EPR Properties (EPR) 2003 Q1 法說會逐字稿

I’d like to thank everyone for holding, and welcome to your conference call today with Mr. David Brain. At this time, we have all the lines muted. However, we will open up for a question-and-answer session 20 minutes after some of the presentation, and I do like to remind all the participants that this call is being recorded today. Thank you for using Sprint Conferencing Services.

Mr. Brain, I’ll go ahead and turn the call over to you at this time.

Thank you, Reka, and good morning to everybody. This is David Brain, and I need to start with the following statement, and that is, this conference call includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate and other comparable terms. Coming to actual financial conditions, results of operations, funds from operations may vary materially from those contemplated by such forward-looking statements. A discussion of the factors that could cause actual results to differ materially from those forward-looking statements is contained in the Company’s SEC filings, including the Company’s annual report on Form 10-K for the year ending December 31, 2002.

With that said, I’ll thank you again for joining us this morning. This is David Brain, the Company’s CEO. And joining me with comments and answering your questions is this morning, as usual, the Company’s Chief Financial Officer, Fred Kennon.

Good morning.

I’ll start this morning with an update on our primary tenant industry, the film exhibition industry. And for one of the first times in a long time, I have to tell you, things are off a bit. Box office revenues this year to date, 2003, are off compared to last year by 10 percent.

Two pieces of context I have to add, the first being obvious, and that is that the Iraq war was a big takeaway. During the first three weeks of the war, box office was off about 22 percent.

The other less obvious point is that this year-to-date data contains one less weekend than last year. Because of the way Nielsen EDI, the box office scorekeeper for the exhibit industry, cuts off the year and seasons, the initial weekend of the year, the January 3 weekend, didn’t count in the current year. Had it counted, the comparative year-to-date deficit would be cut by more than in half.

The other point that I’d like to make is that this is just a quarter-to-quarter comparison for actually what is quite a relatively minor season. On a rolling four-quarters’ basis, box office is still up a healthy 10 percent.

Now, along with this industry news, I want to update you on our portfolio performance. While the industry is off, as I said, year to date 10 percent, the EPR portfolio for that same period is off only 2 percent, somewhat of a good news/bad news story, but the magnitude of the positive difference of our portfolio is quite a plus. Further, our portfolio during this period continues to operate at a better-than-two-times cash flow rent coverage ratio. We continue to be very pleased with our portfolio performance.

It also seems that someone else is pleased as well. In April, Moody’s Investor Service upgraded our $104m investment-grade debt issue completed two years ago in the first quarter of 2001. That debt issue was collateralized with nine properties – seven AMCs, one movie co., and one Edwards megaplex theater. These properties were cited by Moody’s in their upgrade for their strong revenue and cash flow performance. This upgrade is the type of post-transaction performance we continue to strive to deliver to our shareholders and other capital market partners.

Now, further on the debt side, not only did we have an issue upgraded, but we also completed a new debt offering last quarter. At the end of February, the Company concluded a second sale of securitized debt. This recent one was a $155m issue secured by 15 properties – 11 AMCs, two Consolidateds, one Movie Co., and a low Cineplex-operated megaplex theater and was [indiscernible] by Goldman Sachs. This offering was again rated by Moody’s and also this time by Fitch. And even though the borrowing was larger relative to the property values when compared to the 2001 bond I just spoke of, about a 62 LTV this time as compared with about a 52 LTV last, this issue was rated more favorably; had a weighted average rating of about double-A.

We touched on this transaction in our last quarterly call but could not really discuss it at all since it was in the market at that time. Now, with the transaction concluded, I can tell you we are very pleased with its outcome. It converted all of our short-term floating rate debt to 10-year fixed rate obligations with an average coupon of about 5.5 percent. A small premium over the floating rate debt, it replaced but a huge 150-basis-point improvement from our similar Q1 2001 transaction just referenced in my upgrade discussion. About 100 basis points of the approved rate can clearly be attributed to lower base rates. But the balance, we believe, is in large measure related to the continued performance of our properties and the longer and stronger demonstrated track record of our property underwriting.

