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 June 30, 2002 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 July 22, 2002, there were 17,176,830 Common Shares of Beneficial Interest outstanding.
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ENTERTAINMENT PROPERTIES TRUST Consolidated Balance Sheets (Dollars in thousands) <Table> <Caption> JUNE 30, 2002 DECEMBER 31, 2001 ---------------- ---------------- <S> <C> <C> ASSETS (UNAUDITED) Rental properties, net $ 630,795 $ 515,972 Land held for development 15,072 14,308 Investment in real estate joint venture 10,971 12,479 Cash and cash equivalents 16,007 24,590 Restricted cash equivalents 6,495 6,495 Other assets 12,609 9,507 ---------------- ---------------- Total assets $ 691,949 $ 583,351 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities $ 1,437 $ 1,843 Common dividend payable 8,157 6,659 Preferred dividend payable 494 -- Unearned rents 89 1,955 Long-term debt 312,226 314,766 ---------------- ---------------- Total liabilities 322,403 325,223 Commitments and contingencies -- -- Minority interest in consolidated subsidiary 15,375 -- Shareholders' equity: Common Shares, $.01 par value; 50,000,000 shares authorized; 17,644,263 and 15,270,392 shares issued at June 30, 2002 and December 31, 2001, respectively 176 153 Preferred Shares, $.01 par value; 5,000,000 shares authorized; 2,300,000 and no shares issued at June 30, 2002 and December 31, 2001, respectively 23 -- Additional paid-in-capital 379,196 279,603 Treasury Stock at cost: 472,200 shares (6,533) (6,533) Loans to shareholders (3,525) (3,525) Non-vested shares 1,999 (1,105) Distributions in excess of net income (13,167) (10,465) ---------------- ---------------- Shareholders' equity 354,171 258,128 ---------------- ---------------- Total liabilities and shareholders' equity $ 691,949 $ 583,351 ================ ================ </Table>
ENTERTAINMENT PROPERTIES TRUST Consolidated Statements of Income (Unaudited) (Dollars in thousands except per share data) <Table> <Caption> Three Months Ended June 30, Six Months Ended June 30, ---------------------------- ---------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Rental revenue $ 16,989 $ 13,436 $ 32,785 $ 26,810 Property operating expense 75 -- 146 -- General and administrative expense 567 1,010 1,089 1,574 Net interest expense 5,883 4,849 11,616 9,847 Depreciation and amortization 3,248 2,574 6,146 5,148 ----------- ----------- ----------- ----------- Total expense 9,773 8,433 18,997 16,569 Income before minority interest, and income from joint venture 7,216 5,003 13,788 10,241 Equity in income from joint venture 385 566 760 1,136 Minority interest (375) -- (445) -- Net income $ 7,226 $ 5,569 $ 14,103 $ 11,377 Preferred dividend requirements (494) -- (494) -- ----------- ----------- ----------- ----------- Net income available to common shareholders $ 6,732 $ 5,569 $ 13,609 $ 11,377 =========== =========== =========== =========== Net income per common share Basic $ 0.39 $ 0.38 $ 0.82 $ 0.77 Diluted $ 0.39 $ 0.38 $ 0.81 $ 0.77 Shares used for computation (in thousands): Basic 17,120 14,701 16,622 14,701 Diluted 18,155 14,737 17,286 14,737 Dividends per common share: $ 0.475 $ 0.45 $ 0.95 $ 0.90 =========== =========== =========== =========== </Table>
