-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BX12zSunYLc9Ju2pWQ66+h0rt++mtiSJBb3F+zNjjufM0MYtYnR/30EtedRzS+l+ 5x2lOFmqSOYn05StcH5k1A== 0000950144-96-002190.txt : 19960514 0000950144-96-002190.hdr.sgml : 19960514 ACCESSION NUMBER: 0000950144-96-002190 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960328 FILED AS OF DATE: 19960513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: REGAL CINEMAS INC CENTRAL INDEX KEY: 0000905035 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830] IRS NUMBER: 621412720 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21772 FILM NUMBER: 96561948 BUSINESS ADDRESS: STREET 1: 7132 COMMERCIAL PARK DR CITY: KNOXVILLE STATE: TN ZIP: 37918 BUSINESS PHONE: 4239221123 MAIL ADDRESS: STREET 1: 7132 COMMERCIAL PARK DR CITY: KNOXVILLE STATE: TN ZIP: 37918 10-Q 1 REGAL CIMEMAS, INC. FORM 10-Q 03-28-96 1 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 March 28, 1996 Commission file number 0-21772 ------------- Regal Cinemas, Inc. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Tennessee 62-1412720 - ------------------------------- -------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 7132 Commercial Park Drive Knoxville, Tennessee 37918 - ------------------------------------------ ---------------- (Address of Principal Executive Offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (423) 922-1123 ---------------- 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 No ------- -------- Common Stock outstanding - 17,524,379 shares at May 13, 1996 2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- REGAL CINEMAS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (in thousands of dollars) ASSETS
March 28, December 28, 1996 1995 --------- ------------ Current assets: Cash and equivalents $ 1,148 $ 5,037 Accounts receivable 660 927 Inventories 825 831 Prepaids and other current assets 2,562 2,646 Refundable income taxes 849 2,696 Deferred income taxes 679 122 -------- -------- Total current assets 6,723 12,259 -------- -------- Property and equipment: Land 20,601 20,500 Buildings and leasehold improvements 134,247 124,931 Equipment 82,949 78,585 Construction in progress 26,527 22,391 -------- -------- 264,324 246,407 Accumulated depreciation and amortization (36,192) (33,327) -------- -------- Total property and equipment, net 228,132 213,080 -------- -------- Other assets 9,709 9,820 -------- -------- Total assets $244,564 $235,159 ======== ========
See accompanying notes to condensed consolidated financial statements. 2 3 REGAL CINEMAS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) ------------------------------------------------- (in thousands of dollars, except share amounts) LIABILITIES AND SHAREHOLDERS' EQUITY
March 28, December 28, 1996 1995 ---------- ------------- Current liabilities: Current maturities of long-term debt $ 8,600 $ 9,800 Accounts payable 18,543 16,675 Accrued expenses 4,258 5,185 -------- -------- Total current liabilities 31,401 31,660 Long-term debt, less current maturities 96,450 92,450 Other liabilities 3,580 3,542 Deferred income taxes 6,273 5,454 -------- -------- Total liabilities 137,704 133,106 -------- -------- Shareholders' equity: Preferred stock, no par; 1,000,000 shares authorized, none issued - - Common stock, no par; 50,000,000 shares authorized, 17,524,379 and 17,503,986 shares issued and outstanding at March 28, 1996 and December 28, 1995, respectively 74,167 73,832 Retained earnings 32,693 28,221 -------- -------- 106,860 102,053 -------- -------- Total liabilities and stockholders' equity $244,564 $235,159 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 4 REGAL CINEMAS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME ------------------------------------------- (in thousands of dollars, except per share amounts)
Three Months Ended ------------------------------------ March 28, March 30, 1996 1995 ----------------------------------- Revenue: Admissions $36,737 $25,650 Concessions 14,675 10,365 Other operating revenue 831 686 ------- ------- Total revenues 52,243 36,701 ------- ------- Operating expenses: Film rental and advertising costs 18,922 12,334 Cost of concessions and other 1,892 1,291 Theatre operating expenses 17,915 14,798 General and administrative expenses 2,008 1,444 Depreciation and amortization 2,965 2,072 ------- ------- Total operating expenses 43,702 31,939 ------- ------- Operating income 8,541 4,762 Other income (expense): Interest expense (1,244) (887) Interest income 96 56 ------- ------- Income before provision for income taxes 7,393 3,931 Provision for income taxes (2,921) (1,559) ------- ------- Net income $ 4,472 $ 2,372 ======= ======= Earnings per common share: Primary $ .24 $ .13 ======= ======= Fully diluted $ .24 $ .13 ======= =======
See accompanying notes to condensed consolidated financial statements. 4 5 REGAL CINEMAS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (in thousands of dollars)
Three Months Ended ---------------------------- March 28, March 30, 1996 1995 --------- --------- Cash flows from operating activities: Net income $ 4,472 $ 2,372 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,965 2,072 (Gain) loss on sale of assets 8 (26) Deferred income taxes 262 2,148 Changes in operating assets and liabilities: Accounts receivable 267 802 Inventories 6 (55) Prepaids and other current assets 84 (372) Refundable income taxes 1,847 660 Accounts payable 1,868 (2,549) Accrued expenses and other liabilities (889) (1,928) ------- ------- Net cash provided by operating activities 10,890 3,124 Cash flows from investing activities: Capital expenditures, net (17,925) (13,292) Investment in other assets 12 (1,207) ------- ------- Net cash used in investing activities (17,913) (14,499) Cash flows from financing activities: Net borrowings under long-term debt 2,800 9,586 Redemption of preferred stock - (1,196) Net proceeds from issuance of common stock 304 152 Stock compensation expense 30 30 ------- ------- Net cash provided by financing activities 3,134 8,572 ------- ------- Net decrease in cash and equivalents (3,889) (2,803) Cash and equivalents at beginning of period 5,037 6,929 ------- ------- Cash and equivalents at end of period $ 1,148 $ 4,126 ======= =======
