<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ____________TO ___________
Commission file number 001-13187
--------------
CLEARVIEW CINEMA GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-3338356
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
97 Main Street
Chatham, New Jersey 07928
(Address of principal executive offices)
(973) 377-4646
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 2,304,802 shares of common
stock were outstanding as of November 13, 1998
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
---------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,647,176 $14,703,448
Inventories 116,655 185,086
Other current assets 341,273 563,199
----------- ------------
Total current assets 2,105,104 $15,451,733
PROPERTY, EQUIPMENT AND LEASEHOLDS, NET 34,488,714 44,484,942
Intangible assets, net 19,931,555 34,033,579
Other non-current assets 827,019 1,744,500
----------- ------------
$57,352,392 $ 95,714,754
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,876,607 $ --
Accounts payable and accrued expenses 4,562,633 7,717,307
----------- ------------
Total current liabilities 7,439,240 7,717,307
Long-term debt, less current maturities 32,234,955 80,000,000
Subordinated notes payable - long term 6,000,000 --
COMMITMENTS AND CONTINGENCIES (NOTE 7)
CLASS B REDEEMABLE PREFERRED STOCK 1,350,000 --
STOCKHOLDERS' EQUITY:
Undesignated preferred stock:
2,475,697 shares authorized -- --
Class A Preferred Stock, par value $.01, 1,303 shares
authorized; 779 shares issued and outstanding 8 8
Class C Preferred Stock, par value $.01, 3,000 shares
authorized; 3,000 shares issued and outstanding -- 30
Common Stock, par value $.01, 10,000,000 shares
authorized; 2,213,097 and 2,304,802 shares issued
and outstanding 22,131 23,048
Additional paid-in capital 12,214,515 18,596,916
Accumulated deficit (1,908,457) (10,622,555)
----------- -------------
Total stockholders' equity 10,328,197 7,997,447
----------- ------------
$57,352,392 $ 95,714,754
=========== ============
</TABLE>
See accompanying notes to consolidated financial information.
2
<PAGE> 3
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------==--------
1997 1998 1997 1998
--------------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
THEATER REVENUES:
Box office $3,335,958 $ 9,259,160 $8,044,812 $22,904,009
Concession 976,966 3,285,175 2,314,787 7,876,443
Other 129,193 363,951 270,328 953,471
---------- ----------- ---------- ----------
$4,442,117 $12,908,286 $10,629,927 $31,733,923
---------- ----------- ----------- -----------
OPERATING EXPENSES:
Film rental 1,669,935 4,520,509 3,858,635 11,049,893
Cost of concession sales 146,325 491,686 367,603 1,151,834
Theater operating expenses 1,706,986 5,153,727 4,155,946 12,293,994
General and administrative expenses 242,071 1,166,338 646,789 2,835,857
Depreciation and amortization 569,027 1,647,116 1,366,734 4,529,685
---------- ----------- ---------- ----------
4,334,344 12,979,376 10,395,707 31,861,263
---------- ----------- ---------- ----------
OPERATING (LOSS) INCOME 107,773 (71,090) 234,220 (127,340)
Interest expense, net 525,230 2,067,079 1,249,376 4,693,427
---------- ----------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (417,457) (2,138,169) (1,015,156) (4,820,767)
Extraordinary item - loss on redemption -- -- -- 2,029,649
of debt ---------- ----------- ---------- ----------
NET LOSS (417,457) (2,138,169) (1,015,156) (6,850,416)
---------- ------------ ---------- ----------
Preferred Stock Dividends -- (470,767) -- (1,863,682)
---------- ------------ ---------- ----------
LOSS AVAILABLE FOR COMMON STOCK $ (417,457) $(2,608,936) $(1,015,156) $
========== ============ =========== ===========
(8,714,098)
BASIC AND DILUTED LOSS PER SHARE $ (0.29) $ (1.13) $ (0.61) $ (3.84)
========== =========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial information.
3
<PAGE> 4
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS C
CLASS A PREFERRED STOCK COMMON STOCK PREFERRED STOCK
------------------------ --------------------- ----------------- ADDITIONAL
PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ --------- ------- ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997: 779 $8 2,213,097 $22,131 -- -- $12,214,515
Issuance of common stock
For assets acquired -- -- 91,705 917 -- 1,747,083
Issuance of preferred stock -- -- 3,000 $30 2,921,032
Preferred stock dividend -- -- -- -- -- -- 1,714,286
Net loss -- -- -- -- -- -- --
---- --- --------- ------- ----- --- -----------
BALANCE, SEPTEMBER 30, 1998 779 $8 2,304,802 $23,048 3,000 $30 $18,596,916
==== === ========= ======= ===== === ===========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
------------- -----------
<S> <C> <C>
BALANCE, DECEMBER 31, 1997: $ (1,908,457) $10,328,197
Issuance of common stock
For assets acquired -- 1,748,000
Issuance of preferred stock -- 2,921,062
Preferred stock dividend (1,863,682) (149,396)
Net loss (6,850,416) (6,850,416)
----------- ----------
BALANCE, SEPTEMBER 30, 1998 $(10,622,555) $(7,997,447)
============ ===========
</TABLE>
See accompanying notes to consolidated financial information.
4
<PAGE> 5
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 30,
------------------------------
1997 1998
---------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,015,156) $ (6,850,416)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization of property, equipment
& leaseholds 1,104,487 3,019,099
Amortization of intangible assets 262,247 1,510,585
Amortization of debt discount and issuance costs 126,463 285,906
Common stock issued upon surrender of warrants, recorded
as interest expense 104,000 --
Extraordinary loss from early extinguishment of debt -- 2,029,649
Changes in operating assets and liabilities:
Inventories (33,134) (68,431)
Other current assets (286,499) (221,926)
Other non-current assets (10,035) (192,640)
Accounts payable and accrued expenses 709,733 3,088,840
------------ ------------
Net cash provided by operating activities 962,106 2,600,666
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase and construction of property, equipment and (2,208,255) (4,951,167)
leaseholds
Acquisitions of theaters (8,475,070) (18,387,940)
Acquisition costs (229,679) (374,681)
Escrow funding for contingent acquisition price of theater -- (793,969)
------------ ------------
Net cash used in investing activities (10,913,004) (24,507,757)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long term debt 4,824,738 85,800,000
Payments on long term debt (1,024,604) (47,154,291)
Prepayment premium on long term debt repaid -- (410,000)
Debt issuance costs (472,966) (4,759,845)
Redemption of class B preferred stock -- (1,350,000)
Proceeds from initial public offering and underwriter 9,201,000 --
warrants
Proceeds from issuance of class C preferred stock -- 3,000,000
Preferred stock issuance costs (2,132,903) (78,938)
Preferred stock dividends paid -- (83,563)
------------ ------------
Net cash provided by financing activities 10,395,265 34,963,363
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 444,367 13,056,272
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 751,345 1,647,176
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,195,712 $ 14,703,448
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 968,373 $ 2,510,627
============ ============
Non-cash investing and financing activities:
Issuance of common stock as consideration for theater
and assets acquired $ -- $ 1,748,000
============ ============
Warrants repurchased through issuance of debt $ 1,000,000 $ --
============ ============
Common stock issued upon termination of preferred stock
redemption right, considered a preferred stock dividend $ 26,000 $ --
============ ============
</TABLE>
See accompanying notes to consolidated financial information.
5
<PAGE> 6
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
Note 1--Basis of Presentation:
The balance sheet as of December 31, 1997 has been derived from the audited
balance sheet contained in the Form 10-KSB of Clearview Cinema Group, Inc.
("Clearview" or "the Company"), and is presented for comparative purposes. All
other financial information is unaudited. In the opinion of management, all
adjustments, which include only normal recurring adjustments necessary to
present fairly the financial position, results of operations and cash flows for
all periods presented, have been made. Results of operations for interim periods
are not necessarily indicative of the operating results for a full year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. The financial information presented in this report should
be read in conjunction with the annual financial statements included in the
Annual Report on Form 10-KSB.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards 128, Earnings Per Share ("SFAS 128") which is
effective for financial statements for both interim and annual periods ending
after December 15, 1997. The Company adopted SFAS 128 in the fourth quarter of
1997. SFAS 128 replaces the presentation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Basic earnings per share is
calculated based on the weighted average number of common shares outstanding
during the period and excludes all dilution. Diluted earnings per share is
calculated by using the weighted average number of common shares outstanding,
while also giving effect to all dilutive potential common shares that were
outstanding during the period. Prior period amounts have been restated to
conform to the requirements of SFAS 128.