ENTERTAINMENT PROPERTIES TRUST Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands) <Table> <Caption> Six Months Ended June 30, 2002 2001 ----------- ----------- <S> <C> <C> OPERATING ACTIVITIES Net income $ 14,103 $ 11,377 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 6,146 5,148 Common shares issued to management and trustees 54 54 Minority interest in earnings of consolidated subsidiary 375 -- Increase in other assets (1,819) (2,375) Decrease in accounts payable and accrued liabilities (407) (219) Equity in income from joint venture (760) (745) Decrease in unearned rents (1,866) (382) ----------- ----------- Net cash provided by operating activities 15,826 12,858 ----------- ----------- INVESTING ACTIVITIES Acquisition of rental properties (105,611) (15,597) Capital contribution to Westcol joint venture -- (1,839) Distributions from joint venture 927 940 Proceeds from sale of equity interest in Atlantic joint venture -- 1,445 Development and capitalized costs (764) (775) ----------- ----------- Net cash used in investing activities (105,448) (15,826) ----------- ----------- FINANCING ACTIVITIES Proceeds from long-term debt facilities -- 145,000 Principal payments on long-term debt (2,540) (123,977) Funding of escrow deposits -- (6,495) Proceeds from issuance of common shares, net of costs 42,928 25 Proceeds from issuance of preferred shares, net of costs 55,435 -- Distributions to shareholders (14,784) (13,103) ----------- ----------- Net cash provided by financing activities 81,039 1,450 ----------- ----------- Net decrease in cash and cash equivalents (8,583) (1,518) Cash and cash equivalents at beginning of period 24,590 5,948 ----------- ----------- Cash and cash equivalents at end of period $ 16,007 $ 4,430 =========== =========== SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITY Declaration of dividend to common shareholders $ 8,157 $ 6,659 Declaration of dividend to preferred shareholders $ 494 $ -- Transfer of land held for development to rental property $ -- $ 866 Minority interest issued in exchange for rental property $ 15,000 $ -- Sale of equity interest in joint venture $ 1,341 $ -- Exchange of development property in connection with acquisition of rental property $ -- $ 1,818 </Table>
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 and six-month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. The consolidated balance sheet as of December 31, 2001 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, 2001. CONCENTRATION OF RISK American Multi-Cinema, Inc. (AMC) is the lessee of a substantial portion (74%) of the megaplex theatre rental properties held by the Company at June 30, 2002 as a result of a series of sale leaseback transactions pertaining to a number of AMC megaplex theatres. A substantial portion (approximately 76%) of the Company's revenues, and its ability to make distributions to its shareholders, will depend on rental payments by AMC under the leases, or its parent, AMC Entertainment, Inc. (AMCE), as the guarantor of AMC's obligations under the leases. AMC Entertainment, Inc. is a publicly held company (AMEX:AEN) and accordingly, their financial information is publicly available. RECLASSIFICATIONS Certain reclassifications have been made to the prior quarter amounts to conform to the current quarter presentation. 3. PROPERTY ACQUISITIONS On June 28, 2002, the Company acquired 3 megaplex theatres and one retail property from a third party developer for an aggregate cash purchase price of $53 million. The megaplex theatre properties are the AMC Forum 30 in Sterling Heights, MI, the AMC Studio 30 in Olathe, KS and the Consolidated Cherrydale Cinema 16 in Greenville, SC. The retail property acquired in the transaction is a 10,000 square foot building adjacent to the Consolidated theatre in Greenville, SC. Proceeds from the Company's issuance of the preferred shares described in footnote #6 to the consolidated financial statements were used to complete the purchase.