On a couple of final and related notes before we turn it over to Fred, I’d point out that we had one property acquisition during the first quarter, $7m acquisition of the Amstar 16 megaplex in Macon, Georgia, operated by Amstar Entertainment. Amstar is new to EPR and becomes the seventh theater-operated client in our portfolio. This property is the leading theater in its market and has a track record of superior financial performance.

Also to update you, the Colonel Glenn 18-theater operated by Rave Review Cinemas, opened as discussed last quarter, in December of 2002, has now completed its first full quarter of operations, and as we expected, it clearly is the dominant theater in its market.

Now, regarding further new property acquisitions, I want to inform you that we have a very good number of highly qualified opportunities. I am particularly pleased to report this to you in light of our long cash position following the conclusion of our debt offering and the pay-down of our short-term debt facilities. Investment of substantially all our quarter-end cash balance in the type of high-quality properties we target at acceptable yields is key to achieving the financial performance guidance we have given, and reaffirm, of $2.60 to $2.70 FFO per share for 2003.

The opportunities we are working on make us confident in our outlook, and we look forward to informing you in greater detail about them in future announcements.

And with that, I’ll turn it over to Fred, and I’ll look forward to any questions you might have in just a minute. Fred?

Thank you, David.

Our total revenue for the first quarter was up 33 percent over Q1 last year to $21 million. Included this quarter was $375,000 in percentage rents from two of our theater properties and approximately $580,000 in payments as a result of our settlement arising from the Loews bankruptcy. As you know, we approved percentage rents after a trigger level in total revenues are achieved at a property, and I’ll come back to the percentage rent topic a little later.

Property operating expenses increased $24,000 compared to last year. This is reflective of our mid-2002 acquisition of additional retail shop space, which is an integral part of our Consolidated Theater property in South Carolina. In addition, we also tend to be a little more conservative about anticipated property expenses in the early quarters of the year.

G&A expense increased over last year by $334,000, which reflects overall increases in most categories, largely the result of running a larger business compared to a year ago. However, two categories with significant increases accounted for approximately half of the year-over-year increase – those including insurance expense for both director and officer insurance and property insurance costs, and professional fees, which are primarily legal and accounting, which relate to compliance issues with the Sarbanes-Oxley requirements.

We expect the G&A run rate to be slightly lower through the balance of the year, probably in the range of 700 to $750,000 per quarter. Interest expense increased about $1.5m compared to Q1 last year. This reflects both our overall debt level being slightly higher but also included into interest expense this quarter are charges of just over $500,000, which are non-recurring, that relate to fees and expenses incurred with the issuance of the new debt, the related pay-downs on our short-term credit facilities, and the amendment of our iStar credit facility during the quarter.

Joint venture income is lower by about $284,000 compared to last year, and this reflects a full quarter of the effect of our reduced equity interest in the Cantera Theater Joint Venture that we have with our German partners. As you will recall, in December, our JV partners completed their acquisition up to the allowable total of 80-percent equity ownership, leaving EPR with a 20-percent ownership in that joint venture, which we will carry forward.

Fully diluted FFO increased 15 percent over the prior year to $11.3m for the quarter; on a per-share basis, FFO of 62 cents, compared to 60 cents last year, for an increase of just over 3 percent.

Now, reviewing some coverage ratios for the quarter, these include interest coverage at 2.7 times, debt service coverage at 2.2 times, and a fixed-charge coverage of 2.2 times.

Now, a couple comments on the balance sheet.

We ended the quarter with approximately $83m in cash. This liquidity positions us to complete the acquisition of identified properties for the closing during the second quarter consistent with our plan. We also amended our iStar credit facility during the quarter to increase the size to $75m, lengthen the term to three years, and provide additional liquidity and flexibility for qualifying collateral as we go forward.

Now, a few comments on our earnings guidance.