For the three and nine months ended September 30, 1998, the net loss
available to common stockholders was $2,608,936 and $8,714,098, respectively
after giving effect to the preferred stock dividend. For the three and nine
months ended September 30, 1997, the net loss available to common stockholders
was $417,457 and $1,015,156, respectively (no preferred dividend was applicable
for the 1997 periods). For the three and nine months ended September 30, 1998,
the weighted average number of shares outstanding used in the computation of
basic and diluted loss per share was 2,304,802 and 2,268,943, respectively. For
the three and nine months ended September 30, 1997, the weighted average number
of shares outstanding used in the computation of basic and diluted loss per
share was 1,443,000 and 1,668,000, respectively.
Reclassification - Certain amounts previously reported have been
reclassified to conform to current period presentation.
Note 2--Merger Transaction:
On August 13, 1998, Clearview announced that it had entered into an
Agreement and Plan of Merger, dated August 12, 1998 (the "Merger Agreement"),
among Cablevision Systems Corporation, a Delaware corporation ("Cablevision"),
CCG Holdings Inc., a Delaware corporation and a wholly-owned subsidiary of
Cablevision ("CCG Holdings") and the Company. Upon the terms and subject to the
conditions of the Merger Agreement, the Company will be merged (the "Merger")
with CCG Holdings, and the surviving corporation will be a wholly-owned
subsidiary of Cablevision. The Merger is expected to be consummated on December
1, 1998, unless that date is extended. The gross value of the transaction is
estimated at approximately $160 million, based on the acquisition of
approximately 3.3 million shares of the Company's common stock, $.01 par value
per share (the "Common Stock") on a fully diluted basis and the assumption of
the $80 million of the Company's 10-7/8% Senior Notes Due 2008 (the "Notes")
outstanding as of August 13, 1998.
6
<PAGE> 7
Subject to certain allocation and proration provisions contained in the
Merger Agreement, the Merger Agreement provides, among other things, that at the
Effective Time (as defined in the Merger Agreement), (i) each outstanding share
of Clearview Common Stock will be converted into the right to receive, at the
option of the holder thereof, (A) $24.25 per share in cash or (B) that number of
shares of Class A common stock, par value $.01 per share, of Cablevision
("Cablevision Class A Common Stock"), equal to the amount derived by dividing
$24.25 by the average of the average daily per share high and low sales prices
of Cablevision Class A Common Stock as reported on the American Stock Exchange,
Inc. on each of the ten trading days ending on and including the third trading
day prior to the closing of the Merger (the "Share Conversion Number");
provided, however, that if such average price for Cablevision Class A Common
Stock is less than $36.00, no holders of Clearview Common Stock will have the
right to elect to receive Cablevision Class A Common Stock; (ii) each
outstanding share of Class A Preferred Stock, $.01 par value per share ("Class A
Preferred Stock") of Clearview will be converted into the right to receive, at
the option of the holder thereof, the cash consideration or the stock
consideration described above, as if the outstanding shares of Class A Preferred
Stock had been converted into shares of Common Stock immediately prior to the
Effective Time; provided, that if the average price for Cablevision Class A
Common Stock described above is less than $36.00, no holders of Clearview Class
A Preferred Stock will have the right to elect to receive Cablevision Class A
Common Stock; and (iii) each outstanding share of Class C Preferred Stock, $.01
par value per share of Clearview ("Class C Preferred Stock", and together with
the Class A Preferred Stock, "Preferred Stock" and, together with the Common
Stock, the "Company Securities") will be converted into the right to receive, at
the option of the holder thereof, (A) the amount in cash equal to $24.25 per
share multiplied by the number of shares of Common Stock issuable upon
conversion of a share of Class C Preferred Stock based on an exchange ratio of
51 shares of Common Stock per share of Class C Preferred Stock (the "Class C
Conversion Number") or (B) that number of shares of Cablevision Class A Common
Stock equal to the amount derived by multiplying the Class C Conversion Number
and the Share Conversion Number; provided, that if the average price for
Cablevision Class A Common Stock described above is less than $36.00, no holders
of Class C Preferred Stock will have the right to elect to receive Cablevision
Class A Common Stock.
Contemporaneously with the execution and delivery of the Merger Agreement,
and as a condition and inducement to Cablevision's and CCG Holdings' willingness
to enter into the Merger Agreement, certain holders (the "Selling Stockholders")
of the Company's Common Stock and Class A Preferred Stock, holding shares
representing 54.7% of the total number of votes entitled to be cast by the
holders of shares of the Company Securities, entered into an agreement (the
"Stockholders Agreement") with Cablevision pursuant to which such Selling
Stockholders have agreed, among other things, to vote in favor or adoption of
the Merger Agreement and to deliver an irrevocable proxy to that effect to
Cablevision at its request.
The execution and delivery of the Stockholders Agreement constituted a
change of control under the indenture pursuant to which the Notes were issued
(the "Indenture"). The Indenture provides that upon the occurrence of a Change
of Control of the Company (a "Change of Control"), each holder of the Notes has
the right to require the Company to purchase all or any part (equal to $1,000 or
an integral multiple thereof) of such holder's Notes at an offer price in cash
equal to 101% of the aggregate principal amount thereon plus accrued and unpaid
interest and Liquidated Damages (as defined in the Indenture) thereof, if any,
to the date of purchase. Pursuant to the Merger Agreement, Cablevision had
agreed with the Company, subject to certain conditions, to purchase any Notes
required to be purchased by the Company. On August 19, 1998, the Company mailed
a Notice of Change of Control to all holders of the Notes, informing such
holders of their right to require the Company to purchase the Notes. The Change
of Control offer expired September 17, 1998, and no holders requested that the
Company purchase their Notes.
The Change of Control constitutes an event of default under the New Credit
Facility giving the lender the right to terminate the credit commitment and
declare all amounts outstanding immediately due and payable (see Note 4 to the
Consolidated Financial Information). However, the lender has agreed in writing
to waive any violations of the New Credit Facility that may exist solely as a
result of the Merger. The Change of Control transaction also results in all
stock options outstanding to purchase 284,500 shares of the Company's Common
Stock to become fully exercisable.
On October 29, 1998, the Company made a solicitation (the "Solicitation") of
consents (the "Consents") for certain amendments (the "Proposed Amendments") to
the Indenture and an offer to purchase any and all of the Notes for cash,
pursuant to the terms of a Solicitation of Consents Relating to and Offer to
Purchase for Cash dated October 29, 1998 (the "Solicitation and Offer
Statement"). On November 11, 1998, the Company issued a Supplement to the
Solicitation and Offer Statement dated November 11, 1998 (the "Supplement"),
amending the terms of the Proposed Amendments (as amended, the "New Proposed
Amendments"). The New Proposed Amendments would, among other things, eliminate
in their entirety the covenants in the Indenture that prohibit or restrict the
Company's ability to (i) make dividend and other distributions to its
shareholders, (ii) make certain investments, (iii) incur indebtedness, (iv)
incur liens to secure indebtedness, and (v) enter into sale and leaseback
transactions. As part of the Solicitation (as supplemented by Supplement), the
Company offered to pay a consent fee (the "Consent Payment") of $45 for each
$1,000 of principal amount of Notes in respect of which a Consent is delivered
by the consent deadline, November 12, 1998 (the "Consent Deadline"). The
Solicitation (as supplemented by the Supplement) has resulted in the delivery of
Consents by holders of Notes representing a majority of the outstanding
aggregate principal amount of the Notes as of the Consent Deadline. Any tender
of Notes prior to the Consent Deadline also constitutes
7
<PAGE> 8
delivery of a Consent with respect to such Notes. The Company is also offering
to purchase any and all of the Notes for cash upon the terms and subject to the
conditions set forth in the offer (the "Offer"). Any tender of Notes pursuant to
the Offer prior to the Consent Deadline also constitutes the delivery of a
Consent with respect to such Notes. For Notes tendered prior to the Consent
Deadline, the total consideration was $1,185 for each $1,000 of principal amount
of Notes, plus accrued and unpaid interest to but excluding the settlement date
(the "Total Consideration"), which includes the Consent Payment. For Notes
tendered after the Consent Deadline, the purchase price will be $1,140 for each
$1,000 principal amount of Notes, plus accrued and unpaid interest to but
excluding the settlement date (the "Tender Purchase Price"). The Solicitation
and Offer are being made in connection with the proposed merger involving
Cablevision. The Solicitation, the Company's obligation to pay the Consent
Payments, the New Proposed Amendments, the Offer and the Company's obligation to
pay the Total Consideration and the Tender Purchase Price are conditioned on,
among other things (a) the satisfaction or waiver of all of the conditions to
the Merger contained in the Merger Agreement and (b) the receipt by the Bank of
New York as depositary of valid and unrevoked Consents from record holders of a
majority of in principal amount of the outstanding Notes. The Merger, however,
is not conditioned on the successful completion of the Solicitation or the Offer
or the adoption of the New Proposed Amendments. The Merger may be consummated
without the adoption of the Proposed Amendments. The Offer will expire at 12:00
Noon, New York City time on December 1, 1998, unless extended or earlier
terminated. As of the Consent Deadline, holders of Notes representing
approximately 75% of the outstanding value of Notes have agreed to tender their
Notes.
