<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............... to ...............
COMMISSION FILE NUMBER 1-649
READING ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2859312
(State of incorporation) (I.R.S. Employer Identification No.)
ONE PENN SQUARE WEST
30 SOUTH FIFTEENTH STREET, SUITE 1300
PHILADELPHIA, PENNSYLVANIA 19102-4813
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER: 215-569-3344
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
There were 7,449,364 shares of Common Stock outstanding as of November 8,
1996.
<PAGE>
INDEX
READING COMPANY* AND SUBSIDIARIES
<TABLE>
<CAPTION>
PART I. - FINANCIAL INFORMATION PAGE
- - - ------------------------------- ----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- September 30, 1996
(Unaudited) and December 31, 1995 ............................ 3-4
Condensed Consolidated Statements of Operations -- Three
Months and Nine Months Ended September 30, 1996 and 1995
(Unaudited) ................................................. 5
Condensed Consolidated Statements of Cash Flows -- Nine Months
Ended September 30, 1996 and 1995 (Unaudited) ................ 6
Notes to Condensed Consolidated Financial Statements
(Unaudited) ................................................. 7-22
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................... 23-26
PART II. - OTHER INFORMATION
- - - ----------------------------
Item 6. Exhibits and Reports on Form 8-K ............................. 27
Signatures ........................................................... 28
</TABLE>
* Reading Entertainment, Inc. became a successor registrant to Reading Company
effective October 15, 1996.
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
READING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------
(Unaudited)
September 30, December 31,
1996 1995*
- - - -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $21,144 $44,189
Amounts receivable 612 711
Due from affiliate 0 1,040
Restricted cash 1,860 360
Inventories 151 112
Prepayments and other current assets 312 498
- - - -------------------------------------------------------------------------------
Total current assets 24,079 46,910
- - - -------------------------------------------------------------------------------
Investment in Australian joint venture 13,192 640
Investment in Citadel 4,799 0
Deferred restructuring costs 1,264 0
Restricted cash 714 362
Real estate held for sale or development 1,060 1,110
Property and equipment:
Buildings 741 733
Capitalized premises lease 538 538
Leasehold improvements 5,633 5,095
Equipment 4,119 3,787
Construction-in-progress 587 236
- - - -------------------------------------------------------------------------------
11,618 10,389
Less: Accumulated depreciation 1,621 1,176
- - - -------------------------------------------------------------------------------
9,997 9,213
Other assets 726 1,771
Intangible assets:
Beneficial leases - net of accumulated
amortization of $2,055 in 1996
and $1,370 in 1995 14,853 15,538
Cost in excess of assets acquired - net of
accumulated amortization of $48 in 1996 11,577 0
- - - -------------------------------------------------------------------------------
58,182 28,634
- - - -------------------------------------------------------------------------------
$82,261 $75,544
===============================================================================
</TABLE>
* The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE>
READING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------
(Unaudited)
September 30, December 31,
1996 1995*
- - - -------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,107 $ 2,279
Accrued compensation 310 222
Accrued taxes and other 679 528
Film rent payable 395 299
Other liabilities 941 916
Note payable 1,500 0
- - - -------------------------------------------------------------------------------
Total current liabilities 5,932 4,244
- - - -------------------------------------------------------------------------------
Capitalized lease, less current portion 518 521
Note payable 500 0
Other liabilities 2,047 2,067
- - - -------------------------------------------------------------------------------
Total long term liabilities 3,065 2,588
- - - -------------------------------------------------------------------------------
Commitments and contingencies (See Note 10)
Minority interest 2,101 0
Shareholders' equity
Preferred stock, par value $1.00 per share:
Authorized -- 5,000,000 shares
Common stock, par value $.01 per share:
Authorized -- 10,000,000 shares
Issued 1996 -- 8,677 shares; 1995 -- 11,530
shares 1 1
Class A common stock, par value $.01 per share:
Authorized -- 15,000,000 shares
Issued 1996 -- 5,148,014 shares; 1995 --
5,145,161 shares 51 51
Other capital 57,773 56,257
Retained earnings 15,931 15,035
Foreign currency translation adjustment 30 (10)
Class A common stock in treasury, at cost:
1996 -- 183,517 shares; 1995 -- 183,397 (2,623) (2,622)
- - - -------------------------------------------------------------------------------
Total shareholders' equity 71,163 68,712
- - - -------------------------------------------------------------------------------
$82,261 $75,544
===============================================================================
</TABLE>
* The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
READING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
- - - -------------------------------------------------------------------------------
1996 1995 1996 1995
- - - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Theater:
Admissions $3,562 $3,524 $ 9,119 $ 8,161
Concessions 1,226 1,366 3,290 3,076
Advertising and other 206 189 594 483
Real estate 68 67 211 203
Interest and dividends 394 684 1,470 1,787
Equity in earnings of affiliate 41 0 1,475 0
Other 1,139 1,479 1,163 1,969
- - - -------------------------------------------------------------------------------
6,636 7,309 17,322 15,679
- - - -------------------------------------------------------------------------------
EXPENSES:
Theater costs 3,548 3,347 9,660 8,277
Theater concession costs 241 212 588 505
Depreciation and amortization 443 341 1,215 1,021
General and administrative 842 1,018 2,863 3,009
Equity loss from Australian joint
venture 68 289 375 289
Interest expense 33 0 98 0
- - - -------------------------------------------------------------------------------
5,175 5,207 14,799 13,101
- - - -------------------------------------------------------------------------------
Income before income taxes and
minority interest 1,461 2,102 2,523 2,578
Minority interest 32 0 32 0
- - - -------------------------------------------------------------------------------
Income before income taxes 1,429 2,102 2,491 2,578
Income tax provision 57 37 79 192
- - - -------------------------------------------------------------------------------
Net income $1,372 $2,065 $ 2,412 $ 2,386
===============================================================================
PER SHARE INFORMATION:
NET INCOME $ 0.28 $ 0.42 $ 0.49 $ 0.48
===============================================================================
Average shares outstanding 4,973,174 4,973,368 4,973,206 4,973,398
===============================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-5-
<PAGE>
READING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
- - - -------------------------------------------------------------------------------
1996 1995
- - - -------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,412 $ 2,386
Adjustments to reconcile net income to net cash provided
from operating activities:
Condemnation award 0 (1,146)
Depreciation 453 338
Amortization 762 683
Deferred rent expense 130 124
Deferred income tax expense 0 132
Equity in earnings from affiliate (1,475) 0
Equity loss from Australian theater developments 375 0
Minority interest in net income of the Angelika 32 0
Gain on sale of real estate (43) 0
Changes in operating assets and liabilities:
Decrease in amounts receivable 99 59
Increase in inventories (17) (37)
Decrease in prepayments and other current assets 195 213
Increase in accounts payable and accrued expenses 177 127
Increase (decrease) in film rent payable 62 (107)
Decrease in other liabilities (154) (269)
Other, net 57 (27)
- - - -------------------------------------------------------------------------------
Net cash provided from operating activities 3,065 2,476
- - - -------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of property and equipment (1,285) (449)
Investment in Australian joint venture (See Note 5) (12,888) 0
Purchase of Citadel common stock (See Note 4) (3,325) 0
Reimbursement proceeds for the Angelika judgement (See
Note 3) 1,293 0
Purchase of the Angelika (See Note 3) (12,394) 0
Net proceeds from real estate joint venture investments 0 185
Decrease in restricted cash 148 60
Purchases of available-for-sale securities 0 (511)
Sales and maturities of available-for-sale securities 0 36,295
Decrease in due from affiliate 1,040 0
Net proceeds from sales of real estate 91 0
- - - -------------------------------------------------------------------------------
Net cash (used for) provided from investing activities (27,320) 35,580
- - - -------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from minority partner for purchase of the
Angelika 2,069 0
Payments of deferred restructuring costs (604) 0
Payments of debt financing costs (254) 0
Purchase of treasury stock (1) 0
- - - -------------------------------------------------------------------------------
Net cash used for financing activities 1,210 0
- - - -------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (23,045) 38,056
Cash and cash equivalents at beginning of year 44,189 9,413
- - - -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 21,144 $47,469
===============================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-6-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
NOTE 1 -- OWNERSHIP AND BASIS OF PRESENTATION
In October 1996, the shareholders of Reading Company approved, among other
things, a merger of Reading Company into a wholly owned subsidiary of Reading
Entertainment, Inc. a newly formed Delaware corporation (collectively with its
subsidiaries "Reading Entertainment"). As a result of the merger, shareholders
of Reading Company became entitled to receive one share of Reading Entertainment
Common Stock in exchange for each share of Reading Company Common Stock or Class
A Common Stock. (See Note 14).
