UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K



☑   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20182019 or



☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ______



Commission File No. 1-8625



READING INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)





Registrant’s telephone number, including Area Code: (213)  235-2240



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



Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐  No ☑

If this report is an annual or transition report, indicateIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes ☐  No ☑

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for shorter period than the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit post such files).  Yes ☑    No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K of any amendments to this Form 10-K. ☐

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

Large Accelerated Filer ☐   Accelerated Filer☑   Non-Accelerated Filer ☐   Smaller Reporting Company ☐   Emerging Growth Company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  As of June 29, 201828, 2019 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates based on the closing price on that date as reported by the Nasdaq Stock Market was $383,954,817.$312,559,671. As of March 15, 2019,13, 2020, there were 21,240,04420,037,550 shares of class A non-voting common stock, par value $0.01 per share and 1,680,590 shares of class B voting common stock, par value $0.01 per share, outstanding.



Documents Incorporated by Reference

PortionCertain portions of the registrant’s definitive Proxy Statement for the 20192020 annual meeting of the stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 20182019 are incorporated by reference into Part III of this Annual Report on Form 10-K.

READING INTERNATIONAL, INC.

ANNUAL REPORT ON FORM 10-K

YEAR ENDED DECEMBER 31, 20182019

INDEX







PART I



Item 1 – Our Business



GENERAL



Reading International, Inc. (“RDI” and collectively with our consolidated subsidiaries and corporate predecessors, the “Company,” “Reading”, “we,” “us,” or “our”) was incorporated in 1999 incident to our reincorporation in the State of Nevada. Our class A non-voting common stock (“Class A Stock”) and class B voting common stock (“Class B Stock”) are listed for trading on the NASDAQ Capital Market (Nasdaq-CM) under the symbols RDI and RDIB, respectively. Our Corporate Headquarters is located in the Silicon Beach“Silicon Beach” area of Los Angeles County, at 5995 Sepulveda Blvd, Suite 300, Culver City, California, United States 90230.



Our corporate website address is www.ReadingRDI.com.  We provide, free of charge on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we have electronically filed such material with or furnished it to the Securities and Exchange Commission (www.sec.gov).  The contents of our Company website are not incorporated into this report. Our corporate governance charters for our Audit and Conflicts Committee and Compensation and Stock Options Committee are available on our website.



During 2019, we repurchased 1,158,601 shares of our Class A non-voting common stock, at an average price of $12.52.  On March 10, 2020, our Board of Directors authorized a $25.0 million increase to our stock repurchase program and extended it to March 2, 2022.    At the present time, the repurchase program authorization is at $26.0 million.

BUSINESS DESCRIPTION



Synergistic Diversification and Branding



We are a diversified company focused on the development, ownership and operation of entertainment and real property assets in three jurisdictions: (i) United States (“U.S.”), (ii) Australia, and (iii) New Zealand.  We group our businesses in two (2) operating segments:



Set forth below is a brief description of the various brands under which we organize our business operations:









In January of 2019, we acquired our first cinema in Tasmania, a well-established 4 screenfour-screen cinema (withwith a liquor license)license in Devonport, Australia. In order to mitigate the loss from the ongoing temporary closure of our Reading Cinemas at Courtenay Central, at the end of June 2019, we opened a three-screen pop-up in Lower Hutt located in the greater region of Wellington, New Zealand. In December 2019, we acquired our second cinema in Tasmania, the iconic ten-screen State Cinema in Hobart, and we launched our six-screen Reading Cinemas in Burwood, a suburb of Melbourne, Australia, bringing our current worldwide cinema count up to 60.  In addition, as of today, we have entered into four lease agreements, providing for the development of an additional 25 state-of-the-art screens.  This includes the recently announced state-of-the art cinema at Miller’s Junction in Melbourne, Australia.  While no assurances can be given, the completion of these four new complexes is anticipated to increase our cinema count to 64 before the end of 2021.2022.

We continue to focus on upgrading our existing cinemas and developing new cinema opportunities to provide our customers with premium offerings, including luxury recliner seating, state-of-the-art presentation including sound, lounges, cafés and bar service, and other amenities.  Since 20172016, and continuing through 2018,2019, we increased the number of auditoriums featuring recliner seating from 58 to 136.158 (excluding our joint ventures). In addition, we added30 of our auditoriums now feature large format TITAN XC, TITAN LUXE, or LUXE screen offerings to 18 of our cinemas.IMAX screens. Our circuit has been completely converted to digital projection and sound systems. In 2018,2019, we upgraded twothree auditoriums at three of our auditoriumslocations to feature Dolby ATMOS sound which we consider to be the best in the industry at this time. The newly opened Reading Cinemas in Burwood also features Dolby ATMOS sound.



AttendanceWhile attendance and gross box office was significantly higherdeclined for the exhibition industry in the U.S., Australia and New Zealand for 2018,in 2019 compared to 2017. We2018, we believe that the cinema exhibition business will continue to generate increasingfairly consistent cash flows in the years ahead, even in recessionary or inflationary environments, because people will continue to spend a reasonable portion of their entertainment dollars on entertainment outside of the home.  Because of the uncertainty of the duration of the impact from the COVID-19 virus on leisure and entertainment activities, our short-term results will likely be adversely impacted.   For example, New York has ordered theaters closed indefinitely starting March 17, 2020.  When compared to other forms of outside-the-home entertainment, movies continue to be a popular and competitively priced option.  We believe that the advent of an array of streaming and mobile video services is more of a threat to the delivery of traditional in-home forms of entertainment (such as traditional cable and satellite providers), than it is to the creation of new sources of program production will ultimately be beneficial toexhibition industry.  We believe that historically, our industry has benefited as the amount of quality product available for exhibition has increased. In the current situation, the amount of product coming to consumers is in some ways overwhelming. We believe that this means that cinema exhibition becomesis going to be an increasingly important pointway for content providers to establish an identity for their product that will carry over into the streaming and mobile video market and aid consumers in their programming choices. We believe that our cinemas will be critical to provide the “Grand Opening” needed for product providers attempting to compete in the streaming market. This being the case, we likewise believe that the entire cinema-going experience needs to be engaging to provide this “Grand Opening” feel. Acting on that belief, we have focused in recent periods on the upgrading of differentiation for the marketing of such product.our cinemas to feature luxury recliner seating, state-of-the-art sound, large format screens, and enhanced food and beverage. We have invested in technology to make our reservation system more user friendly and to encourage customer loyalty.



Recognizing that the cinema exhibition business is considered a maturewell-established business, we continue to see growth opportunities in our cinema exhibition business principally from (i) the enhancement of our existing cinemas, (ii) the development in select markets of art and specialty cinemas, (iii) the development of new state-of-the-art cinemas on land that we already own or may in the future acquire, and (iv) the development of new mainstream cinemas in selected markets. While we continue to consider possible opportunities in

third party third-party developments, we prefer, where possible, to put our capital to work in properties that we own rather than take on potentially burdensome lease obligations with their built-in rent increases and pass-throughs and their dependence on third partythird-party shopping center operators.



We continue to expand and upgrade our circuits on an opportunistic basis. Our philosophy is not one of growth at any cost and our goal is not to have more screens than anyone else. Rather, our goal is to have high quality, consistently grossing cinemas, and to grow on a steady and sustainable basis. During 2018,2019, we continued working on the refurbishment of several of our cinema locations including Mililani, Kahala, and Rohnert Park in the U.S., Chirnside Park, Dandenong, Maitland, Harbour Town, Waurn Ponds, West Lakes, and Rhodes in Australia, and The Palms in New Zealand. We also upgraded nine screens at five of our locations to luxury recliner seating, in addition to the recently launched Reading Cinemas at Burwood which features luxury recliner seating in all six auditoriums and extended our enhanced food and beverage offerings to 29 of our cinemas. In 2018, our refurbishments included Manville and Mililani in the U.S., and Charlestown, Elizabeth, and Auburn in the Australia and New Zealand circuits.  We  also completed the conversion at our Reading Cinemas in Murrieta, California (Cal Oaks) which now features our “Spotlight” level of service in six out of the 17 auditoriums.  “Spotlight” puts focus directly on our customers by providing an in-auditorium, waiter-serviced, enhanced F&B experience for their enjoyment.  At the end of 2017, we opened a new cinema at our Newmarket Village Shopping Center in Brisbane, Australia, and re-opened our Cal Oaks cinema, located in Murrieta, California which now features our new “Spotlight” level of service in 6 out of the 17 auditoriums.  “Spotlight” puts focus directly on our customers by providing an in-auditorium, waitered, enhanced F&B experience for their enjoyment.  We also upgraded 54 of our screens to luxury seating and extended our enhanced food offerings to 25 of our cinemas in 2017.  In 2016, we opened an eight-screen, state-of-the-art cinema, branded Olino by Consolidated Theatres, our ninth theatre and first to break ground since 2001 in the state of Hawaii.  In 2015, we opened a new state-of-the-art cinema (eight screens) in Auckland, New Zealand, completed the renovation and rebranding as an “Angelika” luxury art cinema of our conventional cinema at the Carmel Mountain Plaza in San Diego, California, completely renovated our fourteen-screen Harbourtown cinema in Queensland, Australia, and added the first IMAX screen to our circuit.Australia. 



Since 2015, we have consistently executed our strategic priority of upgrading the food and beverage menu at a number of our U.S. cinemas. We are focused on the renovation and upgrading of our existing U.S. cinemas, along the lines of our Carmel Mountain cinema.  Working with Bruce Seidel (veteranformer Food Network executive) of Hot Lemon Productions and chef Santos Loo, we are continuing to curate and upgrade our food and beverage offerings.  During 2017, we created our “Spotlight” service concept, which we implemented at our Reading Cinemas at Cal Oaks cinema during 2018.  We saw success in 2019, as each of our cinema divisions achieved record results in food and beverage spend per patron (“SPP”), on a functional currency basis, for the fourth quarter and year ended December 31, 2019. Our U.S. cinema division outperformed some of our major U.S. publicly reporting exhibitors.  At year-end 2018,2019, we currently have beer and wine, and in some cases liquor, licenses for 1416 of our venues in the U.S. and are in the application process of obtaining licenses for an additional 5seven venues.  As a result, we are currently offering alcoholic beverages at 1214 of our U.S. cinemas and two of our live theatres.  In our international cinema operations, we offer alcoholic beverages for 11at  14 of our cinemas in Australia and five of our cinemas in New Zealand (which includes the joint ventures).