If the New Proposed Amendments become effective, the New Proposed Amendments
will be binding on all holders that did not tender Notes in the Offer, including
those holders which tendered Notes in the exchange offer. Such holders who do
not tender their Notes in the Offer will hold such Notes under the Indenture as
modified by the supplemental indenture and such holders will no longer be
entitled to the benefits of the covenants modified or eliminated by the New
Proposed Amendments. The modification or elimination of restrictive covenants
and other provisions pursuant to the New Proposed Amendments may permit the
Company to take actions that could increase the credit risks with respect to the
Company faced by non-tendering holders, adversely affect the market price of the
Notes that remain outstanding or otherwise be adverse to the interest of
non-tendering holders. Among other amendments, the New Proposed Amendments
modify the Indenture to eliminate the consolidated net worth and fixed charge
coverage ratio tests, which limit the Company's ability to incur additional
indebtedness or issue disqualified stock.
The Company is seeking to make the New Proposed Amendments in order to give
it greater flexibility after the Merger with Cablevision. Cablevision has
undertaken to provide the Company with sufficient immediately available funds on
the settlement date to make all Consent Payments required to be made in
connection with the Solicitation (as supplemented by the Supplement) and to
repurchase any and all Notes tender for payment in connection with the Offer.
Cablevision will account for the Merger using the purchase method of
accounting in accordance with the provisions of Accounting Principles Board
Opinion No. 16. "Business Combinations." Accordingly, Cablevision will record at
its cost the acquired assets less liabilities assumed, with the excess of such
cost over the estimated fair value of such net assets reflected as goodwill.
Additionally, certain costs directly related to the acquisition will be
reflected as additional purchase price in excess of the net assets acquired.
Cablevision has not yet determined whether the new basis of the net assets of
Clearview will be recorded on Clearview's separate financial statements. Should
Cablevision record such amounts on such separate financial statements, the
increase in net assets would result principally in the recording of goodwill,
which would be amortized over future periods.
Note 3--Stock Based Compensation:
At the June 11, 1998 Annual Meeting of Stockholders, the shares of the
Company's Common Stock that are authorized to be issued under the 1997 Stock
Incentive Plan (the "Plan") was increased from 200,000 to 450,000. During the
first and second quarter of 1998 the Company granted stock options to purchase
61,000 and 101,000 shares of Common Stock, respectively, under the Plan with
exercise prices equal to the closing quoted market price of the Company's Common
Stock on the date of grant. No stock options were granted in the third quarter
of 1998. In accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", no compensation costs have been
recognized as the options had no intrinsic value (exercise price equaled fair
value of Common Stock) on the dates of issuance. Awards granted under the Plan
become fully vested upon a Change of Control of the Company (see Note 2 to the
Consolidated Financial Information).
8
<PAGE> 9
Note 4--Long-Term Debt and Subordinated Notes Payable:
In February 1998, the Company amended and restated its then-existing Credit
Facility (the "Old Credit Facility") by obtaining a third term note ("Term Note
C") totaling $5.8 million which was used to acquire four additional theaters.
In June 1998, the Company completed an offering of Notes for $80.0 million
(approximately $76 million after issuance costs and related fees). The Notes
mature on June 1, 2008 and bear interest at a fixed rate of 10.875%, payable
semiannually on June 1 and December 1, commencing on December 1, 1998. At any
time prior to June 1, 2001, the Company may on any one or more occasions redeem
up to 33% of the aggregate principal amount of Notes at a redemption price of
110.875% of the principal amount thereof, with the net cash proceeds of a public
offering of common stock of the Company or the net cash proceeds from a
strategic equity investment in the Company, provided that, among other things,
at least $53.3 million in the aggregate principal amount of the Notes remains
outstanding immediately after such redemption. After June 1, 2003, the Notes are
subject to redemption at any time at the option of the Company, at specified
redemption prices. Upon a Change of Control, each holder of the Notes has the
right to require the Company to repurchase all or any part of such holder's
Notes at an offer price equal to 101% of the aggregate principal amount thereof
(see Note 2 to the Consolidated Financial Information). The Notes also stipulate
that the holders of at least 25% in principal amount of the then outstanding
Notes may declare all the Notes due and payable immediately upon the occurrence
of certain events of default, such as default in payment of principal and
interest when due, default under other agreements relating to indebtedness
individually or in the aggregate exceeding $5 million and failure to comply with
the covenants and other provisions of the Indenture. The Notes further provide
that if any event of default occurs prior to June 1, 2003 and is due to any
willful action or inaction taken or not taken by the Company with the intention
of avoiding the prohibition on redemption of certain portions of the Notes prior
to June 1, 2003, then the Notes shall become immediately due and payable at a
specified premium, ranging from 107.25% to 110.875% of the principal amount
depending on the date the event of default occurs. The Notes impose various
restrictive covenants, including restrictions on the payment of dividends, the
incurrence of additional indebtedness, the entering into of certain transactions
and the issuance of preferred stock in certain circumstances. However, as a
result of the New Proposed Amendments, these covenants would be eliminated (see
Note 2 to the Consolidated Financial Information).
Concurrent with the closing of the Notes offering, the Company repaid the
borrowings under the Old Credit Facility ($41.1 million, including accrued
interest and a prepayment premium) and entered into a new credit facility (the
"New Credit Facility") with the same institution, which provides for a secured
revolving line of credit in the aggregate principal amount of $15.0 million. The
New Credit Facility bears interest at the prime rate (8.25% at September 30,
1998) with all outstanding indebtedness repayable on the fifth anniversary of
the closing of the New Credit Facility. The New Credit Facility is
collateralized by substantially all of the assets of the Company and contains
various restrictive covenants including minimum interest and debt service
coverage ratios, restrictions on the payment of dividends (except on the Class B
Preferred Stock and Class C Preferred Stock now outstanding), restrictions on
payments to purchase, redeem or otherwise acquire or retire for value any shares
or rights to acquire shares of the Company's capital stock and subordinated
indebtedness (except the Class B Preferred Stock, Class C Preferred Stock and
any subordinated indebtedness outstanding at the time of the agreement), the
incurrence of additional indebtedness and the entering into of certain
transactions. The New Credit Facility agreement further stipulates that the
lender may terminate the credit commitment and declare all of the amounts
outstanding under the agreement to be immediately due and payable upon the
occurrence of certain events including default on payment of principal and
interest when due, noncompliance with covenants, default under other agreements
relating to indebtedness individually or in the aggregate exceeding $5 million,
and Change of Control (see Note 2 to the Consolidated Financial Information).
There were no amounts outstanding under the New Credit Facility as of the date
hereof.
In June 1998 the Company repaid $6.0 million of Subordinated Notes Payable,
issued in 1997 to the seller in connection with the Nelson Ferman Acquisition,
from the proceeds of the Notes and Class C Preferred Stock offerings (see Note 5
to the Consolidated Financial Information).
Note 5 -- Preferred Stock:
In April 1998 the Company designated a new series of preferred stock,
consisting of 3,000 shares of its preferred stock, $.01 par value, as Class C
Preferred Stock. Concurrently, the Company entered into a Securities
Purchase Agreement dated April 23, 1998 (the "Class C Preferred Stock
Agreement") and issued the 3,000 shares of its Class C Preferred Stock for $2.92
million in cash, net of offering costs.
The conversion feature of the Class C Preferred Stock grants the holder the
right to convert the Class C Preferred Stock
9
<PAGE> 10
into Common Stock based on a formula any time after July 20, 1998 at a
conversion price equal to the lesser of (a) $21.95 and (b) 87-1/2 % of the
average of the 4th, 5th, and 6th lowest closing trade price of the Company's
Common Stock during the 20 trading days preceding the conversion date. As more
fully described in Note 2, on August 13, 1998 an announcement was made of a
definitive agreement for Cablevision Systems Corporation to acquire all
outstanding shares of the Company's Common Stock. The Class C Preferred Stock
Agreement provides that, upon any public announcement by the Company regarding
such a Change of Control, the conversion price of the Class C Preferred Stock
adjusts to the lower of (a) the average closing trade price of the Company's
Common Stock for the five trading days immediately preceding the announcement
date ($22.11), and (b) the conversion price as determined by the conversion
formula discussed above and will remain in effect for a specified period of
time. Pursuant to the Stockholders Agreement, the holder of the Class C
Preferred Stock has agreed to a fixed rate of conversion whereby each share of
Class C Preferred Stock shall be convertible into 51 shares of Common Stock. The
holder of the Class C Preferred Stock is subject to certain conversion
limitations which restricts conversion of the preferred shares if (a) the
aggregate number of shares of the Company's Common Stock already issued and to
be issued on conversion would exceed 19.99% of the number of the Company's
Common Stock outstanding, and (b) the number of shares of the Company's Common
Stock beneficially owned by the holder plus the number of shares of the
Company's Common Stock issuable upon conversion would equal or exceed 4.99% of
the number of shares of the Company's common stock then issued and outstanding.
