<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended.....................................June 30, 1999
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..................................................000-____
SILVER CINEMAS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 72-2656147
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
4004 BELTLINE ROAD, SUITE 205, ADDISON, TEXAS 75001-4363
(Address of principal executive offices)
(Zip Code)
(972) 503-9851
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 134,144 shares of common stock
as of August 13, 1999.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balanced Sheets as of June 30, 1999 (unaudited)
and December 31, 1998 3
Condensed Consolidated Statements of Operations (unaudited) for the
three and six months ended June 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows (unaudited) for the
six months ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SILVER CINEMAS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
(UNAUDITED)
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,277,648 $ 2,880,955
Inventories 556,732 560,886
Receivables 853,524 1,210,328
------------- -------------
Total current assets 2,687,904 4,652,169
THEATER PROPERTIES AND EQUIPMENT, Net 65,497,077 66,913,041
GOODWILL - Net 49,165,598 49,981,350
OTHER ASSETS - Net 8,166,865 10,845,858
------------- -------------
TOTAL $ 125,517,444 $ 132,392,418
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 110,000 $ 110,000
Current portion of capital lease obligations 321,634 306,284
Accounts payable 2,007,913 522,733
Accrued film rentals 1,317,486 2,098,791
Accrued payrolls 1,545,383 1,190,914
Accrued interest 2,193,000 2,209,500
Accrued property taxes and other liabilities 1,345,000 1,646,509
------------- -------------
Total current liabilities 8,840,416 8,084,731
LONG-TERM DEBT, less current portion 100,000,000 100,110,000
CAPITAL LEASE OBLIGATIONS, less current obligations 4,249,588 4,414,299
OTHER LONG-TERM OBLIGATIONS 2,010,410 2,198,380
------------- -------------
Total liabilities 115,100,414 114,807,410
STOCKHOLDERS' EQUITY:
Series preferred stock, 100,000 shares authorized, no shares issued
Series A preferred stock, $.01 par value, 400,000 shares authorized,
358,470 shares issued and outstanding at June 30, 1999
and December 31, 1998 35,847,006 35,987,442
Common stock, $.01 par value; 200,000 shares authorized, 134,144 and
140,458 shares issued and outstanding at June 30, 1999 and
December 31, 1998, respectively 1,341 1,405
Additional paid-in capital 132,803 139,053
Stockholder notes receivable (51,780) (201,780)
Accumulated deficit (25,512,340) (18,341,112)
------------- -------------
Total stockholders' equity 10,417,030 17,585,008
------------- -------------
TOTAL $ 125,517,444 $ 132,392,418
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE> 4
SILVER CINEMAS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ 15,532,997 $ 13,268,235 $ 35,921,266 $ 15,828,531
Concessions 6,675,032 5,900,605 14,468,582 8,029,806
Other 418,858 362,592 832,120 475,822
------------ ------------ ------------ ------------
Total 22,626,887 19,531,432 51,221,968 24,334,159
COSTS AND EXPENSES:
Costs of operations:
Film rentals 7,150,756 5,798,118 15,538,737 6,783,877
Concessions supplies 1,278,739 1,060,170 2,683,683 1,369,564
Salaries and wages 4,184,099 3,784,143 8,394,995 4,639,203
Occupancy costs 4,452,459 3,727,321 8,866,306 4,644,332
Advertising 725,424 1,037,069 1,742,155 1,181,372
Utilities and other 4,386,167 2,808,778 8,020,579 3,624,839
General and administrative expenses 1,769,314 1,558,712 3,649,921 2,172,034
Depreciation and amortization 2,062,910 1,943,338 4,147,517 2,419,188
------------ ------------ ------------ ------------
Total 26,009,868 21,717,649 53,043,893 26,834,409
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (3,382,981) (2,186,217) (1,821,925) (2,500,250)
OTHER INCOME (EXPENSE):
Interest expense (2,751,737) (2,340,248) (5,505,358) (2,496,790)
Amortization of debt issue costs (143,757) (1,110,775) (309,504) (1,144,894)
Interest income and other expense, net (1,478) 228,903 91,589 238,705
Gain on sale of theater 108,808 373,973
------------ ------------ ------------ ------------
Total (2,788,164) (3,222,120) (5,349,300) (3,402,979)
------------ ------------ ------------ ------------
NET LOSS (6,171,145) (5,408,337) (7,171,225) (5,903,229)
PREFERRED STOCK DIVIDENDS (588,070) (416,711) (1,169,525) (669,766)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON STOCK $ (6,759,215) $ (5,825,048) $ (8,340,750) $ (6,572,995)
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE> 5
SILVER CINEMAS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------------
1999 1998
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (7,171,225) $ (5,903,229)
Noncash items in net loss:
Depreciation and amortization 4,457,021 3,564,082
Straight-line rent adjustment 122,322
Gain on sale of theater (373,973)
Amortization of long-term liabilities (108,238)
Capitalized interest (22,085)
Cash from (used for) working capital:
Receivables and other 360,958 (289,638)
Accounts payable 1,485,180 2,549,723
Accrued liabilities (867,167) 4,274,947
------------- -------------
Net cash from (used for) operating activities (2,117,207) 4,195,885
------------- -------------
INVESTING ACTIVITIES:
Acquisitions of theater properties and equipment (802,816) (87,786,588)
Sale of theater 3,552,395
Additions to theater properties and equipment (4,013,282) (6,555,558)
Decrease (increase) in other assets 2,254,982 (1,572,570)
------------- -------------
Net cash from (used for) investing activities 991,279 (95,914,716)
------------- -------------
FINANCING ACTIVITIES:
Proceeds from the issuance of debt 100,000,000
Payments of debt and capital leases (259,360) (6,597,009)
Payments on long-term liabilities (64,733)
Increase in debt issue costs (152,636) (4,488,818)
Issuance (repurchase) of capital stock (650) 13,154,831
------------- -------------
Net cash from (used for) financing activities (477,379) 102,069,004
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,603,307) 10,350,173
CASH AND CASH EQUIVALENTS:
Beginning of period 2,880,955 276,497
------------- -------------
End of period $ 1,277,648 $ 10,626,670
============= =============
SUPPLEMENTAL INFORMATION -
Stock issued for notes receivable $ $ 98,790
============= =============
Cash paid for interest $ 5,521,857 397,776
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE> 6
SILVER CINEMAS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - Silver Cinemas International, Inc. and its subsidiaries
(collectively referred to as the "Company") own or lease and operate
motion picture theaters.
