<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: September 30, 1998
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 (IRS Employer
of incorporation or organization) Identification No.)
550 South Hope Street 90071
Suite 1825 Los Angeles CA (Zip Code)
(Address of principal executive offices)
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 3,628,612 shares of
Common Stock, $0.25 par value per share, and 7,058,412 shares of Class A Common
Preference Stock, $0.01 par value per share, as of November 13, 1998.
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page
----
PART 1. Financial Information
- - ------
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets as of September 30, 1998 (Unaudited)
and December 31, 1997............................................... 3
Consolidated Statements of Operations for the Three and Nine Months
Ended September 30, 1998 and 1997 (Unaudited)....................... 4
Consolidated Statements of Cash Flows for Three and Nine Months
Ended September 30, 1998 and 1997 (Unaudited)....................... 5
Notes to Consolidated Financial Statements.............................. 6
Item 2. Management's Discussion and Analysis of the Consolidated
Statements of Operations............................................ 14
PART 2. Other Information
- - ------
<S>.............................................................................. <C>
Item 1. Legal Proceedings................................................... 21
Item 2. Changes in Securities............................................... 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....................................................................... 22
</TABLE>
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
--------------------- -------------------------
ASSETS (In thousands of dollars)
- - ------------------------------------------------------ -----------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 70,675 $ 98,202
Restricted cash 873 4,755
Receivables, net 139 1,206
Note receivable -- 720
Inventories 212 194
Prepayments and other current assets 777 589
-------- --------
Total current assets 72,676 105,666
Investments in unconsolidated affiliates 15,908 8,603
Notes receivable from joint venture partners 2,182 1,771
Net investment in leased equipment 2,125 2,125
Property and equipment, net 48,478 35,658
Other assets 2,263 2,067
Excess of cost over net assets acquired 10,773 11,235
-------- --------
Total assets $154,405 $167,125
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,459 $ 2,513
Film rental payable 1,236 1,637
Accrued property costs 1,647 3,319
Property purchase commitment -- 3,516
Accrued taxes 397 987
Note payable, including $1,998 to affiliate 2,143 2,643
Other accrued expenses and liabilities 575 1,286
-------- --------
Total current liabilities 7,457 15,901
Capitalized lease, less current portion 505 509
Note payable 970 1,100
Other long-term liabilities 4,335 3,735
Deferred tax liabilities 8,368 8,368
Minority interests in equity of subsidiaries 30,543 32,273
Redeemable Preferred stock of Reading 7,000 7,000
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, 8,734,065 issued and
7,058,412 outstanding 71 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 and 3,710,912
outstanding 1,361 1,361
Additional paid-in capital 31,392 30,828
Accumulated other comprehensive income (7,129) (4,323)
Retained earnings 89,683 90,111
Cost of treasury shares, 3,408,806 shares including
1,675,653 Class A shares (20,151) (19,754)
-------- --------
Total shareholders' equity 95,227 98,239
-------- --------
Total liabilities and shareholders' equity $154,405 $167,125
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------- ------------------------------------
1998 1997 1998 1997
---------------- ----------------- ---------------- --------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Theater admissions $ 6,510 $5,644 $19,107 $14,703
Theater concessions 1,940 1,688 5,870 4,540
Theater advertising and other 325 261 890 694
Real estate 45 40 257 140
Dividend income from Stater -- 698 -- 4,310
Service income from Stater -- 222 -- 972
------- ------ ------- -------
8,820 8,553 26,124 25,359
------- ------ ------- -------
Expenses:
Theater costs 6,279 5,420 18,636 14,565
Theater concession costs 425 342 1,282 968
Depreciation and amortization 663 399 1,883 1,110
General and administrative
expenses 2,797 2,884 8,175 8,094
------- ------ ------- -------
10,164 9,045 29,976 24,737
------- ------ ------- -------
Earnings (loss) before minority
interest, other income and taxes (1,344) (492) (3,852) 622
Equity in earnings (losses) of
affiliates (109) 98 21 264
Other income (expense) (139) (2) (556) 236
Interest income, net 1,143 723 3,633 2,013
Gain from conversion/repurchase of
investment in Stater -- 2,002 -- 2,002
------- ------ ------- -------
Earnings (loss) before taxes and
minority interest (449) 2,329 (754) 5,137
Minority interest's share in (income)
loss of consolidated subsidiaries 462 (302) 1,088 (406)
------- ------ ------- -------
Earnings (loss) before taxes 13 2,027 334 4,731
Provision for taxes 355 378 762 784
------- ------ ------- -------
Net earnings (loss) (342) 1,649 (428) 3,947
Dividends paid on subsidiary
redeemable preferred stock (113) (113) (341) (341)
------- ------ ------- -------
Net earnings (loss) applicable to
common shareholders $ (455) $1,536 $ (769) $ 3,606
======= ====== ======= =======
Basic and diluted earnings (loss) per
share $ (0.04) $ 0.14 $ (0.07) $ 0.33
======= ====== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CRAIG CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1998 1997
-------- --------
(In thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ (428) $ 3,947
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Gain from investment in Stater -- (2,002)
Depreciation 1,382 640
Amortization 501 470
Deferred rent expense 137 305
Equity in earnings of affiliates (21) (264)
Loss on disposal of assets 395 --
Minority interest (1,088) 406
Changes in operating assets and liabilities:
(Increase) decrease in receivables 1,067 1,988
(Increase) decrease in affiliate receivables -- 244
(Increase) decrease in other current assets 257 68
Increase (decrease) in payables (3,403) (5,187)
Increase (decrease) in accrued film rental (391) (128)
Increase (decrease) in other liabilities (60) 795
Other, net -- (677)
-------- --------
Net cash provided by (used in) operating activities (1,652) 605
INVESTING ACTIVITIES
Proceeds from redemption of Stater Preferred Stock -- 69,980
Purchase of stock of subsidiary--minority interest -- (819)
Purchase of Citadel and Big 4 Stock (3,636) (1,998)
Purchase of property and equipment (16,775) (6,445)
Decrease in restricted cash 3,673 2,018
Investment in joint ventures (3,179) --
Note receivable from joint venture partner (557) --
Other investments -- (171)
Decrease in purchase commitment (3,408) --
-------- --------
Net cash provided by (used in) investing activities (23,882) 62,565
FINANCING ACTIVITIES
Treasury Stock repurchases (397) --
Distributions to minority partner (292) (271)
Note payable to Citadel -- 1,998
Payment of Reading preferred dividends (341) (341)
Decrease in note payable (627) (1,500)
-------- --------
Net cash provided by (used in) financing activities (1,657) (114)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES (336) (1,402)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (27,527) 61,654
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 98,202 52,172
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,675 $113,826
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1998
(amounts in tables in thousands)
NOTE 1 -- BASIS OF PRESENTATION
BASIS OF CONSOLIDATION: The consolidated financial statements include the
accounts of Craig Corporation ("Craig") and its wholly owned subsidiaries
(collectively, the "Company") and its majority owned subsidiaries (collectively,
the "Consolidated Company"). Such majority owned subsidiaries include the
accounts of Reading Entertainment, Inc. ("REI" and together with its
consolidated subsidiaries, "Reading"). Reading is in the business of developing
and operating multi-plex cinemas in the United States, Puerto Rico and Australia
and of developing, and eventually operating, entertainment centers in Australia.
