<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 29, 1996
READING COMPANY
---------------
(Exact name of registrant as specified in its charter)
Pennsylvania 1-649 23-6000773
------------ ----- ----------
(State of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
One Penn Square West
30 South Fifteenth Street
Suite 1300
Philadelphia, Pennsylvania 19102-4813
(Address of principal executive offices)(Zip Code)
Registrant's telephone number: 215-569-3344
------------
----------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. Financial Statements of Business Acquired.
The following financial statements of Citadel Holding Corporation are
included in Appendix A hereto and incorporated herein by reference:
Citadel Holding Corporation Report on Form 10-K, for the fiscal
year ended December 31, 1995.
Citadel Holding Corporation Report on Form 10-Q, for quarterly
period ended March 31, 1996
b. Pro Forma Financial Information.
The pro forma financial information is included in Appendix B hereto and
incorporated herein by reference.
c. Exhibits
Item Description
---- -----------
23 Consent of Independent Certified Public Accountants -
Deloitte & Touche
2
<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.
READING COMPANY, REGISTRANT
Date: May 28, 1996 By: /s/ James A. Wunderle
----------------------- ----------------------------
James A. Wunderle
Executive Vice President,
Chief Operating Officer
and Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
Date: May 28, 1996 By: /s/ Eileen Mahady
----------------------- ----------------------------
Eileen M. Mahady
Controller
(Chief Accounting Officer)
3
<PAGE>
APPENDIX A
FINANCIAL STATEMENTS
<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------
Commission file number 1-8625
CITADEL HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 95-3885184
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
550 South Hope Street
Suite 1825 Los Angeles CA 90071
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (213) 239-0540
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. As of May 13, 1996, there were
6,003,924 shares of Common Stock, $0.01 par value per share, and 1,329,114
shares of Serial Preferred Stock, $0.01 par value per share outstanding.
===============================================================================
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page
----
PART 1. Financial Information
- ------
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets as of March 31, 1996 (Unaudited)
and December 31, 1995......................................... 3
Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1995 (Unaudited)..................... 4
Consolidated Statements of Cash Flows for Three Months Ended
March 31, 1996 and 1995 (Unaudited)........................... 5
Notes to Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of the Consolidated
Statements of Operations.................................... 9
PART 2. Other Information
- ------
Item 1. Legal Proceedings.......................................... 13
Item 2. Changes in Securities...................................... 14
Item 3. Defaults Upon Senior Securities............................ 14
Item 4. Submission of Matters to a Vote of Security Holders........ 15
Item 5. Other Information.......................................... 15
Item 6. Exhibits and Reports on Form 8-K........................... 15
Signatures.......................................................... 16
</TABLE>
2
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-------------------------
(In thousands of dollars)
<S> <C> <C>
ASSETS
- ------------------------------------
ASSETS
Cash and cash equivalents $ 16,026 $ 16,291
Properties held for sale 7,897 7,942
Rental properties, net 14,396 14,251
Other receivables 396 437
Other assets 1,650 894
-------- --------
Total assets $ 40,365 $ 39,815
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
LIABILITIES
Security deposits payable $ 254 253
Accrued legal fees 174 313
Accounts payable and accrued liabilities 1,976 1,343
Deferred proceeds from bulk sales agreement 4,000 4,000
Mortgage notes payable 16,115 16,186
-------- --------
Total liabilities 22,519 22,095
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Serial preferred stock, par value $.01,
5,000,000 shares authorized, 3% Cumulative
Voting Convertible, ($3.95 per share or
$5,250,000 stated value) 1,329,114 shares
issued and outstanding 13 13
Common stock, par value $.01, 20,000,000
shares authorized, 6,669,924 issued and
outstanding 67 67
Additional paid-in capital 65,080 65,197
Retained (deficit) (45,899) (46,142)
Cost of treasury shares, 666,000 shares (1,415) (1,415)
-------- --------
Total stockholders' equity 17,846 17,720
-------- --------
Commitments and contingencies
Total liabilities and stockholders' equity $ 40,365 $ 39,815
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---------------------------
(In thousands of dollars,
except per share amounts)
<S> <C> <C>
Real Estate Operations:
Rental income $1,530 $1,037
Interest income 210 76
------ ------
1,740 1,113
------ ------
