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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
NEVADA | 95-3885184 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
500 Citadel Drive, Suite 300 | ||
Commerce, CA | 90040 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered | |
Class A Nonvoting Common Stock, $0.01 par value | American Stock Exchange | |
Class B Voting Common Stock, $0.01 par value | American Stock Exchange |
YEAR ENDED DECEMBER 31, 2005
INDEX
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Report of Independent Registered Public Accountants | 74 | |||||||
Consolidated Balance Sheets as of December 31, 2005 and 2004 | 75 | |||||||
Consolidated Statements of Operations for the Three Years Ended December 31, 2005 | 76 | |||||||
Consolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 2005 | 77 | |||||||
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2005 | 78 | |||||||
Notes to Consolidated Financial Statements | 79 | |||||||
Schedule II — Valuation and Qualifying Accounts | 117 | |||||||
118 | ||||||||
118 | ||||||||
120 | ||||||||
121 | ||||||||
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128 | ||||||||
Exhibit 10.61 | ||||||||
Exhibit 10.62 | ||||||||
Exhibit 21 | ||||||||
Exhibit 23 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
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• | the development, ownership and operation of multiplex cinemas in the United States, Australia, and New Zealand; and | ||
• | the development, ownership and operation of retail and commercial real estate in Australia, New Zealand and the United States, including entertainment-themed retail centers (“ETRCs”) in Australia and New Zealand and live theater assets in Manhattan and Chicago in the United States. |
• | interests in 48 cinemas comprising some 304 screens; | ||
• | consolidated assets with a December 31, 2005 book value of approximately $253.1 million; and | ||
• | a December 31, 2005 consolidated stockholders’ book equity of approximately $99.4 million. |
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• | A mix of activities that generate high number of trips, including business, retail services and entertainment; | ||
• | Being generally well-served by multiple transport routes (some being on the rail network) and on the Principal Public Transport Network or capable of being linked to that network; | ||
• | Having potential to grow and support intensive housing development without conflicting with surrounding land uses; | ||
• | Supplement the network of Principal Activity Centres; and | ||
• | Provide additional scope to accommodate ongoing investment and change in retail, office, service and residential markets. |
• | Constructed and opened for business a 100,373 square foot shopping center in Newmarket, a suburb of Brisbane, Australia, intended for ultimate expansion into an ETRC. Part of the retail opened on November 28, 2005, and the remainder of the leased tenancies will open during the period through April 2006. | ||
• | Over the past two years, acquired (either directly or indirectly) or built, for approximately $33.4 million, interests in 20 cinemas, representing 108 screens, in Australia and New Zealand, including 6 cinemas with 30 screens added in 2005; | ||
• | Entered the art film distribution market in Australia and New Zealand by the acquisition of a 1/3rd interest inRialto Distribution on October 31, 2005; | ||
• | Acquired on September 28, 2005 for $2.0 million (AU$2.6 million) a 8,783 square foot office building in Melbourne to serve as the corporate headquarters for our Australia and New Zealand operations and to replace the leased facility previously serving this purpose; | ||
• | Sold, effective June 8, 2005, for approximately $2.3 million, 6 leasehold cinemas with 48 screens, representing all of our cinemas in Puerto Rico as a part of our previously announced strategy to exit the Puerto Rico market and concentrate our overseas activities in the Pacific Rim; | ||
• | Sold, effective May 15, 2005, our interest in an office building in Glendale, California as the sale leg of a tax deferred exchange, the net proceeds of which (approximately $20.4 million) have been reinvested as a part of the funding used to acquire the fee and ground lease estates underlying our Cinema 1, 2 & 3 property on 3rd Avenue, between 59th and 60th Streets in Manhattan. We believe that, over the medium to long term, the 3rd Avenue property has significantly more upside potential than did the Glendale property and complements our other Manhattan holdings. The Glendale building was our only operating asset in Southern California; | ||
• | Acquired on August 26, 2004 for approximately $7.4 million (NZ$11.0 million) the fee interests underlying three of these recently acquired cinemas; and | ||
• | Sold, effective October 22, 2003, our interest in our Sutton Cinema site on 57th Street in Manhattan for $18.0 million and, incident to that sale transaction, acquired for $3.1 million a 25% membership interest in the limited liability company currently redeveloping that property as a 36 story mixed use residential condominium development. Approximately 90% of the residential units in that project are under contract for |
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sale, and it is currently contemplated that the project will be finished and those contracts completed in the 2nd quarter of 2006. |
• | First, notwithstanding the enormous advances that have been made in home entertainment technology, humans are essentially social beings, and will continue to want to go beyond the home for their entertainment; | ||
• | Second, cinemas can be used as anchors for larger retail developments, and our involvement in the cinema business can give us an advantage over other real estate developers or redevelopers who must identify and negotiate with third party anchor tenants; | ||
• | Third, pure cinema operators can get themselves into financial difficulty as demands upon them to produce cinema based earnings growth tempt them into reinvesting their cash flow into increasingly marginal cinema sites. We do not feel pressure to build or acquire cinemas for the sake of simply adding on units, and intend to focus our cash flow on our real estate development and operating activities, to the extent that attractive cinema opportunities are not available to us; and | ||
• | Fourth, we are never afraid to convert a cinema to another use, if that is a higher and better use of our property, or to sell individual assets, if we are presented with an attractive opportunity. |
Wholly Owned | Consolidated1 | Unconsolidated2 | Managed3 | Totals | ||||||||||||||||||
Australia | 16 cinemas | 3 cinemas | 1 cinema4 | None | 20 cinemas | |||||||||||||||||
120 screens | 16 screens | 16 screens | 152 screens | |||||||||||||||||||
New Zealand | 8 cinemas | None | 10 cinemas5 | 1 cinema6 | 19 cinemas | |||||||||||||||||
40 screens | 51 screens | 5 screens | 96 screens | |||||||||||||||||||
United States | 6 cinemas | 1 cinema7 | None | 2 cinemas | 9 cinemas | |||||||||||||||||
41 screens | 6 screens | 9 screens | 56 screens | |||||||||||||||||||
TOTALS | 30 cinemas | 4 cinemas | 11 cinemas | 3 cinemas | 48 cinemas | |||||||||||||||||
201 screens | 22 screens | 67 screens | 14 screens | 304 screens | ||||||||||||||||||
1 | Cinemas owned and operated through consolidated, but not wholly owned, majority owned subsidiaries. | |
2 | Cinemas owned and operated through unconsolidated subsidiaries. | |
3 | Cinemas in which we have no ownership interest, but which are operated by us under management agreements. | |
4 | 33.3% unincorporated joint venture interest. | |
5 | 50% unincorporated joint venture interests. | |
6 | Managed through Berkeley Cinemas. | |
7 | The Angelika Film Center and Cafe in Manhattan is owned by a limited liability company in which we own a 50% interest with rights to manage. |
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• | the preparation of development plans for one or more phases of our Burwood Project; | ||
• | the finalization of the permitting process and the commencement of construction of the cinema component of our Newmarket Shopping Centre, located in a suburb of Brisbane, Queensland, Australia; | ||
• | the completion of preliminary planning for a mixed use ETRC and, possibly, residential development on our 124,754 square foot parcel in Moonee Ponds, a suburb of Melbourne, in Victoria, Australia. Our Moonee Ponds site has also been recently included in a “major activity centre;” and | ||
• | the finalization of a plan for the redevelopment or disposition of one or more of our remaining domestic real estate assets. |
• | the winning of the unanimous approval of all applicable city authorities of an accelerated program for the rezoning of our 50.6 acre Burwood site for a broad mixture of retail, entertainment, commercial and residential uses. On February 20, 2006, that rezoning plan was also approved by the State of Victoria; | ||
• | the sale of our Puerto Rico cinema circuit for $2.3 million in completion of our previously announced plan to focus our overseas operations on the Pacific Rim and to exit the Puerto Rico market; | ||
• | the sale of our Glendale office building in Glendale, California for $20.4 million ($10.3 million cash and $10.1 million of assumed debt) resulting in a $12.0 million gain, and the redeployment of those proceeds to acquire the fee and the ground lease interest underlying our Cinemas 1, 2 & 3 leasehold cinema in Manhattan for $21.6 million, as a part of a tax deferred exchange under Section 1031 of the Internal Revenue Code. The Glendale building was our only domestic commercial property with no “entertainment” component and our only operating asset in Southern California. As a result of this acquisition, we are now in a position to consider a broader range of potential uses for our Cinemas 1,2 & 3 property, other than cinema exhibition; | ||
• | the opening of our 100,373 square foot shopping center in Newmarket, a suburb of Brisbane, Australia; | ||
• | the acquisition, for $4.8 million (NZ$6.9 million), of a beneficial 50% ownership interest in the largest art cinema circuit in New Zealand. The circuit, which does business under theRialtoname consists of five cinemas with 22 screens; | ||
• | the opening of a new 8-screen cinema in Australia under theReadingname; | ||
• | the acquisition of an office building in Melbourne, Australia for $2.0 million (AUS$2.6 million) to serve as the headquarters for our Australian and New Zealand operations in replacement of previously leased facilities; | ||
• | the acquisition of a 1/3 interest inRialto Distribution for $694,000 (NZ$1.0 million).Rialto Distribution, an unincorporated joint venture, is engaged in the business of distributing art film in New Zealand and Australia; | ||
• | the renegotiation of our credit facility in Australia to increase that facility from $40.4 million (AUS$55.0 million) to $49.5 million (AUS$67.4 million); and | ||
• | in order to reduce and better control general and administrative costs, the relocation of our corporate headquarters in the United States from Downtown Los Angeles to the City of Commerce, California, and the |
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worldwide completion of the integration of our new cinema point of sale system (Radiant) with our new property management and accounting system (Yardi). |
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• | developed a chain of multiplex cinemas in Australia and New Zealand operating principally under the “Reading” name and featuring primarily conventional film product; | ||
• | developed a chain of principally art and urban cinemas including the Angelika Film Center & Café complexes in Manhattan and in Dallas, Houston and Plano, Texas; |
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• | acquired seven “off Broadway” style live theaters, located in four fee owned complexes, three in Manhattan and one in Chicago; | ||
• | developed four ETRCs in Australia and New Zealand; and | ||
• | acquired land in Australia and New Zealand for development purposes aggregating some 3.5 million square feet. |
• | are more capital intensive; | ||
• | have longer lead times and entail greater development risks during the development phase; and | ||
• | have, at least initially, lower cash returns than those of companies focused on the development of cinemas in leased facilities in established or newly developed malls. |
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• | the fee interest in all of our live theater complexes (three of which are located in Manhattan and one of which is located in Chicago); | ||
• | two in-fill suburban development sites in Australia (including our 50.6 acre Burwood Project); | ||
• | additional land for development contiguous to our Auburn, Newmarket and Wellington ETRCs (93,323, 13,390 and 37,674-square feet, respectively); and | ||
• | various miscellaneous land holdings related to our long ago discontinued railroad activities. |
• | the opportunistic purchase of entertainment assets with significant real estate attributes; |
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• | the appreciation of our real estate holdings; and | ||
• | the sale or development of our real estate assets as dictated by their highest and best economic use. |
1. | Domestic Based Borrowings: |
• | $3.3 million non-recourse fixed rate first mortgage loan secured by our Union Square property, located at 100 E. 17th Street, New York, New York. | ||
• | $2.0 million LIBOR based first mortgage loan secured by our Royal George Theatre property, located in Chicago, Illinois. |
2. | Australian Based Borrowings: |
• | Our Australian Corporate Credit Facility with the Bank of Western Australia, Ltd through our Australian subsidiary, Reading Entertainment Australia Pty Ltd (the “Australia Credit Facility”) was increased during 2005 from $40.4 million (AUS$55.0 million) to $49.5 million (AUS$67.4 million). This credit facility is secured by substantially all of our cinema assets in Australia, but has not been guaranteed by any company other than several of our wholly owned Australian subsidiaries. As of December 31, 2005, we have drawn down $32.4 million (AUS$44.2 million) on our Australian Credit Facility with an additional reduction of the overall facility of $2.8 million (AUS$3.8 million) for bank guarantees. At December 31, 2005, the variable interest rate on this credit facility was 6.70%. The credit facility includes a number of affirmative and negative covenants designed to protect the Bank’s security interests. The most restrictive covenant of the facility is a limitation on the total amount that we are able to drawdown based on the total assets that are securing the loan. Our Australian Credit Facility provides for floating interest rates based on the Bank Bill Swap Bid Rate (BBSY bid rate), but requires that not less than 70% of the loan be swapped into fixed rate obligations. The facility allowed us to utilize the old swap that was in place for our previous facility, at 6.70%, through its term, and to swap up to 70% of the maximum credit facility immediately. As a result, at December 31, 2005, the floating rate portion at 6.70% was $12.2 million (AUS$16.6 million); the old swap at 6.70% was notionally $9.0 million (AUS$12.3 million); and the new swap, at 7.44% was notionally $11.2 million (AUS$15.3 million). The old swap fully expires on December 31, 2007, at which time the full swap amount will be held under the new swap, which expires on December 31, 2008. All interest rates above include a 1.00% interest rate margin. |
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• | On December 31, 2004, we entered into a $23.8 million (AUS$32.7 million) construction loan with the Bank of Western Australia, Ltd through our Australian subsidiary Newmarket Properties Pty, Ltd. (the “Newmarket Loan”). This loan was used to finance the construction of our newly opened shopping center of approximately 100,373 square feet in Newmarket, Queensland, Australia and is generally without recourse to our assets other than the Newmarket construction project and the various Australian based cinema assets which also secure our Australian Credit Facility. Our Newmarket Loan has not been guaranteed by any entity other than several of our Australian subsidiaries. The construction portion of our Newmarket Loan converted to a term loan expiring on January 1, 2009 on completion of the construction. Our Newmarket Loan provides for floating rate interest and includes usual and customary affirmative and negative covenants designed to protect the bank’s security interest. The most restrictive covenant of the facility is a limitation on the total amount that we are able to drawdown based on the total assets that are securing the loan. While our Newmarket Loan provides for a floating rate of interest, it requires not less than 70% of the loan to be swapped into fixed rate obligations. At December 31, 2005, the fixed rate portion under the interest rate swap was at 7.43%. The current swap continues until May 31, 2006. As of December 31, 2005, the balance of this loan was $21.7 million (AUS$29.6 million). All interest rates above include a 1.00% interest rate margin. | ||
• | In accordance with SFAS No. 133, we marked our Australian interest rate swap instruments to market resulting in a $171,000 (AUS$180,000) increase, a $91,000 (AUS$118,000) increase and an $80,000 (AUS$106,000) decrease to interest expense during 2005, 2004 and 2003, respectively. |
3. | New Zealand Based Borrowings: |
• | During 2004, we replaced our existing $20.9 million (NZ$31.3 million) credit facility with a $35.5 million (NZ$50.0 million) credit facility with Westpac Banking Corporation. The facility is secured by substantially all of our New Zealand assets, but has not been guaranteed by any entity other than several of our New Zealand subsidiaries. The facility expires on November 23, 2009 and provides for payment of interest only through November 23, 2006. The credit facility has been fully drawn in order to repay the replaced facility and to finance our 2004 acquisitions of six cinemas (27 screens) and three underlying fee interests in New Zealand. The facility includes various affirmative and negative covenants designed to protect the bank’s security, limits capital expenditures and the repatriation of funds out of New Zealand without the approval of the bank. Also included in the covenants of the facility is the restriction of transferring funds from subsidiary to parent. Interest on the facility is a floating rate. At December 31, 2005 that rate was 9.15% (which includes a 1.45% interest rate margin) and the amount outstanding was $34.2 million (NZ$50.0 million). | ||
• | We are the co-owners with Everard Entertainment Ltd of the assets comprising three unincorporated joint ventures in New Zealand, referred to in these financial statements as the Berkeley Cinemas Joint Ventures. At December 31, 2005, we are 50% liable for three bank loans aggregating $10.4 million (NZ$15.2 million) which are secured by a first mortgage over the land and building assets of the three joint ventures. As these are unconsolidated joint ventures, these bank loans are not reflected in the Consolidated Balance Sheet at December 31, 2005. These loans are without recourse to any assets other than our interests in these three joint ventures. | ||
• | We are the 33.3% co-owners of the assets of Rialto Distribution. As such, we are 33.3% liable for the line of credit that Rialto Distribution has with Bank of New Zealand. At December 31, 2005, the total line of credit was $1.4 million (NZ$2.0 million) and had an outstanding balance of $298,000 (NZ$436,000). As this company is an unconsolidated joint venture, this loan is not reflected in our Consolidated Balance Sheet at December 31, 2005. This loan is without recourse to any assets other than our interests in this joint venture. |
4. | Other Borrowings: |
In 2000, we entered into a transaction with Sutton Hill Capital L.L.C. (“SHC”), a related party, designed to give us (i) operating control, through an operating lease, of the 4 cinema “City Cinemas” theater chain in Manhattan, and (ii) the right to enjoy any appreciation in the underlying real estate assets, though a fixed price option to purchase these cinemas on an all or nothing basis in 2010. Two of the cinemas included in that chain — the Murray Hill Cinema and the Sutton Cinema — have now been sold for redevelopment, |
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under terms that we believe preserve this basic structure and which will, if we exercise our purchase option, give us the future benefit of any appreciation realized in those assets during the time they were under our operation and control. In addition, this last year we acquired as a part of a tax-deferred exchange pursuant to Section 1031 of the Internal Revenue Code, (i) from a third party, the fee interest underlying the third of the four cinemas (the Cinemas 1, 2 & 3) and (ii) from SHC its tenant’s interest in the ground lease underlying the Cinemas 1, 2 & 3. Set out below is a more detailed discussion of the City Cinemas Transaction, and the subsequent modifications of that transaction to provide for the release of the Murray Hill Cinema, the Sutton Cinema and the Cinemas 1, 2 & 3 properties. |
In July 2000, we acquired from SHC the Manhattan based City Cinemas circuit in a transaction structured as a 10 year operating lease (the “City Cinemas Operating Lease”) with options either to extend the lease for an additional 10 year term or, alternatively, to purchase the improvements and certain of the real estate assets underlying that lease (the “City Cinemas Purchase Option”). We paid an option fee of $5.0 million, which will be applied against the purchase price if we elect to exercise the City Cinemas Purchase Option. The aggregate exercise price of the City Cinemas Purchase Option was originally $48.0 million, and rent was calculated to provide an 8.25% yield to SHC (subject to an annual modified cost of living adjustment) on the difference between the exercise price and the $5.0 million option fee. Incident to that transaction, we agreed to lend to SHC (the “City Cinemas Standby Credit Facility”) up to $28.0 million, beginning in July 2007, all due and payable in December 2010 (the principal balance and accrued interest on any such loan was likewise to be applied against the option exercise price, in the event the option was exercised). The interest rate on the City Cinemas Standby Credit Facility was also fixed at 8.25%, subject to the same modified cost of living adjustment used to calculate rent under the City Cinemas Operating Lease. | |||
