Reading International - 10-Q quarterly report FY

Washington, D.C.  20549

__________________________________

(Mark One)

For the quarterly period ended:  March 31, 2009

OR

For the transition period from _____________ to ___________

Commission file number 1-8625

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code: (213) 235-2240

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  þ  No  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):  Large accelerated filer ¨  Accelerated filer þ  Non-accelerated filer ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  þ

 

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 8, 2009, there were 21,084,582 shares of Class A Nonvoting Common Stock, $0.01 par value per share and 1,495,490 shares of Class B Voting Common Stock, $0.01 par value per share outstanding.

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

In the opinion of management, all adjustments of a normal recurring nature considered necessary to present fairly in all material respects our financial position, results of our operations and cash flows as of and for the three months ended March 31, 2009 and 2008 have been made.  The results of operations for the three months ended March 31, 2009 and 2008 are not necessarily indicative of the results of operations to be expected for the entire year.

We have investments in marketable securities of $2.3 million and $3.1 million at March 31, 2009 and December 31, 2008, respectively.  These investments are accounted for as available for sale investments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities, as amended by FSP FAS 115-1/124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.  In accordance with the Financial Accounting Standards Board’s Emerging Issues Task Force (“EITF”) 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, assessments of potential impairment for these investments are performed for each applicable reporting period.  During the first quarter of 2009, we realized a loss of $746,000 on certain marketable securities due to an other than temporary decline in market price.  There was no realized gain or loss during the first quarter of 2008.  These investments have a cumulative unrealized loss of $5,000 included in accumulated other comprehensive income at March 31, 2009.  For the three months ended March 31, 2009 and 2008, our net unrealized loss on marketable securities was $2,000 and $1,000, respectively.

 

Direct costs incurred in connection with obtaining tenants are amortized over the respective term of the lease on a straight-line basis.

Direct costs incurred in connection with financing are amortized over the respective term of the loan utilizing the effective interest method, or straight-line method if the result is not materially different.  In addition, interest on loans with increasing interest rates and scheduled principal pre-payments is also recognized on the effective interest method.

 

Effective January 1, 2009, the Company adopted the provisions of Statement of Financial Accounting Standards No. 160 “Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51” (“SFAS 160”).  SFAS 160 requires that amounts formerly reported as minority interests in the Company’s unaudited condensed consolidated financial statements be reported as noncontrolling interests.  In connection with the issuance of SFAS 160, certain revisions were also made to EITF No. Topic D-98“Classification and Measurement of Redeemable Securities” (“EITF D-98”).  These revisions clarify that noncontrolling interests with redemption provisions outside of the control of the issuer and noncontrolling interests with redemption provisions that permit the issuer to settle in either cash or common shares at the option of the issuer are subject to evaluation under EITF D-98 to determine the appropriate balance sheet classification and measurement of such instruments.  This adoption resulted in modifications to the reporting of noncontrolling interests in the Unaudited Condensed Consolidated Financial Statements.

 

 

Non-controlling interest represents ownership interests not held by Reading International, Inc. in its underlying consolidated subsidiaries.

Effective January 1, 2009, the Company adopted the provisions Statement of Financial Accounting Standards No. 141(R) “Business Combinations”(“SFAS 141(R)”).  SFAS 141(R) requires an acquiring entity to recognize acquired assets and assumed liabilities in a transaction at fair value as of the acquisition date and changes the accounting treatment for certain items, including acquisition costs, which will be required to be expensed as incurred.  SFAS 141(R) is required to be applied on a prospective basis.

The adoption of SFAS 141(R) did not have any effect on the Company’s unaudited condensed consolidated financial statements, results of operations, or cash flows for the three months ended March 31, 2009.  The Company anticipates that the adoption of SFAS 141(R) could have an impact on the cost allocation of future acquisitions and will require the Company to expense acquisition costs for future property acquisitions.  While the Company believes the impact of the adoption of SFAS 141(R) will not be material to the Company in the future based on recent historical acquisition activity, the impact will ultimately depend on future property acquisitions.

On April 9, 2009, the Financial Accounting Standards Board (“FASB”) issued three Final Staff Positions (FSPs) intended to provide additional application guidance and enhance disclosures regarding fair value measurements and of impairments of securities.  The following two of these three FSPs were relevant to our company:

FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, (“FSP FAS 157-4”) relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales.  It reaffirms what Statement 157 states is the objective of fair value measurement—to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions.  Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive.  FSP FAS 157-4 will be effective for interim and annual periods ending after June 15, 2009 and will be applied prospectively.  We are currently evaluating FSP FAS 157-4 but currently we believe that the adoption will not have a material effect on our financial statements.

FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, (“FSP FAS 107-1 & APB 28-1”) relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet at fair value.  Prior to issuing this FSP, fair values for these assets and liabilities were only disclosed once a year.  The FSP now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value.  FSP 107-1 & APB 28-1 will be effective for interim periods ending after June 15, 2009.  This FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption.  In periods after initial adoption, FSP FAS 107-1 & APB 28-1 requires comparative disclosures only for periods ending subsequent to initial adoption.  We believe the adoption of FSP FAS 107-1 & APB 28-1 will not have a material effect on our financial statements.

As more fully described in our 2008 annual report, we have granted the President of Landplan Property Partners, Pty Ltd (“LPP”), Mr. Doug Osborne, as incentive compensation, a subordinated carried interest in certain property trusts, owned by LPP and formed to acquire and hold LPP’s real property investments.  The estimated value of Mr. Osborne’s incentive interest of $168,000 at March 31, 2009 is included in the noncontrolling interest of LPP at March 31, 2009 (see Note 14 – Noncontrolling Interest).  During the three months ended March 31, 2009 and 2008, we expensed $49,000 and $34,000, respectively, associated with Mr. Osborne’s interests.  At March 31, 2009, the total unrecognized compensation expense related to the LPP equity awards was $180,000, which is expected to be recognized over the remaining weighted average period of approximately 24 months.  No amounts, however, will be payable unless the properties held by the property trusts, on a consolidated basis, provide returns on capital in excess of 11%, compounded annually.

As part of his compensation package, Mr. John Hunter, our Chief Operating Officer, was granted $100,000 of restricted Class A Non-Voting Common Stock on February 12, 2008.  This stock grant has a vesting period of two years and stock grant price of $9.70.  On February 11, 2009 and 2008, $100,000 and $50,000, respectively, of restricted Class A Non-Voting Common Stock vested related to prior year grants.  At March 31, 2009, 16,742 shares related to vested restricted shares have yet to be issued to him.  During the three months ended March 31, 2009 and 2008, we recorded compensation expense of $56,000 and $96,000, respectively, for the vesting of all our restricted stock grants.

The following table details the grants and vesting of restricted stock to our employees (dollars in thousands):

We have a long-term incentive stock option plan that provides for the grant to eligible employees and non-employee directors of incentive stock options and non-qualified stock options to purchase shares of the Company’s Class A Nonvoting Common Stock.

When the Company’s tax deduction from an option exercise exceeds the compensation cost resulting from the option, a tax benefit is created.  SFAS No. 123(R),Accounting for Stock-Based Compensation (“SFAS 123(R)”), requires that excess tax benefits related to stock option exercises be reflected as financing cash inflows instead of operating cash inflows.  For the three months ended March 31, 2009 and 2008, there was no impact to the unaudited condensed consolidated statement of cash flows because there were no recognized tax benefits from stock option exercises during these periods.

SFAS 123(R) requires companies to estimate forfeitures.  Based on our historical experience and the relative market price to strike price of the options, we do not currently estimate any forfeitures of vested or unvested options.

In accordance with SFAS 123(R), we estimate the fair value of our options using the Black-Scholes option-pricing model, which takes into account assumptions such as the dividend yield, the risk-free interest rate, the expected stock price volatility, and the expected life of the options.  The dividend yield is excluded from the calculation, as it is our present intention to retain all earnings.  We expense the estimated grant date fair values of options issued on a straight-line basis over the vesting period.

Based on the prior years’ assumptions for options which have been granted and in accordance with the SFAS 123(R) modified prospective method, we recorded $160,000 in compensation expense for the total estimated grant date fair value of stock options that vested during the three months ended March 31, 2009 and 2008.  At March 31, 2009, the total unrecognized estimated compensation cost related to non-vested stock options granted was $74,000, which is expected to be recognized over a weighted average vesting period of 0.7 years.  No options were exercised during the three months ended March 31, 2009 and 2008; therefore, no cash was received and no

value was realized from the exercise of options during those periods.  No options vested during either of the three months ended March 31, 2009 or 2008; therefore, there was no grant date fair value of options vesting during either period.  The intrinsic, unrealized value of all options outstanding, vested and expected to vest, at March 31, 2009 was $107,000 of which 100% are currently exercisable.

