<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, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission file number 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 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 3,580,812 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 May 14, 1999.
================================================================================
<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, 1999 (Unaudited)
and December 31, 1998............................................. 1
Consolidated Statements of Operations for the Three Months
Ended March 31, 1999 and 1998 (Unaudited)......................... 3
Consolidated Statements of Cash Flows for Three Months
Ended March 31, 1999 and 1998 (Unaudited)......................... 4
Notes to Consolidated Financial Statements........................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................14
PART 2. Other Information
- ------
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>
-i-
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------- -------------
ASSETS (In thousands of dollars)
- ------------------------------------------------------ ----------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $55,370 $63,314
Restricted cash 931 904
Receivables 684 582
Inventories 212 236
Prepayments and other current assets 905 543
------ ------
Total current assets 58,102 65,579
Equity investment in Citadel 13,110 12,962
Equity investments in foreign affiliates 5,471 4,661
Note receivable from joint venture partners 3,041 2,883
Net investment in leased equipment 2,125 2,125
Property held for development 36,448 32,949
Property and equipment, net 34,240 28,063
Other assets 3,402 4,758
Excess of cost over net assets acquired, net of
accumulated amortization of $1,586 in 1999 and
$1,426 in 1998
11,239 10,611
-------- ---------
Total assets $167,178 $164,591
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- --------------
(In thousands of dollars)
--------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $1,847 $3,155
Film rental payable 1,313 1,347
Accrued property costs 1,055 1,734
Property purchase commitments 11,409 8,066
Accrued taxes 642 495
Note payable, including $1,998 to affiliate 2,151 2,147
Short term debt 606 594
Other accrued expenses and liabilities 1,274 596
----- ---
Total current liabilities 20,297 18,134
------ ------
Note payable 889 920
Other liabilities 6,058 4,606
Deferred tax liabilities 8,368 8,368
----- -----
Total long term liabilities 15,315 13,894
------ ------
Minority interests in equity of subsidiaries 29,698 30,221
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 87 87
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 3,582,812
and 3,628,612 outstanding at March 31, 1999 and 1,361 1,361
December, 31, 1998, respectively
Additional paid-in capital 31,111 31,111
Accumulated other comprehensive loss (4,917) (6,000)
Retained earnings 88,051 89,257
Cost of treasury shares, 3,536,906 and 3,491,106
shares at March 31, 1999 and December 31, 1998,
respectively (20,825) (20,474)
------- ------
Total shareholders' equity 94,868 95,342
------ ------
Total liabilities and shareholders' equity $167,178 $164,591
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
CRAIG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---------------------------------
(In thousands of dollars,
except for share amounts)
<S> <C> <C>
Revenues:
Theaters:
Theater admissions $ 5,529 $ 6,410
Theater concessions 1,627 2,056
Theater advertising and other 313 237
Real estate 49 42
-------- --------
7,518 8,745
Expenses:
Theater costs 5,803 6,227
Theater concession costs 367 437
Depreciation and amortization 708 587
General and administrative expenses 2,826 2,535
-------- --------
9,704 9,786
-------- --------
Loss from operations (2,186) (1,041)
Earnings from equity investments 149 131
Other income (expense) 19 (632)
Interest income 732 1,352
-------- --------
Loss before taxes and minority interest (1,286) (190)
Minority interest 416 324
-------- --------
(Loss) earnings before taxes (870) 134
Provision for taxes (222) (193)
-------- --------
Net loss (1,092) (59)
Dividends paid on subsidiary redeemable
preferred stock (114) (114)
-------- --------
Net loss applicable to Craig common shareholders $ (1,206) $ (173)
======== ========
Basic and diluted loss per share: $ (0.11) $ (0.02)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CRAIG CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1999 1998
--------- ---------
(In thousands of dollars)
<S> <C> <C>
Operating Activities
Net (loss) $ (1,092) $ (59)
Adjustments to reconcile net (loss) to net cash provided by
(used in) operating activities:
Depreciation 561 419
Amortization 147 168
Deferred rent expense 81 (51)
Equity earnings of affiliates (149) (131)
Write off of capitalized development costs 142 13
Loss on disposal of assets -- 395
Minority interest (416) (324)
Changes in operating assets and liabilities:
(Increase) decrease in receivables (84) 382
(Increase) decrease in other current assets (348) 950
Increase (decrease) in payables (1,799) (3,005)
Increase (decrease) in accrued film rental (38) 246
Increase (decrease) in other liabilities 526 (59)
--------- ---------
Net cash used in operating activities (2,469) (1,056)
--------- ---------
Investing activities
Purchase of property held for development (117) --
Purchase of property and equipment (4,631) (7,311)
Acquisition of Royal George (37) --
Decrease in purchase commitment 56 --
Investment in New Zealand joint venture (94) --
Decrease in restricted cash -- 3,093
--------- ---------
Net cash used in investing activities (4,823) (4,218)
--------- ---------
Financing activities
Treasury stock repurchases (351) --
Distributions to minority partner (107) (56)
Payment of Reading preferred dividends (114) (114)
Note receivable to New Zealand joint venture (55) --
Decrease in note payable (61) (537)
--------- ---------
Net cash used in financing activities (688) (707)
--------- ---------
Effect of foreign exchange rate changes 36 98
--------- ---------
Increase (decrease) in cash and cash equivalents (7,944) (5,883)
Cash and cash equivalents at beginning of the period 63,314 98,202
--------- ---------
Cash and cash equivalents at end of period $ 55,370 $ 92,319
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Craig Corporation and Subsidiaries
Notes to Condensed Financial Statements (unaudited)
March 31, 1999
(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").