Reading operates its cinemas through various subsidiaries under the Angelika
Film Centers and Reading Cinemas names in the mainland United States (the
"Domestic Cinemas"); through Reading Cinemas of Puerto Rico, Inc., a wholly
owned subsidiary of Reading, under the CineVista name in Puerto Rico
("CineVista" or the "Puerto Rico Circuit"); and through Reading Entertainment
Australia Pty., Limited (collectively with its subsidiaries referred to herein
as "Reading Australia") under the Reading Cinemas name in Australia (the
"Australia Circuit"). Reading's entertainment center development activities in
Australia are also conducted through Reading Australia, under the Reading
Station name. In April 1998, Reading entered the New Zealand market through
investments representing a 50% ownership in certain joint ventures ("NZ JV's").
Investments in which the Consolidated Company holds a 20 to 50 percent
interest are accounted for using the equity method. All significant
intercompany transactions and accounts have been eliminated in consolidation.
Minority interest in equity of subsidiaries reflects the minority stockholders'
proportionate share of REI and the Consolidated Company's other joint ventures.
As of September 30, 1998, the Company held approximately 78% of the outstanding
voting securities of REI.
The financial statements have been prepared in accordance with generally
accepted accounting principles for interim information and, therefore, do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. 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 December 31, 1997 and for the year then ended. In the opinion
of management, all adjustments of a recurring nature considered necessary for a
fair presentation of the results for the interim periods presented have been
included. Operating results for the three and nine months ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998.
Certain amounts in previously issued financial statements have been
reclassified to conform with the current period presentation.
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE: Basic earnings per
share is calculated by dividing net earnings (loss) available to common
shareholders by the weighted average shares outstanding during the period. The
weighted average number of shares outstanding for the three months ended
September 30, 1998 and 1997 were 10,811,898 and 10,769,824, respectively. The
weighted average number of shares outstanding for the nine months ended
September 30, 1998 and 1997 were 10,797,774 and 10,769,824, respectively. The
weighted average number of shares decreased during the three months ended
September 30, 1998 as a result of the Company's repurchase of 52,000 shares of
its Common Stock outstanding for a purchase price of approximately $397,000.
Subsequent to September 30, 1998, the Company repurchased an additional 82,300
common shares at a price of $588,000. As of November 12, 1998, Common and Class
A Common Preference Stock outstanding amounted to 3,628,612 and 7,058,412
shares, respectively.
6
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1998
(amounts in tables in thousands)
Basic and diluted earnings per share for the three months and nine months
ended September 30, 1998 and 1997 were calculated based on net earnings
available to common stock shareholders, which includes a reduction for dividends
declared on the redeemable preferred stock in REI held by Citadel Holding
Corporation ("CHC" and collectively with its consolidated subsidiaries,
"Citadel") amounting to approximately $113,000 for each of the three month
periods and $341,000 for each of the nine month periods, respectively.
Diluted earnings per share is calculated by dividing net earnings (loss)
available to common shareholders by the weighted average common shares
outstanding plus the dilutive effect of stock options. During the three and nine
months ended September 30, 1998, the Company recorded a net loss and, therefore,
the stock options were anti-dilutive. At September 30, 1998, stock options to
purchase 654,940 shares of Common Stock and 60,000 shares of Class A Common
Stock at average exercise prices of $6.20 and $7.20 per share, respectively,
were outstanding. The weighted average number of shares used in calculating
diluted earnings per share for the three months and nine months ended September
30, 1997 were 10,951,504 and 10,947,827, respectively.
NOTE 2--COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 establishes rules for the reporting and presentation of comprehensive
income and its components. SFAS 130 requires foreign currency translation
adjustments, which prior to adoption were reported separately in stockholders'
equity, to be included in other comprehensive income. The accumulated foreign
currency translation adjustment as of December 31, 1997 has been reclassified to
conform to the requirements of SFAS 130 and has been reflected as "Accumulated
other comprehensive income" in the Consolidated Balance Sheets. The adoption of
SFAS 130 did not impact the Company's net loss or total stockholders' equity.