All stock options granted have a contractual life of 10 years at the grant date.  The aggregate total number of shares of Class A Nonvoting Common Stock and Class B Voting Common Stock authorized for issuance under our 1999 Stock Option Plan is 1,287,150.  At the time that options are exercised, at the discretion of management, we will either issue treasury shares or make a new issuance of shares to the employee or board member.  Dependent on the grant letter to the employee or board member, the required service period for option vesting is between zero and four years.

We had the following stock options outstanding and exercisable as of March 31, 2009 and December 31, 2008:

The weighted average remaining contractual life of all options outstanding, vested and expected to vest, at March 31, 2009 and December 31, 2008 was approximately 5.23 and 5.22 years, respectively.  The weighted average remaining contractual life of the exercisable options outstanding at March 31, 2009 and December 31, 2008 was approximately 4.64 and 4.61 years, respectively.

Our operations are organized into two reportable business segments within the meaning of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information.  Our reportable segments are (1) cinema exhibition and (2) real estate.  The cinema segment is engaged in the development, ownership, and operation of multiplex cinemas.  The real estate segment is engaged in the development, ownership, and operation of commercial properties.  Incident to our real estate operations we have acquired, and continue to hold, raw land in urban and suburban centers in Australia and New Zealand.

The tables below summarize the results of operations for each of our principal business segments for the three (“2009 Quarter”) months ended March 31, 2009 and the three (“2008 Quarter”) months ended March 31, 2008, respectively.  Operating expense includes costs associated with the day-to-day operations of the cinemas and live theatres and the management of rental properties (dollars in thousands):

We have significant assets in Australia and New Zealand.  To the extent possible, we conduct our Australian and New Zealand operations on a self-funding basis.  The carrying value of our Australian and New Zealand assets and liabilities fluctuate due to changes in the exchange rates between the US dollar and the functional currency of Australia (Australian dollar) and New Zealand (New Zealand dollar).  We have no derivative financial instruments to hedge against the risk of foreign currency exposure.

 

Presented in the table below are the currency exchange rates for Australia and New Zealand as of March 31, 2009 and December 31, 2008:

Basic earnings (loss) per share is computed by dividing the net income (loss) to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share is computed by dividing the net income (loss) to common stockholders by the weighted average number of common shares outstanding during the period after giving effect to all potentially dilutive common shares that would have been outstanding if the dilutive common shares had been issued.  Stock options and non-vested stock awards give rise to potentially dilutive common shares.  In accordance with SFAS No. 128, Earnings Per Share, these shares are included in the dilutive loss per share calculation under the treasury stock method.  The following is a calculation of earnings (loss) per share (dollars in thousands, except share data):

For the three months ended March 31, 2009 and 2008, we recorded losses from continuing operations.  As such, the incremental shares of 28,610 and 291,504, respectively, of exercisable stock options were excluded from the computation of diluted loss per share because they were anti-dilutive in those periods.

 

As of March 31, 2009 and December 31, 2008, we owned property held for and under development summarized as follows (dollars in thousands):

 

We recorded capitalized interest related to our properties under development for the three months ended March 31, 2009 and 2008 of $136,000 and $1.4 million, respectively.  We have curtailed the development activities for several of our properties under development.  For these projects, we have stopped the capitalization of interest expense.

As of March 31, 2009 and December 31, 2008, we owned investments in property and equipment as follows (dollars in thousands):

Depreciation expense for property and equipment was $3.2 million and $3.5 million for the three months ended March 31, 2009 and 2008, respectively.

Except as noted below regarding our investment in Malulani Investments, Limited, investments in unconsolidated joint ventures and entities are accounted for under the equity method of accounting, and, as of March 31, 2009 and December 31, 2008, include the following (dollars in thousands):

 

We continue to treat this investment on a cost basis by recognizing earnings as they are distributed to us.  We are currently in litigation with certain controlling shareholders and directors of Malulani Investments Limited (“MIL”).