The Company's principal holdings at March 31, 1999 and December 31, 1998
consisted of (i) common and preferred stock representing approximately 78% of
the voting power of Reading Entertainment, Inc. ("REI") (ii) common shares
representing approximately 16.4% of the outstanding common shares of Citadel
Holding Corporation ("CHC" and collectively with its consolidated subsidiaries
"Citadel") and, (iii) 16.4% of the outstanding common stock of Big 4 Ranch,
Inc., a company owing a 40% interest in certain agricultural properties located
in Kern County, California, and (iv) cash and cash equivalents. The
Consolidated Company holds a 48% interest in Citadel and 49% interest in Big 4
Ranch, Inc.
Through its majority owned subsidiaries, REI is principally in the business
of developing and operating multi-plex cinemas in the United States, Puerto
Rico, Australia and New Zealand and of developing, and eventually operating
cinema based entertainment centers in Australia. The Company operates its
cinemas through various subsidiaries under the Angelika Film Centers and Reading
Cinemas names in the United States (the "Domestic Cinemas"); through Reading
Cinemas of Puerto Rico, Inc., under the CineVista name in Puerto Rico
("CineVista" or the "Puerto Rico Circuit"); through Reading Australia
Entertainment Pty Limited (collectively with its subsidiaries referred to herein
as "Reading Australia") under the Reading Cinemas name in Australia (the
"Australia Circuit") and through Reading New Zealand Limited ("Reading New
Zealand") which has a 50% interest in a cinema joint venture operating under the
Berkley Cinemas name in New Zealand. Reading's entertainment center development
activities in Australia are also conducted through Reading Australia, under the
Reading Station name and in New Zealand under the Reading New Zealand Limited
name. In addition, Reading has recently expanded into the live theater business
and currently owns or has agreements to acquire four live theaters, consisting
of seven auditoriums, located in Manhattan and Chicago, and to license a fifth
live theater located in San Francisco. These live theaters are designed for the
presentation of "Off Broadway" type productions and typically have auditoriums
with less than 600 seats.
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 various joint
ventures. Investments in other companies are carried at cost.
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
5
<PAGE>
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, 1998 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 months
ended March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
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 loss per share
is calculated by dividing net loss applicable to common shareholders by the
weighted average shares outstanding during the period. The weighted average
number of shares outstanding for the three months ended March 31, 1999 and 1998
were 10,667,144 and 10,769,824, respectively. Basic and diluted loss per share
for the three months ended March 31, 1999 and 1998 was 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
amounting to approximately $114,000.
Diluted loss per share is calculated by dividing net loss applicable to
common shareholders by the weighted average common shares outstanding plus the
dilutive effect of stock options. During the first quarter of 1999 and 1998, the
Company recorded a net loss and, therefore, the stock options were anti-
dilutive. At March 31, 1999, stock options to purchase 659,940 shares of Common
Stock and 60,000 shares of Class A Common Preference Stock at average exercise
prices of $6.20 and $7.20 per share, respectively, were outstanding.
NOTE 2 -- COMPREHENSIVE INCOME (LOSS)
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 shareholders'
equity to be included in other comprehensive income (loss).
The following sets forth the company's comprehensive (loss) or income for
the periods shown:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Net loss $(1,206) $ (59)
Other comprehensive income 1,083 494
----- ----
Comprehensive (loss) income $ (123) $ 435
===== ====
</TABLE>
6
<PAGE>
NOTE 3 -- ACQUISITION ACTIVITIES
On March 18, 1999 Reading acquired a four auditorium live theater complex
in Chicago, which operates under the name "The Royal George Theatre" for
approximately $2,812,000 of which $1,200,000 of the purchase price was financed
with a purchase money mortgage due in May 2000. The preliminary allocation of
the purchase price of the fair value of the assets acquired is summarized as
follows:
<TABLE>
<S> <C>
Land $ 700,000
Building 1,300,000
Equipment 25,000
Cost in excess net assets acquired 787,000
----------
$2,812,000
==========
</TABLE>
Also, in March 1999, Reading entered into an agreement to license the use
of the Marines Theater in San Francisco through May 2001.
In December 1998, Reading entered into an Agreement in Principle (the
"Agreement in Principle") to lease and operated four cinemas and manage three
other cinemas all of which are located in Manhattan (herein as referred as the
"Circuit") and to acquire three live "Off Broadway" theaters also located in
Manhattan. Pursuant to the Agreement in Principle, Reading will also acquire
the 16.7% interest in the Angelika Film Center in Manhattan not already owned by
it and certain management rights with respect to three other cinemas located in
Manhattan (the lease transaction, the management rights and the minority
interest in the Angelika Film Center are collectively referred to as the "Cinema
Transactions").