Reading Company and its subsidiaries (the "Company") have operated motion
picture exhibition theaters in leased locations in the Commonwealth of Puerto
Rico since 1994. Such cinemas are currently operated under the name Cine Vista.
On August 27, 1996, the Company acquired an 83.3% interest in the Angelika Film
Center (the "Angelika"), a multiplex theater located in New York City. The
Company's remaining real estate activities include the managed sale of certain
of its real properties, the possible future development of certain center city
Philadelphia properties and participation in two real estate joint ventures. In
November 1995, the Company and Craig Corporation ("Craig"), currently the owner
of a majority of the Company's capital stock, formed Reading International
Cinemas LLC ("Reading International"), a limited liability company owned equally
by the Company and Craig until October 15, 1996, which has initiated theater
development activities in Australia. In October 1996, Reading Entertainment
acquired ownership of 100% of Reading International in exchange for equity
securities of Reading Entertainment, Inc. (See Note 14).
The condensed consolidated financial statements of Company include the
accounts of Reading Company and its majority-owned subsidiaries including the
results of the Angelika subsequent to August 27, 1996, the effective date of the
Angelika acquisition. Significant intercompany transactions and accounts have
been eliminated. Certain amounts in previously issued financial statements have
been reclassified to conform with current classifications.
The financial statements have been prepared in accordance with generally
accepted accounting principles for interim information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments of a recurring nature considered necessary for a fair presentation
of the results for the interim periods presented have been included. Operating
results for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS: For purposes of the Balance
Sheet and Statement of Cash Flows, the Company considers all highly liquid
investments with maturities of three months or less at the time of acquisition
to be cash equivalents. Cash equivalents are stated at cost plus accrued
interest, which approximates market value, and consist principally of federal
agency securities and short-term money market instruments.
AVAILABLE-FOR-SALE SECURITIES: Management classifies government securities
held by the Company with maturities in excess of three months at the time of
purchase as available-for-sale as such investments together with
-7-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
"Cash and cash equivalents" are expected to be used to fund expansion of theater
operations, acquisition or other development activities.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES: Inventories are comprised of confection goods used in Cine
Vista's and the Angelika's operations and are stated at the lower of cost
(first-in, first-out method) or net realizable value.
INCOME PER SHARE: Income per share (Common Stock and Class A Common Stock) is
calculated by dividing net income (loss) by the aggregate of the weighted
average shares outstanding during the period and the dilutive effect, if any, of
common stock equivalents that are outstanding. There were 359,732 and 367,232
Class A Common shares issuable under stock option plans on September 30, 1996
and 1995, respectively. These options were anti-dilutive and were therefore
excluded from the per share calculation.
PROPERTY AND EQUIPMENT: Property and equipment is carried at cost.
Depreciation of buildings, capitalized premises lease, leasehold improvements
and equipment is recorded on a straight line basis over the estimated lives of
the assets or, if the assets are leased, the remaining lease term (inclusive of
options, if likely to be exercised), whichever is shorter. The estimated useful
lives are generally as follows:
<TABLE>
<S> <C>
Building and Improvements 40 years
Equipment 7-15 years
Furniture and Fixtures 7 years
Leasehold Improvements 20 years
</TABLE>
INTANGIBLE ASSETS: Intangible assets are comprised of beneficial theater
leases used in Cine Vista's operations and cost in excess of net assets acquired
in the acquisition of the Angelika.
The amount of the Cine Vista purchase price ascribed to the beneficial leases
was determined by an independent appraiser by computing the present value of the
excess of market rental rates over the rental rates in effect under Cine Vista's
leases at the time of the Company's acquisition of Cine Vista and allocating
such amount as a component of the purchase price of Cine Vista. The beneficial
leases are amortized on a straight-line basis over the remaining term of the
underlying leases which approximates 17 years.
Intangible assets are also comprised of the cost of the net Angelika assets
acquired in excess of their fair value. The fair value of such assets was
determined by an independent appraiser. The cost in excess of assets acquired is
being amortized on a straight line basis over a period of 20 years.
TRANSLATION OF NON-U.S. CURRENCY AMOUNTS: The financial statements and
transactions of Reading International's (See Note 5) Australian operations are
maintained in their functional currency (Australian dollars) and translated into
U.S. dollars in accordance with SFAS No. 52 "Foreign Currency Translation".
Assets and
-8-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
liabilities are translated at exchange rates in effect at the balance sheet date
and shareholders' equity is translated at historical exchange rates. Revenues
and expenses are translated at the average exchange rate for the period.
Translation adjustments are reported as a separate component of shareholders'
equity.
NOTE 3 -- ACQUISITIONS
On August 27, 1996, the Company and Sutton Hill Associates ("Sutton Hill"), a
partnership which is owned by James J. Cotter (the Company's Chairman) and
another principal stockholder of Craig, acquired the Angelika, a multiplex
theater located in New York City, which management believes to be the premier
specialty theater in the United States. The purchase price of the Angelika was
approximately $12,394,000 (subject to certain adjustments), inclusive of
acquisition costs of approximately $529,000. The Company and Sutton Hill have
formed a limited liability company, Angelika Film Centers LLC ("AFC"), to hold
their interest in the Angelika. AFC acquired the Angelika assets with a
combination of available cash, a fully collaterized promissory note issued to
the sellers in the amount of $2,000,000 and credit in full satisfaction of a
judgement encumbering the Angelika, with interest on such judgement at a rate of
9% per annum. The Company had acquired such judgement from a bank for $1,285,000
in November 1995. The short-term portion ($1,500,000) and the long-term portion
($500,000) of the promissory note and an escrow established in relation to this
future obligation have been classified as "Note payable" and "Restricted cash",
respectively, in the Condensed Consolidated Balance Sheet as of September 30,
1996.
The Company contributed 83.3% of the capital of AFC and Sutton Hill
contributed the remaining 16.7%. The operating agreement of AFC provides that
all depreciation and amortization (the "Special Deductions") will first be
allocated to Sutton Hill until the aggregate amount of such Special Deductions
equals Sutton Hill's initial investment. Thereafter, the Company will receive
all Special Deductions until the relative ownership interests are equal to the
initial ownership interests of the parties. Sutton Hill has agreed to
subordinate its interest in AFC to the Company's interest in order to permit the
Company to pledge AFC and its assets as collateral to secure borrowings by the
Company. In addition, Sutton Hill has agreed that the Company will be entitled
to receive up to 100% of the proceeds of borrowings by AFC, up to the amount of
the Company's initial capital contribution to AFC.
AFC is managed by City Cinemas, a New York motion picture exhibitor and an
affiliate of Sutton Hill, pursuant to the terms of a management agreement (the
"Management Agreement"). The Management Agreement provides for City Cinemas to
manage the Angelika for a minimum annual fee of $125,000 plus an incentive fee
equal to 50% of annual cash flow (as defined in the Management Agreement) over
prespecified levels, provided however, that the maximum annual fee (minimum fee
plus incentive fee) may not exceed 5% of the Angelika's annual revenues.
The Company's 83.3% interest in the Angelika was accounted for using the
purchase method and the Angelika's operating results since the acquisition on
August 27, 1996 have been consolidated with the operating results of the
Company. Sutton Hill's initial capital investment and share of the Angelika's
net earnings for the period subsequent to the acquisition of Angelika have been
recorded as "Minority interest" in the Condensed Consolidated Balance Sheet as
of September 30, 1996.
-9-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
NOTE 4 -- INVESTMENTS
Citadel Holding Corporation
- - - ---------------------------
On March 29, 1996, the Company purchased from Craig 1,564,473 shares of the
common stock of Citadel Holding Corporation ("Citadel" and the "Citadel Common
Stock", respectively) for an aggregate purchase price of $3,324,505,
representing slightly less than $2.125 per share and ownership of approximately
26.1% of Citadel Common Stock. Upon acquisition of the Citadel Common Stock, the
Company paid Craig with a five year unsecured, interest-bearing promissory note,
which note was retired on July 29, 1996. The Company accounts for its investment
in the Citadel Common Stock by the equity method. Citadel's net earnings for the
three months ended September 30, 1996, were $197,000. Citadel's net earnings
from the Company's date of acquisition, March 29, 1996, were $5,738,000,
inclusive of a nonrecurring gain on the sale of real estate of $1,473,000 and
nonrecurring income of $4,000,000 from the recognition for financial statement
purposes of previously deferred proceeds from the bulk sale of loans by a
previously owned subsidiary of Citadel. From the Company's date of acquisition,
March 29, 1996, through September 30, 1996, Citadel's net income available to
common stockholders was $5,659,000 of which the Company's share for the same
period was $1,475,000 which amount is included in the Condensed Consolidated
Statement of Operations for the nine months ended September 30, 1996.