Operating Information



At December 31, 2018,2019, our principal tangible assets included:



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



Our cinemas generated approximately 64%63% of their 20182019 revenue from box office receipts.  Ticket prices vary by location, and in selected locations we offer reduced rates for senior citizens, children and, in certain markets, military and students.



Show timesShowtimes and features are placed in advertisements on our various websites, on internet sites and, in some markets, in limited instances, local newspapers. We are increasing our presence in social media, thereby, reducing our dependency on print advertising.  Film distributors may also advertise certain feature films in various print, radio and television media, as well as on the internet, and distributors generally pay those costs.



F&B sales accounted for approximately 29%30% of our total 20182019 cinema revenue. Although certain cinemas have licenses for the sale and on-premises consumption of alcoholic beverages, historically F&B products have been primarily popcorn, candy, and soda. This is changing, as more of our theaters are offering expanded food and beverage offerings.  One of our strategic focuses is to upgrade our existing cinemas with expanded F&B offerings.offerings consistent with what we believe to be the new position of cinemas in the pathway from content provider to consumer.



Screen advertising and other revenue contribute approximately 7% of our total 20182019 cinema revenue.  With the exception of certain rights that we have retained to sell to local advertisers, generally speaking, we are not in the screen advertising business and nationally recognized screen-advertising companies’ contract with us for the right to show such advertising on our screens.



Management of Cinemas



With the exception of our three unconsolidated cinemas, we manage our cinemas with executives located in Los Angeles and Manhattan in the U.S.;, Melbourne, Australia;Australia, and Wellington, New Zealand.  Our two New Zealand Rialto cinemas are owned by a joint venture in which Reading New Zealand is a 50% joint venture partner. While we assist in the booking of these two cinemas, our joint venture partner, Event Cinemas, manages their day-to-day operations.  In addition,For our unconsolidated cinema in Australia, we have a passive one-third interest in a 16-screen Brisbane cinema managed by Event Cinemas.



Licensing and Pricing



Film product is available from a variety of sources, ranging from the major film distributors, such as Paramount Pictures, Twentieth Century Fox,Studios, Warner Bros, Buena Vista Pictures (Disney),Disney, Sony Pictures, Releasing, Universal Pictures and Lionsgate, to a variety of smaller independent film

distributors.  In Australia and New Zealand, some of those major distributors distribute through local unaffiliated distributors. Worldwide, the major film distributors dominate the market for mainstream conventional films.  In the U.S., art and specialty film is distributed through the art and specialty divisions of these major distributors, such as Fox Searchlight Pictures and Sony Pictures Classics, and through independent distributors such as A24.A24 and Neon. Film payment terms are generally based uponon an agreed-upon percentage of box office receipts that will vary from film-to-film.



Competition 



Film is allocated by the applicable distributor among competitive cinemas.  Accordingly, from time-to-time,time to time, we may be unable to license every film that we desire to play. In the Australian and New Zealand markets, we generally have access to all film product in the market.



Competition for films may be intense, depending upon the number of cinemas in a particular competitive market. Our ability to obtain top grossing, first run feature films may be adversely impacted by our comparatively small size, and the limited number of screens and markets that we can supply to distributors. Moreover, because of the dramatic consolidation of screens into the hands of a few very large and powerful exhibitors such as AMC (including the acquisition of Carmike), Cineworld (the new owners of Regal), AMC (including the newly acquired Carmike), Cinemark, and Galaxy Cinemas,Cineplex, who between them control 64% of the North American market, these mega-exhibition companies are in a position to offer distributors access to many more screens in major markets than we can.  Also, the majors have a significant number of markets where they operate without material competition, meaning that the distributors have no alternative exhibitor for their films in these markets.  Accordingly, distributors may decide to give preference to these mega-exhibitors when it comes to licensing top-grossing films, rather than deal with independents such as ourselves. The situation is different in Australia and New Zealand, where typically every major multiplex cinema has access to all of the film currently in distribution, regardless of the ownership of that multiplex cinema.  However, on the reverse side, we have suffered somewhat in these markets from competition from boutique operators, who are able to book top grossing commercial films for limited runs, thus increasing competition for customers wishing to view such top grossing films.    It may be that the power of these major circuits may increase with the determination by the Department of Justice to terminate the so called “Paramount Decree” discussed in greater detail in Item 1A – Risk Factors.



The availability of state-of-the-art technology and/or luxury recliner seating can also be a factor in the preference of one cinema over another. In recent periods, a number of cinemas have opened or re-opened featuring luxury recliner seating and/or expanded food and beverage service, including the sale of alcoholic beverages and food served to the seat.  We have, for a number of years, offered alcoholic beverages in certain of our Australia and New Zealand cinemas and at certain of our Angelika Film Centers in the U.S.  We are currently working to upgrade the seating and food and beverage offerings (including the offering of alcoholic beverages) at a number of our existing cinemas. We now offer alcoholic beverages at 28slightly over half (33) of our worldwide cinemas.



The film exhibition markets in the United States, Australia, and New Zealand are to a certain extent dominated by a limited number of major exhibition companies.  The principal exhibitors in the United States are AMC (with 11,24710,945 screens in 1,0271,000 cinemas, which includes the informationacquisition of newly acquired Carmike), Regal (with 7,3159,518 screens in 561790 cinemas), recently acquired by Cineworld

Group, the U.K.’s largest cinema operator, and Cinemark (with 4,5614,630 screens in 339344 cinemas).  As of December 31, 2018,2019, we were the 11th largest exhibitor with 1% of the box office in the United States with 245238 screens in 2724 cinemas under management.



The principal exhibitors in Australia are Greater Union, which does business under the Event Cinemas name (a subsidiary of Amalgamated Holdings Limited) (“Event”), Hoyts Cinemas (“Hoyts”), and Village Cinemas (“Village”). The major exhibitors control approximately 78%72% of the total cinema box office: Event 43%32%, Hoyts 22%25%, and Village 13%15%.  Event has 566565 screens nationally, Hoyts 354366 screens, and Village 210219 screens.  By comparison, our 149174 screens (excluding any partnership theaters) represent approximately 7%9% of the total box office.office making Reading the fourth largest exhibitor in Australia.



The principal exhibitors in New Zealand are Event Cinemas with 116122 screens nationally and Hoyts with 70 screens.72 screens, nationally.  The major exhibitors in New Zealand control approximately 56% of the total box office: Event 35% and Hoyts 21%.    Reading has 5457 screens (excluding its interest in unconsolidated joint ventures).  The major exhibitors in New Zealand control approximately 52% of the total box office: Event 31% and Hoyts 21%.  Reading has 16%12% of the market (Event and Reading market share figures exclude any partnership theaters) and we wereare the third largest exhibitor in New Zealand.



In Australia and New Zealand, the industry is somewhat vertically integrated in that Roadshow Film Distributors, a subsidiary of Village, serves as a distributor of film in Australia and New Zealand for Warner Brothers.Bros.



Many of our competitors have substantial financial resources which could allow them to operate in a more competitive manner than us.



In-Home, Streaming and Mobile Device Competition



The “in-home,”in-home streaming and mobile device entertainment industry has experienced significant leaps in recent periods in both the quality and affordability of in-home and mobile device entertainment systems and in the accessibility to, and quality of, entertainment programming through cable, satellite, and internet distribution channels, and Blu-ray/DVD.channels. The success of these alternative distribution channels and the

entrance of new sources of product (like Netflix, Hulu, and Amazon) who are producing product competitive with films produced for theatrical release puts additional pressure on film distributors to reduce and/or eliminate the time period between theatrical and secondary release dates.  WithIn November 2019, two new streaming services debuted, Apple TV+ and Disney+, and a few more are in the acquisition of Fox, Disney is now poisedworks with HBO Max and NBCUniversal’s Peacock set to enter this market.launch in 2020.

To a certain extent, it appears that consumers are willing to choose convenience over presentation quality.  

We are responding to this challengethese challenges generally by increasing the comfort and service levels available at our cinemas, by offering convenient on-lineonline ticket reservationsreservation services with guaranteed seating, by investing in larger screens and enhanced audio, by offering more specialized and alternative product to our audiences and by providing value for the movie goer’smoviegoer’s dollar. We are focusing on the fact that going to the movies is a social experience, and we are working to make that experience the best that it can be.  Also, that weWe must differentiate ourselves from other forms of video entertainment by emphasizing the special nature of seeing video presentationsfilm and alternative content in a cinema environment and by developing ways to position ourselves to take advantage in the increased output of film and feature product.  These are issues common to both our U.S. and international cinema operations. 



Competitive issues are discussed in detail under the caption, Item 1A – Risk Factors.



Seasonality



Major films are generally released to coincide with holidays. With the exception of Christmas and New Year’s Days,days, this fact provides some balancing of our revenue because there is no material overlap between holidays in the United States and those in Australia and New Zealand. Distributors will delay, in certain cases, releases in Australia and New Zealand to take advantage of Australian and New Zealand holidays that are not celebrated in the United States. However, the deferral of releases is becoming increasingly less common, given the need to address internet and other channels of distribution that operate on a worldwide basis. basis and are less tied to holiday schedules.



REAL ESTATE



Overall



We engage in the real estate business through development and theour ownership and rental or licensing to third parties of retail, commercial and live theatertheatre assets. We own the fee interests in all of our live theaters,theatres, and in 12 of our cinemas (as presented in the preceding table within the “Cinema Exhibition” section).  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.



Our real estate activities have historically consisted principally of:

Over 2016 and 2017, we added 25,635 square feet of newly constructed net rentable space to our existing ETCs (calculated exclusive of cinema space), of which 24,924 square feet has been rented.