First, our expectation for the full year of 2003 is that our FFO will be in the range of $2.60 to $2.70 per share, as David mentioned earlier. This is consistent with our previous comments. A couple of the factors which may affect the achievement of the range and the high or low end of the range include, first, the timing and overall level of capital investment. And on that point, we are on track with our plan and have the liquidity to execute it. Additionally, our pipeline of acquisition targets continues to grow.

Second, the property level performance, as it relates to percentage rents. As mentioned earlier, we now have two theaters that have passed a threshold to trigger percentage rent this year. And as we mentioned on our previous conference call back in February, we had five of our theaters performing at a run-rate level that, if continued, would provide some level of percentage rent during 2003.

We continue to be optimistic based on the strength of our portfolio that we will have additional properties move into the percentage rent column as the year continues. Now, we try not to be movie critics here at EPR, but we also pay attention to the release calendar, and we are also quite optimistic that the studios will keep the theater operators stocked with good products this year.

And with that, let me turn it back over to David for his closing comments, and then we will answer your questions.

Thanks, Fred.

I don’t know that I have any additional comments at this point. What I’ll do is I think we’ll open up to questions, and, Reka, are you there?

Yes, Mr. Brain, I’m here.

Very good.

[Caller instructions.]

Our first question belongs to [David Ronco][ph]. Sir, you have the floor.

Hi, good morning, guys.

Hi, David.

Good morning.

Here with Jay. First question, related to the one acquisition of $7m for the first quarter, did that basically fall in line with your expectations in terms of first quarter acquisition volume, or were certain anticipated acquisitions delayed until 2Q?

Oh, it’s – we had targeted, really, I think as we’d indicated in our guidance, about $50m of acquisitions to come in the first half of the year. We didn’t really – probably could’ve been a positive if they’d occurred in Q1, but at the same time, we’re still confident that as we’ve indicated that everything is on track and on plan to get done. Some of it’s taking a little extra time to do in the manner to which we’d like to do it, and we’re always willing, I guess – I’ve got to say, David, to take what might be the extra time to do it right. And so we didn’t have a clear guidance, nor did I really have a hard set of expectations for Q1 versus Q2. But –

Great. But you’re still comfortable with the 50 million over the first half of the year?

We are.

Okay, great. In terms of just related to that question, how has pricing changed in terms of acquisition? Has it become more aggressive, or have things basically stayed the same?

Well, I’ll tell you with as many transactions as we have in negotiations at this time, I don’t want to give a lot of detailed discussion on pricing, but I will tell you it’s just kind of a fairly obvious state of the world today with the lower-rate environment and particularly the falling cap rates in a lot of property classes. Our own cap rate is not falling the way other people were talking about in other classes of property. Yet at the same time, as I’ve indicated in prior calls, there has been some downward pressure. Our cost to capital, as indicated by the debt financing, has improved as well, so we’re able to – we’ve brought in our cap rates a bit, but at the same time, we’re able to maintain the spreads to deliver the type of returns we’re targeting for shareholders. So some pricing pressure, cap rate pressure, but still things in very good shape to achieve what we want to achieve.

Great. Thanks a lot. I’ll turn over the floor.

Okay.

Our next question belongs to [Tony Pallone][ph]. Sir, you have the floor.

Thanks. Good morning. Fred, I think at the beginning of your presentation you mentioned a $580,000 number. I couldn’t quite catch what that was.

Okay, Tony, that was payments that we received from Loews. And as you will recall, in the process of the Loews bankruptcy, they actually rejected our lease, and then we subsequently renegotiated a new lease, and the rejection of that lease stemmed largely from the fact that they had about -- I remember, about $3m of essential mechanic liens against that property that they really didn’t have an alternative to avoid those claims except for rejecting our lease. I think, again, as you’ll recall, we described what that renegotiated lease looked like, and we essentially traded a piece of base rent on that store for what we think is a rather significant piece of percentage rent.

Where was the $580,000? Where did it show up?

In the press release, you’ll see it in the Other Income line.

It was really –

Total revenues, part of Total Revenues.