The Company also acquired from Craig (for $50,000) a one year option (the
"1996 Option") to acquire, at fair market value, as determined by an investment
banker selected by the parties, 1,329,114 shares of the 3% Cumulative Voting
Convertible Preferred Stock, stated value $3.95 per share, of Citadel (the
"Citadel Preferred Stock") and an option to acquire, under certain
circumstances, a warrant (the "Citadel Warrant") to acquire 666,000 shares of
Citadel Common Stock at an exercise price of $3 per share. At the Company's 1996
Annual Meeting of Stockholders held on October 15, 1996, a transaction was
approved whereby among other things, Reading Entertainment acquired the Citadel
Preferred Stock in exchange for certain equity securities of Reading
Entertainment, Inc. (providing Reading Entertainment with approximately 39.1% of
the voting power of the outstanding capital stock of Citadel) and the 1996
Option and the Citadel Warrant were terminated (See Note 14).
Reading International Cinemas LLC
- - - ---------------------------------
In November 1995, the Company and Craig formed Reading International to
develop and operate multiplex cinemas in Australia and other markets. A wholly
owned subsidiary of Reading International has retained the services of several
executive employees in Australia who provide services with respect to such
Australian operations on a full time or substantially full time basis. On
September 30, 1996, Reading International was equally owned by the Company and
Craig.
On March 29, 1996, the Company and Craig entered into a capital funding
agreement (the "Capital Funding Agreement") with respect to Reading
International pursuant to which they agreed to increase the capital committed by
the Company and Craig to Reading International from $10 million to approximately
$103 million through a combination of cash contributions and secured capital
funding undertakings. Under the terms of the Capital Funding Agreement, the
Company and Craig each immediately contributed to Reading International
$12,500,000 in cash, for an aggregate of $25,000,000. In addition, the Company
and Craig had undertaken to contribute up to an additional $37,500,000 each, for
an aggregate future commitment of $75,000,000 on an as needed basis. The
commitments of the Company and Craig were secured by various assets of the two
parties. At the Company's 1996 Annual Meeting of Stockholders held on October
15, 1996, a transaction was approved whereby, among other
-10-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
things, Reading Entertainment acquired Craig's interest in Reading International
in exchange for certain equity securities of Reading Entertainment, Inc. and the
Capital Funding Agreement was terminated (See Note 14).
The Company accounts for its investment in Reading International and its
foreign subsidiaries by the equity method. Summarized financial information for
Reading International as of September 30, 1996 is as follows:
<TABLE>
<S> <C>
Cash and cash equivalents $15,304
Other current assets 5,971
-------
Total current assets 21,275
Property and developments 8,536
Other noncurrent assets 165
-------
Total noncurrent assets 8,701
-------
Total assets $29,976
=======
Current liabilities 3,592
Shareholders' equity 26,384
-------
Total liabilities and shareholder's equity $29,976
=======
</TABLE>
Reading International's net loss for the nine months ended September 30, 1996
was $751,000, consisting primarily of general and administrative expenses and
development costs incurred with respect to its theater development activities.
The Company's share of the loss from Reading International was $375,000, which
is included in the Consolidated Statement of Operations for the nine months
ended September 30, 1996.
As of September 30, 1996, advances and contributions amounting to
approximately $27,856,000 have been made to Reading International by Reading and
Craig. Pursuant to a land purchase contract, Reading International is required
to make an installment payment of $3,344,000 on December 20, 1996 which amount
is included in current liabilities on Reading International's balance sheet at
September 30, 1996.
Management believes that the September 30, 1996 carrying amounts of the
Citadel and Reading International investments approximate fair value.
NOTE 5 -- PRO FORMA INFORMATION
Pro forma operating results reflecting the acquisition of the Angelika and of
Citadel are set forth below for the nine months ended September 30, 1996 and
1995. For purposes of preparing the pro forma operating statements, both
acquisitions were assumed to have been completed at the beginning of each period
presented and certain adjustments have been made, including among other things,
reductions in "Interest and dividend" income, the recording of depreciation and
amortization, the recording of management fees and the recording of interest
expense resulting from payment of the purchase prices.
-11-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
/(1)/ /(2)/ /(2)/
Pro forma As
Reading Angelika Film Acquisition Adjusted for
Company Citadel Center Adjustments Acquisitions
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $17,323 $53 $4,835 $(340) $21,871
Net income $ 2,412/(3)/ $53 $ 353 $(553) $ 2,265
Per Share:
Net income $ .49 $ .46
</TABLE>
(1) Reflects post-acquisition results of the Citadel and Angelika investments
(2) Reflects pre-acquisition results of the Citadel and Angelika investments
(3) Includes the Company's share of a nonrecurring gain on sale of real estate
of $1,473,000 and nonrecurring income of $4,000,000 from the recognition for
financial statement purposes of previously deferred proceeds from the bulk sale
of loans by a previously owned subsidiary of Citadel.
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1995
Pro forma As
Reading Angelika Film Acquisition Adjusted for
Company Citadel Center Adjustments Acquisitions
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $15,679 $328 $5,898 $(418) $21,487
Net income $ 2,386 $328 $ 472 $(914) $ 2,272
Per Share:
Net income $ .48 $ .46
</TABLE>
NOTE 6 -- LEASES
Cine Vista and the Angelika conduct all of their operations in leased
premises. The leases relate to motion picture theaters with remaining terms of
approximately 6.5 to 26 years with certain leases containing options to extend
the leases for up to an additional 30 years. The minimum remaining lease term,
inclusive of any renewal options, for any of Cine Vista's theaters and the
Angelika theater is approximately 17 years and 12 years, respectively. Certain
Cine Vista theater leases provide for contingent rentals based upon a specified
percentage of theater revenues with a guaranteed minimum. Performance under one
Cine Vista lease has been guaranteed by the Company. Substantially all of the
leases require the payment of property taxes, insurance and other costs
applicable to the property. With the exception of one capital lease, all leases
are accounted for as operating leases. Cine Vista and the Angelika determine
annual base rent expense by amortizing total minimum lease obligations on a
straight-line basis over the lease terms.
-12-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
Future minimum lease payments for Cine Vista and the Angelika, by year and in
the aggregate, under noncancellable operating leases and the Cine Vista capital
lease consist of the following at September 30:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASES
------- ---------
<S> <C> <C>
1997 $ 95 1,749
1998 95 1,787
1999 95 1,919
2000 95 1,904
2001 95 1,904
Thereafter 1,187 17,521
------- -------
Total net minimum lease payments 1,662 $26,784
=======
Less amount representing interest (1,140)
-------
Present value of net minimum lease payments
under capital lease $ 522
=======
</TABLE>
In June 1995, Cine Vista entered into a lease agreement for a new six-plex
motion picture theater. The lease provides for a 20-year term with an average
annual base rent of approximately $185,000 with options to extend the lease up
to an additional 10 years. The lease also provides for contingent rentals based
upon a specified percentage of theater revenues with a guaranteed minimum and
requires the payment of property taxes, insurance and other costs applicable to
the property. The lease will be effective after completion of construction of
the new theater. Cine Vista is responsible for certain construction costs of the
theater which are presently estimated to total $1.5 million. Completion of
construction and commencement of theater operations is scheduled to occur in
early 1997.
In September 1996, Cine Vista entered into a lease agreement with the landlord
of an existing theater which provides for the replacement of six screens in two
facilities with a new 10 screen facility. The lease provides for a 25-year term
and an increase in annual base rent of approximately $32,000 with options to
extend the lease up to an additional 10 years. Cine Vista will be responsible
for all costs of the new facility, which costs are estimated to total
approximately $5.4 million. The lease also provides for contingent rentals based
upon a specified percentage of theater revenues with a guaranteed minimum and
requires the payment of property taxes, insurance and other costs applicable to
the property. Completion of construction and commencement of theater operations
is scheduled to occur in late 1997.