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - The
accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the financial position, results of operations and
cash flows for the periods presented have been included. Results of
operations for the periods presented herein are not necessarily indicative
of results of operations for any subsequent quarter or the year ending
December 31, 1999.
The information included in this Form 10-Q should be read in conjunction
with the audited financial statements and the notes thereto for the year
ended December 31, 1998 included in the Annual Report filed on Form 10-K
by the Company under the Securities Exchange Act of 1934 on March 31,
1999.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission's rules and regulations.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts 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 amounts.
2. THEATER PROPERTIES AND EQUIPMENT
The following is a summary of theater properties and equipment:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED)
------------ ------------
<S> <C> <C>
Land $ 1,810,062 $ 1,810,062
Buildings 10,685,601 10,689,846
Leasehold interests and improvements 32,879,228 31,770,730
Theater furniture and equipment 26,511,477 26,295,904
Theaters under construction 457,237 897,181
------------ ------------
Total 72,343,605 71,463,723
Less accumulated depreciation and amortization (6,846,528) (4,550,682)
------------ ------------
Theater properties and equipment - net $ 65,497,077 $ 66,913,041
============ ============
</TABLE>
-6-
<PAGE> 7
3. OTHER ASSETS
The following is a summary of other assets:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED)
----------- ------------
<S> <C> <C>
Noncompete agreements $ 2,026,400 $ 2,026,400
Debt issue costs 4,708,295 4,555,659
Organization costs 52,431 52,431
----------- ------------
Total 6,787,126 6,634,490
Less accumulated amortization (1,850,909) (1,274,262)
----------- ------------
Net 4,936,217 5,360,228
Employee notes receivable 128,189 136,681
Equipment, lease and other deposits 3,102,459 5,348,949
----------- ------------
Total $ 8,166,865 $ 10,845,858
=========== ============
</TABLE>
4. DEBT
The following is a summary of debt:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED)
------------ ------------
<S> <C> <C>
Senior subordinated notes $100,000,000 $100,000,000
Other 110,000 220,000
------------ ------------
Total 100,110,000 100,220,000
Less current portion 110,000 110,000
------------ ------------
Long-term debt, less current portion $100,000,000 $100,110,000
============ ============
</TABLE>
The senior subordinated notes bear interest at 10 1/2% and are due in
2005. The notes are redeemable, in whole or in part, at the option of the
Company at a redemption price of 107.875% in 2001, 105.250% in 2002,
102.625% in 2003 and 100% in 2004 and thereafter plus any accrued but
unpaid interest. In addition, on or before April 15, 2001, the Company
may, at its option and subject to certain requirements, use an amount
equal to the net cash proceeds from one or more public equity offerings,
as defined, to redeem up to an aggregate of 35% of the principal amount of
the notes originally issued at a redemption price of 110.5% plus any
accrued but unpaid interest. Upon a change in control of the Company, as
defined in the indenture, the Company will be required to make an offer to
repurchase all or any part of each holder's notes at a price equal to 101%
of the principal amount thereof plus interest. The notes also include
restrictive covenants relative to the incurrence of additional
indebtedness, the payment of dividends and other matters.
-7-
<PAGE> 8
5. CAPITAL STOCK
As of June 30, 1999 and December 31, 1998, aggregate Series A Preferred
Stock dividends of $3,945,761 and $2,776,235, respectively, are in
arrears.
6. SEGMENTS
The Company identifies its segments based on type of films exhibited and
management responsibility. Segment profit (loss) is measured as operating
profit (loss), which is defined as profit (loss) before other income
(expense). During the three months ended March 31, 1998, the Company had
no operations in the Specialty Film segment. Revenues by operating segment
were as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Landmark (Specialty Film) $13,034 $10,252 $31,367 $10,252
Silver Cinemas (Second and First-Run) 9,593 9,279 19,855 14,082
------- ------- ------- -------
Total revenues: $22,627 $19,531 $51,222 $24,334
======= ======= ======= =======
</TABLE>
Depreciation and amortization by operating segment were as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Landmark $1,167 $1,052 $2,323 $1,053
Silver Cinemas 896 891 1,825 1,366
------ ------ ------ ------
Total depreciation and amortization: $2,063 $1,943 $4,148 $2,419
====== ====== ====== ======
</TABLE>
Operating income (loss) and reconciliation to consolidated income (loss)
are as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Landmark $ (676) $ (538) $ 2,707 $ (538)
Silver Cinemas (2,707) (1,648) (4,529) (1,962)
------- ------- ------- -------
Operating loss (3,383) (2,186) (1,822) (2,500)
Interest expense and debt issue costs (2,896) (3,451) (5,815) (3,642)
Interest income and other expense (1) 229 92 239
Gain on sale of theater 109 374
------- ------- ------- -------
Net loss $(6,171) $(5,408) $(7,171) $(5,903)
======= ======= ======= =======
</TABLE>
-8-
<PAGE> 9
7. INCOME TAXES
As a result of net losses and the Company's inability to recognize a
benefit for its deferred tax assets, the Company did not record a
provision for income taxes in the three or six months ended June 30, 1999
and 1998.