In light of the geographic reach of our business, and the highly localized nature of the real estate business, we have historically made use of third partythird-party contractors to provide on-site management of our real estate development and management activities. We have begun, however, in recent periods to selectively build our internal resources in this regard, concentrating on Australia and New Zealand where we have increased our overall real estate team from 3 to 710 full time employees over the last 3 years.



Real Estate Holdings and Developments

United States

In 2016,At the end of 2019, we begansubstantially completed the construction phase of the redevelopment of our 44 Union Square property intoredevelopment project, achieving approximately 73,32273,113 square feet of net leasablerentable area (inclusive(calculated inclusive of anticipated BOMA adjustments), comprised of retail and office space. While no assurances can be given, we currently anticipateWe have now entered the lease-up phase of that the building will be ready for the commencement of the construction of tenant improvements during the second quarter of 2019.  We are currently negotiating, on an exclusive basis, leases representing approximately 90% of the net leasable area of the building.project. A short video on this project can be seen at www.44unionsquare.com.



Regarding our Cinemas 1,2,3 property in Manhattan, we have received the consent of the 25% minority member of the ownership entity for the redevelopment of the property. We are evaluatingcontinue to evaluate the potential to redevelop the property as a mixed usemixed-use property.  While we are still talkingAs our negotiations with the owner of the adjacent property aboutour neighbor for a possible joint venture development we havedid not been able to come to an agreement as to the terms of that joint venture. Accordingly,bear fruit, we have shifted our strategic plan with respect to that property and have commenced the master-planning forviewing it now as a go-it-alone development.  The Cinemas 1,2,3, is currently a cash flowing contributor to our domestic cinema operations. We are in the process of filing for the rezoning of that property, to protect our ability to include a cinema use in any future redevelopment.  It is our current plan not to spend material financial resources on this project, until lease-up of our 44

Union Square property.  On August 31, 2016, we secured a new three-year, $20.0 million mortgage loan ($20.0 million) with Valley National Bank,Bank.  On March 13, 2020, we refinanced the loan to $25.0 million which matures on April 1, 2022 with a one year optiontwo six-month options to extend through August 31, 2020, the proceeds of which were used to repay the then existing mortgage on the property, and to repay certain inter-company indebtedness, and for working capital purposes. April 1, 2023.



On April 11, 2016, we purchased for $11.2 million aan approximately 24,000 square foot office building with 72 parking spaces located at 5995 Sepulveda Boulevard in Culver City, California.  We currently use approximately 50% of the leasable area for our headquartersheadquarters’ offices and endeavor to lease the remainder to unaffiliated third parties.  Culver City has in recent years developed as a center of entertainment and high-tech activity in Los Angeles County. We moved into the building in February 2017, and have obtained $8.4 million in financing on the property pursuant to a 10-year, fixed rate mortgage loan at an interest rate of 4.64% per annum and in June 2017 we obtained an additional $1.5 million in financing due to a reappraisal of the property, at an interest rate of 4.44%. Currently, we own essentially all ofoccupy the office spacethird floor from which we conduct our executive and administrative operations. All of our leasehold interests are cinema operating properties.



All of our leasehold interests are cinema operating properties.properties, excluding our temporary administrative offices in Wellington, New Zealand.



Overseas, on December 23, 2015, we acquired two adjoining properties in Townsville, Queensland, Australia for a total of $24.1 million (AU$33.4 million) comprising approximately 5.6 acres. The total gross leasable area of the two properties, the Cannon Park City Centre and the Cannon Park Discount Centre, is 133,000 square feet.  Our multiplex cinema at the Cannon Park City Centre is the anchor tenant of that center.  This acquisition is consistent with our business plan to own, where practical, the land underlying our entertainment assets. We operate these two (2) properties as a single ETC.  This acquisition was funded internally.   For additional information, see Note 4 – Real Estate Transactions.  



We continue to work on the expansion and upgrading of our Auburn/Auburn Redyard ETC in Sydney Australia and Newmarket Village in Brisbane, Australia and to master-plan the expansion and enhancement of our Cannon Park ETC in Townsville, AustraliaBrisbane through the expansion or improvement of our Reading Cinemas at each of these centrescenters and additionalenhancing food and beverage focused space.



At Auburn/RedYard,Auburn Redyard, since the beginning of 2016, we have constructed and entered into leases representing approximately 15,000 square feet of additional retail space, which increased the square footage of that center from approximately 117,000 to approximately 132,000 square feet.  Of this 15,000 square feet, 9,600 square feet was completed in 2016, and the remaining 5,900 square feet was completed in Q4 2017.  In 2018, we acquired a 20,87020,882 square foot in-fill property, currently improved with a 16,830 square foot office building, leased to Telstra through July 2022. This increased our frontage on Parramatta Road to 1,620 of1,641 uninterrupted square feet.  The center is now comprised of 519,992519,358 square feet of land, 75,49291,580 square feet of retail improvements,net rentable area, surface parking for 367361 vehicles and subterranean parking for 727360 vehicles and is 83%86% leased.  The center also has approximately 10,586 square footfeet of additional land available for development.  This expansion was funded internally.with a mixture of cash flow and our current debt facility.



At Newmarket Village in December of 2017, we added a state-of-the art eight-screen Reading Cinema, 10,150Cinemas, 10,064 square feet of additional retail space and 124 additional parking spaces.   On November 30, 2015, we acquired an approximately 23,000 square foot parcel adjacent to our tenant Coles supermarket.  This property is currently improved with an office building, which is now fully leased.  TheseThe office building leases have early development provisions allowing us to terminate these arrangements in connection with a redevelopment of the property.  We intend to ultimately demolish this office building and to integrate this parcel into Newmarket Village.  This will increase our Newmarket

Village footprint from approximately 204,000 square feet to approximately 227,000 square feet.  Our Newmarket Village project was funded internallywith a mixture of cash flow and our current debt facility and is currently approximately 98% leased.

On December 23, 2015, we acquired two adjoining properties in Townsville, Queensland, Australia for a total of $24.1 million (AU$33.4 million) comprised of approximately 9.4-acres. The total gross leasable area of the two properties, the Cannon Park City Centre and the Cannon Park Discount Centre, is 104,528 square feet.  Our multiplex cinema at the Cannon Park City Centre is the anchor tenant of that center.  This acquisition is consistent with our business plan to own, where practical, the land underlying our entertainment assets. We operate these two properties as a single ETC.  This acquisition was funded with a mixture of cash flow and our current debt facility.

New Zealand



Located in the heart of Wellington – New Zealand’s capital city – this centerCourtenay Central is comprised of 161,071 square feet of land situated proximate to the Te Papa Tongarewa Museum (attracting over 1.5 million visitors annually), across the street from the site of Wellington’s newly announced convention center (estimated to open its doors in 2022) and at a major public transit hub.   Damage from the 2016 earthquake necessitated demolition of our nine-story parking garage at the site, and unrelated seismic issues have caused us to close major portions of the existing cinema and retail structure while we reevaluate the center for redevelopment as an entertainment themed urban center with a major food and grocery component.    

Wellington continues to be rated as one of the top cities in the world in which to live, and we continue to believe that the Courtenay Central site is located in one of the most vibrant and growing commercial and entertainment sectionsprecincts of Wellington. In 2019, UNESCO named Wellington as a UNESCO Creative City of Film. We are currently working on a comprehensive plan for the redevelopment of this property featuring a variety of uses to compliment and build upon the “destination quality” of this location.

Landholdings



In addition to certain historic railroad properties (such as our 6.8 acre8.2-acre North Viaduct Property in downtown Philadelphia and certain adjacent commercial properties)properties in Philadelphia) and certain expansion spacespaces associated with our existing ETCs, we have two unimproved properties that we acquired for, and are currently being held for, development:properties: (i) our 50%

interest in a 202-acre parcel in Coachella, California (near the grounds where the Coachella Music Festival is held), currently zoned for residential and mixed-use uses,purposes, and (ii) our 70.4–acre70.4-acre parcel in Manukau,Manukau/Wiri, a suburb of Auckland, New Zealand (located adjacent to the Auckland International Airport) currently zoned for a mixture of light and heavy industrial uses.uses and a limited amount of supporting mixed-use, such as restaurants and convenience stores.

United States



Our Coachella property was acquired as a long termlong-term land hold in a foreclosure auction by the Resolution Trust Corporation as the liquidator of the lender with the first mortgage on the property.  The zoning has been established and the property freed of a burdensome development agreement.  We are monitoring developments in the area and believe that this property is likely a candidate for sale.  Development activity in the vicinity appears to be strengthening. 



In 2016, the Auckland City Council revised the zoning of the agricultural portion of ourNew Zealand

Our property in ManukauManukau/Wiri (approximately 64.0 acres) to64.0-acres) is primarily zoned for light industrial uses.  The remaining 6.4 acres6.4-acres of our Manukauthis property were already zoned for heavy industrial use.  Light industrial uses include certain manufacturing, production, logistic, transportation, warehouse and wholesale distribution activities and, on an ancillary basis, certain office, retail and educational uses.  Now that our zoning enhancement goalThe light industrial also has been achieved, we are working with other major landowners in the area onlimited rights for the development of ancillary mixed-use. 

Under the rezoning scheme, utilization of the new zoning requires the completion of certain infrastructure works.  During 2019, we worked with adjoining landowners to develop a master plan to address these infrastructure requirements and applied for an obtained the planning approvals required for the portion of such works to be located upon our land and the consents required from various easement holders.  We are currently negotiating an agreement with these adjoining landowners to provide for the construction of neededthe infrastructure works, while we continuecomponents to develop our long range plansbe located upon their properties and for the property.equitable allocation of the costs of such infrastructure work.  



While we report our real estate as a separate segment, it has historically operated as an integral portion of our overall business and historically, has principally been in support of that business.  We have, however, acquired or developed certain properties that do not currently have any cinema or other entertainment component.  In recent periods, we have built an asset management function in Melbourne and Wellington, in order to reduce the needs for (and costs of) outside property managers for our Australia and New Zealand properties.