The following sets forth the company's comprehensive earnings (loss) for
the periods shown:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
------- ------ ------- -------
<S> <C> <C> <C> <C>
Net earnings (loss) $ (342) $1,649 $ (428) $ 3,947
Other comprehensive (loss) (1,212) (744) (2,806) (2,127)
------- ------ ------- -------
Comprehensive earnings (loss) $(1,554) $ 905 $(3,234) $ 1,820
======= ====== ======= =======
</TABLE>
7
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1998
(amounts in tables in thousands)
NOTE 3--INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The carrying value of each of the Company's equity investments which are
included in the accompanying Balance Sheet as "Investments in unconsolidated
affiliates" are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -----------
<S> <C> <C>
Citadel Holding Corporation ("CHC") $10,900 $6,612
Big 4 Ranch, Inc. ("BRI") 395 383
Whitehorse Property Group ("WPG")* 1,487 1,608
New Zealand Joint Ventures ("NZ JVs") 3,126 0
------- ------
Total $15,908 $8,603
======= ======
</TABLE>
* Does not include loan to joint venture partner of approximately $1,624,000 as
of September 30, 1998.
** Does not include loan to joint venture partner of approximately $557,000 as
of September 30, 1998.
The carrying value of the Company's foreign currency denominated assets
will fluctuate due to changes in the exchange rate between the Australian, New
Zealand and U.S. dollar.
At December 31, 1997, the Consolidated Company's interest in CHC was
approximately 33.4%. In April 1998, Craig purchased an additional 430,106 shares
of CHC Common Stock and in September 1998, REI purchased 549,200 shares in
private transactions increasing the Consolidated Company's holdings in CHC to
3,209,779 or approximately 48%. In addition to the 979,306 shares of CHC
securities purchased by the Consolidated Company, Craig also purchased 430,106
shares and REI purchased 661,700 shares of Big 4 Ranch, Inc. ("BRI"). The
purchase price of the CHC securities and BRI securities by Craig were $4.625 per
share and $0.125 per share, respectively, and the purchase price of the CHC
securities and BRI securities by REI were $3.875 and $0.125 per share,
respectively. The purchase of such shares by Craig was consummated pursuant to
the delivery by Craig of $1,425,000 and the issuance of 51,500 treasury shares
of Craig Corporation Class A Common Preference Stock. The issuance of the
Company's Class A Common Preference Stock was reflected in the Balance Sheet as
an increase to shareholders' equity in the amount of $619,000 as of September
30, 1998.
In December 1997, CHC distributed 100% of the stock in BRI to its
shareholders. The Consolidated Company received 2,230,473 shares of BRI
representing an ownership interest of approximately 33.4%. As described above,
in 1998, the Consolidated Company increased its ownership in BRI to
approximately 49.8%. BRI owns a 40% interest in three agricultural partnerships
which own agricultural land located in California. Citadel also owns a 40%
interest in the partnerships. The Company accounts for its investment in the
Citadel and BRI common stock by the equity method.
Citadel's net earnings for the three and nine months ended September 30,
1998 were $245,000 and $808,000 (inclusive of $113,000 and $341,000 of dividend
income paid to Citadel by REI for such periods), respectively. The Company's
share of such earnings as adjusted for the preferred stock dividends, for the
three and nine months ended September 30, 1998 were $40,000 and $169,000,
respectively, which amounts are included in the Condensed Consolidated Statement
of Operations for the three and nine months ended September 30, 1998 as "Equity
in earnings (losses) of affiliates." The Consolidated Company's share of
Citadel's net earnings for the three and nine months ended September 30, 1997
were $98,000 and $264,000, respectively. Citadel's assets and liabilities
totaled $30,032,000
8
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1998
(amounts in tables in thousands)
and $11,170,000, respectively, at September 30, 1998. The closing price of
Citadel's common stock on the American Stock Exchange at September 30, 1998 was
$3.81 per share, approximately $1,329,000 in excess of the Consolidated
Company's carrying value at September 30, 1998.
BRI's net loss for the three and nine months ended September 30, 1998
totaled approximately $184,000 and $354,000, respectively, and the Consolidated
Company's share of such losses for the respective periods totaled $71,000 and
$124,000, and have been included in the Condensed Consolidated Statement of
Operations for the three and nine months ended September 30, 1998 as "Equity in
earnings (losses) of affiliates." BRI's assets are principally comprised of its
40% interest in the agricultural partnerships and totaled $860,000 at September
30, 1998. At September 30, 1998, BRI liabilities amounted to approximately
$14,000. Management believes that the September 30, 1998 carrying value of the
BRI investment amounting to approximately $395,000 approximates its fair value.
Reading Australia owns a 50% interest in the Whitehorse Property Group Unit
Trust ("WPG"). WPG owns a shopping center located near Melbourne, Australia.
Pursuant to the Joint Venture Agreement, Reading Australia has loaned
approximately $1,624,000 to Joint Venture Partner and guaranteed the repayment
of 50% of a secured bank loan which is owed by WPG. The principal outstanding
on the loan totaled approximately $6,988,000 at September 30, 1998, resulting in
a guarantee by Reading Australia of approximately $3,494,000. At September 30,
1998, the loan bears interest at 6.7%, and matures in November 1999. WPG's net
loss for the nine months ended September 30, 1998 was approximately $50,000 and
the Company's share of such loss amounting to $25,000 has been included in the
Condensed Consolidated Statement of Operations for the three and nine months
ended September 30, 1998 as "Equity in earnings (loss) of affiliates." WPG's
assets and liabilities totaled $10,111,000 and $7,391,000, respectively, at
September 30, 1998.
During the second quarter of 1998, the Company entered into certain 50/50
joint ventures with a cinema operator and with a property developer in New
Zealand (the "NZ JVs"). At September 30, 1998, the Company's investment in
these joint ventures totaled $3,126,000 and is reflected on the balance sheet
under "Investments in Unconsolidated Affiliates." In connection with one of
these joint ventures, the Company loaned $557,000 to one cinema joint venture
partner to finance a portion of the acquisition price of a multiple cinema
acquired by the joint venture.
At September 30, 1998, the assets of the NZ JV's consisted of two multiple
cinemas (a five-screen complex built on owned land and a four screen leased
complex), and a 1.764 acre property located in Wellington, which was acquired
as a possible entertainment center site. The Wellington property is subject to a
$1,126,000 mortgage. The Company is responsible for 50% of such mortgage
indebtedness.