We have no legal obligation to exercise either the option to extend the City Cinemas Operating Lease or the City Cinemas Purchase Option. However, our recourse against SHC on the City Cinemas Standby Credit Facility is limited to the assets of SHC which consist of, generally speaking, only the assets subject to the City Cinemas Purchase Option. In this annual report, we refer to the transaction memorialized by the City Cinemas Operating Lease, City Cinemas Purchase Option and City Cinemas Standby Credit Agreement as the City Cinemas Transaction. Because the City Cinemas Operating Lease is an operating lease and since the City Cinemas Standby Credit Facility was, in our view, adequately secured, no asset or liability was established on our balance sheet at the time of the City Cinemas Transaction other than the option fee, which has been deferred and is being amortized over the 10 year period of the lease. | |||
SHC is indirectly owned by Messrs. James J. Cotter and Michael Forman. Mr. Cotter is our Chairman, Chief Executive Officer and controlling stockholder. Mr. Forman is a major holder of our Class A Stock. As the transaction was a related party transaction, it was reviewed and approved by a committee of our Board of Directors comprised entirely of independent directors. | |||
Since we entered into the City Cinemas Transaction, two of the cinema properties involved in that transaction have been sold to third parties for redevelopment: the Murray Hill Cinema and the Sutton Cinema. These purchasers paid $10.0 million and $18.0 million respectively for these two properties, which included the cost of acquiring the fee interest in these properties held by Nationwide Theatres (an affiliate of SHC), the leasehold interest held by SHC, and our rights under the City Cinemas Operating Lease and the City Cinemas Purchase Option. Since we believed that a sale of these properties at these prices was more beneficial to us than continuing to operate them as cinemas, and since the original City Cinemas Transaction did not contemplate a piece-meal release of properties or give us the right to exercise our City Cinemas Purchase Option either (i) on a piece-meal basis or (ii) prior to July 2010, we worked with SHC to devise a transaction that would allow us to dispose of our collective interests in these properties while preserving the fundamental benefits of the transaction for ourselves and SHC. Included among the benefits to be preserved by SHC was the deferral of any capital gains tax with |
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respect to the transfer of the remaining properties until 2010 and assurances that the various properties involved in the City Cinemas Transaction would only be acquired by us on an “all or nothing” basis. Included among the benefits to be preserved for us was the right to get the benefit of 100% of any appreciation in the properties underlying the City Cinemas Operating Lease between the date of that lease (July 2000) and the date any such properties were sold, provided that we ultimately exercised our purchase rights under the City Cinemas Purchase Option. |
As a result of these negotiations and the sale of these two properties, our rent under the City Cinemas Operating Lease was reduced by approximately $1.9 million per annum, the exercise price of the City Cinemas Purchase Option was reduced from $48.0 million to $33.0 million, and our funding obligation under the City Cinemas Standby Line of Credit was reduced from $28.0 million to $13.0 million. In addition, we received in consideration of the release of our interest in the Murray Hill Cinema a cash payment of $500,000. In consideration of the transfer of our interest in the Sutton Cinema we received (i) a $13.0 million purchase money promissory note (the Sutton Purchase Money Note”) secured by a first mortgage on the Sutton Cinema property (the “Sutton Purchase Money Mortgage”), (ii) a right to acquire up to a 25% interest in the special purpose entity formed to redevelop the Sutton Cinema property for a prorated capital contribution (the “Sutton Reinvestment Option”) or to receive instead an in lieu fee of $650,000, and (iii) the right to operate the Sutton Cinema until such time as the Sutton Purchase Money Note was paid. The Sutton Purchase Money Note was due and payable on October 21, 2005, and carried interest for the first year at 3.85%, increasing in the second year to 8.25%. On September 14, 2004, the Sutton Purchase Money Note was prepaid in full and we exercised our Sutton Reinvestment Option. | |||
In keeping with the “all or nothing” nature of our rights under the City Cinemas Purchase Option, we agreed to use the principal proceeds of the Sutton Purchase Money Promissory Note to fund our remaining $13.0 million obligation under the City Cinemas Standby Credit Facility. We have also agreed that the principal amount of the City Cinemas Standby Credit Facility will be forgiven if we do not exercise our purchase rights under the City Cinemas Purchase Option. Accordingly, if we exercise our rights under the City Cinemas Purchase Option to purchase the remaining City Cinemas assets, we will be acquiring the remaining assets subject to the City Cinemas Operating Lease for an additional cash payment of $15.0 million, (offsetting against the current $33.0 million exercise price, the previously paid $5.0 million deposit and the $13.0 million principal amount of the City Cinemas Standby Credit Facility) and will receive, in essence, the benefit of 100% of the appreciation in all of the properties initially subject to the City Cinemas Operating Lease between July 2000, and the date such properties were either disposed of or acquired by us pursuant to the City Cinemas Purchase Option. If we do not exercise our option to purchase, then the City Cinemas Credit Facility will be forgiven, and we will not get the benefit of such appreciation. Immediately following the sale of the Sutton Cinema, the remaining properties consisted of (i) the Village East Cinema, which is located at the corner of 2nd Avenue and 11th Street in Manhattan, on a 27 year land lease, and (ii) the Cinemas 1, 2 & 3, which is located on 3rd Avenue between E. 59th and E. 60th Streets in Manhattan and which was likewise at that time on a long term ground lease. | |||
Since the Murray Hill Cinema sale transaction was structured as a release of our leasehold interest in the Murray Hill Cinema, we did not recognize any gain or loss for either book or tax purposes, other than the $500,000 in lieu fee, which was recognized as non-operating income. We likewise did not book any gain or loss on the disposition of the Sutton Cinema for book purposes. However, we did recognize gain in the amount of approximately $13.0 million for state and federal tax purposes, which gain was offset against net operating losses. Notwithstanding this offset, we were still liable for alternative minimum tax on the transaction. That alternative minimum tax will, however, be offset against our future tax liabilities. In the event that we decide not to exercise our |
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City Cinemas Purchase Option, we would at that time recognize a $13.0 million loss for tax purposes. |
Following the release of our leasehold interest in the Murray Hill Cinema and disposition of the Sutton Cinema in 2003 we decreased the value of the option fee in the City Cinemas Purchase Option agreement by $890,000. In addition, in October 2003 we recorded our loan commitment under the City Cinemas Standby Credit Facility as a payable in our long-term debt on the Consolidated Balance Sheet. | |||
In September 2004, simultaneously with the drawdown by SHC of the remaining $13.0 million under the Standby Credit Facility, SHC lent us $5.0 million. This amount was used principally to fund our purchase of the 25% membership interest in limited liability company that was developing the Sutton Cinema site, and for working capital purposes. The loan bears interest currently at 9.26%, payable monthly, with principal due and payable on September 14, 2007. | |||
On June 1, 2005, we acquired from a third party the fee interest and the landlord’s interest in the ground lease underlying our leasehold estate in the Cinemas 1, 2 & 3. In consideration of the fact that there was some uncertainty as to whether the opportunity to acquire this fee interest was an asset of SHC (as the tenant of the ground lease estate and the owner of the improvements located upon the land) or an asset of our Company, a compromise was reached whereby we agreed to grant to SHC an option to acquire — at cost — up to a 25% membership interest in the special purpose entity that we formed to acquire the fee interest — Sutton Hill Properties, LLC. That agreement has not yet been documented. | |||
On September 19, 2005, we acquired from SHC its “tenant’s interest” in the ground lease underlying our leasehold estate in the Cinemas 1, 2 & 3. The purchase price of the “tenant’s interest” was $9.0 million, and was paid in the form of a 5-year unsecured purchase money promissory note, bearing interest at 8.25%, interest payable monthly with principal payable on December 31, 2010 (the “Purchase Money Promissory Note”). This interest is also held by Sutton Hill Properties, LLC, the same special purpose entity that acquired the fee interest in the property. Accordingly, SHC’s option to buy into Sutton Hill Properties, LLC, is, in essence, a right to buy-back into both the fee interest acquired from the unrelated third party and the leasehold interest acquired from SHC. Following the purchase of the “tenant’s interest,” we decreased the value of the option fee in the City Cinemas Purchase Option agreement by $1.3 million. We have not yet acquired the building and improvements constituting the Cinemas 1, 2 & 3 from SHC. However, Sutton Hill Properties, LLC, has an option to acquire such improvements exercisable at any time in the event we determine to redevelop the property, for $100,000. | |||
As a result of the acquisition of SHC’s tenant’s interest in the ground lease, the City Cinemas Operating Lease was amended to reduce the rent by an amount equal to the interest payable under the Purchase Money Promissory Note, and the exercise price on the City Cinemas Purchase Option was likewise reduced by $9.0 million. Consequently, an exercise of our option to purchase the Village East Cinema would require a cash payment on our part of $6.0 million. | |||
Each of the above modification transactions involved was reviewed by a committee of the independent directors of the Board of Directors. In each case, the independent directors of the applicable committee have found the transaction to be fair and in the best interests of our Company and our public stockholders. | |||
Reflecting the disposition of the Murray Hill Cinema and the Sutton Cinema, the acquisition of the fee, the landlord’s interest in the ground lease and the tenant’s interest in the ground lease underlying the Cinemas 1, 2 & 3, and the amendments to date with respect to the City Cinemas Transaction, which has reduced our rent expense for this property to zero, our anticipated rental payments for 2006 under the City Cinemas Operating Lease will be approximately $495,000. For the years ended December 31, |
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2005 and 2004, rent expense to SHC under the City Cinemas Operating Lease was $1.0 million and $2.4 million, respectively. We have funded all of our $13.0 million obligation under the City Cinemas Standby Credit Facility. We also have the option to purchase in July 2010 the remaining assets under the City Cinemas Operating Agreement (SHC’s long term leasehold interests in the Village East Cinema and the improvements comprising this cinema) for an additional payment of $6.0 million. As separate matters, we currently owe SHC $5.0 million (due September 14, 2007) with respect to the borrowing used principally to finance the acquisition of our interest in the limited liability company currently developing the Sutton Cinema site and $9 million on the Purchase Money Promissory Note (due December 31, 2010), for an aggregate liability of $14.0 million. |
Reflecting the release of the Murray Hill Cinema and the sale of our interest in the Sutton Cinema, we expensed from the $5.0 million option fee for book purposes $890,000 related to such sales. In connection with the purchase of SHC’s interest in the Cinemas 1, 2 & 3 property, we allocated $1.3 million of this amount to the purchase price of that interest. Accordingly, at the present time, we carry only $441,000 of the original $5.0 million option fee as a net asset on our balance sheet. | |||
The option granted to SHC to buy up to a 25% interest in Sutton Hill Properties, LLC has been valued at $1.0 million and is reflected on our balance sheet as of December 31, 2005. |
• | property held for development with an aggregate net book value of approximately $6.9 million; | ||
• | property under development with an aggregate book value of approximately $23.0 million; and | ||
• | property and equipment with an aggregate book value of approximately $166.5 million. |
• | the development, ownership and operation of multiplex cinemas in the U.S., Australia, and New Zealand; | ||
• | the development, ownership and operation of cinema-based ETRCs in Australia and New Zealand; and | ||
• | the development, ownership and operation of commercial real estate in the U.S., Australia and New Zealand as a business that has been historically ancillary to our cinema exhibition business, but which will likely take on increasing importance in the future. |
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December 31, | ||||||||
2005 | 2004 | |||||||
Australia | $ | 84,615 | $ | 59,527 | ||||
New Zealand | 37,025 | 39,852 | ||||||
United States | 45,749 | 22,692 | ||||||
Property and Equipment | $ | 167,389 | $ | 122,071 | ||||
December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Australia | $ | 50,146 | $ | 46,979 | $ | 35,833 | ||||||
New Zealand | 20,179 | 13,531 | 10,079 | |||||||||
United States | 30,745 | 26,892 | 30,772 | |||||||||
Revenue | $ | 101,070 | $ | 87,402 | $ | 76,684 | ||||||
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Net Assets | ||||
Reading Australia | $ | 63,734 | ||
Reading New Zealand | 18,853 | |||
Net Assets | $ | 82,587 | ||
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• | as to when it will be available on an economically attractive basis; | ||
• | as to who will pay for the conversion from conventional to digital technology between exhibitors and distributors; | ||
• | as to what the impact will be on film licensing expense; and | ||
• | as to how to deal with security and potential pirating issues if film is distributed in a digital format. |
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Square Footage of | ||||||||
Improvements | Gross Book Value | |||||||
Property1 | (rental/entertainment) | Percentage Leased | (in U.S. Dollars) | |||||
Auburn | 57,016 / 52,366 | 81% | $ | 26,184,000 | ||||
100 Parramatta Road | Plus an 871-space | |||||||
Auburn, NSW, Australia | subterranean parking | |||||||
structure | ||||||||
Belmont Knutsford Ave and Fulham St | 18,772 / 48,997 | 75% | $ | 10,905,000 | ||||
Belmont, WA, Australia | ||||||||
Cinemas 1, 2 & 3 1003 Third Avenue | 0 / 23,707 | N/A | $ | 23,898,000 | ||||
Manhattan, NY, USA | ||||||||
Courtenay Central | 37,588 / 68,232 | 73% | $ | 30,489,000 | ||||
100 Courtenay Place | Plus a 244,728 square | |||||||
Wellington, New Zealand | foot parking structure | |||||||
Invercargill Cinema 29 Dee Street | 7,158 / 19,795 | 85% | $ | 2,245,000 | ||||
Invercargill, New Zealand | ||||||||
Maitland Cinema Ken Tubman Drive | 0 / 22,410 | N/A | $ | 1,736,000 | ||||
Maitland, NSW, Australia | ||||||||
Minetta Lane Theatre 18-22 Minetta Lane | 0 / 9,212 | N/A | $ | 4,354,000 | ||||
Manhattan, NY, USA | ||||||||
Napier Cinema 154 Station Street | 5,167 / 18,331 | 100% | $ | 2,528,000 | ||||
Napier, New Zealand |
1 | A number of our properties include entertainment components rented to one or more of our subsidiaries. The rental area and percentage leased numbers are net of such entertainment components. Book value, however, includes the entire investment in the property, including any cinema fit-out. Book value and rental information are as of December 31, 2005. |
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Square Footage of | ||||||||
Improvements | Gross Book Value | |||||||
Property1 | (rental/entertainment) | Percentage Leased | (in U.S. Dollars) | |||||
Newmarket2 Newmarket, QLD, Australia | 92,892 / 0 | 87% | $ | 30,085,000 | ||||
Orpheum Theatre 126 2nd Street | 0 / 5,146 | N/A | $ | 1,892,000 | ||||
Manhattan, NY, USA | ||||||||
Royal George | 36,873 / 23,443 | 100% | $ | 3,293,000 | ||||
1633 N. Halsted Street | Plus 21,456 square | |||||||
Chicago, IL, USA | feet of parking | |||||||
Rotorua Cinema 1281 Eruera Street | 0 / 18,783 | N/A | $ | 2,457,000 | ||||
Rotorua, New Zealand | ||||||||
Union Square Theatre 100 E. 17th Street | 21,146 / 16,825 | 100% | $ | 8,483,000 | ||||
Manhattan, NY, USA |
1 | A number of our properties include entertainment components rented to one or more of our subsidiaries. The rental area and percentage leased numbers are net of such entertainment components. Book value, however, includes the entire investment in the property, including any cinema fit-out. Book value and rental information are as of December 31, 2005. | |
2 | The rental components of this project have been opened for business. The cinema component is, however, still in the design phase and not anticipated to open before the fourth quarter of 2007. |
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Square Footage | Percentage | Gross Book Value | |||||||||||
Property1 | (rental/entertainment) | Leased | (in U.S. Dollars) | ||||||||||
Manville | 0 / 63,257 | N/A | $ | 1,536,000 | |||||||||
Village East | 4,647 / 37,157 | 77 | % | $ | 0 | ||||||||
Waurn Ponds | 5,791 / 51,904 | 100 | % | $ | 5,146,000 |
• | the Minetta Lane (399 seats); | ||
• | the Orpheum (364 seats); and | ||
• | the Union Square (499 seats). |
• | Auburn, New South Wales: |
o | Our Auburn site is currently improved with a 109,383 square foot ETRC, anchored by a 10 screen, 52,366 square foot cinema. Commonly known as “Red Yard,” the centre also includes an 871 space subterranean parking garage. |
1 | A number of our properties include entertainment components rented to one or more of our subsidiaries. The rental area and percentage leased numbers are net of such entertainment components. Book value, however, includes the entire investment in the property, including any cinema fit-out. Rental information is as of December 31, 2005. Book value information is as of December 31, 2005. |
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o | Approximately 93,323 square feet of the site is currently unimproved, and is intended to provide expansion space for phase II of our Red Yard project. | ||
o | the Auburn City Council, in coordination with other local governments, is currently reviewing the land use parameters for the areas adjacent to Parramatta Road in which our property is located. Parramatta Road, which runs adjacent to Homebush Bay, the site of the 2000 Olympic Games, is one of the busiest arterial roadways in the greater Sydney area, and is considered by many to be the “gateway” to Sydney. Consequently, there is significant community interest in upzoning the uses along this road. As a major landowner in this area, we intend to be actively involved in this process and are hopeful that this rezoning process will materially enhance the value of our remaining unimproved parcel. We have deferred further work on phase II until we get a better idea of the opportunities that may be opened by this rezoning process. | ||
o | This unimproved parcel is currently carried on our books at $1.5 million (AUS$2.0 million). |
• | Burwood, Victoria: |
o | Our Burwood site is comprised of 50.6 acres of unimproved land, previously used as a brickworks and quarry. The property was rezoned in February 2006 to permit a broad range of entertainment, retail, commercial and residential uses. Located in the Burwood suburb of Melbourne, it was designated as a “major activity centre” by the Victoria government, hopefully paving the way for its redevelopment as a multi-use suburban in-fill site. | ||
o | The site is the largest undeveloped parcel of land in the Burwood Heights “major activity centre” and the largest undeveloped parcel of land in any “major activity centre” in Victoria. Approximately 430,000 people live within five miles of the site, which is well served by both public transit and surface streets. We estimate that approximately 70,000 people pass by the site each day. | ||
o | We anticipate that the project will be built in phases, over a significant period of years, and will not likely be completed before sometime in 2015. The initial phase, however, will likely be an ETRC, as this is the area of development and construction with which we are most familiar. | ||
o | We do not currently have any funding in place for the development, and are paying for current master planning activities out of cash flow and working capital. While the permitted uses for the site have now been established, the preparation and governmental review of phase by phase development plans will still be required before construction can commence. We currently estimate that complete build-out of the site will require funding in the range of $500.0 million (AUS$680.8 million). | ||
o | Our original cost basis in the site is approximately $4.2 million (AUS$5.3 million). The property was originally acquired in 1996, but was revalued upward in connection with the Consolidation in 2001, which was treated as a purchase for accounting purposes. This revaluation was made prior to the designation of the site as a “major activity center” in 2004. The current book value of this property under construction is $19.8 million (AUS$26.9 million). |
• | Courtenay Central, Wellington, New Zealand: |
o | We are currently the owner operator of an approximately 160,156 square foot ETRC in Wellington, New Zealand, known as Courtenay Central. The existing ETRC consists of a ten screen cinema and approximately 37,588 square feet of retail space. The property also includes a separate 9 level parking structure, with approximately 1,086 parking spaces. During 2005, approximately 3.5 million people went through the center. | ||
o | Approximately 37,674 square feet of the site is currently unimproved and is intended to provide expansion space for phase II of our Courtenay Central project. | ||
o | We have completed the design and statutory approval phase of the development and we are seeking potential tenants to pre-commit to the centre with respect to the approximately 100,000 Phase II expansion to the centre. The retail market has significantly softened in Wellington and this has delayed our ability to secure suitable anchor tenants for the development. Accordingly, this project is essentially in a holding pattern while we await a turnaround in the retail market and consider alternative uses for the site. |
