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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended: June 30, 2002

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ____________ to ____________

Commission file number 1-8625

READING INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)

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

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  þ       No o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 5, 2002, there were 20,484,839 shares of Class A Nonvoting Common Stock, $0.01 par value per share and 1,336,337 shares of Class B Voting Common Stock, $0.01 par value per share outstanding.

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READING INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

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PART I — Financial Information

Item 1 — Financial Statements

Reading International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)

See accompanying notes to consolidated financial statements.

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Reading International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share amounts)

See accompanying notes to consolidated financial statements.

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Reading International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except per share amounts)

See accompanying notes to consolidated financial statements.

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Reading International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)

See accompanying notes to consolidated financial statements.

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2002

Note 1 — Basis of Presentation and Significant Accounting Policies

     Reading International, Inc. (“RII” and collectively with its predecessors and consolidated affiliates “Reading” or the “Company”) is the result of the merger on December 31, 2001, of Reading Entertainment, Inc. (“RDGE” and collectively with its consolidated subsidiaries, “Old Reading”), and Craig Corporation (“CRG” and collectively with its wholly owned subsidiaries, “Craig”) with wholly owned subsidiaries of Citadel Holding Corporation and the simultaneous amendment of the Articles of Incorporation of Citadel Holding Corporation to change its name to Reading International, Inc. (the “Consolidation”). As a result, following the Consolidation RII held a 50% combined controlling interest in the Angelika Film Centers LLC (“AFC”) and began consolidating the accounts of AFC as of December 31, 2001. The Company, as it existed prior to the Consolidation, is referred to in these footnotes as “Citadel” and Citadel Holding Corporation, as it existed prior to the Consolidation and its name change, is referred to in the footnotes as “CDL”. Reading International, Inc., the surviving entity following the Consolidation, is now the owner of the consolidated businesses and assets of Reading Entertainment, Inc., Craig Corporation, and Citadel Holding Corporation.

     In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments of a recurring nature considered necessary for a fair presentation of its financial position as of June 30, 2002 and December 31, 2001, and the results of its operations and its cash flows for the three and six months ended June 30, 2002 and 2001. The results of operations for the three and six months ended June 30, 2002 are not necessarily indicative of the results of operations to be expected for the entire year.

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the information and footnotes required to be in conformity with generally accepted accounting principles in the United States of America. The financial information provided herein, including the information under the heading, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” is written with the presumption that the users of the interim financial statements have read, or have access to, the most recent Annual Report on Form 10-K which contains the latest audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2001 and for the year then ended. Certain amounts in previously issued financial statements have been reclassified to conform to the 2002 financial statement presentation.

Foreign Currency Exchange

     The carrying value of the Reading’s Australia and New Zealand assets will fluctuate due to changes in the exchange rate between the U.S. dollar and Australian dollar ($0.5628 and $0.5117, were the respective exchange rates of U.S. dollars per Australian dollar at June 30, 2002 and December 31, 2001) and the U.S. dollar and New Zealand dollar ($0.4860 and $0.4161, were the respective exchange rates of U.S. dollars per New Zealand dollar at June 30, 2002 and December 31, 2001).

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2002

Basic and Diluted Earnings per Share

     Basic earnings per share is calculated by dividing net earnings applicable to common shareholders by the weighted average shares outstanding during the period. Diluted earnings per share is calculated by dividing net earnings applicable to common shareholders by the weighted average common shares outstanding plus the dilutive effect of stock options. Options to purchase 432,750 and 1,556,470 shares of Class A Nonvoting common stock and Class B Voting common stock, respectively, were outstanding at June 30, 2002 at a weighted average exercise prices of $5.17 and $7.51 per share, respectively. Options to purchase an average of 165,000 shares of Class A and Class B common stock were outstanding during the three and six months ended June 30, 2001.

     For the three and six months ended June 30, 2002 and 2001, the Company recorded a net loss and therefore, the effect of these stock options would have been anti-dilutive. Accordingly, the diluted earnings per share for the three and six months ended June 30, 2002 and 2001 were calculated using the weighted average number of shares outstanding during the respective periods.

