-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TVQbWs4RsBsxupbdMpOTXX+gGsPsc5lAwK/Uwt9eX1il1Fu9v1Fks/CiP3JH4VJH /nSkPXXeXgdHfWu1u72PGg== /in/edgar/work/0000950124-00-006968/0000950124-00-006968.txt : 20001115 0000950124-00-006968.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950124-00-006968 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERTAINMENT PROPERTIES TRUST CENTRAL INDEX KEY: 0001045450 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 431790877 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13561 FILM NUMBER: 767895 BUSINESS ADDRESS: STREET 1: ONE KANSAS CITY PLACE STREET 2: 1200 MAIN STREET SUITE 3250 CITY: KANSAS CITY STATE: MO ZIP: 64105 BUSINESS PHONE: 8164721700 MAIL ADDRESS: STREET 1: ONE KANSAS CITY PLACE STREET 2: 1200 MAIN STREET SUITE 3250 CITY: KANSAS CITY STATE: MO ZIP: 64105 10-Q 1 c58546e10-q.txt FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 COMMISSION FILE NUMBER 1-13561 ENTERTAINMENT PROPERTIES TRUST (Exact name of registrant as specified in its charter) MARYLAND 43-1790877 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 30 PERSHING ROAD, SUITE 201 KANSAS CITY, MISSOURI 64108 (Address of principal executive office) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (816) 472-1700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. At October 1, 2000, there were 14,722,762 Common Shares of Beneficial Interest outstanding. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ENTERTAINMENT PROPERTIES TRUST Consolidated Balance Sheets (Dollars in thousands)
SEPTEMBER 30, 2000 DECEMBER 31, 1999 ------------------ ----------------- ASSETS (UNAUDITED) Rental properties, net $ 463,037 $ 466,406 Land held for development 11,894 12,300 Investments in real estate joint ventures 28,090 9,117 Cash and cash equivalents 7,619 22,265 Notes receivable 434 406 Other assets 6,392 5,797 --------- --------- Total assets $ 517,466 $ 516,291 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities $ 2,564 $ 1,538 Dividend payable 6,478 6,273 Unearned rents 3,206 3,356 Long-term debt 243,921 238,737 --------- --------- Total liabilities 256,169 249,904 Commitments and contingencies -- -- Shareholders' equity Common Shares, $.01 par value; 50,000,000 shares authorized; 15,194,962 and 15,091,964 shares issued at September 30, 2000 and December 31, 1999, respectively 152 151 Additional paid-in-capital 278,516 277,126 Treasury Stock at cost: 472,200 shares and 155,200 at September 30, 2000 and December 31, 1999, respectively (6,541) (2,136) Loans to officers (3,525) (2,400) Non-vested shares (688) (805) Distributions in excess of net income (6,617) (5,549) --------- --------- Shareholders' equity 261,297 266,387 --------- --------- Total liabilities and shareholders' equity $ 517,466 $ 516,291 ========= =========
3 ENTERTAINMENT PROPERTIES TRUST Consolidated Statements of Income (Unaudited) (Dollars in thousands except per share data)
Three Months Ended September 30, Nine Months Ended September 30, 2000 1999 2000 1999 ------------- ------------- ------------- ------------ Rental revenue $13,084 $12,325 $40,213 $35,828 Income from joint ventures 576 177 1,501 177 ------- ------- ------- ------- Total revenue 13,660 12,502 41,714 36,005 General and administrative expense 393 520 1,382 1,713 Depreciation and amortization 2,571 2,524 7,886 7,296 ------- ------- ------- ------- Income from operations 10,696 9,458 32,446 26,996 Interest expense, net 4,840 3,270 13,896 9,853 ------- ------- ------- ------- Net income $ 5,856 $ 6,188 $18,550 $17,143 ======= ======= ======= ======= Net income per common share Basic $ 0.40 $ 0.41 $ 1.25 $ 1.19 Diluted $ 0.40 $ 0.41 $ 1.25 $ 1.19 Shares used for computation (in thousands): Basic 14,692 15,041 14,793 14,351 Diluted 14,728 15,089 14,829 14,398 Dividends per common share $ 0.44 $ 0.42 $ 1.32 $ 1.26 ======= ======= ======= =======
4 ENTERTAINMENT PROPERTIES TRUST Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands)
Nine Months Ended September 30, 2000 1999 ----------------- --------------- OPERATING ACTIVITIES Net income $ 18,550 $ 17,143 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 7,886 7,296 (Increase) in other assets (656) (225) Increase in accounts payable and accrued liabilities 1,131 170 Increase (decrease) in unearned rents (150) 444 -------- -------- Net cash provided by operating activities 26,761 24,828 INVESTING ACTIVITIES Acquisition of rental properties (37,027) (32,801) Net proceeds from contribution of rental properties to joint venture 14,596 -- Acquisition of development properties (434) (3,682) -------- -------- Net cash used in investing activities (22,865) (36,483) FINANCING ACTIVITIES Proceeds from long-term debt facilities 20,175 11,000 Principal payments on long-term debt (14,991) (852) Issuance (purchase) of common shares (4,405) 21,029 Common shares issued to management 92 114 Distributions to shareholders (19,413) (17,702) -------- -------- Net cash provided by (used in) financing activities (18,542) 13,589 -------- -------- Net increase (decrease) in cash and cash equivalents (14,646) 1,934 Cash and cash equivalents at beginning of period 22,265 2,341 -------- -------- Cash and cash equivalents at end of period $ 7,619 $ 4,275 ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITY Declaration of dividend to common shareholders $ 6,478 $ 6,338 Contribution of rental property in exchange for equity interest in real estate joint ventures $ 18,157 $ 8,658
5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1). ORGANIZATION Entertainment Properties Trust (the "Company") is a Maryland real estate investment trust (REIT) organized on August 29, 1997. The Company was formed to acquire and develop entertainment properties including megaplex theatres and entertainment-themed retail centers. 2). SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. The consolidated balance sheet as of December 31, 1999 has been derived from the audited consolidated balance sheet at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999. Principles of Consolidation The consolidated financial statements include the accounts of Entertainment Properties Trust and its wholly-owned subsidiaries, EPT DownReit, Inc., EPT DownReit II, Inc. and 3 Theatres, Inc. All significant intercompany transactions have been eliminated. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ significantly from such estimates and assumptions. 3). PROPERTY ACQUISITIONS During the nine month period ended September 30, 2000, the Company purchased the Consolidated Cary Crossroads 20 screen megaplex theatre for an aggregate purchase price of $14.6 million. In addition, the Company purchased the AMC Palm Promenade 24 screen theatre for an aggregate purchase price of $17.8 million. The Company also made tenant improvement contributions allocated to pad site developments it owns and leases to restaurant operators. These properties are subject to lease arrangements generally consistent with the lease terms of the Company's other rental properties. 6 4). REAL ESTATE JOINT VENTURE On May 11, 2000, the Company completed the formation of a joint venture with Atlantic of Hamburg, Germany ("Atlantic"), whereby the Company contributed the AMC Cantera theatre with a carrying value of $33.5 million in exchange for cash proceeds from mortgage financing of $17.85 million and a 100% interest in the joint venture. The Company subsequently sold to Atlantic a 10% initial interest in exchange for $1.4 million in cash. It is expected that Atlantic will acquire up to an additional 70% interest in the joint venture by selling securities to German investors, with the proceeds of those sales to be contributed to the venture and then paid to the Company in reduction of its interest. The Company accounts for its investment in the real estate joint venture under the equity method of accounting. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion should be read in conjunction with the Consolidated Financial Statements of the Company included in this quarterly report on Form 10-Q. The forward-looking statements included in this discussion and elsewhere in this Form 10-Q involve risks and uncertainties, including anticipated financial performance, business prospects, industry trends, anticipated capital expenditures, performance of leases by tenants, shareholder returns and other matters, which reflect management's best judgment based on factors currently known. Actual results and experience could differ materially from the anticipated results and other expectations expressed in the Company's forward-looking statements as a result of a number of factors including but not limited to those discussed in this Item and Item I - Business, in the Company's Annual Report of Form 10-K for the year ended December 31, 1999 incorporated by reference herein. RESULTS OF OPERATIONS THIRD QUARTER RESULTS The Company's revenues, which consist of property rentals and income from a joint ventures, were $13.7 million for the three months ended September 30, 2000 compared to $12.5 million for the three months ended September 30, 1999. The increase was due primarily to the acquisition of three rental properties subsequent to September 30, 1999. General and administrative expense totaled $0.4 million for the three months ended September 30, 2000 compared to $0.5 million for the three months ended September 30, 1999. The decrease was due primarily to reduced travel and shareholder related expenses and reduced personnel costs related to the Company's Los Angeles, California office which was closed in December 1999. Net interest expense totaled $4.8 million for the three months ended September 30, 2000 compared to net interest expense of $3.3 million for the three months ended September 30, 1999. The $1.5 million increase in net interest expense resulted primarily from an increase in long-term debt incurred pertaining to the property acquisitions made subsequent to September 30, 1999 ($0.9 million) and the impact of higher interest rates and amendment fees on the variable rate portion of the Company's debt ($0.6 million). Depreciation and amortization expense was $2.6 million for the three months ended September 30, 2000 compared to $2.5 million for the three months ended September 30, 1999. The increase of $0.1 million resulted from the additional property acquisitions made subsequent to September 30, 1999. Net income for the three months ended September 30, 2000 totaled $5.9 million or $0.40 per diluted share as compared to $6.2 million or $0.41 per diluted share for the three months ended September 30, 1999. The decline in net income was primarily due to the increase in interest expense. 7 YEAR-TO-DATE RESULTS Revenues totaled $41.7 million for the nine months ended September 30, 2000 compared to $36.0 million for the nine months ended September 30, 1999. The increase of $5.7 million was due to the acquisition of three rental properties subsequent to September 30, 1999 ($4.0 million), and increases in joint venture activity, contractual increases in base rents, a full nine months of rent for properties purchased during the first nine months of 1999 and the impact of properties contributed to non-consolidated joint ventures ($1.7 million). General and administrative expense totaled $1.4 million and $1.7 million for the nine months ended September 30, 2000 and 1999. The decrease of $0.3 million was due primarily to reduced personnel costs related to the Company's Los Angeles, California office which was closed in December 1999. Depreciation and amortization expense was $7.9 million for the nine months ended September 30, 2000 compared to $7.3 million for the nine months ended September 30, 1999. The $0.6 million increase in depreciation and amortization resulted from the mid-year property acquisitions made during 1999 and property acquisitions made subsequent to September 30, 1999. Net interest expense totaled $13.9 million for the nine months ended September 30, 2000 compared to net interest expense of $9.9 million for the nine months ended September 30, 1999. The increase of $4.0 million in interest expense resulted from the increase in long-term debt incurred as a result of property acquisitions made during 1999 and 2000 ($3.0 million) and increases in the variable rate portion of the Company's debt ($1.0 million). Net income for the nine months ended September 30, 2000 totaled $18.6 million or $1.25 per diluted share as compared to $17.1 million or $1.19 per diluted share for the nine months ended September 30, 1999. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2000, the Company had $7.6 million in cash and cash equivalents, secured mortgage indebtedness of approximately $126 million, and unsecured indebtedness of $118 million under the Bank Credit Facility. The $244 million aggregate principal amount of mortgage and unsecured indebtedness bears interest at a weighted average rate of 8.12%. On September 11, 2000 the Company amended the Bank Credit Facility to eliminate and modify restrictive covenants on the amount of secured indebtedness that can be obtained by the Company in exchange for reducing the size of the Facility from $150 million to $127 million, increasing the cost of borrowings under the Facility, and securing the Facility with a first mortgage on 13 properties. As of September 30, 2000, the Company had drawn $118 million under the $127 million Bank Credit Facility. The Company anticipates that its cash from operations, credit available under the Bank Credit Facility and funds from the Atlantic joint venture discussed above will provide adequate liquidity to conduct its operations, fund administrative and operating costs, interest payments, planned property development costs, allow distributions to the Company's shareholders in accordance with Internal Revenue Code requirements for qualification as a REIT and to avoid any corporate level federal income tax or excise tax. Future acquisitions will be made pursuant to the Company's investment objectives and policies to maximize both current income and long-term growth in income. As acquisition opportunities are presented that would cause the Company to exhaust its equity capital and any available credit under the Bank Credit Facility, the Company intends to consider: (i) entering into additional joint ventures with other investors to acquire or develop properties; (ii) issuing Company securities in exchange for properties; and/or (iii) conducting a public offering or direct placement of the Company's securities designed to raise capital for acquisitions and/or reduce borrowings under the Bank Credit Facility. There can be no assurance these objectives can be achieved. See the December 31, 1999 annual report on Form 10-K for a discussion of the Company's capitalization strategies 8 and capital requirements for future growth and Item 1 - Business, in that report for a discussion of Risk Factors that may affect our ability to raise additional capital. Two of the Companies theatre properties are leased and operated by Edwards Theatre Circuits, Inc., which filed for bankruptcy on August 23, 2000. The Company has received all rent due and payable on a timely basis and expects the leases to be affirmed by the tenant during the bankruptcy proceedings. Recent adverse conditions in the motion picture exhibition industry (including the effects of obsolete multiplex theatres and the costs of building megaplex theatres on exhibitor's operating results and financial statements) and resulting pressures on the share prices of the publicly-held theatre operators may make it more difficult for the Company to obtain financing on favorable terms in the near term. The company believes that long-term prospects for the leading theatre operators remain positive and that the fundamentals of its investment and leasing strategies remain sound. The Company's liquidity requirements with respect to future acquisitions may be reduced to the extent the Company is able to use common Shares as consideration for such purchases. Accordingly, the Company has filed a registration statement on Form S-4 with the Securities and Exchange Commission to register 5,000,000 Shares for issuance in exchange for the acquisition of additional properties as such opportunities may arise. None of these Shares have been issued as of the date of this report. FUNDS FROM OPERATIONS The Company believes that to facilitate a clear understanding of the historical consolidated operating results, FFO should be examined in conjunction with net income as presented in the Consolidated Financial Statements. FFO is considered by management as an appropriate measure of the performance of an equity REIT because it is predicated on cash flow analysis, which management believes is more reflective of the value of real estate companies, such as the Company, rather than a measure predicated on net income, which includes non-cash expenses, such as depreciation. FFO is generally defined as net income plus certain non-cash items, primarily depreciation of real estate properties. The following tables summarize the Company's FFO for the three and nine month periods ended September 30, 2000 and September 30, 1999 (in thousands except per Share data):