Real estate operating expenses 760 545
Depreciation and amortization 122 100
Interest expense 398 238
General and administrative expenses 217 425
------ ------
Total expenses 1,497 1,308
------ ------
Gain on sale of properties -- 1,541
------ ------
Earnings before income taxes 243 1,346
Provision for income taxes -- --
------ ------
Net earnings 243 1,346
------ ------
Earnings per common and
common equivalent share $ 0.03 $ 0.15
------ ------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------------------------
(In thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 243 $ 1,346
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 122 85
Gain on sale of rental property -- (1,541)
Amortization of deferred loan costs 12 15
Changes in operating assets and liabilities:
Decrease (increase) in other receivables 41 (55)
Decrease (increase) in other assets (768) 163
Increase (decrease) in security deposits 1 (91)
Increase (decrease) in accrued liabilities 494 (1,332)
------- -------
Net cash provided by (used in) operating activities 145 (1,410)
INVESTING ACTIVITIES
Proceeds from sale of property -- 8,837
Purchase of and additions to real estate (222) (2,336)
------- -------
Net cash provided by (used in) investing activities (222) 6,501
FINANCING ACTIVITIES
Dividends paid on Preferred Stock (117) --
Repayments of long-term borrowings (71) (3,722)
------- -------
Net cash (used in) financing activities (188) (3,722)
Increase (decrease) in cash and cash equivalents (265) 1,369
Cash and cash equivalents at beginning of period 16,291 4,805
------- -------
Cash and cash equivalents at end of period $16,026 $ 6,174
======= =======
</TABLE>
SUPPLEMENTAL DISCLOSURES:
Interest paid during the three months ended March 31, 1996 and 1995 was $393,000
and $238,000, respectively.
See accompanying notes to consolidated financial statements.
5
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of Citadel Holding
Corporation ("Citadel") and its wholly owned subsidiaries (collectively the
"Company"). In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments of a recurring nature
considered necessary for a fair presentation of its financial position as of
March 31, 1996 and December 31, 1995, and the results of operations and its cash
flows for the three months ended March 31, 1996 and 1995. The results of
operations for the three month period ended March 31, 1996 are not necessarily
indicative of the results of operations to be expected for the entire year.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and, therefore, do not include
all information and footnotes required to be in conformity with generally
accepted accounting principles. The financial information provided herein,
including the information under the heading, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," is written with the
presumption that the users of the interim financial statements have read, or
have access to, the most recent Annual Report on Form 10-K which contains the
latest audited financial statements and notes thereto, together with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of December 31, 1995 and for the year then ended.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Included in cash and cash
equivalents at March 31, 1996 is approximately $15.6 million which is being held
in institutional money market mutual funds.
Earnings Per Share
- ------------------
Earnings per common and common equivalent share is based on 8,200,960 and
8,866,960 shares, the weighted average number of shares of common stock
and common stock equivalents outstanding during the three months ended March 31,
1996 and 1995. The 3% Cumulative Voting Convertible Preferred Stock, the
outstanding Warrants and stock options are common stock equivalents. The
calculation of the weighted average shares of common stock outstanding included
the effect of shares assumed to be issued on the conversion of the Preferred
Stock as of the beginning of the periods being reported. The number of shares
assumed converted as of the January 1, 1996 and 1995 amounted to 2,197,036 and
was calculated as of March 31, 1996 in accordance with the Preferred Stock
conversion terms described in Note 4.
6
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE 2 - RENTAL PROPERTIES AND PROPERTIES HELD FOR SALE
- -------------------------------------------------------
The Company's rental properties at March 31, 1996 and December 31, 1995 consist
of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-------------- -------------
(in thousands)
<S> <C> <C>
Land $ 4,699 $ 4,699
Building and improvements 10,077 9,855
-------- --------
Total $ 14,776 $ 14,554
Less accumulated depreciation (380) (303)
-------- --------
Rental properties, net $ 14,396 $ 14,251
-------- --------
</TABLE>
At March 31, 1996 and December 31, 1995, rental properties consisted of one
apartment building and two commercial buildings. Properties held for sale was
comprised of one apartment building and an undeveloped parcel of land amounting
to $7,497,000 and $400,000, respectively, at March 31, 1996.
