Craig (CRG) - Vulture Pick Message Board

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Non-Tech : Craig (CRG) - Vulture Pick

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To: LauA who wrote (17)	1/11/1999 3:21:00 PM
From: Andrew	Read Replies (2) of 27

I was at annual mtg for crg, rdge and cdl held in LA last month as well as those in previous years. maybe we met. my view is a bit different. I think very highly of this team's ability to build and manage a theater business. As for being "stock managers" I would join your sentiment and am used to cotter's very poor presentation approach. In response to your points/questions (in order of importantce): 1) Cash flow positive estimate comes from combination of three things a) recent 10-Q's showing theater cash flow now reaching levels of corporate overhead and footnotes showing scheduled openings of new theaters whose cash flow would outweigh interest income on the cash; b) annual meeting comments as to expected cash flow from foot-noted theaters schedule to open as well as nyc theater purchase taking place at 8X cash flow means around $6 MM cash flow from CITY CINEMA purchase alone less $3.9MM lease cost. Off broadway theaters another chunk of positive cash flow; c) annual meeting comments about US corp o/h and Austrailia o/h able to handle INCREMENTAL 100+ screens EACH w/o much incremental cost. 2) Carmike's numbers are down because they are writing off and closing ton of older theaters and are still stuck with a ton of older screen base. I believe sales/screen are up modestly except recently vs titanic comps; what makes RDGE so compelling vs any other industry player is RDGE's growth from new state-o-art theaters is much larger and off much much smaller old theater base. 3) australia- annual meeting stated getting great returns on cash BEFORE cost of Aussie infrastructure which they said is now capable of managing a 200 screen chain w/o much more cost. They overcame huge barrier to entry (politics of oligopoly) to get into market and now are accepted participants protecting by it. 4) angelica- annual mtg- they said NYC angelica bought w/ $2mm cash flow it now has $3MM; houston angelika "jury still out"; its not yet providing expected returns but too soon to tell as their location (downtown redevelopment zone) not fully occupied by others. cautious eye and sharing similar concerns as your sources regarding other sites especially since australia providing much better returns. 5) nyc pricing- appears to be arms length; the multiple is in line and the conflicts are so apparent they must take pains to justify everything. actually sale removes previous conflict once and for all- city cinemas owned 1/6 of angelika and got paid $350-75 K/yr to 'manage" angelika. That annual conflict gets eliminated and purchase protects the angelika investment from horrendous result from sale of those theaters to 3rd party exhibitor. don't really like rdge stock being issued at $9 for live theaters; defense is current price is much lower and RDGE has option to use cash. However, think co should be more forthcoming and talkative about its plans to get better rdge price in market and use cash instead. Its not like the info's not in the 10-Q's. its just that no one cares to read them. 6) pfd was the cheaper play historically. But the lower voting rights on the pfd doesn't matter because cotter and forman family controlled over 50% so no need to pay premium. origin- like a/b stock before nyse allowed it so pfd was created. last year's distribution made the pfd much more liquid. now pfd trades at parity more often and sometimes at premium. in fact the big drop in august was caused when small block of crg common was puked on market and then pfd sold down thereafter. RDGE is now sometimes the cheapest play. (note, when you speak of arm's length.- if rdge at $9 is good enough for Cotter and the forman's its a bargain below that price!!) 7) they said at annual meeting that these companies would all get rolled into one but there are large NOL's to maximize. They don't like 3 annual meetings and public entities either. With sale of CDL property in phoneix (in escrow), CDL NOL used up and may get rolled in in 1999. RDGE won't get folded in until NOL used up or clarified (IRS audit). When there is no NOL there is no need for separate cos. 8) big 4 was a good buy in a creative way from a distressed seller. In addition to cheap federal water, they got a ton of empty land upon which to grow more citrus from a lender who forclosed on previous owners and was about to lose its cheap water priviledges. As for this year's freeze, yep it probably got wiped out but that is 1 year of planted costs and some this cost was probably insured. The profits from this year's crop - gone for good. the future annuity still there and positioned for growth with new trees on extra empty land.

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