-- part of the settlement renegotiation of that lease.

Okay, but it was in Other Income?

Yes, on the press release, you’ll see Rental Revenue and Other Income included in the Other Income.

Okay. Can you – I’m still not understanding the cash balance and why it was so big. Can you just walk through that again?

Yes. Essentially, the debt issuance after pay-down of short-term credit facilities generated about $60m of excess proceeds for us. On top of that, at the end of the quarter, although we – in conjunction with that trend, the debt issuance, we paid down all of our short-term floating rate debt. At the very end of the quarter, we redrew $20m of debt under our iStar line, and that is about – that, coupled with just normal cash flow, that is about the $80m.

And that redraw was in conjunction with a negotiation and extension and restructuring of that line to make it more appealing and available and flexible to us.

So can you go over the various components of your debt at this time and what the rate is on each slice?

Well, you caught me without the notes on that right in front of me.

All right. We can go over it later then.

We have the specifics in our 10-K for the end of the year, and I can tell you the changes from that really are essentially that we had paid down the short-term debt, $91m, subsequently redrew $20m of that under the iStar line, which is a LIBOR-plus 400 rate, and our new debt was issued at an average life-of-the debt coupon of about 5.7 percent. And that’s $155.5m.

Okay. And, David, in terms of those box office numbers, I was unclear as to whether those were first quarter or year-to-date?

Tony, they’re very much essentially the same. The first quarter and year-to-date are running just about the same. It’s off 10 percent on the industry, off 2 percent on the portfolio. And very often I do distinguish between them on the call, and I didn’t this morning, so they’re kind of unified in telling the same story. They’re a little more – it’s more like, well, 11 versus 9, our portfolio of 2.6 as opposed to 2.2. They’re a little improved to date as they were by the end of the quarter but essentially the same.

Okay. And in your guidance, how much percentage rents do you have in the numbers?

Only what we have booked.

What was that number again?

For this year, we have booked – I believe it’s $325,000 total.

And so that was basically in the first quarter?

Let me check. No, it’s $375,000, I believe, in the first quarter.

I believe, Tony, in our guidance, we might have an additional $200,000 in Q4, which is consistent with our recognition last year. We had $200,000 in Q4. So beyond that, $375,000 already booked.

No, that’s correct.

So there is one other piece –

Okay. Any feel for what second quarter FFO is going to look like? I mean it just seems like the variability here is pretty substantial.

Well, if you do the numbers based on the cost of funds that we’re reinvesting, it does kick up the numbers considerably in the latter quarters of the year to get to – and obviously at a 62 rate to get to the 260, 270 range we talked about. So there’s no doubt about it. And we really – I’ve got to tell you, policy-wise, in conjunction with the Board, we’re giving annual guidance, not quarterly, so I can’t really hone you in on a number on the quarter, I think, but it’s fair to say if you do the math, there’s a big difference in the performance relative to the reinvestment of cash versus just sitting on the balance sheet. And we’re very aware of that. The math is reasonably straightforward to do, and I think that will get you there with regard – the timing will [inaudible] very little. You know, when we get it down, vis-à-vis Q2 versus Q3 and Q4, but even if we get it done at the end of Q2, it’ll get us to our range.

Okay, thanks.

Okay.

We have another question from [John Roberts][ph].

Good morning. First of all, I’ve got some housekeeping issues before I go to questions. I’ve got your spreadsheet up here. I hope you guys have got it in front of you. And I was plugging the numbers in my model, and it seems as if we’ve got some discrepancies here. If you look at the total revenue numbers, you add up that 20485 and the 587, you come to 21072, not 21045. And I’m just wondering which is the correct number there?

Well, we don’t really – we don’t have a spreadsheet model open. I mean we’ve got the statement in front of us.

Yeah, if you just add those numbers up, they don’t add up.

[Inaudible].

Rental revenue plus other income, you add them up, it comes to 21072 and you’ve got 21045, which is total revenue. I’m just – you know, from my modeling –

Well, if we made an error there, I’m stunned. I didn’t think we were capable (inaudible).