In December 2006, we commenced a lawsuit against certain officers and directors of Malulani Investments Limited alleging various direct and derivative claims for breach of fiduciary duty and waste and seeking, among other things, access to various company books and records.  As certain of these claims were brought derivatively, MIL was also named as a defendant in that litigation.  On March 11, 2009, we and Magoon Acquisition and Development, LLC (“Magoon LLC”) agreed to terms of settlement (the “Settlement Terms”) with respect to this lawsuit.  Under the Settlement Terms, we and Magoon LLC will receive $2.5 million in cash, a $6.75 million three-year 6.25% secured promissory note (issued by The Malulani Group ("TMG")), and a ten year “tail interest” in MIL and TMG which allows us, in effect, to participate in certain distributions made or received by MIL, TMG and/or, in certain cases, the shareholders of TMG.  However, the tail interest continues only for a period of ten years and no assurances can be given that we will in fact receive any distributions with respect to this Tail Interest.  As of March 31, 2009, neither the cash, note receivable, nor the tail interest have been received by us and are not reflected in our balance sheet or statements of operations.  For a further explanation of this agreement, see Note 13 – Commitments and Contingencies.

The remaining retail condominium of our Place 57 joint venture was sold in February 2009 for approximately $4.0 million.  Based on the closing statements of the sale, our share of the sales proceeds was approximately $900,000 and earnings of $304,000.

Subsequent to January 1, 2002, in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we do not amortize goodwill.  Instead, we perform an annual impairment review of our goodwill and other intangible assets on a reporting unit basis unless changes in circumstances indicate that an asset may be impaired.  During the quarter ended March 31, 2009, our U.S. cinema reporting unit (which includes the assets of Consolidated Entertainment cinemas acquired on February 22, 2008) annual goodwill impairment test was completed and goodwill was determined not to be impaired.  As of March 31, 2009 and December 31, 2008, we had goodwill consisting of the following (dollars in thousands):

We have intangible assets other than goodwill that are subject to amortization and are being amortized over various periods.  We amortize our beneficial leases over the lease period, the longest of which is 20 years, our trade name using an accelerated amortization method over its estimated useful life of 50 years, and our option fee and other intangible assets over 10 years.  For the three months ended March 31, 2009 and 2008, amortization expense totaled $648,000 and $419,000, respectively.

Intangible assets subject to amortization consist of the following (dollars in thousands):

Prepaid and other assets are summarized as follows (dollars in thousands):

 

The income tax provision for the three months ended March 31, 2009 and 2008 was composed of the following amounts (dollars in thousands):

During the three months ended March 31, 2009 the Company’s FIN 48 liability increased by $127,000 reflecting the accrual of interest for IRS matters under litigation.

Notes payable and subordinated debt are summarized as follows (dollars in thousands):

During the first quarter of 2009, we took advantage of current market illiquidity for securities such as our trust preferred securities to repurchase $22.9 million in face value of those securities through an exchange of $11.5 million worth of marketable securities purchased during the period for the express purpose of executing this exchange transaction with the third party holder of these trust preferred securities.  These trust preferred securities are presented on our balance sheet at their net carrying value of $11.5 million and net of a discount of $11.4 million.  During the three months ended March 31, 2009, $106,000 of discount was amortized to interest income.

 

Other liabilities are summarized as follows (dollars in thousands):

 

Total debt of unconsolidated joint ventures and entities was $772,000 and $785,000 as of March 31, 2009 and December 31, 2008, respectively.  Our share of unconsolidated debt, based on our ownership percentage, was $257,000 and $261,000 as of March 31, 2009 and December 31, 2008, respectively.  This debt is without recourse to Reading as of March 31, 2009 and December 31, 2008.

On March 11, 2009, we and Magoon LLC agreed to terms of settlement (the “Settlement Terms”) with respect to that certain lawsuit entitled Magoon Acquisition & Development, LLC; a California limited liability company, Reading International, Inc.; a Nevada corporation, and James J. Cotter vs. Malulani Investments, Limited, a Hawaii Corporation, Easton T. Mason; John R. Dwyer, Jr.; Philip Gray; Kenwei Chong (Civil No. 06-1-2156-12 (GWBC)).  Under the Settlement Terms, we and Magoon LLC will receive $2.5 million in cash, a $6.75 million three year 6.25% secured promissory note (issued by TMG), and a ten year “tail interest” in MIL and TMG which allows us, in effect, to participate in certain distributions made or received by MIL, TMG and/or, in certain cases, the shareholders of TMG.  However, the tail interest continues only for a period of ten years and no assurances can be given that we will in fact receive any distributions with respect to this Tail Interest.