Reading will lease the Circuit for an initial term of ten years and Reading
will acquire, in consideration of an option payment of $5 million ($4 million of
which is payable eighteen months from closing), the right to purchase, at the
end of the initial term of the lease, the Circuit for a purchase price of $48
million (including option fee). The Circuit includes the fee interests
underlying two of the cinemas. Reading will acquire the 16.7% interest in the
Angelika Film Center for $4.5 million, which purchase price will be paid in a
ten-year installment sale note. Reading has agreed to provide to the sellers,
at the election of the sellers, standby credit facilities of up to $32,500,000
maturing in 10 years. Borrowings under the credit facilities cannot be made
prior to eighteen months following the closing of the Cinema Transactions.
It is anticipated that Reading will acquire the three live theaters in
exchange for approximately 1.1 million shares of Reading Common Stock valued at
$9.00 per share. The closing price of the Reading Common Stock on December 2,
1998 was $9.00, the date the Agreement in Principle was approved by Reading. If
any of the conditions to Reading's obligation to issue Common Stock are not
satisfied, the acquisition will close on a cash basis, for a purchase price of
approximately $9.9 million.
In connection with the Cinemas Transactions, Reading has made a deposit of
approximately $1,000,000. Such deposit is included as a component of "Other
Assets" in the Condensed Consolidated Balance Sheets.
7
<PAGE>
Closing of the transactions are subject to certain conditions, including
approval by the Conflicts Committee of the Reading Board of Director's of the
definitive documentation memorializing the transaction, and the issuance of
fairness opinions.
NOTE 4 -- EQUITY INVESTMENT IN CITADEL HOLDING CORPORATION
("CITADEL") AND BIG 4 RANCH, INC. ("BRI")
At March 31, 1999, the Consolidated Company's owned 3,209,779 shares of
common stock of Citadel representing an ownership interest of approximately 48%.
The Company accounts for its investment in the Citadel by the equity method.
Citadel's net earnings for the three months ended March 31, 1999 were
approximately $470,000 and the Consolidated Company's share of such earnings was
$147,000, which amount is included in the Condensed Consolidated Statement of
Operations for the three months ended March 31, 1999 as "Earnings in equity
investments." Citadel's assets and liabilities totaled $35,179,000 and
$10,968,000, respectively, at March 31, 1999. The closing price of Citadel's
common stock on the American Stock Exchange was $4.69 per share at May 12, 1999.
Management believes that the March 31, 1999 carrying value of the Citadel
investment amounting to approximately $13,110,000 approximates the underlying
financial statement equity in the net assets of Citadel.
During 1997, Craig acquired 666,000 of the CHC shares it owns upon the
exercise of a warrant at a cost of approximately $3.00 per share, or $1,998,000.
Such exercise was consummated pursuant to delivery by Craig of its secured
promissory note in the amount of $1,998,000, secured by 500,000 shares of REI
Common Stock. Interest is payable quarterly in arrears at the prime rate, which
amounted to 7.75% at March 31, 1999. Interest expense paid pursuant to this
note amounted to approximately $39,000 and $43,000 for the three months ended
March 31, 1999 and 1998, respectively. Principal and accrued but unpaid interest
is due upon the earlier of April 11, 2002 or 120 days following Citadel's
written demand for payment and has been included in the accompanying Balance
Sheet as "Note Payable to Citadel."
The Consolidated Company owns 3,322,279 shares of common stock of BRI
representing an ownership interest of approximately 49%. BRI owns a 40%
interest in three agricultural partnerships which own agricultural land located
in California. A company controlled and owned by the Chairman of the Board of
the Company and certain members of his family owns a 20% interest in the
partnerships and Citadel owns the remaining 40% interest in the partnerships.
The Company accounts for its investment in the BRI common stock by the equity
method. BRI's net loss for the three months ended March 31, 1999 totaled
$118,000; the Company did not record its share of such loss as the carrying
value of its investment in BRI had previously been reduced to $0. The Company
has no obligation to fund BRI's operating losses. BRI had deficit equity of
approximately $20,000 at March 31, 1999.
8
<PAGE>
NOTE 5 -- EQUITY INVESTMENTS IN FOREIGN AFFILIATES
The carrying value of each of the Company's equity investments in foreign
affiliates is as follows:
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Whitehorse Property Group ("WPG")/1/ $1,530 $1,484
New Zealand Joint Ventures ("NZ JVs")/2/ 3,941 3,177
------ ------
Total $5,471 $4,661
====== ======
</TABLE>
/1/ Does not include a loan to the joint venture partner of approximately
$1,849,000 and $1,769,000 at March 31, 1999 and December 31, 1998, respectively.
/2/ Does not include a loan to the joint venture partner of approximately
$1,192,000 and $1,114,000 at March 31, 1999 and December 31, 1998, respectively.
Reading Australia owns a 50% interest in the Whitehorse Property Group Unit
Trust ("WPG"). WPG owns a shopping center located near Melbourne, Australia.
WPG's net income for the quarter ended March 31, 1999 totaled $4,000 and the
Company's $2,000 share of the net income has been included in the Condensed
Consolidated Statement of Operations for the three months ended March 31, 1999
as "Earnings of equity investments." WPG's assets and liabilities totaled
$10,870,000 and $7,911,000, respectively, at March 31, 1999. The carrying amount
of the Consolidated Company's 50% interest approximates half of the appraised
value of WPG.
Reading New Zealand owns a 50% interest in two joint ventures, (the "NZ
JVs"), one with a cinema operator and one with a property developer in New
Zealand. The results of the operation of the NZ JVs for the three months ended
March 31, 1999 were immaterial.
At March 31, 1999, the assets of the NZ JVs consisted of two multiplex
cinemas (a five screen cinema on owned land and a four screen leased cinema), a
1.764 acre property located in Wellington, and a parcel on which a 4 screen
cinema is being constructed and is expected to open during the third quarter of
1999. The Wellington property was acquired as a potential entertainment center
location, and is subject to a $1,126,000 loan, of which Reading is responsible
for 50% of such indebtedness.
Reading 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 $8,230,000.
Reading has conveyed to its joint venture partner in the Wellington property the
option to acquire a 50% interest in the adjacent land and parking garage at an
exercise price equal to 50% of the Company's costs of acquiring and holding
these properties. This option expires on November 30, 1999.
9
<PAGE>
NOTE 6 -- PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------- -----------
<S> <C> <C>
Land/1/ $ 1,089 $ 378
Buildings 3,181 1,858
Leasehold improvements 15,784 15,722
Equipment 9,408 9,205
Construction-in-progress and property development costs 10,160 5,714
------ -----
39,622 32,877
Less: Accumulated depreciation (5,382) (4,814)
------ ------
$34,240 $28,063
======= =======
</TABLE>
/1/ Does not include land held for development, which is included in the
Consolidated Balance Sheet as "Property held for development".
The carrying value of Reading Australia's assets will fluctuate due to
changes in the exchange rate between the Australian and U.S. dollars.
NOTE 7 -- 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 $222,000 during the three months ended
March 31, 1999 including $207,000 of foreign withholding taxes which will be
paid if certain intercompany loans are repaid.
NOTE 8 -- PURCHASE COMMITMENTS
At March 31, 1999, Reading had commitments for major capital expenditures,
property purchase commitments, and purchase money debt commitments for 1999 and
thereafter which totaled approximately $68,600,000 inclusive of approximately
$57,400,000 related to Australia and New Zealand projects. Included in this
amount are projected construction and equipment expenditures of approximately
$46,300,000 for 1999, $25,300,000 of which relate to commitments under seven
cinemas with a total of 64 screens on leased land, which are anticipated to be
completed in 1999, $11,400,000 to close certain property purchase commitments,
and $9,600,000 to construct an entertainment center with a 10 screen cinema on
land owned by Reading which is expected to be completed in 1999. With respect to
periods subsequent to 1999, Reading has a development commitment of
approximately $21,100,000 relating to an entertainment center in Australia and a
$1,200,000 purchase commitment due in May 2000.
10
<PAGE>
The U.S. dollar cost of such Australia and New Zealand projects was based
on a conversion rate of .5389 U.S. dollars to each Australian dollar and a
conversion rate of .6315 U.S. dollars to each New Zealand dollar. At March 31,
1999 the Company has not utilized forward contracts to hedge or offset exposure
to market risks arising from changes to foreign exchange rates. Accordingly,
amounts reflect as commitments may fluctuate based upon foreign exchange rates
at the time of payments.
Pursuant to the provisions of the Agreement in Principle (See Note 3), if
Reading completes the Cinemas Transaction, Reading will be required to provide
the existing owners, with a ten-year line of credit of up to $32,500,000
commencing 18 months from the conclusion of the transaction and will be required
to pay $4,000,000 pursuant to a deferred option fee 18 months from closing.
While no assurances can be given that the transaction will be concluded,
management presently anticipates closing to occur in the second quarter of 1999,
in which case such amounts would be funded in late 2000 or early 2001.
The Agreement in Principle contemplates the acquisition of certain live
theater assets, in exchange for REI common stock. However, under certain
circumstances, the Company could be required to fund the Theater Acquisition
with a cash payment of approximately $9,900,000. While no assurances can be
given that the Theater Acquisition will be completed, management presently
anticipates closing of the transaction in the second quarter of 1999 and that
the transaction will be structured as a stock transaction and not as a cash
transaction.
Under the terms of the joint venture agreement with WPG (see Note 5), the
Company has guaranteed approximately $3,600,000 of WPG debt.
In May 1999, Craig purchased a development property in Southern California
for $1,600,000 from a real estate investment trust ("REIT"), which the President
of the Company is a director. Pursuant to the terms of a management agreement
with the REIT, the REIT has an option to repurchase the property in December
1999 for $1,786,660. The Company has the option to put the property back to the
REIT at the end of January 2000 for $1,900,000.
NOTE 9 -- SEGMENT INFORMATION
The following sets forth certain information concerning the Company's two
segments, real estate development and cinema operations, for the three months
ended March 31, 1999 and 1998:
11
<PAGE>
<TABLE>
<CAPTION>
Real Corporate
Estate Development Cinema Operations and Eliminations Consolidated
------------------ ----------------- ---------------- ------------
<S> <C> <C> <C> <C>
1999
- ----
Revenues $ 0 $7,469 $ 49 $7,518
Operating (loss) income (748) 104 (1,542) (2,186)
1998
- ----
Revenues $ 0 $8,703 $ 42 $8,745
Operating (loss) income (571) 876 (1,346) (1,041)
</TABLE>
NOTE 10 -- 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.
<TABLE>
<CAPTION>
Condensed Balance Sheet: March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Assets:
- ------
Cash and cash equivalents $ 3,844 $ 4,721
Other current assets 29 18
-------- --------
Total current assets 3,873 4,739
Investment in Common Stock of Reading 63,744 63,761
Investment in Preferred Stock of Reading 55,000 55,000
Investment in Citadel 4,863 4,804
Property and equipment, net 698 694
Other assets 145 157
Excess of cost over net assets acquired 1,098 1,109
-------- --------
Total assets $129,421 $130,264
======== ========
Liabilities and stockholders equity:
- -----------------------------------
Accounts payable and accrued expenses $638 $674
Note payable to Citadel, current 1,998 1,998
Deferred tax liabilities 30,410 30,410
Stockholders' equity 96,375 97,182
-------- --------
Total liabilities and stockholders' equity $129,421 $130,264
======== ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
March 31, March 31,
Condensed Statement of Operations: 1999 1998
--------------- ----------------
<S> <C> <C>
Revenues:
- ---------
Earnings (losses) from Reading investment $ (767) $ 269
Equity in losses of BRI -- (13)
Equity in earnings of Citadel 59 26
Interest income 50 67
------- -------
(658) 349
------- -------
Expenses:
- --------
General and administrative 464 418
Depreciation and amortization 44 61
Interest expense 39 43
------- -------
547 522
------- -------
(Loss) before income taxes (1,205) (173)
Income taxes -- --
------- -------
Net (loss) $(1,205) $ (173)
======= =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------
March 31, March 31,
Condensed Statement of Cash Flows: 1999 1998
--------------- ----------------
<S> <C> <C>
Operating Activities:
- --------------------
Net earnings (loss) $(1,205) $ (173)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Undistributed earnings (losses) of equity affiliates 767 (256)
Other (62) (112)
------- -------
Net cash provided by (used in) operating activities (500) (541)
------- -------
Investing Activities:
- --------------------
Dividends received from Reading -- 894
Purchase of equipment (26) (5)
------- -------
Net cash provided by (used in) investing activities (26) 889
------- -------
Financing Activities:
Repurchase of common stock (351) --
------- -------
Increase (decrease) in cash and cash equivalents (877) 348
Cash and cash equivalents at beginning of period 4,721 5,332
------- -------
Cash and cash equivalents at end of period $3,844 $5,680
======= =======
</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
March 31, 1999, 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 wholly owned 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. The Consolidated Company
currently owns approximately 48% of the Common Stock of Citadel and
approximately 49% of the Common Stock of BRI.
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 and
Australia; development in Australia of entertainment centers typically existing
of a multiplex cinema, complimentary restaurant and retail uses, and sell
contained parking.
Results of Operations
The following is a comparison of the results of operations for the three
months ended March 31, 1999 ("1999 Quarter") with the three months ended March
31, 1998 ("1998 Quarter"). Due to the nature of the Consolidated Company's
development and acquisition activities and the timing associated with the
results of such activities, and the results of operations of five new cinemas
opened since January 1, 1998, the Consolidated Company's financial position,
results of operations and cash flows have varied significantly and, in the view
of management are not necessarily 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 development approvals have
been secured.
The Consolidated Company's net loss applicable to common shareholders for the
1999 Quarter approximated $1,206,000 or $.11 per basic share as compared to the
1998 Quarter net loss of approximately $173,000 or $.02 per basic share. The
increased loss applicable to common shareholders is principally attributable to
a decrease in "Theater Operating Income", a reduction in "Interest income" and
an increase in "General and administrative expenses" as described below. In
each of the three month periods ended March 31, "Net loss applicable to common
shareholders" has been increased by the 6.5% per annum dividend ($114,000
quarterly) in the $7,000,000 stated value of Reading Convertible Preferred Stock
held by Citadel.
Theater Revenues, Theater Operating Expenses, and General and
Administrative expenses for each of the three month periods ended March 31, were
as follows:
14
<PAGE>
<TABLE>
<CAPTION>
Domestic
1999 Cine Vista Cinemas Australia Corporate/1/ Total
------------ --------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Theater Revenue $2,721,000 $2,906,000 $1,794,000 $48,000 $7,469,000
Theater Operating Expense 2,518,000 2,233,000 1,419,000 6,170,000
Depreciation and
Amortization 219,000 271,000 182,000 36,000 708,000
General & Administrative 185,000 133,000 824,000/2/ 1,684,000/3/ 2,826,000
-------------------------------------------------------------------------------
($201,000) $269,000 ($631,000) ($1,672,000) ($2,235,000)
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
Domestic
1998 Cine Vista Cinemas Australia Corporate/1/ Total
------------ --------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Theater Revenue $4,372,000 $2,658,000 $1,667,000 $6,000 $8,703,000
Theater Operating Expense 3,259,000 2,181,000 1,224,000 0 6,664,000
Depreciation and
Amortization 119,000 251,000 170,000 47,000 587,000
General & Administrative 392,000 133,000 663,000/2/ 1,347,000 2,535,000
-------------------------------------------------------------------------------
$602,000 $93,000 ($390,000) ($1,388,000) ($1,083,000)
=================================================================================
</TABLE>
CineVista
- ---------
CineVista's Theater Revenues decreased approximately 37.8% or $1,651,000 to
$2,721,000 in the three months ended March 31, 1999 from $4,372,000 in the
corresponding prior year period. The decrease is primarily a result of more
favorable film product in the first quarter of 1998 and a $327,000 reduction in
the current year quarter as a result of the net effect of the closing of an
eight screen cinema at one location in the second quarter of 1998, the closing
of four screens at two locations in the first quarter of 1998, offset by the
opening of an eight screen cinema in the second quarter of 1998. CineVista is
constructing a twelve screen cinema on a leased property in the San Juan
metropolitan area which is expected to open in the fourth quarter of 1999.
CineVista is also currently in negotiation to build an additional ten screen
cinema at an existing location. At March 31, 1999 and 1998, CineVista operated
46 screens at seven locations and 44 screens at seven locations, respectively.
CineVista's Theater Operating Expenses decreased approximately 22.7% or
$741,000 to $2,518,000 for the three months ended March 31, 1999 from $3,259,000
in the corresponding prior year
- --------------------------------------
/1/ Includes $82,000 of expenses associated with New Zealand operations.
/2/ Includes $666,000 and $571,000 of General and Administrative expenses
associated with Reading Australia's real estate development segment for the
three months ended March 31, 1999 and March 31, 1998, respectively.
/3/ Corporate operations reflect net revenue from the operation of the Royal
George Theatre (1999 only) and corporate overhead.
15
<PAGE>
period. The decrease from the prior year period is attributable to expenses
items which vary directly with the Theater Revenue of CineVista.
CineVista's General and administrative expenses decreased approximately
52.8% or $207,000 to $185,000 for the three months ended March 31, 1999 from
$392,000 in the corresponding prior year period. The total for the quarter
ended March 31, 1998 included a $165,000 charge relating to the closing of four
screens during the period. The charge was comprised of a $395,000 loss on
leasehold improvements net of a reversal of a $230,000 provision for deferred
rent.
Domestic Cinemas
- ----------------
Domestic Cinemas' Theater Revenues increased approximately 9.3% or $248,000
to $2,906,000 for the three months ended March 31, 1999 from $2,658,000 in the
corresponding prior year period in part due to the inclusion in the current year
period of the Tower Theater in Sacramento, California which commenced operations
in November 1998. Reading is currently negotiating a transaction to lease
sixteen screens at four locations in Manhattan (See Note 3). Closing of the
transaction is expected to occur in the second quarter of 1999. In May 1999,
Reading commenced operation of a twelve screen cinema in Manville, New Jersey.
The Company has leased an additional eight screen cinema in Buffalo, New York
with operations expected to commence in the second quarter of 1999. At March
31, 1999 and March 31, 1998, the Domestic Cinemas operated 22 screens at four
locations and 19 screens at three locations respectively.
Theater Operating Expenses increased approximately 2.4% or $52,000 to
$2,233,000 for the three months ended March 31, 1999 from $2,181,000 in the
corresponding prior year period, primarily as a result of the inclusion of the
Tower Theater in the current period.
The Domestic Cinemas' General and Administrative expenses remained
consistent with the corresponding prior year period.
Australia
- ---------
Theater Revenues for Australian operations increased approximately 7.6% or
$127,000 to $1,794,000 for the three months ended March 31, 1999 from $1,667,000
in the corresponding prior year period. A four screen cinema commenced
operations in November 1998 and is included in the results for the three months
ended March 31, 1999. Reading Australia is currently constructing an
entertainment center on land owned by the Company. The complex will include a
10 screen cinema and entertainment related retail space with operations expected
to commence in the fourth quarter of 1999. Reading Australia is also
constructing 40 screens at five leased locations with five screens at one
location to commence operations in the second quarter of 1999, 5 screens at
another location expected to commence operations in the third quarter 1999, and
thirty screens at three locations expected to commence operation in the fourth
quarter 1999. At March 31, 1999 and 1998, Reading Australia operated 21 screens
at four locations and 16 screens at three locations, respectively.
Theater Operating Expenses for Australian operations increased
approximately 15.9% or $195,000 to $1,419,000 for the three months ended March
31, 1999 from $1,224,000 in the corresponding prior year period. The increase
reflects results of the recently opened cinema, including increased advertising
costs associated with promoting the new location.
General and Administrative costs increased approximately 24.3% or $161,000
to $824,000 for the three months ended March 31, 1999 from $663,000 in the
corresponding prior year period. The increase primarily
16
<PAGE>
related to increased payroll costs, office expenses and carrying costs of land
held for development associated with continued expansion of operations and
development activities in Australia.
Corporate "General and administrative" expenses increased approximately
$337,000 in the 1999 Quarter to $1,684,000 as compared to $1,347,000 in the 1998
Quarter principally as a result of increased payroll costs, office expenses and
carrying costs associated with Reading's continued expansion of operations and
development activities.
Real Estate Revenues
- --------------------
Real estate revenues include rental income and the net proceeds of sales of
Reading's real estate in the United States which Reading is liquidating.
Equity in Earnings of Affiliate
- -------------------------------
"Earnings from equity investments" include earnings from the Company's
investment in Citadel, BRI, WPG and the NZ JVs. "Earnings from equity
investments" increased $18,000 to $149,000 in the three months ended March 31,
1999 as compared to $131,000 in the 1998 Quarter. In the first quarter of 1999
"Earnings from equity investments" included equity earnings of $147,000 from the
Company's investment in Citadel and $2,000 from WPG. "Earnings from equity
investments" in the first quarter of 1998 was comprised of Citadel equity
earnings of $86,000, $85,000 from WPG and a loss of $40,000 from BRI.
Other Income (Expense)
- ----------------------
"Other income" totaled $19,000 in the 1999 Quarter as compared to "Other
expense" of $632,000 in the 1998 Quarter. The 1998 Quarter expense is comprised
primarily of losses on foreign currency derivative positions. The Consolidated
Company does not currently have any foreign currency derivative positions.
Interest Income
- ---------------
Interest income totaled $732,000 in the 1999 Quarter as compared to $1,352,000
in the 1998 Quarter. The decrease in interest income is primarily a result of a
reduction in average cash fund balances during the three months ended March 31,
1999 as compared to the corresponding prior year period due to increasing
investments in Reading's development projects.
Minority Interest
- -----------------
The components of "Minority Interest" in the 1999 and 1998 Quarters is as
follows:
<TABLE>
<CAPTION>
1999 1998
---------------- ------------------
(in thousands)
--------------------------------------
<S> <C> <C>
REI $481 $418
Angelika New York (61) (59)
Australian cinema (4) (35)
-- ---
Minority interest income (expense) $416 $324
==== ====
</TABLE>
17
<PAGE>
The principal component of minority interest is derived from the Company's
holdings in REI. The Company owns preferred stock in REI which earns an annual
dividend of approximately $3,575,000 and approximately 69% of the outstanding
REI common stock. REI minority income in the 1999 and 1998 Quarter reflects the
30.7% minority interests share of REI losses and preferred dividends paid to the
Company. REI has not declared or paid the dividends accumulating to the Company
in the 1999 Quarter amounting to approximately $893,750, which resulted in a
decrease to the Minority interest share of REI losses in the 1999 Quarter as
compared to the 1998 Quarter. The 16.67% minority interest in income of
Angelika NY amounted to $61,000 and $59,000 in the 1999 Quarter and 1998
Quarter, respectively. Minority interest in income of the Australian Cinema
represents the 25% minority interests ownership in such cinema.
Income Tax Provision
- --------------------
Income tax expense amounted to $222,000 in the 1999 Quarter as compared to
$193,000 in the 1998 Quarter. The 1999 Quarter includes an accrual for $207,000
which will be paid if certain intercompany loans are repaid and state and local
taxes of $15,000. The 1998 Quarter includes a current tax provision for foreign
withholding taxes of $179,000 which will be paid when certain intercompany loans
are repaid and estimated federal and state taxes of $14,000.
Liquidity and Capital Resources
At March 31, 1999, the Consolidated Company had cash and cash equivalents
totaling approximately $55,370,000 which includes approximately $51,526,000 held
by Reading. At March 31, 1999, Craig had cash and cash equivalents of
approximately $3,844,000. 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 liquidity of Craig is principally dependent on
Reading's ability to pay dividends in accordance with the terms of the Reading
Preferred Stock amounting to approximately $3.575 million annually. After
consultation between the Company and REI, it was determined that REI would
defer, for the time being, payment of dividends to the Company with respect to
the Series B Preferred Stock. The Company has no current need for such funds,
since it has, in the view of management, sufficient funds on hand to meet its
cash needs for the immediate future. While not anticipated, further liquidity
could be achieved through the sale of shares of Citadel and/or REI.