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



EMPLOYEES



As of December 31, 2018,2019, we had 10493 full-time executive and administrative employees, 113130 live theatre employees, 8 Real Estate10 real estate employees and 2,7192,755 cinema employees. A small number of our cinema employees in New Zealand are union members, as are our projectionists in Hawaii. None of our Australian-based employees or other employees are subject to union contracts. Overall, we are of the view that the existence of these collective-bargaining agreements does not materially increase our costs of labor or our ability to compete.



FORWARD LOOKINGFORWARD-LOOKING STATEMENTS



Our statements in this annual report, including the documents incorporated herein by reference, contain a variety of forward-looking statements as defined by the Securities Litigation Reform Act of 1995. Forward-looking statements reflect only our expectations regarding future events and operating performance and necessarily speak only as of the date the information was prepared.  No guarantees can be given that our expectation will in fact be realized, in whole or in part.  You can recognize these statements by our use of words, such as by way of example, “may,” “will,” “expect,” “believe,” and “anticipate” or other similar terminology.

These forward-looking statements reflect our expectation after having considered a variety of risks and uncertainties.  However, they are necessarily the product of internal discussion and do not necessarily completely reflect the views of individual members of our Board of Directors or of our management team.  Individual Board members and individual members of our management team may have a different viewviews as to the risks and uncertainties involved and may have different views as to future events or our operating performance.



Among the factors that could cause actual results and our financial condition to differ materially from those expressed in or underlying our forward-looking statements are the following:



The above list is not necessarily exhaustive, as business is by definition unpredictable and risky, and it is subject to influence by numerous factors outside of our control, such as changes in government regulation or policy, competition, interest rates, supply,

technological innovation, changes in consumer taste theand fancy, weather, and the extent to which consumers in our markets have the economic wherewithal to spend money on beyond-the-home entertainment. Refer to Item 1A  -Risk factorsFactors for more information.



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



Finally, we undertake no obligation to publicly update publicly or to revise any of our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law.  Accordingly, you should always note the date to which our forward-looking statements speak.



Additionally, certain of the presentations included in this annual report may contain “non-US GAAP“non-GAAP financial measures.”  In such case, a reconciliation of this information to our US GAAP financial statements will be made available in connection with such statements.

Item 1A – Risk Factors



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



BUSINESS RISK FACTORS



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



Cinema Exhibition and Live TheaterTheatre Business Risk Factors

Our cinema and live theatre businesses are vulnerable to the effects from the coronavirus outbreak which could cause customers to avoid public assembly seating and has delayed the release of major motion pictures.The currently developing coronavirus outbreak could cause patrons to avoid our cinemas and live theatres or other public places where large crowds are in attendance.  Outbreaks of the coronavirus have caused cinemas and other public assembly venues to close in certain parts of the world.  As the coronavirus spreads in the United States, Australia and New Zealand, the Company may elect on a voluntary basis to close some of our cinemas or portions of our cinemas, or governmental officials may order such closures.  Certain major studios have announced the delayed release of major motion pictures to later in the year.  At a minimum, the delayed releases of major motion pictures will push revenues into later quarters, will potentially reduce our full year revenues and may accelerate the Company’s decisions to consider reduction of operational levels at our cinemas.



We operate in a highly competitive environment with many competitors who are significantly larger and may have significantly better access to funds than we do.  We are a comparatively small cinema operator and face competition from much larger cinema exhibitors.  These larger exhibitors are able to offer distributors more screens in more markets – including markets where they may be the exclusive exhibitor – than can we.  Faced with such competition, we may not be able to get access to all of the films we want, which may adversely affect our revenue and profitability. 

While we are concerned about the use of larger competitors of national and international booking power to limit our access to film, there is little we can do to mitigate this risk as antitrust litigation is very expensive and typically long lived.  While several private lawsuits are currently pending challengingMoreover, on November 22, 2019, the practiceUnited States Department of certain competitorsJustice – Antitrust Division filed a motion to prevent or limit their accessterminate the so called “Paramount Decree;” the principal judicial precedent regulating the distributor/exhibitor relationship (United States vs. Paramount Pictures, Inc. (334 U.S. 131 (1948)) and which included prohibitions on so called “block booking” and “circuit dealing.”   This motion is opposed by independent cinema operators, who – like ourselves – believe that this will further strengthen the competitive advantages of the national circuits.  The status of the “Paramount Decree”, and the protections afforded to independent cinemas, is uncertain.   A repeal of the “Paramount Decree” may also adversely impact small independent film producers, a major source of film product these are private lawsuits.  We have no control over the prosecution of such lawsuits or the terms on which they may be privately resolved or settled.  While severalfor our art cinemas.

Several distributors have announced that they will generally provide access of film to all who desire it,it.  However, this practice is not universal.universal and is not necessarily indicative of how these distributors will chose to distribute film in a post “Paramount Decree” environment.  There is a risk that film rents charged by major distributors will include account volume discounts which will favor national or international chains.  Also, as a practical matter, for major commercial films, the terms of exhibition as a practical matter limiteddemanded by the competitorsdistributors of such films  are limiting the cinema operators who couldcan exhibit the film.film by requiring that their films be shown on a minimum number of screens and for a minimum period of time at each cinema.  Many smaller theaters simply cannot accommodate these requirements due to their more limited screen count and limited number of outlets in a given market. This competitive disadvantage has been, in our view, exacerbated in recent periods with the further concentration of the cinema exhibition industry, for example, Cineworld Group Plc’s acquisition of Regal Entertainment Group and Dalian Wanda’s acquisition of AMC Entertainment, which has now acquired Carmike Cinemas, Odeon &and UCI Cinemas Group and Nordic Cinema Group.

Increasingly, national operators in the United States are offering various discount and loyalty programs.  We believe that these have been effective in increasing attendances at theaters in the United States operated by “national chains” at the expense of independent cinemas such as ourselves.  It is unclear at this time as to how these discounts are affecting film rents paid by these exhibitors.  A discount or loyalty program is, we believe, more effective when the card or benefit provides access to a significant number of theaters and is less effective in the case of an independent cinema which may only service a very limited number of markets.  For an independent cinema operator, the only competitive option may be to reduce ticket prices.  

These larger competitors may also enjoy (i) greater cash flow, which can be used to develop additional cinemas, including cinemas that may be competitive with our existing cinemas, (ii) better access to equity capital and debt, (iii) better visibility to landlords and real estate developers, (iv) for the sake of building volume, to operate cinemas with margins below our threshold for cinema acquisitions and/or development, and (iv)(v) better economies of scale than us.scale.



In the case of our live theaters,theatres, we compete for shows not only with other “for profit” Off-Broadway theaters, but also with “not-for-profit” operators and, increasingly, with Broadway theaters.  We believe our live theaterstheatres are generally competitive with other Off-Broadway venues.  However, due to the increased cost of staging live theatertheatre productions, we are seeing an increasing tendency for plays that would historically have been staged in an Off-Broadway theater moving directly to larger Broadway venues.  In 2016, we closed our principal live theater in New York, the Union Square incident to our redevelopment of that property.



We face competition from other sources of entertainment and other entertainment delivery systems.  Both our cinema and live theatertheatre operations face competition from “in-home” and mobile device sources of entertainment. These include competition from network, cable and satellite television, internet streaming video services, Video on Demand, Blu-ray/DVD, the internet, video games and other sources of entertainment. The quality of “in-home” and mobile entertainment systems, as well as programming available on an in-home and mobile basis, has increased, while the cost to consumers of such systems (and such programming) has decreased in recent periods, and some consumers may prefer the security and/or convenience of an “in-home” or mobile entertainment experience to the more public and presentation oriented experience offered by our cinemas and live theaters.theatres. Film distributors have been responding to these developments by, in some cases, decreasing or eliminating the period of time between cinema release and the date such product is made available to “in-home” or mobile forms of distribution. The competitive pressure from streaming video may increase as a result of the acquisition of Fox by Disney.

In order to compete with these in-home and mobile forms of distribution, it is likely that we will make material capital improvements to our cinemas to increase the amenities and quality of presentation delivered.  It may also be necessary to reduce admission prices.



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

were released on a simultaneous basis to movie exhibitors and to in-home and mobile markets. It is likely that this trend will continue, making it, in our view, increasingly important for exhibitors to enhance the convenience and quality of the theater-going experience.   This can require substantial capital outlays and increased labor expense, which exhibitors may not be able to fully pass on to their customers.   Also, the amount of programming (including without limitation, the live streaming of sporting, theatrical and political events) available on an “in-home” and mobile basis continues to increase.



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



Netflix has achieved broad market acceptance, with over 167 million subscribers.  In addition, Netflix reported production of approximately 73 full-length feature films in 2019 – virtually all of which went straight to streaming.  In addition, traditional content providers, such as Walt Disney, Warner Media and Comcast’s NBCUniversal, and HBO, and new entrants such as Apple, are now offering or have announced plans to offer later this year, direct to consumer streaming services on a fixed fee basis.  The impact of this competition is unclear.  But, in order to compete with these in-home and mobile forms of distribution, it is likely that we will need to make material capital improvements to our cinemas to increase the amenities and quality of presentation delivered.  It may also be necessary to reduce admission prices.

We also face competition from various other forms of “beyond-the-home” entertainment, including sporting events, concerts, restaurants, casinos, video game arcades, and nightclubs. Our cinemas also face competition from live theaterstheatres and vice versa.  Also, social media offerings – such as Facebook, Instagram and Snapchat – appear to be commanding increasing portions of the recreational time of our potential audience.



Our cinema and live theatertheatre businesses may be vulnerable to fears of terrorism and random shooter incidents and of exposure to infectious disease which could cause customers to avoid public assembly seating, and natural disastersseating..  Political events, such as terrorist attacks, random shooter incidents and health-related epidemics, pandemics, such as the coronavirus outbreak discussed above and flu outbreaks, could cause patrons to avoid our cinemas or other public places where large crowds are in attendance.  In addition, aWe believe that recent shooting incidents involving other public assembly situations have resulted in material increases in insurance premiums for cinema operators such as ourselves.