Under the terms of our Amended and Restated Shareholder Agreement with Magoon LLC, we are, generally speaking, entitled to receive, on a priority basis, 100% of any proceeds from any disposition of the shares in MIL and TMG held by us or Magoon LLC until we (Reading) have recouped substantially all of our litigation costs and the cost of our investment in MIL.  Accordingly, we will receive virtually all of the cash proceeds of the settlement, plus virtually all distribution with respect to the promissory note, until such time as we have recouped both our litigation costs and the cost of our investment.  Thereafter, Magoon LLC will receive some distributions under the promissory note and the Tail Interest (if any) until it has recouped its investment in MIL and TMG.  Thereafter, any distributions under the Tail Interest, if any, will be shared between us and Magoon LLC in accordance with the sharing formula set forth in the Amended and Restated Shareholder Agreement between ourselves and Magoon LLC.  Given the secured nature of the promissory note, we believe that we will recoup the full amount of our litigation costs and our investment in MIL from the proceeds of this settlement.

Noncontrolling interest is composed of the following enterprises:

 

 

 

 

 

The components of noncontrolling interest are as follows (dollars in thousands):

 

A summary of the changes in controlling and noncontrolling stockholders’ equity are as follows (dollars in thousands):

During the 2009 Quarter, we issued 83,568 and 14,461 of Class A Nonvoting shares to Mr. James J. Cotter and to Mr. S. Craig Tompkins, respectively, associated with their prior years’ vested stock bonuses.

 

U.S. GAAP requires that the effect of foreign currency translation adjustments and unrealized gains and/or losses on securities that are available-for-sale (“AFS”) be classified as comprehensive income (loss).  The following table sets forth our comprehensive income (loss) for the periods indicated (dollars in thousands):

The following table sets forth the terms of our interest rate swap derivative instruments at March 31, 2009:

In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), we marked our interest rate swap instruments to market on the unaudited condensed consolidated balance sheet resulting in a $243,000 increase to interest expense during the three months ended March 31, 2009, and a $61,000 decrease to interest expense during the three months ended March 31, 2008.  At March 31, 2009 and December 31, 2008, we have recorded the fair market value of our interest rate swaps of $1.7 million and $1.4 million, respectively, as an other long-term liability.  In accordance with SFAS 133, we have not designated any of our current interest rate swap positions as financial reporting hedges.

The following items are measured at fair value on a recurring basis subject to the disclosure requirements of SFAS No. 157 (dollars in thousands):

 

On September 16, 2008, we entered into a sale option agreement to sell our Auburn real estate property and cinema for $28.5 million (AUS$36.0 million).  The sale option agreement calls for an initial option payment of $948,000 (AUS$1.2 million), received on the agreement date, and four option installment payments of $316,000 (AUS$400,000), $265,000 (AUS$400,000), $265,000 (AUS$400,000), and $948,000 (AUS$1.2 million) payable over the subsequent 9 months.  The option comes to term on November 1, 2009 at which time the balance of $25.6 million (AUS$32.4 million) is due and payable.  At any time during the 13-month option, the buyer may decline to move further in the sale process resulting in a forfeiture of all previous option payments.  As of March 31, 2009, we have received the initial option payment and the first two of the scheduled option installment payments indicating that the purchaser is in compliance with the terms of the option.

The assets of the Auburn real estate and cinema are as follows:

The 2009 and 2008 quarterly results for the Auburn real estate and cinema are as follows:

 

In January and February 2009, Reading reacquired approximately $22.9 million of the trust preferred securities in exchange for certain marketable securities.  On April 30, 2009, Reading extinguished $22.9 million of these trust preferred securities, which will result in a second quarter gain on extinguishment of debt of approximately $11.5 million.

On April 11, 2009, we received $1.2 million in association with our investment in the Place 57 joint venture representing a return of substantially all of our initial investment.

On April 30, 2009, we entered into an agreement to purchase for $2.9 million (NZ$5.2 million) a property adjacent to our Manukau property.  The agreement is conditioned upon us getting regulatory approval and calls for a deposit of $147,000 (NZ$258,000) to be paid immediately which is returnable to us if we are unable to get regulatory approval, a second deposit to be made of $440,000 (NZ$773,000) upon regulatory approval, and the remaining balance to be paid on the settlement date of March 31, 2010.

