established an allowance for accounts that we deem uncollectible.

Inventory

Inventory is composed of food and beverage items in our theater operations and books and associated stationery items at our State Cinema bookstore, and is stated at the lower of cost (first-in, first-out method) or net realizable value.

Restricted Cash

Restricted cash includes those cash accounts for which the use of funds is restricted by any contract or bank covenant. At December 31, 2022 and 2021, our restricted cash balance was $5.0 million and $5.3 million, respectively.

Derivative Financial Instruments

From time to time, we purchase interest rate derivative instruments to hedge the interest rate risk that results from the variability of certain of our floating-rate borrowings. Our use of derivative transactions is intended to reduce long-term fluctuations in cash flows caused by market movements. Derivative instruments are recorded on the balance sheet at fair value with changes in fair value through interest expense in the Consolidated Statements of Operations or, in the case of accounting hedges, in Other Comprehensive Income and then reclassified into interest expense in the same period(s) during which the hedged transactions affect earnings. The cash flows from interest rate derivatives are classified as cashflows provided by operating activities in the Consolidated Cashflow Statement, as are the hedged transactions. As of December 31, 2022 we had no unfavorable derivative positions. As of December 31, 2021, we had unfavorable derivative positions designated as accounting hedges of $181,000. As of December 31, 2022, and December 31, 2021, we had favorable derivative positions designated as accounting hedges of $907,000 and $208,000, respectively.

With regards to accounting hedges, the Company has elected, by reference to certain practical expedients contained within ASC 848 Reference Rate Reform, to continue the method of assessing effectiveness as documented in the original hedge, so that the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument. In addition, the Company has elected the expedient permitting the assertion of probability of the hedged interest payments regardless of any expected modification in the terms related to reference rate reform.

Operating Properties, net

Our Operating Properties consist of land, buildings and improvements, leasehold improvements, fixtures and equipment, which we use to derive operating income associated with our two business segments, cinema exhibition and real estate. Buildings and improvements, leasehold improvements, fixtures and equipment are initially recorded at the lower of cost or fair market value and depreciated over the useful lives of the related assets. Land is not depreciated. Expenditures relating to renovations, betterments or improvements to existing assets are capitalized if they improve or extend the lives of the respective assets and/or provide long-term future net cash inflows, including the potential for cost savings.

Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are generally as follows:

Building and improvements 15 – 60 years

Theater equipment 7 years

Furniture and fixtures 3 – 10 years

Investment and Development Properties, net

Investment and Development Properties consist of land, buildings and improvements under development, and their associated capitalized interest and other development costs that we are either holding for development, currently developing, or holding for

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investment appreciation purposes. These properties are initially recorded at the lower of cost or fair market value. Within this category are building and improvement costs directly associated with the development of potential cinemas (whether for sale or lease), the development of entertainment-themed centers (“ETCs”), or other improvements to real property. As incurred, we expense start-up costs (such as pre-opening cinema advertising and training expense) and other costs not directly related to the acquisition and development of long-term assets. We cease cost capitalization (including interest) on a development property when the property is complete and ready for its intended use, or if activities necessary to get the property ready for its intended use have been substantially curtailed. However, we do not suspend cost capitalization for brief interruptions and interruptions that are externally imposed, such as mandates from governmental authorities.

Impairment of Long-Lived 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. Due to the COVID-19 pandemic, we have at various quarters since 2020 reviewed such assets for impairment where changes in circumstances suggest such a review is necessary.

We review internal management reports on a monthly basis as well as monitor current and potential future competition in film markets for indications of potential impairment.

(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. Following the adoption of Accounting Standards Codification 842 Leases, we include all relevant right-of-use assets in our impairment assessments and exclude the related lease liabilities and payments. 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.

We recorded $1.5 million of impairment losses against long-lived and finite-lived intangible assets in the second half of 2022. This impairment was recorded against cinemas whose performance had not improved commensurate to the rest of our portfolio. No further impairment losses were recorded in 2022. No impairment losses were recorded for long-lived and finite-lived intangible assets for the year ended December 31, 2022, based on historical information and projected cash flow. $217,000 of impairment losses were recorded for long-lived and finite-lived intangible assets for the year ended December 31, 2020.

(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 the 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 three years ended December 31, 2022.

For a detailed discussion of our impairment assessments, refer to Note 3 – Impact of COVID-19 Pandemic on Liquidity.