See accompanying notes to condensed consolidated financial statements. 5 6 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- 1. THE COMPANY AND BASIS OF PRESENTATION Regal Cinemas, Inc. (Regal) and its wholly owned subsidiaries, Litchfield Theatres, Ltd. (Litchfield) and Neighborhood Entertainment, Inc. (Neighborhood); collectively referred to as the "Company" operate multi-screen motion picture theatres principally throughout the eastern United States. The Company formally operates on a fiscal year ending on the Thursday closest to December 31. On April 17, 1995, Regal issued 543,170 shares of its common stock for all of the outstanding common stock of Neighborhood. The merger has been accounted for as a pooling of interests and, accordingly, these condensed consolidated financial statements have been restated for all periods to include the results of operations and financial positions of Neighborhood. Separate results of the combining entities for the three-month period ended March 28, 1996 and the three-month period ended March 30, 1995 are as follows:
Three Months Three Months Ended Ended March 28, 1996 March 30, 1995 -------------- -------------- Revenues: (in thousands) Regal $52,243 $32,542 Neighborhood - 4,159 ------- ------- $52,243 $36,701 ======= ======= Net income (loss): Regal $ 4,472 $ 2,627 Neighborhood - (255) ------- ------- $ 4,472 $ 2,372 ======= =======
6 7 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- 2. RECENTLY ADOPTED ACCOUNTING POLICIES Effective December 29, 1995, the Company adopted Statement of Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which i) requires that long-lived assets to be held and used be reviewed for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable, ii) requires that long-lived assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell, iii) provides guidelines and procedures for measuring impairment losses that are different from previously existing guidelines and procedures. Such adoption had no effect on the Company's financial statements. Also effective December 29, 1995, the Company adopted Statement of Accounting Standards No. 123, Accounting and Disclosure of Stock-Based Compensation, which encourages but does not require companies to recognize stock awards based on their fair value at the date of grant. As the Company elected to adopt only the disclosure requirements of the new standard, it will continue to apply the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equal the market price of the underlying stock on the date of grant, no compensation expense is recognized. 3. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheet as of March 28, 1996, the condensed consolidated statements of income for the three months ended March 28, 1996 and March 30, 1995, and the condensed consolidated statements of cash flows for the three months ended March 28, 1996 and March 30, 1995 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The December 28, 1995 information has been derived from the audited December 28, 1995 balance sheet of Regal Cinemas, Inc. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report to Shareholders for the year ended December 28, 1995. The results of operations for the three month period ended March 28, 1996 are not necessarily indicative of the operating results for the full year. 4. INCOME TAXES The Company's effective income tax rate differs from the expected federal income tax rate of 35% due to the inclusion of state income taxes. 7 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- 5. LONG-TERM DEBT Long-term debt at March 28, 1996 and December 28, 1995, consists of the following:
March 28, December 28, 1996 1995 --------- ------------ (in thousands) Regal $150,000,000 senior reducing revolving credit facility which expires on June 30, 2001, with interest payable quarterly, at LIBOR (5.31% and 5.7% at March 28, 1996 and December 28, 1995, respectively) plus 1.0%. Draw capability will expire on June 30,1997. Repayment of the outstanding balance on the credit facility will begin September 30, 1997, and consist of 5% of the outstanding balance on a quarterly basis through June 30, 1999. Thereafter, payments will be 7.5% of the outstanding balance quarterly through June 30, 2001. $ 96,450 $ 92,450 Demand note payable to former owners of North and South Carolina theatres. Interest is payable at Company's senior credit facility rate less .25% and is collateralized by letters of credit 8,600 9,800 -------- -------- 105,050 102,250 Less current maturities (8,600) (9,800) -------- -------- $ 96,450 $ 92,450 ======== ========
8 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- Regal's reducing revolving credit facility contains various restrictive covenants which require Regal to maintain certain financial ratios and limit annual capital expenditures. During 1995, the Company amended its Loan Agreement to decrease the interest rate, increase the facility to $150 million, extend the maturity of the facility to June 30, 2001, modify the collateralization of the facility to a negative pledge of substantially all assets of the Company, and modify certain financial covenants. 6. EARNINGS PER SHARE Primary earnings per share have been computed by dividing net income applicable to common stock (net income less dividend requirements for preferred stock) by the weighted average number of common and common equivalent shares outstanding during each period. Shares issued in connection with the Litchfield and Neighborhood mergers have been included in shares outstanding for all periods presented. Common equivalent shares relating to options issued during the 12-month period preceding the initial public offering have been calculated using the treasury stock method assuming that the options were outstanding during each period presented and that the fair value of the Company's common stock during each period was equal to the initial public offering price. Common equivalent shares relating to options issued subsequent to the initial public offering have been calculated using the treasury stock method for the portion of each period for which the options were outstanding and using the fair value of the company's common stock for each of the respective periods. All per share data has also been adjusted to give effect to the December 1995 common stock split. After giving effect to the items described above, primary earnings per common share have been computed based on the assumed weighted average number of common and common equivalent shares outstanding in each period ((in thousands) 18,334 shares for the three month period ended March 28, 1996; and 17,973 shares for the three month period ended March 30, 1995). Fully diluted earnings per common share reflect the retroactive effect of the preferred stock conversion at the time of the initial public offering. The calculation utilizes net income before preferred dividends and increased common share equivalents from the conversion ((in thousands) 18,402 shares for the three month period ended March 28, 1996; and 17,973 shares for the three month period ended March 30, 1995). 