We are an internationally diversified company principally focused on the development, ownership, and operation of entertainment and real property assets in the United States, Australia, and New Zealand.  Currently, we operate in two business segments:

 

 

 

We believe that these two business segments can complement one another, as the comparatively consistent cash flows generated by our cinema operations can be used to fund the front-end cash demands of our real estate development business.

We manage our worldwide cinema businesses under various different brands:

 

 

 

We believe cinema exhibition to be a business that will likely continue to generate fairly consistent cash flows in the years ahead.  This is based on our belief that people will continue to spend some reasonable portion of their entertainment dollar on entertainment outside of the home and that, when compared to other forms of outside the home entertainment, movies continue to be a popular and competitively priced option.  In keeping with our business plan of being opportunistic in adding to our existing cinema portfolio, on February 22, 2008, we acquired 15 cinemas with 181 screens in Hawaii and California (the “Consolidated Entertainment” acquisition) and we continue to consider the acquisition of cinema assets currently being offered for sale in Australia, New Zealand, and the United States.  Also, in April 2008 and in August 2008, we opened two leased cinemas in Rouse Hill and Dandenong, Australia with 9 and 6 screens, respectively.  Nevertheless, we believe it is likely that, over the long term, we will be reinvesting the majority our free cash flow into our general real estate development activities.  We anticipate that our cinema operations will continue as our main source of cash flow and will support our real estate oriented activities.

In short, while we do have operating company attributes, we see ourselves principally as a hard asset company and intend to add to shareholder value by building the value of our portfolio of tangible assets.

In addition, we may from time to time identify opportunities to expand our existing businesses and asset base, or to otherwise profit, through the acquisition of interests in other publicly traded companies, both in the United States and in the overseas jurisdictions in which we do business.  At March 31, 2009, our investments in the securities of other public companies aggregated $2.3 million, based on the closing price of such securities on that date.  We may also, in addition to our investments in various private cinema joint ventures, take positions in private companies.

At March 31, 2009, we owned and operated 52 cinemas with 427 screens, had interests in certain unconsolidated joint ventures and entities that own an additional 4 cinemas with 32 screens and managed 2 cinemas with 9 screens.

While remaining opportunistic in our acquisitions of cinema assets, our business plan going forward is to build-out our existing development properties and to seek out additional real estate development opportunities

while continuing to use and judiciously expand our presence in the cinema exhibition and live theatre business, by identifying, developing, and acquiring cinema and live theatre properties when and where appropriate.

We continue to acquire, to dispose of, or to reposition assets in accordance with our business plan.

As previously stated, with the purchase of the Consolidated Entertainment cinemas in February 2008 and the addition of our newly opened Rouse Hill and Dandenong cinemas in Australia, at March 31, 2009, we owned and operated 52 cinemas with 427 screens, had interests in certain unconsolidated joint ventures and entities that own an additional 4 cinemas with 32 screens and managed 2 cinemas with 9 screens.  Regarding real estate, we owned and operated during the period four ETRC’s that we have developed in Australia and New Zealand; owned the fee interests in four developed commercial properties in Manhattan and Chicago, all of which are improved with live theatres, which together comprise seven stages and, in two cases, ancillary retail and commercial space; owned the fee interests underlying one of our Manhattan cinemas and hold for development an additional seven parcels (aggregating approximately 123 acres) located principally in urbanized areas of Australia and New Zealand.  Two of these parcels, Burwood and Moonee Ponds, comprise approximately 54 acres, and are in areas designated by the provincial government of Victoria, Australia as “major principal activity centres.”  We are currently in the planning phases of their development.

Operating expense includes costs associated with the day-to-day operations of the cinemas and live theatres and the management of rental properties.  Our year-to-year results of operation were principally impacted by the following:

 

 

The tables below summarize the results of operations for each of our principal business segments for the three (“2009 Quarter”) months ended March 31, 2009 and the three (“2008 Quarter”) months ended March 31, 2008, respectively (dollars in thousands):

Included in the cinema segment above is revenue and expense from the operations of 52 cinema complexes with 427 screens during the 2009 Quarter and 49 cinema complexes with 404 screens during the 2008 Quarter.  These numbers include the results of the Consolidated Entertainment acquisition for 39 days during the 2008 Quarter.  The following tables detail our cinema segment operating results for the three months ended March 31, 2009 and 2008, respectively (dollars in thousands):

 

 

 

 

 

 

 

 

The following tables detail our real estate segment operating results for the three months ended March 31, 2009 and 2008, respectively (dollars in thousands):