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o | No financing is currently in place with respect to Phase II, and current work is being funded from working capital and cash flow. | ||
o | This unimproved parcel is currently being used for parking and is carried on our books at $2.0 million (NZ$3.0 million). |
• | Moonee Ponds, Victoria: |
o | Our Moonee Ponds site is located in suburban Melbourne and currently consists of approximately 124,754 square feet of unimproved land. | ||
o | We are currently working on a plan for the mixed use development of the site. The site, like our Burwood site, is located in a “major activity centre.” Accordingly, our development of the property will be influenced by other development activity in the area. | ||
o | We acquired the property in April 1997, for a purchase price of $4.9 million (AUS$6.4 million) and currently carry the property on our books at $5.4 million (AUS$7.4 million). | ||
o | We intend to work towards the finalization of a plan for the development of this site over 2006. |
• | Place 57, Manhattan, New York: |
o | We have a 25% non-managing membership interest in the single purpose limited liability company formed to develop the site located at 205-209 E. 57th Street. | ||
o | The property is being redeveloped as an approximately 100,000 square foot residential condominium project with ground floor retail and is currently being marketed under the name “Place 57.” | ||
o | The project is being financed with a combination construction and mezzanine finance, totaling approximately $80.6 million. The remainder of the funds required has been supplied by the members of the limited liability company. The financing is without recourse to the members. | ||
o | Construction at the site commenced in September of 2004, and approximately 61 of the residential units, representing approximately 90% of the residential area of the project, are under contract of sale. It is currently anticipated that construction will be completed and the residential unit sales contracts will close in the second quarter of 2006. | ||
o | We have retained, in essence, a right of first offer with respect to the ground retail component of the project. |
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• | The identification and acquisition of suitable development properties.Competition for suitable development properties is intense. Our ability to identify and acquire development properties may be limited by our size and resources. Also, as we and our affiliates are considered to be “foreign owned” for purposes of certain Australia and New Zealand statutes, we have been in the past, and may in the future be, subject to regulations that are not applicable to other persons doing business in those countries. | ||
• | The procurement of necessary land use entitlements for the project.This process can take many years, particularly if opposed by competing interests. Competitors and community groups (sometimes funded by such competitors) may object based on various factors including, for example, impacts on density, parking, traffic, noise levels and the historic or architectural nature of the building being replaced. If they are unsuccessful at the local governmental level, they may seek recourse to the courts or other tribunals. This can delay projects and increase costs. | ||
• | The construction of the project on time and on budget.Construction risks include the availability and costs of finance, the availability and costs of material and labor, inclement weather conditions, and the ever present potential for labor related disruptions. | ||
• | The leasing or sell-out of the project.Ultimately, there are the risks involved in the leasing of a rental property or the sale of condominium or built-for-sale property. Leasing or sale can be influenced by economic factors that are neither known nor knowable at the commencement of the development process and by local, national and even international economic conditions, both real and perceived. | ||
• | The refinancing of completed properties.Properties are often developed using relatively short term loans. Upon completion of the project, it may be necessary to find replacement financing for these loans. This process involves risk as to the availability of such permanent or other take-out financing, the interest rates and the payment terms applicable to such financing, which may be adversely influenced by local, national or international factors. To date, we have been successful in negotiating development loans with roll over or other provisions mitigating our need to refinance immediately upon completion of construction. |
• | Risk of currency fluctuations.While we report our earnings and assets in US dollars, substantial portions of our revenues and of our obligations are denominated in either Australian or New Zealand dollars. The value of these currencies can vary significantly compared to the US dollar and compared to each other. We typically have not hedged against these currency fluctuations, but rather have relied upon the natural hedges that exist as a result of the fact that our film costs are typically fixed as a percentage of box office, and our local operating costs and obligations are likewise typically denominated in local currencies. | ||
• | Risk of adverse government regulation.At the present time, we believe that relations between the United States, Australia and New Zealand are good. However, no assurances can be given that this |
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Approximate Range of Remaining Lease Terms | ||||||||
Aggregate Square Footage | (including renewals) | |||||||
United States | 253,685 | 5 – 42 years | ||||||
Australia | 613,736 | 29 – 40 years | ||||||
New Zealand | 289,474 | 5 – 10 years |
• | In Australia, we own a 66% unincorporated joint venture interest in a leased 5-screen multiplex cinema in Melbourne, a 75% interest in a subsidiary company that leases two cinemas with eleven screens in two Australian country towns, and a 33% unincorporated joint venture interest in a 16-screen leasehold cinema in a suburb of Brisbane. | ||
• | In New Zealand we own |
o | a 50% unincorporated joint venture interest in five mainstream cinemas (comprising two fee properties and three leasehold properties), totaling approximately 135,000 square feet in the Auckland and Christchurch areas. The two fee parcels are improved with cinema/restaurant complexes, and |
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o | a 50% joint venture interest in the largest art cinema circuit in New Zealand. The joint venture owns five leasehold cinemas with 22 screens in the New Zealand cities of Auckland, Christchurch, Wellington, Dunedin and Hamilton. |
• | In the United States, we own a 50% membership interest in Angelika Film Center, LLC, which holds the lease to the approximately 16,983 square foot Angelika Film Center & Café in the Soho district of Manhattan. We also hold the management rights with respect to this asset. |
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• | By the following vote, our eight directors were reelected to serve on the Board of Directors until the 2006 Annual Meeting of Stockholders: |
Election of Directors | For | Withheld | ||||||
James J. Cotter | 1,129,551 | 1,591 | ||||||
Eric Barr | 1,129,551 | 1,591 | ||||||
James J. Cotter, Jr. | 1,129,551 | 1,591 | ||||||
Margaret Cotter | 1,129,551 | 1,591 | ||||||
Edward L. Kane | 1,129,551 | 1,591 | ||||||
Gerard P. Laheney | 1,129,551 | 1,591 | ||||||
William D. Gould | 1,129,551 | 1,591 | ||||||
Alfred Villaseñor, Jr. | 1,129,551 | 1,591 |
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Class A Nonvoting | Class B Voting | |||||||||||||||||||
Common Stock | Common Stock | |||||||||||||||||||
High | Low | High | Low | |||||||||||||||||
2005: | Fourth Quarter | $ | 8.25 | $ | 7.52 | $ | 8.00 | $ | 7.40 | |||||||||||
Third Quarter | $ | 8.40 | $ | 7.18 | $ | 8.20 | $ | 7.10 | ||||||||||||
Second Quarter | $ | 7.50 | $ | 6.01 | $ | 7.40 | $ | 6.05 | ||||||||||||
First Quarter | $ | 8.19 | $ | 6.81 | $ | 8.20 | $ | 7.20 | ||||||||||||
2004: | Fourth Quarter | $ | 8.80 | $ | 7.55 | $ | 8.50 | $ | 7.50 | |||||||||||
Third Quarter | $ | 8.31 | $ | 7.45 | $ | 8.30 | $ | 7.45 | ||||||||||||
Second Quarter | $ | 8.70 | $ | 6.18 | $ | 8.35 | $ | 6.20 | ||||||||||||
First Quarter | $ | 6.85 | $ | 5.70 | $ | 6.70 | $ | 5.85 |
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At or for the Year Ended December 31, | ||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
Revenue | $ | 101,070 | $ | 87,402 | $ | 76,684 | $ | 69,179 | $ | 21,000 | ||||||||||
Gain (loss) from discontinued operations | $ | 12,231 | $ | (469 | ) | $ | (288 | ) | $ | 333 | $ | 468 | ||||||||
Operating loss | $ | (6,372 | ) | $ | (6,322 | ) | $ | (5,839 | ) | $ | (6,509 | ) | $ | (4,570 | ) | |||||
Net income (loss) | $ | 989 | $ | (8,463 | ) | $ | (5,928 | ) | $ | (7,954 | ) | $ | (4,572 | ) | ||||||
Basic & diluted earnings (loss)per share – continuing operations | $ | (0.51 | ) | $ | (0.37 | ) | $ | (0.26 | ) | $ | (0.34 | ) | $ | (0.26 | ) | |||||
Basic & diluted earnings (loss)per share – discontinued operations | $ | 0.55 | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.05 | |||||||
Basic & diluted earnings (loss)per share | $ | 0.04 | $ | (0.39 | ) | $ | (0.27 | ) | $ | (0.36 | ) | $ | (0.21 | ) | ||||||
Other Information: | ||||||||||||||||||||
Shares outstanding | 22,485,948 | 21,998,239 | 21,899,290 | 21,821,154 | 21,821,324 | |||||||||||||||
Weighted average shares and dilutive share equivalents | 22,249,967 | 21,948,065 | 21,860,222 | 21,821,236 | 9,980,946 | |||||||||||||||
Total assets | $ | 253,057 | $ | 230,227 | $ | 222,866 | $ | 182,772 | $ | 170,595 | ||||||||||
Total debt | $ | 109,320 | $ | 72,879 | $ | 60,765 | $ | 37,563 | $ | 26,769 | ||||||||||
Working capital (deficit) | $ | (14,282 | ) | $ | (6,915 | ) | $ | (154 | ) | $ | 124 | $ | 548 | |||||||
Stockholders’ equity | $ | 99,404 | $ | 102,010 | $ | 108,491 | $ | 91,265 | $ | 91,125 | ||||||||||
EBIT | $ | 6,671 | $ | (4,339 | ) | $ | (2,650 | ) | $ | (6,208 | ) | $ | (3,988 | ) | ||||||
Depreciation and amortization | $ | 12,384 | $ | 11,823 | $ | 10,952 | $ | 7,835 | $ | 1,161 | ||||||||||
Add: Adjustments for discontinued operations | $ | 567 | $ | 1,915 | $ | 1,907 | $ | 1,906 | $ | 1,446 | ||||||||||
EBITDA | $ | 19,622 | $ | 9,399 | $ | 10,209 | $ | 3,533 | $ | (1,381 | ) | |||||||||
Debt to EBITDA | 5.57 | 7.75 | 5.95 | 10.63 | — | |||||||||||||||
Capital expenditure (including acquisitions) | $ | 53,954 | $ | 33,180 | $ | 5,809 | $ | 10,437 | $ | 10,325 | ||||||||||
Number of employees at 12/31 | 1,523 | 1,677 | 1,453 | 1,304 | 1,110 |
• | Since we operate in multiple tax jurisdictions, we find EBIT removes the impact of the varying tax rates and tax regimes in the jurisdictions in which we operate. | ||
• | In addition, we find EBIT useful as a financial measure that removes the impact from our effective tax rate of factors not directly related to our business operations, such as, whether we have acquired |
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operating assets by purchasing those assets directly, or indirectly by purchasing the stock of a company that might hold such operating assets. |
• | The use of EBIT as a financial measure also (i) removes the impact of tax timing differences which may vary from time to time and from jurisdiction to jurisdiction, (ii) allows us to compare our performance to that achieved by other companies, and (iii) is useful as a financial measure that removes the impact of our historically significant net loss carryforwards. | ||
• | The elimination of net interest expense helps us to compare our operating performance to those companies that may have more or less debt than do we. |
• | We believe that EBITDA is an industry comparative measure of financial performance. It is, in our experience, a measure commonly used by analysts and financial commentators who report on the cinema exhibition and real estate industries and a measure used by financial institutions in underwriting the creditworthiness of companies in these industries. Accordingly, our management monitors this calculation as a method of judging our performance against our peers and market expectations and our creditworthiness. | ||
• | Also, analysts, financial commentators and persons active in the cinema exhibition and real estate industries typically value enterprises engaged in these businesses at various multiples of EBITDA. Accordingly, we find EBITDA valuable as an indicator of the underlying value of our businesses. |
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2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
Net income (loss) | $ | 989 | $ | (8,463 | ) | $ | (5,928 | ) | $ | (7,954 | ) | $ | (4,572 | ) | ||||||
Add: Interest expense, net | 4,473 | 3,078 | 2,567 | 1,740 | 376 | |||||||||||||||
Add: Income tax expense | 1,209 | 1,046 | 711 | 6 | 208 | |||||||||||||||
EBIT | $ | 6,671 | $ | (4,339 | ) | $ | (2,650 | ) | $ | (6,208 | ) | $ | (3,988 | ) | ||||||
Add: Depreciation and amortization | 12,384 | 11,823 | 10,952 | 7,835 | 1,161 | |||||||||||||||
Adjustments for discontinued operations: | ||||||||||||||||||||
Add: Interest expense, net | 310 | 839 | 856 | 1,036 | 563 | |||||||||||||||
Add: Depreciation and amortization | 257 | 1,076 | 1,051 | 870 | 883 | |||||||||||||||
EBITDA | $ | 19,622 | $ | 9,399 | $ | 10,209 | $ | 3,533 | $ | (1,381 | ) | |||||||||
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Today, our businesses consist primarily of: | |||||
• | the development, ownership and operation of multiplex cinemas in the United States, Australia, and New Zealand; and | ||||
• | the development, ownership and operation of retail and commercial real estate in Australia, New Zealand and the United States, including entertainment-themed retail centers (“ETRCs”) in Australia and New Zealand and live theater assets in Manhattan and Chicago in the United States. | ||||
We manage our worldwide cinema businesses under various different brands: | |||||
• | in the US, under the Reading, Angelika Film Center and City Cinemas brands; | ||||
• | in Australia, under the Reading brand; and | ||||
• | in New Zealand, under the Reading, Berkeley Cinemas and Rialto brands. |
1. | Newmarket Property: On November 28, 2005, we opened some of the retail elements of our Newmarket ETRC, a 100,373 square foot retail facility situated on an approximately 177,497 square foot parcel in Newmarket, a suburban of Brisbane. At December 31, 2005, the remaining tenants were scheduled to take occupancy during the first quarter of 2006. Through December 31, 2005, the construction costs for the site were $24.2 million (AUS$32.5 million) including $1.4 million (AUS$1.9 million) of capitalized interest. To finalize the project, we anticipate the total construction costs will be approximately $26.0 million (AUS$35.4 million). Most of this project is being funded by a $23.8 million (AUS$32.7 million) construction loan with the Bank of Western Australia, Ltd. As of December 31, 2005, we had drawn $21.7 million (AUS$29.6 million) on this loan related to the construction on this property. |
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2. | Elizabeth Cinema: We opened on October 20, 2005 our 8-screen leasehold cinema in Adelaide, Australia. The cost to us of the fit-out of this cinema was $2.2 million (AUS$2.9 million) and was funded from internal sources. | ||
3. | Rialto Entertainment: Effective October 1, 2005, we purchased, indirectly, beneficial ownership of 100% of the stock of Rialto Entertainment for $4.8 million (NZ$6.9 million). Rialto Entertainment is a 50% joint venture partner with Village Roadshow Ltd (“Village”) and SkyCity Leisure Ltd (“Sky”) in Rialto Cinemas, the largest art cinema circuit in New Zealand. The joint venture owns five leasehold cinemas with 22 screens in the New Zealand cities of Auckland, Christchurch, Wellington, Dunedin and Hamilton. | ||
4. | Rialto Distribution: Effective October 1, 2005, we purchased for $694,000 (NZ$1.0 million) a 1/3 interest in Rialto Distribution. Rialto Distribution, an unincorporated joint venture, is engaged in the business of distributing art film in New Zealand and Australia. | ||
5. | Melbourne Office Building: On September 29, 2005, we purchased an office building in Melbourne, Australia for $2.0 million (AUS$2.6 million) to serve as our Australia headquarters, eliminating the need for leasehold administrative facilities in Australia, and reducing our general and administrative expenses by approximately $165,000 (AUS$226,000) per year. | ||
6. | Wilmington and Northern Property: On September 26, 2005, we sold the railroad right of way previously servicing the Wilmington and Northern Railroad for cash totaling $515,000. This property was one of several remaining tracks of railroad land, all of which are considered non-core assets under our current business plan. The sale resulted in a negligible loss during the third quarter and the property produced a nominal income per year. | ||
7. | Cinemas 1, 2 & 3: On September 19, 2005, we acquired the tenant’s interest in the ground lease estate that is currently between (i) our fee ownership of the underlying land and (ii) our current possessory interest as the tenant in the building and improvements constituting the Cinemas 1, 2 & 3 in Manhattan. This tenant’s ground lease interest was purchased from Sutton Hill Capital LLC (“SHC”) in exchange for a $9.0 million promissory note, bearing interest at a fixed rate of 8.25% and maturing on December 31, 2010. As SHC is a related party to our corporation, our Board’s Audit and Conflicts Committee, comprised entirely of outside independent directors, and subsequently our entire Board of Directors unanimously approved the purchase of the tenant’s ground lease interest. The Cinemas 1, 2 & 3 is located on 3rd Avenue between 59th and 60th Streets. | ||
The acquisition of the tenant’s ground lease interest finalizes the acquisition side of a tax deferred exchange under Section 1031 of the Internal Revenue Code designed to exchange our interest in our only non-entertainment oriented fee property in the United States for the fee interest underlying our leasehold estate in the Cinemas 1, 2 & 3. The acquisition of this tenant’s ground lease interest and the Cinemas 1, 2 & 3 Fee Interest described below has resulted in a book value of approximately $23.9 million and a tax basis of $10.4 million (which includes $1.3 million of option fees paid in 2000 as part of the City Cinemas Master Lease Agreement, see Note 10 – Goodwill and Intangible Assets). | |||
On June 1, 2005, we acquired for $12.6 million the fee interest and the landlord’s ground lease interest underlying our Cinemas 1, 2 & 3 property in Manhattan, as a part of a tax deferred exchange under Section 1031 of the Internal Revenue Code. The funds used for the acquisition came primarily from the sale proceeds of our Glendale, California office building. As a result of the acquisition of the fee interest, the landlord’s interest in the ground lease and the tenant’s interest in the ground lease, our effective rental expense with respect to the Cinemas 1, 2 & 3 and the Village East cinema and of the building and equipment constituting the Cinemas 1, 2 & 3 has decreased by approximately $1.0 million annually beginning September 30, 2005 to $945,000 per annum, virtually all of which is allocated to the rental of the Village East cinema. | |||
As part of the purchase of this ground lease interest, we have agreed in principal, as a part of our negotiations to acquire the land and the SHC interests in the Cinemas 1, 2 & 3, to grant an option to Sutton Hill Capital, LLC, a limited liability company beneficially owned in equal 50/50 shares by Messrs. James J. Cotter and Michael Forman to acquire, at cost, up to a 25% non-managing membership interest in the |
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limited liability company that we formed to acquire these interests. In relation to this option, we have recorded a $1.0 million call option liability in our other liabilities at December 31, 2005. Mr. Cotter is our Chairman, Chief Executive Officer and controlling stockholder. Mr. Forman is a major holder of our Class A Stock. | |||
8. | Puerto Rico Cinema Operations: On June 8, 2005, we sold our assets and certain liabilities associated with our Puerto Rico cinema operations for $2.3 million resulting in a $1.6 million gain. Net losses of $1.8 million, $688,000 and $484,000 were included in the loss from discontinued operations for the years ending 2005, 2004 and 2003, respectively, relating to these operations. No material income tax provision arises from this transaction. | ||
9. | Glendale Building: On May 17, 2005, we sold our Glendale office building in Glendale, California for $10.3 million cash and $10.1 million of assumed debt resulting in a $12.0 million gain. All the cash proceeds from the sale were used in the purchase for $12.6 million of the Cinemas 1, 2 & 3 fee interest and of the landlord’s interest in the ground lease, encumbering that land, as part of a tax deferred exchange under Section 1031 of the Internal Revenue Code. | ||
10. | West Lakes and Rhodes: In December 2004, we completed the fit outs of the two cinemas with a total of 15 screens. The leases and development rights for the two cinemas were acquired as part of the Anderson acquisition discussed below. | ||
11. | Botany Downs: On December 24, 2004, we opened an 8-screen cinema located in a suburb of Auckland, New Zealand and owned in an unincorporated joint venture with our partner in the Berkeley Cinemas chain in New Zealand. | ||
12. | Sutton Redevelopment Investment: On September 14, 2004, we acquired for $2.3 million a non-managing membership interest in 205-209 East 57th Street Associates, LLC a limited liability company formed to redevelop our former cinema site at 205 East 57th Street in Manhattan. Our membership interest represents a 25% interest in the LLC, and was issued to us by 205-209 East 57th Street Associates, LLC in consideration of a capital contribution equal to 25% of its total book capital, calculated after taking into account the effect of our capital contribution. During the first quarter of 2005, we increased our investment by $719,000 in the 205-209 East 57th Street Associates, LLC to maintain our 25% equity ownership in the joint venture in light of increased budgeted construction costs. | ||
13. | Movieland Cinemas Circuit: In August 2004, we closed a series of agreements which, together, provided for the acquisition of six existing New Zealand cinemas, representing 27 screens, and in the case of three of these locations, the fee interests underlying such cinemas. Two of the locations included ancillary retail and commercial tenants. We also acquired the plans and permits for the development of an additional two screens at each of two of the cinemas, for a potential increase of 4 additional screens. | ||