Since September 30, 1998, the NZ JVs have entered into a contract to
acquire a parcel of land for the development of a multi-plex cinema, and the
Company has entered into contracts to acquire a .215 acre site and a 1,086 stall
parking garage, each located adjacent to the Wellington property. The aggregate
commitment of the Company under these agreements is $10,000,000. The Company has
conveyed to its joint venture partner in the Wellington property the option to
acquire a 50% interest in the adjacent land and car park at an exercise price
equal to 50% of the Company's costs of acquiring and holding these properties,
plus a variable interest factor, which was approximately 6.2% at September 30,
1998. This option expires on November 30, 1999.
9
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1998
(amounts in tables in thousands)
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ -----------
<S> <C> <C>
Property held for development* $22,722 $14,714
Land-cinemas 365 401
Property development costs* 1,074 1,440
Buildings 1,829 1,959
Capitalized premises lease 538 538
Leasehold improvements 16,484 9,007
Equipment 9,260 8,074
Construction-in-progress 1,269 3,159
------ ------
53,541 39,292
Less: Accumulated depreciation (5,063) (3,634)
------- -------
$48,478 $35,658
======= =======
</TABLE>
___________________________
* Represents land held for development and property development costs
capitalized with respect to potential Reading Australia projects. The
carrying value of the Company's foreign currency denominated assets
will fluctuate due to changes in the exchange rate between the
Australian, New Zealand and U.S. dollars.
NOTE 5--INCOME TAXES
Craig and Reading file separate consolidated federal and state income tax
returns. One company's net operating loss and capital loss carryforwards,
therefore, cannot be used to offset the other company's tax liabilities. Income
tax expense amounted to approximately $355,000 and $762,000 during the three and
nine months ended September 30, 1998 and amounted to $378,000 and $784,000 for
the three and nine months ended September 30, 1997, respectively. Income tax
expense for the nine months ended September 30, 1998 reflects current estimated
tax liabilities, including federal and state income tax expense of $178,000 and
$584,000 of foreign withholding taxes which will be due if certain intercompany
loans are repaid.
NOTE 6--PURCHASE COMMITMENTS
In May 1998, Reading Australia entered into an agreement with a
transportation authority pursuant to which Reading Australia agreed to make
certain infrastructure improvements to the Frankston Train Station located in
the Melbourne, Australia metropolitan area. Reading Australia has been granted
the right to construct a combination 12-screen cinema and retail entertainment
center on the site and will receive a permanent license to use, or title to the
property upon which such improvements are located upon completion of the
improvements. Pursuant to its agreement with the authority, Reading Australia
is required to post a letter of credit totaling approximately $3 million to
guarantee completion of the improvements. In addition to the Frankston
construction commitment, Reading owns a parcel of land in which it is obligated
to construct a 10-screen cinema and has seven committed lease agreements for
theater facilities representing a total of 59 screens which are either under
construction or for which construction is anticipated to be completed in the
year 2000. The aggregate anticipated costs remaining to complete construction
for the nine facilities totals approximately $59 million, inclusive of
approximately $43 million related to seven Australian projects. The U.S. dollar
cost of such Australian projects was based on a conversion rate of .60 U.S.
dollars to
10
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1998
(amounts in tables in thousands)
each Australian dollar. Such aggregate estimated costs of $59 million are
exclusive of the NZ JV purchase commitments amounting to approximately $10
million described in Note 3.
NOTE 7 -- PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
As described in Note 1, the accompanying consolidated financial statements,
include the accounts of Craig and its majority owned subsidiaries. The following
information reflects only the accounts of Craig and its wholly owned
subsidiaries. Craig and Reading are separate public companies and each entity's
capital resources and liquidity is legally independent of the other and any
intercompany loans or receivables would require approval of each separate
company's Board of Directors. Accordingly, the future working capital of Craig
will be primarily dependent on Reading's ability to pay dividends in accordance
with the terms of the Series B Preferred Stock.
11
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1998
(amounts in tables in thousands)
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEET: SEPTEMBER 30, DECEMBER 31,
1998 1997
-------- --------
<S> <C> <C>
Assets:
- - -------
Cash and cash equivalents $ 4,714 $ 5,332
Other current assets 6 31
-------- --------
Total current assets 4,720 5,363
Investment in Common Stock of Reading 64,062 68,098
Investment in Preferred Stock of Reading 55,000 55,000
Investment in Citadel 4,014 1,972
Investment in BRI 121 120
Property and equipment, net 719 788
Other assets 168 203
Excess of cost over net assets acquired 1,120 1,153
-------- --------
Total assets $129,924 $132,697
======== ========
Liabilities and stockholders equity:
- - ------------------------------------
Accounts payable and accrued expenses $ 444 $ 723
Note payable to Citadel, current 1,998 1,998
Deferred tax liabilities 30,410 30,410
Stockholders' equity 97,072 99,566
-------- --------
Total liabilities and stockholders' equity $129,924 $132,697
======== ========
<CAPTION>
CONDENSED STATEMENT OF OPERATIONS: THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
- - ---------
Earnings from Reading investment $ (63) $1,746 $ 591 $4,122
Equity in losses of BRI (34) -- (53) --
Equity in earnings of Citadel 14 30 53 60
Service income from Stater -- 222 -- 972
Interest income 59 57 184 133
----- ------ ------ ------
$ (24) $2,055 $ 775 $5,287
----- ------ ------ ------
Expenses:
- - ---------
General and administrative 372 427 1,276 1,365
Depreciation and amortization 17 50 139 150
Interest expense 43 43 129 81
----- ------ ------ ------
432 520 1,544 1,596
----- ------ ------ ------
Earnings (loss) before income taxes (456) 1,535 (769) 3,691
Income taxes -- -- -- (85)
----- ------ ------ ------
Net earnings (loss) $(456) $1,535 $ (769) $3,606
===== ====== ====== ======
</TABLE>
12
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements (unaudited)
September 30, 1998
(amounts in tables in thousands)
During the three and nine months ended September 30, 1998, the Company
earned dividend income from its preferred stock investment in Reading amounting