Recent Accounting Pronouncements

     In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”). The FASB also issued Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), in August 2001.

     SFAS 142 addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS 142, the Company no longer amortizes goodwill but continues to amortize other intangible assets with finite lives. In addition, all goodwill and intangible assets with indefinite lives will be subject to periodic testing for impairment.

     SFAS 144 supercedes SFAS 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and applies to all long-lived assets, including discontinued operations. SFAS 144 establishes a single accounting model for the impairment of disposal of long-lived assets, including discontinued operations. Additionally, SFAS 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. We have adopted SFAS No. 142 and SFAS 144 effective January 1, 2002. The adoption of SFAS No. 142 and 144 did not have a material impact on our financial position or on our results of operations.

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2002

Note 2 — Certain Pro Forma Information Regarding the Consolidation

     Citadel, Craig and Old Reading consolidated under Reading International, Inc. as of December 31, 2001. In the Consolidation, each holder of RDGE common stock received 1.25 shares of RII Class A Nonvoting common stock for each share of RDGE common stock and each holder of CRG common stock and CRG common preference received 1.17 shares of RII Class A Nonvoting common stock for each share of the CRG common and CRG common preference stock. Holders of CDL common stock hold the same shares after the Consolidation as they did prior to the Consolidation since Citadel, though renamed Reading International, Inc., was the survivor in the transaction. (The Consolidation is discussed in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2001).

     The operations of Craig and Old Reading are included in the Company’s accounts from December 31, 2001, the effective date of the Consolidation. The pro forma information presented below is not necessarily indicative of what the actual financial results would have been, had the Consolidation taken place on January 1, 2001. Unaudited pro forma operating results for the three and six months ended June 30, 2001 for the consolidated company, assuming that the Consolidation had occurred on January 1, 2001, are set forth below (dollars in thousands, except for per share amounts).

     All significant intercompany transactions and balances between Craig, Old Reading and Citadel, including management fees, equity in earnings of affiliates, intercompany interest and dividend, and intercompany notes payable, have been eliminated. The Company’s operating loss from its Puerto Rican cinema circuit of approximately $116,000 and $805,000 for the three and six months ended June 30, 2001 is presented as operating loss from asset held for sale (Note 4).

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2002

Note 3 — Rental Property and Property and Equipment

     The table below sets forth the Company’s investment in rental property and property and equipment as of the dates indicated (dollars in thousands).

     The increase in property and equipment is primarily due to reclassification of approximately $18,600,000 from property held in development upon completion of the Company’s entertainment center located in Wellington, New Zealand.

     Note 4 — Property Held for Sale

     Subsequent to the Company’s acquisition of the CineVista circuit as part of the Consolidation, the Company continued discussions with an interested party regarding the disposition of all or a substantial portion of its assets and operations in Puerto Rico (See Note 11). As a consequence of write-downs taken in 1999, the CineVista circuit is currently carried on the books of the Company at $3,018,000 and CineVista’s operating income of $228,000 and $18,000 for the three and six months ended June 30, 2002 is included in the Company’s Condensed Consolidated Statements of Operations as “Operating loss from asset held for sale”. No assurances can be given that these discussions will mature into a sales transaction.

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2002

Note 5 — Goodwill and Intangible Assets

     Reading’s goodwill of $5,021,000 consists of (1) $4,817,000 of goodwill arising from the Liberty Theaters acquisition and (2) $204,000 from the acquisition of a cinema in Australia.

     Reading’s intangible assets, net of amortization, of $15,010,000 consist of (1) $10,111,000 in beneficial lease arising from the consolidation of AFC, (2) $4,509,000 of option payment made on the City Cinemas properties, and (3) $390,000 of capitalized acquisition costs relating to the Liberty Theaters and the City Cinemas chain. Reading amortizes its beneficial lease over 20 years and its option fees and acquisition costs over 10 years. At June 30, 2002 and at December 31, 2001, the accumulated amortization on the Company’s intangible assets was approximately $660,000 and $215,300, respectively.