We acquired the “Movieland Circuit” in New Zealand for $7.2 million (NZ$10.7 million) representing a multiple of approximately 5 times projected cash flow and the underlying fee interests of three of the cinema properties for $7.4 million (NZ$11.1 million) representing a capitalization rate of approximately 9%. | |||
The acquisition costs of these cinemas and fee interests amounting to $14.6 million (NZ$21.8 million) was funded by a combination of $13.3 million (NZ$19.8 million) of working capital, $792,000 (NZ$1.2 million) in shares of our Class A Common Stock (98,949 shares issued at $8.00 per share (NZ$11.94, using a NZ$ to US$ exchange ratio of $0.67)), and a $546,000 (NZ$784,000) purchase money promissory note. The working capital was funded through a combination of cash of $5.4 million (NZ$8.1 million) and a drawdown under of our banking facility in New Zealand of $8.3 million (NZ$12.3 million). The shares issued included a non-transferable option to put to us the Class A Common Stock issued to them at a put price of NZ$11.94 at any time during January 2006. On January 27, 2006, this put option was exercised by the sellers resulting in the extinguishment of this obligation for a net settlement value of $24,000. The $546,000 (NZ$784,000) purchase money promissory note has an interest rate of 5.50%. Pursuant to the terms of the note, the principal and interest of this note was paid in full in February 2006. | |||
14. | Anderson Cinema Circuit: On July 1, 2004, we acquired most of the assets of the Australia based “Anderson Circuit” for $5.7 million (AUS$8.0 million) giving us four existing cinemas with 22 screens and |
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agreements to lease with respect to two additional cinemas (with an additional 15 screens) in two facilities then under construction. | |||
The total acquisition costs of these cinemas, of $5.7 million (AUS$8.0 million), excluding the cost of the fit-out of the two development cinemas, were met from our own funds in conjunction with a $3.4 million (AUS$4.7 million) drawdown on our $39.3 million (AUS$55.0 million) bank facility. As part of this acquisition, several landlords required bank guarantees, which increased our restricted cash by $296,000 (AUS$417,000) and reduced our total credit facility by $1.9 million (AUS$2.7 million). The total fit-out cost for the two development cinemas aggregated $3.8 million (AUS$5.0 million) and was paid from our own funds. | |||
As ownership of the various cinemas in the circuit was divided among a variety of entities and subject to the claims of a variety of creditors, the acquisitions were ultimately structured as the acquisition of (i) the shares of one company, which owns as its sole asset the 10-screen leasehold cinema at Epping (a suburb of Melbourne), (ii) agreements to lease with respect to two leasehold cinemas opened in the fourth quarter at Rhodes (8 screens) (a suburb of Sydney) and West Lakes (7 screens) (a suburb of Adelaide), and (iii) two existing leasehold cinemas at Melton (5 screens) and Sunbury (5 screens) (all suburbs of Melbourne). | |||
15. | Angelika – Plano: We have been retained to manage an art cinema in Plano, Texas which is being operated under ourAngelikaname and which commenced operations in June 2004. |
Year Ended December 31, 2005 | Cinema | Real Estate | Total | |||||||||
Revenue | $ | 86,760 | $ | 14,310 | $ | 101,070 | ||||||
Operating expense | 70,452 | 7,359 | 77,811 | |||||||||
Depreciation & amortization | 8,323 | 3,674 | 11,997 | |||||||||
General & administrative expense | 5,894 | 38 | 5,932 | |||||||||
Segment operating income | $ | 2,091 | $ | 3,239 | $ | 5,330 | ||||||
Year Ended December 31, 2004 | ||||||||||||
Revenue | $ | 74,324 | $ | 13,078 | $ | 87,402 | ||||||
Operating expense | 60,129 | 6,948 | 67,077 | |||||||||
Depreciation & amortization | 8,094 | 3,629 | 11,723 | |||||||||
General & administrative expense | 4,373 | 23 | 4,396 | |||||||||
Segment operating income | $ | 1,728 | $ | 2,478 | $ | 4,206 | ||||||
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Year Ended December 31, 2005 | Cinema | Real Estate | Total | |||||||||
Revenue | $ | 67,128 | $ | 9,556 | $ | 76,684 | ||||||
Operating expense | 51,435 | 7,379 | 58,814 | |||||||||
Depreciation & amortization | 7,068 | 3,700 | 10,768 | |||||||||
General & administrative expense | 3,911 | 7 | 3,918 | |||||||||
Segment operating income (loss) | $ | 4,714 | $ | (1,530 | ) | $ | 3,184 | |||||
Reconciliation to net income: | 2005 | 2004 | 2003 | |||||||||
Total segment operating income | $ | 5,330 | $ | 4,206 | $ | 3,184 | ||||||
Non-segment: | ||||||||||||
Depreciation and amortization expense | 387 | 100 | 184 | |||||||||
General and administrative expense | 11,315 | 10,428 | 8,839 | |||||||||
Operating loss | (6,372 | ) | (6,322 | ) | (5,839 | ) | ||||||
Interest expense, net | (4,473 | ) | (3,078 | ) | (2,567 | ) | ||||||
Other income (expense) | 19 | 884 | 3,138 | |||||||||
Minority interest | (579 | ) | (112 | ) | (249 | ) | ||||||
Gain on disposal of discontinued operations1 | 13,610 | — | — | |||||||||
Income (loss) from discontinued operations | (1,379 | ) | (469 | ) | (288 | ) | ||||||
Income tax expense | (1,209 | ) | (1,046 | ) | (711 | ) | ||||||
Equity earnings of unconsolidated investments | 1,372 | 1,680 | 588 | |||||||||
Net income (loss) | $ | 989 | $ | (8,463 | ) | $ | (5,928 | ) | ||||
Cinemas | Screens | |||||||
Number at December 31, 2004 | 39 | 262 | ||||||
Less: Sale of Colac cinema (Australia) | 1 | 2 | ||||||
Less: Sale of Puerto Rico circuit | 6 | 48 | ||||||
Add: Elizabeth cinema (Australia) | 1 | 8 | ||||||
Number at December 31, 2005 | 33 | 220 | ||||||
1 | Comprised of $12.0 million from the sale of our Glendale office building and $1.6 million from the sale of our Puerto Rico cinema operations. |
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Year Ended December 31, 2005 | United States | Australia | New Zealand | Total | ||||||||||||
Admissions revenue | $ | 17,802 | $ | 33,142 | $ | 11,926 | $ | 62,870 | ||||||||
Concessions revenue | 4,979 | 10,505 | 3,618 | 19,102 | ||||||||||||
Advertising and other revenues | 1,646 | 2,233 | 909 | 4,788 | ||||||||||||
Total revenues | 24,427 | 45,880 | 16,453 | 86,760 | ||||||||||||
Cinema costs | 17,869 | 38,045 | 9,944 | 65,858 | ||||||||||||
Concession costs | 1,054 | 2,448 | 1,092 | 4,594 | ||||||||||||
Total operating expense | 18,923 | 40,493 | 11,036 | 70,452 | ||||||||||||
Depreciation and amortization | 1,822 | 5,537 | 964 | 8,323 | ||||||||||||
General & administrative expense | 5,839 | 74 | (19 | ) | 5,894 | |||||||||||
Segment operating income (loss) | $ | (2,157 | ) | $ | (224 | ) | $ | 4,472 | $ | 2,091 | ||||||
Year Ended December 31, 2004 | United States | Australia | New Zealand | Total | ||||||||||||
Admissions revenue | $ | 15,584 | $ | 31,385 | $ | 7,908 | $ | 54,877 | ||||||||
Concessions revenue | 4,338 | 9,451 | 2,293 | 16,082 | ||||||||||||
Advertising and other revenues | 1,374 | 1,600 | 391 | 3,365 | ||||||||||||
Total revenues | 21,296 | 42,436 | 10,592 | 74,324 | ||||||||||||
Cinema costs | 16,734 | 33,577 | 5,953 | 56,264 | ||||||||||||
Concession costs | 904 | 2,213 | 748 | 3,865 | ||||||||||||
Total operating expense | 17,638 | 35,790 | 6,701 | 60,129 | ||||||||||||
Depreciation and amortization | 2,081 | 5,293 | 720 | 8,094 | ||||||||||||
General & administrative expense | 3,987 | 66 | 320 | 4,373 | ||||||||||||
Segment operating income (loss) | $ | (2,410 | ) | $ | 1,287 | $ | 2,851 | $ | 1,728 | |||||||
Year Ended December 31, 2003 | United States | Australia | New Zealand | Total | ||||||||||||
Admissions revenue | $ | 18,709 | $ | 24,700 | $ | 5,783 | $ | 49,192 | ||||||||
Concessions revenue | 4,988 | 7,607 | 1,682 | 14,277 | ||||||||||||
Advertising and other revenues | 1,683 | 1,667 | 309 | 3,659 | ||||||||||||
Total revenues | 25,380 | 33,974 | 7,774 | 67,128 | ||||||||||||
Cinema costs | 19,301 | 25,052 | 3,883 | 48,236 | ||||||||||||
Concession costs | 793 | 1,862 | 544 | 3,199 | ||||||||||||
Total operating expense | 20,094 | 26,914 | 4,427 | 51,435 | ||||||||||||
Depreciation and amortization | 3,127 | 3,407 | 534 | 7,068 | ||||||||||||
General & administrative expense | 4,243 | (332 | ) | — | 3,911 | |||||||||||
Segment operating income (loss) | $ | (2,084 | ) | $ | 3,985 | $ | 2,813 | $ | 4,714 | |||||||
• | Cinema revenue increased in 2005 by $12.4 million or 16.7% compared to 2004. The geographic activity of our revenues can be summarized as follows: |
o | United States — Revenues in the United States increased by $3.1 million or 14.7%. This increase in revenues was attributable to an increase in admissions revenues by $2.2 million, concessions revenues by $641,000, and advertising and other revenues by $272,000. The significant increase in admissions revenues resulted from higher admissions related to improved access to film product subsequent to our settlement with Universal and Fox of our Village East litigation. | ||
o | Australia — Revenues in Australia increased by $3.4 million or 8.1%. This increase in revenues was attributable to an increase in admissions revenues by $1.7 million, concessions revenues by $1.1 million, and advertising and other revenues by $633,000. $7.1 million of the increase in |
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revenues was as a result of our purchase of the Anderson Circuit and the opening of our West Lakes and Rhodes cinemas in 2004 and the opening of our Elizabeth cinema in October 2005. This increase in revenues was offset by lower revenues from our existing cinemas as we noted an overall decrease in annual admissions which we believe to be primarily the product of generally less appealing film offerings in 2005. | |||
o | New Zealand — Revenues in New Zealand increased by $5.9 million or 55.3%. This increase in revenues was attributable to an increase in admissions revenues by $4.0 million, concessions revenues by $1.3 million, and advertising and other revenues by $518,000. $5.6 million of the increase was as a result of our purchase of the Movieland Circuit in 2004. |
• | Operating expense increased in 2005 by $10.3 million or 17.2% compared to 2004. |
o | United States — Operating expenses in the United States increased by $1.3 million or 7.3% resulting from higher admissions and concession sales. | ||
o | Australia — Operating expenses in Australia increased by $4.7 million or 13.1%. This increase was mainly due to higher admissions and concessions resulting from the addition of six new theaters. However, we noted that our previously existing sites recorded higher operating expenses as a percentage of revenues from fixed costs including rent and other operating expenses. | ||
o | New Zealand — Operating expenses in New Zealand increased by $4.3 million or 64.7%. This increase was due to higher admissions and concessions resulting from the addition of six new theaters. |
• | Depreciation expense increased in 2005 by $229,000 or 2.8% compared to 2004. The increase was primarily from our late-year 2004 acquisitions of the Anderson and Movieland Circuits and the addition of two new leasehold cinemas in December 2004. | ||
• | General and administrative expense increased in 2005 by $1.5 million or 34.8% compared to 2004. The increase was primarily related to legal services for our continuing anti-trust litigation with respect to the access of our Village East cinema to first run commercial film products. | ||
• | Cinema segment operating income increased in 2005 by $363,000 compared to 2004 primarily resulting from our new operations in Australia and New Zealand and our increased admissions at our existing cinemas in the United States. |
• | Cinema revenue increased in fiscal 2004 by $7.2 million or 10.7% when compared to fiscal 2003. Most of the $11.3 million increase noted in Australia and New Zealand was related to activity from our new Anderson Circuit and Movieland Circuits. This increase was proportionately distributed between admissions and concessions revenues. However, these increases were offset by a decline in our domestic admissions and concessions revenue primarily related to the refusal of Universal and Fox to supply our domestic cinemas with film product as a result of our antitrust lawsuit against them. Cinema revenues are primarily related to admissions which are directly related to our ability to obtain desirable product from our distributors. | ||
• | Cinema operating expense increased in fiscal 2004 by $8.7 million or 16.9% when compared to fiscal 2003. Approximately $8.0 million and $666,000 of the increased costs of sales was related to cinema costs and concession costs, respectively. Of these fiscal 2004 increases, $8.9 million was from our Australian operations and $2.3 million was from our New Zealand operations, mostly related to our new Anderson and Movieland Circuits, which were acquired in July and August 2004, respectively. However, these increases were offset by a decline in theater film rental costs and concessions costs at our domestic theaters primarily related to our Village East lawsuit. Overall our operating expenses for twelve months year-to-year were 81% and 77% of gross revenue for 2004 and 2003, respectively. | ||
• | Depreciation expense increased in fiscal 2004 by $1.0 million or 14.5% when compared to fiscal 2003. The fiscal 2004 increase was primarily from our mid-year 2004 acquisitions of the Anderson and Movieland Circuits in Australia and New Zealand, respectively, and an increased domestic depreciation expense stemming from various renovation/remodeling projects undertaken at the Angelika New York and Village East cinemas offset by a 2003 charge of $890,000 to amortization expense related to our City Cinemas purchase option under intangible assets. |
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• | General and administrative expense increased in fiscal 2004 by $462,000 or 11.8% when compared to fiscal 2003. The increase in general and administrative expenses is primarily related to the pre-opening expenses at our two new cinemas in Australia that opened in December 2004. As they were only open for less than a month, their operating results for 2004 were distorted by their inability over this truncated period to generate sufficient earnings to offset these pre-opening expenses. | ||
• | Cinema operating income decreased in fiscal 2004 by $3.0 million when compared to fiscal 2003. |
Year Ended December 31, 2005 | United States | Australia | New Zealand | Total | ||||||||||||
Live theater rental and ancillary income | $ | 5,199 | $ | — | $ | — | $ | 5,199 | ||||||||
Property rental income | 1,118 | 4,266 | 3,727 | 9,111 | ||||||||||||
Total revenues | 6,317 | 4,266 | 3,727 | 14,310 | ||||||||||||
Live theater costs | 2,925 | — | — | 2,925 | ||||||||||||
Property rental cost | 692 | 2,118 | 1,624 | 4,434 | ||||||||||||
Total operating expense | 3,617 | 2,118 | 1,624 | 7,359 | ||||||||||||
Depreciation and amortization | 296 | 1,588 | 1,790 | 3,674 | ||||||||||||
General & administrative expense | 29 | 8 | 1 | 38 | ||||||||||||
Segment operating income | $ | 2,375 | $ | 552 | $ | 312 | $ | 3,239 | ||||||||
Year Ended December 31, 2004 | United States | Australia | New Zealand | Total | ||||||||||||
Live theater rental and ancillary income | $ | 4,557 | $ | — | $ | — | $ | 4,557 | ||||||||
Property rental income | 1,039 | 4,542 | 2,940 | 8,521 | ||||||||||||
Total revenues | 5,596 | 4,542 | 2,940 | 13,078 | ||||||||||||
Live theater costs | 2,477 | — | — | 2,477 | ||||||||||||
Property rental cost | 633 | 2,225 | 1,613 | 4,471 | ||||||||||||
Total operating expense | 3,110 | 2,225 | 1,613 | 6,948 | ||||||||||||
Depreciation and amortization | 479 | 1,471 | 1,679 | 3,629 | ||||||||||||
General & administrative expense | 22 | — | 1 | 23 | ||||||||||||
Segment operating income (loss) | $ | 1,985 | $ | 846 | $ | (353 | ) | $ | 2,478 | |||||||
Year Ended December 31, 2003 | United States | Australia | New Zealand | Total | ||||||||||||
Live theater rental and ancillary income | $ | 4,298 | $ | — | $ | — | $ | 4,298 | ||||||||
Property rental income | 1,098 | 1,854 | 2,306 | 5,258 | ||||||||||||
Total revenues | 5,396 | 1,854 | 2,306 | 9,556 | ||||||||||||
Live theater costs | 2,434 | — | — | 2,434 | ||||||||||||
Property rental cost | 648 | 2,709 | 1,588 | 4,945 | ||||||||||||
Total operating expense | 3,082 | 2,709 | 1,588 | 7,379 | ||||||||||||
Depreciation and amortization | 481 | 1,764 | 1,455 | 3,700 | ||||||||||||
General & administrative expense | 6 | — | 1 | 7 | ||||||||||||
Segment operating income (loss) | $ | 1,827 | $ | (2,619 | ) | $ | (738 | ) | $ | (1,530 | ) | |||||
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For fiscal 2005, our rental generating real estate holdings consisted of the following properties: | |||
• | Our Belmont, Western Australia ETRC, our Auburn, New South Wales ETRC and our Wellington, New Zealand ETRC; | ||
• | Our Newmarket shopping center in Newmarket, Queensland, a suburb of Brisbane. The first retail tenants opened in November 2005, and it is anticipated that the center will be fully opened by April 2006. The center is ultimately intended to be an ETRC, and applications are currently being processed for the construction of an approximately 31,560 square foot cinema as a part of the complex; | ||
• | Three single auditorium live theaters in Manhattan (Minetta Lane, Orpheum, and Union Square) and a four auditorium live theater complex in Chicago (The Royal George) and, in the case of the Union Square and the Royal George their accompanying ancillary retail and commercial tenants; | ||
• | The ancillary retail and commercial tenants at some of our non-ETRC cinema properties; and | ||
• | An office building located in Glendale, California (which we sold on May 17, 2005 as part of a tax deferred exchange under Section 1031 of the Internal Revenue Code). |
• | The 8,783 square foot commercial building in Melbourne, Australia which we use as the administrative headquarters for our operations in Australia and New Zealand; | ||
• | The fee interest and the lessor’s interest in the ground lease underlying our Cinemas 1, 2 & 3 property in Manhattan; and | ||
• | The lessee’s interest in the same ground lease. | ||
For 2005, we achieved the following results in our real estate segment: | |||
• | Revenue increased by $1.2 million or 9.4% when compared 2004. Of this increase, approximately $642,000 was attributable to an increase in rent from our domestic live theaters and $866,000 was from higher rental revenue and higher occupancy rates from our New Zealand ETRC and domestic properties. These increases were somewhat offset by a $276,000 decrease in rental revenue related to a reduction in the percentage rent generated by our Australian properties. | ||
• | Operating expense increased by $411,000 or 5.9% when compared to 2004. This increase mostly relates to an increase in variable costs associated with our live theater facilities. | ||
• | Depreciation expense increased by $45,000 or 1.2% when compared to 2004. The majority of this increase was attributed to the newly acquired properties in Australia and New Zealand. | ||
• | General and administrative expense decreased by $15,000 when compared to 2004. | ||
• | Real estate segment operating income increased by $761,000 when compared to 2004 mostly related to our overall increase in revenues while holding total costs at approximately the same amount as in the prior year. | ||
• | In May 2005, we sold our interest in our Glendale office building for $20.4 million. However, as the sale of this property is treated for accounting purposes as a discontinued operation, its operating results have been backed out of our results for 2005, 2004 and 2003. Our Glendale office building contributed $750,000, $1.7 million and $1.7 million in EBITDA to our Company annually in 2005, 2004 and 2003, respectively. |
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For fiscal 2005 our investments in property held for or under development consisted of: | |||
• | An approximately 50.6 acre property located in the Burwood area of Melbourne, Australia, recently rezoned from an essentially industrial zone to a priority zone allowing a variety of retail, entertainment, commercial and residential uses and currently in the planning stages of development; | ||
• | An approximately 2.9 acre property located in the Moonee Ponds area of Melbourne, Australia, currently in the planning stage as an ETRC; | ||
• | An approximately 2.1 acre property located next to our Auburn ETRC in the Auburn area of Sydney, Australia. This property is in an area adjacent to the 2000 Olympic Village in Sydney and is currently being considered by local governmental authorities for significant up-zoning; | ||
• | An approximately 0.9 acre property located adjacent to the Courtenay Central ETRC in Wellington, New Zealand. While we have received all necessary governmental approvals to develop the site for retail, commercial and entertainment purposes as Phase II of our existing ETRC, we have not been able to find suitable anchor retail tenants willing to pay the rentals necessary to support development at this time. Accordingly, this project is essentially in a holding pattern while we await a turnaround in the retail market and consider alternative uses for the site; and | ||
• | A 25% interest in the company redeveloping the site of our old Sutton Cinema site in Manhattan, New York. The property is being redeveloped as an approximately 100,000 square foot residential condominium project with ground floor retail and is being marketed under the name “Place 57.” The project is in the final construction phase of development, and over 90% of the residential units are currently in escrow. We anticipate these residential unit sales contracts will close in the second quarter of this year. |
During 2004, we acquired the following real property interests: | |||
• | Three fee parcels, incident to our acquisition of the Movieland Circuit in New Zealand. These parcels included, in addition to cinemas, expansion space for two of the cinemas and the ancillary retail and commercial tenants at two of the locations and | ||
• | An approximately 13,390 square foot parcel next to our Newmarket site. It is anticipated that the acquisition of this fee interest will enable us to develop a cinema at that site. | ||
Net income increased in 2004 for the real estate segment compared to 2003, primarily due to the following: | |||
• | An increase in rental revenue at our Australia and New Zealand ETRCs due to higher occupancy rates; | ||
• | An increase in rental revenue relating to the ancillary retail and commercial tenants at two of our locations acquired in the Movieland acquisition; | ||