-9-
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION.
OVERVIEW
The following analysis of the financial condition and results of operations
of Silver Cinemas International ("Silver Cinemas") and its wholly owned
subsidiaries, Silver Cinemas, Inc. ("Silver") and Landmark Theatre Corp.
("Landmark") (collectively referred to as the "Company") should be read in
conjunction with the Condensed Consolidated Financial Statements and Notes
thereto included elsewhere herein.
Since inception in May 1996, the Company has experienced rapid revenue
growth through theater acquisitions and the development of new theaters. During
fiscal year 1996, the Company acquired 18 theaters with 102 screens. During
fiscal year 1997, the Company acquired eight additional theaters with a total of
52 screens, constructed one theater with ten screens and added one screen to an
existing theater. During fiscal year 1998, the Company acquired 81 theaters with
372 screens, opened three newly constructed theaters with 18 screens, closed 4
theaters with 10 screens, and terminated the management agreement on 2 theaters
with 11 screens. In the current fiscal year through June 30, 1999, the Company
acquired 1 specialty film theater with 4 screens, sold one specialty film
theater with 3 screens and one first run theater with 6 screens, closed one
discount theater with 8 screens, constructed one theater with 6 screens, and
acquired one discount theater with 6 screens, bringing the Company's total
theater and screen count to 105 and 533, respectively. The Company expects that
its future revenue growth will be derived primarily from the operation of its
existing theaters, the acquisition and construction of specialty film theaters
and the addition of screens and seating to existing theaters.
In the six months ended June 30, 1999, the Company incurred a net loss of
$7.2 million compared with a net loss for the same period of 1998 of $5.9
million.
The consolidated operating loss for the three months ended June 30, 1999 was
$3.4 million, compared with an operating loss of $2.2 million for the three
months ended June 30, 1998. Revenues for the three months ended June 30, 1999
grew $3.1 million, or 15.8%, to $22.6 million. Expenses increased $4.3 million,
or 20%.
The consolidated operating loss for the six months ended June 30, 1999 was
$1.8 million, compared with an operating loss of $2.5 million for the six months
ended June 30, 1998. Revenues for the six months ended June 30, 1999 grew $26.9
million, or 110.5%, to $51.2 million, primarily as a result of the Company's
acquisitions in the second quarter of 1998. Expenses increased $26.2 million, or
97.7%.
SEGMENT DATA
A summary of the results of operations for each of the Company's principal
business segments is displayed in Note 6 to the condensed consolidated financial
statements.
The Company's business operations are aligned into the following two
segments: Landmark (Specialty Film) and Silver Cinemas (primarily second-run).
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<PAGE> 11
RESULTS OF OPERATIONS OF LANDMARK
The following table sets forth for the fiscal periods indicated the
percentage of total revenues represented by certain items:
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1998 1999
----------------------- -----------------------
<S> <C> <C> <C> <C>
Revenues:
Admissions $ 8,151 79.5% $ 10,433 80.0%
Concessions 1,907 18.6 2,315 17.8
Other 194 1.9 286 2.2
-------- ------ -------- ------
Total 10,252 100.0 13,034 100.0
Costs and expenses
Cost of operations:
Film rentals 3,827 37.3 5,157 39.6
Cost of concessions 381 3.7 404 3.1
Payroll and related
expenses 1,918 18.7 2,126 16.3
Occupancy costs 1,190 11.6 1,763 13.5
Advertising 601 5.9 430 3.3
Other theater operating
costs 1,116 10.9 1,883 14.4
-------- ------ -------- ------
Total 9,033 88.1 11,763 90.2
General & administrative 704 6.9 780 6.0
Depreciation and
amortization 1,052 10.3 1,167 9.0
-------- ------ -------- ------
Operating income (loss) $ (537) (5.3)% $ (676) (5.2)%
======== ====== ======== ======
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1998
Admissions Revenues. Admissions revenues increased $2.3 million or 28.0% to
$10.4 million during the three months ended June 30, 1999 compared to the three
months ended June 30, 1998. The increased admissions revenue was primarily the
result of a 26.7% increase in attendance from 1,402,415 to 1,776,868 (partially
attributable to the inclusion of the entire month of April 1999 compared to a
partial month in April 1998 due to the timing of the close of the Landmark
acquisition) and an increase in the average ticket price from $5.81 to $5.87.
Landmark benefits from having an average ticket price that is substantially
higher than the national average and strong customer loyalty due to their
dedication to the specialty film market.
Concessions Revenues. Concessions revenues increased $0.4 million or 21.4%
to $2.3 million during the three months ended June 30, 1999 compared to the
three months ended June 30, 1998. The increase in concession revenue was
primarily the result of the increase in attendance, but was partially offset by
a decrease in the average concession sale per attendee from $1.36 to $1.30.