Variable Interest Entity

The Company enters into relationships or investments with other entities that may be a variable interest entity (“VIE”). A VIE is consolidated in the financial statements if the Company has the power to direct activities that most significantly impact the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Reading International Trust I is a VIE. It is not consolidated in our financial statements because we are not the primary beneficiary. We carry our investment in the Reading International Trust I, recorded under “Other Assets”, using the equity method of accounting because we have the ability to exercise significant influence (but not control) over operating and financial policies of the entity. We eliminate transactions with an equity method entity to the extent of our ownership in such an entity. Accordingly, our share of net income/(loss) of this equity method entity is included in consolidated net income/(loss). We have no implicit or explicit obligation to further fund our investment in Reading International Trust I.

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Land and Property Held for Sale

When a property is classified as held for sale, we present the respective assets and liabilities related to the property held for sale separately on the balance sheet and cease to record depreciation and amortization expense. Properties held for sale are reported at the lower of their carrying value or their estimated fair value less the estimated costs to sell. As of December 31, 2020, we classified our landholding at Coachella, California and Manukau, New Zealand, as held for sale. There were no adjustments necessary to reduce the carrying value of these assets on transfer to held for sale. These assets were subsequently held at historical cost on the consolidated balance sheet until their sale in the first quarter of 2021. We had no properties held for sale as of December 31, 2022 or December 31, 2021. Refer to Note 5 – Real Estate Transactions for details.

Deferred Leasing/Financing Costs

Direct costs incurred in connection with obtaining tenants and or financing are amortized over the respective term of the loan utilizing the effective interest method, or straight-line method if the result is not materially different. In addition, interest on loans with increasing interest rates and scheduled principal pre-payments are also recognized using the effective interest method. Net deferred financing costs are presented as a reduction in the associated debt account (see Note 12 – Borrowings).

Film Rental Costs

Film rental costs are accrued based on the applicable box office receipts and estimates of the final settlement to the film licensors.

Advertising Expense

We expense our advertising as incurred. The amount of our advertising expense was $1.4 million, $0.7 million, and $0.7 million in 2022, 2021, and 2020, respectively.

Operating Leases

As Lessee

‎We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities, current and non-current, in our consolidated balance sheets. Finance leases are included in operating properties, other current liabilities, and other long-term liabilities in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any prepaid lease payments made and excludes lease incentives received. Our lease terms may include options to extend or not to terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which we do not separate. For certain equipment leases, such as cinema equipment, we account for the lease and non-lease components as a single lease component.

As a result of the impacts of COVID-19, we have obtained certain concessions from our landlords. Where we have obtained rent concessions from our landlords, or provided concessions to our tenants, we have elected not to perform the standard Topic 842 modification evaluation where the concession does not result in the total consideration required by the contract being substantially more than the total consideration originally required by the contract. We have elected to account for these concessions as if there have been no changes to the underlying contracts, thereby recognizing abatements secured as variable lease expenses, and increasing payables for lease payment deferrals.

As Lessor

As part of our real estate operations, we own certain real estate property in the U.S., Australia and New Zealand which we lease to third parties. We recognize lease payments for operating leases as property revenue on a straight-line basis over the lease term. Lease incentive payments we make to lessees are amortized as a reduction in property revenue over the lease term. The lease term includes all non-cancellable periods contracted for within the lease and excludes any option periods which a tenant may hold.

As a result of the impacts of COVID-19, we have provided certain concessions to specific tenants. Where we have provided deferrals of rent, we have recorded the deferrals as receivables, and where we have provided abatements, we have recorded these as variable rents in the consolidated statements of income.

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Share-based Compensation

The determination of the compensation cost for our share-based awards (primarily in the form of stock options or restricted stock units) is made at the grant date based on the estimated fair value of the award, and such cost is recognized over the grantee’s requisite service period (which typically equates to our vesting term). Previously recognized compensation cost shall be reversed for any forfeited award to the extent unvested at the time of forfeiture. Refer to Note 16 – Share-based Compensation and Repurchase Plans for further details.

Treasury Shares

In recent years, we repurchased our own Class A common shares as part of a publicly announced stock repurchase plan. We account for these repurchases using the cost method and present these as a separate line within the Stockholders’ Equity section in our consolidated balance sheets. Refer to Note 16 – Share-based Compensation and Repurchase Plans for further details of our stock repurchase plan.

Insurance Recoveries and Other Contingency Matters

(i)Loss contingencies – we record any loss contingencies if there is a “probable” likelihood that the liability had been incurred, and the amount of the loss can be reasonably estimated.