to approximately $894,000 and $2,681,000 respectively. Such dividends were in
excess of the Company's share of Reading operating results for such periods and,
accordingly, the Company recorded the excess of such dividends earned and paid
as a reduction to its common stock investment.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
SEPTEMBER 30
CONDENSED STATEMENT OF CASH FLOWS: 1998 1997
---- ----
<S> <C> <C>
Operating Activities:
- - ---------------------
Net earnings (loss) $ (769) $ 3,606
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Dividend distributions from affiliates in excess
of equity earnings 2,090 (1,501)
Other (112) 54
------- ------
Net cash provided by (used in) operating activities 1,209 2,159
------- ------
Investing Activities:
- - ---------------------
Acquisition of Citadel Stock (1,425) (1,998)
Acquisition of Reading Stock -- (819)
Purchase of equipment (5) --
------- -------
Net cash provided by (used in) investing activities (1,430) (2,817)
------- -------
Financing Activities:
- - ---------------------
Treasury stock repurchases (397) --
Note payable to Citadel for stock -- 1,998
------- -------
Net cash provided by financing activities (397) 1,998
------- -------
Increase (decrease) in cash and cash equivalents (618) 1,340
Cash and cash equivalents at beginning of period 5,332 3,492
------- -------
Cash and cash equivalents at end of period $ 4,714 $ 4,832
======= =======
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Craig Corporation (Craig and collectively with its wholly owned subsidiaries,
the "Company") is in the business of identifying, acquiring, owning and
strategically managing controlling interests in other operating companies. At
September 30, 1998, the Company owned common stock of Reading Entertainment,
Inc. ("REI" and collectively with its consolidated subsidiaries, "Reading") and
REI Series B Preferred Stock representing approximately 78% of the voting power
of that company, and 1,096,106 (approximately 16.4%) shares of Citadel Holding
Corporation ("CHC" and collectively with its consolidated subsidiaries,
"Citadel") Common Stock and 1,096,106 (approximately 16.4%) shares of Big 4
Ranch, Inc. ("BRI"). As used herein, the term the "Consolidated Company" is used
to describe, for accounting purposes, the Company reporting on a consolidated
basis its ownership interest in REI.
REI has elected to focus its theater development and related real estate
development activities in two principal areas, the development and operation of
multiplex motion picture theaters in Puerto Rico, the United States, New Zealand
and Australia; and the development in Australia of entertainment centers
typically existing of a multiplex cinema, complimentary restaurant and retail
uses, and self contained parking.
RESULTS OF OPERATIONS
The following is a comparison of the results of operations for the three
months ended September 30, 1998 ("1998 Quarter") with the three months ended
September 30, 1997 ("1997 Quarter") and a comparison of the results of
operations for the nine months ended September 30, 1998 ("1998 Nine Months")
with the nine months ended September 30, 1997 ("1997 Nine Months"). Due to (i)
the nature of the Consolidated Company's development and acquisition activities
and the timing associated with the results of such activities, (ii) the effect
of earnings recorded with respect to the Consolidated Company's previous
investment in Stater, (iii) the effect of litigation awards and settlements, and
(iv) the results of operations of new cinemas opened during the last two years,
the Consolidated Company's financial position, results of operations and cash
flows have varied significantly and management believes are not indicative of
future operating results. The Consolidated Company's entertainment center
developments are in the early stage of development and generally will not
produce income or cash flow for at least eighteen to twenty-four months from the
time that all land use approvals have been secured.
The Consolidated Company's net loss applicable to common shareholders for the
1998 Quarter approximated $455,000 or $.04 per basic share as compared to 1997
Quarter net earnings applicable to common shareholders of approximately
$1,536,000 or $.14 per basic share. The Consolidated Company's net loss
applicable to common shareholders for the 1998 Nine Months amounted to
approximately $769,000 or $0.07 per basic share as compared to net earnings
applicable to common shareholders of $3,606,000 or $0.33 per basic share for the
1997 Nine Months. The net earnings (loss) applicable to common shareholder has
been reduced by the 6.5% per annum dividend on the $7,000,000 stated value of
Reading's convertible preferred stock outstanding amounting to $113,000 and
$341,000 for each of the Quarters and Nine Month periods reported on herein.
Theater Revenue
- - ---------------
Theater Revenue is comprised of Admissions, Concessions and Advertising and
other revenues and totaled the amounts set forth below for each of the three and
nine months ended September 30, 1998 and 1997:
14
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cine Vista $4,458,000 $4,543,000 $12,733,000 $11,717,000
Domestic Cinema 2,888,000 2,179,000 8,400,000 5,747,000
Australia 1,429,000 871,000 4,717,000 2,473,000
Other -0- -0- 17,000 -0-
---------- ---------- ----------- -----------
$8,775,000 $7,593,000 $25,867,000 $19,937,000
========== ========== =========== ===========
</TABLE>
Cine Vista's Theater Revenues increased approximately 9% to $12,733,000 in
the 1998 Nine Months as compared to $11,717,000 in the 1997 Nine Months,
primarily as a result of more favorable film product in the first quarter of
1998. CineVista Theater Revenue decreased approximately 2% to $4,458,000 in the
1998 Quarter from $4,543,000 in the corresponding 1997 Quarter. The decrease in
the current year quarter included a decrease of approximately $489,000 or 11% in
cinemas open throughout each of the respective quarterly periods and a decrease
of approximately $572,000 or 13% due to the closure of four screens during the
first quarter of 1998; offset by an increase in Theater Revenue of $976,000 or
22% related to the opening of a new eight-plex theater in June 1998.
Approximately $170,000 or 35% of the decrease in Theater Revenues from cinemas
open throughout both the 1997 and 1998 Quarters resulted from certain of the
cinemas being closed in September 1998 as a result of damage of lost power from
Hurricane George. At September 30, 1998 and November 9, 1998, one location
containing six screens remained closed while CineVista's other seven locations
with a total of 46 screens were fully operational. CineVista is presently in
negotiations to build an additional 10-screens at an existing location and is
constructing a new leased 12-screen multiplex in the San Juan metropolitan area
scheduled to open in the second quarter of 1999. At September 30, 1997,
CineVista operated 46 screens at 9 locations.