Our cinema business may be vulnerable to natural disasters.  A natural disaster, such as a typhoon or an earthquake, could impact and has impacted, in New Zealand, our ability to operate certain of our cinemas, which could adversely affect, and has historically adversely affected, in New Zealand, our results of operations.  A material portion of our cinemas are located in seismically active areas, such as California, Hawaii and New Zealand.

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



Distribution of film is in the discretion of the film distribution companies.  Accordingly, we are at risk that the distributors may not give us all of the film we request.



Adverse economic conditions could materially affect our business by reducing discretionary income and by limiting or reducing sources of film and live theatertheatre funding.  Cinema and live theater attendanceGoing to a movie or a play is a luxury, not a necessity.  Furthermore, consumer demand for better and better amenities and food offerings have resulted in an increase of the cost of a night at the movies.  Accordingly, a decline in the economy resulting in a decrease in discretionary income, or a perception of such a decline, may result in decreased discretionary spending, which could adversely affect our cinema and live theatertheatre businesses. Adverse economic conditions can also affect the supply side of our business, as reduced liquidity can adversely affect the availability of funding for movies and plays.  This is particularly true in the case of Off-Broadway plays, which are often times financed by high net worth individuals (or groups of such individuals) and that are very risky due to the absence of any ability to recoup investment in secondary markets like Blu-ray/DVD,like–– cable, satellite or internet distribution.



Our screen advertising or auditorium leasing revenue may decline.  Over the past several years, cinema exhibitors have been looking increasingly to screen advertising and auditorium leasing as a way to improve income.  No assurances can be given that this source of income will be continuing, or that the use of screen advertising will not ultimately prove to be counterproductive, by giving consumers a disincentive to choose going to the movies over “in-home” or mobile entertainment alternatives.   Screen advertising revenues are typically tied to attendance.  Consequently, declining attendance would likewise result in decreased screen advertising revenues.



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



We face competition from competitors offering food and beverage and luxury seating as an integral part of their cinema offerings.  AThe number of our competitors offering an expanded food and beverage menu (including the sale of alcoholic beverages) and luxury seating, have emergedhas continued to grow in recent periods. In addition, somemore competitors such as AMC are converting existing cinemas to provide such expanded menu offerings and in-theater dining options. The existence of such cinemas may alter traditional cinema selection practices of moviegoers, as they seek out cinemas with such expanded offerings as a preferred alternative to traditional cinemas.  In order to

compete with these new cinemas, the Company has begunbeen required to materially increase its capital expenditures to add such features to many of our cinemas and to take on additional and more highly trained (and, consequently, compensated) staff.  Also, the conversion to luxury seating typically requires a material reduction in the number of seats that an auditorium can accommodate which may translate into fewer movie tickets being sold.sold and the shutdown (or limitation of activities) during the time required to complete such modifications.



Our failure to obtain and maintain liquor licenses at any of our cinemas could adversely affect our business, results of operations or financial condition. Each of our cinemas offering beer and wine, and in some cases liquor, is subject to licensing and regulation by the alcoholic beverage control agency in the state, county and municipality in which the cinema is located. Each cinema is required to obtain a license to sell alcoholic beverages on the premises from a state authority and, in certain locations, county and municipal authorities. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of each store,cinema, including minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling and storage and dispensing of alcoholic beverages. The failure to receive or retain a liquor license, or any other required permit or license, in a particular location, or to continue to qualify for, or renew licenses, could have a material adverse effect on our profitability, our ability to attract patrons, and our ability to obtain such a liquor license in other locations.



We may be subject to increased labor and benefits costs generally. We are subject to laws governing such matters as minimum wages, working conditions and overtime. As minimum wage rates increase and/or limitations are imposed on our ability to adjust staffing levels to reflect cinema attendances, we may need to increase not only the wages of our minimum wage employees, but also

the wages paid to employees at wage rates that are above minimum wage.wage and to incur higher amounts overtime and over-staffing costs. Labor shortages, increased employee turnover and health care mandates could also increase our labor costs. This in turn could lead us to increase prices which could impact our sales. Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our results of operations may be adversely impacted.



Cyber securityCybersecurity threats, ADA issues, and our failure to protect our electronically stored data could adversely affect our business. We store and maintain electronic information and data necessary to conduct our business.  Data maintained in electronic form is subject to the risk of intrusion, tampering and theft. While we believe that we have adopted industry-accepted security measures and technology to protect the confidential and proprietary information, the development and maintenance of these systems is costly and require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. As such, we may be unable to anticipate and implement adequate preventive measures in time.  Cybersecurity has been an area of increasing government attention and regulations, and in many jurisdictions, statutes have been passed, or are under consideration, imposing penalties and fines related to breaches of a company’s cybersecurity.  This may adversely affect our business, including exposure to government enforcement actions and private litigation, and our reputation with our customers and employees may be injured. In addition to Company-specific cyber threats or attacks, our business and results of operations could also be impacted by breaches affecting our peers and partners within the entertainment industry, as well as other retail companies.  Also, recently adopted expansions of ADA type laws to cover access to websites and uncertainty as to the requirements of such new laws may result in litigation claims that could adversely impact our results of operation.



Real Estate Development and Ownership Business Risks



Our real estate business is vulnerable to the effects from the coronavirus outbreak which we expect may adversely impact our retail tenants' operations and, in turn, result in an increase in tenant defaults and rent reductions.  The currently developing coronavirus outbreak could cause patrons to avoid our tenant's retail businesses or other public places where large crowds are in attendance.  As the coronavirus spreads in the United States, Australia and New Zealand, we expect that it may adversely impact the retail businesses of our tenants which, in turn, would likely result in an increase in the number of tenant defaults under their respective lease agreement and/or requests for rent reduction or rent abatement.  Also, our certain of our tenants may elect on a voluntary basis to close on a temporary basis, or governmental officials may order such closures.  Any of these events would have a material adverse effect on our business, results of operations and financial condition.

We operate in a highly competitive environment in which we must compete against companies with much greater financial and human resources than we have.  We have limited financial and human resources, compared to our principal real estate competitors.  In recent periods, we have relied heavily on outside professionals in connection with our real estate development activities.  Many of our competitors have significantly greater resources and may be able to achieve greater economies of scale than we can.  Given our structure as a taxable corporation, our cost of capital is typically higher than other real estate investment vehicles such as real estate investment trusts.



Risks Related to the Real Estate Industry Generally



Our financial performance will be affected by risks associated with the real estate industry generally.  Events and conditions generally applicable to developers, owners, and operators of real property will affect our performance as well.  These include (i) changes in the national, regional and local economic climate, (ii) local conditions, such as an oversupply of, or a reduction in demand for, commercial space and/or entertainment-oriented properties, (iii) reduced attractiveness of our properties to tenants, (iv) the rental rates and capitalization rates applicable to the markets in which we operate and the quality of properties that we own, (v) competition from other properties, (vi) inability to collect rent from tenants, (vii) increased operating costs, including labor, materials, real estate taxes, insurance premiums, and utilities, (viii) costs of complying with changes in government regulations, (ix) the relative illiquidity of real estate investments, and (x) decreases in sources of both construction and long-term lending as traditional sources of such funding leave or reduce their commitments to real estate-based lending.  In addition, periods of rising interest rates or declining demand for real estate (for example, due to competition from internet sellers the demand for brick and mortar retail spaces has declined and may continue to decline, and due to the increasing popularity of tele-commuting demand for traditional office space has likewise declined and may likewise continue to decline), or the public perception that any of these events may occur, could result in declining rents or increased lease defaults. Increasing cap rates can result in lower property values.  Also, we have holdings in areas that are subject to earthquake, storm and flooding risk.



We may incur costs complying with the Americans with Disabilities Act and similar laws.  Under the Americans with Disabilities Act and similar statutory regimes in Australia and New Zealand or under applicable state or local law, all places of public accommodation (including cinemas and theaters) are required to meet certain governmental requirements related to access and use by persons with disabilities.  A determination that we are not in compliance with those governmental requirements with respect to any of

our properties could result in the imposition of fines or an award of damages to private litigants.  The cost of addressing these issues could be substantial. 

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



Real estate development involves a variety of risks. 



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



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



A number of our assets are in geologically active areas, presenting risk of earthquake and land movement.  We have properties in California, Hawaii and New Zealand, areas that present a greater risk of earthquake and/or land movement than other locations. New Zealand has in recent periods had several major earthquakes damaging our facilities in Christchurch and Wellington.Wellington resulting in closures or partial closures of said facilities and consequent reduction in revenue and cash flow. The ability to insure for such casualties is limited and may become more difficult and/or more expensive in future periods.



We may be subject to liability under environmental laws and regulations. We own and operate a large number of cinemas and other properties within the U.S. and internationally, which may be subject to various foreign, federal, state and local laws and regulations relating to the protection of the environment or human health. Such environmental laws and regulations include those that impose liability for the investigation and remediation of spills or releases of hazardous materials. We may incur such liability, including for any currently or formerly owned, leased or operated property, or for any site, to which we may have disposed, or arranged for the disposal of, hazardous materials or wastes. Certain of these laws and regulations may impose liability, including on a joint and several liability, which can result in a liable party being obliged to pay for greater than its share, regardless of fault or the legality of the

original disposal. Environmental conditions relating to our properties or operations could have an adverse effect on our business and results of operations and cash flows.

Legislative or regulatory initiatives related to global warming/climate change concerns may negatively impact our business.  Recently, there has been an increasing focus and continuous debate on global climate change including increased attention from regulatory agencies and legislative bodies. This increased focus may lead to new initiatives directed at regulating an as yet unspecified array of environmental matters. Legislative, regulatory or other efforts in the U.S. to combat climate change could result in future increases in the cost of raw materials, taxes, transportation and utilities for our vendors and for us which would result in higher operating costs for the Company. Also, compliance by our cinemas and accompanying real estate with new and revised environmental, zoning, land-use or building codes, laws, rules or regulations, could have a material and adverse effect on our business. However, we are unable to predict at this time, the potential effects, if any, that any future environmental initiatives may have on our business.