• | Renegotiation of rents at our Union Square property which resulted in a $358,000 per annum increase; and | ||
• | A 2% decrease in “dark-time” (period when the live theaters carry no productions) when compared to fiscal 2003 at our rental live theaters. The rental live theaters’ decrease in dark time was positively impacted by the continued success of the production, Stomp, at our Orpheum Theatre as well as improved occupancy rates in our Royal George Theatre (where a production has been in our main stage for 31 weeks in 2004; this stage had been dark for 49 weeks in 2003) and Minetta Theatre. |
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• | $1.1 million from an additional bonus accrual for our Chief Executive Officer’s new employment contract offset by | ||
• | Lower rental expense to Sutton Hill Capital as we have purchased properties which we now finance through debt. | ||
During 2005: | |||
• | Our net interest expense increased by $1.4 million primarily due to increased borrowings related to our 2005 and 2004 acquisitions in the U.S., Australia, and New Zealand; | ||
• | Our other income decreased by $865,000 primarily due to fewer foreign exchange gains compared to 2004; | ||
• | Our minority interest expense increased by $467,000 compared to 2004 due to an improvement in cinema admission sales particularly in our Angelika New York cinema; | ||
• | We recorded a net gain of $13.6 million on sales of discontinued operations from the sale of our Glendale Building and our Puerto Rico cinema operations; | ||
• | Our losses from discontinued operations increased by $910,000 due to reduced operating income from our Puerto Rico operations and due to the fact we sold the Puerto Rico operations just prior to the summer when we historically record the majority of our annual admission sales; | ||
• | Income tax expense increased by $163,000; and | ||
• | Equity earnings from unconsolidated investments decreased by $308,000 due to lower admissions at our joint venture cinemas compared to 2004. |
• | Costs for Sarbanes-Oxley implementation and the associated first year audit costs of $520,000; | ||
• | Duplicate salaries and severance payments relating to a major change-over in executive personnel at our Australian operation of approximately $540,000; and | ||
• | Bank fees associated with financing activities that ultimately were not consummated due to our decision to pursue alternate financing opportunities amounted to approximately $165,000. | ||
In addition, during 2004: | |||
• | Net interest expense of $3.1 million which was $531,000 higher than 2003 because of higher debt and interest rates and an $91,000 increase in interest related to marking our interest swap instruments to market in accordance with SFAS No. 133 –Accounting for Derivatives; |
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• | Other income suffered from the absence of (i) the $500,000 in income associated with the release of the option, recorded in 2003 which we received as part of the consideration for the disposition of our interest in the Murray Hill cinema and (ii) the $2.3 million recorded in 2003 with respect to the settlement of certain litigation claims in Australia; | ||
• | Equity earnings from our affiliates of $1.7 million which was $1.1 million higher than 2003 primarily due to a full year of earnings from our joint venture cinema in Christchurch, New Zealand, which opened in September 2003 and a full year of earnings from our joint venture cinema in Mt. Gravatt, New South Wales venture which effected earnings from May 2003; and | ||
• | $1.7 million of realized exchange gain on monies transferred from our Australian subsidiary to the US parent. |
• | The opening of our newest ETRC at Newmarket, Queensland which is 87% leased; | ||
• | The inclusion of full year earnings for our newly acquired interest in Rialto Entertainment and our newly opened 8-screen leasehold cinema in Adelaide, Australia; | ||
• | The inclusion of full year of rental income for our new restaurant tenant at our Royal George Theatre complex in Chicago; | ||
• | The disposition of our Puerto Rico cinema operations; | ||
• | The completion of implementation of the internal controls required by Sarbanes Oxley and of our new Yardi accounting software package; and | ||
• | The anticipated closing of current contracts to sell 61 of the 68 retail condominium units currently being constructed as a part of Place 57 on 57th Street in Manhattan. |
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• | Working capital requirements; | ||
• | Capital expenditures; and | ||
• | Debt servicing requirements. |
• | A $592,000 increase of cash provided by our cinema operations notably $1.8 million from our new cinemas in New Zealand offset by a $1.2 million decrease cash provided by our Australia cinema operations resulting from lower admissions, driving lower revenues, which, coupled with non-revenue dependant costs from our previously existing cinema sites could not be fully offset by the cash flow from our cinema sites acquired or opened during the latter half of 2004 and during 2005; | ||
• | An $806,000 increase in cash provided by our real estate operations primarily due to increased cash flow coming from the New Zealand properties that we purchased in 2004; | ||
• | Approximately $494,000 of cash received in payment of certain legal claims in 2005; and | ||
• | The non-recurrence of $165,000 in cash paid in 2004 for costs related to negotiations with a borrower with whom we ultimately did not consummate a credit facility. |
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• | A decrease in cash of approximately $1.6 million due to reduced operating cash flows from our cinemas predominately in the United States resulting from our lack of quality film product due primarily to the refusal of Universal and Fox to provide film to our domestic cinemas as a consequence of our antitrust lawsuit against them; | ||
• | A decrease in cash of $573,000 due to increased legal costs paid in 2004 compared to 2003 primarily related to our anti-trust lawsuit against Universal, Fox, and certain other distributors and against Regal; | ||
• | A decrease in cash of $700,000 due to increased interest paid in 2004 versus 2003 due to our increased borrowings; | ||
• | A decrease in cash of $884,000 due to lower proceeds from litigation settlements in 2004 compared to 2003; | ||
• | A $1.0 million decrease in cash due to cash received in 2003 for a one-time sale of certain marketable securities; | ||
• | A $220,000 increase of cash used in inventory related to our increase in business in 2004 compared to 2003; | ||
• | A $244,000 increase of cash used as restricted cash in 2004 compared to 2003 related to lease guarantees required for our new operations in Australia; | ||
• | A decrease of cash of approximately $650,000 due to a change in deferred revenues driven by reduced sales of theater gift certificates in 2004 when compared to 2003; and | ||
• | A $400,000 decrease in cash due to higher film rent payments in early 2004 due to 2003 year-end blockbuster film rentals. This trend was not repeated at the 2004 year-end. |
• | $12.6 million in net proceeds from the sales of our Glendale office building and Puerto Rico operations; | ||
• | $1.0 million cash provided by a decrease in restricted cash; and | ||
• | $515,000 in cash proceeds from the sale of certain surplus properties used in connection with our historic railroad activities; offset by | ||
• | $13.7 million paid for acquisitions including $11.8 million for the acquisition of the fee interest lessor’s ground lease interest and lessee’s ground lease interest of the Cinemas 1, 2 & 3 property in New York City and $2.0 million (AUS$2.6 million) paid for our new Melbourne office building; | ||
• | $6.5 million primarily paid to invest in or add capital to our existing investments in unconsolidated joint ventures including $4.8 million (NZ$6.9 million) to purchase 100% of the stock of Rialto Entertainment, $694,000 (NZ$1.0 million) to purchase a 1/3 interest in Rialto Distribution, and $719,000 cash paid as additional capital contributions with respect to our joint venture investment in the 205-209 East 57th Street Associates, LLC; | ||
• | $30.5 million in purchases of equipment and development of property. In Australia, $28.4 million related primarily to the construction work on our Newmarket development in a suburb of Brisbane and the fit-out of our 8-screen Adelaide cinema which opened on October 20, 2005. $2.1 million in purchases of equipment primarily related to the renovation of our U.S. and New Zealand cinemas; and | ||
• | $376,000 paid to purchase certain marketable securities. |
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• | $20.0 million of business acquisition costs related to the Anderson Circuit acquisition for $5.7 million (AUS$8.0 million), the purchase of certain land adjacent to our Newmarket (Queensland) site for $1.0 million (AUS$1.4 million), and the Movieland Circuit acquisition for $13.3 million (NZ$19.8 million); | ||
• | $3.8 million (AUS$5.0 million) related to the fit-outs to our Westlake and Rhodes leasehold cinemas (development opportunities acquired as a part of the Anderson Circuit); | ||
• | $1.4 million expended on the Newmarket development project (an approximately 100,373 square foot shopping center located in a suburb of Brisbane, Australia); | ||
• | $2.3 million paid to acquire a 25% membership interest in 205-209 E. 57th Street Associates, LLC, the limited liability company developing our old Sutton Cinema site in Manhattan; offset by | ||
• | $13.0 million receivable payment on the Sutton Promissory Note, issued to us in partial consideration for the sale to 205-209 E. 57th Street Associates, LLC of our interest in the Sutton Cinema site. |
• | Capital investments in connection with the development of our Newmarket and Burwood projects and improvements to our Angelika New York, Cinemas 1, 2, 3 and Village East cinemas and | ||
• | The purchase of a 1/3rd interest in a Mt. Gravatt joint venture for approximately $2.2 million in connection with our 2003 legal settlement. |
• | $60.7 million of proceeds in borrowings primarily from our credit facilities in Australia of $24.9 million (AUS$32.3 million) and in New Zealand of $35.5 million (NZ$50.0 million) and | ||
• | $600,000 of lower distributions to minority interests; offset by | ||
• | $52.4 million of repayments on existing debt and obligations. |
2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | |||||||||||||||||||
Long-term debt | $ | 1,776 | $ | 5,098 | $ | 3,134 | $ | 81,922 | $ | 239 | $ | 3,151 | ||||||||||||
Long-term debt to related parties | — | 5,000 | — | — | 9,000 | — | ||||||||||||||||||
Lease obligations | 9,908 | 10,260 | 9,604 | 9,506 | 9,356 | 70,674 | ||||||||||||||||||
Interest on long-term debt | 8,088 | 8,264 | 7,631 | 3,380 | 955 | 173 | ||||||||||||||||||
Total | $ | 19,772 | $ | 28,622 | $ | 20,369 | $ | 94,808 | $ | 19,550 | $ | 73,998 | ||||||||||||
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• | $13.1 million of cash provided by the sale of our Glendale Building, our Puerto Rico cinema operation, and certain surplus property; | ||
• | $1.0 million of cash provided by a decrease in restricted cash; | ||
• | $2.1 million of cash provided by operations from our new cinema locations in Australia and New Zealand and legal settlements related to certain litigation claims; and | ||
• | $31.7 million of net borrowings in 2005; offset by | ||
• | $30.5 million of cash used in the purchases of or additions to property and equipment primarily related to the development of our Newmarket ETRC, fit-out of our Adelaide, Australia cinema, and renovations to certain U.S. and New Zealand cinemas; | ||
• | $13.7 million of cash used in acquisition purchases related to our purchase of the Cinemas 1, 2, & 3 fee and ground lease interests and our new Melbourne Office Building; | ||
• | $6.5 million paid to invest in or add capital to our investments in unconsolidated joint ventures; and | ||
• | $376,000 paid to purchase certain marketable securities. |
• | Cash used in the purchase of the Anderson Circuit for $5.7 million (AUS$8.0 million) and the related fit-out costs of two new cinemas $3.8 million (AUS$5.0 million) totaling $9.5 million (AUS$13.0 million); | ||
• | Cash used in the purchase of the Movieland circuit and related fee interests of $13.3 million (NZ$19.8 million); | ||
• | Cash of $1.0 million (AUS$1.4 million) paid for the acquisition of land adjacent to our Newmarket property in a suburb of Brisbane, Australia; | ||
• | Cash of $1.4 million expended on the Newmarket development project (an approximately 100,373 square foot shopping center located in a suburb of Brisbane, Australia), to date; | ||
• | Cash of $800,000 deposited in connection with our acquisition of the Cinemas 1, 2 and 3 fee interest in Manhattan; | ||
• | Cash of $2.3 million paid as our 25% ownership equity in the redevelopment of the property located on 57th Street just below 3rd Avenue in Manhattan as an approximately 100,000 square foot condominium complex; offset by | ||
• | Net borrowings increase of $21.2 million primarily from increased borrowings in Australia and New Zealand. |
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• | Our Australian Corporate Credit Facility with the Bank of Western Australia, Ltd through our Australian subsidiary, Reading Entertainment Australia Pty Ltd (the “Australia Credit Facility”) was increased from $40.4 million (AUS$55.0 million) to $49.5 million (AUS$67.4 million). This additional liquidity will allow us to continue to expand our operations in Australia. This credit facility expires on January 1, 2009 and provides for interest-only payments until June 30, 2006. As of December 31, 2005, we have drawn down $32.4 million (AUS$44.2 million) on this facility with an additional reduction of the overall facility of $2.8 million (AUS$3.8 million) for bank guarantees; | ||
• | On September 19, 2005, we issued a $9.0 million promissory note in exchange for the tenant’s interest in the ground lease estate that is currently between (i) our fee ownership of the underlying land and (ii) our current possessory interest as the tenant in the building and improvements constituting the Cinemas 1, 2 & 3 in Manhattan. This tenant’s ground lease interest was purchased from Sutton Hill Capital LLC (“SHC”); | ||
• | On June 8, 2005, we sold the assets and certain liabilities associated with our Puerto Rico cinema operations for $2.3 million resulting in a $1.6 million gain. Net operating losses of $1.8 million and $688,000 were included in the loss from discontinued operations for the years ending 2005 and 2004, respectively, relating to these operations. No material income tax provision arises from this transaction; | ||
• | In May 2005, we moved our Los Angeles corporate headquarters out of downtown to the City of Commerce, California, a suburb of Los Angeles, resulting in an annual savings of approximately $100,000; | ||
• | On December 31, 2004 we entered into a $25.2 million (AUS$32.7 million) construction loan with the Bank of Western Australia, Ltd through our Australian subsidiary Newmarket Properties Pty, Ltd. This loan was used to finance the construction of our approximately 100,373 square foot shopping center, in Newmarket, Queensland, Australia. Between December 2005 and April 2006, the majority of the development opened for business. At December 31, 2005, we had drawn down $21.7 million (AUS$29.6 million). The remaining available credit will be used to finance any unpaid construction costs at December 31, 2005; | ||
• | On November 23, 2004, we replaced our existing $20.9 million (NZ$31.3 million) New Zealand credit facility with a $35.5 million (NZ$50.0 million) credit facility providing us the funds to pay off the notes payable related to the Movieland acquisition and providing additional funds for current liquidity; | ||
• | On September 14, 2004, we issued a $5.0 million promissory note to SHC at an interest rate of 8.98% per annum and we used the proceeds to in part invest in 205-209 East 57th Street Associates, LLC a limited liability company formed to redevelop our former cinema site at 205 East 57th Street in Manhattan; | ||
• | On September 14, 2004, we fulfilled our remaining obligation under the City Cinemas Standby Credit Facility by paying $13.0 million to Sutton Hill Capital thus completing our $28.0 million commitment under the agreement; and | ||
• | In January 2004, we concluded the consolidation of our worldwide insurance coverage at an anticipated saving of approximately $500,000 annually in insurance costs. In January 2005, this policy was renewed with an additional $100,000 savings and again in January 2006 with a similar savings. |
• | equity funding for several new developments in Australia and New Zealand; and | ||
• | the payment of tenant improvement incentives to lessees in Australia. |
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• | to defer construction of projects currently slated for land presently owned by us; | ||
• | to take on joint venture partners with respect to such development projects; and/or | ||
• | to sell assets. |
• | impairment of long-lived assets, including goodwill and intangible assets; | ||
• | tax valuation allowance and obligations; and | ||
• | legal and environmental obligations. |
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• | Our Australian Credit Facility provides for floating interest rates based on the Bank Bill Swap Bid Rate (BBSY bid rate), but requires that not less than 70% of the loan be swapped into fixed rate obligations. The facility allowed us to utilize the old swap that was in place for our previous facility, at 6.70%, through its term, and to swap up to 70% of the maximum credit facility immediately. As a result, at December 31, 2005, the floating rate portion at 6.70% was $12.2 million (AUS$16.6 million); the old swap at 6.70% was notionally $9.0 million (AUS$12.3 million); and the new swap, at 7.44% was notionally $11.2 million (AUS$15.3 million). The old swap fully expires on December 31, 2007, at which time the full swap amount will be held under the new swap, which expires on December 31, 2008. All interest rates above include a 1.00% interest rate margin. | ||
• | The Australian construction/term facility of $23.8 million (AUS$32.7 million) provides for a floating rate of interest, but requires not less than 70% of the loan to be swapped into fixed rate obligations. At December 31, 2005, the fixed rate portion was at 7.43%. The current swap continues until May 31, 2006. The construction loan converts to a term loan on completion of the construction, and is interest only during the construction period and for the remaining years of the term loan expiring on January 1, 2009. As of December 31, 2005, the balance of this loan was $21.7 million (AUS$29.6 million). All interest rates above include a 1.00% interest rate margin. |
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• | the amount of taxable income in particular jurisdictions; | ||
• | the tax rates in particular jurisdictions; | ||
• | tax treaties between jurisdictions; | ||
• | the extent to which income is repatriated; and | ||
• | future changes in law. |
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• | With respect to our cinema operations: |
o | The number and attractiveness to movie goers of the films released in future periods; | ||
o | The amount of money spent by film distributors to promote their motion pictures; | ||
o | The licensing fees and terms required by film distributors from motion picture exhibitors in order to exhibit their films; | ||
o | The comparative attractiveness of motion pictures as a source of entertainment and willingness and/or ability of consumers (i) to spend their dollars on entertainment and (ii) to spend their entertainment dollars on movies in an outside the home environment; and | ||
o | The extent to which we encounter competition from other cinema exhibitors, from other sources of outside of the home entertainment, and from inside the home entertainment options, such as “home theaters” and competitive film product distribution technology such as, by way of example, cable, satellite broadcast, DVD and VHS rentals and sales, and so called “movies on demand;” |
• | With respect to our real estate development and operation activities: |
o | The rental rates and capitalization rates applicable to the markets in which we operate and the quality of properties that we own; | ||
o | The extent to which we can obtain on a timely basis the various land use approvals and entitlements needed to develop our properties; | ||
o | The availability and cost of labor and materials; | ||
o | Competition for development sites and tenants; and | ||
o | The extent to which our cinemas can continue to serve as an anchor tenant which will, in turn, be influenced by the same factors as will influence generally the results of our cinema operations; and |
• | With respect to our operations generally as an international company involved in both the development and operation of cinemas and the development and operation of real estate; and previously engaged for many years in the railroad business in the United States: |
o | Our ongoing access to borrowed funds and capital and the interest that must be paid on that debt and the returns that must be paid on such capital; | ||
o | The relative values of the currency used in the countries in which we operate; | ||
o | Changes in government regulation, including by way of example, the costs resulting from the implementation of the requirements of Sarbanes-Oxley; | ||
o | Our labor relations and costs of labor (including future government requirements with respect to pension liabilities, disability insurance and health coverage, and vacations and leave); | ||
o | Our exposure from time to time to legal claims and to uninsurable risks such as those related to our historic railroad operations, including potential environmental claims and health related claims relating to alleged exposure to asbestos or other substances now or in the future recognized as being possible causes of cancer or other health related problems; | ||
o | Changes in future effective tax rates and the results of currently ongoing and future potential audits by taxing authorities having jurisdiction over our various companies; and | ||
o | Changes in applicable accounting policies and practices. |
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• | It is based on a single point in time. | ||
• | It does not include the effects of other complex market reactions that would arise from the changes modeled. |
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75 | ||||
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Reading International, Inc.