-13-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
NOTE 7 -- REAL ESTATE HELD FOR SALE OR DEVELOPMENT
"Real estate held for sale or development" at September 30, 1996 is carried at
the lower of cost or estimated net realizable value and is classified as a
noncurrent asset due to the inherent difficulty in estimating the timing of
future sales. The Company is exploring development and sale options for its
center city Philadelphia properties which are adjacent to the Pennsylvania
Convention Center site and is actively seeking buyers for its properties located
outside center city Philadelphia.
NOTE 8 -- OTHER LIABILITIES
Other liabilities consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Reserve for guarantee obligations of SWS
Industries, Inc. (See Note 10) $ 406 $ 406
Obligations related to past railroad
operations and environmental issues (See Note
10) 1,248 1,251
Cine Vista deferred purchase price 557 707
Minimum rent obligations 370 247
Other 407 372
------ ------
2,988 2,983
Less estimated current portion (941) (916)
------ ------
$2,047 $2,067
====== ======
</TABLE>
NOTE 9 -- INCOME TAXES
Effective December 31, 1981, after approval by its shareholders, the Company
eliminated its accumulated deficit by a charge to "Other capital". This
quasi-reorganization did not require the restatement of any assets or
liabilities or any other modification of capital accounts. Tax benefits realized
from the carryforwards of pre-quasi-reorganization losses have been included in
the determination of net income and then reclassified from "Retained earnings"
to "Other capital". Had such tax benefits been excluded from net income, the
Company would have reported net income of $896,000 or $.18 per share and
$1,396,000 or $.28 per share for the nine months ended September 30, 1996 and
1995, respectively.
At December 31, 1995, net operating loss carryforwards totalled $162.7 million
of which $123.1 million expires at the end of 1996 unless utilized prior thereto
and $39.6 million will expire in various amounts between 1997 and 2009 unless
utilized prior thereto.
-14-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
Carryforwards and temporary differences which give rise to the deferred tax
asset are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Net operating loss carryforwards $ 53,989 $ 55,325
Reserves 1,004 1,004
Other, net 242 242
-------- --------
Gross deferred asset 55,235 56,571
Valuation allowance (55,235) (56,571)
-------- --------
Net deferred asset $ 0 $ 0
======== ========
</TABLE>
Based on an analysis of the likelihood of realizing the Company's gross
deferred tax assets (taking into consideration applicable statutory carryforward
periods), the Company concluded that under SFAS No. 109, a valuation allowance
for the entire asset was necessary at September 30, 1996. As a result of the
transactions approved by the shareholders on October 15, 1996 (See Note 14) and
their related impact on the Company's future financial statements, the Company
anticipates recording a material adjustment decreasing the valuation allowance
thereby recognizing income from the reduction. The Company anticipates recording
this adjustment in the fourth quarter of 1996.
The Company is required to pay federal alternative minimum tax ("AMT"). AMT is
calculated separately from the regular federal income tax and is based on a flat
rate applied to a broader tax base. Amounts payable thereunder cannot be totally
eliminated through the application of net operating loss carryforwards. The
Company recorded AMT expense of $57,000 and $60,000 in the nine months ended
September 30, 1996 and 1995, respectively. The Company recorded $22,000 in state
income tax expense in the current year quarter related to earnings from its
wholly-owned subsidiary which purchased the 83.3% interest in the Angelika. Upon
adoption of SFAS No. 109 in 1993, a deferred tax asset of $132,000 was recorded
for the tax benefits which were determined by management to be more likely than
not to be realized from the Company's net operating loss carryforwards. The
Company recorded a $132,000 tax provision in the Condensed Consolidated
Statement of Operations for the six months ended June 30, 1995 related to the
realization of such tax benefits in that period.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
SWS Industries, Inc.
- - - --------------------
The Company sold a subsidiary, SWS Industries, Inc. ("SWS"), in 1987. SWS
subsequently filed for bankruptcy in 1988. Under the terms of the SWS sales
agreement, the Company remained liable as guarantor on various performance bonds
issued on behalf of SWS. The Company's liability under the performance bond
guarantees has been reduced as the related contracts have been completed or
settled. Completion activities will continue throughout 1996. Management
believes the remaining reserve at September 30, 1996 is adequate for the
remaining obligations of the Company.
-15-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
Cine Vista
- - - ----------
A landlord of Cine Vista has alleged that Cine Vista underpaid rent by
approximately $600,000 for the thirty-six month period ended June 30, 1996. Cine
Vista is finalizing a settlement of this claim under which Cine Vista will pay
approximately $130,000 and the former owner of Cine Vista will pay approximately
$220,000 and agreed to pay higher rent subsequent to June 30, 1996. Provision
for the settlement has been recorded in Cine Vista's financial results.
Historical Railroad Operations
- - - ------------------------------
The Company is a defendant in various personal injury legal actions relating
to its railroad operations prior to reorganization and has insurance coverage
relating to such actions. In accordance with the provisions of a 1990 settlement
agreement (the "Settlement Agreement") with its insurance carriers, the Company
receives quarterly reimbursement for certain personal injury legal actions. At
September 30, 1996, $124,000 was reimbursable to the Company for amounts
expended in defense and settlement of such actions. This amount has been
included in "Amounts receivable." Three participants in the insurance settlement
are insolvent. Unreimbursed claims insured by these insolvent companies totaled
$64,000 from 1992 through September 30, 1996. The Company believes that it may
be entitled to reimbursement of such amounts from the other parties to the
agreement and may request an arbitration hearing on such matters. Based upon the
backlog of pending personal injury cases and the Company's experience in
settling such cases, the Company has established a reserve of $148,000
reflecting the potential effect of such insolvencies on future insurance
reimbursement if no recovery is received from either the insolvent carriers or
the other parties to the Settlement Agreement. The reserve associated with such
insolvencies may increase if additional claims are filed; however, the Company
does not believe that such amount will be material.
Environmental
- - - -------------
The Company and a wholly-owned subsidiary, Reading Transportation Company
("RTC"), have each been advised by the Environmental Protection Agency ("EPA")
that they are potentially responsible parties ("PRPs") under environmental laws
including Federal Superfund legislation ("Superfund") for a site located in
Douglassville, Pennsylvania. The EPA issued an Administrative Order under
Superfund against 34 PRPs requiring, among other things, that the named parties
be required to incinerate materials at the site pursuant to a June 30, 1989
Record of Decision ("ROD"). The ROD estimated that the incineration would cost
approximately $53 million. Thirty-six PRPs were also named in a civil action
brought by the United States Government which seeks to recover alleged costs
incurred at the site by the United States of approximately $22 million. Reading
and RTC have each been named in a third-party action instituted by the majority
of the 36 PRPs sued by the United States. The actions instituted against the
Company and approximately 300 PRPs seek to have the parties contribute to
reimbursement for past costs and any costs associated with further remediation
at the site.
During 1994, based upon the Company's and counsel's evaluation of possible
outcomes in the matter, the Company increased its "Provision for environmental
matters" by $1,200,000. In September 1995, the federal district court judge who
presided over Reading's reorganization ruled that all liability asserted against
Reading relating to the site was discharged pursuant to the consummation order
issued in conjunction with the Company's amended plan of reorganization on
December 31, 1980. The United States Department of Justice and a named defendant
in the above described Administrative Order have appealed the decision and the
appeal was heard in July 1996. The judge's decision did not affect the potential
liability of RTC for the site. RTC has no assets and therefore
-16-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
cannot fund a settlement or judgement relating to this matter and the Company
believes that the potential liability of RTC, if any, is not in excess of
$300,000. Based upon the appeal and possible alternate attempts by the PRPs to
obtain Reading's participation in funding for the site as well as the existence
of the other environmental matters set forth below, the Company has not reduced
its "Provision for environmental matters."
The Company is a party to a consent decree relating to a Superfund site
located on land owned by the Company. Apart from future operation and
maintenance expenses ("O&M"), remediation is complete. During 1994, the Company
paid approximately $106,000 as its estimated share of ten years of O&M and
charged such amount to "Provisions for environmental matters" expense. The
Company believes that the amounts expended to date will be adequate to fund O&M
at the site. If additional amounts are required, such amounts would not be
material.