Film Expenses. Film rental expenses as a percentage of admissions revenue
increased from 46.9% to 49.4% as a result of higher film settlement rates on
several successful film releases during the first and second quarters of 1999.
Landmark's film rental rates are typically below film rental rates of first-run
theaters, which average in the low to mid 50% range.
Cost of Concessions. Concession costs as a percentage of concession revenue
decreased for the three months ended June 30, 1999 compared to the three months
ended June 30, 1998 from 20.0% to 17.5%. The reduction is primarily attributable
to the Company's negotiated volume discounts on the traditional theater
concession items including fountain drinks. The Company put most of the volume
discounts in place during the second and third quarters of 1998.
Payroll and Related Expense. Payroll expense increased $0.2 million or 10.8%
to $2.1 million for the three months ended June 30, 1999 compared to the three
months ended June 30, 1998. Payroll per attendee, a key measure for staff
efficiency, decreased from $1.37 per attendee to $1.20 per attendee. The
increased staffing
-11-
<PAGE> 12
efficiency is primarily attributable to the Company's efforts to train theater
managers to adjust their staffing levels to the level of business.
Occupancy Costs. Occupancy costs increased $0.6 million or 48.2% to $1.8
million for the three months ended June 30, 1999 compared to the three months
ended June 30, 1998. This increase was primarily the result of two new theaters
opened late in the second quarter of 1998 and the inclusion of the entire month
of April 1999 compared to a partial month in April 1998 due to the timing of the
close of the Landmark acquisition.
Advertising Expenses. Advertising expenses decreased $0.2 million or 28.5%
to $0.4 million for the three months ended June 30, 1999 compared to the three
months ended June 30, 1998. This decrease was primarily the result of
advertising rebates received in the second quarter of 1999 due to Landmark's
advertising usage.
Utilities and Other Expenses. Utilities and other expenses increased from
$1.1 million to $1.9 million or 68.8% for the three months ended June 30, 1999
compared to the three months ended June 30, 1998. The increase was primarily the
result of the additional theaters operated in the second quarter of 1998, and
the inclusion of the entire month of April 1999 compared to a partial month in
April 1998 due to the timing of the close of the Landmark acquisition.
General and Administrative Expenses. General and administrative expenses
were flat at $0.7 million for the three months ended June 30, 1999 compared to
the three months ended June 30, 1998.
Operating Loss. The operating loss for the three months ended June 30, 1999
increased by $0.1 million to $0.7 million or 5.2% of total revenues, compared to
an operating loss of $0.5 million, or 5.2% of total revenues, for the three
months ended June 30, 1998.
The following table sets forth for the fiscal periods indicated the
percentage of total revenues represented by certain items:
<TABLE>
<CAPTION>
UNAUDITED (1) UNAUDITED
-------------------- --------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1999
-------------------- --------------------
<S> <C> <C> <C> <C>
Revenues:
Admissions $20,794 80.3% $25,375 81.0%
Concessions 4,720 18.2 5,518 17.6
Other 398 1.5 474 1.4
------- ----- ------- -----
Total 25,912 100.0 31,367 100.0
Costs and expenses
Cost of operations:
Film rentals 9,751 37.6 11,527 36.8
Cost of concessions 962 3.7 964 3.1
Payroll and related
expenses 4,388 16.9 4,324 13.8
Occupancy costs 2,836 10.9 3,473 11.1
Advertising 879 3.4 975 3.1
Other theater operating
costs 2,411 9.3 3,458 11.0
------- ----- ------- -----
Total 21,227 81.8 24,721 78.9
General & administrative 2,061 8.0 1,616 5.0
Depreciation and
amortization 2,342 9.0 2,323 7.4
------- ----- ------- -----
Operating income $ 282 1.2% $ 2,707 8.7%
======= ===== ======= =====
</TABLE>
(1) The six months ended June 30, 1998 contain predecessor results through
March 31, 1998 and successor results through June 30, 1998. This
predecessor information is provided herein for the purposes of presenting
comparisons for such periods; however, the Company makes no representations
as to its usefulness for such purpose.
-12-
<PAGE> 13
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
Admissions Revenues. Admissions revenues increased $4.6 million or 22.0% to
$25.4 million during the six months ended June 30, 1999 compared to the six
months ended June 30, 1998. The increased admissions revenue was primarily the
result of a 22.5% increase in attendance from 3,505,000 to 4,293,000 partially
offset by a decrease in the average ticket price from $5.93 to $5.91. Landmark
benefits from having an average ticket price that is substantially higher than
the national average and strong customer loyalty due to their dedication to the
specialty film market.
Concessions Revenues. Concessions revenues increased $0.8 million or 16.9%
to $5.5 million during the six months ended June 30, 1999 compared to the six
months ended June 30, 1998. The increase in concession revenue was primarily the
result of the increase in attendance, but was partially offset by a decrease in
the average concession sale per attendee from $1.35 to $1.29.
Film Expenses. Film rental expenses as a percentage of admissions revenue
decreased from 46.9% to 45.4% as a result of the extended play weeks of several
successful releases during the fourth quarter of 1998 and the first quarter of
1999. Landmark's film rental rates are typically below film rental rates of
first-run theaters, which average in the low to mid 50% range.