The Class C Preferred Stock will be automatically converted two years following
the issue date.
The Class C Preferred Stock Agreement also provides the holders the right to
redeem their preferred shares at a price based on a formula upon the occurrence
of certain events involving voluntary actions or failure to take action by the
Company, such as Change of Control transactions, failure to deliver shares of
Common Stock upon conversion of the Class C Preferred Stock, delisting of the
Company's Common Stock on a national exchange and material breach of covenants
and other terms of the agreements surrounding the issuance of the Class C
Preferred Stock.
In accordance with the Registration Rights Agreement dated April 23, 1998 by
and between the Company and the holder of the Class C Preferred Stock, the
Company filed with the Securities and Exchange Commission a registration
statement covering 257,143 shares of the Company's Common Stock representing at
least 150% of the number of shares of Common Stock then issuable upon conversion
of the Class C Preferred Stock.
In accordance with Emerging Issues Task Force Abstract D-60 ("EITF Abstract
D-60"), "Accounting for the Issuance of Convertible Preferred Stock with a
Nondetachable Conversion Feature", the intrinsic value of the beneficial
conversion feature of the Class C Preferred Stock, which is measured as the
difference between the conversion price and fair value of the Common Stock on
the date of issuance, is recognized as a non-cash preferred stock dividend over
the period from issuance to earliest conversion (90 days) in the statement of
changes in stockholders' equity. Based on the Company's stock price on April 23,
1998 (date of issuance), the fair value of the conversion feature is $1,714,286,
which was recorded as a preferred stock dividend on a straight line basis over
the period from issuance through July 20, 1998, the earliest conversion date.
In June 1998 the Company redeemed 600 shares of its Class B Nonvoting
Cumulative Redeemable Preferred Stock, $.01 par value per share (the "Class B
Preferred Stock"), and in September 1998 the Company redeemed the remaining 750
shares of its Class B Preferred Stock, for $600,000 and $750,000, respectively,
from the proceeds of the Notes (see Note 4 to the Consolidated Financial
Information) and the Class C Preferred Stock offerings.
Note 6-- Theater Acquisitions:
During the nine months ended September 30, 1998 the Company acquired a total
of eleven theaters and acquired the right to operate one theater totaling 54
screens, all of which are located in New Jersey and New York, except for one
theater located in Pennsylvania. The acquisitions have been accounted for under
the purchase method of accounting. Under the purchase method of accounting, the
purchase price for each transaction has been allocated based on the estimated
fair value of identifiable tangible and intangible assets (principally property,
equipment and leasehold interest) of the respective theaters with the excess
purchase price, together with acquisition costs, being allocated to goodwill.
The results of operations of each acquired theater is included in the
accompanying consolidated financial information from the earlier of the
respective date of acquisition or commencement of operation by Clearview.
10
<PAGE> 11
Clairidge Acquisition - In February 1998, the Company acquired substantially
all the assets, including the leasehold interest, equipment and various
operating contracts, of one theater from Clairidge Cinemas, Inc. (the "Clairidge
Acquisition") for a total purchase price of $2.3 million. The Company paid $2.1
million in cash from borrowings under the Old Credit Facility and issued 14,782
shares of the Company's Common Stock with an aggregate market value of $200,000
based on the closing price of the Company's stock on the ten trading days
preceding the acquisition. The leasehold interest acquired is to be amortized
over the theater lease, which has a remaining lease term through December 31,
2016. The purchase price has been allocated as follows:
Leasehold interest $ 104,500
Equipment 345,000
Goodwill 1,850,500
----------
$2,300,000
==========
UA II Acquisition - In March 1998, the Company acquired substantially all
the assets, including land, building, equipment and various operating contracts,
of two theaters from United Artists Theater Circuit, Inc. (the "UA II
Acquisition") for a total purchase price of $1.5 million paid in cash from
borrowings under the Old Credit Facility. The purchase price has been allocated
as follows:
Land $ 252,000
Building 1,008,000
Equipment 240,000
----------
$1,500,000
==========
Cobble Hill Acquisition - In March 1998, the Company acquired substantially
all the assets, including equipment and various operating contracts of one
theater from Cobble Hill Cinemas, Inc. (the "Cobble Hill Acquisition") for a
total purchase price of $2.15 million, paid in cash from borrowings under the
Old Credit Facility. The purchase price has been allocated as follows:
Equipment $ 188,500
Non-compete 14,000
Goodwill 1,947,500
----------
$2,150,000
==========
Great Neck / Franklin Square Acquisition - In June 1998, the Company
acquired substantially all the assets, including the leasehold interests,
equipment and various operating contracts of two theaters from Great Neck
Theater Associates, Inc. and WSA Theater Corp. (the "Great Neck / Franklin
Square Acquisition") for a total purchase price of $6.5 million, paid in cash
from the proceeds of the Notes and Class C Preferred Stock offerings. The
purchase price has been allocated as follows:
Leasehold Interest $ 458,000
Equipment 1,022,000
Non-compete 23,000
Goodwill 4,997,000
----------
$6,500,000
==========
11
<PAGE> 12
AMC Acquisition - In June 1998, the Company acquired substantially all the
assets, including the leasehold interest, equipment and various operating
contracts of one theatre from American Multi-Cinema, Inc. (the "AMC
Acquisition") for a total purchase price of $2.775 million, paid in cash from
the proceeds of the Notes and Class C Preferred Stock offerings. The purchase
price has been allocated as follows:
Leasehold Interest $ 242,000
Equipment 460,000
Goodwill 2,073,000
----------
$2,775,000
==========
Millburn Acquisition - In August 1998, the Company exercised an option to
acquire substantially all the assets, including the land, building, equipment
and various operating contracts of one theatre from Jesse Sayegh (the "Millburn
Acquisition"), which the Company had operated since January 1998 under an
agreement with the owner. The total purchase price was $1.150 million, paid in
cash from the proceeds of the Notes and Class C Preferred Stock offerings. The
purchase price has been allocated as follows:
Land $ 150,000
Building 600,000
Equipment 118,000
Goodwill 282,000
----------
$1,150,000
==========
Bala Cynwyd Acquisition - In August 1998, the Company acquired substantially
all the assets, including equipment and various operating contracts of one
theatre from Constantine Sotolidis (the "Bala Cynwyd Acquisition") for a total
purchase price of $713 thousand, paid in cash from the proceeds of the Notes and
Class C Preferred Stock offerings. The purchase price has been allocated as
follows:
Equipment $ 236,000
Non-Compete 10,000
Goodwill 467,000
----------
$ 713,000
==========
Regal Acquisition - In August 1998, the Company acquired substantially all
the assets of two theatres, including land, building, equipment, leasehold
interest and various operating contracts of one theatre and equipment and
various operating contracts of the other theatre from Regal Cinemas, Inc. (the
"Regal Acquisition") for a total purchase price of $1.5 million, paid in cash
from the proceeds of the Notes and Class C Preferred Stock offerings. The
purchase price has been allocated as follows:
Leasehold Interest $ 39,000
Land 150,000
Building 600,000
Equipment 303,000
Goodwill 408,000
----------
$1,500,000
==========
12
<PAGE> 13
Note 7--Extraordinary Charge:
In connection with the early extinguishment of the debt under the Old Credit
Facility (see Note 4 to the Consolidated Financial Information) in June 1998,
the Company recognized an extraordinary charge of $2,029,649 or $.89 per share
for the nine months ended September 30, 1998, respectively. The extraordinary
charge consisted of a prepayment premium of $410,000 and the write-off of
unamortized debt discount and debt issuance costs of $242,729 and $1,376,920,
respectively.
Note 8--Commitments and Contingencies:
As of September 30, 1998 the aggregate minimum lease payments for all of
the Company's theaters over the next five years are as follows: 1999:
$4,711,798; 2000: $4,590,281; 2001: $4,473,467; 2002: $4,562,525; 2003:
$4,161,013; 2004 and thereafter: $43,739,100.
In August 1998, the Company entered into a lease agreement to temporarily
occupy additional office space for the corporate headquarters staff at 97 Main
St, Chatham, NJ for a period commencing within six months, while a new facility
is constructed. The agreement provides for the same terms and conditions as the
existing lease at that location, except that the monthly base rent shall be
$7,930. Also, in August 1998 the Company entered into a five year lease
agreement to occupy 16,000 square feet of office space at a building to be
constructed at 180 River Road, Summit, NJ. The agreement provides for the
erection of the building within 9 months and occupancy within 18 months. The
monthly base rent shall be $36,000 with no renewal terms. It is the Company's
intention to relocate the entire corporate headquarters staff to this location
upon completion.