9 10 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- 7. PENDING ACQUISITIONS On February 2, 1996, the Company entered into a definitive agreement to acquire all the outstanding stock of Georgia State Theatres, Inc. (GST) in exchange for approximately 912,000 shares of the Company's common stock, subject to adjustment in certain circumstances. GST currently operates 10 theatres with 68 screens. Provided shareholder approval of the Merger Agreement is obtained, the Company intends to close the transaction and effect the merger promptly following the special meeting of GST shareholders scheduled for May 30, 1996. Also, the Company has entered into an agreement with an individual, George Krikorian ("Krikorian"), and corporations controlled by him, to acquire certain assets of eight theatres with 69 screens. Consideration for the transaction is anticipated to be approximately 470,000 shares of Company common stock and approximately $14.1 million cash. The transaction is anticipated to be consummated during the second quarter of 1996. The following unaudited pro forma results of operations for the three-month periods ended March 28, 1996 and March 30, 1995, respectively, give retroactive effect to the GST and Krikorian acquisitions. The pro forma results of operations assume the acquisitions occurred at the beginning of fiscal 1995 and have been prepared for comparative purposes only and do not purport to indicate the results of operations that would actually have occurred had the combinations been in effect on the dates indicated, or which may occur in the future.
(in thousands, except per share data) Three Months Ended March 28, 1996 March 30, 1995 -------------- -------------- Revenue $59,506 $44,897 Operating income 8,882 5,110 Net income applicable to common stock 4,351 2,134 Earnings per common share: Primary $ .22 $ .11 ======= ======= Fully diluted $ .23 $ .11 ======= =======
10 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following analysis of the financial condition and results of operations of Regal Cinemas, Inc. (Regal) and its wholly owned subsidiaries, Litchfield Theatres, Ltd. (Litchfield) and Neighborhood Entertainment, Inc. (Neighborhood), collectively referred to as the "Company," should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included herein. On June 15, 1994, Regal consummated the acquisition of Litchfield and on April 17, 1995, the Company consummated the acquisition of Neighborhood, and the acquisitions have been accounted for as poolings of interest. BACKGROUND OF REGAL Regal has achieved significant growth in theatres and screens since its formation in November of 1989. Since inception through March 28, 1996, Regal has acquired 97 theatres with 624 screens, has developed 28 new theatres with 319 screens and has added 36 new screens to acquired theatres. Theatres developed by the Company typically generate positive theatre level cash flow within the first three months following commencement of operation and reach a mature level of attendance within one to three years following commencement of operation. The Company does not defer any pre-opening costs associated with opening its theatres and expenses such costs in the periods incurred. Theatre closings have not had a significant effect on the operations of the Company. On June 15, 1994, Regal consummated the acquisition of Litchfield, a southeastern theatre chain consisting of 24 theatres and 172 screens, for 5,804,045 shares of Regal's common stock. In conjunction with the transaction, Regal refinanced approximately $17 million of debt on Litchfield's balance sheet. On April 17, 1995, Regal consummated the acquisition of Neighborhood for 543,170 shares of Regal common stock. In conjunction with the transaction, Regal refinanced approximately $10 million of debt on Neighborhood's balance sheet. In addition, on April 28, 1995, the Company completed the purchase of substantially all of the assets of three companies which held four theatres with 40 screens. Consideration for the transaction was approximately $14.3 million cash and other consideration and 160,875 shares of Regal common stock. At March 28, 1996, the Company had 125 multi-screen theatres with an aggregate of 979 screens. At such date, Regal had 16 new theatres with 183 screens under construction and 23 screens under construction at existing theatres and two pending acquisitions for the purchase at eighteen theatres with 137 screens. 11 12 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED RESULTS OF OPERATIONS The Company's revenues are generated primarily from box office receipts and concession sales. Additional revenues are generated by electronic video games located adjacent to the lobbies of certain of the Company's theatres, by on-screen advertisements and by revenues from the Company's two entertainment centers adjacent to theatre complexes, the first of which opened in August 1995. Direct theatre costs consist of film rental and advertising costs, costs of concessions and theatre operating expenses. Film rental costs are related to the popularity of a film and the length of time since the film's release and generally decline as a percentage of admission revenues the longer a film has been released. Because certain concession items, such as fountain drinks and popcorn, are purchased in bulk and not pre-packaged for individual servings, the Company is able to improve its margins by negotiating volume discounts. Theatre operating expenses consist primarily of theatre labor and occupancy costs. Future increases in minimum wage requirements or legislation requiring additional employer funding of health care, among other things, may increase theatre operating expenses as a percentage of total revenues. 12 13 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED The following table sets forth for the fiscal periods indicated the percentage of total revenues represented by certain items reflected in the Company's consolidated statements of income.