Changes in interest rates may increase our interest expense. Because a portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense. In each of March, June,August, September and December 2018,October 2019, the U.S. Federal Reserve raisedlowered its benchmark interest rate by a quarter of a percentage point, with additional increasesdecreases expected to come over the next year. If interest rates continue increasing, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Based on our debt outstanding as of December 31, 2018,2019, if interest rates were to increase by 1%, the corresponding increase in interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $1.4$1.2 million per year. Potential future increases in interest rates may therefore negatively affect our financial condition and results of operations, and reduce our access to the debt or equity capital markets.



In addition, someUncertainty relating to the likely phasing out of LIBOR by 2021 may result in paying increased interest under our credit facilities. Some of our variable rate indebtedness uses LIBOR as a benchmark for establishing the rate. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to phase out LIBOR by the end of 2021. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequencesAt this time, it is not possible to predict the effect that any discontinuance, modification or other reform of these developments cannotLIBOR or any other reference rate, or the establishment of alternative reference rates, may have on LIBOR, other benchmarks, or LIBOR-based debt instruments. However, the use of alternative reference rates or other reforms could cause the interest rates payable under our credit facilities to be entirely predicted, but could include an increase in the cost of our variable rate indebtedness.

substantially higher than we would otherwise have expected.

International Business Risks



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





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



Trade disputes and geopolitical instability outside of the U.S. may adversely impact the U.S. and global economies.

In 2018,2019, global growth weakened, trade tensions heightened, and several emerging markets experienced significant downturns as macroeconomic and geopolitical developments weighed on market sentiments. Governmental policies of developed economies, such as the U.S., have a substantial effect on emerging markets, and the consequences of a trade war between two developed countries, like that of the U.S. and China, could further contribute to the adverse economic and political conditions of emerging and other developed economies. Additionally, North Korea’s nuclear weapons capabilities continue to be an ongoing security concern and worsening relations between the U.S. and North Korea continue to create a global security issue that may adversely affect international business and economic conditions. While it is difficult for us to predict the effect of such trade wars and heightened geopolitical and economic instability on our business, they could lead to currency devaluation, economic and political turmoil, market volatility, and a loss of consumer confidence in the broader U.S. economy.



Risks Associated with Certain Discontinued Operations



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



Operating, Financial Structure and Borrowing Risk



From time to time,Typically, we may have negative working capital.  In recent years, asAs we have investedinvest our cash in new acquisitions and the development of our existing properties, we have had negative working capital. This negative working capital is typical in the cinema exhibition industry because our short-term liabilities are in part financing our long-term assets instead of long-term liabilities financing short-term assets, as is the case in other industries such as manufacturing and distribution. In addition, the new lease accounting standard requires us to include the current portion of our operating lease liabilities on our consolidated balance sheet. See Note 2 - Summary of Significant Accounting Policies – Operating Leases.



We are subject to complex taxation, changes in tax rates, adoption of new U.S. or international tax legislation and disagreements with tax authorities that could adversely affect our business, financial condition or results of operations. We are subject to many different forms of taxation in both the U.S. and in foreign jurisdictions where we operate, such as the U.S. Tax Cuts and Jobs Act signed into law in December 2017. The new laws are still evolving and require we interpret the provisions of the law as we try to comply with them. The costs of compliance with these laws and regulations are high and are likely to increase in the future. Any failure on our part to comply with these laws and regulations can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties.



Changes in U.S. accounting standards may adversely impact our business. In February 2016, the Financial Accounting Standard Board (FASB) issued Accounting Standards Update (ASU) 2016-02 Leases (ASC 842). This ASU was a joint effort by FASB and the International Accounting Standards Board (IASB) to improve the financial reporting of leasing transactions by requiring companies to recognize lease assets and lease liabilities on their balance sheet. ASU 2016-02 could require significant changes to our balance sheet relating to the recognition of operating leases as assets or liabilities based on existing lease terms and whether we are the lessor or lessee. Although these standards become effective in 2019, these changes in accounting standards could have a material effect on our financial condition or results of operations which, ultimately, could materially impact the price of our stock.

We have substantial shortshort- to medium termmedium-term debt.  Generally speaking, we have historically financed our operations through relatively short-term debt.  No assurances can be given that we will be able to refinance this debt, or if we can, that the terms will be reasonable.  However, as a counterbalance to this debt, we have certain unencumbered real property assets, which could be sold to pay debt or encumbered to assist in the refinancing of existing debt, if necessary. 



We have substantial lease liabilities.  Most of our cinemas operate in leased facilities. These leases typically have “cost of living” or other rent adjustment features and require that we operate the properties as cinemas.  A downturn in our cinema exhibition business might, depending on its severity, adversely affect the ability of our cinema operating subsidiaries to meet these rental obligations.  Even if our cinema exhibition business remains relatively constant, cinema level cash flow will likely be adversely affected unless we can increase our revenue sufficiently to offset increases in our rental liabilities.



Our stock is thinly traded.  Our stock is thinly traded, with an average daily volume in 20182019 of only approximately 45,12337,416 Class A Stock.  Our Class B Stock is very thinly traded with even less volume.  This can result in significant volatility, as demand by buyers and sellers can easily get out of balance.



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



PendingOngoing disputes among the heirs of James J. Cotter, Sr., have over the past threefive years have caused, and may continue to cause, uncertainty regarding the ongoing control of the Company by the Cotter family and have distracted and may continue to distract

the time and attention of our officers and directors from our business and operations and may ultimately interfere with the effective management of the Company.  Up until his death on September 13, 2014, James J. Cotter, Sr., the father of Ellen Cotter, James J. Cotter, Jr. and Margaret Cotter, was our controlling stockholder, having the sole power to vote approximately 66.9% of the outstanding voting stockClass B Voting Common Stock (the “Class B Stock”) of the Company.  Under applicable Nevada Law, a stockholder holding more than 2/3rdstwo-thirds of the Company’s voting stockClass B Stock has the power at any time, with or without cause, to remove any one or more

directors (up to and including the entire board of directors) by written consent taken without a meeting of the stockholders.

Since his death,  Over the past four years there have been a variety of disputes have arisen amongbetween Ellen Cotter and Margaret Cotter, on one side, and James J. Cotter, Jr., on the other side, as to the control and Margaret Cotter concerningdisposition of this Class B Stock.

Immediately following his death, the voting control of those shares and regarding the exerciseabove referenced Class B Stock was beneficially owned by the Estate of James J. Cotter Sr. Deceased (the “Cotter Estate”) which held 427,808 shares, representing 25.5% of options to acquire an additional 100,000 shares of Class B Stock.  At the present time, Ellen Cotter is the Chair, Presidentsuch voting stock, and Chief Executive Officer of our Company.  Margaret Cotter is the Vice-Chair of our Company, Executive Vice-President – Real Estate Management and Development, NYC and the President of Liberty Theaters, LLC, the company through which we own and operate our live theaters.  She heads up the management and redevelopment of our New York properties.  James J. Cotter, Jr., from June 2013 until June 12, 2015 was the President and from August 7, 2014 until June 12, 2015 was the Chief Executive Officer of our Company, having been removed from those positions by Board action on June 12, 2015.  From 2002 until November 7, 2018, Mr. Cotter, Jr., was also a director of our Company.

As of December 31, 2018, according to the books of the Company, the Living Trust established by the Declaration of Trust dated June 5, 2013, by James J. Cotter, Sr. (the(as amended, the “Cotter Trust”), which held of record 696,080 shares, of our Class B  Stock  constituting approximatelyrepresenting 41.4% of thesuch voting power of our outstanding capital stock.  According to the books of the Company, the Cotter Estate as of that date held of record an additional 427,808 shares of Class B Stock, constituting approximately 25.5% of the voting power of our outstanding capital stock.  We are advised, based upon public filings made by one or more of Ellen Cotter, Margaret Cotter and James J. Cotter, Jr. (the “Cotter Filings”) that the Class B Stock currently held of record by the Cotter Estate will eventually pour over into the Cotter Trust.  We are further advised from the Cotter Filings that the Cotter Trust also provides for the establishment of a voting trust (the “Cotter Voting Trust”) which will eventually hold the Class B Stock currently held by the Cotter Estate and the Cotter Trust.  At the present time, however, such Class B Stock is held of record by the Cotter Trust and the Cotter Estate, respectively.



On December 22, 2014, the District Court of Clark County, Nevada, (the “Nevada District Court”) appointed Ellen Cotter and Margaret Cotter as co-executors of the Cotter Estate.  The Will of James J. Cotter provides that, after the payment of certain debts, the residual of his estate was to flow over into the Cotter Trust. However, a dispute arose between Ellen Cotter and Margaret Cotter, on one side, and James J. Cotter, Jr., on the other side, as to which trust document controlled the Cotter Trust and the designation of the trustees thereunder.  On March 23, 2018, the Superior Court of the State of California, County of Los Angeles (the “California Superior Court”), issued its judgement in the case captioned In re James J. Cotter Living Trust dated August 1, 2000 (Case No. BP159755) (the “Trust Case”), to the effect that Ellen Cotter and Margaret Cotter are the Co-Trustees of the Cotter Trust and that Margaret Cotter is the sole Trustee of the Voting Trust.  As the appeal period for that judgment has expired, the California Superior Court’s determination in this regard is now final and not subject to review.  Accordingly, in the view of the Company, Ellen Cotter and Margaret Cotter have voting control over the shares held by the Cotter Trust and the Cotter Estate, collectively representing 66.9% of our Company’s Class B Stock.  Taking into account Ellen Cotter and Margaret Cotter’s personal holdings of voting stock,Class B Stock, Ellen Cotter and Margaret Cotter have the power to vote 71.9% of our Company’s voting stock. Class B Stock.   In so far as we are aware, based upon public filings and our internal records, at the present time the Voting Trust does not own any shares of Class B Stock.   The shares which are anticipated to flow into the Voting Trust are, insofar as our Company is aware, currently owned by the Cotter Estate and the Cotter Trust.