Los Angeles, California:
March 15, 2006
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(U.S. dollars in thousands)
December 31, | ||||||||
2005 | 2004 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 8,548 | $ | 12,292 | ||||
Receivables | 5,272 | 7,162 | ||||||
Inventory | 468 | 720 | ||||||
Investment in marketable securities, at cost | 401 | 29 | ||||||
Restricted cash | — | 815 | ||||||
Assets held for sale | — | 10,931 | ||||||
Prepaid and other current assets | 996 | 2,181 | ||||||
Total current assets | 15,685 | 34,130 | ||||||
Property held for development | 6,889 | 10,122 | ||||||
Property under development | 23,069 | 26,825 | ||||||
Property & equipment, net | 167,389 | 122,071 | ||||||
Investment in unconsolidated joint ventures | 14,025 | 7,352 | ||||||
Capitalized leasing costs | 15 | 20 | ||||||
Goodwill | 14,653 | 14,857 | ||||||
Intangible assets, net | 8,788 | 10,916 | ||||||
Other assets | 2,544 | 3,934 | ||||||
Total assets | $ | 253,057 | $ | 230,227 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 13,538 | $ | 12,129 | ||||
Film rent payable | 4,580 | 3,508 | ||||||
Notes payable — current portion | 1,776 | 401 | ||||||
Income taxes payable | 7,504 | 6,714 | ||||||
Deferred current revenue | 2,319 | 2,177 | ||||||
Liabilities related to assets held for sale | — | 15,310 | ||||||
Other current liabilities | 250 | 806 | ||||||
Total current liabilities | 29,967 | 41,045 | ||||||
Notes payable — long-term portion | 93,544 | 67,478 | ||||||
Notes payable to related parties | 14,000 | 5,000 | ||||||
Deferred non-current revenue | 554 | 522 | ||||||
Other liabilities | 12,509 | 10,702 | ||||||
Total liabilities | 150,574 | 124,747 | ||||||
Commitments and contingencies (Note 18) | ||||||||
Minority interest in consolidated affiliates | 3,079 | 3,470 | ||||||
Stockholders equity: | ||||||||
Class A Nonvoting Common Stock, par value $0.01, 100,000,000 shares authorized, 35,468,733 issued and 20,990,458 outstanding at December 31, 2005 and 34,444,167 issued and 20,452,733 outstanding at December 31, 2004 | 215 | 205 | ||||||
Class B Voting Common Stock, par value $0.01, 20,000,000 shares authorized and 1,495,490 issued and outstanding at December 31, 2005 and 2,198,761 issued and 1,545,506 outstanding at December 31, 2004 | 15 | 15 | ||||||
Nonvoting Preferred Stock, par value $0.01, 12,000 shares authorized and no outstanding shares at December 31, 2005 and 2004 | — | — | ||||||
Additional paid-in capital | 128,028 | 124,307 | ||||||
Accumulated deficit | (53,914 | ) | (54,903 | ) | ||||
Treasury shares | (3,515 | ) | — | |||||
Accumulated other comprehensive income | 28,575 | 32,386 | ||||||
Total stockholders equity | 99,404 | 102,010 | ||||||
Total liabilities and stockholders equity | $ | 253,057 | $ | 230,227 | ||||
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(U.S. dollars in thousands, except per share amounts)
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Operating revenue | ||||||||||||
Cinema | $ | 86,760 | $ | 74,324 | $ | 67,128 | ||||||
Real estate | 14,310 | 13,078 | 9,556 | |||||||||
Total operating revenue | 101,070 | 87,402 | 76,684 | |||||||||
Operating expense | ||||||||||||
Cinema | 70,452 | 60,129 | 51,435 | |||||||||
Real estate | 7,359 | 6,948 | 7,379 | |||||||||
Depreciation and amortization | 12,384 | 11,823 | 10,952 | |||||||||
General and administrative | 17,247 | 14,824 | 12,757 | |||||||||
Total operating expense | 107,442 | 93,724 | 82,523 | |||||||||
Operating loss | (6,372 | ) | (6,322 | ) | (5,839 | ) | ||||||
Non-operating income (expense) | ||||||||||||
Interest income | 209 | 843 | 807 | |||||||||
Interest expense | (4,682 | ) | (3,921 | ) | (3,374 | ) | ||||||
Net gain on sale of marketable securities | — | — | 235 | |||||||||
Net gain (loss) on sale of assets | (32 | ) | (114 | ) | 207 | |||||||
Other income | 51 | 998 | 2,696 | |||||||||
Loss before minority interest, discontinued operations, income tax expense and equity earnings of unconsolidated investments | (10,826 | ) | (8,516 | ) | (5,268 | ) | ||||||
Minority interest | 579 | 112 | 249 | |||||||||
Loss from continuing operations | (11,405 | ) | (8,628 | ) | (5,517 | ) | ||||||
Discontinued operations: | ||||||||||||
Gain on disposal of business operations | 13,610 | — | — | |||||||||
Loss from discontinued operations, net of tax | (1,379 | ) | (469 | ) | (288 | ) | ||||||
Income (loss) before income tax expense and equity earnings of unconsolidated investments | 826 | (9,097 | ) | (5,805 | ) | |||||||
Income tax expense | 1,209 | 1,046 | 711 | |||||||||
Loss before equity earnings of unconsolidated investments | (383 | ) | (10,143 | ) | (6,516 | ) | ||||||
Equity earnings of unconsolidated investments | 1,372 | 1,680 | 588 | |||||||||
Net income (loss) | $ | 989 | $ | (8,463 | ) | $ | (5,928 | ) | ||||
Earnings (loss) per common share — basic: | ||||||||||||
Loss from continuing operations | $ | (0.51 | ) | $ | (0.37 | ) | $ | (0.26 | ) | |||
Income (loss) from discontinued operations, net | 0.55 | (0.02 | ) | (0.01 | ) | |||||||
Basic earnings (loss) per share | $ | 0.04 | $ | (0.39 | ) | $ | (0.27 | ) | ||||
Weighted average number of shares outstanding — basic | 22,249,967 | 21,948,065 | 21,860,222 | |||||||||
Earnings (loss) per common share — diluted: | ||||||||||||
Loss from continuing operations | $ | (0.51 | ) | $ | (0.37 | ) | $ | (0.26 | ) | |||
Income (loss) from discontinued operations, net | 0.55 | (0.02 | ) | (0.01 | ) | |||||||
Diluted earnings (loss) per share | $ | 0.04 | $ | (0.39 | ) | $ | (0.27 | ) | ||||
Weighted average number of shares outstanding | 22,249,967 | 21,948,065 | 21,860,222 | |||||||||
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(U.S. dollars in thousands)
Accumulated | ||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||
Class A | Class A | Class B | Class B | Paid-In | Treasury | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Capital | Stock | Deficit | Income/(Loss) | Equity | ||||||||||||||||||||||||||||||||
At January 1, 2003 | 20,485 | $205 | 1,336 | $13 | $123,517 | $ | — | $(40,512 | ) | $ | 8,042 | $ | 91,265 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (5,928 | ) | — | (5,928 | ) | |||||||||||||||||||||||||||||
Other comprehensive income: | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Cumulative foreign exchange rate adjustment | — | — | — | — | — | — | — | 23,373 | 23,373 | |||||||||||||||||||||||||||||||
Unrealized loss on securities | — | — | — | — | — | — | — | (219 | ) | (219 | ) | |||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | — | — | — | 17,226 | |||||||||||||||||||||||||||||||
Class A common stock received from stockholder for stock options exercised in exchange for Class B common stock | (618 | ) | (6 | ) | 696 | 7 | (1 | ) | — | — | — | — | ||||||||||||||||||||||||||||
At December 31, 2003 | 19,867 | $199 | 2,032 | $20 | $123,516 | $ | — | $(46,440 | ) | $ | 31,196 | $ | 108,491 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (8,463 | ) | — | (8,463 | ) | |||||||||||||||||||||||||||||
Other comprehensive income: | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Cumulative foreign exchange rate adjustment | — | — | — | — | — | — | — | 1,190 | 1,190 | |||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | — | — | — | (7,273 | ) | ||||||||||||||||||||||||||||||
Class B common stock received from stockholder in exchange for Class A common stock | 487 | 5 | (487 | ) | (5 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||
Class A common stock issued | 99 | 1 | — | — | 791 | — | — | — | 792 | |||||||||||||||||||||||||||||||
At December 31, 2004 | 20,453 | $205 | 1,545 | $15 | $124,307 | $ | — | $(54,903 | ) | $ | 32,386 | $ | 102,010 | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 989 | — | 989 | |||||||||||||||||||||||||||||||
Other comprehensive income: | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Cumulative foreign exchange rate adjustment | — | — | — | — | — | — | — | (3,822 | ) | (3,822 | ) | |||||||||||||||||||||||||||||
Unrealized gain on securities | — | — | — | — | — | — | — | 11 | 11 | |||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | — | — | — | (2,822 | ) | ||||||||||||||||||||||||||||||
Class B common stock received from stockholder in exchange for Class A common stock | 50 | — | (50 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Class A common stock issued for stock options exercised in exchange for cash or treasury shares | 487 | 10 | — | — | 3,721 | (3,515 | ) | — | — | 216 | ||||||||||||||||||||||||||||||
At December 31, 2005 | 20,990 | $215 | 1,495 | $15 | $128,028 | $ | (3,515 | ) | $(53,914 | ) | $ | 28,575 | $ | 99,404 | ||||||||||||||||||||||||||
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(U.S. dollars in thousands)
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Operating Activities | ||||||||||||
Net income (loss) | $ | 989 | $ | (8,463 | ) | $ | (5,928 | ) | ||||
Adjustments to reconcile net income( loss) to net cash provided by operating activities: | ||||||||||||
Realized gain on foreign currency translation | (417 | ) | (1,686 | ) | — | |||||||
Equity earnings of unconsolidated investments | (1,372 | ) | (1,680 | ) | (588 | ) | ||||||
Distributions of earnings from unconsolidated joint ventures | 855 | 1,546 | 1,104 | |||||||||
Gain on sale of Puerto Rico | (1,597 | ) | — | — | ||||||||
Gain on sale of Glendale Building | (12,013 | ) | — | — | ||||||||
Gain on settlement of litigation | — | (1,375 | ) | (2,259 | ) | |||||||
(Gain) loss on sale of assets, net | 32 | 114 | (148 | ) | ||||||||
Depreciation and amortization | 12,384 | 12,899 | 12,003 | |||||||||
Minority interest | 579 | 112 | 249 | |||||||||
Other, net | — | — | 213 | |||||||||
Changes in assets and liabilities: | ||||||||||||
(Increase) decrease in receivables | 1,559 | (889 | ) | (806 | ) | |||||||
(Increase) decrease in prepaid and other assets | 797 | (885 | ) | 1,702 | ||||||||
Increase (decrease) in payable and accrued liabilities | 748 | 448 | (1,626 | ) | ||||||||
Increase (decrease) in film rent payable | 549 | (402 | ) | (4 | ) | |||||||
Increase (decrease) in deferred revenues and other liabilities | (506 | ) | 778 | 2,899 | ||||||||
Net cash provided by operating activities | 2,587 | 517 | 6,811 | |||||||||
Investing Activities | ||||||||||||
Proceeds from sale of Puerto Rico | 2,335 | — | — | |||||||||
Proceeds from sale of Glendale Building | 10,300 | — | — | |||||||||
Acquisitions of real estate and leasehold interests | (13,693 | ) | (20,031 | ) | — | |||||||
Purchases of and additions to property and equipment, net | (30,461 | ) | (7,794 | ) | (3,777 | ) | ||||||
Investment in unconsolidated joint ventures | (6,468 | ) | (2,290 | ) | (2,032 | ) | ||||||
(Increase) decrease in restricted cash | 1,011 | (359 | ) | 65 | ||||||||
Repayment of loan receivable | — | 13,000 | — | |||||||||
Purchase of marketable securities | (376 | ) | — | — | ||||||||
Proceeds from disposal of assets, net | 515 | 157 | 932 | |||||||||
Net cash used in investing activities | (36,837 | ) | (17,317 | ) | (4,812 | ) | ||||||
Financing Activities | ||||||||||||
Repayment of long-term borrowings | (513 | ) | (52,439 | ) | (1,431 | ) | ||||||
Proceeds from borrowings | 31,666 | 60,681 | — | |||||||||
Proceeds from exercise of stock options | 161 | — | — | |||||||||
Minority interest distributions | (944 | ) | (1,137 | ) | (1,789 | ) | ||||||
Net cash provided by (used in) financing activities | 30,370 | 7,105 | (3,220 | ) | ||||||||
Decrease in cash and cash equivalents | (3,880 | ) | (9,695 | ) | (1,221 | ) | ||||||
Effect of exchange rate on cash | 136 | 252 | 3,670 | |||||||||
Cash and cash equivalents at beginning of year | 12,292 | 21,735 | 19,286 | |||||||||
Cash and cash equivalents at end of year | $ | 8,548 | $ | 12,292 | $ | 21,735 | ||||||
Supplemental Disclosures | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest on borrowings | $ | 6,188 | $ | 4,634 | $ | 3,938 | ||||||
Income taxes | $ | 328 | $ | 312 | $ | 524 | ||||||
Non-Cash Transactions | ||||||||||||
Debt issued to purchase Cinemas 1, 2, 3 (Note 8) | 9,000 | — | — | |||||||||
Deposit applied to Cinemas 1, 2, 3 (Note 8) | 800 | — | — | |||||||||
Property addition from purchase option asset (Note 8) | 1,337 | — | — | |||||||||
Buyer assumption of note payable on Glendale Building (Note 9) | (10,103 | ) | — | — | ||||||||
Common stock issued for acquisition (Note 20) | — | 792 | — | |||||||||
Common stock issued for note receivable (Note 20) | 55 | — | — | |||||||||
Treasury shares received (Note 20) | (3,515 | ) | — | — | ||||||||
Stock options exercised in exchange for treasury shares received (Note 20) | 3,515 | — | — | |||||||||
Note received for sale of Sutton Cinema (Note 25) | — | — | 13,000 |
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• | the development, ownership and operation of multiplex cinemas in the United States, Australia, and New Zealand; and | ||
• | the development, ownership and operation of retail and commercial real estate in Australia, New Zealand and the United States, including entertainment-themed retail centers (“ETRC”) in Australia and New Zealand and live theater assets in Manhattan and Chicago in the United States. |
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Building and building improvements | 40 years | |
Leasehold improvement | Shorter of the life of the lease or useful life of the improvement | |
Theater equipment | 7 years | |
Furniture and fixtures | 5 – 10 years |
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Common Stock | Weighted Average | Common Stock | Weighted Average | |||||||||||||||||||||||||||||
Options | Price of Options | Exercisable | Price of Exercisable | |||||||||||||||||||||||||||||
Outstanding | Outstanding | Options | Options | |||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
Outstanding-January 1, 2003 | 1,459,000 | 881,180 | $ | 4.15 | $ | 6.08 | 969,588 | 881,180 | $ | 4.59 | $ | 7.25 | ||||||||||||||||||||
Exercised | — | (696,080 | ) | $ | — | $ | 5.06 | |||||||||||||||||||||||||
Expired / Forfeited | (151,800 | ) | — | $ | 4.10 | $ | — | |||||||||||||||||||||||||
Granted | 141,000 | — | $ | 4.01 | $ | — | ||||||||||||||||||||||||||
Outstanding-December 31, 2003 | 1,448,200 | 185,100 | $ | 4.09 | $ | 9.90 | 1,053,038 | 185,100 | $ | 4.75 | $ | 9.90 | ||||||||||||||||||||
Granted | 40,000 | — | $ | 7.80 | $ | — | ||||||||||||||||||||||||||
Outstanding-December 31, 2004 | 1,488,200 | 185,100 | $ | 4.19 | $ | 9.90 | 1,377,700 | 185,100 | $ | 4.80 | $ | 9.90 | ||||||||||||||||||||
Exercised | (974,600 | ) | — | $ | 3.78 | $ | — | |||||||||||||||||||||||||
Granted | 7,500 | — | $ | 7.86 | $ | — | ||||||||||||||||||||||||||
Outstanding-December 31, 2005 | 521,100 | 185,100 | $ | 5.00 | $ | 9.90 | 474,600 | 185,100 | $ | 5.04 | $ | 9.90 | ||||||||||||||||||||
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Number Outstanding | ||||||||||||
Class A Common Stock Range of Exercise Price | 2005 | 2004 | 2003 | |||||||||
$2.00 to $4.99 | 357,250 | 1,331,850 | 1,331,850 | |||||||||
$5.00 to $9.99 | 82,600 | 75,100 | 35,100 | |||||||||
$10.00 to $11.00 | 81,250 | 81,250 | 81,250 | |||||||||
Total Outstanding | 521,100 | 1,488,200 | 1,448,200 | |||||||||
Number Outstanding | ||||||||||||
Class B Common Stock Range of Exercise Price | 2005 | 2004 | 2003 | |||||||||
$2.00 to $4.99 | — | — | — | |||||||||
$5.00 to $9.99 | 35,100 | 35,100 | 35,100 | |||||||||
$10.00 to $11.00 | 150,000 | 150,000 | 150,000 | |||||||||
Total Outstanding | 185,100 | 185,100 | 185,100 | |||||||||
2005 | 2004 | 2003 | ||||||||||
Stock option exercise price | $ | 7.86 | $ | 7.80 | $ | 4.01 | ||||||
Risk-free interest rate | 4.39 | % | 4.22 | % | 4.04 | % | ||||||
Expected dividend yield | — | — | — | |||||||||
Expected option life | 9.9 | yrs | 9.9 | yrs | 9.9 | yrs | ||||||
Expected volatility | 35.4 | % | 36.4 | % | 58.2 | % | ||||||
Weighted average fair value | $ | 4.25 | $ | 4.28 | $ | 2.83 |
Pro forma net income (loss): | 2005 | 2004 | 2003 | |||||||||
Net income (loss) after tax | $ | 989 | $ | (8,463 | ) | $ | (5,928 | ) | ||||
Add: Stock-based compensation costs included in reported net loss | — | — | — | |||||||||
Deduct: Stock-based compensation costs under SFAS 123 | (83 | ) | (358 | ) | (287 | ) | ||||||
Proforma net income (loss) after tax | $ | 906 | $ | (8,821 | ) | $ | (6,215 | ) | ||||
Pro forma basic net earnings (loss) per common share: | ||||||||||||
Pro forma net earnings (loss) per common share-basic and diluted | $ | 0.04 | $ | (0.40 | ) | $ | (0.28 | ) | ||||
Reported net earnings (loss) per common share-basic and diluted | $ | 0.04 | $ | (0.39 | ) | $ | (0.27 | ) | ||||
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2005 | 2004 | 2003 | ||||||||||
Loss from continuing operations | $ | (11,242 | ) | $ | (7,994 | ) | $ | (5,640 | ) | |||
Income (loss) from discontinued operations | 12,231 | (469 | ) | (288 | ) | |||||||
Net income (loss) | 989 | (8,463 | ) | (5,928 | ) | |||||||
Weighted average shares of common stock | 22,249,967 | 21,948,065 | 21,860,222 | |||||||||
Earnings (loss) per share: | ||||||||||||
Loss from continuing operations – basic and dilutive | $ | (0.51 | ) | $ | (0.37 | ) | $ | (0.26 | ) | |||
Earnings (loss) from discontinued operations – basic and dilutive | $ | 0.55 | $ | (0.02 | ) | $ | (0.01 | ) | ||||
Earnings (loss) per share – basic and dilutive | $ | 0.04 | $ | (0.39 | ) | $ | (0.27 | ) | ||||
December 31, | ||||||||
2005 | 2004 | |||||||
Prepaid and other current assets | ||||||||
Prepaid expenses | $ | 246 | $ | 292 | ||||
Prepaid taxes | 370 | 668 | ||||||
Deposits | 157 | 830 | ||||||
Other | 223 | 391 | ||||||
Total prepaid and other current assets | $ | 996 | $ | 2,181 | ||||
Other non-current assets | ||||||||
Other non-cinema and non-rental real estate assets | $ | 1,314 | $ | 2,073 | ||||
Long-term restricted cash | 191 | 399 | ||||||
Deferred financing costs, net | 847 | 1,076 | ||||||
Deferred expense | — | 353 | ||||||
Other | 192 | 33 | ||||||
Total non-current assets | $ | 2,544 | $ | 3,934 | ||||
December 31, | ||||||||
Property Under Development | 2005 | 2004 | ||||||
Land | $ | 18,585 | $ | 21,675 | ||||
Construction-in-progress (including capitalized interest) | 4,484 | 5,150 | ||||||
Property Under Development | $ | 23,069 | $ | 26,825 | ||||
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December 31, | ||||||||