Percentage of Total Revenues Three Months Ended ----------------------------- March 28, March 30, 1996 1995 ------------ ------------ Revenue: Admissions 70.3 % 69.9 % Concessions 28.1 % 28.2 % Other 1.6 % 1.9 % Total revenues 100.0 % 100.0 % ----- ----- Cost of revenues: Film rental and advertising costs 36.2 % 33.6 % Cost of concessions and other 3.6 % 3.5 % Total operating expenses 34.3 % 40.4 % General and administrative expenses 3.8 % 3.9 % Depreciation and amortization 5.7 % 5.6 % ----- ----- Theatre operating expenses 83.6 % 87.0 % Operating income (loss) 16.4 % 13.0 % Other income (expense): Interest expense (2.4)% (2.4)% Interest income 0.2 % 0.2 % ----- ----- Income before provision for income taxes 14.2 % 10.8 % Provision for income taxes (5.6)% (4.3)% ----- ----- Net income 8.6 % 6.5 % ===== =====
13 14 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED THREE MONTHS ENDED MARCH 28, 1996 AND MARCH 30, 1995 TOTAL REVENUES -- Total revenues for the first quarter of fiscal 1996 increased by 42.3% to $52.2 million from $36.7 million in the comparable 1995 period. This increase was due to a 26.6% increase in attendance attributable primarily to the net addition of 147 screens in fiscal 1995 and first quarter of 1996 as well as strong film releases in the first quarter of 1996. Of the $15.5 million net increase in revenues for the period, a $6.1 million increase was attributed to theatres previously operated by the Company, $4.6 million increase was attributed to theatres acquired by the Company, and $4.8 million increase was attributed to new theatres constructed by the Company. Average ticket prices increased 13.2% during the period, reflecting a smaller proportion of discount theatres in the 1996 period than in the same period in 1995 and, to a lesser degree, an increase in ticket prices. Average concession sales per customer increased 11.9% for the period, reflecting both an increase in consumption and, to a lesser degree, an increase in concession prices. FILM RENTAL AND ADVERTISING COSTS -- Film rental and advertising costs increased by 53.4% to $18.9 million in the first quarter 1996 from $12.3 million in the first quarter 1995. Film rental and advertising costs as a percentage of total revenues increased to 36.2% in the 1996 period from 33.6% in the 1995 period, reflecting higher film rental costs associated with strong film releases. COST OF CONCESSIONS AND OTHER -- Cost of concessions and other increased by 46.6% to $1.9 million in the first quarter 1996 from $1.3 million in the first quarter 1995. Cost of concessions and other as a percentage of revenues increased to 3.6% in the first quarter 1996 from 3.5% in the first quarter 1995. Cost of concessions and other were 12.9% of concession revenues in the first quarter 1996 as compared to 12.5% of concession revenues in the first quarter 1995, reflecting costs associated with the Company's two entertainment centers. THEATRE OPERATING EXPENSES -- Theatre operating expenses increased by 21.1% to $17.9 million in the first quarter 1996 from $14.8 million in the first quarter 1995. Total theatre operating expenses as a percentage of total revenues decreased to 34.3% in the 1996 period from 40.4% in the 1995 period. The decrease of theatre operating expenses as a percentage of total revenues was primarily attributable to the strong film releases in the first quarter 1996 and better monitoring and control of costs at the Company's theatres, especially acquired theatres. GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses increased by 39.1% to $2.0 million in the first quarter 1996 from $1.4 million in the first quarter 1995. As a percentage of total revenues, general and administrative expenses decreased to 3.8% in the 1996 period from 3.9% in the 1995 period. DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased in the first quarter 1996 by 43.1% to $3.0 million from $2.1 million in the first quarter 1995. This increase was primarily the result of theatre property additions associated with the Company's expansion efforts. OPERATING INCOME -- Operating income for the first quarter 1996 increased by 79.4% to $8.5 million, or 16.4% of total revenues, from $4.8 million, or 13.0% of total revenues, in the first quarter 1995. INTEREST EXPENSE -- Interest expense increased in the first quarter 1996 by 40.2% to $1.2 million from $0.9 million in the first quarter 1995. The increase was primarily due to higher average borrowings outstanding, net of capitalized interest totaling $566,000 during the first quarter 1996, relating to projects under construction. 14 15 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED INCOME TAXES -- The provision for income taxes increased in the first quarter 1996 by 87.4% to $2.9 million from $1.6 million in the first quarter 1995. The effective tax rate was 39.5% in the 1996 period as compared to 39.7% in the 1995 period. NET INCOME -- Net income in the first quarter 1996 increased by 88.5% to $4.5 million from $2.4 million in the first quarter 1995. The increase in net income reflects primarily the additional screens operated by the Company, as well as strong film releases in the first quarter of 1996. LIQUIDITY AND CAPITAL RESOURCES Substantially all of the Company's revenues are derived from cash box office receipts and concession sales, while film rental fees are ordinarily paid to distributors 15 to 45 days following receipt of admission revenues. The Company thus has an operating cash "float" which partially finances its operations, reducing the Company's needs for external sources of working capital. The Company's capital requirements have arisen principally in connection with acquisitions of existing theatres, new theatre openings and the addition of screens to existing theatres and acquisitions of existing theatres, and generally have been financed with