However, issues as to the ongoing control of our Company are still uncertain.  James J. Cotter, Jr., has a motion pending since August 2015 to remove Ellen Cotter and Margaret Cotter as trustees of the Cotter Trust (a motion for which no discovery schedule, briefing schedule or hearing date has been set).  Also, James J. Cotter, Jr., continues to support a motion brought by the guardian ad litem (the “GAL”) appointed by the Superior Court to represent the interests of the beneficiaries of the Voting Trust to effect a sale of the Voting Stock to be held by the Voting Trust.  

The GAL has motions pending (i) to divide the Voting Trust into separate trusts, one for the benefit of Margaret Cotter’s children and one for the benefit of James J. Cotter, Jr.’s children, (ii) in order to achieve diversification of the assets of these trusts,  to sell the Class B stock eventually to be held by these trusts, and (iii) to immediately retain a valuation expert to advise him as to value of the Class B Voting Stock to be eventually held by the Voting Trust.  A motion brought by Margaret Cotter and Ellen Cotter, as Co-Trustees of the Cotter Trust, to disqualify the GAL on the basis that he cannot simultaneously represent the interests of Margaret Cotter and James J. Cotter’s, Jr’s, children as the interests of those children differ, was denied by the Superior Court.   Ellen Cotter and Margaret Cotter, as Co-Trustees of the Living Trust have advised that they believe that it was the intention of their father that the Class B Voting Stock be held in the Voting Trust as long as possible and that they intend to oppose any splitting of the Voting Trust and/or sale of the Class B Voting Stock eventually to be held by the Voting Trust.



We understand from public filings made by Ellen Cotter and Margaret Cotter and public filings made by James J. Cotter, that James J. Cotter, Jr. is the first alternate trustee of the Voting Trust, in the event that Margaret Cotter is unable or unwilling to serve as trustee.



While our Company is not a party to the Trust Case, our Company has appeared in court, to protect (a) the business plan adopted by our Board of Directors and its determination that stockholder interests are best achieved by continuing with that business plan rather than selling the Company at this time and (b) in the event that the California Court were to disregard the advice of our Board and order that a controlling interest in our Company be marketed or sold,  that the interests of our Company and stockholders generally are protected.protected in the context of any such change of control transaction.  Our Company’s participation in the Trust Case since August 2017 has been overseen by a Special Independent Committee of the Board of Directors currently comprised of directors Doug McEachern and Judy Codding.



On February 8, 2017, James Cotter, Jr. filed in the Trust Case an Ex Parte Petition for Appointment of a trustee ad litem and of a guardian ad litem for the benefit of Cotter, Sr.’s, minor grandchildren (two of whom are the children of Margaret Cotter and three of whom are the children of James Cotter, Jr., and who are referred to herein as the “Cotter Grandchildren”).  Mr. Cotter, Jr., sought the appointment of a trustee ad litem, to evaluate the non-binding indication of interest sent by Patton Vision, LLC (“Patton Vision”), to the Trustees of the Cotter Trust to acquire the RDI shares held by the Cotter Trust at $18.50 per share (referred to in Mr. Cotter, Jr’s pleadings as the “Offer”) and to take reasonable steps to act on the Offer in the trustee’s sole discretion.  Specifically, Mr. Cotter Jr. sought an order “granting the trustee ad litem with full power, authority, and protections under the Cotter Trust and California trust law, as any other named trustee would have, to evaluate the Offer, conduct due diligence, negotiate with Patton Vision or any other potential offerors, and take all actions necessary or appropriate to consummate the sale of the Cotter Trust’s RDI shares, including but not limited to:

Notwithstanding its determination that Mr. Cotter, Jr. was not a trustee of either the Cotter Trust or the Voting Trust, on February 14, 2018, the California Superior Court issued its “Statement of Decision” to appoint a temporary trustee ad litem (the “TTAL”) “with the narrow and specific authority to obtain offers to purchase the RDI stock in the voting trust, but not to exercise any other powers without court approval, specifically the sale of the company or any other powers possessed by the trustees.”  The California Superior Court’s order based on that Statement of Decision was entered on March 23, 2018.  That order was appealed by Ellen Cotter and Margaret Cotter to the California Court of Appeals for the Second District (the “California Court of Appeals”), and on April 2, 2018, the California Court of Appeals entered its order to show cause and a stay (the “Order to Show Cause and Stay”) as to why the court below “should not be compelled to vacate your order of March 23, 2018 directing that trustee ad litem be appointed to obtain offers to purchase the voting-stock trust’s interest in Reading International, Inc., and issue a new and different order denying the ex parte petition seeking a trustee ad litem.   . . . All trial court proceedings are stayed pending disposition of this proceeding or further order of this court.”   Briefs have been submitted by all parties, and a hearing is set for April 5, 2019.  Accordingly, no temporary trustee ad litem has been appointed and no solicitation of offers is ongoing. 

In so far as we are aware, based upon public filings and our internal records, at the present time the Voting Trust does not own any shares of RDI stock.   The shares which are anticipated to flow into the Voting Trust are, insofar as our Company is aware, currently owned by the Cotter Estate and the Cotter Trust.

We continue to believe that, whether or not a final determination is made to sell the voting shares, the appointmentvery commencement of a TTALprocess to sell a controlling interest in our Company would pose risks to our Company and our stockholders  for a variety of reasons, including the resultant potential for:  (i) distraction of management and key employees from focusing on the conduct of our business, including the implementation of our three year business strategy, (ii) incurrence of additional general and administrative costs due to the need to implement employee retention programs and to incur legal expenses of the type and at levels not typically required in the ordinary conduct of our Company’s business, (iii) interference with contractual relationships, negotiations and potential negotiations

with third parties important to our Company’s business, including, without limitation, current and future lenders, tenants, landlords, suppliers and co-developers, (iv) increased difficulty in hiring and retaining high quality employees, and (v) exposure of our Company to potential litigation claims of the type which often accompany any extraordinary corporate transactions together with the expense, distraction and time loss that typically results from any such litigation.  If the California Superior Court’s order is not reversed by the California Court of Appeals and if a decision to sell a controlling interest is made by the California Superior Court, then there would be the additional risk that control might be sold to an unqualified purchaser who might exploit such control position in a manner not consistent with the best interests of our Company or stockholders generally.



Since May 2016, Patton Vision has sent various non-binding indications of interest to us to purchase all of our Company’s outstanding shares. In each case our Board of Directors has determined that our Company and our stockholders would be best served by our continued independence and by our pursuit of our business strategy.  We were informed that on January 23, 2017, Patton Vision separately sent a similar indication of interest to the co-trustees of the Cotter Trust to purchase the Cotter Trust’s shares and to the Co-Executors of the Cotter Estate to purchase the Cotter Estate’s shares.  We have been advised by Ellen Cotter and Margaret Cotter that, acting in their capacities as the Co-Executors of the Cotter Estate and as the Co-Trustees of the Cotter Trust and by Margaret Cotter, acting in her capacity as the Trustee of the to-be-formed Voting Trust, that they do not have any current plans to sell voting control of our Company.

Most recently, on November 6, 2018, we received a non-binding indication of interest from Patton Vision dated November 5, 2018, stating an indicated purchase price of $444.0 million, allocated $17.22 per share for our Class A Common Stock and $37.38 per share for our Class B Common Stock.  In a further letter dated January 17, 2019, Patton Vision clarified that “the value per Class A and Class B shares reflected [in the November 5, 2018 non-binding indication of interest] were exemplary and intended to reflect that the proposal represented a substantial equity value premium across Reading classes of common stock” and extended the term of its non-binding indication of interest to March 29, 2019.  On March 14, 2019, our Board of Directors, following consideration and adoption of our three year business strategy, once again confirmed its determination that our Company and our stockholders would be best served by our continued independence and by our pursuit of our business strategy.  Our Board of Directors instructed our management to inform Patton Vision once again that our Board had no present interest in engaging in discussions regarding our possible sale.

The California Superior Court, in the Trust Case, has jurisdiction over a potentially controlling block of our voting power.  The Cotter Trust, which as described in more detail above, currently owns 41.4% of our Class B Stock, and, at such time as the Cotter Estate is

probated, may receive up to an additional 25.5% of our Class B Stock, should the California Superior Court order the sale of the Trusts’ Class B Stock and such sale be completed, then there may be a change of control of our Company (depending on, among other things, who the ultimate purchaser(s) of such shares might be, the number of shares of VotingClass B Stock distributed by the Cotter Estate to the Cotter Trust, and whether the California Superior Court orders a sale of all or only some portion to the Class B Stock held by the Cotter Trust).  We cannot predict what reactions, including appeals or other steps, might be taken by Ellen Cotter and Margaret Cotter in their respective capacities as Trustees under the Cotter Trust, or in other capacities (for example, as Co-Executors of the Cotter Estate or as stockholders acting in their own right), should the California Superior Court make such an order.  We do note, however, that Ellen Cotter and Margaret Cotter have publicly stated that, if there is to be a sale of controlling shares, they intend to be the purchaser of such shares.  We also cannot predict what action our Board of Directors would take in response, if any.  However, our Board of Directors has an obligation to act in the best interest of our Company, and in the event the California Superior Court were to order a sale of the Class B Stock held by the Cotter Trust, our Board of Directors would be obligated to consider the interests of the Company and to act accordingly.



In addition, James J. Cotter, Jr., has filed a derivative action (discussed in greater detail below)2015 against Ellen Cotter and Margaret Cotter and certain of our Directors, alleging a variety of misconduct on their part and, among other things, seeking the reinstatement of James J. Cotter, Jr. as president and chief executive officer of our Company, and challenging the voting by Ellen Cotter and Margaret Cotter of the shares held by the Cotter Estate.  The Nevada District Court has now dismissed on summary judgment all of Mr. Cotter, Jr.’s claims in that action, including his claims relating to the handling of the Patton Vision non-binding indications of interest.  The Nevada District Court has also entered a cost order against Mr. Cotter, Jr., in the amount of $1.55 million.  However, Mr. Cotter, Jr., has appealed those decisions so they continue as an overhang over our Company. See Notes to Consolidated Financial Statements—Statements – Note 12—12 – Commitments and Contingencies—Contingencies – Cotter Jr. Related Litigation Matters (including legal costs coverage).  