On March 15, 2002, the Company acquired 5 megaplex theatres owned and operated by Gulf States Theatres, located in New Orleans, LA. The aggregate purchase price of $67.2 million was comprised of approximately $52 million in cash and $15 million in common and preferred operating units issued by EPT Gulf States, LLC, a subsidiary of the Company, to the sellers of the property. The operating units bear a 10% dividend yield and are convertible into 857,142 common shares of the Company at the option of the holder. Simultaneously, AMC acquired the remaining operations and assets of Gulf States and the Company executed a 20 year lease with AMC for each of the five theatres. 4. EARNINGS PER SHARE The following table summarizes the Company's common shares used for computation of basic and diluted earnings per share: <Table> <Caption> Three months Six months ended June 30, 2002 ended June 30, 2002 Income Shares Per Share Income Shares Per Share (numerator) (denominator) Amount (numerator) (denominator) Amount ---------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> Basic earnings: Income available to common shareholders $ 6,732 17,120 $ 0.39 $ 13,609 16,622 $ 0.82 Effect of dilutive securities: Stock options -- 178 -- -- 154 -- Contingent shares from conversion of minority interest 375 857 -- 445 509 (0.01) ---------- ---------- ---------- ---------- ---------- ---------- Diluted earnings $ 7,107 18,155 $ 0.39 $ 14,054 17,285 $ 0.81 ========== ========== ========== ========== ========== ========== </Table> <Table> <Caption> Three months Six months ended June 30, 2001 ended June 30, 2001 Income Shares Per Share Income Shares Per Share (numerator) (denominator) Amount (numerator) (denominator) Amount ---------- ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> Basic earnings: Income available to common shareholders $ 5,569 14,701 $ 0.38 $ 11,377 14,701 $ 0.77 Effect of dilutive securities: Stock options -- 36 -- -- 36 -- ---------- ---------- ---------- ---------- ---------- ---------- Diluted earnings $ 5,569 14,737 $ 0.38 $ 11,377 14,737 $ 0.77 ========== ========== ========== ========== ========== ========== </Table> 5. COMMON SHARE OFFERING On February 8, 2002, the Company issued 2.3 million common shares for net proceeds of $42.9 million. The proceeds were used to fund the acquisition of the 5 megaplex theatres from Gulf States Theatres, described in note 3 to the consolidated financial statements. 6. PREFERRED SHARE OFFERING On May 29, 2002, the Company issued 2.3 million 9.5% Series A cumulative preferred shares, in a registered public offering, for net proceeds of $55.4 million. The offering includes 300,000 shares from the underwriters' over-allotment option which was exercised in full. The net proceeds have been recorded in shareholders equity. The preferred shares have a liquidation preference of $25 per share. The proceeds were used to fund the $53 million acquisition of the 3 megaplex theatres, purchased on June 28, 2002, described in note 3 to the consolidated financial statements.
7. SALE OF JOINT VENTURE INTEREST During the second quarter, the Company sold to Atlantic a total of a 7.5% interest in Atlantic-EPR in exchange for $1.3 million in cash. It is expected that Atlantic will acquire up to an additional 56.5% interest in Atlantic-EPR by selling securities to German investors, with the proceeds of those sales to be contributed to Atlantic-EPR and then paid to the Company to reduce its current interest of 76.5%. Atlantic EPR is subject to joint control between the Company and Atlantic and accordingly, the Company does not consolidate the financial results of Atlantic EPR but rather 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, 2001 and in "Risk Factors" in the Company's prospectus filed under Rule 424(b) of the SEC on May 24, 2002, incorporated by reference herein. CRITICAL ACCOUNTING POLICIES There have been no changes from the policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2001 incorporated by reference herein. RESULTS OF OPERATIONS THREE-MONTH PERIOD ENDED JUNE 30, 2002 COMPARED TO THE THREE-MONTH PERIOD ENDED JUNE 30, 2001 RENTAL REVENUE - Revenue from property rentals was $17.0 million for the three months ended June 30, 2002 compared to $13.4 million for the three months ended June 30, 2001. The $3.6 million increase resulted from three property acquisitions completed in 2001 ($0.5 million), the acquisition and consolidation in December 2001 of the remaining third party interest in the Westcol joint venture ($1.1 million), property acquisitions completed in 2002 ($1.8 million) and from rent increases on existing properties ($0.2 million). PROPERTY OPERATING EXPENSE - Our property operating expenses totaled $75 thousand for the three months ended June 30, 2002. These expenses arise from the operations of Westcol Center, an entertainment and retail center in Westminster CO., in which the Company acquired sole ownership in December 2001 by buying the remaining interest in the Westcol