borrowings under the Company's loan agreement, equity financings and internally generated cash. The Company amended its loan agreement to a $150 million revolving credit facility as of November 30, 1995. The amendments to the loan agreement require that the indebtedness under the facility be amortized at a rate of $7.5 million per quarter commencing with the quarter ending September 30, 1997, and at a rate of $11.3 million per quarter commencing with the quarter ending September 30, 1999. The loan agreement requires the Company to comply with certain financial and other covenants, including maintaining a minimum net worth of not less than $80.0 million plus 50%of the Company's net income for each quarter commencing with the quarter ending June 29, 1995, and also restricts the Company from incurring capital expenditures in excess of $85.0 million in the year ending June 30, 1995, $85.0 million in the year ending June 30, 1996, $50.0 million in the year ending June 30, 1997, and $32.5 million in any year ending June 30, thereafter. The loan agreement amendments also modified certain covenants to provide for the Litchfield and Neighborhood mergers. On May 9, 1996, Regal filed a Registration Statement with the Securities and Exchange Commission covering a proposed public firm commitment underwritten offering of 2,500,000 shares of its common stock. In connection with the offering, Regal will also grant the underwriters an over-allotment option for an additional 375,000 shares. The net proceeds to Regal from the sale of the common stock at an assumed price of $41.125 per share are estimated to be $97.7 million ($112.4 million if the underwriters' over-allotment option is exercised in full) after deducting the estimated underwriting discount and offering expenses payable by Regal. Regal will utilize the net proceeds to repay amounts outstanding under its credit facility. The indebtedness under the credit facility has been incurred primarily to finance acquisitions and to construct theatres. Borrowings thereunder currently bear interest at 6.44%, which is the London Inter-Bank Offering Rate (LIBOR) plus 1%, and the facility matures in June 2001. Currently, the borrowings under the credit facility are $114.0 million. Upon application of the net proceeds of the offering to repay a portion of the credit facility, the balance of the credit facility will continue to be available for borrowing pursuant to the terms thereof. On April 17, 1995, Regal consummated the acquisition of Neighborhood for 543,170 shares of Regal common stock. In conjunction with this transaction, the Company refinanced approximately $10 million of debt on Neighborhood's balance sheet under the Company's revolving credit facility, and Neighborhood redeemed its preferred stock for $1,150,000. 15 16 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED On April 28, 1995, the Company completed the acquisition of two theatres with 18 screens, one theatre with 14 screens and one theatre with eight screens from Southern Cinemas, Inc., South Asheville Cinemas, Inc. and Cinemas South, Inc., respectively. The respective theatres are located in Aiken and Charleston, South Carolina, Asheville, North Carolina and Rock Hill, South Carolina. Consideration for the transaction was approximately $14,300,000 cash and other consideration and 160,875 shares of Regal common stock. On March 28, 1996, the Company had 125 multi-screen theatres with an aggregate of 972 screens. Also, at March 28, 1996, the Company had 16 new theatres with 183 new screens and 23 screens under construction at existing locations. The Company anticipates that its capital expenditures over the next twelve months will approximate $80.0 million. The Company believes that its capital needs for completion of theatre construction and development for at least the next 6 to 12 months will be satisfied by available credit under the loan agreement, as amended, the proceeds of the offering described above, internally generated cash flow and available cash and equivalents. PENDING ACQUISITIONS The Company has entered into an Agreement and Plan of Merger to acquire Georgia State Theatres, Inc. ("GST"). The terms of the Merger Agreement provide that the holders of GST common stock will receive shares of Regal common stock in exchange for all of the outstanding shares of GST common stock as of the effective time of the merger. GST, headquartered in Atlanta, Georgia, has 10 first run theatres with 68 screens including one drive-in theatre located in the metropolitan Atlanta, Georgia area and a partnership in Gainesville, Georgia. In addition, Regal has reached an agreement to acquire eight theatres with 69 screens from an individual, George Krikorian, and corporations controlled by him. The Krikorian theatres are located primarily in California. These acquisitions have not yet been consummated. 16 17 ITEM 5. OTHER INFORMATION - -------------------------------------------------------------------------------- Included herewith as Exhibit 99 are interim financial statements of GST and Krikorian. See "Management's Discussion and Analysis and Financial Condition and Results of Operations -- Pending Acquisitions." Also included as part of Exhibit 99 are certain pro forma financial statements of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. - -------------------------------------------------------------------------------- (a) Exhibits: (11) Statement re: computation of per share earnings (27) Financial Data Schedule (for SEC use only) (99) Financial Statements I. PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF REGAL CINEMAS, INC.: Pro Forma Consolidated Financial Statements Introduction Pro Forma Consolidated Statements of Income for the three months ended March 30, 1995 and March 28, 1996 Notes to Pro Forma Consolidated Statements of Income Pro Forma Consolidated