In June 1998, the Company entered into an agreement to develop a new
multiplex theater in Anthony Wayne, PA. The estimated cost of development is
$750,000. The theater is expected to have four screens, and construction is
expected to be completed by December 1998. Monthly rental payments of $4,500
will be due on the earlier of 120 days after all permits have been obtained or
the date that the Company begins operating the theater.
In March 1998, the Company entered into an agreement, subject to obtaining
certain approvals, to develop a new 11-screen multiplex theater in Putnam
County, NY. The agreement provides that after the theater is constructed the
Company will add the seats and other theater equipment at an estimated cost of
approximately $1.1 million. Monthly rental payments of approximately $22,500 are
payable beginning on the earlier of 120 days after the landlord completes
construction or the date that Clearview begins operating the theater.
Construction is expected to be completed by March 1999.
In February 1998, the Company entered into a lease agreement to operate a
theater facility in Montclair, N.J. for ten years with four 5- year renewal
options. The lease provides for a monthly base rent of $3,125 and is adjusted
upward each year based on a formula.
In connection with the CJM Acquisition consummated in 1997, the Company
agreed to pay the seller additional consideration of 750 shares of Class B
Preferred Stock valued at $750,000 if another competing theater is not opened in
the operating vicinity of the purchased theaters within two years of the date of
the agreement, or December 12, 1999. In September 1998 the Company funded an
escrow account in the amount of $793,969 (including $43,969 of accrued interest)
in lieu of the shares. However, such consideration is deemed to be contingent
and, as such, will only be paid when it becomes probable that no competing
theater will be opened by December 12, 1999.
On April 30, 1998, the Company issued 76,923 shares of Common Stock having a
market value of $1,548,000 in order to acquire the leasehold interest and
related construction permit from Warren County Cinemas, for a 15-screen
multiplex theater in Mansfield, NJ. The shareholders of Warren County Cinemas
have the right to receive additional consideration, dependent upon future
earnings of the theater for the next two years, of up to $500,000. The shares of
Common Stock issued are unregistered shares and are subject to a Voting Trust
Agreement whereby the Chairman of the Company has the right to exercise all
rights as an owner of the shares, including the right to vote, until the shares
are sold or registered. The shares may be sold at any time subject to certain
restrictions on the amount and holding period of the shares as stipulated under
Rule 144 of the Securities Act of 1933 (the "Securities Act"). The shareholders
also have the right to participate in certain registered offerings undertaken by
the Company under the Securities Act that could result in the sale of the shares
held. Construction began in May 1998 and is expected to be completed by the end
of December 1998. The estimated cost of development, in addition to the common
stock, is $3.5 million. The Company began paying 50% of the monthly rental
payments of $29,167 and will become liable for the full monthly rent on the
earlier of the opening of the theater or January 1, 1999.
13
<PAGE> 14
In February 1997, the Company entered into an agreement to lease a new
multiplex theater to be constructed in Bayonne, NJ. This theater is currently
planned to have at least 10 screens and the landlord has agreed to install all
seats and other theater equipment according to the Company's specifications, and
therefore the Company does not expect to incur any capital costs for the
project. Construction is expected to be completed in May 1999, at which time the
Company would be obligated to begin monthly rental payments of $41,667. The
construction contract for this theater has not yet been signed.
During September 1995, the Company entered into an agreement providing for
the lease of three New York theater locations with annual combined rent of
approximately $300,000 and the option to purchase certain assets of the three
theaters through September 2000. In September 1998 the Company informed the
owner of its intention to exercise its option to purchase the theaters, for an
aggregate purchase price of approximately $1.6 million, of which $0.5 million
has been funded to an escrow account. The purchase is expected to be completed
by January 1999. Until that time, the Company continues to make option payments
which are recorded as interest expense.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of the Company's results of operations
and financial condition should be read in conjunction with the information set
forth in the unaudited financial information and notes thereto included
elsewhere herein and the audited financial information and the notes thereto
included in the Annual Report on Form 10-KSB.
Overview
The Company has achieved significant growth in theaters and screens since
its formation in November 1994. Since the inception of its business in December
1994, when the Company acquired the right to operate four theaters with eight
screens, the Company has acquired the right through September 30, 1998, to
operate an additional 38 theaters with 183 screens, has added seven screens to
three existing theaters and has constructed a new 5-screen theater in an
existing building, resulting in a total of 43 theaters and 203 screens operated
by the Company at September 30, 1998. The Company operated 22 theaters with 83
screens as of September 30, 1997. The Company expects that its future revenue
growth will be derived primarily from the acquisition of additional theaters,
the addition of screens to existing theaters and the development of new
theaters. In order to fund its plans for continued growth, the Company may
require additional debt and equity financing. Failure to obtain any such
financing could require the Company to significantly curtail its acquisition
activities. The Company has had no theater closings since inception.
On August 13, 1998, the Company announced that it had entered into the
Merger Agreement with Cablevision and CCG Holdings pursuant to which the Company
would be merged with and into CCG Holdings (see Note 2 to the Consolidated
Financial Information).
The Company's revenues are predominantly generated from box office receipts,
concession sales and on-screen advertising. Direct theater costs include film
rental and the cost of concessions. Other theater operating expenses consist
primarily of theater labor and related fringe benefit costs and occupancy costs
(including rent and/or real estate taxes, utilities, repairs and maintenance,
cleaning costs and supplies). Film rental costs are directly related to the
popularity of a film and the number of weeks the film has run. Film rental costs
generally decline as a percentage of box office receipts the longer a film has
been showing. Because certain concession items, such as fountain drinks and
popcorn, are purchased in bulk and not prepackaged for individual servings, the
Company has significant gross profit margins on those items.
General and administrative expenses consist primarily of corporate overhead
costs, such as management and office salaries and related fringe benefits costs,
professional fees, insurance costs and general office expenses. The Company
believes that its current internal controls and management information system
will allow the Company to expand its number of screens without incurring
proportionate increases in general and administrative expenses. The Company's
management information system has on-line capabilities to collect information
concerning box office receipts, ticketing, concession sales, inventory control
and booking. This system allows the Company to closely track and manage box
office and concession revenues.
In the quarter ended September 30, 1998, the Company acquired the Bala
Theater in Bala Cynwyd, PA (3 screens); the Colony Cinemas in Livingston, NJ (3
screens); and the West Milford Cinemas in West Milford, NJ (4 screens). The
purchase of these additional theaters increased the Company's total number of
theaters to 43 and its screen count to 203.
14
<PAGE> 15
15
<PAGE> 16
Comparison of Three and Nine Months Ended September 30, 1998 and September 30,
1997
Total Revenues. Total revenues for the three and nine months ended September
30, 1998 were $12,908,286 and $31,733,923, respectively, as compared to
$4,442,117 and $10,629,927 for the three and nine months ended September 30,
1997, respectively. The increases in revenues of 190.6% and 198.5% for the three
and nine months ended September 30, 1998, respectively, are primarily due to
increased box office receipts and concession sales as a result of the increase n
the number of theaters operated. Box office receipts for the three and nine
months ended September 30, 1998 were $9,259,160 and $22,904,009 respectively as
compared to $3,335,958 and $8,044,812, for the three and nine months ended
September 30, 1997, respectively. The increases in box office receipts for the
three months ended September 30, 1998 of 177.6% resulted primarily from an
increase in attendance of 173.1% to approximately 1,729,000 from 633,000
attendees in the comparable 1997 period. The increases in box office receipts
for the nine months ended September 30, 1998 of 184.7% resulted primarily from
an increase in attendance of 182.0% to approximately 4,216,000 from 1,495,000
attendees in the comparable 1997 period. The increases in attendance were
attributable primarily to the operation of the additional theaters acquired in
the third and fourth quarters of 1997 and in the first three quarters of 1998.
Total concession sales for the three and nine months ended September 30, 1998
were $3,285,175 and $7,876,443, respectively as compared to $976,966 and
$2,314,787 for the three and nine months ended September 30, 1997, respectively.
The increases in concession sales of 236.3% and 240.3% for the three and nine
months ended September 30, 1998, respectively, were primarily due to the
increase in the number of theaters operated. Other revenues, which consist
primarily of advertising revenue and rental income on fee-owned properties, were
$363,951 and $953,471 for the three and nine months ended September 30, 1998,
respectively, as compared to $129,193 and $270,328 for the three and nine months
ended September 30, 1997, respectively. The increase in other revenues of 181.7%
and 252.7% for the three and nine months ended September 30, 1998, respectively,
is the result of operating additional theaters during 1998, and an increase in
the Company's on-screen advertising which provided for increased commission
rates in 1998.