     The reconciliation of reported net loss and loss per share to adjusted net loss and loss per share for the three and six months ended June 30, 2002 and 2001 is as follows (dollars in thousands, except for per share data):

     The goodwill amortization expense for the three and six months ended June 30, 2001 was recorded as operating expense of the cinema/live theater segment and as of January 1, 2002, the Company stopped amortizing its goodwill in accordance with SFAS 142. The Company’s intangible assets were determined to have finite useful lives and as a result, the Company continues to amortize its option fee and acquisition costs over 10 years and its beneficial lease over 20 years.

Note 6 — Income Tax

     The income tax provision (benefit) for the three and six months ended June 30, 2002 amounted to $198,000 and $63,000, respectively, representing foreign withholding tax provision of $198,000 and $385,000, respectively, reduced by a federal tax refund of ($322,000) occurring during the first three months of the year.

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2002

Note 7 — Minority Interest

     The minority interest is principally derived from the Company’s holdings in AFC. The Company owns 50% of the membership interest in AFC, with a subsidiary of National Auto Credit, Inc. (“NAC”) holding the other 50% membership interest. Notwithstanding the fact that the Company only owns a 50% interest, the Company consolidates AFC for financial reporting purposes due to the fact that the Company has effective management control over AFC. The minority interest in the Australian cinemas represents a 25% minority interest ownership in Australian County Cinemas and a 33.3% interest in the Elsternwick joint venture. The minority interest in Big 4 Farming represents the 20% minority membership interest by Cecelia. The components of minority interest are as follows (dollars in thousands):

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2002

Note 8 — Business Segments

     The table below sets forth certain information concerning the Company’s theater and rental real estate operations for the three and six months ended June 30, 2002 and 2001 (dollars in thousands).

Three Months Ended June 30,

Six Months Ended June 30,

     The cinema/live theater results shown above include revenue and operating expense directly linked to Reading’s cinema and theater assets. The rental real estate results include rental income from properties owned by Reading offset by operating expense, including mortgage payments and interest. Corporate results include interest income earned with respect to the Company’s cash balances, and other income (expense).

     Corporate expenses include general and administrative expenses that are not directly attributable to other operating segments and are mostly comprised of the costs associated with the corporate offices located in Los Angeles, California, and Melbourne, Australia.

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2002

Note 9 — Comprehensive Income (Loss)

     Generally accepted accounting principles require Reading to classify unrealized gains and/or losses on Gish securities which are held as available-for-sale securities and the effect of the foreign currency translation adjustments as comprehensive income. The following table sets forth Reading’s comprehensive income for the periods indicated (in thousands):

Note 10 — Other Income

     Other income is comprised of the following (dollars in thousands):

Note 11 — Subsequent Events

Disposition of Agricultural Activities: Effective July 1, 2002, the Agricultural Partnerships in which the Company held a 40% interest reconveyed their interest in the Big 4 Ranch to the prior owner of that property in satisfaction of all of the obligations of the Agricultural Partnerships to that prior owner. The Company is currently winding up its interest in Big 4 Farming LLC and does not intend to be engaged in the farming business in the future. The Company does not anticipate any significant net gain or loss on the disposition of its agricultural assets.

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2002

Reading Australia Loan Extension: On August 8, 2002, the Company’s primary Australian based lender approved an extension through March 31, 2004 of its $16,884,000 (AUS$30,000,000) loan to the Company’s Australian subsidiary, Reading Entertainment Australia, Pty, LTD. That loan is shown as a noncurrent liability on the Company’s consolidated balance sheet at June 30, 2002, is denominated in Australian dollars, and is secured by substantially all of the Company’s Australian assets.

Payment of Cotter/Forman Note: In connection with its acquisition of the City Cinemas Circuit in Manhattan, the Company issued notes in the aggregate amount of $4,500,000 to Messrs. James J. Cotter and Michael Forman. Those notes were due and payable on July 28, 2002. The Company, with the consent of Messrs. Cotter and Forman, has only paid $3,500,000 of such liability, and the balance continues to remain outstanding on a demand basis. Interest is presently accruing, payable monthly at the rate of 9.75% per annum.