Balance Sheet at March 28, 1996 Notes to Pro Forma Consolidated Balance Sheet II. HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF GEORGIA STATE THEATRES, INC.: Consolidated Balance Sheets at December 29, 1995 and March 28, 1996 Consolidated Statements of Income for the three months ended March 30, 1995 and March 28, 1996 Consolidated Statements of Cash Flows for the three months ended March 30, 1995 and March 28, 1996 Notes to Consolidated Financial Statements III. COMBINED HISTORICAL SUMMARIES OF KRIKORIAN PREMIERE THEATRES, INC.: Combined Historical Summary of Net Theatre Assets Acquired as of December 31, 1995 and March 31, 1996 Combined Historical Summary of Direct Theatre Operating Revenues and Expenses for the three months ended March 31, 1995 and March 31, 1996 Notes to Combined Historical Summaries (b) No reports on Form 8-K were filed for the quarter ended March 28, 1996. 17 18 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. REGAL CINEMAS, INC. Date: March 13, 1996 By: /s/ Michael L. Campbell ----------------------------------------- Michael L. Campbell, Chairman, President and Chief Executive Officer By: /s/ Lewis Frazer III ----------------------------------------- Lewis Frazer III, Vice President, Chief Financial Officer and Treasurer 18 19 EXHIBIT INDEX
SEQUENTIAL ITEM DESCRIPTION PAGE NO. - ---------- ----------------------------------------------- ------------- (11) Statement re: computation of per share earnings (27) Financial Data Schedule (for SEC use only) (99) Index to Financial Statements
EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE (in thousands, except per share data)
Three Months Ended ------------------------------- March 30, March 30, 1996 1995 ---------- --------- PRIMARY: Weighted average number of common shares outstanding 17,524 17,216 Net effect of dilutive stock options and warrants based on the treasury stock method using average market price 810 757 ------- ------- Weighted average number of common and common equivalent shares outstanding 18,334 17,973 ======= ======= Net income $ 4,472 $ 2,372 Less preferred dividends - - ------- ------- Net income applicable to common shares $ 4,472 $ 2,372 ======= ======= Net income per common share as reported $ .24 $ .13 ======= ======= FULLY DILUTED: Weighted average number of common shares outstanding 17,524 17,216 Net effect of dilutive stock options and warrants based on the treasury stock method using ending market price 878 757 ------- ------- 18,402 17,973 ======= ======= Net income $ 4,472 $ 2,372 ======= ======= Net income per common share assuming full dilution, as reported $ .24 $ .13 ======= =======
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS JAN-02-1997 DEC-29-1995 MAR-28-1996 1 1,148 0 660 0 825 6,723 264,324 36,192 244,564 31,397 105,050 0 0 74,167 32,697 244,564 14,675 52,243 1,892 20,814 22,888 0 1,244 7,393 2,921 4,472 0 0 0 4,472 .24 .24
EX-99 4 FINANCIAL STATEMENTS 1 INDEX TO FINANCIAL STATEMENTS I. PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF REGAL CINEMAS, INC.: Pro Forma Consolidated Financial Statements Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Pro Forma Consolidated Statements of Income for the three months ended March 30, 1995 and March 28, 1996 . . F-3 Notes to Pro Forma Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5 Pro Forma Consolidated Balance Sheet at March 28, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7 Notes to Pro Forma Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8 II. HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF GEORGIA STATE THEATRES, INC.: Consolidated Balance Sheets at December 29, 1995 and March 28, 1996 . . . . . . . . . . . . . . . . . . . . F-9 Consolidated Statements of Income for the three months ended March 30, 1995 and March 28, 1996 . . . . . . . F-10 Consolidated Statements of Cash Flows for the three months ended March 30, 1995 and March 28, 1996 . . . . . F-11 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12 III. COMBINED HISTORICAL SUMMARIES OF KRIKORIAN PREMIERE THEATRES, INC.: Combined Historical Summary of Net Theatre Assets Acquired as of December 31, 1995 and March 31, 1996 . . . F-13 Combined Historical Summary of Direct Theatre Operating Revenues and Expenses for the three months ended March 31, 1995 and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14 Notes to Combined Historical Summaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15
F-1 2 REGAL CINEMAS, INC. PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) INTRODUCTION On February 2, 1996, the Company entered into the Agreement to acquire Georgia State Theatres, Inc. ("GST") for approximately 912,000 shares of the Company's common stock, subject to adjustment in certain circumstances. GST, headquartered in Atlanta, Georgia, has 10 theatres with 68 screens in Georgia. Provided shareholder approval of the merger is obtained the Company intends to close the transaction and effect the Merger on May 30, 1996. Also, the Company has entered into an agreement to acquire certain assets related to 8 theatres with 69 screens from an individual, George Krikorian, and corporations controlled by him (the "Krikorian Acquisition"). The purchase price for the Krikorian Acquisition is approximately $14.1 million cash and approximately 470,000 shares of Company common stock with an estimated fair market value of $14.1 million on the date of agreement on the terms of the acquisition. The cash portion will be financed from availability under the Company's credit facility. The theatres are located in California. The transaction is subject to the completion of due diligence. The transaction is expected to be consummated in May 1996 and will be accounted for under the purchase method of accounting. On April 28, 1995, the Company completed the acquisition of one theatre with 8 screens from