Not audited, right? So the accountants haven’t looked at it?

I think that’s the problem. They did look at it. No, they definitely have, and this incorporated all the comments. It’s standard procedure here now to do quarterly reviews.

And, actually, you’ve got a similar situation with the balance sheet. The numbers also don’t add up on the liability side. You’re off by about $375,000. The bottom line, if you add all those lines up, it comes to – hang on a second here. I’ve got to get my spreadsheet up.

First off, John, your question on the revenue number for the first quarter, can you tell me what numbers that you have there again that aren’t adding up?

Yeah, I’m just looking at your income statement on the website. If you add the 20485, which is the rental revenue number –

Actually, that’s 20458.

Okay.

Well, somebody transposed that number, it sounds like, in getting –

The press release says 20485. Okay, so it should be 20458?

We’ve got a hard copy of the press release right in front of us, yeah, and it’s 458. I don’t know how they got –

All right. On your website, it says 485.

Oh, that’s interesting. That’s a transcribe error that went – I don’t know. We’ll have to find out then.

Okay. And you’ve got – you know, if you go to the balance sheet, you’re also off by – it’s about $375,000, I believe, on the bottom line if you add all of the various numbers in your – on the press release on the website. Anyway –

We’ll check what happened on the – whatever the electronic glitch may be on the website.

Okay. I’d just like to know for my – you know, working on my spreadsheet here, and the numbers aren’t adding up for me.

Yes, I hear you. Hopefully, if you looked out on the wires and saw the press release, those numbers should be consistent with what we have in front of us.

All right. Very good.

I don’t know if there’s some electronic glitch that occurred by posting that to our website, but I assure you that –

I can’t actually tell you. We have an outside service do that web posting. I don’t know whether they transcribe it or how they do that. But we will find out, and we will fix that.

Great. Okay. Well, I’ll just look at your Dow Jones wire release then to get the numbers.

Now, you noted the one acquisition in the first quarter, $7m megaplex, you did not – that was something that wasn’t announced, at least I didn’t see it on the Dow Jones. Now, going forward, are you giving any guidance as to when you’re likely to make the acquisitions that you’re looking at here in the second, third and fourth quarters?

I think what we said is 50 million in the first half of the year, and that’s the guidance we’ve given. We haven’t really given any dates. I do, though, want to let you know there was a press release. Whether Dow Jones picked it up or not –

Okay.

-- we had a press release dated March 31, 2003. It is posted to our website, and I’m looking this time off our website roster of our current news postings.

Okay. Well, I guess Dow Jones just didn’t pick it up. I didn’t see it. And I guess John didn’t e-mail it to me. I didn’t pick that up. But be that as it may …

In terms of my cap rate pressure before –

Yes, sir?

Will you give any thought as to exactly how much pressure you’re seeing and what type of basis-point drop are you seeing in cap rates here?

Really, I don’t think it’s really -- in really the shareholder interest to discuss that in detail at this time. I think, generally, I’ve said, you know, there’s probably, you know, 50 to 100 basis points of pressure that’s occurred over where we were. We’ve never really – we don’t discuss it on any particular property. We’re trying to discuss it in aggregate. I think this serves the shareholders best to allow the company to conduct its business appropriately and properly. But I think if you do the math again, you get 150 basis points – 100 to 150 basis points improvement in debt with a 50 leverage, you’ve got 50 to 100 basis points of improvement in your spreads anyway. So as I say, we feel like the spread, the shareholder returns, are still very adequate, and even though there is some pressure, that’s really the extent of which we’ve commented, and I really want to stay with that level of comment.

That’s fine. So, in essence, what you’re saying is the spreads have basically stayed the same?

That is correct.

Okay. On the debt question – I’m following up on the previous debt question – what at this point is your total cost of debt excluding the variable rate debt?

[Inaudible.]

[Inaudible] fixed rate debt.

[Inaudible] the quarter, I believe that was 6.6 percent.

Six point six?

Yup.