Cost of Concessions. Concession costs as a percentage of concession revenue
decreased for the six months ended June 30, 1999 compared to the six months
ended June 30, 1998 from 20.4% to 17.5%. The reduction is primarily
attributable to the Company's negotiated volume discounts on the traditional
theater concession items including fountain drinks. The Company put most of the
volume discounts in place during the second and third quarters of 1998.
Payroll and Related Expense. Payroll expense decreased $0.1 million or 1.5%
to $4.3 million for the six months ended June 30, 1999 compared to the six
months ended June 30, 1999. Payroll per attendee, a key measure for staff
efficiency, decreased from $1.25 per attendee to $1.01 per attendee. The
increase in payroll efficiency is primarily attributable to the Company's
efforts to train theater managers to adjust their staffing to the level of
business.
Occupancy Costs. Occupancy costs increased $0.6 million or 22.5% to $3.5
million for the six months ended June 30, 1999 compared to the six months ended
June 30, 1998. This increase was primarily the result of two new theaters opened
in 1998 and contractual rent increases.
Advertising Expenses. Advertising expenses increased $0.1 million or 10.9%
to $1.0 million for the six months ended June 30, 1999 compared to the six
months ended June 30, 1998. This increase was the result of increased print
advertising associated with promoting the specialized film product.
Utilities and Other Expenses. Utilities and other expenses increased from
$2.4 million to $3.4 million or 43.4% for the six months ended June 30, 1999
compared to the six months ended June 30, 1998. The increase was primarily the
result of the additional theaters operated at June 30, 1999 compared to June 30,
1998.
-13-
<PAGE> 14
General and Administrative Expenses. General and administrative expenses
decreased $0.4 million or 21.6% to $1.6 million for the six months ended June
30, 1999 compared to the six months ended June 30, 1998. The decrease was
primarily the result of the elimination of duplicate staff positions following
the acquisition.
Operating Profit. The operating profit for the six months ended June 30,
1999 increased by $2.4 million to $2.7 million or 8.6% of total revenues,
compared to an operating profit of $0.3 million, or 1.1% of total revenues, for
the six months ended June 30, 1998.
RESULTS OF OPERATIONS OF SILVER CINEMAS
The following table sets forth for the fiscal periods indicated the
percentage of total revenues represented by certain items:
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
--------------------- ----------------------
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1998 1999
--------------------- ----------------------
<S> <C> <C> <C> <C>
Revenues:
Admissions $ 5,117 55.2% $ 5,100 53.2%
Concessions 3,993 43.0 4,360 45.4
Other 169 1.8 133 1.4
------- ----- -------- -----
Total 9,279 100.0 9,593 100.0
Costs and expenses
Cost of operations:
Film rentals 1,971 21.2 1,994 20.8
Cost of concessions 679 7.3 874 9.1
Payroll and related
expenses 1,866 20.1 2,059 21.5
Occupancy costs 2,537 27.3 2,688 28.0
Advertising 436 4.7 295 3.1
Other theater
operating costs 1,693 18.2 2,503 26.1
------- ----- -------- -----
Total 9,182 98.8 10,413 108.6
General & administrative 854 9.2 991 10.3
Depreciation and
amortization 891 9.6 896 9.3
------- ----- -------- -----
Operating income (loss) $(1,648) (17.7)% $ (2,707) (28.2)%
======= ===== ======== =====
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1998
Admissions Revenues. Admissions revenue was flat at $5.1 million for the
three months ended June 30, 1999 compared to the three months ended June 30,
1998. The average ticket price for the circuit decreased from $1.70 to $1.58
primarily as the result of market-related price adjustments, but was entirely
offset by a 7.0% increase in attendance from 3,015,347 to 3,225,104 for the
three months ended June 30, 1998 and June 30, 1999 respectively.
Concession Revenues. Concession revenue increased $0.4 million or 9.2% to
$4.4 million during the three months ended June 30, 1999 compared to the three
months ended June 30, 1998. The increased concession revenue was primarily the
result of a 2.3% increase in the average concession sale per attendee from $1.32
to $1.35 due primarily to the implementation of the Company's reduced price
concession menu aimed at stabilizing attendance at several locations and a 7.0%
increase in attendance.
Film Rental Expenses. Film rental expenses as a percentage of admissions
revenues increased from 38.5% for the three months ended June 30, 1998 compared
to 39.1% for the three months ended June 30, 1999. The increase was primarily
attributable to the increased percentage of admission revenue that was
contributed by first-run theaters when compared to June 30, 1998.
-14-
<PAGE> 15
Concession Supplies Expenses. Concession costs as a percentage of concession
revenue for the period to period comparison increased from 17.0% of concession
sales to 20.0% primarily due the implementation of the Company's reduced price
concession menu at several locations. Management believes this new pricing
policy has assisted in stabilizing attendance levels at most theaters where the
policy has been implemented.
Salaries and Wage Expenses. Payroll expense increased $0.2 million or 10.3%
to $2.1 million for the three months ended June 30, 1999 compared to the three
months ended June 30, 1998 due primarily to the implementation of the Company's
reduced-price concession policy which has increased unit sales resulting in
increased staff levels. Payroll per attendee, a key measure for staff
efficiency, increased from $0.62 per attendee to $0.64 per attendee.