Cinema South, Inc., two theatres with 18 screens from Southern Cinemas, Inc. and one theatre with 14 screens from South Asheville Cinemas, Inc. (collectively, "Acquisition"). The aforementioned theatres were S corporations and were owned individually or jointly by Jack Fuller, Jr. and William Stembler. The purchase price for Acquisition was $14.3 million cash and other consideration and 160,875 shares of Company common stock with an approximate fair market value of $2.5 million. The cash portion was financed from availability under the Company's credit facility. The theatres are located in North and South Carolina. This transaction was accounted for under the purchase method of accounting. The following unaudited pro forma consolidated statement of income for the three months ended March 30, 1995, gives effect to the merger with GST and the acquisitions of Acquisition and Krikorian as if the transactions had been effected at the beginning of the period. The unaudited pro forma consolidated statement of income for the three months ended March 28, 1996 gives effect to the merger with GST and the acquisition of Krikorian as if the transactions had been effected at the beginning of the period. The following unaudited pro forma consolidated balance sheet as of March 28, 1996 gives effect to the merger by the Company with GST and the acquisition of Krikorian as if the transactions had occurred on March 28, 1996. The pro forma financial statements have been prepared by management of the Company and may not be indicative of the financial position or results that actually would have occurred if the transactions had been in effect on the dates indicated or which may be obtained in the future. F-2 3 REGAL CINEMAS, INC. PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) THREE MONTHS ENDED MARCH 30, 1995 (IN THOUSANDS)
Regal Cinemas, Inc. Acquisition Three Three Acquisition Months Months Pro Regal/ Ended Ended Forma Acquisition 3/30/95 3/30/95 Adjustment Pro Forma ----------------------------------------------------------------------------- Revenues: Admissions $25,650 $ 842 $ 0 $26,492 Concessions 10,365 464 0 10,829 Other operating revenue 686 64 0 750 ---------------------------------------------------------------------- Total Revenue 36,701 1,370 0 38,071 Operating expenses: Film rental costs 12,334 351 0 12,685 Cost of concession and other 1,291 77 0 1,368 Theatre operating expenses 14,798 405 0 15,203 General and administrative expenses 1,444 109 0 1,553 Depreciation and amortization (1) 2,072 246 22 2,340 ---------------------------------------------------------------------- Total operating expenses 31,939 1,188 22 33,149 ---------------------------------------------------------------------- Operating Income 4,762 182 (22) 4,922 Other income (expense) Interest expense (2) (887) (128) (123) (1,138) Interest income 56 0 0 56 Other 0 0 0 0 ---------------------------------------------------------------------- Income before income taxes 3,931 54 (145) 3,840 Provision (benefit) for income taxes (3) 1,559 0 (58) 1,501 ---------------------------------------------------------------------- Income from continuing operations 2,972 54 (87) 2,339 ====================================================================== Primary earnings from continuing operations per share: $ .13(4) Weighted average shares and equivalent 17,973 Fully diluted earnings from continuing operations per share: $ .13(4) Weighted average shares and equivalents 17,973 Georgia State Theatres, Inc. Krikorian Three Regal/ Three Months Acquisition Months Ended /GST Pro Ended Pro Forma Pro Forma 3/30/95 Forma 3/31/95 Adjustments Total ------------------------------------------------------------------------- Revenues Admissions $1,865 $28,357 $2,997 $0 $31,354 Concessions 720 11,549 1,175 0 12,724 Other operting revenue 69 819 0 0 819 ----------------------------------------------------------------------- Total Revenue 2,654 40,725 4,172 0 44,897 Operating expenses: Film rental costs 864 13,549 1,604 0 15,153 Cost of concessions and other 189 1,557 222 0 1,779 Theatre operting expenses 1,065 16,268 2,105 0 18,373 General and administrative expenses 93 1,646 0 0 1,646 Depreciation and amortization (1) 143 2,483 217 136 2,836 ----------------------------------------------------------------------- Total operating expenses 2,354 35,503 4,148 136 39,787 ----------------------------------------------------------------------- Operating Income 300 5,222 24 (136) 5,110 Other income (expense) Interest expense (2) (75) (1,213) 0 (247) (1,460) Interest income 0 56 0 0 56 Other (69) (69) 0 0 (69) ----------------------------------------------------------------------- Income before income taxes 156 3,996 24 (383) 3,637 Provision (benefit) for income taxes (3) 59 1,560 0 (105) 1,455 ----------------------------------------------------------------------- Income from continuing operations 97 2,436 24 (278) 2,182 ======================================================================= Primary earnings from continuing operations per share $.11(5) $.13 $.11(4) Weighted average shares and equivalents 912 18,925 19,395 Fully diluted earnings from continuing operations per share $.11(5) $.13 $.11(4) Weighted average shares and equivalents 912 18,925 19,395
See notes to pro forma consolidated statements of income (unaudited) F-3 4 PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) THREE MONTHS ENDED MARCH 28, 1996 (IN THOUSANDS)