Yes.

That’s about [indiscernible].

Great. Okay, thanks.

Okay.

We have a question from [John Bratt][ph]. Sir, you have the floor.

Morning, guys.

John.

Most of my questions were answered, but one question, David. At the end of the year, you said, and I think you’ve reiterated today, that you felt that there might be five properties contributing, you know, percentage rents during the year. Given the current box office trends, would you – are you holding to that statement?

Yes, John. Well, I still feel like that’s a good number. You know, it’s a whole year. Continued to show a little bit of weakness. It could be four or something, you know, I guess, because some of them are really in a run rate in it, but we haven’t been able to book it yet, and we don’t count it before it happens.

Okay. If –

[Inaudible] going to be just about essentially five. I still hold to that.

Okay. If we would take it one step further and sort of look out towards next year and you get a resumption of sort of 5- to 8-percent type of box office increases, what might we see the number of theaters going to then?

I don’t have that right in front of me, John, but I think the number’s still around seven or eight.

Okay, so another couple?

Yeah, another couple.

Yes, we had – in addition to the five that we mentioned that we’re tracking on a run-rate level to achieve percentage rents for us, we had two more that were close --

All right.

[Inaudible] as of the end of the year.

Yes.

Okay. All right. Thank you.

Okay.

[Joe Garner][ph], you have the floor.

Good morning.

Good morning.

A couple questions. You may have mentioned this at the beginning of the call, but you talked about the performance of the portfolio versus the industry. I’m wondering if you could talk about what do you think – what your thoughts are on what drove the out-performance for you -- perhaps located into some of the markets that may not have seen the weather impact as much as others in the quarter? Or is this a continued market share shift from some of the smaller theaters? Or what do you think was behind that?

Well, I don’t know that it was really as regional. Like I don’t have any information there to tell you. The interesting thing about – as we’ve tracked our portfolio relative to the industry, we tend to -- fundamentally, our portfolio tends to run closer to capacity, kind of theoretical capacity, than a lot of other stores. So it just runs steadier. So when the industry – when we get a huge boom sometimes in a Q4 – let’s say like we had at the end of 2001, for example, Q4 ’01 was a bit spike -- we didn’t get quite as big a spike because we’re already running close to capacity, if you will. But when the industry – we see some softness, same—you know, they’re correlated. We just have to lower beta.

Now, I think that just because we have a steadier, more solid performing portfolio, better located, that you just – you know, year-round, day in, day out, round the clock, round the calendar, we’ll run at a steadier rate. I don’t have any regional weather factors to give you on that or we’ve had – you know, as will be the case, we’ve had a couple of markets we’ve been in and added a couple new megaplex theaters, some, you know, within five, seven miles that drew off. On other cases, we had theater close, and there’s no real overwhelming trend to point to.

Okay. Wonder if you could talk a little bit more, sort of your outlook for the box office here for the summer and the balance of the year. You’re fairly close to the industry there. It was kind of a slow start to the year. Last weekend obviously was a nice pick-up with X2. I’m wondering what your thoughts might be here for the summer, and if you care, be curious to hear your thoughts on handicapping some of the releases for the summer, what you think might be some of the big films that may drive the box office.

Well, I’m not going to handicap individual films. That’s just dangerous. I will tell you, I guess, two things. One is the release calendar was slowed a bit. There were a couple titles that were [dragged] an extra two weeks or so during the Iraq war in hitting a release date. And the studios were purposely not really naming release dates for things they had targeted because the war was pending. So we had a little shortness of product, which I think the studios are going to make up. That’ll be a positive thing.

The calendar – I think a lot of the industry buzz right now is calling this the summer of sequels. I think there were 25 to 27 sequels targeted through the year, not just the summer, but heavily in the summer. You know, the appetite is traditionally or recently, the last few years, been very, very good for sequels. A lot of people see them. If they saw the first one, they like to go to the second, and if they missed the first one, they like to kind of get on that train if it appears it’s kind of a franchise building around some titles, let’s say like the Matrix and X- Men and those type of things. So I guess, you know, the feeling is that there’s a pretty strong slate out there. No particular title I’m going to, you know – we don’t bet that way, and I don’t want to –

Sure.