On March 26, 1996, the Company entered into a Purchase and Sale Agreement to
sell the apartment rental property included in Properties held for sale at March
31, 1996. The Buyer agreed to purchase the property for approximately $9.3
million, of which $0.5 million has been deposited in escrow. As of March 31,
1996, this property was encumbered by a mortgage in the amount of approximately
$5,698,000. Pursuant to the terms of the Purchase and Sale Agreement, the
closing date, subject to certain conditions precedent, is scheduled to occur on
or before May 29, 1996.
During the three months ended March 31, 1995, the Company sold an apartment
building and an office building which resulted in a gain of approximately
$1,541,000.
NOTE 3 - TAXES ON INCOME
- ------------------------
For the three months ended March 31, 1996 and 1995, no provision for income
taxes was required due to the realization for financial statement purposes of
deferred tax assets previously reserved.
NOTE 4 - 3% CUMULATIVE VOTING CONVERTIBLE PREFERRED STOCK
- ---------------------------------------------------------
On November 10, 1994, the Company issued 1,329,114 shares of 3% Cumulative
Voting Convertible Preferred Stock ("Preferred Stock") at a stated value of
$3.95 per share or $5,250,000 to Craig Corporation, a stockholder affiliate.
7
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
The Preferred Stock carries a liquidation preference equal to its stated value
and bears a cumulative (noncompounded) annual dividend equal to 3% of the stated
value. Each share of the Preferred Stock entitles the holder to vote on all
matters submitted to a vote of the Company's stockholders on the basis of one
vote per share. The Preferred stock is convertible at the option of the holder
into common stock. The conversion ratio is one share of Preferred Stock for a
fraction of a share of common stock; the numerator of which is $3.95 per share
plus any unpaid dividends, and the denominator of which is the average of the
closing price per share of the Company's common stock, as defined ("Market
Price"). If the Market Price exceeds $5.00 per share the conversion ratio will
be calculated using a denominator of $5.00 per share and if the Market Price is
below $3.00, the Company can redeem the Preferred Stock tendered for conversion.
Except in the case of a tender at a conversion price of less than $3.00 per
share, the Company does not have the right to call for the redemption of the
Preferred Stock prior to November 1997. Thereafter, the Company has the right,
at its sole option, to redeem at the sum of (1) $3.95 per share, (2) any unpaid
dividends, and (3) a premium at the redemption equal to an accrual on the Stated
Value ranging from 9% per annum during the period from November 1994 to November
1998 and thereafter reducing over time from the period November 1998 to November
2006 at the rate of 1% per year. The same formula pricing is also applicable to
any redemption in connection with a tender for conversion. If the redemption
date is after November 2006 there is no premium. The Market Price calculated in
accordance with the terms of the Preferred Stock provisions approximated $2.39
at March 31, 1996, which price, would result in the Preferred Stock converting
into approximately 2,197,000 shares of the Company's common stock.
Recorded as a reduction of paid in capital for the three months ended is
$118,125, representing cumulative dividends declared for the nine month period
ended March 31, 1996. At March 31, 1996, there are no undeclared cumulative
dividends.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Citadel Holding Corporation, a Delaware corporation ("Citadel" and
collectively with its wholly owned subsidiaries, the "Company") has been engaged
primarily in the ownership and management of commercial and residential property
since August 1994.
RESULTS OF OPERATIONS
The following is a comparison of the results of operations for the three
months ended March 31, 1996 ("1996 Quarter") with the three months ended March
31, 1995 ("1995 Quarter"). Due to the nature of the Company's business
activities, revenues and earnings have varied significantly reflecting the
operating results of its managed real estate and asset sales during those
periods.
The Company's net earnings for the three months ended March 31, 1996 were
$243,000 or $0.03 per share compared to $1,346,000 or $0.15 per share for the
three month period ended March 31, 1995. Included in the earnings for the 1995
Quarter is approximately $1,541,000 from the sale of the Sherman Oaks and Harbor
City properties.
Rental income amounted to $1,530,000 for the 1996 Quarter as compared to
$1,037,000 for the 1995 Quarter. The increase in the 1996 Quarter from the
previous quarters reflects the change in composition of the Company's rental
properties between the 1995 and 1996 Quarters. The 1996 Quarter includes rental
income from the Company's May 1995 acquisition of the Glendale property
amounting to approximately $485,000. The increase in real estate operating
expenses to $760,000 in the 1996 Quarter as compared to $545,000 in the 1995
Quarter is principally due to the costs associated with operating the Glendale
Building as well as an increase in deferred maintenance costs incurred at the
apartment building held for sale.
Interest expense was $398,000 in the 1996 Quarter as compared to $238,000 in
the 1995 Quarter. The increase in interest expense is a result of additional
mortgage loans obtained during the periods reported and an increase in overall
interest rates. The Company obtained two mortgages aggregating approximately
$6.1 million since the 1995 Quarter.
General and administrative expenses amounted to $217,000 for the three months
ended March 31, 1996 as compared to $425,000 for the three months ended March
31, 1995. Such decrease is attributable to (1) a reduction in outside
professional and legal costs and (2) a decrease in directors fees related to a
payment for past services authorized by the Board to a director in the 1995
Quarter. In addition, the 1996 Quarter includes a reimbursement of approximately
$40,000 for consulting services provided by employees of the Company to its
shareholder affiliate, Reading Company.
9
<PAGE>
REAL ESTATE INTERESTS
- ---------------------
The table below provides an overview of the properties which constituted all
of the real properties owned by the Company at March 31, 1996.
<TABLE>
<CAPTION>
Address Type Units/ % Major Remaining
Sq. Feet Leased Tenants Lease Term
- -------- ---------- ---------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
ARBOLEDA Office/ 178,000 99 American
1661 Camelback Rd. Restaurant Express Feb. 1999
Phoenix, Arizona Others 1-5 Yrs.
BRAND Office 89,000 65 Fidelity May 2005
600 N. Brand
Glendale, CA
PARTHENIA Apartment 27 89 None 6-12 months
21028 Parthenia 26,000
Canoga Park, CA
VESELICH Apartment 216 93 None 6-12 months
3939 Veselich Ave. 176,000
Los Angeles, CA
CLAREMONT Land 26 Acres -- -- --
</TABLE>
Arboleda, Phoenix
-----------------
At March 31, 1996, this property is substantially leased through February
1999 to American Express Company, which occupies 58% (100,098 sq. ft.) of the
property.
Brand, Glendale
---------------
The Glendale Building was at the time of acquisition, the headquarters
building of Fidelity Federal Bank, FSB ("Fidelity"). Citadel and Fidelity have
entered into a 10 year, full service gross lease for four of the six floors of
the Glendale Building. The rental rate for the first five years of the lease
term is $26,000 per month (including parking) for the ground floor and
approximately $75,000 per month (including parking) for the fourth, fifth and
sixth floors. The lease provides for annual rental increases at a rate equal to
the lower of the increase in the Consumer Price Index or 3%. After the first
five years of the lease term, the rental rate for the ground floor will be
adjusted to the higher of the then current market rate or the prevailing rental
rate in the fifth year of the lease and the rental rate for the upper floors
will be adjusted to the higher of the then current market rate or $1.50 per
square feet increased by the annual rental rate increase applied during the
first five years of the lease as described in the preceding sentence. Fidelity
has the option to extend the lease of the ground floor for two consecutive five
year terms at a market rental rate and has the option to purchase the Glendale
Building at the market value at the expiration of the lease term, provided that
10
<PAGE>
the Company then owns the building. Fidelity has subsequently relocated its
headquarters and is currently attempting to sublease all or a portion of its
leased premises.
Until April 1996, Public Storage occupied 30,879 square feet (two floors)
with a total rental of $53,900 per month ($1.75/sq. ft.). The Company is
actively seeking potential tenants for these premises. No agreements have been
reached at this time and the Company can make no assurance that attractive terms
will be reached with an alternative tenant.
Veselich, Los Angeles
---------------------
During the fourth quarter of 1995, the Company determined to seek offers for
the sale of the property and on March 26, 1996 entered into a Purchase and Sale
Agreement to sell the property for approximately $9.3 million. Pursuant to the
terms of the Agreement, the closing date, subject to certain conditions
precedent, is scheduled to occur on or before May 29, 1996. However, the
Company can make no assurance that the sale will be closed.
Claremont
---------
The Company foreclosed on a loan previously made by Fidelity and received in
the Restructuring on August 14, 1995. The property is currently carried on the
books at $400,000. The Company is currently marketing this property for sale,
however, due to certain conditions attached to the entitlements which require
action of the adjacent owners, the Company can make no assurance that the
property can be sold in the near term.
FINANCING OF REAL ESTATE INTERESTS
The Company's acquisition of the Arboleda and Veselich properties was 100%
leveraged: $10.2 million was obtained in the form of conventional mortgage loans
by Fidelity against the Arboleda and Veselich properties, while the balance was
obtained through drawdowns ($3.5 million) on an $8.2 million line of credit (the
"Craig Line of Credit") from Craig Corporation ("Craig").
With respect to the Veselich property, Fidelity extended a ten year loan,
amortizing over thirty years, at an adjustable rate of interest tied to the one
year Treasury rate plus approximately 3.7% per annum, with an initial rate of
7.25%. The rate on the Veselich loan is currently 8.75%. The loan secured by
the Arboleda property has a seven year term, amortizing over 25 years, with an
adjustable rate of interest tied to the six month LIBOR rate plus 4.5% per
annum, with an initial rate of 9.25% per annum. The rate on this loan is
currently 9.668%.
The remainder of the purchase price of the Arboleda and Veselich properties
was drawn on the Craig Line of Credit. The Craig Line was initially committed
in the amount of $8.2 million, of which $6.2 million was immediately drawn down
to purchase the Arboleda and Veselich properties and an additional property that
has since been sold. On November 10, 1994, the Company retired $5.25 million
of the Craig Line of Credit by issuance to Craig of 1,329,114 shares of the
Company's 3% Cumulative Voting Convertible Preferred Stock. The remaining
11
<PAGE>
$950,000 of the Craig Line of Credit was retired in May 1995 and, accordingly,
the Company has no further funds available under the Craig Line of Credit.
With regard to the purchase of the Glendale Building, Fidelity extended a 5
year loan, amortizing over twenty years, at an adjustable rate of interest tied
to LIBOR plus 4.5% per annum, adjustable monthly, in the amount of $5.34
million. The Company paid Fidelity points of 1% plus normal closing costs. The
loan is subject to prepayment penalties in year one of 4%, decreasing 1% in each
subsequent year. The current interest rate is 9.668%.
On May 1, 1995, the Company obtained a loan of $765,000 on the Parthenia
property. The loan has a term of 30 years, with an adjustable rate of interest
at 2.95% over the 11th District cost of funds, currently amounting to 7.824%.
BUSINESS PLAN, CAPITAL RESOURCES AND LIQUIDITY
Cash and cash equivalents decreased by approximately $265,000 from
$16,291,000 at December 31, 1995 to $16,026,000 at March 31, 1996. During the
three months ended March 31, 1996 the Company utilized cash proceeds of
approximately $118,000 to pay dividends on the outstanding 3% Cumulative
Convertible Preferred Stock and $222,000 to fund repairs at the Glendale
Building.
The Company expects that its sources of funds in the near term will include
cash on hand ($16 million at March 31, 1996), cash flow from the operations of
its real estate properties, consulting fees and proceeds from the sale of its
properties net of the mortgage loan repayments.
In the short term, uses of funds are expected to include (i) funding of the
repair of the earthquake damage to the parking structure of the Glendale
Building, (ii) operating expenses, (iii) any amounts that may become payable
under the $4 million Bulk Sale Indemnity, (iv) debt service under the property
mortgages and (v) dividends declared, if any, under the Preferred Stock.
Management believes that the Company's sources of funds will be sufficient to
meet its cash flow requirements for the foreseeable future.
Management is currently evaluating the assets and opportunities available to
the Company with a view to developing a new business plan. Among the
alternatives under consideration are the continuation and expansion of its real
estate operations, the movement into a new line or lines of business, merger or
sale of the entire Company, and liquidation. Such alternatives may include the
participation with the Company's major beneficial shareholders, Reading Company
and/or Craig Corporation in land based entertainment businesses such as motion
picture exhibition.
12
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1 - LEGAL PROCEEDINGS
- --------------------------
Roven Litigation
- ----------------
The Company, Hecco Ventures I and James J. Cotter were defendants in a civil
action filed in 1990 by Alfred Roven in the United States District Court for the
Central District of California. The complaint alleged fraud by the Company in a
proxy solicitation relating to the Company's 1987 annual meeting of stockholders
and breach of fiduciary duty. The complaint sought compensatory and punitive
damages in an amount alleged to exceed $40 million. The complaint grew out of
and was originally asserted as a counter claim in an action brought by the
Company against Roven to recover alleged short swing profits. In October 1995,
the Company, Hecco Ventures I and James J. Cotter were granted summary judgement
on all causes of action asserted in the 1990 complaint in federal court. Roven
has appealed that judgement.
In 1995, Roven filed a complaint in the California Superior Court against the
Company, Hecco Ventures I and James J. Cotter and, in addition, S. Craig
Tompkins and certain other persons, including the Company's outside counsel and
certain former directors of the Company (which directors are currently directors
of Craig and Reading), alleging malicious prosecution in connection with the
short swing profits litigation. The Company believes that it has meritorious
defenses to these claims, and has not reserved any amounts with respect thereto.
Defense of the action has been accepted by the Company's insurers. However, no
assurance can be given that additional costs of defense will not be material to
Citadel's future operating results considering the Company's limited revenue and
operating profits.
Fidelity Employee Claims
- ------------------------
Citadel is advised that, following the reduction of Citadel's interest in
Fidelity from a 100% ownership interest to an approximately 16% non-voting
equity interest, Fidelity significantly reduced staffing as part of its efforts
to reduce costs. Certain terminated employees have threatened, and in one case
filed, claims asserting that Citadel is in some manner liable for what is
asserted to be wrongful termination of these individuals by Fidelity. In light
of the fact that, among other things, these employees were never employees of
Citadel and were terminated only after Citadel's interest in Fidelity had been
reduced to an essentially non-voting 16% interest, the Company believes it has
no liability to these individuals. Defense of this action has been accepted by
the Company's insurer's, although the Company expects to incur some additional
costs of defense.
Securities Litigation
- ---------------------
In July 1995, Citadel was named as a defendant in a lawsuit alleging
violations of federal securities laws in connection with the offering of common
stock of Citadel's then wholly owned subsidiary, Fidelity, in 1994 as part of
the previously reported Restructuring (the "Harbor Finance Litigation"). The
suit was filed by Harbor Finance Partners in an alleged class action complaint
in the
13
<PAGE>
United States District Court - Central District of California on July 28, 1995
and named as defendants Citadel, Fidelity, Richard M. Greenwood (Fidelity's
chief executive officer and Citadel's former chief executive officer), J.P.
Morgan Securities, Inc. and Deloitte & Touche LLP. The suit alleged that false
and misleading information was provided by the defendants in connection with
Fidelity's stock offering and the defendants knew and failed to disclose
negative information concerning Fidelity. Fidelity and Citadel filed a Motion
to Dismiss, which was granted with leave to amend on January 25, 1996.
Plaintiff has now retained new counsel and filed a new complaint alleging
essentially the same claims, but adding state securities law causes of action,
and not naming J.P. Morgan Securities or Deloitte & Touche LLP. On March 15,
1996 Fidelity and Citadel filed a Motion to Dismiss the new complaint. Defense
of the action has been accepted by Fidelity under the terms of the Stockholders
Agreement entered into between Citadel and Fidelity as part of the restructuring
of Citadel's interest in Fidelity, and Citadel, to date, has not retained
separate counsel with respect to this litigation and is not incurring outside
costs of defense. Since the filing of the initial complaint inn the Harbor
Finance Litigation, Fidelity has completed a second recapitalization
transaction, in which it raised gross proceeds of approximately $146 million
through the sale of common and preferred stock. Citadel has been named in only
two of the four alleged claims for relief and only in the capacity as an alleged
controlling entity of Fidelity.
Both the initial complaint and the new complaint filed by Harbor Finance
Partners make certain assertions previously made in a wrongful termination and
defamation action brought by William Strocco against Fidelity and Citadel, which
was filed in Los Angeles County Superior Court on March 9, 1995. The plaintiff
in that case is the former manager of Fidelity's REO Department who alleges that
his employment was terminated in violation of public policy and was a result of
breaches of his implied employment contract and the implied covenant of good
faith and fair dealing. The plaintiff alleges his termination was related to
the fact that he objected to various aspects of Fidelity's restructuring,
including the selling of REO properties in bulk sales, as not in the interests
of Fidelity, and that he asserted that the same was not fully disclosed to
potential investors and to the Office of Thrift Supervision. Strocco also seeks
damages for alleged defamation and interference with contractual relationship.
Citadel has been named in only one of five causes of action brought by Strocco,
and is made a party defendant only on the basis that Citadel allegedly conspired
with and induced Fidelity to breach its employment agreement with Strocco.
Both of the Harbor Finance and Strocco complaints seek damages in an
unspecified amount. Citadel believes that these claims against it are without
merit and is vigorously contesting them.
ITEM 2 - CHANGES IN SECURITIES
- ------------------------------
Not applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
Not applicable.
14
<PAGE>
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
ITEM 5 - OTHER INFORMATION
- --------------------------
Not applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
A. Exhibits
27. Financial Data Schedule.
B. Reports on Form 8-K
None.
<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.
CITADEL HOLDING CORPORATION
---------------------------
By: /s/ Steve Wesson
-------------------------
President and Chief
Executive Officer
May 14, 1996
/s/ S. Craig Tompkins
-------------------------
Principal Accounting Officer
May 14, 1996
15
<PAGE>
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 3-MOS 3-MOS
[FISCAL-YEAR-END] DEC-31-1995 DEC-31-1994
[PERIOD-START] JAN-01-1996 JAN-01-1995
[PERIOD-END] MAR-31-1996 MAR-31-1995
[CASH] 16,026 0
[SECURITIES] 11 0
[RECEIVABLES] 396 0
[ALLOWANCES] 0 0
[INVENTORY] 0 0
[CURRENT-ASSETS] 18,072 0
[PP&E] 22,967 0
[DEPRECIATION] (674) 0
[TOTAL-ASSETS] 40,365 0
[CURRENT-LIABILITIES] 2,404 0
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 13 0
[COMMON] 67 0
[OTHER-SE] 40,285 0
[TOTAL-LIABILITY-AND-EQUITY] 40,365 0
[SALES] 1,530 1,037
[TOTAL-REVENUES] 1,740 1,113
[CGS] 0 0
[TOTAL-COSTS] 1,099 1,070
[OTHER-EXPENSES] 0 (1,541)
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] 398 238
[INCOME-PRETAX] 243 1,346
[INCOME-TAX] 0 0
[INCOME-CONTINUING] 243 1,346
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] 243 1,346
[EPS-PRIMARY] 0.03 0.15
[EPS-DILUTED] 0.03 0.15
</TABLE>
<PAGE>
APPENDIX B
PRO FORMA FINANCIAL INFORMATION
<PAGE>
READING COMPANY
Acquisition of Citadel Holding Corporation Common Stock
Pro Forma Financial Statements
On March 29, 1996, Reading Holding's, Inc. ("Holding's"), a wholly-owned
subsidiary of Reading Company ("Reading") purchased from its affiliate Craig
Corporation ("Craig") 1,564,473 shares of the common stock of Citadel Holding
Corporation, ("Citadel" and the "Citadel Common Stock", respectively) for an
aggregate purchase price of $3,324,505, representing slightly less than $2.125
per share and ownership of approximately 26% of Citadel Common Stock. The
closing price of Citadel Common Stock on the American Stock Exchange on March
28, 1996 was $2.25 per share. Holding's paid Craig for the Citadel Common Stock
with a five year unsecured promissory note which provides for the payment of
interest at a rate equal to LIBOR plus 2.25%. Craig currently owns approximately
50.7% of Reading's capital stock.
Holding's also acquired from Craig (for $50,000) a one year option to acquire,
at fair market value, as determined by an investment banker selected by the
parties, 1,329,114 shares of the 3% Cumulative Voting Convertible Preferred
Stock, stated value $3.95 per share, of Citadel and an option to acquire a
warrant to purchase 666,000 shares at $3.00 per share of Citadel Common Stock.