Film Rental Fees. Film rental fees increased by 170.7% and 186.4% to
$4,520,509 and $11,049,893 for the three and nine months ended September 30,
1998, respectively, from $1,669,935 and $3,858,635 for the three and nine months
ended September 30, 1997, respectively. The increases were principally due to
the operation of additional theaters as previously discussed. Film rental fees
as a percentage of box office receipts were 48.8% for the three months ended
September 30, 1998, compared to 50.1% for the three months ended September 30,
1997. Such costs were 48.2% of box office receipts for the nine months ended
September 30, 1998, as compared to 48.0% for the same 1997 period.
Cost of Concession Sales. Cost of concession sales increased by 236.0% and
213.3% to $491,686 and $1,151,834 for the three and nine months ended September
30, 1998, respectively, from $146,325 and $367,603 for the three and nine months
ended September 30, 1997, respectively. This increase was attributable primarily
to the operation of the theaters acquired in the third and fourth quarters of
1997 and in the first three quarters of 1998. As a percentage of concession
revenues, the cost of concession sales were 15.0% and 14.6% for the three and
nine months ended September 30, 1998, respectively, compared to 15.0% and 15.9%
for the three and nine months ended September 30, 1997, respectively. The
decrease for the nine-month period was primarily attributable to the concession
purchasing efficiencies made as a result of achieving greater economies of scale
from the Company's growth, and were further reduced due to a vendor rebate
program.
Theater Operating Expenses. Theater operating expenses increased by 201.9%
and 195.8% to $5,153,727 and $12,293,994 for the three and nine months ended
September 30, 1998, respectively, from $1,706,986 and $4,155,946 for the three
and nine months ended September 30, 1997, respectively. This increase was
attributable primarily to the operation of the theaters acquired as previously
discussed. Theater operating expenses as a percentage of total revenues
increased to 39.9% for the three months ended September 30, 1998, from 38.4% for
the comparable 1997 period. Theater operating expenses as a percentage of total
revenues decreased slightly to 38.7% for the nine months ended September 30,
1998, from 39.1% for the comparable 1997 period.
General and Administrative Expenses. General and administrative expenses
increased by 381.8% and 338.5% to $1,166,338 and $2,835,857 for the three and
nine months ended September 30, 1998, respectively, from $242,071 and $646,789
for the three and nine months ended September 30, 1997, respectively. The
increase was due principally to the hiring of personnel and related increases in
salaries to support the Company's growth. As a percentage of total revenues,
general and administrative expenses increased to 9.0% and 8.9% for the three and
nine months ended September 30, 1998, respectively, compared to 5.4% and 6.1%
for the three and nine months ended September 30, 1997, respectively. The
increase, as a percentage of total revenues, for the three and nine month period
was due to the incurrence of outside professional costs in connection with the
Company's first fiscal year-end and subsequent reporting requirements since
becoming a publicly traded company, and also in connection with the impending
merger
16
<PAGE> 17
transaction. Also contributing to the increase were expenses attributable to the
establishment of in-house film buying and legal departments in the first quarter
of 1998 to support the Company's growth and future expansion plans.
Depreciation and Amortization. Depreciation and amortization expense
increased by 189.5% and 231.4% to $1,647,116 and $4,529,684 for the three and
nine months ended September 30, 1998, respectively, from $569,027 and $1,366,734
for the three and nine months ended September 30, 1997, respectively. The
increase is a direct result of the addition of 21 theaters through acquisition
or development in the fourth quarter of 1997 and first three quarters of 1998,
which significantly increased the Company's depreciable and amortizable assets.
Operating Income (Loss). Operating income decreased by 166.0% to an
operating loss of $71,090 for the three months ended September 30, 1998, from an
operating income of $107,773 for the three months ended September 30, 1997.
Operating income decreased by 154.4% to an operating loss of $127,339 for the
nine months ended September 30, 1998, from an operating income of $234,220 for
the nine months ended September 30, 1997. As a percentage of total revenues,
operating income (loss) was (0.6%) and (0.4%) for the three and nine months
ended September 30, 1998, respectively, and 2.4% and 2.2% for the three and nine
months ended September 30, 1997, respectively. The fluctuations as a percentage
of total revenues is due to the increase in depreciation and amortization, as a
direct result of the increase in theaters, and the aforementioned increase in
general and administrative expenses.
Interest Expense. Interest expense increased by 293.6% and 275.7% to
$2,067,079 and $4,693,427 for the three and nine months ended September 30,
1998, respectively, from $525,230 and $1,249,376 for the three and nine months
ended September 30, 1997, respectively. The increase is due to the significant
increase in total debt outstanding during the first three quarters of 1998 as
compared to the corresponding 1997 period, primarily to fund acquisitions. All
of the Company's debt was retired and replaced in June 1998 by the issuance of
Senior Notes bearing interest at 10.875% (see Note 4 to the Consolidated
Financial Information).
Extraordinary Item. The extraordinary item of $2,029,649 relates to the
early extinguishment of the debt under the Old Credit Facility in June 1998 (see
Notes 4 and 7 to the Consolidated Financial Information).
Net Loss. Net loss increased to $2,138,169 and $6,850,416 for the three and
nine months ended September 30, 1998, respectively, from $417,457 and $1,015,156
for the three and nine months ended September 30, 1997. The increase in net loss
was attributable primarily to substantial increases in both depreciation and
amortization expense and interest expense, resulting from the Company's growth
through acquisitions and related borrowings, and the above-mentioned
extraordinary item.
Loss Available for Common Stock. Loss Available for Common Stock reflects
the net loss, the components of which are explained above, and preferred stock
dividends of $470,767 and $1,863,682 for the three and nine months ended
September 30, 1998, respectively. The preferred stock dividend is primarily the
result of the April 1998 issuance of 3,000 shares Class C Preferred Stock, and
the resulting non-cash dividend recorded through July 20, 1998. In accordance
with Emerging Issues Task Force Abstract D-60 ("EITF Abstract D-60"),
"Accounting for the Issuance of Convertible Preferred Stock with a Nondetachable
Conversion Feature", the intrinsic value of the beneficial conversion feature of
the Class C Preferred Stock, which is measured as the difference between the
conversion price and fair value of the Common Stock on the date of issuance, is
recognized as a non-cash preferred stock dividend over the period from issuance
to earliest conversion (90 days) in the statement of changes in stockholders'
equity. Based on the Company's stock price on April 23, 1998 (issuance date),
the fair value of the conversion feature is $1,714,286, which was reflected as a
preferred stock dividend over the period from issuance through July 20, 1998,
the earliest conversion date. See Note 5 to the Consolidated Financial
Information for additional information.
Other Financial Data. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") is a financial measure commonly used in the Company's
industry, although it is not a measure of performance calculated in accordance
with generally accepted accounting principles. It should not be construed as an
alternative to operating income (as determined in accordance with generally
accepted accounting principles) as an indicator of the Company's operating
performance or as an alternative to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) as a
measure of the Company's liquidity. EBITDA increased by 132.9% and 175.0% to
$1,576,026 and $4,402,345 for the three and nine months ended September 30,
1998, respectively, from $676,800 and $1,600,954 for the comparable 1997
periods. As a percentage of total revenues, EBITDA was 12.2% and 13.9% for the
three and nine months ended September 30, 1998, respectively, and was 15.2% and
15.1% for the comparable 1997 periods.
17
<PAGE> 18
Liquidity and Capital Resources
The Company receives substantially all of its revenues in cash from box
office receipts and concession sales and, therefore, benefits from minimal
accounts receivable and inventory requirements. One of the Company's most
significant operating expenses, film rental fees, continues to be paid to
distributors 30 to 45 days following the receipt of the applicable cash ticket
payments. In addition, nearly all of the Company's other operating expenses,
such as concession purchases, theater payroll and theater rent, are paid
bi-weekly or monthly, respectively. The period between the receipt of cash from
operations and the use of that cash to pay the related expenses provides certain
operating capital to the Company.
On August 13, 1998, the Company announced that it had entered into the
Merger Agreement with Cablevision and CCG Holdings pursuant to which the Company
would be merged with and into CCG Holdings. Each issued and outstanding share of
Common Stock of the Company would be acquired at $24.25 per share, payable in a
combination of cash and Cablevision Class A Common Stock on the aggregate basis
of 55% cash and 45% Cablevision Class A Common Stock. The gross value of the
transaction is estimated at approximately $160 million, based on the acquisition
of approximately 3.3 million shares of the Company's common stock on a fully
diluted basis and the assumption of the $80 million of Notes outstanding as of
August 13, 1998. For more information, see Note 2 to the Consolidated Financial
Information.