Property and Equipment | 2005 | 2004 | ||||||
Land | $ | 54,476 | $ | 25,128 | ||||
Building | 92,188 | 68,120 | ||||||
Leasehold interests | 9,075 | 7,931 | ||||||
Construction-in-progress | 863 | 1,332 | ||||||
Fixtures and equipment | 51,221 | 50,119 | ||||||
Total cost | 207,823 | 152,630 | ||||||
Less accumulated depreciation | (40,434 | ) | (30,559 | ) | ||||
Property and equipment, net | $ | 167,389 | $ | 122,071 | ||||
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“Anderson” | “Movieland” | Newmarket | ||||||||||||||
Assets Acquired | Acquisition | Acquisition | Acquisition | Total | ||||||||||||
Cash | $ | 135 | $ | 18 | $ | — | $ | 153 | ||||||||
Receivables | 99 | 48 | — | 147 | ||||||||||||
Inventory | 25 | — | — | 25 | ||||||||||||
Prepayments | 56 | — | — | 56 | ||||||||||||
Land | — | 992 | — | 992 | ||||||||||||
Building | — | 6,083 | — | 6,083 | ||||||||||||
Lease agreements | 282 | 593 | — | 875 | ||||||||||||
Fixtures and equipment | 3,237 | 2,157 | — | 5,394 | ||||||||||||
Property held for development | — | — | 1,042 | 1,042 | ||||||||||||
Plans and permits | — | 162 | — | 162 | ||||||||||||
Deferred tax asset | 9 | — | — | 9 | ||||||||||||
Goodwill | 3,129 | 5,415 | — | 8,544 | ||||||||||||
Total Acquired Assets | $ | 6,972 | $ | 15,468 | $ | 1,042 | $ | 23,482 | ||||||||
Liabilities Assumed | ||||||||||||||||
Creditors | $ | 433 | $ | — | $ | — | $ | 433 | ||||||||
Prepaid revenue | 8 | — | — | 8 | ||||||||||||
Accruals | 71 | — | — | 71 | ||||||||||||
Other payables | 62 | — | — | 62 | ||||||||||||
Provisions | 95 | — | — | 95 | ||||||||||||
Lease agreements | 450 | 666 | — | 1,116 | ||||||||||||
Loans | 661 | — | — | 661 | ||||||||||||
Put Option | — | 175 | — | 175 | ||||||||||||
Total Liabilities Assumed | $ | 1,780 | $ | 841 | $ | — | $ | 2,621 | ||||||||
Total Net Assets | $ | 5,192 | $ | 14,627 | $ | 1,042 | $ | 20,861 | ||||||||
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December 31, | ||||
2004 | ||||
Assets | ||||
Prepaid and other current assets | $ | 717 | ||
Rental property, net of depreciation | 7,396 | |||
Capitalized leasing costs | 277 | |||
Other assets | 200 | |||
Total assets held for sale | $ | 8,590 | ||
Liabilities | ||||
A/P and accrued expenses | $ | 2,067 | ||
Property taxes payable | 67 | |||
Deferred revenue | 211 | |||
Mortgage payable | 10,188 | |||
Total liabilities related to assets held for sale | $ | 12,533 | ||
2005 | 2004 | 2003 | ||||||||||
Revenue | $ | 1,103 | $ | 2,648 | $ | 2,719 | ||||||
Operating expense | 355 | 984 | 1,065 | |||||||||
Depreciation & amortization expense | 51 | 601 | 601 | |||||||||
General & administrative expense | — | 5 | — | |||||||||
Operating income | 697 | 1,058 | 1,053 | |||||||||
Interest income | 2 | 1 | — | |||||||||
Interest expense | 312 | 840 | 856 | |||||||||
Income from discontinued operations before gain on sale | 387 | 219 | 197 | |||||||||
Gain on sale | 12,013 | — | — | |||||||||
Total income from discontinued operations | $ | 12,400 | $ | 219 | $ | 197 | ||||||
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December 31, | ||||
2004 | ||||
Assets | ||||
Other receivable | $ | 84 | ||
Inventory | 84 | |||
Prepaid and other assets | 185 | |||
Rental property, net of depreciation | 1,988 | |||
Total assets held for sale | $ | 2,341 | ||
Liabilities | ||||
A/P and accrued expenses | $ | 1,572 | ||
Property taxes payable | 377 | |||
Deferred revenue | 50 | |||
Other liabilities-non current | 778 | |||
Total liabilities related to assets held for sale | $ | 2,777 | ||
2005 | 2004 | 2003 | ||||||||||
Revenue | $ | 4,575 | $ | 12,932 | $ | 14,464 | ||||||
Operating expense | 5,752 | 12,347 | 13,569 | |||||||||
Depreciation & amortization expense | 206 | 475 | 450 | |||||||||
General & administrative expense | 383 | 798 | 929 | |||||||||
Loss from discontinued operations before gain on sale | (1,766 | ) | (688 | ) | (484 | ) | ||||||
Gain on sale | 1,597 | — | — | |||||||||
Total loss from discontinued operations | $ | (169 | ) | $ | (688 | ) | $ | (484 | ) | |||
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2005 | Cinema | Real Estate | Total | |||||||||
Balance as of January 1, 2005 | $ | 9,725 | $ | 5,132 | $ | 14,857 | ||||||
Purchase accounting adjustment during 2005 | 122 | 75 | 197 | |||||||||
Foreign currency exchange adjustment | (358 | ) | (43 | ) | (401 | ) | ||||||
Balance at December 31, 2005 | $ | 9,489 | $ | 5,164 | $ | 14,653 | ||||||
2004 | Cinema | Real Estate | Total | |||||||||
Balance as of January 1, 2004 | $ | 1,050 | $ | 4,040 | $ | 5,090 | ||||||
Goodwill acquired during 2004 | 7,834 | 710 | 8,544 | |||||||||
Purchase accounting adjustment during 2004 | 296 | 357 | 653 | |||||||||
Foreign currency exchange adjustment | 545 | 25 | 570 | |||||||||
Balance at December 31, 2004 | $ | 9,725 | $ | 5,132 | $ | 14,857 | ||||||
Beneficial | Other | |||||||||||||||
As of December 31, 2005 | Lease | Option Fee | Intangibles | Total | ||||||||||||
Gross carrying amount | $ | 10,957 | $ | 2,773 | $ | 212 | $ | 13,942 | ||||||||
Less: Accumulated amortization | 2,809 | 2,332 | 13 | 5,154 | ||||||||||||
Total, net | $ | 8,148 | $ | 441 | $ | 199 | $ | 8,788 | ||||||||
Beneficial | Other | |||||||||||||||
As of December 31, 2004 | Lease | Option Fee | Intangibles | Total | ||||||||||||
Gross carrying amount | $ | 10,849 | $ | 4,110 | $ | 47 | $ | 15,006 | ||||||||
Less: Accumulated amortization | 2,048 | 2,033 | 9 | 4,090 | ||||||||||||
Total, net | $ | 8,801 | $ | 2,077 | $ | 38 | $ | 10,916 | ||||||||
Year Ending December 31, | ||||
2006 | $ | 831 | ||
2007 | 831 | |||
2008 | 831 | |||
2009 | 831 | |||
2010 | 828 | |||
Thereafter | 4,503 | |||
Total future amortization expense | $ | 8,655 | ||
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December 31, | ||||||||||||
Interest | 2005 | 2004 | ||||||||||
Rialto Distribution | 33.3 | % | $ | 734 | $ | — | ||||||
Rialto Cinemas | 50.0 | % | 4,691 | — | ||||||||
205-209 East 57th Street Associates, LLC | 25.0 | % | 3,139 | 2,290 | ||||||||
Mt. Gravatt | 33.3 | % | 4,052 | 3,845 | ||||||||
Berkeley Cinemas | 50.0 | % | 1,409 | 1,217 | ||||||||
Total | $ | 14,025 | $ | 7,352 | ||||||||
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December 31, | ||||||||
2005 | 2004 | |||||||
Current assets | $ | 8,146 | $ | 3,145 | ||||
Non current assets | 95,184 | 17,157 | ||||||
Current liabilities | 9,265 | 4,850 | ||||||
Non current liabilities | 76,045 | 11,385 | ||||||
Minority interest | 14,025 | 7,352 |
December 31, | ||||||||
2005 | 2004 | |||||||
Net revenue | $ | 34,156 | $ | 21,195 | ||||
Operating income | 5,347 | 7,971 | ||||||
Net income | 4,484 | 4,024 |
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December 31, | December 31, | |||||||||||||||||||
2005 | 2004 | |||||||||||||||||||
Interest | Interest | 2005 | 2004 | |||||||||||||||||
Name of Note Payable | Rate | Rate | Maturity Date | Balance | Balance | |||||||||||||||
Australian Corporate Credit Facility | 6.96 | % | 6.99 | % | January 1, 2009 | $ | 32,442 | $ | 24,900 | |||||||||||
Australian Newmarket Construction Loan | 7.34 | % | 7.18 | % | January 1, 2009 | 21,701 | — | |||||||||||||
Australian Shopping Center Loans | — | — | 2007-2013 | 1,169 | 1,374 | |||||||||||||||
New Zealand Corporate Credit Facility | 9.15 | % | 8.25 | % | November 23, 2009 | 34,225 | 35,625 | |||||||||||||
New Zealand Movieland Note Payable | 5.50 | % | 5.50 | % | February 26, 2006 | 537 | 501 | |||||||||||||
US Sutton Hill Capital Note 1 – Related Party | 9.26 | % | 8.98 | % | July 28, 2007 | 5,000 | 5,000 | |||||||||||||
US Royal George Theatre Term Loan | 6.97 | % | 5.04 | % | November 29, 2007 | 1,986 | 2,153 | |||||||||||||
US Sutton Hill Capital Note 2 – Related Party | 8.25 | % | — | December 31, 2010 | 9,000 | — | ||||||||||||||
US Union Square Theatre Term Loan | 7.31 | % | 7.31 | % | October 1, 2011 | 3,260 | 3,326 | |||||||||||||
Total Notes Payable | $ | 109,320 | $ | 72,879 | ||||||||||||||||
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Year Ending December 31, | ||||
2006 | $ | 1,776 | ||
2007 | 10,098 | |||
2008 | 3,134 | |||
2009 | 81,922 | |||
2010 | 9,239 | |||
Thereafter | 3,151 | |||
Total future principal loan payments | $ | 109,320 | ||
Receive Variable | ||||||||||||||||
Type of Instrument | Notional Amount | Pay Fixed Rate | Rate | Maturity Date | ||||||||||||
Interest rate swap | $ | 17,979,000 | 6.1800 | % | 5.6600 | % | March 31, 2006 | |||||||||
Interest rate swap | $ | 11,986,000 | 6.6800 | % | n/a | December 31, 2008 | ||||||||||
Interest rate swap | $ | 11,197,000 | 6.4400 | % | 5.7050 | % | December 31, 2008 | |||||||||
Interest rate swap | $ | 8,994,000 | 5.7000 | % | 5.7050 | % | December 31, 2007 |
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Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
United States | $ | (1,863 | ) | $ | 20 | $ | (9,345 | ) | ||||
Foreign | 2,689 | (9,117 | ) | 3,540 | ||||||||
Income (loss) before income tax expense and equity earnings of unconsolidated investments | $ | 826 | $ | (9,097 | ) | $ | (5,805 | ) | ||||
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Current income tax expense (benefit) | ||||||||||||
Federal | $ | 444 | $ | — | $ | (1,184 | ) | |||||
State | 186 | 216 | (101 | ) | ||||||||
Foreign | 579 | 830 | 988 | |||||||||
Total | 1,209 | 1,046 | (297 | ) | ||||||||
Deferred income tax expense | ||||||||||||
Federal | — | — | 819 | |||||||||
State | — | — | 189 | |||||||||
Foreign | — | — | — | |||||||||
Total | — | — | 1,008 | |||||||||
Total income tax expense | $ | 1,209 | $ | 1,046 | $ | 711 | ||||||
December 31, | ||||||||
Components of Deferred Tax Assets and Liabilities | 2005 | 2004 | ||||||
Deferred Tax Assets: | ||||||||
Acquired and option properties | $ | — | $ | 1,515 | ||||
Net operating loss carry forwards | 51,678 | 27,516 | ||||||
Impairment reserves | 465 | 13,439 | ||||||
Alternative minimum tax carry forwards | 3,483 | 3,445 | ||||||
Investment in subsidiary | — | 6,767 | ||||||
Installment sale of cinema property | 5,321 | 5,671 | ||||||
Other | 1,912 | 827 | ||||||
Total Deferred Tax Assets | 62,859 | 59,180 | ||||||
Deferred Tax Liabilities: | ||||||||
Acquired and option properties | 4,275 | — | ||||||
Net deferred tax assets before valuation allowance | 58,584 | 59,180 | ||||||
Valuation allowance | (58,584 | ) | (59,180 | ) | ||||
Net deferred tax asset | $ | — | $ | — | ||||
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Expiration Date | Amount | |||
2018 | $ | 4 | ||
2019 | 1,798 | |||
2020 | 542 | |||
2021 | 16,777 | |||
2022 | 1,636 | |||
2025 | 31,318 | |||
Total net operating loss carry forwards | $ | 52,075 | ||
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Expected tax provision (benefit) | $ | 769 | $ | (2,596 | ) | $ | (1,826 | ) | ||||
Reduction (increase) in taxes resulting from: | ||||||||||||
Change in valuation allowance | (596 | ) | 1,752 | 1,699 | ||||||||
Foreign tax provision | 579 | 830 | 802 | |||||||||
Tax effect of foreign tax rates on current income | 740 | 341 | 433 | |||||||||
State and local tax provision | 186 | 216 | 88 | |||||||||
Other items | (469 | ) | 503 | (485 | ) | |||||||
Actual tax provision | $ | 1,209 | $ | 1,046 | $ | 711 | ||||||
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December 31, | ||||||||
2005 | 2004 | |||||||
Current liabilities | ||||||||
Deferred payables | $ | — | $ | 599 | ||||
Security deposit payable | 174 | 207 | ||||||
Other | 76 | — | ||||||
Other current liabilities | $ | 250 | $ | 806 | ||||
Other liabilities | ||||||||
Foreign withholding taxes | $ | 4,944 | $ | 4,733 | ||||
Straight-line rent liability | 3,541 | 2,992 | ||||||
Option liability | 1,055 | 186 | ||||||
Environmental reserve | 1,656 | 1,656 | ||||||
Interest rate swap | 635 | 810 | ||||||
Other | 678 | 325 | ||||||
Other liabilities | $ | 12,509 | $ | 10,702 | ||||
Book Value | Fair Value | |||||||||||||||
Financial Instrument | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Cash | $ | 8,548 | $ | 12,292 | $ | 8,548 | $ | 12,292 | ||||||||
Accounts receivable | $ | 5,272 | $ | 7,162 | $ | 5,272 | $ | 7,162 | ||||||||
Investment in marketable securities | $ | 401 | $ | 29 | $ | 401 | $ | 53 | ||||||||
Restricted cash | $ | — | $ | 815 | $ | — | $ | 815 | ||||||||
Accounts and film rent payable | $ | 18,118 | $ | 15,637 | $ | 18,118 | $ | 15,637 | ||||||||
Notes payable | $ | 109,320 | $ | 72,879 | $ | 107,727 | $ | 71,820 | ||||||||
Interest rate swaps liability | $ | 638 | $ | 810 | $ | 638 | $ | 810 |
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Minimum Lease Payments | ||||
2006 | $ | 9,908 | ||
2007 | 10,260 | |||
2008 | 9,604 | |||
2009 | 9,506 | |||
2010 | 9,356 | |||
Thereafter | 70,674 | |||
Total minimum lease payments | $ | 119,308 | ||
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• | 50% of membership interest in AFC by a subsidiary of National Auto Credit, Inc. (“NAC”) | ||
• | 25% minority interest in Australian Country Cinemas by 21st Century Pty, Ltd | ||
• | 33% minority interest in the Elsternwick Joint Venture by Champion Pictures Pty Ltd | ||
• | 20% minority interest in Big 4 Farming LLC by Cecelia Packing Corporation |
December 31, | ||||||||
2005 | 2004 | |||||||
AFC | $ | 2,847 | $ | 2,997 | ||||
Australian Country Cinemas | 113 | 295 | ||||||
Elsternwick Unincorporated Joint Venture | 116 | 176 | ||||||
Other | 3 | 2 | ||||||
Total minority interest | $ | 3,079 | $ | 3,470 | ||||
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Year Ended December 31, 2005 | Cinema | Real Estate | Total | |||||||||
Revenue | $ | 86,760 | $ | 14,310 | $ | 101,070 | ||||||
Operating expense | 70,452 | 7,359 | 77,811 | |||||||||
Depreciation & amortization | 8,323 | 3,674 | 11,997 | |||||||||
General & administrative expense | 5,894 | 38 | 5,932 | |||||||||
Segment operating income (loss) | $ | 2,091 | $ | 3,239 | $ | 5,330 | ||||||
Segment assets | $ | 60,228 | $ | 176,441 | $ | 236,669 | ||||||
Segment capital expenditures | 3,503 | 48,146 | 51,649 | |||||||||
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Year Ended December 31, 2004 | Cinema | Real Estate | Total | |||||||||
Revenue | $ | 74,324 | $ | 13,078 | $ | 87,402 | ||||||
Operating expense | 60,129 | 6,948 | 67,077 | |||||||||
Depreciation & amortization | 8,094 | 3,629 | 11,723 | |||||||||
General & administrative expense | 4,373 | 23 | 4,396 | |||||||||
Segment operating income | $ | 1,728 | $ | 2,478 | $ | 4,206 | ||||||
Segment assets | $ | 81,439 | $ | 133,110 | $ | 214,549 | ||||||
Segment capital expenditures | 21,971 | 11,016 | 32,987 | |||||||||
Year Ended December 31, 2003 | ||||||||||||
Revenue | $ | 67,128 | $ | 9,556 | $ | 76,684 | ||||||
Operating expense | 51,435 | 7,379 | 58,814 | |||||||||
Depreciation & amortization | 7,068 | 3,700 | 10,768 | |||||||||
General & administrative expense | 3,911 | 7 | 3,918 | |||||||||
Segment operating income (loss) | $ | 4,714 | $ | (1,530 | ) | $ | 3,184 | |||||
Segment assets | $ | 72,180 | $ | 133,677 | $ | 205,857 | ||||||
Segment capital expenditures | 3,321 | 2,401 | 5,722 | |||||||||
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Reconciliation to consolidated net income: | 2005 | 2004 | 2003 | |||||||||
Total segment operating income | $ | 5,330 | $ | 4,206 | $ | 3,184 | ||||||
Non-segment: | ||||||||||||
Depreciation and amortization expense | 387 | 100 | 184 | |||||||||
General and administrative expense | 11,315 | 10,428 | 8,839 | |||||||||
Operating loss | (6,372 | ) | (6,322 | ) | (5,839 | ) | ||||||
Interest expense, net | (4,473 | ) | (3,078 | ) | (2,567 | ) | ||||||
Other income (expense) | 19 | 884 | 3,138 | |||||||||
Minority interest | (579 | ) | (112 | ) | (249 | ) | ||||||
Gain on disposal of discontinued operations | 13,610 | — | — | |||||||||
Income (loss) from discontinued operations | (1,379 | ) | (469 | ) | (288 | ) | ||||||
Income tax expense | (1,209 | ) | (1,046 | ) | (711 | ) | ||||||
Equity earnings of unconsolidated investments | 1,372 | 1,680 | 588 | |||||||||
Net income (loss) | $ | 989 | $ | (8,463 | ) | $ | (5,928 | ) | ||||
Segment assets | $ | 236,669 | $ | 214,549 | $ | 205,857 | ||||||
Corporate assets | 16,388 | 15,678 | 17,009 | |||||||||
Total Assets | $ | 253,057 | $ | 230,227 | $ | 222,866 | ||||||
Segment capital expenditures | $ | 51,649 | $ | 32,987 | $ | 5,722 | ||||||
Corporate capital expenditures | 2,305 | 193 | 87 | |||||||||
Total capital expenditures | $ | 53,954 | $ | 33,180 | $ | 5,809 | ||||||
December 31, | ||||||||
2005 | 2004 | |||||||
Australia | $ | 84,615 | $ | 59,527 | ||||
New Zealand | 37,025 | 39,852 | ||||||
United States | 45,749 | 22,692 | ||||||
Total property and equipment | $ | 167,389 | $ | 122,071 | ||||
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December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Australia | $ | 50,146 | $ | 46,979 | $ | 35,833 | ||||||
New Zealand | 20,179 | 13,531 | 10,079 | |||||||||
United States | 30,745 | 26,892 | 30,772 | |||||||||
Total Revenues | $ | 101,070 | $ | 87,402 | $ | 76,684 | ||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
2005 | ||||||||||||||||
Revenue | $ | 25,524 | $ | 24,853 | $ | 24,809 | $ | 25,884 | ||||||||
Net earnings (loss) | $ | (2,403 | ) | $ | 10,500 | $ | (4,572 | ) | $ | (2,536 | ) | |||||
Basic earnings (loss) | $ | (0.11 | ) | $ | 0.48 | $ | (0.20 | ) | $ | (0.13 | ) | |||||
Diluted earnings (loss) per share | $ | (0.11 | ) | $ | 0.48 | $ | (0.20 | ) | $ | (0.13 | ) |
2004 | ||||||||||||||||
Revenue | $ | 20,015 | $ | 20,016 | $ | 24,164 | $ | 23,207 | ||||||||
Net loss | $ | (1,353 | ) | $ | (584 | ) | $ | (2,162 | ) | $ | (4,364 | ) | ||||
Basic loss per share | $ | (0.06 | ) | $ | (0.03 | ) | $ | (0.10 | ) | $ | (0.20 | ) | ||||
Diluted loss per share | $ | (0.06 | ) | $ | (0.03 | ) | $ | (0.10 | ) | $ | (0.20 | ) |
Years Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Net income (loss) | $ | 989 | $ | (8,463 | ) | $ | (5,928 | ) | ||||
Cumulative foreign currency adjustment | (3,822 | ) | 1,190 | 23,373 | ||||||||
Unrealized loss on securities | 11 | — | (219 | ) | ||||||||
Comprehensive income (loss) | $ | (2,822 | ) | $ | (7,273 | ) | $ | 17,226 | ||||
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Year Ending December 31, | ||||
2006 | $ | 4,944 | ||
2007 | 5,019 | |||
2008 | 4,354 | |||
2009 | 3,331 | |||
2010 | 3,023 | |||
Thereafter | 16,932 | |||