joint venture. For the same period in 2001, the Company accounted for its partial interest in the Westcol joint venture under the equity method of accounting, therefore, the Company did not recognize expenses related to the venture in 2001. GENERAL AND ADMINISTRATIVE EXPENSE - Our general and administrative expenses totaled $0.6 million for the three months ended June 30, 2002 compared to $1.0 million for the same period in 2001. The decrease was attributed to the non-recurring proxy related expenses incurred in the prior year. NET INTEREST EXPENSE - Our net interest expense increased to $5.9 million for the three months ended June 30, 2002 from $4.8 million for the three months ended June 30, 2001. The $1.0 million increase in net interest expense resulted from an increase in long-term debt related to financings of property acquisitions made during fiscal 2001, and the recognition of interest
expense from the Westcol theatre first mortgage loan, acquired with the acquisition/consolidation of the remaining third party interest of the Westcol joint venture in December 2001. DEPRECIATION AND AMORTIZATION EXPENSE - Our depreciation and amortization expenses totaled $3.2 million for the three months ended June 30, 2002 compared to $2.6 million for the same period in 2001. The $0.7 million increase resulted from the property acquisitions completed in 2001 and 2002. MINORITY INTEREST IN NET INCOME - For the three months ended June 30, 2002 minority interest in net income was $375 thousand, arising from the issuance of $15 million of common and preferred interests by EPT Gulf States, LLC, our consolidated subsidiary, as a result of the Gulf States theatres acquisition completed on March 15, 2002. For the same period in 2001, the Company had no minority interest outstanding. INCOME FROM JOINT VENTURE - Income from joint venture totaled $0.4 million for the three months ended June 30, 2002 compared to $0.8 million for the same period in 2001. The decrease was attributed to the acquisition of the remaining third party interest in the Westcol joint venture in December 2001. During the three-months ended June 30, 2001, the Company accounted for our interest in the Westcol joint venture using the equity method of accounting, and for the three-months ended June 30, 2002 the results of Westcol are shown on a consolidated basis. NET INCOME - Net income for the three months ended June 30, 2002 totaled $7.2 million as compared to $5.6 million for the three months ended June 30, 2001. The $1.7 million increase in net income resulted from the $3.6 million increase in rental revenue and the $0.4 million decrease in general and administrative expenses, offset by increases in net interest expense ($1.0 million), depreciation and amortization ($0.7 million), property operating expenses ($0.1 million), decreases in income from joint venture ($0.2 million), and the impact of distributions to minority interests ($0.4 million). SIX-MONTH PERIOD ENDED JUNE 30, 2002 COMPARED TO THE SIX-MONTH PERIOD ENDED JUNE 30, 2001 RENTAL REVENUE - Revenue from property rentals was $32.8 million for the six months ended June 30, 2002 compared to $26.8 million for the six months ended June 30, 2001. The $6.0 million increase resulted from property acquisitions completed in 2001 ($1.1 million), the acquisition and consolidation in December 2001 of the remaining third party interest in the Westcol joint venture ($2.2 million), property acquisitions completed in 2002 ($2.1 million) and from rent increases on existing properties and increases in percentage rents earned ($0.6 million). PROPERTY OPERATING EXPENSE - Our property operating expenses totaled $146 thousand for the six months ended June 30, 2002. These expenses arise from the operations of Westcol Center, an entertainment and retail center in Westminster CO., in which the Company acquired sole ownership in December 2001 by buying the remaining interest in the Westcol joint venture. For the same period in 2001, the Company accounted for its partial interest in the Westcol joint venture under the equity method of accounting, therefore, the Company did not recognize expenses related to the venture in 2001. GENERAL AND ADMINISTRATIVE EXPENSE - Our general and administrative expenses totaled $1.1 million for the six months ended June 30, 2002 compared to $1.6 million for the same period in 2001. The decrease was attributed to the proxy related expenses incurred in the prior year. NET INTEREST EXPENSE - Our net interest expense increased to $11.6 million for the six months ended June 30, 2002 from $9.9 million for the six months ended June 30, 2001. The $1.8 million increase in net interest expense resulted from an increase in long-term debt related to financings of property acquisitions made during fiscal 2001, and the recognition of interest expense from the Westcol theatre first mortgage loan, acquired with the acquisition/consolidation of the remaining third party interest in the Westcol joint venture in December 2001.