Domestic Cinemas' Theater Revenues increased approximately 46% to
$8,400,000 in the nine months ended September 30, 1998 from $5,747,000 in the
corresponding prior year period. Two Domestic cinemas commenced operations in
December 1997, and accounted for 37% of the increase with the other 9% increase
recorded at the cinema which was open throughout the respective periods. These
same factors contributed to an increase in Theater Revenues of approximately 33%
to $2,888,000 for the three months ended September 30, 1998 from $2,179,000 in
the corresponding prior year period. Reading is currently constructing a new 12
screen cineplex in New Jersey, scheduled to open in the second quarter of 1999.
At September 30, 1998 and 1997, Reading operated 19 screens at 3 locations and 6
screens at 1 location.
Theater Revenues for Australian operations increased in excess of 91% to
$4,717,000 for the nine months ended September 30, 1998 from $2,473,000 in the
corresponding prior year period, primarily as a result of Reading Australia's
acquisition of a four screen cinema in July 1997 and the opening of an
additional six screen cinema in December 1997. The increased screen count
resulted in an increase in Theater Revenues in excess of 64% to $1,429,000
for the three months ended September 30, 1998 from $872,000 in the corresponding
prior year period. At September 30, 1998 Reading Australia operated 16 screens
at 3 locations and had committed to develop 59 screens at 7 leased locations.
Real Estate
- - -----------
Real Estate revenues include rental income and the net proceed of sales of
Reading's historic railroad real estate in the United States which Reading is
liquidating. Future real estate revenues may increase as larger properties are
sold, however, Reading anticipates total revenues from such sales will not be
material.
15
<PAGE>
Dividend Income and Service Income from Stater
- - ----------------------------------------------
In August 1997, Stater Bros. Holdings Inc. ("SBH") repurchased the
Consolidated Company's investment in SBH Preferred Stock and terminated its
consulting agreement with the Company, and accordingly, the Company no longer
reports Dividend income or Service income from Stater in the 1998 Quarter and
1998 Nine Months as compared to the $920,000 and $5,282,000 recorded in the 1997
Quarter and 1997 Nine Months, respectively.
Interest income
- - ---------------
The SBH Preferred Stock, while outstanding, accumulated dividends at a rate
of 10.5% on the par value of $69,365,000. Upon redemption of the SBH Preferred
Stock described above, at par plus accumulated dividends, the proceeds were
invested in money market instruments which provided an average yield of
approximately 5.5% during the three months and nine months ended September 30,
1998. Such reinvestment of the SBH proceeds resulted in the elimination of
"Dividend income from Stater" and an overall increase in amounts reported as
"Interest Income" in the Consolidated Statement of Operations in the 1998
periods. Interest income increased from $723,000 in the 1997 Quarter to
$1,143,000 in the 1998 Quarter and increased from $2,013,000 in the 1997 Nine
Months to $3,633,000 in the 1998 Nine Months.
Expenses
- - --------
"Theater costs," "Theater concession costs" and "Depreciation and
amortization," collectively "Theater Operating Expenses," reflect the direct
theater costs of CineVista, the Domestic Cinemas and Reading Australia's theater
operations. Theater Operating Expenses increased approximately 31% to
$21,801,000 for the nine months ended September 30, 1998 from $16,643,000 in the
corresponding prior year period, due primarily to the inclusion in the current
year of approximately $6,205,000 of Theater Operating Expenses associated with
two Domestic cinemas which opened in December 1997, two Australian cinemas which
opened in July 1997 and December 1997 and a CineVista cinema which opened in
July 1998; offset by a decrease in Theater Operating Expenses of approximately
$2,463,000 due to the closure of our CineVista screens in the second quarter of
1997 and another four CineVista screens in the first quarter of 1998. The
remaining increase of $1,416,000 is attributable to expense items which vary in
proportion to increased Theater Revenues. These same factors contributed to an
increase in Theater Operating Expenses of approximately 20% to $7,367,000 in the
three-month period ended September 30, 1998 from $6,161,000 in the corresponding
prior year period. Theater Operating Expenses as a percentage of Theater
Revenues remained constant for the three and nine months ended September 30,
1998 as compared to the corresponding prior year periods.
"General and administrative" expenses for the three and nine months ended
September 30, 1998 and 1997 include the following components:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
----- ---- ---- ----
<S> <C> <C> <C> <C>
Cine Vista $ 202,000 $ 193,000 $ 811,000 $ 581,000
Domestic Cinemas 148,000 166,000 436,000 417,000
Australia 907,000 697,000 2,290,000 2,251,000
Craig 372,000 429,000 1,276,000 1,364,000
Reading, general 1,168,000 1,399,000 3,362,000 3,481,000
---------- ---------- ---------- ----------
Total $2,797,000 $2,884,000 $8,175,000 $8,094,000
========== ========== ========== ==========
</TABLE>
CineVista's "General and administrative" expense in the 1998 Nine Months
includes a $165,000 charge relating to the closing of four screens during the
first quarter. The charge is comprised of a $395,000 loss on leasehold
improvements net of the reversal of a $230,000 provision for deferred rent.
16
<PAGE>
General and administrative expenses of the Domestic Cinemas increased 5% to
$436,000 for the 1998 Nine Months from $417,000 in the 1997 Nine Months,
primarily as a result of increased management expenses associated with the
opening of two new cinemas in December 1997 and as a result of increased revenue
in the cinema in operation in each of the respective periods.