Total future minimum rental income | $ | 37,603 | ||
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Additions | ||||||||||||||||
Balance at | charged to | |||||||||||||||
beginning of | costs and | Balance at | ||||||||||||||
Description | year | expenses | Deductions | end of year | ||||||||||||
Allowance for doubtful accounts | ||||||||||||||||
Year-ended December 31, 2005 – Allowance for doubtful accounts | $ | — | $ | 161 | $ | 64 | $ | 97 | ||||||||
Year-ended December 31, 2004 – Allowance for doubtful accounts | $ | — | $ | — | $ | — | $ | — | ||||||||
Year-ended December 31, 2003 – Allowance for doubtful accounts | $ | — | $ | — | $ | — | $ | — | ||||||||
Tax valuation allowance | ||||||||||||||||
Year-ended December 31, 2005 – Tax valuation allowance | $ | 59,180 | $ | — | $ | 596 | $ | 58,584 | ||||||||
Year-ended December 31, 2004 – Tax valuation allowance | $ | 57,428 | $ | 1,752 | $ | — | $ | 59,180 | ||||||||
Year-ended December 31, 2003 – Tax valuation allowance | $ | 55,729 | $ | 1,699 | $ | — | $ | 57,428 |
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1. | Financial Statements |
Description | Pg. No | |||
Report of Independent Registered Public Accountants | 74 | |||
Consolidated Balance Sheets as of December 31, 2005 and 2004 | 75 | |||
Consolidated Statements of Operations for the Three Years Ended December 31, 2005 | 76 | |||
Consolidated Statements of Stockholders’ Equity for the Three Years Ended December 31, 2005 | 77 | |||
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2005 | 78 | |||
Notes to Consolidated Financial Statements | 79 |
2. | Financial Statement Schedule for the years ended December 31, 2005, 2004 and 2003 |
3. | Exhibits (Listed by numbers corresponding to Item 601 of Regulation S-K) |
3.1 | Certificate of Amendment of Restatement Articles of Incorporation of Citadel Holding Corporation (filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, and incorporated herein by reference). | |
3.2 | Restated By-laws of Citadel Holding Corporation, a Nevada corporation (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, and incorporated herein by reference). | |
3.3 | Certificate of Amendment of Articles of Incorporation of Citadel Holding Corporation (filed as Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001). | |
3.4 | Articles of Merger of Craig Merger Sub, Inc. with and into Craig Corporation (filed as Exhibit 3.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001). | |
3.5 | Articles of Merger of Reading Merger Sub, Inc. with and into Reading Entertainment, Inc. (filed as Exhibit 3.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001). |
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3.6 | Restated By-laws of Reading International, Inc., a Nevada corporation (filed as Exhibit 3.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference). | |
4.1 | 1999 Stock Option Plan of Reading International, Inc. as amended on December 31, 2001 (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 filed on January 21, 2004, and incorporated herein by reference). | |
10.1 | Tax Disaffiliation Agreement, dated as of August 4, 1994, by and between Citadel Holding Corporation and Fidelity Federal Bank (filed as Exhibit 10.27 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and incorporated herein by reference). | |
10.2 | Standard Office lease, dated as of July 15, 1994, by and between Citadel Realty, Inc. and Fidelity Federal Bank (filed as Exhibit 10.42 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and incorporated herein by reference). | |
10.3 | First Amendment to Standard Office Lease, dated May 15, 1995, by and between Citadel Realty, Inc. and Fidelity Federal Bank (filed as Exhibit 10.43 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and incorporated herein by reference). | |
10.4 | Guaranty of Payment dated May 15, 1995 by Citadel Holding Corporation in favor of Fidelity Federal Bank (filed as Exhibit 10.47 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and incorporated herein by reference). | |
10.5 | Exchange Agreement dated September 4, 1996 among Citadel Holding Corporation, Citadel Acquisition Corp., Inc. Craig Corporation, Craig Management, Inc., Reading Entertainment, Inc., Reading Company (filed as Exhibit 10.51 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). | |
10.6 | Asset Put and Registration Rights Agreement dated October 15, 1996 among Citadel Holding Corporation, Citadel Acquisition Corp., Inc., Reading Entertainment, Inc., and Craig Corporation (filed as Exhibit 10.52 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). | |
10.7 | Articles of Incorporation of Reading Entertainment, Inc., A Nevada Corporation (filed as Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, and incorporated herein by reference). | |
10.7a | Certificate of Designation of the Series A Voting Cumulative Convertible preferred stock of Reading Entertainment, Inc. (filed as Exhibit 10.7a to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, and incorporated herein by reference). | |
10.8 | Lease between Citadel Realty, Inc., Lesser and Disney Enterprises, Inc., Lessee dated October 1, 1996 (filed as Exhibit 10.54 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, and incorporated herein by reference). | |
10.9 | Second Amendment to Standard Office Lease between Citadel Realty, Inc. and Fidelity Federal Bank dated October 1, 1996 (filed as Exhibit 10.55 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, and incorporated herein by reference). | |
10.10 | Citadel 1996 Non-employee Director Stock Option Plan (filed as Exhibit 10.57 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996, and incorporated herein by reference). |
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10.11 | Reading Entertainment, Inc. Annual Report on Form 10-K for the year ended December 31, 1997 (filed as Exhibit 10.58 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.12 | Stock Purchase Agreement dated as of April 11, 1997 by and between Citadel Holding Corporation and Craig Corporation (filed as Exhibit 10.56 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997). | |
10.13 | Secured Promissory Note dated as of April 11, 1997 issued by Craig Corporation to Citadel Holding Corporation in the principal amount of $1,998,000 (filed as Exhibit 10.60 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997). | |
10.14 | Agreement for Purchase and Sale of Real Property between Prudential Insurance Company of America and Big 4 Farming LLC dated August 29, 1997 (filed as Exhibit 10.61 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). | |
10.15 | Second Amendment to Agreement of Purchase and Sale between Prudential Insurance Company of America and Big 4 Farming LLC dated November 5, 1997 (filed as Exhibit 10.62 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). | |
10.16 | Partnership Agreement of Citadel Agricultural Partners No. 1 dated December 19, 1997 (filed as Exhibit 10.63 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.17 | Partnership Agreement of Citadel Agricultural Partners No. 2 dated December 19, 1997 (filed as Exhibit 10.64 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.18 | Partnership Agreement of Citadel Agricultural Partners No. 3 dated December 19, 1997 (filed as Exhibit 10.65 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.19 | Farm Management Agreement dated December 26, 1997 between Citadel Agricultural Partner No. 1 and Big 4 Farming LLC (filed as Exhibit 10.67 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.20 | Farm Management Agreement dated December 26, 1997 between Citadel Agricultural Partner No. 2 and Big 4 Farming LLC (filed as Exhibit 10.68 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.21 | Farm Management Agreement dated December 26, 1997 between Citadel Agricultural Partner No. 3 and Big 4 Farming LLC (filed as Exhibit 10.69 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.22 | Line of Credit Agreement dated December 29, 1997 between Citadel Holding Corporation and Big 4 Ranch, Inc. (filed as Exhibit 10.70 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.23 | Management Services Agreement dated December 26, 1997 between Big 4 Farming LLC and Cecelia Packing (filed as Exhibit 10.71 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.24 | Agricultural Loan Agreement dated December 29, 1997 between Citadel Holding Corporation and Citadel Agriculture Partner No. 1 (filed as Exhibit 10.72 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). |
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10.25 | Agricultural Loan Agreement dated December 29, 1997 between Citadel Holding Corporation and Citadel Agriculture Partner No. 2 (filed as Exhibit 10.73 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.26 | Agricultural Loan Agreement dated December 29, 1997 between Citadel Holding Corporation and Citadel Agriculture Partner No. 3 (filed as Exhibit 10.74 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.27 | Promissory Note dated December 29, 1997 between Citadel Holding Corporation and Citadel Agricultural Partners No. 1 (filed as Exhibit 10.75 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.28 | Promissory Note dated December 29, 1997 between Citadel Holding Corporation and Citadel Agricultural Partners No. 2 (filed as Exhibit 10.76 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.29 | Promissory Note dated December 29, 1997 between Citadel Holding Corporation and Citadel Agricultural Partners No. 3 (filed as Exhibit 10.77 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.30 | Security Agreement dated December 29, 1997 between Citadel Holding Corporation and Citadel Agricultural Partnership No. 1 (filed as Exhibit 10.78 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.31 | Security Agreement dated December 29, 1997 between Citadel Holding Corporation and Citadel Agricultural Partnership No. 2 (filed as Exhibit 10.79 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.32 | Security Agreement dated December 29, 1997 between Citadel Holding Corporation and Citadel Agricultural Partnership No. 3 (filed as Exhibit 10.80 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.33 | Administrative Services Agreement between Citadel Holding Corporation and Big 4 Ranch, Inc. dated December 29, 1997 (filed as Exhibit 10.81 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). | |
10.34 | Reading Entertainment, Inc. Annual Report on Form 10-K for the year ended December 31, 1998 (filed as Exhibit as 10.41 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference). | |
10.35 | Reading Entertainment, Inc. Annual Report on Form 10-K for the year ended December 31, 1999 (filed by Reading Entertainment Inc. as Form 10-K for the year ended December 31, 1999 on April 14, 2000 and incorporated herein by reference). | |
10.36 | Promissory note dated December 20, 1999 between Citadel Holding Corporation and Nationwide Life Insurance 3 (filed as Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). | |
10.37* | Employment Agreement between Citadel Holding Corporation and Andrzej Matyczynski (filed as Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). | |
10.38 | Citadel 1999 Employee Stock Option Plan (filed as Exhibit 10.38 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). |
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10.39 | Amendment and Plan of Merger By and Among Citadel Holding Corporation and Off-Broadway Theatres, Inc. (filed as Exhibit A to the Company’s Proxy Statement and incorporated herein by reference). | |
10.40 | Amended and Restated Lease Agreement dated as of July 28, 2000 as amended and restated as of January 29, 2002 between Sutton Hill Capital, L.L.C. and Citadel Cinemas, Inc. (filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). | |
10.41 | Amended and Restated Citadel Standby Credit Facility dated as of July 28, 2000 as amended and restated as of January 29, 2002 between Sutton Hill Capital, L.L.C. and Reading International, Inc. (filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). | |
10.42 | Amended and Restated Security Agreement dated as of July 28, 2000 as amended and restated as of January 29, 2002 between Sutton Hill Capital, L.L.C. and Reading International, Inc. (filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). | |
10.43 | Amended and Restated Pledge Agreement dated as of July 28, 2000 as amended and restated as of January 29, 2002 between Sutton Hill Capital, L.L.C. and Reading International, Inc. (filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). | |
10.44 | Amended and Restated Intercreditor Agreement dated as of July 28, 2000 as amended and restated as of January 29, 2002 between Sutton Hill Capital, L.L.C. and Reading International, Inc. and Nationwide Theatres Corp. (filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). | |
10.45 | Guaranty dated July 28, 2000 by Michael R. Forman and James J. Cotter in favor of Citadel Cinemas, Inc. and Citadel Realty, Inc. (filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). | |
10.46 | Amended and Restated Agreement with Respect to Fee Option dated as of July 28, 2000 as amended and restated as of January 29, 2002 between Sutton Hill Capital, L.L.C. and Citadel Realty, Inc. (filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). | |
10.47 | Theater Management Agreement between Liberty Theaters, Inc. and OBI LLC (filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). | |
10.48* | Non-qualified Stock Option Agreement between Reading International, Inc. and James J. Cotter (filed as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 and incorporated herein by reference). | |
10.49 | Omnibus Agreement between Citadel Cinemas, Inc. and Sutton Hill Capital, LLC, dated October 22, 2003 (filed on Quarterly Report Form 10-Q for the period ended September 30, 2003 and incorporated herein by reference). | |
10.50 | Pledge Agreement between Citadel Cinemas, Inc. and Sutton Hill Capital, LLC, dated October 22, 2003 (filed on Quarterly Report Form 10-Q for the period ended September 30, 2003 and incorporated herein by reference). |
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10.51 | Guarantee of Lenders Obligation Under Standby Credit Agreement in favor of Sutton Hill Capital, LLC, dated October 22, 2003 (filed on Quarterly Report Form 10-Q for the period ended September 30, 2003 and incorporated herein by reference). | |
10.52* | Employment agreement between Reading International, Inc. and Wayne D. Smith (filed as exhibit 10.52 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference). | |
10.53 | Contract of Sale between Sutton Hill Capital L.L.C. and Sutton Hill Properties, LLC dated as of September 19, 2005 (filed as exhibit 10.53 to the Company’s report on Form 8-K filed on September 21, 2005, and incorporated herein by reference). | |
10.54 | Installment Sale Note dated as of September 19, 2005 (filed as exhibit 10.54 to the Company’s report on Form 8-K filed on September 21, 2005, and incorporated herein by reference). | |
10.55 | Guaranty by Reading International, Inc. dated as of September 1, 2005 (filed as exhibit 10.55 to the Company’s report on Form 8-K filed on September 21, 2005, and incorporated herein by reference). | |
10.56 | Assignment and Assumption of Lease between Sutton Hill Capital L.L.C. and Sutton Hill Properties, LLC dated as of September 19, 2005 (filed as exhibit 10.56 to the Company’s report on Form 8-K filed on September 21, 2005, and incorporated herein by reference). | |
10.57 | License and Option Agreement between Sutton Hill Properties, LLC and Sutton Hill Capital L.L.C. dated as of September 19, 2005 (filed as exhibit 10.57 to the Company’s report on Form 8-K filed on September 21, 2005, and incorporated herein by reference). | |
10.58 | Second Amendment to Amended and Restated Master Operating Lease dated as of September 1, 2005 (filed as exhibit 10.58 to the Company’s report on Form 8-K filed on September 21, 2005, and incorporated herein by reference). | |
10.59 | Letter from James J. Cotter dated August 11, 2005 regarding liens (filed as exhibit 10.59 to the Company’s report on Form 8-K filed on September 21, 2005, and incorporated herein by reference). | |
10.60 | Letter amending effective date of transaction to September 19, 2005 (filed as exhibit 10.60 to the Company’s report on Form 8-K filed on September 21, 2005, and incorporated herein by reference). | |
10.61 | Promissory Note by Citadel Cinemas, Inc. in favor of Sutton Hill Capital L.L.C. dated September 14, 2004 (filed herewith). | |
10.62 | Guaranty by Reading International, Inc. in favor of Sutton Hill Capital L.L.C. dated September 14, 2004 (filed herewith). | |
�� | ||
21 | List of Subsidiaries (filed herewith). | |
23 | Consent of Independent Auditors (filed herewith). | |
31.1 | Certification of Principal Executive Officer dated March 13, 2006 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). | |
31.2 | Certification of Principal Financial Officer dated March 13, 2006 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). | |
32.1 | Certification of Principal Executive Officer dated March 13, 2006 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
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32.2 | Certification of Principal Financial Officer dated March 13, 2006 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
(b) | Exhibits Required by Item 601 of Regulation S-K | |
See Item (3) above. | ||
(c) | Financial Statement Schedule | |
See Item (2) above. |
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Date: March 13, 2006 | By: | /s/ Andrzej Matyczynski | ||
Andrzej Matyczynski | ||||
Chief Financial Officer and Treasurer | ||||
(Principal Financial and Accounting Officer) |
Signature | Title(s) | Date | ||
/s/ James J. Cotter | Chairman of the Board and Director and | March 13, 2006 | ||
Chief Executive Officer | ||||
/s/ Eric Barr | Director | March 13, 2006 | ||
/s/ James J. Cotter, Jr. | Director | March 13, 2006 | ||
/s/ Margaret Cotter | Director | March 13, 2006 | ||
/s/ William D. Gould | Director | March 13, 2006 | ||
/s/ Edward L. Kane | Director | March 13, 2006 | ||
/s/ Gerard P. Laheney | Director | March 13, 2006 | ||
/s/ Alfred Villaseñor, Jr. | Director | March 13, 2006 | ||
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