-- encourage that. But it does feel pretty good. Studios are talking very positively. They get a lot more advanced screening and focus group impact reports, and we’re feeling pretty good about it.

So you’re seeing things like the release dates firming up?

Yes.

That’ll be [indiscernible].

Release dates are now firming up now that there is more stability with regard to kind of the geopolitical climate. I will tell you that we’re going to come into a season -- the studios always hate when you get distractions, particularly with political, with the election. And as you come into more of an election season, you know, you’re already seeing candidate forums and so forth for the presidential election. You know, that always tends – they want to hold movies back because they think that’s a distraction. Sometimes it keeps people from going. And so we’ll see. But right now, don’t hear any of that. It looks very strong. The calendar seems very full through the balance of the year.

Good. Thank you very much.

Okay.

[Brett Strasser][ph], you have the floor.

Good morning. Just a quick question on screen closures, seeing how the box office was down around 10 percent. Can you give us a little color on screen closures, you know, so far in 2003 and what you see for the rest of the year?

You know, I have a screen closure through the – yeah, let’s see. I had them as of – through the quarter, I guess, this is, we had – ’03, we had 200 screens close in the first quarter, which is very similar to ’02; ’02, we had almost – we had a little more, 300 screens closed in Q1 ’02. This time, we had 200 screens close. And, again, the average theater closing is a five-screen theater. It’s very typical for everything we’ve talked about before. There really wasn’t a lot of news on this front. It’s still a declining rate. We are seeing some – I think I mentioned before, there is some new construction going on of some new theaters, but right now, the industry still is in a net decline screen count trend, and that 200, you know, would probably take you through to about, you know, a run rate of 800 to 1,000 screen reduction still for the year.

All right, thanks.

Okay.

[John Roberts][ph], you have the floor.

Yes, just a couple of follow-up questions. One I forgot to ask you about is obviously you’ve added that Other Income line item. I assume that’s all the Loews settlement. Is that right?

Yes, predominantly.

Okay. Now, when you say predominantly, is it going to be something there going forward?

Well, I’m not – no, I wouldn’t bet that there is necessarily, but out of that, I believe that Loews settlement was about $580,000, so there may be some other income that flowed in there, but typically not, John.

Okay. Is your -- Amortization line item is a new item as well. Is that something that will continue going forward?

Yes, it will. We have – it now has become significant enough that it’s appropriate that we split it out and identify it. In the past, it was typically lumped into our amortization.

Okay.

We decided to break it out on a separate line.

Okay. So basically lumped into depreciation?

Well, yeah.

Depreciation amortization, okay.

It was previously, however, you will start seeing it comparable when we present the public financials, so you’ll always have a prior-period comparison.

Very good, because we obviously need that for modeling purposes. Also, I noticed that the Property Operating Expense line jumped up a bit here. Any reason for that?

Yes, actually, we picked up additional retail shop space in 2002 with the acquisition of one of the theaters, the Consolidated Theater property in South Carolina. So there’s a little bit of increase related to that, and, also, I think in – we’re probably going to approach it on a little more conservative basis early in the year.

So we can anticipate that will stay at this type of run rate going forward?

You know, it’s probably reasonable, yeah. Might tail down a little bit as we get closer to the end of the year and we have more clarity and visibility on the property expenses, but typically, like in the case of the space that we have, where we picked up last year in South Carolina, we don’t have a long track record to be 100-percent accurate in predicting that, so we’ll tend to be a little more conservative early on.

Great. That’s it for me. Thanks.

Okay.

[Caller instructions.]

Mr. Brain, I believe that concludes your questions at this time.

Very good. Well, thank you. Thank you, Reka. Thank you, everyone, for joining us. We always appreciate these opportunities to check in with you and look forward to hearing from you at any time, and we’ll see you next quarter if not before. Thank you.