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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

     Reading International, Inc. (“RII”), the surviving entity following the consolidation of Reading Entertainment, Inc. (“Old Reading”), Craig Corporation (“Craig”) and Citadel Holding Corporation (“Citadel”) on December 31, 2001, is now the owner of the consolidated businesses and assets of Old Reading, Craig, and Citadel. These businesses consist primarily of:

	•		The development, ownership and operation of cinemas in the United States, Australia, New Zealand, and Puerto Rico;
	•		The development, ownership and operation of cinema based entertainment centers in Australia and New Zealand,
	•		The ownership and operation of “Off Broadway” style live theaters in the United States; and
	•		As a business ancillary to its ownership and operation of cinemas, entertainment centers and live theaters — the development, ownership and operation of commercial real estate in Australia, New Zealand and the United States.

     We consider ourselves to be essentially a cinema and live theater exhibition company with a focus on real estate oriented assets. Consequently, our business plan is to continue to identify, develop and acquire cinema and live theater properties, focusing on those opportunities where we can acquire either the fee interest underlying such operating assets, or long term leases, which provide flexibility with respect to the usage of such leasehold estates. As of July 1, 2002, the Agricultural Partnerships in which we owned a 40% interest, reconveyed the Big 4 Ranch to the original owner in consideration of the release from all obligations and liabilities otherwise owed to the original owner. We are currently in the process of winding up our agricultural activities. We intend to dispose of our interests in Puerto Rico as well as our investment in Gish Biomedical, Inc. securities. From time to time we may dispose of, or put to alternative use some or all of our interests in various operating assets, in order to realize the real estate values of such assets.

     As further described in our Annual Report on Form 10-K which contains the audited financial statements and notes thereto, for the year end December 31, 2001, we completed a series of transactions in 2001 that caused reported results for the three and six months period ended June 30, 2002 (“2002 Quarter” and “2002 Six Months”, respectively) and three and six month periods ended June 30, 2001 (“2001 Quarter” and “2001 Six Months”, respectively) to lack comparability. Also included below are transactions completed during the 2002 Six Months which may affect comparability. To summarize:

•

On July 1, 2002, we disposed of substantially all of our agricultural interests and assets.

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	•		On March 21, 2002, we opened a 10-screen cinema and associated retail areas in Wellington, New Zealand, as part of an entertainment center that we developed.
	•		On January 29, 2002, we modified our lease with Sutton Hill Associates to reflect the sale of the Murray Hill Cinema, resulting in a reduction in rental expense of approximately $825,000 per annum.
	•		On December 31, 2001, Citadel Holding Corporation merged with Reading Entertainment, Inc.,(“Old Reading”) and Craig Corporation (“Craig”) and then changed its name to Reading International, Inc. (“RII”) (“Consolidation”). As a result of the Consolidation, RII holds an aggregate 50% interest in the Angelika Film Centers LLC (“AFC”) and consolidates the accounts of AFC as of that date. The operating results of AFC are included in the 2002 Quarter and 2002 Six Months.
	•		Also due to the Consolidation, the operating results of Old Reading and Craig are included in the 2002 Quarter and 2002 Six Months results.
	•		On August 3, 2001, we opened an 8-screen cinema in Dallas that we had fitted out.
	•		On March 8, 2001, we acquired four domestic cinemas from Old Reading. Accordingly, the 2001 Six Months results include only fifteen weeks of operations from these four cinemas.
	•		On February 13, 2001, we acquired the fee interest in the Union Square building. Accordingly, the 2001 Six Months results include only eighteen weeks of rental income from the Union Square building.

     The unaudited pro forma operating results for the three and six months ended June 30, 2001 for the Consolidated Company, assuming that the Consolidation had occurred on January 1, 2001, are presented in Note 2 to the Condensed Consolidated Financial statements.

Results of Operations

     The tables below summarize the results of operations for each of our principal business segments for the 2002 Quarter and Six Months and the 2001 Quarter and Six Months (dollars in thousands). Expenses include costs associated with the day-to-day management of the theaters and rental property, depreciation and amortization as well as general and administrative expenses.

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Three Months Ended June 30: