1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
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 May 1, 2001, there were 14,723,726 Common Shares of Beneficial Interest
outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENTERTAINMENT PROPERTIES TRUST
Consolidated Balance Sheets
(Dollars in thousands)
MARCH
31, 2001 DECEMBER 31, 2000
-------------- -----------------
ASSETS
(UNAUDITED)
Rental properties, net $
458,924 $ 460,537
Land held for development
11,845 12,258
Investment in real estate joint venture
26,193 27,391
Cash and cash equivalents
5,781 5,948
Restricted cash equivalents
6,495 --
Notes receivable
-- 434
Other assets
9,631 6,966
--------- ---------
Total assets $
518,869 $ 513,534
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities $
2,044 $ 1,499
Dividend payable
6,626 6,479
Unearned rents
396 390
Long-term debt
249,919 244,547
--------- ---------
Total liabilities
258,985 252,915
Commitments and contingencies
-- --
Shareholders' equity
Common Shares, $.01 par value; 50,000,000 shares authorized;
15,195,926 issued at March 31, 2001 and December 31, 2000
152 152
Additional paid-in-capital
278,574 278,574
Treasury Stock at cost: 472,200 shares
(6,533) (6,533)
Loans to officers
(3,525) (3,525)
Non-vested shares
(492) (575)
Distributions in excess of net income
(8,292) (7,474)
--------- ---------
Shareholders' equity
259,884 260,619
--------- ---------
Total liabilities and shareholders' equity $
518,869 $ 513,534
========= =========
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ENTERTAINMENT PROPERTIES TRUST
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands except per share data)
Three Months Ended March 31,
2001 2000
------- -------
Rental revenue $13,374 $13,700
Income from joint venture 569 176
------- -------
Total revenue 13,943 13,876
General and administrative expense 563 494
Depreciation and amortization 2,574 2,696
------- -------
Income from operations 10,806 10,686
Interest expense 4,998 4,437
------- -------
Net income $ 5,808 $ 6,249
======= =======
Net income per common share
Basic $ 0.40 $ 0.42
Diluted $ 0.39 $ 0.42
Shares used for computation (in thousands):
Basic 14,700 14,973
Diluted 14,964 15,009
Dividends per common share $ 0.45 $ 0.44
======= =======
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ENTERTAINMENT PROPERTIES TRUST
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Three
Months Ended March 31,
2001
2000
---------
---------
OPERATING ACTIVITIES
Net income $ 5,808
$ 6,249
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 2,574
2,696
(Increase) decrease in other assets
(2,266) (352)
Increase (decrease) in accounts payable and accrued liabilities 567
(40)
Increase (decrease) in unearned rents 6
(111)
---------
---------
Net cash provided by operating activities 6,689
8,442
INVESTING ACTIVITIES
Acquisition of rental properties --
(33,851)
Investment in joint venture equity
(247) (3,156)
Proceeds from sale of equity interest in joint venture 1,445
--
Development and capitalized costs
(453) --
---------
---------
Net cash provided by (used) in investing activities 745
(37,007)
FINANCING ACTIVITIES
Proceeds from long-term debt facilities 125,000
20,175
Principal payments on long-term debt
(119,628) (310)
Funding of escrow deposits
(6,495) 92
Common shares issued to management --
92
Distributions to shareholders
(6,478) (6,273)
---------
---------
Net cash provided by financing activities 7,601
13,684
---------
---------
Net decrease in cash and cash equivalents
(167) (14,881)
Cash and cash equivalents at beginning of period 5,948
22,265
---------
---------
Cash and cash equivalents at end of period $ 5,781
$ 7,384
=========
=========
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITY
Declaration of dividend to common shareholders $ 6,626
$ 6,479
Transfer of land held for development to rental property $ 866
--
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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 three-month period ended March 31, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001.
The consolidated balance sheet as of December 31, 2000 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, 2000.
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, Three Theatres, Inc. and Cantera 30, 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). LONG TERM DEBT
On February 14, 2001, the Company completed a $125 million debt private
placement, secured by nine megaplex theatre properties, the proceeds of which
were used primarily to retire borrowings under the $127 million Bank Credit
Facility. The debt carries a stated interest rate at March 31, 2001 of 8.29%
and matures on February 12, 2006.
4). REAL ESTATE JOINT VENTURES
On June 30, 1999, the Company finalized a joint venture with Excel Legacy Corp.
(Amex: XLG), whereby the Company contributed certain undeveloped land parcels
with a carrying value of $8.7 million in exchange for a 50% interest in the real
estate joint venture, comprised of the undeveloped land parcels and the
Westminster AMC 24 screen Theatre in Westminster,
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Colorado. The joint venture intends to develop the properties as an
entertainment-themed retail center. The Company accounts for its investment in
the real estate joint venture under the equity method of accounting.
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 30 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 venture. The Company subsequently sold to Atlantic a 16% interest in the
venture in exchange for $2.8 million in cash. It is expected that Atlantic will
acquire up to an additional 64% 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 and Notes thereto 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, shareholder returns,
performance of leases by tenants 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 in Item I
"Business -- Risk Factors", in the Company's Annual Report of Form 10-K for the
year ended December 31, 2000 incorporated by reference herein.
RESULTS OF OPERATIONS
The Company's revenues, which consist of property rentals and income from a
joint venture, were $13.9 million for the three months ended March 31, 2001
compared to $13.9 million for the three months ended March 31, 2000. Rental
revenues reflect a decline of $0.3 million, offset by an increase in joint
venture income of $0.3 million, primarily due to the contribution of the Cantera
30 property to the Atlantic-EPR joint venture, which is accounted for under the
equity method of accounting whereby the company's proportional share of net
income is recognized as revenue rather than the actual rental revenue of the
joint venture.
General and administrative expense totaled $0.6 million for the three months
ended March 31, 2001 compared to $0.5 million for the three months ended March
31, 2000. The increase was due primarily to expenses related to the proxy
contest described in Part II - Item 4 "Submission of Matters to a Vote of
Security Holders".
Net interest expense totaled $5.0 million for the three months ended March 31,
2001 compared to net interest expense of $4.4 million for the three months ended
March 31, 2000. The $0.6 million increase in net interest expense resulted
primarily from the impact of higher interest rates on the variable rate portion
of the Company's debt ($0.5 million).
Depreciation and amortization expense was $2.6 million for the three months
ended March 31, 2001 compared to $2.7 million for the three months ended March
31, 2000. The decrease of $0.1 million resulted from the contribution of the
Cantera 30 property to the Atlantic-EPR joint venture.
Net income for the three months ended March 31, 2001 totaled $5.8 million or
$0.39 per diluted share as compared to $6.2 million or $0.42 per diluted share
for the three months ended March 31, 2000.
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LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, the Company had $5.8 million in cash and cash equivalents,
$6.5 million in restricted cash escrows available to service debt under the
Company's $125 million secured mortgage debt issue completed in February, 2001,
and secured mortgage indebtedness of approximately $250 million. The $250
million aggregate principal amount of fixed rate mortgage indebtedness bears
interest at a weighted average rate of 8.10%.
On February 14, 2001, the Company completed a $125 million debt private
placement, secured by nine megaplex theatre properties, the proceeds of which
were used primarily to retire borrowings under the $127 million Bank Credit
Facility.
The Company anticipates that its cash from operations will provide adequate
liquidity to conduct its operations, fund administrative and operating costs and
debt service requirements and 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, the Company intends to consider: (i)
entering into 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. There can be
no assurance these objectives can be achieved. See the December 31, 2000 annual
report on Form 10-K for a discussion of the Company's capitalization strategies
and capital requirements for future growth.
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.
Comparison of our presentation of FFO, using the definition adopted by the
National Association of Real Estate Investment Trusts (NAREIT), to similarly
titled measures for other REITs may not necessarily be meaningful due to
possible differences in the application of the NAREIT definition used by such
REITs.
The following tables summarize the Company's FFO for the three month periods
ended March 31, 2001 and March 31, 2000 (in thousands except per Share data):
Three months ended March 31,
2001 2000
------- -------
Net income $ 5,808 $ 6,249
Real estate depreciation 2,704 2,624
------- -------
Funds From Operations $ 8,512 $ 8,873
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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 THOSE DISCUSSED IN ITEM I - "BUSINESS - RISK
FACTORS" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2000. 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 subject to risks associated with debt financing, including the
risk that existing indebtedness may not be refinanced or that the terms of such
refinancing (including interest rates) may not be as favorable as the terms of
current indebtedness. All of the Company's borrowings are subject to mortgages
and carry fixed interest rates.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company solicited proxies for an annual meeting of shareholders held May 9,
2001 at which one trustee was to be elected. The Board of Trustees nominated
Scott H. Ward to serve as trustee for a term expiring at the 2004 annual meeting
of shareholders. The terms of trustees Peter C. Brown, David M. Brain, Robert J.
Druten and Danley K. Sheldon continued after the annual meeting. BRT Realty
Trust, a shareholder of the Company, solicited proxies in opposition to the
Board's nominee for the purpose of electing its nominee, Fredric H. Gould, as
trustee.
On May 14, 2001, the indedpendent inspector of elections certified the final
results of the voting at EPR's annual meeting held on May 9, 2001. Shareholders
elected EPR's nominee, Scott Ward and ratified the selection of Ernst & Young
LLP as independent public accountants for the current fiscal year. Final
results are as follows:
Management proxies: Scott Ward as Director - votes for 6,440,047,
votes against 74,672
Opposition proxies: Fredric Gould as Director - votes for 2,492,294,
votes against 218,185
Management proxies: Ratification of Auditors - votes for 6,439,603,
votes against 28,801
Opposition proxies: Ratification of Auditors - votes for 2,800,437,
votes against 48,236
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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A. Exhibits.
None
B. Reports on Form 8-K.
None
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: August 3, 2001 By /s/ Fred L. Kennon
---------------------------------------------------------
Fred L. Kennon, Vice President - Chief
Financial Officer
Treasurer and Controller