Three months ended September 30, Nine months ended September 30, 2000 1999 2000 1999 ------------- ------------ ------------ -------------- Net income $ 5,856 $ 6,188 $18,550 $17,143 Real estate depreciation including depreciation of unconsolidated joint ventures 2,709 2,397 7,980 6,982 ------- ------- ------- ------- Funds From Operations $ 8,565 $ 8,585 $26,530 $24,125 ======= ======= ======= ======= Basic FFO per share $ 0.58 $ 0.57 $ 1.79 $ 1.68 Diluted FFO per share $ 0.58 $ 0.57 $ 1.79 $ 1.68 Shares used for computation: Basic 14,692 15,041 14,793 14,351 Diluted 14,728 15,089 14,829 14,398
9 FORWARD LOOKING INFORMATION CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION WITH THE EXCEPTION OF HISTORICAL INFORMATION, THIS REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND IDENTIFIED BY SUCH WORDS AS "WILL BE," "INTEND," "CONTINUE," "BELIEVE," "MAY," "EXPECT," "HOPE," "ANTICIPATE," "GOAL," "FORECAST," OR OTHER COMPARABLE TERMS. THE COMPANY'S ACTUAL FINANCIAL CONDITION, RESULTS OF OPERATIONS OR BUSINESS MAY VARY MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS AND INVOLVE VARIOUS RISKS AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO: - - THE COMPANY'S DEPENDENCE ON ITS LARGEST TENANT AND LEASE GUARANTOR FOR A SUBSTANTIAL PORTION OF ITS LEASE REVENUES AND ABILITY TO MAKE DISTRIBUTIONS TO ITS SHAREHOLDERS - - THE COMPANY'S CONTINUING ABILITY TO DIVERSIFY ITS PORTFOLIO - - COMPETITION FROM OTHER ENTITIES PROVIDING CAPITAL TO THE ENTERTAINMENT INDUSTRY - - DEPENDENCE ON KEY PERSONNEL - - OPERATING RISKS IN THE ENTERTAINMENT INDUSTRY THAT MAY AFFECT THE OPERATIONS OF THE COMPANY'S TENANTS AND THE COMPANY'S ABILITY TO OBTAIN FINANCING ON FAVORABLE TERMS - - TAX RISKS ARISING FROM THE COMPANY'S CONTINUING ABILITY TO QUALIFY AS A REIT - - INTEREST RATES AND AVAILABILITY OF DEBT FINANCING - - AVAILABILITY OF CAPITAL FOR FUTURE EXPANSION - - PERFORMANCE OF LEASE TERMS BY TENANTS - - GENERAL REAL ESTATE INVESTMENT RISKS - - OTHER RISK AND UNCERTAINTIES THESE AND OTHER RISKS ARE DISCUSSED IN GREATER DETAIL IN ITEM I-BUSINESS, IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, INCORPORATED HEREIN BY REFERENCE. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENTS. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risks, primarily relating to potential losses due to changes in interest rates on long-term debt. The Company seeks to mitigate the effects of fluctuations in interest rates by matching the term of new investments with new long-term fixed rate borrowings whenever possible. The Company is subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of such refinancing may not be as favorable as the terms of current indebtedness. The majority of the Company's borrowings are subject to mortgages or contractual agreements which limit the amount of indebtedness the Company may incur. Accordingly, if the Company is unable to raise additional equity or borrow money due to these limitations, the Company's ability to acquire additional properties may be limited. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. 10 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits. 27 Financial Data Schedule. 99(a) Item I - Business - "Risk Factors" on pages 5-11 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. B. Reports on Form 8-K. Form 8-K dated September 28, 2000 Item 7. Exhibits (c) - Exhibit 10.17 Fourth Amendment to the Credit Agreement dated as of March 2, 1998 among Entertainment Properties Trust as Borrower and the Lenders party thereto. 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. ENTERTAINMENT PROPERTIES TRUST Dated: November 13, 2000 By /s/ Fred L. Kennon ------------------------------------------- Fred L. Kennon, Vice President - Chief Financial Officer Treasurer and Controller EX-27.1 2 c58546ex27-1.txt FINANCIAL DATA SCHEDULE
5 THE FINANCIAL DATA SCHEDULE INFORMATION HAS BEEN EXTRACTED FROM THE REGISTRANTS CONSOLIDATED BALANCE SHEET DATED SEPTEMBER 30, 2000 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000. 1000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 7619 0 0 0 0 0 524053 (21031) 517466 0 0 0 0 152 261145 517466 0 41714 0 0 9268 0 13896 18550 0 0 0 0 0 18550 1.25 1.25
-----END PRIVACY-ENHANCED MESSAGE-----