Since the Company is in an industry which is capital intensive,
substantially all of its assets are typically non-current. The Company's primary
current asset is cash, while inventories are relatively insignificant throughout
the fiscal year. The Company had positive working capital of $7,734,426 at
September 30, 1998 and negative working capital of ($5,334,136) at December 31,
1997. The increase in working capital was attributable to an increase in cash
due to the proceeds from the Notes and Class C Preferred Stock offerings,
partially offset by an increase in accounts payable and film rent payable to
support the Company's additional theaters. Additionally, at December 31, 1997
the Company had $2,876,607 of debt maturing within one year, and at September
30, 1998 all of the Company's debt was classified as long-term.
The Company has financed its day-to-day operations principally from the cash
flow generated by its operating activities. Such cash flow totaled $2,600,666
for the nine months ended September 30, 1998, as compared to $962,106 for the
comparable 1997 period. The difference between the Company's net loss and its
cash flow from operating activities in both periods was principally due to
non-cash depreciation and amortization expenses and increases in accounts
payable and accrued expenses. In addition, the 1998 period was impacted by the
extraordinary item related to the early extinguishment of debt.
The Company's primary capital requirements are to fund additional theater
acquisitions and for remodeling, expansion and maintenance of existing theaters.
While the Company has acquired fee-owned theaters from time to time, the Company
prefers to acquire theaters as leasehold properties in order to preserve
capital. The Company has historically developed, and plans to continue
developing, new theaters principally by entering into long-term leases, which
provide an opportunity to share construction and development costs with the
lessor.
Capital expenditures, exclusive of theater acquisitions, approximated $5.0
million in the first nine months of 1998 and $2.2 million in the first nine
months of 1997. The 1998 amount includes planned additions to furniture,
fixtures and equipment and leasehold improvements at various theaters, $0.7
million related to the purchase of the underlying real estate of a theater
previously leased, and $1.7 million of construction costs and equipment related
to the Mansfield theater (see Note 8 to the Consolidated Financial Information).
During 1998 the Company funded its capital expenditures, other than theater
acquisitions, through a combination of cash flow from operations and from
borrowings.
In February 1998, the Company amended and restated its Old Credit Facility
by obtaining the Term Note C totaling $5.8 million, which was used to acquire
four additional theaters. The aggregate availability under the Old Credit
Facility was $41.8 million, of which $40.2 million was outstanding at the date
of repayment. The Old Credit Facility included a revolving credit line of $1
million, which could have been used for refinancing existing debt, financing
working capital, financing acquisitions and for general corporate purposes.
There were no amounts outstanding under the revolving credit line as of the date
the Old Credit Facility was repaid.
18
<PAGE> 19
In April 1998, the Company designated a new series, consisting of 3,000
shares of its Class C Preferred Stock. Concurrently, the Company entered into a
Securities Purchase Agreement and issued the 3,000 shares of its Class C
Preferred Stock for $2.92 million in cash, net of offering costs (See Note 4 to
the Consolidated Financial Information).
In June 1998, the Company completed an offering of Notes ("the Notes") for
$80.0 million (approximately $76.1 million after issuance costs and related
fees). The Notes bear interest at a fixed rate of 10.875% and are due on June 1,
2008. Concurrent with the closing of the Notes offering, the Company repaid the
Old Credit Facility and entered into a New Credit Facility with the same
institution, which provides for a secured revolving line of credit in the
aggregate principal amount of $15.0 million. The New Credit Facility bears
interest at the prime rate. There were no amounts outstanding under the New
Credit Facility as of the date hereof (See Note 4 to the Consolidated Financial
Information).
The Company's future capital expenditures for planned maintenance will be
funded through cash flow from operations. In accordance with the Company's
strategic plan, Clearview intends to continue to acquire theaters and is
pursuing the acquisition of additional locations. However, in order to fund its
plan for continued growth, the Company may need to seek additional debt and
equity financing. Failure to obtain any such financing would require the Company
to significantly curtail its acquisition activities and reduce its planned
capital expenditures and could have a material adverse effect on the Company's
ability to achieve its business strategy. In the absence of additional
financing, the Company believes that it is capable of funding its current
operations (including principal and interest payments as they come due) through
internally-generated cash flow from operations and existing debt financing.
Quarterly Results and Seasonality
Historically, the most successful films have been released during the summer
months (July and August) and Thanksgiving through the year-end holiday season.
Consequently, motion picture exhibitors generally have had proportionality
higher revenues during such periods, although seasonality of motion picture
exhibition revenues has become less pronounced in recent years as studios have
begun to release major motion pictures more evenly throughout the year. The
Company believes that its regular exhibition of art films has contributed to a
moderation in the seasonality of its own revenues as compared to the seasonality
of the revenues of some of its competitors. Nevertheless the Company's revenues
and income in any particular quarter will be substantially the result of the
commercial success of the particular films being exhibited during such quarter.
Year 2000
The Year 2000 issue is the result of computer programs being written using
two digits (rather than four) to define the applicable year. Any of the
Company's programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the Year 2000, which could result in
miscalculations or system failures, causing disruption in operations, including,
but not limited to, an inability to send and receive electronic data, or to
engage in routine business activities and operations.
This issue creates risk for the Company from unforeseen problems in its
own computer systems and from third parties with whom the Company deals on
transactions. Clearview is in the early stages of evaluating the potential
impact of the Year 2000 on the electronic data processing and other information
systems relevant to Clearview's business, and is developing a plan to resolve
this issue. As part of that plan, the Company recently hired an outside
consulting firm to assist in the completion of the first phase of its Year 2000
project. Those activities, which have begun and will be completed in the fourth
quarter of 1998, include the compiling of a detailed inventory of Clearview's
computer hardware and software applications; the identification of imbedded
chips in any non-IT equipment, the development of detailed project plans to
address each component, the breakdown of the Year 2000 project into phases with
a timetable for each phase, and the development of an estimated cost for the
remainder of the project.
Clearview has had formal communications with certain of its major suppliers
and financial institutions concerning their Year 2000 readiness, and intends to
initiate those discussions with all such parties by the end of 1998. However,
there can be no assurance that the systems of other companies that interact with
Clearview will be sufficiently Year 2000 compliant so as to avoid an adverse
impact on Clearview's operations, financial condition or results of operations.
19
<PAGE> 20
The Company anticipates that it will complete its Year 2000 project,
including contingency planning during 1999 but there can be no assurance that
the Company will be successful in meeting this schedule. It is currently unknown
what specific potential adverse consequences could result from failure to
properly mitigate the Year 2000 problem and the Company is currently unable to
estimate the overall cost associated with its Year 2000 project. The first phase
of the project, as discussed above, is expected to result in total costs of less
than $40,000. The Company is currently unable to ascertain what impact the
impending merger will have on its Year 2000 project.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
During the quarter ended March 31, 1998, the Company issued a total of
14,782 shares of its Common Stock and 750 shares of its Class B Preferred Stock.
During the quarter ended June 30, 1998, the Company issued a total of 76,923
shares of its Common Stock and 3,000 shares of its Class C Preferred Stock. On
February 13, 1998, the Company issued 14,782 shares of its Common Stock, which
represented the number of shares with an aggregate average market value of
$200,000 for the ten trading days prior to February 13, 1998, to Clairidge
Cinemas, Inc. ("Clairidge") as a portion of the purchase price under an Asset
Purchase Agreement dated as of February 13, 1998, by and among the Company, its
wholly-owned subsidiary CCC Clairidge Cinema Corp., and Clairidge, pursuant to
which CCC Claridge Cinema Corp. acquired a leasehold interest and certain
furniture, fixtures, equipment and personal property related to the operation of
a six-screen theater in Montclair, New Jersey.
On March 31, 1998, the Company issued 540 shares of its Class B Preferred
Stock to Middlebrook Galleria Cinemas, Inc. ("Middlebrook"), as a portion of the
purchase price under an Asset Purchase Agreement dated November 14, 1997, by and
among the Company, its wholly-owned subsidiary CCC Middlebrook Cinema Corp., and
Middlebrook and Jesse Sayegh, as amended by an Amendment No. 1 dated as of
December 12, 1997 (the "Middlebrook Amendment No. 1"), pursuant to which CCC
Middlebrook Cinema Corp. acquired a leasehold interest and certain furniture,
fixtures, equipment and personal property related to the operation of a
ten-screen theater in Middlebrook, New Jersey. Under the Middlebrook Amendment
No. 1, the Company and Middlebrook agreed to issue the 540 shares of the
Company's Class B Preferred Stock to replace a promissory note made by the
Company in favor of Middlebrook in the amount of $540,000. In September 1998,
the Company redeemed the Class B Preferred Stock with a portion of the proceeds
from the Notes and Class C Preferred Stock offerings.