(ii)Gain contingencies:

Insurance recoveries – in the event we incur a loss attributable to an impairment of an asset or incurrence of a liability that is recoverable, in whole or in part, through an insurance claim, we record an insurance recoverable (not to exceed the amount of the total losses incurred) only when the collectability of such claim is probable. To evaluate the probable collectability of an insurance claim, we consider communications with third parties (such as with our insurance company), in addition to advice from legal counsel.

Others – other gain contingencies typically result from legal settlements and we record those settlements in income when cash or other forms of payments are received.

Legal costs relating to our litigation matters, whether we are the plaintiff or the defendant, are recorded when incurred. For the years ended December 31, 2022, 2021, and 2020, we recorded gains/(losses) relating to litigation settlement of $40,000, ($3.2) million and $3,000, respectively.

Currency Translation Policy

The financial statements and transactions of our Australian and New Zealand cinema and real estate operations are recorded in their functional currencies, namely Australian and New Zealand dollars, respectively, and are then translated into U.S. dollars. Assets and liabilities of these operations are denominated in their functional currencies and are then translated at exchange rates in effect at the balance sheet date. Revenue and expenses are translated at the average exchange rate for the reporting period. Translation adjustments are reported in “Accumulated Other Comprehensive Income,” a component of Stockholders’ Equity.

The carrying values of our Australian and New Zealand assets fluctuate due to changes in the exchange rate between the U.S. dollar and the Australian and New Zealand dollars. Presented in the table below are the currency exchange rates for Australia and New Zealand as of and for the three years ended December 31, 2022:

Spot Rate

Average Rate

Income Taxes

We account for income taxes under an asset and liability approach. Under the asset and liability method, deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled

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and are classified as noncurrent on the balance sheets in accordance with current U.S. GAAP. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Income tax expense (benefit) is the tax payable (refundable) for the period and the change during the period in deferred tax assets and liabilities. The effect of a change in tax rates or law on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations.

A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

We recognize tax liabilities for uncertain tax positions and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. We record interest and penalties related to income tax matters as part of income tax expense and record the related liabilities in income tax related balance sheet accounts. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which it is determined a change in recognition or measurement is appropriate.

The U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”) creates a new requirement for U.S. corporations to include in U.S. taxable income certain earnings of their foreign subsidiaries, effective beginning tax year 2018. The Global Intangible Low Taxed Income (“GILTI”) framework introduces a new tax on foreign earnings of U.S. based consolidated groups. We record taxes related to GILTI as a current-period expense when incurred.

Earnings (Loss) Per Share

The Company presents both basic and diluted earnings (loss) per share amounts. Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to the Company by the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share is based upon the weighted average number of common and common equivalent shares outstanding during the year, which is calculated using the treasury-stock method for equity-based awards. Common equivalent shares are excluded from the computation of diluted earnings (loss) per share in periods for which they have an anti-dilutive effect. Stock options for which the exercise price exceeds the average market price over the period are anti-dilutive and, accordingly, are excluded from the calculation.

Government Grants

In the second quarter of 2020, in order to account for certain wage subsidies received from the Australian and New Zealand governments, we adopted International Accounting Standard 20 - Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”). The aim of these Australian and New Zealand government subsidies is to protect as many jobs as possible during the COVID-19 pandemic by subsidizing the wages of employees, using the administrative capabilities of employers to forward such subsidies to their employees. The subsidies are not loans to employees or employers. Other than the disclosure requirements promulgated by ASU 2021-10, U.S. GAAP has no other codified accounting guidance concerning the measurement and presentation of such government grants for for-profit entities, and in lieu of such guidance, common practice is to refer to IAS 20. IAS 20 permits entities to account for government grants on a gross basis, showing grants receivable as income and the associated expense as costs, or on a net basis, by deducting the grant from the related expense. The nature of the wage subsidies is such that, without them, our Company would likely have reduced its wages and salaries expense through the termination of certain employees. In order to faithfully present the transaction, our Company has therefore elected to present wages and salaries expense net of government grants. The impacted wages and salaries costs are contained within ‘other operating expenses’ and ‘general and administrative expenses’ in our cinema and real estate segments. We received no subsidies in the year to December 31, 2022. In the year to December 31, 2021, we received subsidies totaling $2.6 million (AU$3.5 million) in Australia and $366,000 (NZ$518,000) in New Zealand, respectively. In the year to December 31, 2020, we received subsidies totaling $9.5 million (AU$12.3 million) and $1.4 million (NZ$1.9 million) in Australia and New Zealand, respectively.

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Business Acquisition Valuation and Purchase Price Allocation