In 1991, the Company filed a lawsuit against the Southeastern Pennsylvania
Transportation Authority ("SEPTA"), Conrail, the City of Philadelphia, and other
parties which sought to recover costs expended by the Company in conjunction
with the cleanup of polychlorinated biphenyls ("PCBs") in the Reading Terminal
Train Shed and a portion of the viaduct south of Vine Street. In January 1996,
the Company and several parties agreed to settle this litigation by providing
for the Company to receive payments totalling $2.35 million which amount the
Company anticipates receiving in 1996. The Company is presently finalizing a
settlement agreement. The parties to the settlement also agreed to pay an amount
ranging from 52% to 55% of certain future costs the Company may incur in
cleaning environmental contamination on one of its other properties, the
Viaduct, which the Company believes may be contaminated by PCBs resulting from
former railroad operations on that property conducted by, or on behalf of, the
Reading Railroad, Conrail, the City of Philadelphia or SEPTA. The Company has
advised the Environmental Protection Agency of the potential contamination. The
Company has not determined the scope and extent of any such PCB contamination.
However, the Company has been advised by counsel that, given the lack of
regulatory attention to the Viaduct in the twelve years which have elapsed since
EPA was notified of the likelihood of contamination, it is unlikely that the
Company will be required to decontaminate the Viaduct or incur costs related
thereto.
Prior to the Company's reorganization, the Company had extensive railroad and
related operations. Such operations could have contributed to environmental
contamination of properties now owned by the Company, previously sold or leased
by the Company, or to which the Company, prior to its reorganization, sent
waste. The ultimate extent of liabilities, if any, with respect to such matters,
as well as the timing of cash disbursements, if any, cannot be determined.
However, management is of the opinion that while the ultimate liability
resulting from such matters could have a material effect upon the results of
operations in a given year, they will not have a material adverse effect upon
the Company's financial position or liquidity.
-17-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
The following is an analysis of the Company's accrual for environmental
claims:
<TABLE>
<S> <C>
Balance at January 1, 1994 $ 336
Provisions 1,306
Payments (133)
------
Balance at December 31, 1994 1,509
Provisions 0
Payments (248)
------
Balance at December 31, 1995 1,261
Provisions 0
Payments (3)
------
Balance at September 30, 1996 $1,258
======
</TABLE>
Certain Shareholder Litigation
- - - ------------------------------
In September 1996, an individual shareholder of the Company commenced a
purported class action on behalf of the Company's minority shareholders owning
Class A Common Stock (the "Shareholder Action"), entitled Walter Alphin v.
Reading Company, et al., in the Philadelphia County Court of Common Pleas
relating to the transactions which were approved by shareholders of the Company
on October 15, 1996. (See Note 14). The complaint in the Shareholder Action (the
"Complaint") named the Company, Craig, former directors of the Company Gerard P.
Laheney and Ralph B. Perry III, and all of the current directors of the Company
(other than Gregory R. Brundage) as defendants. The Complaint alleges, among
other things, that (i) none of the directors of the Company are independent and
each was appointed by James J. Cotter, Craig or those controlled by them; (ii)
resignations of Messrs. Laheney and Perry from the Board of Directors of the
Company, and of Edward L. Kane from the Board of Directors of Craig, were a sham
designed to give the "appearance" that each is disinterested, and that, in
reality, none of the defendants can exercise independent business judgement or
protect the interests of the Company's minority shareholders; (iii) the Stock
Transactions are "in violation of defendants' fiduciary duties owed" to the
holders of the Class A Common Stock and "in violation of Pennsylvania law," in
that the Stock Transactions lack a valid business purpose and are "designed and
intended solely to minimize the interests of" the holders of the Class A Common
Stock and "dilute their continued equity participation" in the Company, to the
advantage of Craig, Citadel, and their controlling shareholders; (iv) the Board
of Directors of the Company is unable to consider the transactions in a way that
reflects the "intrinsic value" of the Class A Common Stock; (v) the defendants
other than the Company have breached their fiduciary and other duties to the
purported class in that they have not exercised independent business judgement,
have acted to the detriment of the holders of the Class A Common Stock in order
to benefit defendants, and have participated in a plan to dilute the interests
of such shareholders for no proper business purpose, particularly in that the
investment in the Stater Stock is inconsistent with the Company's identified
business; (vi) the Company's Board of Directors had "gone through the motions"
of appointing the Independent Committee of "purportedly independent directors";
(vii) the defendants have failed to disclose the "full extent of the future
earnings potential" of the Company as well as the value of its assets and the
assets to be transferred to it; and (viii) Craig will benefit unjustly by having
its credit rating upgraded and its balance sheet bolstered. The Complaint seeks
preliminary and permanent injunctive relief to prevent the consummation of the
Stock Transactions or any similar transaction, rescission of the Stock
Transactions if they are consummated, divestiture by the defendants of
-18-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
assets and shares of the Company they may obtain as a result of the Stock
Transactions, and unspecified damages and other relief. Management believes that
the allegations of the Company are without merit and intends to vigorously
defend itself against the Shareholders Action.
NOTE 11 -- RELATED PARTY TRANSACTIONS
In 1994, 1995 and 1996, the Company's Board of Directors voted to waive the
transfer restrictions imposed by the provisions of the Company's Class A Common
Stock to the extent necessary to permit James J. Cotter, Chairman of the Board
of Directors of the Company and Craig, to acquire additional shares of the
Company's Class A Common Stock. The transfer provisions prohibit a party from
acquiring more than 4.75% of the Company's outstanding capital stock without the
permission of the Company's Board of Directors and are intended to assure the
continuing availability of the Company's tax loss carryforwards by precluding a
change in control which could limit the value of the carryforwards. These
transfer restrictions were subsequently extended to January 1, 2003 after
shareholder approval at the Company's 1996 Annual Meeting of Stockholders held
on October 15, 1996. (See Note 14). Prior to granting the waiver of the
restrictions, the Board of Directors had determined that acquisition of the
shares by Mr. Cotter and Craig would not affect the continuing availability of
the Company's tax loss carryforwards.
The Company acquired the Angelika on August 27, 1996 (See Note 3). The theater
is owned jointly by the Company and Sutton Hill, a partnership affiliated with
City Cinemas, a Manhattan-based theater operator. City Cinemas (owned indirectly
in equal parts by James J. Cotter, the Company's Chairman, and Mr. Michael
Forman) will operate the theater pursuant to the Management Agreement. Mr.
Cotter is a principal shareholder of Craig. Mr. Forman beneficially owns 16.4%
of Craig's common stock. Robert F. Smerling, President of Cine Vista, also
serves as President of City Cinemas.
On March 29, 1996, the Company purchased from Craig 1,564,473 shares of
Citadel Common Stock, the 1996 Option and the Citadel Warrant, provisions of
which were reviewed, negotiated and approved by an independent committee
comprised of outside directors not affiliated with Craig. Upon the acquisition
of the Citadel Common Stock, the Company paid Craig with a five year unsecured,
interest-bearing promissory note in the amount of $3,324,505, which note was
retired on July 29, 1996. The 1996 Option and the portion of it relating to the
Citadel Warrant were terminated as a result of certain transactions approved at
the Company's 1996 Annual Meeting of Shareholders held on October 15, 1996 (See
Note 14). Citadel also, through its President and Chief Executive Officer,
provides consulting services to, and is, in effect, the principal United States
real estate advisor to the Company with respect to cinema development matters.
In November 1995, the Company and Craig formed Reading International to
develop and operate multiplex cinemas in Australia and other markets. On March
29, the Company and Craig entered into a Capital Funding Agreement pursuant to
which each of the parties contributed $12,500,000 and pledged to contribute an
additional $37,500,000 each to Reading International. The Company and Craig each
pledged various assets as security for the additional capital commitments. At
the Company's 1996 Annual Meeting of Stockholders held on October 15, 1996, a
transaction was approved whereby, among other things, the Capital Funding
agreement was terminated (See Note 14) and Reading Entertainment acquired
ownership of 100% of Reading International in exchange for certain equity
securities of Reading Entertainment, Inc.
-19-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
NOTE 12 -- LONG-TERM DEBT
In December 1995, Cine Vista entered into a $15 million eight year revolving
credit agreement (the "Credit Agreement") with a bank. Under terms of the Credit
Agreement, Cine Vista may borrow up to $15 million to repay Cine Vista
acquisition loans, which loans are payable to a wholly-owned subsidiary of the
Company (the "Subsidiary Loans"), and fund certain new theater development
expenditures (the "Development Expenditures"). During the initial 30 months of
the eight-year term, Cine Vista may borrow and repay amounts outstanding under
the Credit Agreement. Any amounts outstanding during the initial term would be
payable in increasing quarterly installments over the balance of the loan term.