DEPRECIATION AND AMORTIZATION EXPENSE - Our depreciation and amortization expenses totaled $6.1 million for the six months ended June 30, 2002 compared to $5.1 million for the same period in 2001. The $1.0 million increase resulted from the property acquisitions completed in 2001 and 2002. MINORITY INTEREST IN NET INCOME - For the six months ended June 30, 2002 minority interest in net income was $445 thousand, arising from the issuance of $15 million in common and preferred interests by EPT Gulf States, LLC, our consolidated subsidiary, as a result of the Gulf States theatres acquisition completed on March 15, 2002. For the same period in 2001, the Company had no minority interest outstanding. INCOME FROM JOINT VENTURE - Income from joint venture totaled $0.8 million for the six months ended June 30, 2002 compared to $1.1 million for the same period in 2001. The decrease was attributed to the acquisition of the remaining third party interest in the Westcol joint venture in December 2001. During the six months ended June 30, 2001, the Company accounted for our interest in the Westcol joint venture using the equity method of accounting, and for the six months ended June 30, 2002 the results of Westcol are shown on a consolidated basis. NET INCOME - Net income for the six months ended June 30, 2002 totaled $14.1 million as compared to $11.4 million for the six months ended June 30, 2001. The $2.7 million increase in net income resulted from the $6.0 million increase in rental revenue and the $0.5 million decrease in general and administrative expenses, offset by increases in net interest expense ($1.8 million), depreciation and amortization ($1.0 million), property operating expenses ($0.1 million), decreases in income from joint venture ($0.3 million), and the impact of distributions to minority interests ($0.4 million). LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents were $16.0 million at June 30, 2002. In addition, the Company had restricted cash of $6.5 million available for debt service in connection with the $121.2 million mortgage debt due in February 2006. Mortgage Debt and Credit Facilities As of June 30, 2002, we had total debt outstanding of $312.2 million. All of our debt is mortgage debt secured by substantially all of our rental properties. Of this debt, $54.0 million is variable rate debt and $258.2 million is fixed rate debt. The $312.2 million aggregate principal amount of indebtedness had a weighted average interest rate of 7.3% as of June 30, 2002. At June 30, 2002, we had $54 million outstanding under our $75 million credit facility. The remaining $21 million available to borrow under that facility is subject to the Company providing additional real estate as collateral. At June 30, 2002, we had no outstanding debt under our $50 million Fleet Bank credit facility. The Company entered into the credit agreement on May 3, 2002, and expects to use proceeds from the facility for the acquisition of rental property and general corporate purposes. The credit facility is a secured facility with a three-year term and carries interest at LIBOR plus 300 basis points. Liquidity Requirements Short-term liquidity requirements consist primarily of normal recurring corporate operating expenses, debt service requirements and distributions to shareholders, including a 9.5% fixed dividend on our preferred shares. At June 30, 2002, the Company had no unfunded acquisition or development commitments. We anticipate that our cash on hand and cash from operations will provide adequate liquidity to conduct operations, fund administrative and operating costs and interest and principal payments on our debt, and allow distributions to our shareholders and avoidance of corporate level federal income or excise tax in accordance with Internal Revenue Code requirements for qualification as a REIT. However, we will continue to require new capital to acquire additional properties, and continue to evaluate potential sources of debt and equity capital for this purpose.