Holding's share of equity earnings from Citadel will be included in Reading's
operating results for periods subsequent to March 29, 1996. Unaudited pro forma
financial statements of operations are presented for the year ended December 31,
1995 and the three months ended March 31, 1996, and assume that the acquisition
transaction was completed at the beginning of each such period.
The pro forma financial statements have been prepared by Reading management
based upon the financial statements of Citadel included elsewhere herein. The
pro forma statements may not be indicative of the results that actually would
have occurred if the acquisition had occurred on the dates indicated or which
may be obtained in the future. The pro forma financial statements should be read
in conjunction with the financial statements and notes of Citadel contained
elsewhere herein and the Company's financial statements and notes contained in
the Company's Annual Report on Form 10-K for the year ending December 31, 1995
and the Company's Quarterly Report on Form 10-Q for the period ending March 31,
1996.
<PAGE>
- ----------------------------------------------------
Proforma Consolidated Statements of Operations
Three Months Ended March 31, 1996
(in thousands)
- ----------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Acquisition
RDG Citadel Adjustments Consolidated
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Theater:
Admissions $2,776 $2,776
Concessions 1,021 1,021
Advertising and other 214 214
Real estate 74 74
Interest and dividends 585 585
Equity earnings from Citadel investments 0 63 (1) 63
Other 15 15
- -------------------------------------------------------------------------------------------------------------
4,685 63 4,748
- -------------------------------------------------------------------------------------------------------------
EXPENSES:
Theater costs 2,970 2,970
Theater concession costs 168 168
Depreciation and amortization 386 386
General and adminstrative 1,170 1,170
Equity loss from Australian theater developments 254 254
Interest expense 0 64 (2) 64
- -------------------------------------------------------------------------------------------------------------
4,948 0 64 5,012
- -------------------------------------------------------------------------------------------------------------
Net (loss) income before income taxes (263) 63 (64) (264)
Income tax expense 10 0 (1)(3) 9
- -------------------------------------------------------------------------------------------------------------
Net (loss) income ($273) $63 ($63) ($273)
=============================================================================================================
</TABLE>
(1) Represents the Company's share of Citadel's earnings for the period.
(2) To record interest expense for the period on the promissory note (principal
$3,324,505) payable to Craig for the purchase of Citadel's Common Stock.
(3) To adjust AMT expense for the effects of the purchase of Citadel's Common
Stock.
<PAGE>
- ----------------------------------------------------
Proforma Consolidated Statements of Operations
Twelve Months Ended December 31, 1995
(in thousands)
- ----------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Acquisition
RDG Citadel Adjustments Consolidadated
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Theater:
Admissions $10,356 $10,356
Concessions 3,883 3,883
Advertising and other 686 686
Real estate 272 272
Interest and dividends 2,435 2,435
Equity earnings from Citadel investment 0 365 (1) 365
Other 2,341 2,341
- -------------------------------------------------------------------------------------------------------------
19,973 365 20,338
- -------------------------------------------------------------------------------------------------------------
EXPENSES:
Theater costs 10,784 10,784
Theater concession costs 640 640
Depreciation and amortization 1,369 1,369
General and adminstrative 4,200 4,200
Equity loss from Australian theater developments 390 390
Interest expense 0 274 (2) 274
- -------------------------------------------------------------------------------------------------------------
17,383 0 274 17,657
- -------------------------------------------------------------------------------------------------------------
Net income before income taxes 2,590 365 (274) 2,681
Income tax expense 239 0 (6)(3) 233
- -------------------------------------------------------------------------------------------------------------
Net income $2,351 $365 ($268) $2,448
=============================================================================================================
</TABLE>
(1) Represents the Company's share of Citadel's earnings for the period.
(2) To record interest expense for the year on the promissory note (principal
$3,324,505) payable to Craig for the purchase of Citadel's Common Stock.
(3) To adjust AMT expense for the effects of the purchase of Citadel's Common
Stock.
<PAGE>
EXHIBIT INDEX
-------------
Item
Number Description Page
- ------ ----------- ----
23 Consent of Independent Certified Public Accountants - Deloitte &
Touche
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-57222 and No. 2-83039 of Reading Company on Forms S-8 of our report on
the consolidated financial statements of Citadel Holding Corporation dated March
27, 1996, appearing in this current report on Form 8-K of Reading Company.
May 24, 1996
Los Angeles, California