Facility Lease Expenses. Facility leases increased $0.2 million to $2.7
million or 6% for the three months ended June 30, 1999 from $2.5 million for the
three months ended June 30, 1998. The increase in facility lease expense is
primarily attributable to contractual increases in theater leases and additional
theaters operated at June 30, 1999 compared to June 30, 1998. Included in
facility lease expense for the three months ended June 30, 1999 is noncash rent
expense of $0.1 million.
Advertising Expenses. Advertising expenses decreased $0.1 million or 32.3%
from the three months ended June 30, 1998 to $0.3 million for the three months
ended June 30, 1999. Advertising expenses comprised 3.1% and 4.7% of total
revenues for the three months ended June 30, 1999 and 1998 respectively.
Utilities and Other Expenses. Utilities and other expenses increased from
$1.7 million to $2.5 million or 47.8% for the three months ended June 30, 1999
compared to the three months ended June 30, 1998. The increase was primarily the
result of the additional theaters operated at June 30, 1999 compared to June 30,
1998.
General and Administrative Expenses. General and administrative expenses
increased from $0.9 million to $1.0 million or 16% for the three months ended
June 30, 1999 compared to the three months ended June 30, 1998. The increase was
primarily the result of increased payroll costs associated with the Company's
expansion.
Operating Loss. The operating loss for the three months ended June 30, 1999
increased by $1.0 million to $2.7 million or 28.2% of total revenues, compared
to an operating loss of $1.7 million, or 17.8% of total revenues, for the three
months ended June 30, 1998.
-15-
<PAGE> 16
The following table sets forth for the fiscal periods indicated the percentage
of total revenues represented by certain items:
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
---------------------- ----------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1999
---------------------- ----------------------
<S> <C> <C> <C> <C>
Revenues:
Admissions $ 7,677 54.5% $ 10,547 53.1%
Concessions 6,122 43.5 8,950 45.1
Other 282 2.0 358 1.8
-------- ----- -------- -----
Total 14,081 100.0 19,855 100.0
Costs and expenses
Cost of operations:
Film rentals 2,957 21.0 4,011 20.2
Cost of concessions 988 7.0 1,720 8.6
Payroll and related
expenses 2,721 19.3 4,071 20.5
Occupancy costs 3,454 24.5 5,393 27.1
Advertising 580 4.1 767 3.9
Other theater
operating costs 2,509 17.8 4,563 23.0
-------- ----- -------- -----
Total 13,209 93.7 20,525 103.3
General & administrative 1,467 10.4 2,034 10.2
Depreciation and
amortization 1,367 9.7 1,825 9.2
-------- ----- -------- -----
Operating income (loss) $ (1,962) (13.8)% $ (4,529) (22.7)%
======== ===== ======== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
Admissions Revenues. Admissions revenue increased $2.9 million or 37.4% to
$10.5 million during the six months ended June 30, 1999 compared to the six
months ended June 30, 1998. The increased admission revenue was primarily the
result of the addition of 31 acquired or constructed theaters representing 228
screens acquired in the second quarter of 1998, which contributed to the 44.9%
increase in attendance. The average ticket price for the circuit decreased from
$1.69 to $1.60 primarily as the result of market-related price adjustments.
Concession Revenues. Concession revenue increased $2.8 million or 46.2% to
$9.0 million during the six months ended June 30, 1999 compared to the six
months ended June 30, 1998. The increased concession revenue was primarily the
result of the newly acquired and constructed theaters and an 1.5% increase in
the average concession sale per attendee from $1.34 to $1.36 due primarily to
the implementation of the Company's reduced price concession menu aimed at
stabilizing attendance at several locations.
Film Rental Expenses. Film rental expenses as a percentage of admissions
revenues declined from 38.5% for the six months ended June 30, 1998 compared to
38.0% for the six months ended June 30, 1999. The decrease was primarily
attributable to the acquisition of 31 second-run theaters during 1998, which
increased the percentage of admission revenue that was contributed by second-run
theaters when compared to June 30, 1998.
Concession Supplies Expenses. Concession costs as a percentage of concession
revenue for the period to period comparison increased from 16.1% of concession
sales to 19.2% primarily due to the implementation of the Company's reduced
price concession menu at several locations. Management believes this new pricing
policy has assisted in stabilizing attendance levels at most theaters where
implemented.
Salaries and Wage Expenses. Payroll expense increased $1.4 million or 49.6%
to $4.1 million for the six months ended June 30, 1999 compared to the six
months ended June 30, 1998 due primarily to the addition of the newly acquired
and constructed theaters. Payroll per attendee, a key measure for staff
efficiency, increased from $0.60 per attendee to $0.62 per attendee. The
increase is primarily attributable to the increased staffing levels at those
theaters offering the reduced-rate concession menu.
Facility Lease Expenses. Facility leases increased $1.9 million to $5.4
million or 56.1% for the six months ended June 30, 1999 from $3.5 million for
the six months ended June 30, 1998. The increase in facility lease
-16-
<PAGE> 17
expense is primarily attributable to the additional theaters acquired and
constructed during 1998. Included in facility lease expense for the six months
ended June 30, 1999 is noncash rent expense of $0.1 million.
Advertising Expenses. Advertising expenses increased $0.2 million or 32.2%
from the six months ended June 30, 1998 to $0.8 million for the six months ended
June 30, 1999. Advertising expenses comprised 3.9% and 4.1% of total revenues
for the six months ended June 30, 1999 and 1998 respectively.
Utilities and Other Expenses. Utilities and other expenses increased from
$2.5 million to $4.6 million or 81.9% for the six months ended June 30, 1999
compared to the six months ended June 30, 1998. The increase was primarily the
result of the additional theaters operated at June 30, 1999 compared to June 30,
1998.
General and Administrative Expenses. General and administrative expenses
increased from $1.5 million to $2.0 million or 38.7% for the six months ended
June 30, 1999 compared to the six months ended June 30, 1998. The increase was
primarily the result of increased payroll costs associated with the Company's
expansion.
Depreciation and Amortization. Depreciation and amortization increased $0.5
million to $1.8 million or 33.5% for the six months ended June 30, 1999 from
$1.4 million for the six months ended June 30, 1998. The increase was primarily
the result of theater property additions associated with the Company's expansion
efforts.
Operating Loss. The operating loss for the six months ended June 30, 1999
increased by $2.6 million to $4.5 million or 22.8% of total revenues, compared
to an operating loss of $2.0 million, or 13.9% of total revenues, for the six
months ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Revenues are collected in cash, primarily through box office receipts and
the sale of concession items. Because revenues are received in cash prior to the
payment of related expenses, there are, in effect, no accounts receivable. This,
in combination with minimal inventory requirements, creates a negative working
capital position, which provides certain operating capital.
During the first six months of 1999, the Company's capital requirements were
the result of a theater acquisition ($0.8 million), the renovation and upgrade
of existing theaters ($2.0 million), and the continued development and
construction of new theaters ($4.1 million). Such capital expenditures were
financed with a November 1998 equity sale and certain asset sales.
"Same Theater" attendance at the Company's Silver theaters has increased by
approximately 2% for the three months ended June 30, 1999 compared to the three
months ended June 30, 1998 and has declined by approximately 6% for the six
months ended June 30, 1999 compared to the six months ended June 30, 1998. While
management is encouraged with the slight increase in "Same Theater" attendance
for the second quarter of 1999, there can be no assurances that this trend will
continue into the future. Management believes the overall softness in discount
theater attendance levels is the result of several factors including the
development of megaplexes in certain markets, changes in film and video release
patterns, and the overall strength of the U.S. economy. If this downward trend
in attendance continues, the Company's ability to generate liquidity could be
negatively impacted.
The preceding statements concerning the attendance declines may constitute
forward-looking statements within the meaning of the federal securities laws.
The Company warns that many factors could, individually or in aggregate, lead to
further declines in theater attendance, including, without limitation, the
following: consumer spending trends and habits; increased competition in the
theater industry; adverse developments in economic factors influencing the
exhibition industry; and lack of demand for films by the general public. The
Company does not expect to update such forward-looking statements continually as
conditions change, and readers should consider that such statements pertain only
to the date hereof.
-17-
<PAGE> 18
On January 15, 1999, a wholly owned subsidiary of Landmark purchased the
stock of Dinger Brothers, Inc. which operated a 4-screen specialty-film theater,
located in Texas, for approximately $0.8 million. The purchase was financed by a
November 1998 equity sale and internally generated cash.
On March 5, 1999, the Company sold its specialty theater in Sacramento, CA
to a non-theater entity for approximately $1.6 million. The Company operated
this theater on a month-to-month basis through May 1999. On April 2, 1999, the
Company sold its first-run theater in Burton, MI for approximately $2.0 million.
The net proceeds from both sales are being used to continue the Company's
new-build expansion program.
On April 6, 1999 the Company entered into a Letter of Credit and
Reimbursement Agreement between the Company and NationsBank, N.A. The agreement
allows the Company to enter into up to $5.3 million in letters of credit
associated with specific to-be-built theaters. Under certain circumstances,
including the failure of the Company to pay amounts drawn under the letters of
credit, Brentwood Associates Buyout Fund II, L.P has agreed to purchase a
participation from the bank in outstanding letters of credit and reimbursement
obligations. This agreement released approximately $3.4 million in cash that was
securing previously issued letters of credit.
In April 1998 the Company obtained a commitment for a $40.0 million
revolving line of credit from DLJ Capital Funding, Inc. The terms of the
commitment were based on assumptions of the business at the time of the
acquisition of Landmark and StarTime in April 1998. Due to the recent attendance
trends in the second-run segment, which have negatively impacted the Company's
performance, the commitment is no longer available to the Company. As a result,
in May 1999 the Company retained Donaldson, Lufkin & Jenrette to evaluate
potential alternative sources of capital to complete the Company's new build
program, to pursue acquisitions and for general corporate purposes.
On August 3, 1999, Farallon Capital Management, LLC or affiliates
("Farallon") committed, subject to compliance with customary conditions, to
provide the Company with a four year, senior secured credit facility with
aggregate availability of $50.0 million, subject to a real estate
collateral-based borrowing base (the "Credit Facility"). The Company does not
anticipate that the borrowing base initially will permit funding of the entire
committed amount. The Company, subject to execution of a credit agreement
("Credit Agreement"), will be able to utilize borrowings to fund working
capital requirements, may possibly repurchase or refinance existing
indebtedness and for other general corporate purposes, including, subject to
conditions, the acquisition and construction of theaters. Silver Cinemas and
each of the Company's direct and indirect domestic subsidiaries will be jointly
and severally liable as co-borrowers for all borrowings under the Credit
Agreement. The Credit Facility will rank senior in right of payment to the
Notes and will be secured by a perfected first priority security interest in
substantially all existing and future assets of the Company including: (i) fee
interests and certain leasehold interests in real property; (ii) accounts
receivable, equipment, inventory, and intangibles; and (iii) the capital stock
of the Company. Until the Company enters into a Credit Agreement with Farallon
(as assignee of and successor to DLJ Capital Funding), the Company will not be
able to borrow under any credit facility.
-18-
<PAGE> 19
As of June 30, 1999, the Company had $3.9 million of Series A Preferred
Stock dividends in arrears.
INFLATION
Inflation has not had a significant impact on the Company's operations to
date.
SEASONALITY
The Company's quarterly results of operations tend to be affected by film
release patterns by producers and distributors, and the commercial success of
films. In the past the year-end holiday season and the summer resulted in
higher-than-average quarterly revenues for the Company.
YEAR 2000
The "Year 2000 Issue" is the result of computer programs that use two digits
instead of four to record the applicable year. Computer programs that have
date-sensitive software might recognize a date using "00" as the Year 1900
instead of the Year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including among other events,
a temporary inability to process transactions or engage in similar normal
business activities. The Year 2000 is a leap year, which may also lead to
incorrect calculations, functions or system failure. At the present time, the
Company has completed its assessment of the day-to-day operating and reporting
systems for all theaters and has contacted the various vendors to ensure that
all necessary modifications and upgrades will be implemented by September 30,
1999. The Company's financial reporting and operational databases associated
with the corporate offices have been tested, and modified as needed to ensure
compliance with the Year 2000. All projects to modify the existing systems to
ensure Year 2000 compliance are expected to be completed by September 30, 1999.
Related costs are not anticipated to exceed $0.1 million at the completion of
the project, and will be funded through internally generated cash flow.
Under the "most reasonably likely worst case scenario" the Company's point
of sale equipment will fail to operate at the theater level. In this event, the
Company could return to a manual system of recording daily admission and
concession revenues, which are primarily received in cash. Given the Company's
daily reliance on point of sale equipment, theaters are currently trained in
operating within a manual system when the point of sale equipment is
occasionally inoperable. The impact from a system failure at the corporate
office would only effect financial reporting and analysis of operating results.
The Company is still in the assessment phase with respect to its significant
suppliers and critical business partners to determine the extent to which the
Company may be vulnerable in the event that those parties fail to properly
remediate their own Year 2000 issues. The major third party vendors include
financial institutions, utility suppliers, providers of communication services
and parties that provide goods or services that are essential to the Company's
operations. While the Company is not presently aware of any such significant
exposure, there can be no guarantees that the systems of third-parties on which
the Company relies will be converted in a timely manner, or that failure to
properly convert by another company would not have a material adverse effect on
the Company. The Company will develop appropriate contingency plans in the event
that a significant exposure is identified relative to the dependence on
third-party systems.
-19-
<PAGE> 20
Although the Year 2000 assessment has not been completed, management
currently believes, based on available information, that resolving these matters
will not have a material adverse impact on the Company's financial position,
results of operations or cash flows.
The preceding statements concerning the Company's efforts and management's
expectations, relating to year 2000 compliance and the incremental costs
associated therewith may constitute forward-looking statements within the
meaning of the federal securities laws. The Company warns that many factors
could, individually or in aggregate, adversely impact the company's ability to
achieve year 2000 compliance including without limitation, the availability and
costs of programming and testing resources, vendors' ability to modify
proprietary software and unanticipated problems identified in the ongoing
compliance review. The Company does not expect to update such forward-looking
statements continually as conditions change, and readers should consider that
such statements pertain only to the date hereof.
-20-
<PAGE> 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable to the Registrant.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time a party to legal proceedings that
arise in the ordinary course of business. Management does not believe
that the resolution of any threatened or pending legal proceedings
will have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The senior subordinated notes include a restrictive covenant relative
to the payment of dividends. As of June 30, 1999, aggregate Series A
Preferred Stock dividends of $3.9 million are in arrears.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
There have been no matters to a vote of the holders of securities of
the Company since the Company became subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
EXHIBIT
NO. DESCRIPTION
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
On January 15, 1999, the Company filed a report on Form 8-K
dated January 12, 1999, announcing the resignation of Thomas
J. Owens from the positions of President and Director of
Silver Cinemas International.
-21-
<PAGE> 22
SIGNATURES
Pursuant to the requirement 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.
SILVER CINEMAS INTERNATIONAL, INC.
Date: August 16, 1999 By /s/ STEVEN L. HOLMES
----------------------------------
Steven L. Holmes
Chief Executive Officer and
Chief Financial Officer
-22-
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27.1 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET OF SILVER CINEMAS, INTERNATIONAL,
INC. AS OF JUNE 30, 1999, AND THE RELATED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,277,648
<SECURITIES> 0
<RECEIVABLES> 853,524
<ALLOWANCES> 0
<INVENTORY> 556,732
<CURRENT-ASSETS> 2,687,904
<PP&E> 72,343,605
<DEPRECIATION> 6,846,528
<TOTAL-ASSETS> 125,517,444
<CURRENT-LIABILITIES> 8,840,416
<BONDS> 100,000,000
0
35,847,006
<COMMON> 1,341
<OTHER-SE> 25,431,317
<TOTAL-LIABILITY-AND-EQUITY> 125,517,444
<SALES> 0
<TOTAL-REVENUES> 51,221,968
<CGS> 0
<TOTAL-COSTS> 45,246,455
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,814,862
<INCOME-PRETAX> (7,171,225)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,171,225)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,171,255)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