Australia's "General and administrative" expenses increased 30% to $907,000 in
the 1998 Quarter from $697,000 in the corresponding prior year period primarily
as a result of increased payroll costs, office expenses and carrying costs of
land held for development associated with the continued expansion of operations
and development activities in Australia. General and administrative expenses for
the 1998 Nine Months are comparable to the 1997 Nine Months as a result of a
decrease of approximately $500,000 in write-offs of property development costs
in the 1998 Nine Months offset by increased payroll costs, professional fees and
carrying costs of land held for development. Australia's general and
administrative expenses are expected to increase as property development
activities expand.
Craig's "General and administrative" expenses decreased $57,000 in the 1998
Quarter and decreased $88,000 in the 1998 Nine Months as compared to the 1997
Quarter and 1997 Nine Months, principally as a result of decreased payroll costs
in the 1998 periods, offset by increased outside professional and legal costs
during the first quarter of 1998.
"General and administrative" expenses for Reading in the 1998 Quarter and 1998
Nine Months remained consistent with the 1997 Quarter and 1997 Nine Months.
Equity in Earnings of Affiliate
- - -------------------------------
"Equity in earnings of affiliates" include earnings from the Consolidated
Company's investment in Citadel, BRI, NZ JVs and WPG. The investments in BRI
and WPG were made in the fourth quarter of 1997 and the investment in the NZ
JVs was made in the second quarter of 1998. Accordingly, "Equity in earnings of
affiliates" in the 1997 Quarter and 1997 Nine Months was comprised only of
Citadel equity earnings of $98,000 and $264,000, respectively. In the 1998 Nine
Months "Equity in earnings of affiliates" included equity earnings of $169,000
from the Company's investment in Citadel, a loss of $24,000 from WPG and the NZ
JVs and a loss of $124,000 from BRI.
Other Income (Expense)
- - ----------------------
"Other expenses" totaled $139,000 in the 1998 Quarter in comparison to $2,000
in the 1997 Quarter and amounted to a loss of $556,000 in the 1998 Nine Months
as compared to "Other income" of $236,000 in the 1997 Nine Months. The 1998 Nine
Month expense is primarily a result of losses on foreign currency derivative
positions. The Consolidated Company does not currently have any foreign currency
derivative positions. The 1997 Nine Month income is comprised primarily of
amounts received from a third party as reimbursement of certain acquisition
related expenditures in the first quarter of 1997 which were expensed in prior
periods.
Minority Interest
- - -----------------
"Minority interest in (income) losses of consolidated subsidiaries" amounted
to a credit of $1,088,000 in the 1998 Nine Months and is comprised of (i) the
Reading minority interests share (31%) of Reading's losses and dividend payments
applicable to common shareholders amounting to $1,351,000, offset by $263,000
from Sutton Hills minority interests share of the NY Angelika earnings and the
minority interests share in a Reading Australia theater's net income.
"Minority interest in (income) losses of consolidated subsidiaries" amounted
to a change of approximately $462,000 for the three months ended September 30,
1998 and includes the minority interest's share of the Company's consolidated
net income and dividend payments of Reading amounting to $566,000 offset by the
minority interests share of the NY Angelika income and the minority interests
share of the Australian theater operating results amounting to $104,000.
17
<PAGE>
Income Tax Provision
- - --------------------
Income tax expense in the 1998 Quarter and Months was $355,000 and $762,000,
respectively as compared to $378,000 and $784,000 in the 1997 Quarter and Nine
Months, respectively. Income tax expense in the 1998 Nine Months included
$584,000 representing foreign withholding taxes, and $178,000 of state and local
taxes as compared to $529,000 and $170,000 in the 1997 Nine Months. The 1997
Quarter includes a current tax provision for foreign withholding taxes of
$306,000 which will be paid if certain intercompany loans are repaid and
estimated federal and state taxes of $61,000.
Comprehensive Income
- - --------------------
The Company Comprehensive losses (Note 3) of $1,554,000 and $3,324,000 in the
three and nine month periods ended September 30, 1998 as compared to
comprehensive income in the corresponding periods last year of $905,000 and
$1,820,000, respectively. The losses reflect the change in Shareholder's equity
resulting from changes in the exchange rates between the U.S. and Australian
dollar. Foreign currency exchange rates in general and in the Pacific Rim
countries in particular (including Australia and New Zealand) have been subject
to significant weakness and volatility during 1998 due to the currency crisis in
South East Asia. The Company's business and operating results may be impacted
by the effects of future foreign currency fluctuations.
In the past the Company has utilized derivative contracts in order to offset
the weakening Australian dollar. No such positions are presently in place or
contemplated by management. The Company's foreign investments are long term in
nature and not readily hedged under normal means. Management believes that the
foreign denominated investments which are presently comprised primarily of
undeveloped real estate assets are currently hedged by the anticipated foreign
dollar investments which will be required to develop the assets to income
producing levels and that no further hedging is required at this time.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Consolidated Company had cash and cash equivalents
totaling approximately $70,675,000 which includes approximately $65,961,000 held
by Reading. At September 30, 1998, Craig had cash and cash equivalents of
approximately $4,714,000. REI is majority owned by the Company and,
accordingly, is included in the consolidated financial statements. However,
Craig and REI are separate public companies and each entity's capital resources
and liquidity is legally independent of the other and any intercompany loans or
receivables would require approval of each separate company's Board of
Directors. Accordingly, the future liquidity of Craig will be principally
dependent on Reading's ability to pay dividends in accordance with the terms of
the Reading Preferred Stock amounting to approximately $3,575,000 annually.
If the Consolidated Company is successful in its efforts to develop all of the
projects which it is presently considering in Australia, New Zealand, Puerto
Rico and the domestic market, its capital requirements over the next two years
will exceed its existing cash balances and existing borrowing arrangements.
However, the Consolidated Company believes that additional funding could be
realized through, among other things, bank borrowings, sale-leaseback
transactions and the issuance/sale of additional equity either of REI or at a
subsidiary or the project level.