At September 30, 1996, no amounts were outstanding under this agreement.
As security for the loan, Cine Vista has pledged substantially all of its
assets. In addition, the stock of Cine Vista's parent company has been pledged
as security for the loan. In conjunction with the loan, the Company has also
agreed to subordinate to the lender its right to payment of the Subsidiary Loans
as well as certain other fees payable by Cine Vista to the Company under certain
circumstances. In addition, the Company has agreed to contribute funds to Cine
Vista in the event that estimated unpaid Development Expenditures exceed the
amount of funds available to Cine Vista under the Credit Agreement.
The provisions of the Credit Agreement require Cine Vista to maintain a
minimal level of net worth and other financial ratios, restrict the payment of
dividends, and limit additional borrowings and capital expenditures. Borrowings
under the Credit Agreement accrue interest at LIBOR (the London Interbank
Offered Rate) plus 2.25%, the cost of Section 936 deposits (deposits held by
lenders in Puerto Rico which are qualified under Section 936 of the Internal
Revenue Code) to the lender (currently 5.43%) plus 2.25%, or the base rate plus
1/2 of 1%, at Cine Vista's election. In accordance with the provisions of the
Credit Agreement, Cine Vista is required to pay a commitment fee on the unused
commitment equal to 1/2 of 1%.
NOTE 13 -- OTHER INCOME
In July 1996, the Company received $1,119,000 net of expenses in full
settlement of its claim against TPI Enterprises, Inc. ("TPI"). The matter
related to the Company's 1993 offer to acquire from TPI a partnership interest
in a partnership which operates motion picture exhibition theaters. This amount
was recorded as "Other" income in the Condensed Consolidated Statement of
Operations for the three months ending September 30, 1996.
NOTE 14 -- SUBSEQUENT EVENTS
On October 15, 1996, the Company held the 1996 Annual Meeting of Shareholders
at which meeting two transactions were approved by shareholders. Both
transactions were completed on October 15, 1996. The first transaction was a
reorganization of the Company (the "Reorganization") pursuant to an Agreement
and Plan of Merger (the "Merger Agreement") among the Company, Reading
Entertainment, Inc., which was a newly formed, wholly-owned subsidiary of the
Company, and Reading Merger Co., a Pennsylvania corporation ("Merger Co.") which
was a newly formed, wholly-owned subsidiary of Reading Entertainment. Pursuant
to the Reorganization, the Company merged with Merger Co. In the Reorganization,
each outstanding share of the Company's Common Stock, par value $.01 per share
and Class A Common Stock, par value $.01 per share, were converted into the
right to receive one share of Reading Entertainment's Common Stock, par value
$.001 per share (the "Reading Entertainment Common Stock"), and the outstanding
shares of Merger Co. were converted into shares of Common Stock of the Company.
As a result, the Company became a wholly-owned subsidiary of Reading
Entertainment,
-20-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
Inc., and the current shareholders of the Company became shareholders of Reading
Entertainment. Among other changes in the rights of shareholders resulting from
the Reorganization, the transfer restrictions on the Company's Class A Common
Stock, which were scheduled to expire January 1, 1997, were extended with
respect to the Reading Entertainment, Inc., Common Stock to January 1, 2003, in
order to reduce the possibility that a change-in-control of Reading
Entertainment will occur, which change could reduce the amount of net operating
loss carryforwards available to offset taxable income.
In addition, on October 15, 1996, pursuant to an Exchange Agreement, dated
September 4, 1996 (the "Exchange Agreement"), Reading Entertainment, Inc.,
issued (i) 70,000 shares of Series A Voting Cumulative Convertible Preferred
Stock, par value $.0001 per share (the "Series A Preferred Stock"), to Citadel
Acquisition Corporation ("CAC"), and granted certain contractual rights to
Citadel and CAC, for $7 million in cash and (ii) 550,000 shares of Series B
Voting Cumulative Convertible Preferred Stock, par value $.001 per share (the
"Series B Preferred Stock"), and 2,476,190 shares of Common Stock to Craig and
its wholly owned subsidiary, Craig Management Inc. ("CMI") in exchange for
certain assets owned by Craig and CMI. The assets acquired by Reading
Entertainment from Craig and CMI consist of 693,650 shares of Series B Preferred
Stock of Stater Bros. Holdings, Inc. (the "Stater Stock"), Craig's 50%
membership interest in Reading International (thereby terminating the Capital
Funding Agreement), of which an indirect wholly owned subsidiary of Reading
Entertainment is the sole other member, and 1,329,114 shares of the 3%
Cumulative Voting Convertible Preferred Stock, stated value $3.95 per share, of
Citadel. Effective upon the closing of this transaction, the 1996 Option,
including the portion of it relating to the Citadel Warrant (See Note 4), was
terminated.
The Series A Preferred Stock (i) bears a cumulative dividend of 6.5%, payable
quarterly, and (ii) is convertible any time after 18 months of issuance (or
earlier upon a change of control of Reading Entertainment) into shares of
Reading Entertainment Common Stock at a conversion price of $11.50 per share.
The Series B Convertible Stock (i) bears a cumulative dividend of 6.5%, payable
quarterly, and (ii) is convertible, at any time after 18 months from issuance,
into shares of Reading Entertainment Common Stock at a conversion price of
$12.25 per share. Holders of the Series A and Series B Convertible Stock are
entitled to 9.64 votes per share held on all matters brought to a vote of the
shareholders of Reading Entertainment Inc. As a result of the exchange, Craig
and Citadel own approximately 77.4% and 5%, respectively of the outstanding
capital stock of Reading Entertainment, Inc.
Also pursuant to the Exchange Agreement, Reading Entertainment, Citadel and
CAC entered into an Asset Put and Registration Rights Agreement pursuant to
which Citadel has the right (the "Asset Put Option"), exercisable at any time
after October 15, 1996 and until 30 days after Reading Entertainment files its
Annual Report on Form 10-K for the year ending December 31, 1999, to require
Reading Entertainment to acquire substantially all of Citadel's assets, and
assume related liabilities (such as mortgages), for shares of Reading
Entertainment Common Stock. Reading Entertainment will not be obligated to
acquire (i) the shares of Series A Preferred Stock or Reading Entertainment
Common Stock held by CAC (or the capital stock of CAC), (ii) such amount of cash
or marketable securities as Citadel determines to retain to provide necessary
liquidity to Citadel, (iii) such other assets as the Board of Directors of
Reading Entertainment determines are subject to liabilities reasonably likely to
be in excess of the fair market value of such assets, (iv) assets acquired by
Citadel subsequent to closing without Reading Entertainment's approval to the
extent such acquired assets have a value in excess of $5 million or (v) any
assets exceeding $30 million in aggregate value. In exchange for Citadel's
assets on exercise of the Asset Put Option, Reading Entertainment will deliver
to Citadel a number of shares of Reading Entertainment, Inc., Common Stock
determined by dividing the value of the Citadel assets, as determined by
appraisal, by a stated value of the Reading Common Stock.
-21-
<PAGE>
READING COMPANY AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1996
(amounts in tables in thousands)
Pursuant to the Exchange Agreement, Reading Entertainment agreed that
immediately following its receipt of the Citadel Preferred Stock from Craig, it
would deliver such shares to Citadel for an equal number of shares of a new
series of Citadel preferred stock (the "New Preferred Stock"). Under the terms
of the Citadel Preferred Stock, Citadel had the right, at any time after
November 10, 1997, to redeem the Series A Preferred Stock in whole or in part,
at a redemption price equal to the stated value ($3.95 per share), plus accrued
and unpaid dividends, plus a premium equal to an accrual from November 4, 1994
on the stated value at a percentage per annum (the "Accrual Percentage") of 9%
until November 10, 1998, decreasing 1% each year thereafter until the Accrual
Percentage reaches zero. In addition, if, at the date a holder of shares of the
Citadel Preferred Stock elected to convert the shares into Citadel Common Stock,
the market price of the Citadel Common Stock was less than $3.00 per share,
Citadel had the right to redeem such shares of Citadel Preferred Stock, at the
same redemption price. Finally, if a change of control of Citadel occurred, each
holder of Preferred Stock had the right to require redemption of the shares of
the Citadel Preferred Stock held by him, also at the same redemption price.