At March 31, 1999, the cash and cash equivalents held by Reading are
anticipated to be fully deployed in furtherance of Reading's cinema,
entertainment center development and live theater programs. Reading's total
commitments exceed the available liquid funds. However, management believes
that Reading has sufficient cash on hand to complete the projects and
acquisitions currently scheduled for completion in 1999. This includes the
anticipated addition of 50 screens in Australia (increasing the screen count in
that market from 21 to 71 screens), 36 screens in the United States (increasing
the screen count from 22 to 58 screens), 12 screens in Puerto Rico (increasing
the screen count from 46 to 58 screens) and four screens in New Zealand
(increasing the screen count from 9 to 13 screens). Reading plans to leverage
these assets as they commence operations, and to use the proceeds from such
financings to continue the development program in the year 2000. Reading
estimates that the total development cost of all of its currently planned cinema
and entertainment center projects will exceed $230,000,000. In the event that
debt financing cannot be obtained on terms acceptable to Reading, consideration
will be given to seeking joint venture partners, issuing debt or equity
securities, delaying development of certain projects and/or selling land
currently held for development, or other
18
<PAGE>
assets. Reading is also in discussions with various lenders concerning the
possibility of securing construction period finance. Reading does not currently
consider any of its development assets to be held for sale.
At March 31, 1999, Reading had total commitments of approximately
$105,100,000. Of this amount, it is currently anticipated that approximately
$46,300,00 will be funded in 1999, and approximately $58,800,00 will be funded
in or after 2000. Included among these commitments is a $32,500,000 credit
facility to be made available by Reading and a $4,000,000 option payment to be
funded in connection with the Cinema Transactions (see Note 3) (both of which
are unlikely to be funded before the end of the fourth quarter of 2000); a
contractual obligation to construct an entertainment center in Australia, at an
estimated remaining cost of $21,100,000 (currently anticipated to be completed
in late 2000 or early 2001), an $8,230,000 obligation to purchase a 1,086 stall
parking structure and a 0.215 acre site located in central Wellington, and a
$3,179,000 obligation to acquire additional open land in New Zealand.
The following summarizes the major sources and uses of cash funds in the
three months ended March 31, 1999 and 1998:
1999:
- ----
"Unrestricted cash and cash equivalents" decreased $7,944,000 from
$63,314,000 at December 31, 1998 to $55,370,000 at March 31, 1999. Working
capital decreased $9,640,000 from $47,445,000 at December 31, 1998 to
$37,805,000 at March 31, 1999.
The Consolidated Company used approximately $1,527,000 in cash for
operating purposes during the 1999 Quarter. This operating use of funds was
offset some what by $732,000 in "Interest and Dividend" income and an increase
in other liabilities of approximately $526,000.
In addition to the payment of operating and general and administrative
expenses, the principal use of cash funds during the 1999 Quarter included
$351,000 used to repurchase Craig common stock, $4,631,000 in purchases of
property and equipment, $117,000 for purchases of property held for development,
and payment of preferred stock dividends by Reading to Citadel of $114,000.
1998:
- ----
"Unrestricted cash and cash equivalents" decreased $5,883,000 from $98,202,000
at December 31, 1997 to $92,319,000 at March 31, 1998. Working capital
decreased $3,265,000 from $89,765,000 at December 31, 1997 to $86,500,000 at
March 31, 1998.
Net cash used in investing activities amounted to $4,218,000 in the 1998
Quarter as a result of property purchases of $7,311,000, offset by cash provided
through a decrease in restricted cash amounting to $3,093,000.
Cash used in financing activities amounted to approximately $707,000 and
included a $56,000 distribution to a minority interest, $114,000 dividend paid
to Citadel in connection with their investment in Reading redeemable stock and a
$537,000 decrease in note payables.
19
<PAGE>
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 the dates beyond December 31, 1999 ("Year
2000 Compliance"). The Company is also conducting a review of its major
suppliers of goods and services ("service providers") to understand their level
of compliance with Year 2000 issues. Both of these reviews are expected to be
completed by June 30, 1999.
Based on its review to date, the Company does not believe that material
problems exist relative to the internal hardware and software utilized, as the
Company uses current versions of software provided by major software vendors,
and 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 costs of addressing Year 2000
compliance has not been, nor is expected to be, material to the Company's
financial condition or results of operations.
Based on responses received to date, the Company believes that most of its
service providers will represent that they are Year 2000 compliant or that
formal programs are in place to ensure that they will be Year 2000 compliant.
If in its survey of significant service providers, the Company becomes concerned
that one or more providers is not Year 2000 compliant or has what the Company
believes to be inadequate programs to become Year 2000 compliant, the Company
will take action to reduce or eliminate its reliance upon such service providers
or suppliers.
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, 1998.
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: May 17, 1999 By: /s/ S. Craig Tompkins
------------------------ -------------------------------
S. Craig Tompkins
President
Date: May 17, 1999 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 55,370
<SECURITIES> 0
<RECEIVABLES> 684
<ALLOWANCES> 0
<INVENTORY> 212
<CURRENT-ASSETS> 58,102
<PP&E> 39,622
<DEPRECIATION> (5,382)
<TOTAL-ASSETS> 167,178
<CURRENT-LIABILITIES> 20,297
<BONDS> 889
7,000
87
<COMMON> 1,361
<OTHER-SE> 93,420
<TOTAL-LIABILITY-AND-EQUITY> 167,178
<SALES> 7,469
<TOTAL-REVENUES> 7,518
<CGS> 6,170
<TOTAL-COSTS> 9,704
<OTHER-EXPENSES> (1,355)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> (870)
<INCOME-TAX> 222
<INCOME-CONTINUING> (1,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,092)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