On March 31, 1998, the Company issued 210 shares of its Class B Preferred
Stock to C.J.M. Enterprises, Inc. ("CJM"), as a portion of the purchase price
under an Asset Purchase Agreement dated November 14, 1997, by and among the
Company, its wholly-owned subsidiary CCC Cedar Grove Cinema Corp., and CJM and
Jesse Sayegh, as amended by an Amendment No. 1 dated December 12, 1997 (the
"Cedar Grove Amendment No. 1"); pursuant to which CCC Cedar Grove Cinema Corp.
acquired a leasehold interest and certain furniture, fixtures, equipment and
personal property related to the operation of a five-screen theater in Cedar
Grove, New Jersey. Under the Cedar Grove Amendment No. 1, the Company and CJM
agreed to issue the 210 shares of the Company's Class B Preferred Stock to
replace a promissory note made by the Company in favor of CJM in the amount of
$210,000. . In September 1998, the Company redeemed the Class B Preferred Stock
with a portion of the proceeds from the Notes and Class C Preferred Stock
offerings.
On April 23, 1998 the Company designated a new series of preferred stock,
consisting of 3,000 shares of its preferred stock, $.01 par value, as Class C
Preferred Stock pursuant to, and in accordance with the terms of, a Certificate
of Designation of Class C Convertible Preferred Stock of Clearview Cinema Group,
Inc., dated as of April 23, 1998 (the "Certificate of Designation").
Concurrently, the Company entered into a Securities Purchase Agreement with
Proprietary Convertible Investments Group, Inc. (a/k/a Marshall Capital
Management, Inc.) and issued the 3,000 shares of its Class C Preferred Stock for
$2.92 million in cash, net of offering costs.
On April 30, 1998, the Company issued 76,923 shares of its Common Stock in
connection with an Agreement and Plan of Merger dated April 30, 1998, by and
between the Company's subsidiary, CCC Mansfield Cinema Corp., and Warren County
Cinemas, Inc., a Delaware Corporation ("Warren Cinemas"), pursuant to which
Warren Cinemas was merged into CCC Mansfield Cinema Corp.
All of the shares of the Company's Common Stock, Class B Preferred Stock and
Class C Preferred Stock were issued in reliance on the exemption under Section
4(2) of the Securities Act.
20
<PAGE> 21
21
<PAGE> 22
Item 4. Submission of Matters to a Vote of Security Holders.
(a) Date and Type of Meeting: On June 11, 1998 the Company held its Annual
Meeting of stockholders.
(b) Items voted on at the June 11, 1998 annual meeting:
- Election of Brett E. Mark as a Class I director for a three-year
term expiring in 2001. Votes for: 2,022,439; Votes
against/withheld: 3,800
- Approval of the 1997 Stock Incentive Plan, as amended and
restated. Votes for: 1,697,525; Votes against/withheld: 63,440;
Votes abstained: 21,700; Broker non-votes: 710,974.
- Retention of Price Waterhouse LLP as independent public
accountants (Price Waterhouse LLP became PricewaterhouseCoopers
LLP on July 1, 1998). Votes for: 2,470,579; Votes
against/withheld: 4,060; Votes abstained 19,000.
(c) Not applicable.
Item 5. Other Information.
On August 13, 1998, the Company announced that it had entered into the
Merger Agreement with Cablevision and CCG Holdings pursuant to which the Company
would be merged with and into CCG Holdings. Each issued and outstanding share of
Common Stock of the Company would be acquired at $24.25 per share, payable in a
combination of cash and Cablevision Class A Common Stock on the aggregate basis
of 55% cash and 45% Cablevision Class A Common Stock. The gross value of the
transaction is estimated at approximately $160 million, based on the acquisition
of approximately 3.3 million shares of the Company's Common Stock on a fully
diluted basis and the assumption of the $80 million of Notes outstanding as of
August 13, 1998. For more information, see Note 2 to the Consolidated Financial
Information.
Certain stockholders of the Company have entered into the Stockholders
Agreement with Cablevision pursuant to which such stockholders have agreed to
vote in favor of the transaction. The execution of the Stockholders Agreement is
a Change of Control for purposes of the Indenture governing the Company's Notes.
On August 19, 1998 a notice was sent to holders of the Notes in accordance with
the terms of the Indenture notifying such holders of the right to require the
Company to repurchase all or any part of the Notes at a price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest,
and liquidated damages, if any, to the date of purchase. The notice expired on
September 17, 1998 with no holders requesting that the Company purchase their
Notes.
22
<PAGE> 23
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
<S> <C> <C>
2.01 Agreement and Plan of Merger dated as of August 12, 1998 by and among Exhibit 2.01 to Current Report on
Clearview Cinema Group, Cablevision Systems Corporation and its Form 8-K filed August 27, 1998
wholly-owned subsidiary, CCG Holdings, Inc.
2.02 Stockholders Agreement dated as of August 12, 1998 by and among Exhibit 2.02 to Current Report on
Cablevision Systems Corporation, A. Dale Mayo, individually and as Form 8-K filed August 27, 1998
voting trustee, under certain Voting Trust Agreements, and Robert G.
Davidoff, CMNY Capitol II, L.P., CMCO, Inc., MidMark Capital, L.P.,
Prime Charter Ltd., Brett E. Marks, John Nelson, F&N Cinema, Inc.,
Roxbury Cinemas, Inc., Olde EC, Inc. (f/k/a Emerson Cinemas, Inc.),
Michael C. Rush, Pamela Ferman, Seth Ferman, Craig Zeltner, Clairidge
Cinemas, Inc., Paul Kay, Cindy Kay, and Marshall Capital Management,
Inc.
4.01 Indenture dated as of June 12, 1998 by and among Clearview Cinema Exhibit 4.01 to Registration
Group, Inc., its subsidiaries as guarantors, and The Bank of New York, Statement on Form SB-2 (No.
as Trustee. 333-58463) filed July 2, 1998
27.01 Financial Data Schedule Filed herewith
</TABLE>
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K under Items 1 and 7 thereof on
August 27, 1998, related to the Merger Agreement with Cablevision and the
resulting Change of Control transaction.
23
<PAGE> 24
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CLEARVIEW CINEMA GROUP, INC.
November 16, 1998
/s/ A. Dale Mayo
-------------------------------------------
Name: A. Dale Mayo
Title: Chairman of the Board, President
and Chief Executive Officer
November 16, 1998
/s/ Joan M. Romine
-------------------------------------------
Name: Joan M. Romine
Title: Treasurer and Chief Financial
Officer (Chief Accounting Officer)
24
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Method of Filing
- ------- ----------- ----------------
<S> <C> <C>
2.01 Agreement and Plan of Merger dated as of August 12, 1998 by and among Exhibit 2.01 to Current Report on
Clearview Cinema Group, Cablevision Systems Corporation and its Form 8-K filed August 27, 1998
wholly-owned subsidiary, CCG Holdings, Inc.
2.02 Stockholders Agreement dated as of August 12, 1998 by and among Exhibit 2.02 to Current Report on
Cablevision Systems Corporation, A. Dale Mayo, individually and as Form 8-K filed August 27, 1998
voting trustee, under certain Voting Trust Agreements, and Robert G.
Davidoff, CMNY Capitol II, L.P., CMCO, Inc., MidMark Capital, L.P.,
Prime Charter Ltd., Brett E. Marks, John Nelson, F&N Cinema, Inc.,
Roxbury Cinemas, Inc., Olde EC, Inc. (f/k/a Emerson Cinemas, Inc.),
Michael C. Rush, Pamela Ferman, Seth Ferman, Craig Zeltner, Clairidge
Cinemas, Inc., Paul Kay, Cindy Kay, and Marshall Capital Management,
Inc.
4.01 Indenture dated as of June 12, 1998 by and among Clearview Cinema Exhibit 4.01 to Registration
Group, Inc., its subsidiaries as guarantors, and The Bank of New York, Statement on Form SB-2 (No.
as Trustee. 333-58463) filed July 2, 1998
27.01 Financial Data Schedule Filed herewith
</TABLE>
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CLEARVIEW CINEMA GROUP, INC. SEPTEMBER 30, 1998 CONSOLIDATED FINANCIAL
STATEMENTS AND IS QUANTIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENT.
</LEGEND>
<CIK> 0001038754
<NAME> CLEARVIEW CINEMA GROUP, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 14,703
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 185
<CURRENT-ASSETS> 15,452
<PP&E> 49,912
<DEPRECIATION> (5,427)
<TOTAL-ASSETS> 95,715
<CURRENT-LIABILITIES> 7,717
<BONDS> 80,000
0
0
<COMMON> 23
<OTHER-SE> 7,974
<TOTAL-LIABILITY-AND-EQUITY> 95,715
<SALES> 31,734
<TOTAL-REVENUES> 31,734
<CGS> 1,152
<TOTAL-COSTS> 31,861
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,693
<INCOME-PRETAX> (4,821)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,821)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,029)
<CHANGES> 0
<NET-INCOME> (6,850)
<EPS-PRIMARY> (3.84)
<EPS-DILUTED> (3.84)
</TABLE>