The terms of the Preferred Stock are substantially identical to the terms of
the New Preferred Stock except that (i) the Accrual Percentage is 3% from and
after the closing and (ii) except on a change of control of Citadel, the holders
of the New Preferred Stock do not have the right to convert the New Preferred
Stock into Common Stock during the one-year period commencing on the 15th day
following the filing of Citadel's Annual Report on Form 10-K for the year ending
December 31, 1996.
Direct costs associated with the above transactions have been capitalized by
the Company and are reflected as "Deferred restructuring costs" in the Condensed
Consolidated Balance Sheet as of September 30, 1996. Also, the Company has
agreed to reimburse Citadel for its out of pocket costs with respect to the
transaction up to a maximum of $280,000.
-22-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
Due to the nature of the Company's historical business activities, revenues
and earnings have varied significantly reflecting the results of real estate and
other asset sales as well as the amount and timing of development activities. In
addition, Reading International is acquiring properties and entering into leases
for sites in Australia which it will develop into motion picture theaters. Until
the theaters have been constructed and are placed in operation, Reading
International will have no material revenues and can be expected to generate
losses. Accordingly, period-to-period comparisons of operating results are not
anticipated to be indicative of future financial results. Theater operating
results are seasonal and only include the results of the Angelika from the date
of acquisition, August 27. Accordingly theater operating results included in the
nine-month period ended September 30, 1996 may not be indicative of annual
theater operating results.
Revenues in the nine-month period ended September 30, 1996 increased
$1,643,000 to $17,322,000 from $15,679,000 in the corresponding nine-month
period last year. The increase was due in part to a $485,000 increase in theater
revenues recorded by Cine Vista (which 4% increase resulted from higher box
office revenues at existing theaters and the opening of a new 8-screen theater
in late 1995), the inclusion of $808,000 in Angelika theater revenues subsequent
to its acquisition and equity earnings of $1,475,000 from the Company's
investment in Citadel. (See Note 4). The current period revenue increases were
partially offset by a $317,000 decrease in "Interest and dividend" revenues and
an $806,000 decrease in "Other" revenues. The decrease in "Interest and
dividend" revenues was due to lower balances of investable funds due to the 1996
contributions to Reading International, the purchase of the Angelika and the
purchase of the Citadel Common Stock.
The $1,475,000 in "Equity in earnings of affiliate" reflects earnings from the
Company's investment in Citadel, and include a nonrecurring gain on sale of real
estate of $1,473,000 and nonrecurring income of $4,000,000 from the recognition,
for financial statement purposes, of previously deferred proceeds from the bulk
sale of loans by a previously owned subsidiary of Citadel. (See Note 4). "Other"
revenue in the nine month period ended September 30, 1996 includes $1,119,000
received net of expenses in full settlement of a claim against TPI (See Note
13). Revenues in the nine-month period last year included $1,146,000 received as
a condemnation award, a $425,000 litigation settlement and $319,000 received in
settlement of two claims relating to the Company's former railroad operations.
"Theater costs", "Theater concession costs" and "Depreciation and
amortization" reflect the direct theater costs of Cine Vista and the Angelika's
operations. These costs increased $1,674,000 from $9,789,000 in the nine months
ending September 30, 1995 to $11,463,000 in this year's nine-month period due
primarily to increased costs associated with higher revenues, the operating
expenses associated with the addition of a new Cine Vista 8-screen theater in
late 1995 and the inclusion of $583,000 of theater costs associated with the
Angelika's operations subsequent to acquisition. Significant Cine Vista expense
increases in the current nine-month period include a $119,000 increase in film
rent (which expense remained constant as a percentage of box office revenues
from the prior year), a $147,000 increase in contingent rent under facility
leases, a nonrecurring provision of $130,000 in anticipation of the settlement
of a landlord rental dispute (see Note 10), and increased operating, rent and
depreciation expense as a result of the opening of the new 8-screen theater in
late 1995. During the fourth quarter of 1996 the minimum wage was increased by
approximately 15%. Since most of Cine Vista's theater employees are paid minimum
wage, the increase will have a negative effect upon Cine Vista's operating
results in future periods.
"General and administrative" expenses in the current nine-month period
remained relatively consistent with the prior year nine-month period.
"Equity loss from investment in Australian joint venture" reflects the
Company's 50% share of the initial general and administrative expenses in
Australia and noncapitalized development expenditures relating to new theater
-23-
<PAGE>
site analysis and selection (See Note 5). Reading International's first theater
in Australia is expected to open before the end of the 1996. However, Reading
International anticipates continuing losses during the next six months until
additional new theaters are developed and operations initiated. The investment
in and operating results of Reading International have been reported under the
equity method. On October 15, 1996, Reading Entertainment acquired, among other
things, ownership of all of Reading International and will consolidate the
results of Reading International with the results of the Company in future
periods.(See Note 14).
The Company recorded $98,000 of interest expense in the nine months ended
September 30, 1996 related primarily to the $3,325,000 promissory note payable
to Craig for the acquisition of the Citadel Common Stock, which note was retired
on July 29, 1996.
The Company recorded AMT expense of $57,000 and $60,000 in the nine months
ended September 30, 1996 and 1995, respectively and recorded $22,000 in state
income tax expense in the current year quarter related to earnings from its
wholly-owned subsidiary which purchased the 83.3% interest in the Angelika. Upon
adoption of SFAS No. 109 in 1993, a deferred tax asset of $132,000 was recorded
for the tax benefits which were determined by management to be more likely than
not to be realized from the Company's net operating loss carryforwards. The
Company recorded a $132,000 tax provision in the Condensed Consolidated
Statement of Operations for the six months ended June 30, 1995 related to the
realization of such tax benefits in that period.
The Company recorded net income of $2,412,000 and $2,386,000 for the nine
months ended September 30, 1996 and 1995, respectively.
Revenues for the three months ended September 30, 1996 decreased $673,000 to
$6,636,000 from $7,309,000 compared with the three months ended September 30,
1995. The decrease was due primarily to a decrease in revenues from Cine Vista
of $883,000, a decrease in "Other revenues" of $340,000, a decrease of $290,000
in "Interest and dividend" revenues (which decrease was due to lower invested
funds from the 1996 contributions to Reading International and the purchase of
the Angelika). The decrease in revenues in the current nine-month period was
offset somewhat by the inclusion of $808,000 in theater revenues from the
Angelika subsequent to its acquisition. The decrease in "Other revenues" in the
current three-month period was due to the inclusion in the prior year quarter of
$1,146,000 in condemnation proceeds (discussed above), and $319,000 received in
settlement of two claims relating to the Company's former railroad operations
offset somewhat by the inclusion in the current year nine-month period of
$1,119,000 from the Company's full settlement of its claim against TPI (See Note
13).
"General and administrative" expense in the current three-month period
remained relatively consistent with three-month period last year.
LIQUIDITY AND CAPITAL RESOURCES:
The Company had sufficient funding available to meet its commitments as of
September 30, 1996. However, the Company believed that there are significant
expansion opportunities in the cinema exhibition business and, that if it is to
fully exploit the opportunities for growth in the exhibition business, it needed
to increase its capital base and simplify the corporate structures which it had
found necessary to utilize in pursuing such opportunities. Accordingly, the
Exchange Agreement approved by shareholders on October 15, 1996 (see Note 14)
was developed to achieve the goals of significantly increasing the Company's
capital base while simultaneously simplifying its corporate structure. Pursuant
to its terms, Reading Entertainment received 693,650 shares of Series B
Preferred Stock of Stater Bros. Holdings, Inc. with a stated value of
$69,365,000, Craig's 50% membership interest in Reading International
(increasing the Company's ownership to 100% of Reading International and thereby
terminating the Capital Funding Agreement), 1,329,114 shares of the Citadel
Preferred Stock (stated value of $3.95 per share or a total of $5,250,000) and
$7,000,000 in cash. In payment for the assets, the Company issued common and
preferred stock to Craig and Citadel. It is believed by the Company that the
non-cash assets may be
-24-
<PAGE>
hypothecated or sold in order to significantly increase the Company's base of
liquid funds for investment in the cinema exhibition business.
In November 1995, the Company and Craig formed Reading International in order
to make available additional capital and liquidity to develop other theater
opportunities in Australia. Reading International, through a 75% owned joint
venture subsidiary, is scheduled to open its first theater in the fourth quarter
of 1996 and is actively seeking other properties to develop in Australia. In
addition to the theater to be opened in the fourth quarter of 1996, Reading
International has acquired two sites and has made deposits for several other
real property purchases or leases. In March 1996, pursuant to the terms of the
Capital Funding Agreement (which was subsequently terminated in October 1996),
the Company and Craig each contributed to Reading International $12,500,000 in
cash.