The Nevada derivative litigation and related matters has for multiple years, required the time and attention of Ellen Cotter, Margaret Cotter, our directors and members of our management team and could, in the future, potentially further distract the time and attention of these key persons from the business and operations of our Company.



Furthermore, the uncertainty as to the future management and control of our Company could potentially  adversely impact, among other things (i) our ability to develop and maintain favorable business relationships, (ii) our ability to attract and retain talented and experienced directors, executives and employees, (iii) the compensation and other terms needed to attract and retain such individuals (including, without limitation, the potential need for retentions agreements and other incentive arrangements typically put into place when control of a public company is uncertain), (iv) our ability to borrow money on favorable long-term terms, and (v) our ability to pursue and complete long-term business objectives.



The interests of our controlling stockholder may conflict with your interests.  As of December 31, 2018,2019, the Cotter Estate and the Cotter Trust beneficially own 66.9% of our outstanding Class B Stock.  At the present time, according to the books of the Company, Ellen Cotter and Margaret Cotter vote (including their direct holdings of 50,000 shares and 35,100 shares respectively of the Class B Stock), Class B Stock representing 71.9% of our outstanding Class B Stock.  Our Class A Stock is non-voting, while our Class B Stock represents all of the voting power of our Company.  For as long as the Cotter Estate, the Cotter Trust and/or the Cotter Voting Trust (referred to herein collectively as the “Cotter Entities”) continue to own shares of Class B Stock representing more than 50% of the voting power of our common stock, the Cotter Entities will be able to elect all of the members of our Board of Directors and determine the outcome of all matters submitted to a vote of our stockholders, including matters involving mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional shares of common stock or other equity securities and the payment of dividends on common stock. The Cotter Entities will also have the power to prevent or cause a change in control and could take other actions that might be desirable to the Cotter Entities but not to other stockholders.  To the extent that the Cotter Entities hold more than 2/3rdstwo-thirds of our outstanding Class B Stock, the Cotter Entities will have the power at any time, with or without cause, to remove any one or more Directors (up to and including the entire boardBoard of directors)Directors) by written consent taken without a meeting of the stockholders.    



In addition, the Cotter Estate or the Cotter Trust and/or their respective affiliates have controlling interests in companies in related and unrelated industries.  In the future, we may participate in transactions with these companies (see Note 1920 – Related Parties).

While controlling stockholders may owe certain fiduciary duties to our Company and/or minority stockholders, these duties are limited.  No assurances can be given that the Cotter Entities will not take action that, while beneficial to them and legally enforceable, would not necessarily be in the best interests of our Company and/or our stockholders generally.



We are a “Controlled Company” under applicable NASDAQ Regulations.  As permitted by those Regulations, our Board has elected to opt-out of certain corporate governance rules applicable to non-controlled companies.  Generally speaking, the NASDAQ requires listed companies to meet certain minimum corporate governance provisions.  However, a “Controlled Company”, such as we, may elect not to be governed by certain of these provisions.  Our Board of Directors has elected to exempt our Company from requirements that (i) at least a majority of our Directors be independent and (ii) nominees to our Board of Directors be nominated by a committee comprised entirely of independent Directors or by a majority of our Company’s independent Directors.  Notwithstanding the determination by our Board of Directors to opt-out of these NASDAQ requirements, we believe that a majority of our Board of

Directors is nevertheless currently comprised of independent Directors.  As a practical matter, subject to their fiduciary duties, Ellen Cotter and Margaret Cotter control the composition of our Board of Directors.



We depend on key personnel for our current and future performance.  Our current and future performance depends to a significant degree upon the continued contributions of our senior management team and other key personnel. The loss or unavailability to us of any member of our senior management team or a key employee could significantly harm us. We cannot assure you that we would be able to locate or employ qualified replacements for senior management or key employees on acceptable terms. Due to the uncertainty of our control situation, the ongoing availability of these employees and our ability to replace them is uncertain.



If our company suffers cyber-securitycybersecurity attacks, data security challenges or privacy incidents that result in security breaches, we could suffer a loss of sales, additional liability, reputational harm or other adverse consequences.

The effective operation of our international businesses depends on our network infrastructure, computer systems, physical, virtual and/or cloud based, and software. Our information technology systems collect and process information provided by customers, employees and vendors.  In addition, third partythird-party vendors’ systems process ticketing for our theaters.  These various information technology systems and the data stored within them are subject to penetration by cyber attackers.  We utilize industry accepted security protocols to securely maintain and protect proprietary and confidential information. However, in spite of our best efforts, our information systems may fail to operate for a variety of technological or human reasons.  An interruption or failure of our information technology systems and of those maintained by our third partythird-party providers could adversely affect our business, liquidity or results of operations and result in increases in reputational risk, litigation or penalties.  Furthermore, any such occurrence, if significant could require us to expend resources to remediate and upgrade information technology systems.  Since 2015, we have annually procured cybersecurity insurance to protect against cyber-securitycybersecurity risks; however, such we cannot provide any assurance regarding the adequacy of such insurance coverage.

Item 1B – Unresolved Staff Comments



None.

Item 2 – Properties 



EXECUTIVE AND ADMINISTRATIVE OFFICES



As discussed previously, inSince February 2017, we moved our executive headquarters has been in the U.S. from an 11,700 square foot leased office space located at 6100 Center Drive, Suite 900, Los Angeles, California 90045 to a 24,000 square foot Class B office building with 72 parking spaces located at 5995 Sepulveda Boulevard, Suite 300, Culver City, California 90230, which we had purchased on April 11, 2016.  We are currently using approximately 50% of the leasable area for our headquarters’ offices and continueanticipate leasing the remainder of the space to look for an unaffiliated third party tenant to lease the remainder.third-party tenant. 



We own an 8,3008,500 square foot office building in Melbourne, Australia, approximately 5,2005,000 square feet of which serve as the headquarters for our Australian and New Zealand operations (the remainder being leased to an unrelated third party). We maintain our accounting personnel and certain IT and operational personnel in approximately 5,9005,400 square feet of office spaces located in our Wellington Courtenay Central ETC.ETC in Wellington, New Zealand, however due to the ongoing temporary closure of Courtenay Central, we have leased temporary premises (about half a mile away) with 3,900 square feet on acceptable commercial terms to cover the period of closure.  We also occupy approximately 3,500 square feet at our Village East leasehold property in New York for administrative purposes.



ENTERTAINMENT PROPERTIES



Entertainment Use Leasehold Interests



As of December 31, 2018,2019, we lease approximately 1,800,0001,812,000 square feet of completed cinema space in the United States, Australia, and New Zealand as follows:



In December 2014, we entered into a lease for a new luxury cinema, Olino by Consolidated Theatres, which opened on October 21, 2016 at the new Ka Makana Ali'i Shopping Center developed in Kapolei, Hawaii by an affiliate of DeBartolo Development.



REAL ESTATE INTERESTS



Fee Interests



In Australia, as of December 31, 2018,2019, we owned approximately 1,200,0001,356,000 square feet of land at nineseven locations.  Most of this land is located in the greater metropolitan areasstates of Brisbane, Perth,Queensland, New South Wales, and Sydney.Western Australia.  Of these fee interests, approximately 208,000 square feet are currently improved with cinemas.  We also own an approximately 23,000 square foot parcel currently improved with an approximately 22,000 square foot office building that we intend to integrate with and into our Newmarket Village ETC and that, accordingly, is not included in the above table. In 2018, we acquired a building of 16,830 square feet which bordersis bordered on three sides ofby our Auburn ETC for $3.5 million (AU$ 4.5 million).  This building has a lease in place, which expires in July 2022, after which we intend to integrate the property withinto our ETC.



In New Zealand, as of December 31, 2018,2019, we owned approximately 3,300,0003,370,000 square feet of land at six locations. The foregoing includes theour Courtenay Central ETC in Wellington, the development land adjacent to our Courtenay Central ETC, the 70.4-acre ManukauManukau/Wiri site, and the fee interests underlying four cinemas in New Zealand, which properties include approximately 20,0006,000 square feet of ancillary retail space.



In the United States, as of December 31, 2018,2019, we owned approximately 134,000139,000 square feet of improved real estate comprised of three live theatertheatre buildings, which include approximately 37,00011,000 square feet of leasable space, the fee interest in the 44 Union Square property (currently being redeveloped), the fee interest in our U.S. headquarters in Culver City, California, and the fee interest in our Cinemas 1,2,3 in Manhattan (held through a limited liability company in which we have a 75% managing member interest) and. We have a fee interest in 202-acres of developable land in Coachella, California (through a limited liability company [Shadow View Land and Farming, LLC] in which we have a 50% managing member interest) 202 acres of developable land in Coachella, California,, which is zoned for residential and mixed usemixed-use purposes.  We also own various properties relating to our historic railroad business, including the Reading Viaduct in central Philadelphia. 



Live TheatersTheatres



Included among our real estate holdings are three Off-Broadway style live theaters,theatres, operated through our Liberty TheatersTheatres subsidiary. We license theatertheatre auditoriums to the producers of Off-Broadway theatrical productions and provide various box office and food & beverage services. The terms of our licenses are, naturally, principally dependent upon the commercial success of our tenants. While we attempt to choose productions that we believe will be successful, we have no control over the production itself.  At the current time, we have two single-auditorium theaterstheatres in Manhattan:



We also own a four-auditorium theatertheatre complex, the Royal George Theatre in Chicago (main stage(Mainstage 452 seats, cabaretCabaret 199 seats, great roomThe Great Room 100 seats, and galleryThe Gallery 60 seats), which has ancillary retail, office space, and parking.



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



Joint Venture Interests



Real estate joint ventures comprise of a 75% managing member interest in the limited liability company that owns our Cinemas 1,2,3 property and a 50% managing member interest in Shadow View Land & Farming, LLC, which owns an approximately 202-acre property in Coachella, California that is currently zoned for residential and mixed use.   



OPERATING PROPERTY

As of December 31, 2018,2019, we own fee interests on approximately 879,000844,000 square feet of income-producing properties (including certain properties principally occupied by our cinemas) as follows: