<PAGE>
================================================================================
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: March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 1-6123
CRAIG CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 95-1620188
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
550 South Hope Street
Suite 1825, Los Angeles CA 90071
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (213) 239-0555
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. There were 4,171,870 shares of
Common Stock, $0.25 par value per share, and 1,622,000 shares of Class A Common
Preference Stock, $0.01 par value per share, as of May 13, 1996.
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1
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART 1. Financial Information
-------
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1996 (Unaudited)
and September 30, 1995............................................. 3
Consolidated Statements of Earnings for the Three and Six Months
Ended March 31, 1996 and 1995 (Unaudited).......................... 4
Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 1996 and 1995 (Unaudited).......................... 5
Notes to Consolidated Financial Statements......................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 16
PART 2. Other Information
-------
Item 1. Legal Proceedings............................................. 22
Item 2. Changes in Securities......................................... 22
Item 3. Defaults Upon Senior Securities............................... 22
Item 4. Submission of Matters to a Vote of Security Holders........... 22
Item 5. Other Information............................................. 22
Item 6. Exhibits and Reports on Form 8-K.............................. 22
Signatures............................................................. 23
</TABLE>
2
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
-------------------------
(In thousands of dollars)
<S> <C> <C>
ASSETS
--------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 29,030 $ 21,059
Receivables from affiliates 962 247
Other current assets 67 76
-------- --------
Total current assets 30,059 21,382
Investments in affiliates 101,800 60,171
Note receivable from affiliate 3,325 --
Excess of cost over net assets acquired, net 1,716 2,201
Other assets 6,186 915
-------- --------
Total assets $143,086 $ 84,669
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 964 $ 692
Payable to affiliate 237 --
Land contract payable 3,306 --
-------- --------
Total current liabilities 4,507 692
Other long-term liabilities 32 56
Option to sell investment in affiliate -- 14,650
Deferred gain from conversion of common
stock of affiliate to preferred stock 6,235
Deferred tax liabilities 30,842 5,380
Minority liability 6,746 --
SHAREHOLDERS' EQUITY
Preferred stock, par value $.25,
1,000,000 shares authorized, none issued -- --
Class A common preference stock, par value
$.01, 10,000,000 shares authorized,
1,645,000 issued and outstanding 16 16
Class B common stock, par value $.01,
20,000,000 shares authorized, none issued -- --
Common stock, par value $.25,
7,500,000 shares authorized, 5,444,065
shares issued 1,361 1,361
Additional paid-in capital 30,793 30,793
Cumulative foreign currency
translation adjustment 34 --
Retained earnings 76,001 43,858
Cost of treasury shares, 1,295,195 and 1,154,095 (13,481) (12,137)
-------- --------
Total shareholders' equity 94,724 63,891
-------- --------
Total liabilities and shareholders' equity $143,086 $ 84,669
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
------------------ ----------------
(In thousands of dollars,
except per share amounts)
<S> <C> <C> <C> <C>
Service income from affiliate $ 375 $ 375 $ 750 $ 750
Equity earnings (losses) of affiliates 1,598 395 3,531 1,118
Interest and dividend income 740 459 1,060 867
-------- ------ -------- -------
Revenues 2,713 1,229 5,341 2,735
Expenses from Australian theater
developments (509) -- (1,001) --
General and administrative expenses (575) (482) (1,119) (1,212)
-------- ------ -------- -------
Earnings before other income and
income taxes 1,629 747 3,221 1,523
Other income:
Minority interest in net loss of
consolidated subsidiary 128 -- 253 --
Gain from conversion of common stock
interest in Stater 49,961 -- 49,961 --
-------- ------ -------- -------
Earnings before income taxes 51,718 747 53,435 1,523
Provision for taxes (20,425) (300) (21,292) (655)
-------- ------ -------- -------
Net earnings $ 31,293 $ 447 $ 32,143 $ 868
======== ====== ======== =======
Earnings per common and
common equivalent share $5.40 $0.07 $5.48 $0.14
======== ====== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1996 1995
------------------------
(In thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net Earnings $ 32,143 $ 868
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on conversion of common stock
investment in Stater (49,961) --
Amortization of excess purchase price 30 33
Undistributed earnings of affiliates (3,531) (1,118)
Depreciation 54 46
Loss on sale of stock 68 --
Minority interest (253) --
Provision for deferred income taxes 21,292 655
Changes in operating assets and liabilities:
(Increase) decrease in other current assets (706) (504)
(Increase) decrease in other assets (374) (10)
(Decrease) increase in accrued liabilities 280 (63)
-------- -------
Net cash provided by (used in) operating activities (958) (93)
INVESTING ACTIVITIES
Acquisition of stock of affiliates (2,050) (287)
Other investments (210) --
Purchase of stock investment -- (442)
Sale of stock investment -- 457
Purchase of property and equipment (4,741) --
-------- -------
Net cash provided by (used in) investing activities (7,001) (272)
FINANCING ACTIVITIES
Borrowings and advances from affiliates 1,927 --
Payment of borrowings from affiliates (1,690) --
Short-term debt incurred for land purchase 3,306 --
Common stock repurchase (1,343) (823)
Capital contributed by affiliate to
joint venture in Reading International 13,730 --
-------- -------
Net cash provided by (used in) financing activities 15,930 (823)
Increase (decrease) in cash and cash
equivalents 7,971 (1,188)
Cash and cash equivalents at beginning
of period 21,059 21,205
-------- -------
Cash and cash equivalents at end
of period $ 29,030 $20,017
======== =======
</TABLE>
SUPPLEMENTAL DISCLOSURES:
During the six months ended March 31, 1996 the Company (1) sold its common stock
investment in CHC to an affiliate for a note receivable amounting to $3,325,000,
(2) exchanged its common stock interest in Stater with a net book value of
approximately $9,000,000 for Stater Preferred Stock with a stated redemption
value of $69,365,000, and (3) invested approximately $13,928,000 in a 50% joint
venture, Reading International, with its affiliate Reading.
See accompanying notes to consolidated financial statements.
5
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
Basis of Presentation and Principle of Consolidation
----------------------------------------------------
The consolidated financial statements include the accounts of Craig Corporation
and its majority-owned subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
During the six months ended March 31, 1996, the Company and its affiliate,
Reading Company ("Reading"), formed Reading International Cinemas LLC ("Reading
International") to develop and operate multiplex cinemas in Australia. Reading
International is owned in equal shares by the Company and Reading. The
Company's 50% direct interest in Reading International, together with its 49.3%
interest in Reading, results in a 74.65% interest by the Company in Reading
International. Minority interest is reflected in the consolidated financial
statements and represents the portion of Reading International (25.35% at March
31, 1996) that is not owned by the Company directly or indirectly.
Common stock investments in affiliates in which the Company holds a 20 to 50%
percent ownership interest are accounted for using the equity method (Note 2).
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments of a recurring nature considered necessary
for a fair presentation of its financial position as of March 31, 1996 and
September 30, 1995, and the results of operations and its cash flows for the
three and six month periods ended March 31, 1996 and 1995. The results of
operations for the three and six month periods ended March 31, 1996 and 1995 are
not necessarily indicative of the results of operations to be expected for the
entire year.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and, therefore, do not include
all information and footnotes required to be in conformity with generally
accepted accounting principles. The financial information provided herein,
including the information under the heading, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," is written with the
presumption that the users of the interim financial statements have read, or
have access to, the most recent Annual Report on Form 10-K which contains the
latest audited financial statements and notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of September 30, 1995 and for the year then ended.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Cash equivalents are
stated at cost, which approximates market value, and consist primarily of
federal agency securities. Included in cash and cash equivalents at March 31,
1996 is approximately $2.4 million, which is held in government securities
having maturities of three months or less and $25 million invested by Reading
International in repurchase agreements collateralized by U.S. Treasury
securities.
6
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
Earnings Per Share
------------------
Earnings per share is based on 5,798,279 and 5,964,970, the weighted average
number of shares of common stock outstanding during the three months ended March
31, 1996 and 1995, and 5,860,462 and 5,994,970 shares during the six months
ended March 31, 1996 and 1995, respectively. Common stock equivalents (stock
options) have been excluded from the computations because the effect on such
computation was not significant or was anti-dilutive in the periods reported.
Depreciation and amortization
-----------------------------
Depreciation and amortization of property and leasehold improvements is
generally provided using the straight line method over the estimated useful
lives of the assets or the shorter of the estimated lives or lease term for
leasehold improvements.
The excess of cost over net assets acquired is amortized using the straight line
method over periods ranging from 20 to 40 years. Accumulated amortization at
March 31, 1996 and September 30, 1995 was approximately $613,000 and $585,000
respectively. During the six months ended March 31, 1996 excess of cost over
net assets acquired decreased approximately $341,000 as a result of accounting
for additional purchases of common stock of equity affiliates.
NOTE 2 - INVESTMENTS IN AFFILIATES
----------------------------------
The Company's investments in affiliates at March 31, 1996 and September 30, 1995
consist of the following:
<TABLE>
<CAPTION>
March 31, Sept. 30,
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Common stock:
Stater Bros. Holdings Inc. ("SBH") $ -- $20,160
Reading Company ("RC") 27,185 32,725
Citadel Holding Corporation ("CHC") -- 2,036
-------- -------
27,185 54,921
-------- -------
Preferred Stock:
Stater Bros. Holdings Inc. ("SBH") 69,365 --
Citadel Holding Corporation ("CHC") 5,250 5,250
-------- -------
74,615 5,250
-------- -------
Total investments in affiliates $101,800 $60,171
-------- -------
</TABLE>
SBH
---
Prior to March 8, 1996, the Company held a 50% common stock interest in Stater
Bros. Holdings Inc. ("SBH" and collectively with its operating subsidiaries,
"Stater"). The remaining 50% interest in Stater was owned by La Cadena
Investments ("La Cadena"), a general
7
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
partnership consisting of key management executives of Stater. In March 1994,
the Company entered into a series of restructuring agreements, whereby the
Company received, among other things, a $14.65 million option payment from SBH
which provided Stater with the option to acquire all, but not less than all, of
the Company's interest in Stater. The option had an initial term of two years
(March 8, 1996), but could be extended for ten additional years if Stater
converted the Company's common stock interest in SBH to preferred stock prior to
March 8, 1996.
Effective March 8, 1996, SBH exercised its right to convert all the Company's
common stock in SBH into 693,650 shares of SBH's Series B Preferred Stock,
stated value $100 per share (the "SBH Stater Preferred Stock"). The SBH
Preferred Stock has a liquidation preference and redemption value of $69.365
million and a cumulative dividend preference beginning at 10.5%, increasing to
12% after 78 months, and further increasing every twelve months thereafter by an
additional 1%, to a terminal cumulative dividend rate of 15%. Included in
dividend income for the three and six months ended March 31, 1996, is
approximately $479,000 earned from the date of issuance of the SBH Preferred
Stock through March 31, 1996. Dividends are paid quarterly in arrears. The
Company received the $479,000 in April 1996. The payment of dividends by Stater
to the Company is restricted subject to various financial covenants in the
Stater credit agreements. The SBH Preferred Stock, if owned by the Company,
entitles the Company to (1) elect one director of Stater, (2) vote 20% of the
total number of votes, and (3) elect a majority of the Board of Directors of
Stater if two or more quarterly preferred stock dividends remain unpaid.
Pursuant to the option terms, Stater has a transferable right to purchase the
SBH Preferred Stock at any time prior to March 2006. If not purchased by Stater,
prior to March 2006, the Company has the right to have the SBH Preferred Stock
redeemed at any time following March 8, 2009.
Upon the conversion by SBH in March 1996 of the Company's common stock interest
to redeemable preferred stock, the Company discontinued the use of the equity
method of accounting for its investment in Stater. Prior to the preferred stock
conversion, the net book value of Stater amounted to approximately $20.3 million
and the carrying value of the Company's 50% common stock interest, net of the
$14.65 million option proceeds received in 1994 and reflected on the balance
sheet at September 30, 1995 as "Option to sell investment in affiliate, amounted
to approximately $9 million. The Company has recorded approximately $49.96
million of the difference between the $69.365 million stated value of the SBH
Preferred Stock and the Company's carrying value of its previous common stock
investment ($9 million) at the time of the conversion as "Gain from conversion
of common stock interest in Stater Brothers". The Company's investment in
Stater is not held for sale. The ultimate value of the SBH Preferred Stock is
based upon various market factors including, but not limited to, Stater's
operating performance, Stater's existing senior debt covenants, interest rates
and the likelihood of redemption, from time to time, by Stater. After the
Company's consideration of those factors, and recognition by the Company that
its preferred voting rights, as described above, are not transferable if the SBH
Preferred Stock were to be sold to a third party, the Company has deferred
approximately $10.405 million of the gain from the conversion by Stater of the
Company's common
8
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
stock interest to SBH Preferred Stock until such time as the uncertainties
regarding realization can be more reasonably assured. Such gain, net of
deferred taxes provided, is reflected in the balance sheet as "Deferred gain
from conversion of common stock of affiliate to preferred stock" in the amount
of approximately $6.235 million.
Effective March 8, 1994, the Company entered into a consulting agreement with
SBH pursuant to which the Company has agreed, among other things, to render
consulting services for a five year period, for an annual fee of $1.5 million,
payable quarterly. Included in service income for the both the three and six
months ended March 31, 1996 and 1995 is $375,000 and $750,000 earned pursuant to
this agreement.
Stater files the required periodic reports with the Securities and Exchange
Commission (SEC). Summarized financial information of Stater is as follows:
<TABLE>
<CAPTION>
March 24, September 24,
1996 1995
-----------------------------
(In thousands)
<S> <C> <C>
CONDENSED BALANCE SHEET
Current assets $177,789 $158,647
Property, plant and equipment, net 105,826 118,627
Other assets 34,714 36,808
Current liabilities 110,813 113,633
Long-term debt 172,567 173,099
Other liabilities 13,772 13,772
Redeemable preferred stock 69,365 --
Shareholders' common equity (48,188) 13,578
CONDENSED STATEMENT OF INCOME
<CAPTION>
Twenty-Six Weeks Ended
-------------------------
Mar. 24, Mar. 26,
1996 1995
-------- --------
(In thousands)
-------------------------
<S> <C> <C>
Revenues $814,963 $781,216
Cost of goods sold 629,154 608,336
-------- --------
Gross profit 185,809 172,880
General and administrative 155,616 151,146
Depreciation and amortization 6,162 5,676
Consulting costs 750 748
-------- --------
Income from operations 23,281 15,310
Interest expense, net 9,217 9,901
Other (income) loss 724 156
Income taxes 5,402 2,100
-------- --------
Net income $ 7,938 $ 3,153
======== ========
</TABLE>
9
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
Prior to SBH's exercise of its option to convert the Company's common stock to
SBH Preferred Stock in March 1996, the Company included in equity earnings of
affiliates the Company's share of SBH's operating results amounting to
$1,608,000 and $883,000 for the three months ended March 31, 1996 and 1995 and
$3,489,000 and $1,742,000 for the six months ended March 31, 1996 and 1995,
respectively.
Reading
-------
During the six months ended March 31, 1996, the Company increased its ownership
in RC from 2,367,976 shares (47.6%) at September 30, 1995 to 2,452,526 shares
(49.3%) at March 31, 1996 through the purchase of an additional 84,550 shares at
a cost of approximately $770,000. Based on the closing price per share of RC at
March 31, 1996 of $10.75, the aggregate market value of the Company's investment
in RC at that date was approximately $25,456,000. In April 1996, the Company
requested and received permission from the Board of Directors of RC to acquire
additional shares of RC Class A Common Stock such that Craig's total holdings
would not exceed 55% of the issued and outstanding shares of RC Class A Common
Stock. On May 17, 1996, the Company entered into an agreement with James J.
Cotter to exchange 66,042 shares of the Company's Common Stock for certain
shares of RC Class A Common Stock held by Mr. Cotter, pursuant to which the
Company has agreed to acquire and the Mr. Cotter has agreed to transfer 67,000
shares of RC Class A Common Stock, increasing the Company's equity ownership of
RC to approximately 50.7%. In the future periods, the Company will report its
ownership interest in RC on a consolidated basis, rather than on the equity
basis.
Summarized financial information of Reading at March 31, 1996 and September 30,
1995 follows:
<TABLE>
<CAPTION>
Mar. 31, Sept. 30,
1996 1995
--------------------
(In thousands)
<S> <C> <C>
CONDENSED BALANCE SHEET
Current assets $33,981 $50,263
Property and equipment 9,138 7,118
Intangible assets 15,309 15,770
Investment and advances
in Reading International 13,306 145
Investment in CHC 3,325 --
Other assets 3,334 1,966
Current liabilities 4,059 3,596
Note payable to Company 3,325 --
Other long-term liabilities 2,539 2,907
Shareholders' common equity 68,470 68,759
</TABLE>
In November 1995, Reading and the Company formed Reading International Cinema
LLC ("Reading International") to develop and operate multiplex cinemas in
Australia. Reading International is owned in equal shares by Reading and the
Company. On March 29, 1996, the Company and RC entered into a capital funding
agreement (the "Capital Funding Agreement") with respect to Reading
International pursuant to which the Parties agreed to increase the capital
committed by the Company and RC
10
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
from $10 million to $103 million through the combination of cash contributions
and secured capital funding undertakings. As of March 31, 1996, the Company and
RC have made cash contributions to Reading International approximating
$27,856,000 million (inclusive of $237,000 advanced on behalf of the Company by
RC and which is included as "Due to affiliates" on the Company's balance sheet
at March 31, 1996), and have undertaken to contribute up to an additional $37.5
million each for an aggregate commitment of $75 million on an as needed basis.
The Company's commitment is secured by the Company's SBH Preferred Stock and the
commitment of RC is secured by substantially all of the assets of RC.
In addition, to the Company's 50% interest in Reading International, the Company
indirectly owns an additional 24.65% interest through its 49.3% ownership
interest in Reading. For financial statement purposes, the Company consolidates
its 74.65% interest in Reading International and, accordingly, eliminates from
its equity earnings (losses) from affiliates, the Company's proportionate share
of Reading's operating results of Reading International. In addition, in
connection with consolidating the accounts of Reading International in the
Company's financial statements, the Company has reduced the amount previously
reported as equity investment in RC by approximately $6,730,000 representing the
Company's proportionate net equity ownership of RC's interest in Reading
International at March 31, 1996.
On March 29, 1996, the Company sold to Reading its common stock investment in
CHC for an aggregate purchase price of $3,324,505, which was paid in the form of
a five year unsecured promissory note which provides for the payment of interest
at a rate equal to LIBOR plus 2.25%. The note is included in the Company's
Consolidated Balance Sheet as "Note receivable from affiliate". In addition,
the Company sold to Reading for an option fee of $50,000, a one year option to
acquire at fair market value, as determined by an investment banker selected by
the parties, the 1,329,114 shares of CHC 3% Cumulative Convertible Preferred
Stock, stated value $3.95 per share owned by the Company and the Warrant to
acquire 666,000 shares of CHC Common Stock.
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
--------- -------- -------- --------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Revenue:
Theatre $4,011 $3,205 $7,216 $6,363
Other 674 603 1,764 1,299
------ ------ ------ ------
Total revenue 4,685 3,808 8,980 7,662
Theatre costs 3,138 2,469 5,780 5,056
Depreciation and amortization 386 336 734 750
Equity losses from Reading
International 254 -- 500 --
General and administrative 1,170 941 2,218 2,083
------ ------ ------ ------
Earnings (loss) before
income taxes (263) 62 (252) (227)
</TABLE>
11
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
<S> <C> <C> <C> <C>
Income taxes 10 141 58 141
------ ------ ------ ------
Net (loss) $ (273) $ (79) $ (310) $ (368)
------ ------ ------ ------
</TABLE>
Included in equity earnings (losses) of affiliates is the Company's share of
Reading's operating results, adjusted for the Company's ownership in Reading
International, amounting to earnings of $21,700 and losses of $37,000 for the
three months ended March 31, 1996 and 1995, and earnings of $53,700 and losses
of $173,000 for the six months ended March 31, 1996 and 1995, respectively.
Citadel
-------
As of March 31, 1996 and September 30, 1995, the Company's investment in CHC is
as follows (in thousands):
<TABLE>
<CAPTION>
March September
1996 1995
------- ---------
<S> <C> <C>
Common stock $ -- $2,036
3% Cumulative Convertible Preferred Stock 5,250 5,250
------ ------
$5,250 $7,286
====== ======
</TABLE>
During the six months ended March 31, 1996, the Company increased its common
stock ownership in CHC from 993,112 shares (16.5%) at September 30, 1995 to
1,564,473 shares (26%) through the purchase of an additional 571,361 shares at a
cost of approximately $1,281,000. In addition, the Company owns 1,329,114
shares of CHC 3% Cumulative Voting Convertible Preferred Stock (the "CHC
Preferred Stock") with a stated value of $5,250,000. The Company also holds a
warrant, exercisable at $3.00 per share, to purchase an additional 666,000
shares of CHC Common Stock (the "Warrant"). As described above, on March 29,
1996, the Company sold to its 49.3% affiliate, RC, its common stock interest in
CHC and an option to purchase its CHC Preferred Stock and the Warrant. The sale
of the Company's common stock interest in CHC resulted in a loss of
approximately $69,000 during the three and six months ended March 31, 1996.
The CHC Preferred Stock represents approximately 18.1% of the voting power of
CHC and together with the common shares owned by the Company's affiliate, RC,
represent approximately 39.5% of the voting power of CHC as of March 31, 1996.
Assuming full exercise of the Warrant, the Company together with its affiliate,
RC, would own approximately 44.5% of the then issued outstanding voting
securities of CHC.
The CHC Preferred stock was issued to the Company in November 1994 pursuant to a
Stock Purchase Agreement and Certificate of Designation which provides, among
other things, that (i) the preferred shares carry a liquidation preference equal
to their stated value and bear a cumulative (noncompounded) annual dividend
equal to 3% of the stated value, (ii) are convertible under certain
circumstances into shares of common stock of CHC, (iii) are redeemable at the
option of CHC at any
12
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
time after November 1997 and (iv) are redeemable (subject to Delaware
limitations upon distributions to shareholders) at the option of the Company in
the event of a change of control of CHC. Subject to certain limitations, the
Preferred Stock is convertible into common stock of CHC at a conversion price
per share equal to the market price, as defined, per share of CHC common stock,
calculated as the per share stated value of $3.95 divided by the average of the
closing price per share of the CHC common stock for each of the 60 days
preceding the conversion. Assuming a market price of $2.375, the Company's
preferred stock if converted would be at 2,210,525 shares, resulting in an
increase in the Company's voting ownership when considered with its affiliate's
common stock ownership in CHC to 46% at March 31, 1996, or 50% assuming in
addition the exercise of the Warrant.
For financial statement purposes the Company carries its CHC Preferred Stock
investment at cost amounting to $5.25 million. Dividends earned and included in
dividend and interest income for both the three months ended March 31, 1996 and
1995 amounted to $39,375, and for the six months ended March 31, 1996 and 1995
amounted to $78,750 and $62,125, respectively.
Included in equity earnings of affiliates is the Company's portion of CHC's
operating results, less preferred stock dividends, amounting to earnings of
$20,000 for the three and six months ended March 31, 1996. Pursuant to the
Company's sale of its common stock to its affiliate, RC, the Company no longer
has a common stock interest in CHC and, accordingly, no longer reports equity
earnings from its investment in CHC.
NOTE 3 - READING INTERNATIONAL
------------------------------
As described above, Reading International is owned in equal shares by the
Company and Reading. However, when the Company's share is considered with its
49.3% interest in Reading, the Company's direct and indirect ownership in
Reading International approximates 74.65% at March 31, 1996. Accordingly, the
consolidated financial statements of the Company include the accounts of Reading
International and its domestic and foreign subsidiaries at March 31, 1996.
Reading International was formed to develop and operate multiplex theaters in
Australia. The Company and Reading have each committed to make equal
contributions up to approximately $103 million, on an as needed basis. As of
March 31, 1996, cash contributions amounting to approximately $27,856,000 have
been funded to Reading International.
A wholly owned subsidiary of Reading International has retained the services of
several executive employees in Australia who provide management services with
respect to such Australian operations on a full time basis or substantially full
time basis. Included in the statements of operations for the three and six
month periods ended March 31, 1996, as operating, general and administrative
expenses, is approximately $509,000 and $1,001,000 of administrative and
development costs
13
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
incurred with respect to the operations of Reading International. Reading
International has no current revenues and is currently entirely developmental in
nature.
As of March 31, 1996, Reading International's assets amounting to approximately
$30,393,000 including cash of approximately $25.1 million. In addition, Reading
International's noncurrent assets at March 31, 1996 are comprised principally of
$6,234,000 related to the purchase of a parcel of land and the related
development costs, and $189,000 of refundable property and lease deposits. The
land purchase was made pursuant to a real estate purchase contract with the
seller which provided for installment payments, including approximately
$3,306,000 due on December 20, 1996, which is reflected as "Land contract
payable" on the balance sheet at March 31, 1996. Reading International is in
negotiations with several developers and landlords with respect to other
potential locations.
NOTE 4 - TAXES ON INCOME
------------------------
Under SFAS No. 109, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory rates
applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities. At March
31, 1996 and September 30, 1995, the deferred tax liability components consisted
of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------- -------------
(in thousands)
<S> <C> <C>
Deferred tax liabilities:
Book gains from preferred stock
investment, not realized
for tax 34,200 --
Other 7,032 13,742
-------- -------
Total deferred tax liabilities 41,232 13,742
-------- -------
Deferred tax assets:
Capital loss carryforward from
sale of equity securities (7,680) --
Unrealized capital loss from
writedown of equity securities -- (7,680)
Federal benefit of state taxes (2,480) (450)
Other (230) (232)
-------- -------
Total deferred tax assets (10,390) (8,362)
-------- -------
Net Deferred tax liabilities $ 30,842 $ 5,380
-------- -------
</TABLE>
As of March 31, 1996, the reported deferred tax assets are expected to be
realized as an offset against reversing temporary differences which create net
future tax liabilities.
14
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
The provision for taxes on income differs from the amounts computed by applying
the Federal income tax rate of 34% in 1996 to earnings before income taxes
principally due to (1) state income taxes provided, net of federal income tax
benefit (2) dividend income exclusion and, (3) losses incurred from the
Company's foreign subsidiary operations upon which no U.S income tax benefit is
currently realizable.
NOTE 5 - COMMON AND CLASS A COMMON PREFERENCE STOCK
---------------------------------------------------
During the six months ended March 31, 1996, the Company repurchased 118,100
shares of common stock and 23,000 shares of Class A common preference stock at a
purchase price of approximately $1,344,000. As described in Note 2, on May 17,
1996, the Company agreed to purchase 67,000 shares of Reading Company common
stock in exchange for 66,042 shares of its common stock from Mr. James J.
Cotter. Under the terms of the agreement, Mr. Cotter granted to the Company for
a two-year period the right of first refusal to acquire the 66,042 shares of the
Company's common stock at a price of $9.00 per share in the event that Mr.
Cotter determines to sell, assign or convey any interest in such shares. On May
17, 1996, the closing price of the Company's shares on the New York Exchange was
$11.375.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
--------------------------------------
During the three months ended March 31, 1996, the Company entered into a 50/50
joint venture and committed to invest up to approximately $500,000 in a newly
formed company, Hope Street Hospitality LLC, established to develop a retail
store/restaurant specializing in woodfire baked goods. As of March 31, 1996, the
Company has contributed approximately $210,000 to this development project. In
addition, the Company has signed, as a corporate guarantor, the facility lease
obtained by Hope Street Hospitality LLC. The lease commenced on March 1, 1996,
the terms of which included a prepayment of approximately $150,000 and annual
minimum payments of $102,540, to be paid monthly for 10 years. In addition to
the base rent which adjusts for annual increases in CPI, the lessor will receive
a percentage of gross monthly sales in excess of certain minimums. The lease
provides the lessee with a one-time option to cancel the lease at the end of the
third year for approximately $45,000.
15
<PAGE>
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Prior to March 1996, the Company's investments in Stater Bros. Holdings Inc.
("SBH" and, collectively with its subsidiaries, "Stater"), Reading Company
(""RC" and collectively with its subsidiaries, "Reading") and Citadel Holding
Corporation ("CHC" and collectively with its subsidiaries, "Citadel") were
included in the Company's Consolidated Financial Statements on the equity method
of accounting. See Notes 1 and 2 of Notes to the Consolidated Financial
Statements. In March 1996, certain transactions occurred which resulted in the
Company exchanging its common stock interests in SBH and CHC and, accordingly,
the Company no longer accounts for these investments utilizing the equity method
of accounting. In addition, on May 17, 1996 the Company increased it ownership
interest in Reading Company to approximately 50.7% by the purchase from its
Chairman of the Board, of an additional 67,000 shares of Reading Company in
exchange for 66,042 shares of the Company's Common stock. As a result of the
Company's interest increasing to greater than 50%, the Company will report in
future periods, its interest in Reading Company on a consolidated basis. Due to
the changes in the Company's ownership interests in its affiliates, the results
of operations have varied significantly from its results of operations for
previous periods.
Prior to March 8, 1996, the Company held a 50% common stock interest (48%
voting interest) in SBH. In March 1994, the Company entered into a series of
restructuring agreements, whereby the Company received, among other things, a
$14.65 million option payment from SBH which provided Stater with the option to
acquire all, but not less than all, of the Company's interest in Stater. The
option had an initial term of two years (March 8, 1996), but could be extended
for ten additional years if Stater converted the Company's common stock interest
in SBH to preferred stock prior to March 8, 1996.
Effective March 8, 1996, SBH exercised its right to convert all the Company's
common stock in SBH into 693,650 shares of SBH's Series B Preferred Stock,
stated value $100 per share (the "SBH Stater Preferred Stock"). The SBH
Preferred Stock has a liquidation preference and redemption value of $69.365
million and a cumulative dividend preference beginning at 10.5%, increasing to
12% after 78 months, and further increasing every twelve months thereafter by an
additional 1%, to a terminal cumulative dividend rate of 15%. The SBH Preferred
Stock, if owned by the Company, entitles the Company to (1) elect one director
of Stater, (2) vote 20% of the total number of votes, and (3) elect a majority
of the Board of Directors of Stater if two or more quarterly preferred stock
dividends remain unpaid. Pursuant to the option terms, Stater has a
transferable right to redeem the SBH Preferred Stock at any time prior to
March 2006. If not redeemed by Stater prior to March 2006, the Company has the
right to have the SBH Preferred Stock redeemed at any time following March 8,
2009.
Upon the conversion by SBH in March 1996 of the Company's common stock
interest to redeemable preferred stock, the Company discontinued the use of the
equity method of accounting for its investment in Stater. Prior to the
preferred stock conversion, the net book value of Stater amounted to
approximately $20.3 million and the carrying value of the Company's 50% common
stock interest, net of the $14.65 million option proceeds received in 1994 and
reflected on the balance sheet at September 30, 1995 as "Option to sell
investment in affiliate, amounted to approximately $9 million. The Company has
recorded approximately
16
<PAGE>
$49.96 million of the difference between the $69.365 million stated value of the
SBH Preferred Stock and the Company's carrying value of its previous common
stock investment ($9 million) at the time of the conversion as "Gain from
conversion of common stock interest in Stater Brothers". The Company's
investment in Stater is not held for sale. The ultimate value of the SBH
Preferred Stock is based upon various market factors including, but not limited
to, Stater's operating performance, Stater's existing senior debt covenants,
interest rates and the likelihood of redemption, from time to time, by Stater.
After the Company's consideration of those factors, and recognition by the
Company that its preferred voting rights, as described above, are not
transferable if the SBH Preferred Stock were to be sold to a third party, the
Company has deferred approximately $10.405 million of the gain from the
conversion by Stater of the Company's common stock interest to SBH Preferred
Stock until such time as the uncertainties regarding realization can be more
reasonably assured. Such gain, net of deferred taxes provided, is reflected in
the balance sheet as "Deferred gain from conversion of common stock of affiliate
to preferred stock" in the amount of approximately $6.235 million.
Results of Operations
---------------------
The following is a comparison of the results of operations for the three
months ended March 31, 1996 ("1996 Quarter") with the three months ended March
31, 1995 ("1995 Quarter") and the six months ended March 31, 1996 ("1996 Six
Months") and the six months ended March 31, 1995 ("1995 Six Months").
The Company's net earnings for the 1996 Quarter was approximately $31.293
million or $5.40 per share, including other income which resulted from the gain
on the conversion of the Company's common stock interest in SBH to preferred
stock described above, amounting to approximately $29.9 million net of income
taxes provided, as compared with net earnings of $.447 million or $0.07 per
share for the 1995 Quarter. The net earnings for the 1996 Six Months was
approximately $32.143 million or $5.48 per share, as compared to $868,000 or
$0.14 per share for the 1995 Six Months.
Earnings before income taxes for the 1996 Quarter and 1995 Quarter amounted
to approximately $51.718 million and $.747 million, respectively, as compared to
$53.435 million and $1.523 million for the 1996 Six Months and 1995 Six Months,
respectively. Included in the 1996 Quarter and 1996 Six Months earnings before
income taxes is other income of approximately $49.961 million from a gain
recorded as a result of the conversion of the Company's common stock interest in
SBH to SBH Preferred Stock.
Earnings before other income and income taxes amounted to approximately
$1.629 million for the 1996 Quarter as compared to $.747 million for the 1995
Quarter. Earnings before other income and income taxes approximated $3.221
million for the 1996 Six Months as compared to approximately $1.532 million for
the 1995 Six Months. The increase in the 1996 periods is principally
attributable to improved operating results reported by the Company's affiliate,
SBH, and dividends earned on the SBH Preferred Stock received in March 1996.
Such improvements were offset, in part, by operating losses of from the
Company's subsidiary, Reading International Cinemas LLC ("Reading
International").
17
<PAGE>
Service Income
--------------
Effective March 8, 1994, the Company entered into a consulting agreement with
SBH pursuant to which the Company has agreed, among other things, to render
consulting services for a five year period, for an annual fee of $1.5 million,
payable quarterly. Included in service income for both the 1996 and 1995
Quarter is $375,000 and for both the 1996 and 1995 Six Months is $750,000,
earned pursuant to this agreement.
Equity in earnings of affiliates
--------------------------------
As described above, in March 1996, the Company's common stock interests in
SBH was exchanged for preferred stock and its common stock interest in CHC was
sold to Reading. Equity in earnings of affiliates reflects the Company's share
of net earnings or losses of Stater, Reading and Citadel before preferred
dividends, for the periods in which the Company held its common stock interests.
The following table sets forth the contribution by affiliate of the equity in
earnings or losses of affiliates for the periods reported:
Equity in Earnings of Affiliates - Contribution by Affiliates
-------------------------------------------------------------
(In thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
------ ----- ------ ------
<S> <C> <C> <C> <C>
SBH $1,608 $ 883 $3,489 $1,742
CHC -- (451) 20 (451)
Reading (10) (37) 22 (173)
------ ----- ------ ------
$1,598 $ 395 $3,531 $1,118
------ ----- ------ ------
</TABLE>
Stater
------
Effective March 8, 1996, upon receipt by the Company of Stater Preferred
Stock in exchange for its common stock interest, the Company discontinued the
use of the equity method of accounting for its investment in Stater.
Accordingly, the 1996 Quarter and 1996 Six Months are not comparable to the 1995
Quarter and 1995 Six Months as they include approximately only 2 and 5 months,
respectively, of the Company's share of Stater's operating results.
Stater's net earnings for the three months ended March 31, 1996 amounted to
approximately $4.3 million as compared to $1.6 million for the three months
ended March 31, 1995. Stater's net earnings for the six months ended March 31,
1996 amounted to approximately $7.9 million as compared to $3.2 million for the
six months ended March 31, 1995. Such increases were, among other things, a
result of increased profit margins and a decrease in costs reflecting reductions
in employer contributions to collective bargaining benefit trusts of $2.4
million for the three months and $3.8 million for the six months ended March 31,
1996.
18
<PAGE>
Reading
-------
Reading's operating results for the 1996 Quarter amounted to a net loss of
approximately $273,000 as compared to a net loss of $79,000 for the 1995
Quarter. Reading's net loss for the 1996 Six Months amounted to $310,000 as
compared to a net loss of $368,000 for the 1995 Six Months. Included in the
1996 Quarter and 1996 Six Months loss is Reading's share of its 50% equity
operating losses from Reading International amounting to $254,000 and $500,000,
respectively. The Company's 49% share of such equity losses, amounting to
approximately $125,000 for the 1996 Quarter and $247,000 for the 1996 Six
Months, has been eliminated from the amount reported as equity earnings of
affiliates, in connection with reporting the Company's interest in Reading
International as a consolidated subsidiary. Accordingly, the Company has
included in equity earnings of affiliates the Company's share of operating
results of Reading, adjusted for the operating results of Reading International,
amounting to a loss of $10,000 with respect to Reading for the 1996 Quarter as
compared to a loss of $37,000 for the 1995 Quarter.
Reading's operating results for the 1996 Quarter and 1996 Six Months as
compared to the 1995 Quarter and 1995 Six Months reflect additional losses
principally as a result of its share of equity losses reported from its 50%
investment in Reading International. The operations of Reading International
are developmental in nature. Operating results from Reading's theater
operations in Puerto Rico, Cine Vista, and general and administrative expenses
were comparable between the 1996 and 1995 periods.
In February 1996, Reading obtained a $15 million line of credit with respect
to Cine Vista's operations, which line of credit is expected to provide
sufficient funds to complete Cine Vista's new theater development plans and
provide additional liquid funds for RC. No amounts are presently outstanding
under the Credit Agreements.
Interest income and expense
---------------------------
Interest and dividend income increased in the 1996 Quarter to $740,000 as
compared to $459,000 in the 1995 Quarter and increased to $1,060,000 for the
1996 Six Months as compared to $867,000 for the 1995 Six Months. The increase
in the 1996 Six Quarter and 1996 Six Months reflects dividends earned on the
Stater Preferred Stock since its receipt on March 8, 1996, offset, in part by a
decrease in interest income earned from a loan paid in full in 1995 by Citadel.
In March 1996, SBH exercised its right to convert the Company's common stock
in SBH into 693,650 shares of SBH's Series B Preferred Stock, stated value $100
per share. The preferred stock has a liquidation preference of $69.365 million
and a cumulative dividend preference of 10.5% or approximately $7,283,000
annually. Pursuant to the terms of the option agreement between the Company and
SBH, SBH has the right to purchase the preferred stock at anytime prior to March
8, 2006. Included in dividend income for the three and six months ended March
31, 1996, is approximately $479,000 earned from the date of issuance of the SBH
Preferred Stock through March 31, 1996. Dividends are paid quarterly in
arrears. The Company received the $479,000 in April 1996. The payment of
dividends by Stater to the
19
<PAGE>
Company is restricted subject to various financial covenants in the Stater
credit agreements.
In the 1995 periods interest income was earned on the Company's working
capital reserves maintained in institutional money market mutual funds as well
as, for a portion of the 1995 Six Months, a $6.2 million loan to Citadel
accruing interest at prime plus 3% (the "Citadel loan"). Included in the 1995
Quarter and 1995 Six Months is $220,000 and $142,000 of interest income earned
pursuant to the Citadel loan. In November 1994, the Company agreed to acquire
preferred stock in satisfaction of payment of $5.25 million of the Citadel loan
and in May 1995 the balance of $950,000 was paid in full. Accordingly, the 1996
periods as compared to the 1995 periods, reflect the elimination of interest
income earned on the Citadel loan.
General and administrative expenses
-----------------------------------
Operating, general and administrative expenses of the Company amounted to
$575,000 for the 1996 Quarter compared to $482,000 for the 1995 Quarter.
General and administrative expenses slightly decreased in the 1996 Six Months to
$1,119,000 as compared to $1,212,000 for the 1995 Six Months.
The 1996 Quarter and 1996 Six Months includes approximately $509,000 and
$1,001,000, respectively, of general, administrative and development expenses
incurred with respect to the foreign operations of Reading International.
Reading International is actively seeking properties to develop in Australia and
has acquired a property and has made deposits for several other real property
purchases or leases. The Company does not anticipate revenues from Reading
International during the next 15 months and therefore anticipates continuing
losses during such periods as operations are developed.
Liquidity
---------
At March 31, 1996 the Company and its consolidated subsidiaries had cash and
cash equivalents totaling approximately $29 million which includes approximately
$25.1 million held by Reading International, owned in equal shares by the
Company and its affiliate, Reading Company. Due to the Company's direct 50%
ownership and indirect 24.65% ownership (through its 49.4% interest in Reading)
the Company includes the accounts of Reading International on a consolidated
basis. At March 31, 1996, Craig Corporation ("Craig") had cash and cash
equivalents approximating $3.9 million. The amounts held by Reading
International of $25.1 million were funded equally by Craig and Reading.
In November 1995, the Craig and Reading formed Reading International in
order to make available additional capital and liquidity to develop theater
opportunities in Australia. On March 29, 1996, Craig and Reading entered into a
Capital Funding Agreement with respect to Reading International pursuant to
which they agreed to increase the capital committed by the Craig and Reading to
Reading International to approximately $103 million through a combination of
cash contributions and secured capital funding undertakings. Craig and Reading
each immediately contributed to Reading International $12.5 million in cash and
have undertaken to contribute up to an additional $37.5 million on an as needed
basis (the "Funding Commitment"). To secure the Funding Commitment, Craig
Management Inc., a wholly owned subsidiary of Craig pledged it Preferred Stock
interest in Stater and Reading pledged its interest in Cine Vista and certain
government
20
<PAGE>
securities. Reading International does not currently project cash requirements
in excess of the total of Craig's existing cash balances and previous capital
contributions made to Reading International. Craig currently has no debt
outstanding and no outstanding borrowing facilities. Based upon the current
cash balances of Craig amounting to $3.9 million, additional financing would be
required, if requested by Reading International, to fund the additional $37.5
million commitment.
At March 31, 1996, current liabilities of the Company amounted to
approximately $4.5 million, including approximately $3.8 million attributable to
liabilities of Reading International.
During the 1996 Six Months, the Company made additional acquisitions
totalling approximately $2,051,000 of common stock of Reading and Citadel,
amounting to $770,000 and $1,281,000, respectively. In March 1996, the Company
sold its common stock interest in Citadel to Reading for an aggregate sale price
of approximately $3,325, which was paid in the form of a five year unsecured
note which provides for the payment of interest at a rate equal to LIBOR plus
2.25%.
Cash and cash equivalents decreased approximately $1,343,000 in the 1996 Six
Months as a result of the Company's repurchasing 118,100 shares of its common
stock and 23,000 shares of its Class A common preference stock.
The SBH Preferred Stock has a liquidation preference of $69.365 million and
a cumulative dividend preference of 10.5%, to be paid quarterly. Until such
time as SBH exercises its right to repurchase the SBH Preferred Stock, annual
dividend payments are expected to approximate $7,283,000 annually. Accordingly,
the Company's cash flows are expected to increase significantly due to dividends
earned on its Preferred Stock interest in Stater.
21
<PAGE>
PART 2
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. The following exhibits are filed as part of this report:
10.25 Capital Funding Agreement between Reading International
Cinemas LLC, Craig Corporation, Reading Investment Company,
Inc., and Craig Management, Inc. dated March 29, 1996.
10.26 Stock Purchase and Sale Agreement dated March 29, 1996
between Craig Corporation and Reading Holdings, Inc.
27. Financial Data Schedule, Article 5.
B. No reports on Form 8-K were filed during the quarter ended March
31, 1996.
22
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRAIG CORPORATION
-----------------
By: /s/ S. Craig Tompkins
------------------------
President
May 20, 1996
By: /s/ Robin W. Skophammer
------------------------
Chief Financial Officer
May 20, 1996
23
<PAGE>
EXHIBIT 10.25
AMENDED AND RESTATED
--------------------
CAPITAL FUNDING AGREEMENT
-------------------------
This Capital Funding Agreement with respect to READING INTERNATIONAL
CINEMAS LLC, a Delaware limited liability company (the "Company"), is made and
entered into as of this 8th day of March, 1996 by and among CRAIG CORPORATION, a
Delaware corporation ("Craig"), READING INVESTMENT COMPANY, INC., a Delaware
corporation ("Reading "), CRAIG MANAGEMENT, INC., a California corporation
("CMI") and the Company.
WHEREAS, Craig and Reading caused the Company to be formed under the
laws of the State of Delaware; and
WHEREAS, Craig and Reading entered into a Limited Liability Company
Agreement dated as of November 9, 1995 (the "LLC Agreement");
WHEREAS, CMI is a wholly-owned subsidiary of Craig; and
WHEREAS, Craig, Reading, CMI and the Company desire to supplement and
amend the LLC Agreement pursuant to this agreement,
NOW, THEREFORE, for and in consideration of the mutual covenants,
rights and obligations set forth herein, the benefits to be derived
therefrom, and other good and valuable considerations, the receipt and
sufficiency of which Craig, Reading, CMI and the Company acknowledge,
Craig, Reading, CMI and the Company agree as follows:
Section 1.
The terms of the LLC Agreement shall remain in full force and effect unless
and to the extent specifically amended by this Agreement and all terms used in
this Agreement shall have the meanings indicated in Section 1.1. of the LLC
Agreement.
Page 1
<PAGE>
Section 2.
At the Closing Time, as defined herein, Craig directly or through CMI, will
transfer to the Company cash in the amount of Twelve Million Five Hundred
Thousand Dollars ($12,500,000) and its undertaking, or that of CMI, to fund the
Company, upon demand, an additional Thirty-Seven Million Five Hundred Thousand
Dollars ($37,500,000). This undertaking (the "Craig Capital Funding
Undertaking") will be secured by a pledge of 693,650 shares (the "Shares") of
Stater Bros. Holdings, Inc., a Delaware corporation ("Stater") Series B
Preferred Stock, stated value $100 per share and par value $0.01 per share (the
"Preferred Stock") held by CMI. At the Closing Time, Reading shall transfer to
the Company cash in the amount of Twelve Million Five Hundred Thousand Dollars
($12,500,000) and its undertaking to fund to the Company, upon demand, an
additional Thirty-Seven Million Five Hundred Thousand ($37,500,000). This
undertaking (the "Reading Capital Funding Undertaking") will be secured by a
security interest in Reading's interest in Cine Vista Holding's, Inc. and by
additional collateral mutually agreeable to the parties and designed to have a
fair market value of not less than the amount of the Reading Capital Funding
Undertaking. The security agreements securing performance by the respective
parties under their respective Capital Funding undertakings will be in a form
mutually acceptable to the parties and will include usual and customary
provisions including a commercially reasonable collateral release and
substitution provisions. The parties will use their good faith best efforts to
document such grant of security interest and to perfect such security interests
promptly and in any event, within thirty (30) days following the closing. The
parties will review from time to time the collateral securing their respective
Capital Contribution Undertakings with the intention that such collateral have
from time to time a fair market value equal to approximately 125% of the amount
of the unfunded portion of such Capital Contribution Undertakings from time to
time; provided, however, that no such overcollateralization will be required
with respect to collateral consisting of government or government agency
securities.
The commitments of the parties under this Section 2 supersede any prior
commitments with respect to the funding of Reading International.
Section 3.
To the extent capital is contributed by CMI, the LLC Agreement will be
amended to constitute CMI a Voting Member pursuant to Section 3.1 of the LLC and
to reflect CMI's right to pro rate allocations of Income under Section 5.1.1.
and Loss under Section 5.1.2. of the LLC Agreement.
Section 4.
The Closing Time Shall take place in Wilmington, Delaware at the registered
offices of the Company at noon, Delaware time on March 29, 1996, or such other
time and place as may be agreed upon by the parties hereto.
Page 2
<PAGE>
Section 5.
Notices given pursuant to this Agreement shall be given in the manner as
set forth in Section 12.1 of the LLC Agreement. The provisions of Sections 12.4,
12.5 and 12.7 and 12.8 of the LLC Agreement are repeated in their entirety
herein and shall become applicable to this Agreement.
Section 6.
This Agreement is made and entered into subject to the approvals of the
Boards of Directors of both Craig and Reading. In the event such approval is not
obtained on or before March 29, 1996 at noon Delaware time, this Agreement shall
be null and void.
IN WITNESS WHEREOF, the parties hereto executed this Agreement effective
as of the date first above written.
CRAIG CORPORATION
By: /s/ S. Craig Tompkins
-----------------------------
President
READING INVESTMENT COMPANY, INC.
By: /s/ James Wunderle
-----------------------------
Vice President
CRAIG MANAGEMENT, INC.
By: /s/ S. Craig Tompkins
-----------------------------
President
Page 3
<PAGE>
READING INTERNATIONAL CINEMAS LLC
By the Voting Members
CRAIG CORPORATION
By: /s/ S. Craig Tompkins
-----------------------------
President
READING INVESTMENT COMPANY, INC.
By: /s/ James Wunderle
-----------------------------
Vice President
Page 4
<PAGE>
EXHIBIT 10.26
STOCK PURCHASE AND SALE AGREEMENT
This STOCK PURCHASE AND SALE AGREEMENT is entered into as of this 29th day
of March, 1996 by and between Craig Corporation, a Delaware corporation
("Seller") and Reading Holdings, Inc., a Delaware corporation ("Purchaser"), at
Purchaser's corporate headquarters located in Wilmington, Delaware and with
reference to the following facts:
WHEREAS, Seller is the owner of the following securities, issued by Citadel
Holding Corporation, a Delaware corporation ("Citadel"):
A. One Million Five Hundred Sixty Four Thousand Four Hundred Seventy
Three (1,564,473) shares (the "Common Shares") of common stock, par value $.01
per share (the "Common Stock");
B. One Million Three Hundred Twenty Nine Thousand One Hundred Fourteen
(1,329,114) shares (the "Preferred Shares") of 3% Cumulative Convertible
Preferred Stock, stated value $3.95 per share (the "Preferred Stock"); and
C. Warrants to purchase Six Hundred Sixty Six Thousand (666,000) shares
of Common Stock at an exercise price of $3.00 per share, expiring April 11, 1997
(the "Warrants"); and
WHEREAS, the closing price for Shares of Common Stock on the American Stock
Exchange as of the date immediately preceding the date hereof was $2.250; and
WHEREAS, Purchaser desires to purchase and Seller desires to sell the
Common Shares;
WHEREAS, Purchaser desires to acquire and Seller desires to grant options
to acquire the Preferred Shares and the Warrants on the terms set forth
hereinbelow:
THE PARTIES HERETO in consideration of the above stated premises, the terms
and conditions hereinbelow set forth, and other good and valid consideration,
the receipt and sufficiency of which is hereby acknowledged, do hereby agree as
follows:
1. The Common Stock.
----------------
1.1 Purchase Price. The purchase price of the Common Shares will be
--------------
Three Million Three Hundred Twenty Four Thousand Five Hundred Five Dollars
($3,324,505), representing a purchase price of slightly less than $2.125 per
share.
<PAGE>
1.2 Form of Payment. The Purchase Price will be paid at the Closing
---------------
(as defined in Section 5) in the form of Purchaser's promissory note in the
amount of the purchase price (the "Note"). The Note will have a term of five
(5) years, bear interest at that fluctuating rate equal from time to time to
thirty (30) day LIBOR plus two hundred twenty-five (225) basis points payable
quarterly in arrears, and otherwise be on the terms set forth in Exhibit 1,
hereto.
2. The Preferred Stock.
-------------------
2.1 Preferred Purchase Option. Effective at the Closing, Seller
-------------------------
hereby grants to the purchaser an option (the "Preferred Purchase Option")
exercisable for a period of twelve (12) months, commencing upon the later of (a)
the tenth (10th) business day following the next annual meeting of the
stockholders of Citadel and (b) July 1, 1996 to purchase all, but not less than
all, of the Preferred Shares or such securities into which such Preferred Shares
may have been converted (the "Preferred Securities"). Seller will use
commercially reasonable efforts to have the conversion feature of the Preferred
Stock considered by the shareholders of Citadel at the next meeting of such
Shareholders.
2.2 Exercise Price. The exercise price will be equal to the fair
--------------
market value on the Preferred Securities on the date of exercise, as determined
by an investment banking firm mutually and reasonably agreeable to Purchaser and
Seller; provided, however, that in the event that (i) Purchaser has determined
to enter into an Acquisition Transaction (as such term is defined in Section
3.1, below) and (ii) Seller has, prior to the closing of any transfer following
exercise of the Preferred Purchase Option, exercised its right to convert the
Preferred Shares into Common Stock, then the exercise price with respect to such
Common Stock shall be the same price and the form of payment will be in the same
form as paid to third party shareholders of Citadel Common Stock (the
"Independent Shareholders") in such Acquisition Transaction.
The cost and expense of any such investment banker will be shared
equally between the Purchaser and the Seller.
2.3 Form of Payment. The Exercise Price will be paid upon the
---------------
closing of the sale of such Preferred Shares in the form of a further note (the
"2nd Note") issued by Purchaser in the amount of the Exercise Price (less the
amount of any fees paid under Section 2.5, below), which 2nd Note will be in the
same form as the Note, carry interest at the same rate as specified in the Note,
and have a term co-terminus with the Note.
2.4 Notice and Closing. Purchaser shall give to
------------------
<PAGE>
Seller not less than forty-five (45) days notice of its determination to
exercise the Preferred Purchase Option. Purchaser and Seller shall thereafter
work in good faith to designate a mutually acceptable investment banker, so as
to permit a timely closing of the sale.
2.5 Option Fee. Purchaser will pay to the Seller at the Closing an
----------
Option Fee of Fifty Thousand Dollars ($50,000) which amount will be credited
against the Exercise Price in the event of the exercise by Purchaser of the
Preferred Purchase Option. In the event that Purchaser wishes to extend the
Preferred Purchase Option so that the total option term is two years rather than
one year, Purchaser may do so at any time prior to the expiration of the
Preferred Purchase Option by increasing the Option Fee paid to Seller to One
Hundred Thousand Dollars ($100,000) by delivery to Seller on or before the
expiration of the Preferred Purchase Option the sum of an additional Fifty
Thousand Dollars ($50,000).
2.6 Assignment. This Preferred Purchase Option is personal to the
----------
Purchaser and may not be transferred to any other Person or entity without the
approval of Seller, which may be withheld or granted in the sole discretion of
the Seller; provided, however, that the Preferred Purchase Option may be
assigned to any wholly owned subsidiary of the Purchaser without any such
approval, provided that (a) the Common Shares and the Warrant Purchase Option
(as defined below) are simultaneously transferred to and retained by such
affiliate and (b) such affiliate executes and delivers to Seller its written
agreement to be bound by the terms of this Agreement (an "Approved Transfer").
The Preferred Purchase Option will immediately terminate upon any transfer of
the Common Shares by the Purchaser, other than an Approved Transfer.
3. The Warrants.
3.1 The Warrant Purchase Option. Effective at the Closing, Seller
---------------------------
hereby grants to Purchaser an option (the "Warrant Purchase Option") exercisable
in the event that the Purchaser determines, by a resolution duly adopted by its
Board of Directors, to proceed with an acquisition (through merger, asset
purchase, tender offer or otherwise) of an equity interest in Citadel sufficient
to permit the consolidation of Citadel and the Purchaser for Federal Income Tax
purposes (an "Acquisition Transaction"), to acquire the Warrants simultaneously
with the consummation of such transaction. It is understood that Seller will
have no obligation to exercise the Warrants or to acquire the underlying Common
Stock.
3.2 Exercise Price. The exercise price for the Warrant Purchase
--------------
Option will be that amount equal to the
<PAGE>
difference between $3.00 per share and the price per share being paid to
Independent Shareholders in the Acquisition Transaction. Seller may elect to
receive such consideration either in cash or, if Independent Shareholders are
being paid in whole or in part in securities in the form of such securities. In
the event that, as of the time of the closing of the Acquisition Transaction,
Seller has exercised the Warrants, in whole or in part, and paid the purchase
price for the underlying Common Stock, then to such extent such underlying
Common Stock, and not the Warrants, will be the subject of this Warrant Purchase
Option, and the exercise price with respect to such shares of Common Stock will
be the same consideration as paid to Independent Shareholders.
3.3 Exercise and Closing. The Warrant Purchase Option may be
--------------------
exercised at any time on not less than twenty (20) days written notice from the
Purchaser to the Seller. The closing will be simultaneous with the closing of
the Acquisition Transaction, and the closing of the Acquisition Transaction will
be a condition precedent to the obligation of the Seller to sell and of the
Purchaser to purchase.
3.4 Term. The term of the Warrant Purchase Option is the same as the
----
Preferred Purchase Option as modified by Section 3.3.
3.5 Assignment. The Warrant Purchase Option is subject to the
----------
provisions of Section 2.6.
4. Seller's Put Option. In the event that Purchaser determines, by a
-------------------
resolution duly adopted by its Board of Directors, to proceed with an
Acquisition Transaction, then Seller will have the right to put to Purchaser the
Preferred Securities, the Warrants and/or the Common Stock underlying such
Warrants, as the case may be, to the Purchaser on the same terms as if the
Purchaser had exercised the Preferred Purchase Option and/or the Warrant
Purchase Option.
5. The Closing. The Closing will be held at 1:00 p.m., Wilmington local
-----------
time, on March 29, 1996, at the offices of the Purchaser in Wilmington,
Delaware, or at such other location as the parties hereto may determine.
6. Representations and Warranties.
------------------------------
6.1 Due Authority. Each party hereby represents, subject to the
-------------
receipt of appropriate Board approvals, that it has all necessary corporate
power and authority and that it has taken all necessary corporate action
required to perform its obligations under this Agreement.
6.2 Good Title. Seller hereby represents that it has
----------
<PAGE>
good and marketable title to the Common Stock, the Preferred Stock and the
Warrants, and that it is permitted to and will transfer such securities free and
clear of all liens, claims or other encumbrances.
6.3 Unregistered Securities. Purchaser acknowledges that Seller is
-----------------------
an affiliate of Citadel, and that the Preferred Stock and the Warrants have not
been registered with any state or federal authority and that the Preferred Stock
and Warrants are not traded on any securities exchange. Accordingly, Purchaser
represents that it is acquiring the Common Stock, the Preferred Purchase Option
and the Warrant Purchase Option in a privately negotiated transaction, with an
intention to hold such securities for the indefinite future, and without any
intention to engage in a public distribution of such securities.
7. Board Approval. The obligations of the Purchaser and the Seller are
--------------
subject to the approval of this agreement on or before 1:00 p.m., Wilmington
local time, on March 29, 1996.
8. Miscellaneous Provisions.
------------------------
8.1 Integrated Agreement. This Agreement sets forth all of the
--------------------
agreements of the parties with respect to the subject matter hereof.
8.2 Choice of Law. This Agreement will be interpreted in accordance
-------------
with the laws of the State of Delaware, as such laws govern contracts to be made
and performed within such State. Any dispute between the parties with respect
to this agreement will be adjudicated solely in the state or federal courts
sitting in Wilmington, Delaware, and both parties consent to the jurisdiction of
such court.
8.3 Notices. Any notice required or permitted by this Agreement
-------
shall be deemed delivered when personally delivered or on the fourth (4th)
business day after deposit in the U.S. Mail, postage paid, registered or
certified mail and addressed to the recipient at its corporate headquarters
address.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
entered into as of the date first set forth above.
CRAIG CORPORATION READING HOLDINGS, INC.
By: /s/ S. Craig Tompkins By: /s/ James Wunderle
--------------------------------- ---------------------------------
Its: President Its: Vice President
-------------------------------- --------------------------------
<PAGE>
EXHIBIT 1
FORM OF PROMISSORY NOTE
$3,324,505 March 29, 1996
FOR VALUE RECEIVED, READING HOLDINGS, INC., a Delaware corporation
(the "Maker") hereby promises to pay to the order of CRAIG CORPORATION, a
Delaware corporation (the "Payee") the principal sum of Three Million, Three
Hundred Twenty-Four Thousand, Five Hundred Five Dollars ($3,324,505) according
to the terms hereof.
1. Defined Terms. All terms capitalized herein but not defined shall
-------------
have the meanings ascribed to them in that certain Stock Purchase and Sale
Agreement dated the date hereof between Payee and Maker.
2. Payment of Principal and Interest. Interest shall accrue on the
---------------------------------
outstanding principal amount hereunder at an annual rate of LIBOR plus 2.25%,
and shall be paid to Payee quarterly in arrears commencing July 1, 1996 and on
each October 1, January 1, April 1 and July 1 thereafter, with a final payment
of all accrued and unpaid interest being made on the date on which all
outstanding principal hereof is paid in full. For purposes of this Promissory
Note ("Note") "LIBOR" shall mean the London Interbank Offered Rate for thirty-
day deposits as published in The Wall Street Journal three business days prior
to the first day of each month. The principal amount due hereunder shall be due
and payable on March 29, 2001. This Note may be prepaid in whole or in part at
any time without penalty or prepayment charge.
3. Place of Payment. All amounts payable by the Maker to the Payee
----------------
hereunder shall be paid directly to the Payee at its address as set forth in
paragraph 11 hereof, or at such other address of which the Payee shall give
written notice to the Maker.
4. Representations and Warranties of Maker. The Maker represents and
---------------------------------------
warrants that as of the date hereof:
(a) Maker is a corporation duly incorporated and organized in
accordance with the laws of the State of Delaware with all necessary powers to
own its properties and operate its business as now owned and operated by it;
(b) Maker has full power and authority to enter into this Note and
Maker has taken or caused to be taken all actions required to authorize the
approval, execution and consummation of the transactions contemplated by this
Note. This Note is a valid and binding obligation of Maker, enforceable against
Maker in
<PAGE>
accordance with its terms, except (i) as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors, rights and (ii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought; and
(c) Neither the execution and delivery of this Note, nor the
consummation of the transactions contemplated hereby, will (i) violate any
provision of the Certificate of Incorporation or Bylaws of Maker, (ii) violate,
or be in conflict with, or constitute a default under, or permit the termination
of, or cause the acceleration of the maturity of any debt or obligation of
Maker, (iii) require the consent of any other party, or result in the creation
or imposition of any security interest, lien or other encumbrance upon any
property or assets of Maker under any agreement or commitment to which Maker is
a party or by which Maker is bound, or (iv) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority to which Maker is subject.
5. Events of Default; Remedies. If any of the following events of
---------------------------
default ("Events of Default") shall occur and be continuing for any reason
whatsoever (and whether it shall be voluntary or involuntary or occur or be
affected by operation of law or otherwise):
(a) the Maker fails to make any payment when due of any principal or
interest or other sum payable under this Note, which failure remains uncured for
a period of five days after written notice thereof from Payee;
(b) the Maker shall (i) file, or consent by answer or otherwise to the
filing against it of, a petition for relief or reorganization or arrangement or
any other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (ii) make an assignment for
the benefit of its creditors, (iii) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (iv) be adjudicated
insolvent or be liquidated, or (v) take appropriate action for the purpose of
any of the foregoing; or
(c) a court or governmental authority of competent jurisdiction shall
enter an order appointing, without consent by the maker, a custodian, receiver,
trustee or other officer with similar powers with respect to it or with respect
to any substantial part of its property, or if an order for relief shall be
entered in any case or proceeding for liquidation or
<PAGE>
reorganization or otherwise to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Maker, or if any petition for any such relief shall be filed against the
Maker, and such order or petition shall not be dismissed within sixty (60) days;
then, automatically upon the occurrence of an Event of Default described in
subparagraph (b) or (c), or in the sole discretion of the Payee upon the
occurrence of an Event of Default described in subparagraph (a), the unpaid
principal amount of, and the unpaid interest on, this Note shall become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the Maker.
6. Additional Remedies. If any Event of Default shall have occurred
-------------------
and be continuing, the Payee may proceed to protect and enforce its rights under
this Note by exercising such remedies as are available to the Payee in respect
thereof under applicable law, either by suit in equity or by action at law, or
both, whether for specific performance of any agreement contained in this Note
or in aid of the exercise of any power granted in this Note. No remedy is
intended to be exclusive and each such remedy shall be cumulative.
7. No Waiver. Neither the failure of the Payee nor any delay on the
---------
part of the Payee in the exercise of any right, power or privilege under this
Note shall operate as a waiver thereof, nor shall any single or partial exercise
by the Payee of any right, power, or privilege preclude any other or further
exercise of that or any other right, power or privilege.
8. Expenses. The Maker shall reimburse the Payee promptly for all
--------
reasonable counsel fees, costs and other expenses incurred by the Payee in
connection with the enforcement and collection of this Note.
9. Payment Due on Holidays. If the principal of or interest on this
-----------------------
Note or any fee due hereunder falls due on a Saturday, Sunday or legal holiday
at the place of payment, such payment shall be made on the next succeeding
business day and such extended time shall be included in computing interest.
10. Applicable Law. The construction, interpretation and enforcement
--------------
of this Note shall be governed by the laws of the State of Delaware.
11. Notices. Every notice and communication under this Note shall be
-------
in writing and shall be given by either (i) hand delivery, (ii) first class mail
(postage prepaid), (iii) reliable overnight commercial courier (charges
prepaid), or (iv) telecopy or other means of electronic transmission, if
confirmed promptly by any of the methods specified in clauses (i), (ii) and
(iii) of
<PAGE>
this sentence, to the following addresses:
If to the Maker:
Reading Holdings, Inc.
103 Springer Building
3411 Silverside Road
Wilmington, DE 19810
If to the Payee:
Craig Corporation
550 South Hope Street
Suite 1825
Los Angeles, CA 90071
Notice given by telecopy or other means of electronic transmission shall be
deemed to have been given and received when sent. Notice by overnight courier
shall be deemed to have been given and received on the date scheduled for
delivery. Notice by mail shall be deemed to have been given and received three
(3) calendar days after the date first deposited in the United States Mail.
Notice by hand delivery shall be deemed to have been given and received upon
delivery.
A party may change its address by giving written notice to the other party
as specified herein.
12. Severability. If any provision in this Note shall be held invalid
------------
under any applicable law, such invalidity shall not effect any other provision
of this Note that can be given effect without the invalid provision and, to this
end, the provisions hereof are severable.
13. Successors and Assigns. This Note shall be binding upon the Maker and
----------------------
its successors and assigns, and shall inure to the benefit of the Payee and its
successors and assigns, provided that Maker may not assign any of its rights or
obligations hereunder or any interest herein without the written consent of
Payee. Payee may assign this Note or any interest herein without restriction,
and upon written notice being given to Maker of such assignment, the assignee
shall be deemed to be the Payee for all purposes hereunder.
14. Waiver of Demand, Presentment, etc. The Maker waives the requirements
-----------------------------------
of demand, presentment, protest, notice of protest and dishonor and all other
demands or notices of any kind in connection with the delivery, acceptance,
performance, default, dishonor or enforcement of this Note.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, Reading
Holdings, Inc. has caused this Note to be executed and delivered by its proper
and duly authorized officer as of the date first above written.
READING HOLDINGS, INC.
By: /s/ James Wunderle
----------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 29,030
<SECURITIES> 0
<RECEIVABLES> 1,029
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,059
<PP&E> 5,971
<DEPRECIATION> (413)
<TOTAL-ASSETS> 143,086
<CURRENT-LIABILITIES> 4,507
<BONDS> 0
0
0
<COMMON> 1,377
<OTHER-SE> 93,347
<TOTAL-LIABILITY-AND-EQUITY> 143,086
<SALES> 0
<TOTAL-REVENUES> 5,341
<CGS> 0
<TOTAL-COSTS> 3,221
<OTHER-EXPENSES> (53,341)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 53,435
<INCOME-TAX> 21,292
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,143
<EPS-PRIMARY> 5.48
<EPS-DILUTED> 0
</TABLE>