FUNDS FROM OPERATIONS The Company believes that to facilitate a clear understanding of the historical consolidated operating results, funds from operations (FFO) should be examined in conjunction with net income as presented in the Consolidated Financial Statements. FFO is defined as net income (computed in accordance with GAAP), excluding extraordinary gains and losses from debt restructuring and gains and losses from sales of depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships, joint ventures and other affiliates. Adjustments for unconsolidated partnerships, joint ventures and other affiliates are calculated to reflect FFO on the same basis. FFO does not represent cash flows from operations as defined by GAAP and is not indicative that cash flows are adequate to fund all cash needs and is not to be considered an alternative to net income or any other GAAP measure as a measurement of the results of the Company's operations or the Company's cash flows or liquidity as defined by GAAP. The following tables summarize the Company's FFO for the three and six month periods ended June 30, 2002 and June 31, 2001 (in thousands): <Table> <Caption> Three months Six months ended June 30, ended June 30, 2002 2001 2002 2001 ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Net income available to common shareholders $ 6,732 $ 5,569 $ 13,609 $ 11,377 Add: Real estate depreciation 3,056 2,500 5,787 4,999 Add: Allocated share of joint venture depreciation 137 205 275 410 ----------- ----------- ----------- ----------- Basic Funds From Operations 9,925 8,274 19,671 16,786 Add: minority interest in net income 375 -- 445 -- ----------- ----------- ----------- ----------- Diluted Funds From Operations $ 10,300 $ 8,274 $ 20,116 $ 16,786 Common shares used for computation: Basic 17,120 14,701 16,622 14,701 Diluted 18,155 14,737 17,286 14,737 </Table> NEW ACCOUNTING PRONOUNCEMENT In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While this statement supersedes SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of", it retains many of the fundamental provisions of that statement. This statement also supersedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a segment of a business. However, it retains the requirement in Opinion No. 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. This statement is effective for fiscal years beginning after December 15, 2001 and was adopted by the Company on January 1, 2002. The adoption of SFAS 144 did not have a material impact on the Company's financial position or results of operations. 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 UNDER "RISK FACTORS" IN
THE COMPANY'S PROSPECTUS FILED UNDER RULE 424(b) OF THE SEC ON MAY 24, 2002. 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. 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 Other than routine litigation and administrative proceedings arising in the ordinary course of business, the Company is not presently involved in any litigation nor, to its knowledge, is any litigation threatened against the Company or its properties, which is reasonably likely to have a material adverse effect on the liquidity or results of operations of the Company. ITEM 2 . CHANGES IN SECURITIES AND USE OF PROCEEDS (a) On May 24, 2002, the Company filed Articles Supplementary to its Amended and Restated Declaration of Trust designating the rights and preferences of its 9.5% Series A Cumulative Preferred Shares. The Articles Supplementary were filed as Exhibit 4.4 to 4.5, incorporated by reference herein. (b) No dividends may be paid to the holders of the Company's common shares unless and until all accrued and unpaid dividends on the Company's preferred shares have been paid or set aside for payment. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits. 99.1 Certification of Principal Executive Officer 99.2 Certification of Principal Financial Officer B. Reports on Form 8-K. <Table> <Caption> Filing Date Date of Report Items Reported - ----------- -------------- -------------- <S> <C> <C> April 12, 2002 April 8, 2002 Item 4. Change in Registrant's Certifying Accountant April 12, 2002 April 8, 2002 Item 4. Change in Registrant's Certifying Accountant May 20, 2002 May 17, 2002 Item 7. Financial Statements and Exhibits Item 9. Regulation FD Disclosure May 21, 2002 March 15, 2002 Amended 8K/A Item 2. Acquisition of Assets May 30, 2002 May 23, 2002 Item 7. Financial Statements and Exhibits June 4, 2002 May 30, 2002 Item 5. Other Events Item 7. Financial Statements and Exhibits </Table> 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 13, 2002 By /s/ David M. Brain ----------------------------------------------- David M. Brain, President - Chief Executive Officer and Trustee Dated: August 13, 2002 By /s/ Fred L. Kennon ----------------------------------------------- Fred L. Kennon, Vice President - Chief Financial Officer Treasurer and Controller