The Company has two construction commitments and seven committed lease
agreements for theater facilities, with a total of approximately 81 screens
which are either under construction or for which construction is anticipated to
be completed in the year 2000. In addition, the Company has entered a contract
to acquire a land parcel for the development of a multi-plex cinema and has
entered into contracts to acquire a .215 acre site and a 1,086 stall park
garage. The aggregate estimated cost remaining to complete construction for the
nine facilities and acquired the additional land sites totaled approximately $69
million, inclusive of approximately $43 million related to seven Australian
projects. The U.S. dollars cost of such Australian projects was based on a
conversion rate of $0.60 U.S. dollars to each Australian dollar.
18
<PAGE>
The following summarizes the major sources and uses of cash funds in each of
1998 and 1997 Six Months, respectively:
1998:
- - ----
"Unrestricted cash and cash equivalents" decreased $27,527,000 from
$98,202,000 at December 31, 1997 to $70,675,000 at September 30, 1998. Working
capital decreased $24,546,000 from $89,765,000 at December 31, 1997 to
$65,219,000 at September 30, 1998. In addition, to other general and
administrative expenses, other uses in operating activities were a decrease in
accounts payable of $3,403,000.
Net cash used in investing activities amounted to $23,882,000 in the 1998 Nine
Months as a result of property purchases of $16,775,000, an investment in joint
venture (inclusive of loans to joint venture partners) of $3,736,000 and the
purchase of Citadel securities for cash of approximately $3,636,000. Cash used
in investing activities was offset by cash provided through a decrease in
restricted cash amounting to $3,673,000.
Cash used in financing activities in the 1998 Nine Months amounted to
approximately $1,657,000 and included a $397,000 expenditure to repurchase
52,000 shares of Craig Common Stock, a $292,000 distribution to a minority
interest, $341,000 dividend paid to Citadel in connection with their investment
in Reading redeemable stock and a $627,000 decrease in note payables.
1997:
- - ----
"Unrestricted cash and cash equivalents" increased $61,654,000 from
$52,172,000 at December 31, 1996 to $113,826,000 at September 30, 1997
principally as a result of the redemption of the Stater Preferred Stock
investment in August 1997 whereby the Company received approximately
$73,915,000, inclusive of accumulated dividends. Net cash operating activities
amounted to $605,000 in the 1997 Nine Months.
Net cash used in investing activities amounted to approximately $62,565,000 in
the 1997 Nine Months including $69,980,000 from the redemption of the Stater
Preferred, $6,445,000 in the purchase of property and equipment, $1,998,000 to
purchase Citadel Common Stock and $819,000 used to purchase an additional 78,500
shares (approximately 1% of the outstanding stock) of REI.
Net cash provided by financing activities amounted to $114,000 in the 1997
Nine Months and was comprised of a $271,000 distribution to a minority partner,
a $1,500,000 note payable payment, a $341,000 dividend paid to Citadel in
connection with their ownership of Reading Preferred Stock, offset by a
$1,998,000 borrowing from Citadel to purchase Citadel Common Stock.
YEAR 2000
As reasonably necessary and appropriate, the Company is conducting an audit of
the software and hardware components that it uses to assess whether such
components will properly recognize dates beyond December 31, 1999 ("Year 2000
Compliance"). The Company is also conducting a review of its major suppliers of
goods and services to understand their level of compliance with Year 2000
issues. Both of these reviews are expected to be completed during the three
months ended December 31, 1998.
The Company does not anticipate that its review of internal hardware and
software will reveal material problems, as the Company uses current versions of
software provided by major software vendors. Likewise, the Company does not
anticipate that any material issues will arise as a result of tits review of
hardware, as the Company utilizes hardware that is less than a year old for the
most part. The Company has adequate financial resources to replace any hardware
and/or software that is determined not to be Year 2000 compliant.
The Company believes that most of its service providers will represent that
they are Year 2000 compliant. If in its survey of significant vendors of
materials the Company becomes concerned that one or more vendors either is not
Year 2000 compliant or has what the company believes to be inadequate
19
<PAGE>
programs to become Year 2000 compliant, the Company will develop additional
programs to reduce or eliminate its reliance on such vendors.
FORWARD-LOOKING STATEMENTS
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing, including those contained
herein. Such forward-looking statements may be included in, without limitation,
reports to stockholders, press releases, oral statements made with the approval
of an authorized executive officer of the Company and filings with the
Securities and Exchange Commission. The words or phrases "anticipates,"
"expects," "will continue," "estimates," "projects," or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.
The results contemplated by the Company's forward-looking statements are
subject to certain risks, trends, and uncertainties that could cause actual
results to vary materially from anticipated results, including without
limitation, delays in obtaining leases and permits for new multiplex locations,
construction risks and delays, the lack of strong film product, the impact of
competition, market and other risks associated with the Company's investment
activities and other factors described herein.
20
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of legal proceedings, please refer to Item 3
entitled "Legal Proceedings" contained in the Company's Form 10-K for
the fiscal year ended December 31, 1997.
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 HOLDER.
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the reporting period.
21
<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 REGISTRANT
Date: November 13, 1998 By: /s/ S. Craig Tompkins
--------------------------------- ------------------------
S. Craig Tompkins
President
Date: November 13, 1998 By: /s/ Robin W. Skophammer
--------------------------------- ------------------------
Robin W. Skophammer
Chief Financial Officer
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 70,675
<SECURITIES> 0
<RECEIVABLES> 873
<ALLOWANCES> 0
<INVENTORY> 212
<CURRENT-ASSETS> 72,676
<PP&E> 53,541
<DEPRECIATION> (5,063)
<TOTAL-ASSETS> 48,478
<CURRENT-LIABILITIES> 7,457
<BONDS> 7,970
0
0
<COMMON> 1,432
<OTHER-SE> 93,793
<TOTAL-LIABILITY-AND-EQUITY> 154,405
<SALES> 25,867
<TOTAL-REVENUES> 26,124
<CGS> (19,918)
<TOTAL-COSTS> (29,976)
<OTHER-EXPENSES> 4,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 334
<INCOME-TAX> (762)
<INCOME-CONTINUING> (428)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (428)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