Cine Vista has three new theaters under development (including a 10 screen
development which will replace an existing six-plex now operated by Cine Vista)
and is seeking additional theater sites in Puerto Rico. Cine Vista entered into
a revolving credit agreement in December 1995 (the "Credit Agreement"). In
accordance with the terms of the Credit Agreement, Cine Vista may borrow up to
$15,000,000 to repay certain loans payable to a wholly-owned subsidiary of the
Company and fund certain new theater development expenditures (See Note 12). No
amounts are presently outstanding under the Credit Agreement. The Company may
use funds available under the Credit Agreement to fund its other theater
development activities provided adequate funding remains available under the
Credit Agreement to fund certain Cine Vista development projects.
On March 29, 1996, the Company purchased from Craig 1,564,473 shares of
Citadel Common Stock for an aggregate purchase price of $3,324,505 (See Note 4).
Upon acquisition of the Citadel Common Stock, the Company paid Craig with a five
year unsecured, interest-bearing promissory note, which note was repaid together
with accrued interest in July 1996. The Company also acquired from Craig (for
$50,000) a one year option to acquire, at fair market value, as determined by an
investment banker selected by the parties, 1,329,114 shares of the 3% Cumulative
Voting Convertible Preferred Stock, stated value $3.95 per share, of Citadel
(the "1996 Option"), and an option to acquire under certain circumstances, a
warrant to acquire 666,000 shares of Citadel Common Stock (the "Citadel
Warrant"). At the Company's 1996 Annual Meeting of Stockholders held on October
15, 1996, a transaction was approved by shareholders, whereby, among other
things, the 1996 Option and the portion of it relating to the Citadel Warrant
were terminated (See Note 14).
In January 1996, the Company and the other parties agreed to settle litigation
whereby the Company sought to recover certain environmental cleanup costs
previously expended by the Company on properties it formerly owned. The
agreement provides for the Company to receive payments totalling $2.35 million
to recover these costs, which amount the Company anticipates receiving in 1996.
The Company is presently finalizing a settlement agreement. The parties to the
settlement also agreed to pay an amount ranging from 52% to 55% of certain
future costs, if any, the Company may incur in cleaning environmental
contamination on the Viaduct (See Note 10).
Prior to the Company's 1981 reorganization, the Company had extensive railroad
and related operations. Such operations may have contributed to environmental
contamination of properties now owned by the Company, previously sold by the
Company, or to which the Company, prior to its reorganization, sent waste. The
ultimate extent of liabilities, if any, with respect to such matters, as well as
the timing of cash disbursements, if any, cannot be determined. However,
management is of the opinion, based on the information currently known, that
while the ultimate liability resulting from such matters could have a material
effect upon the results of operations in a given year, they will not have a
material adverse effect upon the Company's financial position or liquidity.
"Cash and cash equivalents" decreased $23,045,000 from $44,189,000 at December
31, 1995 to $21,144,000 at September 30, 1996, due primarily to $12,888,000 in
capital contributions to Reading International (See Note 4), $11,101,000 used to
purchase the Angelika (an additional $1,293,000 was expended in 1995 in
conjunction with the acquisition) and $3,325,000 used to purchase the Citadel
Common Stock. While not necessarily indicative of cash flows determined under
generally accepted accounting principles, Cine Vista's
-25-
<PAGE>
operating cash flow (income before depreciation and amortization) totaled
$1,726,000 in the nine month period ended September 30, 1996 versus $2,295,000
in the prior year nine month period. Cine Vista's operating cash flow for the
current nine-month period includes a nonrecurring $130,000 charge for additional
rent expense recorded as a result of the settlement with a landlord. (See Note
10). After consideration of the 16.7% minority interest, the Company's share of
the Angelika's operating cash flow (income before depreciation and amortization
and interest) totaled $230,000 from August 27 through September 30, 1996. In
addition to the theater operating cash flow noted above, other significant
sources of liquid funds during this period included "Interest and dividends"
revenue of $1,470,000, a decrease in due from affiliate of $1,040,000 (related
to the payment by Craig of amounts advanced by the Company on Craig's behalf for
Reading International), and $1,119,000 received net of expenses in full
settlement of the Company's claim against TPI (See Note 13).
In addition to the funds used in the current nine-month period for Reading
International contributions, the purchase of the Angelika and the purchase of
the Citadel Common Stock, principal uses of liquid funds also included
approximately $1,285,000 used to purchase property, plant and equipment for Cine
Vista's operations.
Principal sources of liquid funds in the prior year nine-month period included
$2,295,000 from Cine Vista's operating cash flow, $1,787,000 in "Interest and
dividends" revenue, a decrease in "Prepaid and other current assets" of $213,000
and $1,890,000 received in "Other revenues" as described above. In addition to
operating expenses, the principal uses of liquid funds for the nine months ended
September 30, 1995, included $449,000 used to purchase property, plant and
equipment for Cine Vista's operations, and a decrease in "Other liabilities" of
$269,000.
-26-
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
In September 1996, an individual shareholder of Reading Company (the
"Company") commenced a purported class action on behalf of the Company's
minority shareholders owning Class A Common Stock (the "Shareholder Action"),
entitled Walter Alphin v. Reading Company, et al., in the Philadelphia County
Court of Common Pleas relating to the transactions which were approved by
shareholders of the Company on October 15, 1996. (See Note 14). The complaint in
the Shareholder Action (the "Complaint") named the Company, Craig Corporation
("Craig"), former directors of the Company Gerard P. Laheney and Ralph B. Perry
III, and all of the current directors of the Company (other than Gregory R.
Brundage) as defendants. The Complaint alleges, among other things, that (i)
none of the directors of the Company are independent and each was appointed by
James J. Cotter, Craig or those controlled by them; (ii) resignations of Messrs.
Laheney and Perry from the Board of Directors of the Company, and of Edward L.
Kane from the Board of Directors of Craig, were a sham designed to give the
"appearance" that each is disinterested, and that, in reality, none of the
defendants can exercise independent business judgement or protect the interests
of the Company's minority shareholders; (iii) the Stock Transactions are "in
violation of defendants' fiduciary duties owed" to the holders of the Class A
Common Stock and "in violation of Pennsylvania law," in that the Stock
Transactions lack a valid business purpose and are "designed and intended solely
to minimize the interests of" the holders of the Class A Common Stock and
"dilute their continued equity participation" in the Company, to the advantage
of Craig, Citadel, and their controlling shareholders; (iv) the Board of
Directors of the Company is unable to consider the transactions in a way that
reflects the "intrinsic value" of the Class A Common Stock; (v) the defendants
other than the Company have breached their fiduciary and other duties to the
purported class in that they have not exercised independent business judgement,
have acted to the detriment of the holders of the Class A Common Stock in order
to benefit defendants, and have participated in a plan to dilute the interests
of such shareholders for no proper business purpose, particularly in that the
investment in the Stater Stock is inconsistent with the Company's identified
business; (vi) the Company's Board of Directors had "gone through the motions"
of appointing the Independent Committee of "purportedly independent directors";
(vii) the defendants have failed to disclose the "full extent of the future
earnings potential" of the Company as well as the value of its assets and the
assets to be transferred to it; and (viii) Craig will benefit unjustly by having
its credit rating upgraded and its balance sheet bolstered. The Complaint seeks
preliminary and permanent injunctive relief to prevent the consummation of the
transactions or any similar transaction, rescission of the transactions if they
are consummated, divestiture by the defendants of assets and shares of the
Company they may obtain as a result of the transactions, and unspecified damages
and other relief. Management believes that the allegations of the Company are
without merit and intends to vigorously defend itself against the Shareholder
Action.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Company filed a Form 8-K on September 18, 1996 reporting an event under
Item 2 (Acquisitions or Disposition of Assets).
27 Financial Data Schedule
-27-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
READING COMPANY, REGISTRANT
Date: November 14, 1996 By: /s/ James A. Wunderle
------------------------------- ---------------------------------
James A. Wunderle
Executive Vice President,
Chief Operating Officer
and Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
Date: November 14, 1996 By: /s/ Eileen M. Mahady
------------------------------- ---------------------------------
Eileen M. Mahady
Controller
(Principal Accounting Officer)
-28-
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 21,144
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0
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<COMMON> 52
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