Regal Cinemas, Georgia State Inc Theatres, Inc. Krikorian Three Months Three Months Three Months Ended Ended Regal/ GST Ended Pro Forma Pro Forma 3/28/96 3/28/96 Pro Forma 3/31/96 Adjustments (6) Total ---------------------------------------------------------------------------------------- Revenues: Admissions $36,737 $1,930 $38,667 $3,217 $0 $41,884 Concessions 14,675 821 15,496 1,225 0 16,721 Other operating revenue 831 69 900 47 0 900 ----------------------------------------------------------------------------------- Total Revenue 52,243 2,820 55,063 4,442 0 59,505 Operating expenses: Film rental 18,922 958 19,880 1,796 0 21,676 costs Cost of concession 1,892 178 2,070 249 0 2,319 s and other Theatre operating 17,915 890 18,805 2,130 0 20,935 expenses General and administrative expenses 2,008 191 2,199 0 0 2,199 Depreciation and amortization (1) 2,965 177 3,142 217 135 3,494 ----------------------------------------------------------------------------------- Total operating expenses 43,702 2,394 46,096 4,392 135 50,623 ----------------------------------------------------------------------------------- Operating Income 8,541 426 8,967 50 (135) 8,882 Other income (expense) Interest expense (2 (1,244) (72) (1,316) 0 (247) (1,563) Interest income 96 6 102 0 0 102 Other 0 161 161 0 0 161 ----------------------------------------------------------------------------------- Income before income taxes 7,393 521 7,914 50 (382) 7,582 Provision (benefit) for income taxes (3) 2,921 198 3,119 0 (86) 3,033 ----------------------------------------------------------------------------------- Income from continuing operations 4,472 323 4,795 50 (296) 4,549 =================================================================================== Primary earnings from continuing operations per share: $.24(4) $.35(5) $.25 $.23(4) Weighted average shares and equivalents 18,334 912 19,246 19,716 Fully diluted earnings from continuing operations per share: $.24(4) $.35(5) $.25 $.23(4) Weighted average shares and equivalents 18,402 912 19,314 19,784
See notes to pro forma consolidated statements of income (unaudited) F-4 5 REGAL CINEMAS, INC. NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (1) To reflect additional depreciation and amortization on Acquisition and Krikorian assets acquired by the Company based upon their adjusted values using lives of 3-20 years for equipment and leasehold improvements, 25 years for buildings and 20 years for goodwill. The purchase price allocation, depreciation lives and depreciation calculations are as follows: (In Thousands)
Depreciation Expense Purchase Price Three Months Ended Acquisition Allocation Depreciation Period 3/30/95 - -------------- -------------------- ------------------- --------------------- Land $ 1,500 N/A $ -- Building 9,175 25 years 92 Equipment 5,000 3-20 years 162 Goodwill 1,125 20 years 14 ------- ---- $16,800 $268 ======= ==== Pro Forma Adjustment 22 Historical Depreciation Expense $246 ====
Depreciation Expense Purchase Price Three Months Ended Krikorian Allocation Depreciation Period 3/31/95 --------- -------------- ------------------- -------------------- Equipment $ 5,175 20 years $ 65 Leasehold 8,868 20 years 111 Improvements Goodwill 14,157 20 years 177 ------- ---- $28,200 $353 ======= ==== Pro Forma Adjustment 136 ---- Historical Depreciation Expense $217 ====
F-5 6
Depreciation Expense Purchase Price Three Months Ended Krikorian Allocation Depreciation Period 3/31/96 ------------ -------------- ------------------- -------------------- Equipment $ 5,175 20 years $ 65 Leasehold 8,868 20 years 111 Improvements Goodwill 14,157 20 years 177 ------- ---- $28,200 $353 ======= ==== Pro Forma Adjustment 135 ---- Historical Depreciation Expense $218 ====
(2) To eliminate Acquisition's historical interest expense, and record the Company's estimated interest expense related to debt incurred for the Acquisition and Krikorian acquisitions ($14.3 million and $14.1 million, respectively, principal amount at an average rate of 7% for the 1995 and 1996 periods). (3) To reflect the net income tax impact of the acquired operating income and the aforementioned pro forma adjustments at the Company's effective income tax rate of 40%. (4) Historical and pro forma primary and fully diluted per share data are based on income from continuing operations. Pro forma earnings per share for the three months ended March 30, 1995 reflect the Company's historical weighted average shares and equivalents after giving effect to the issuance at the beginning of the period of 160,875, 912,000 and 470,000 shares of Company common stock associated with the Acquisition, GST and Krikorian transactions, respectively. Pro forma earnings per share for the three months ended March 30, 1996 reflect the Company's historical weighted average shares and equivalents after giving effect to the issuance at the beginning of the period of 912,000 and 470,000 shares of Company Common Stock associated with the GST and Krikorian transactions, respectively. (5) Historical GST primary and fully diluted per share data reflect the effect of the issuance of 912,000 shares of Company common stock associated with the GST merger. (6) The pro forma consolidated statements of income do not reflect certain estimated non-recurring charges aggregating approximately $1.5 million (approximately $1.1 million after tax) with respect to legal and accounting expenses associated with the GST merger (approximately $500,000) and amounts payable under compensation arrangements with certain GST officers (approximately $1 million). F-6 7 REGAL CINEMAS, INC. PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED) AS OF MARCH 28, 1996 (IN THOUSANDS)
Georgia Regal Regal State Cinemas/ Cinemas, Theatres, Georgia State Inc. Inc. Theatres Krikorian Pro Forma Pro Forma 3/28/96 3/28/96 3/28/96 3/31/96 Adjustments Total -------- --------- -------------- ---------- ----------- --------- ASSETS Current assets: Cash and equivalents $ 1,148 $ 1,185 $ 2,333 $ 0 $ 0 2,333 Prepaid expenses 2,562 394 2,956 0 0 2,956 Other current assets 3,013 43 3,056 0 0 3,056 -------- -------- -------- ------ ------- ------- Total current assets 6,723 1,622 8,345 0 0 8,345 Property and equipment: Land 20,601 2,426 23,027 0 0 23,027 Buildings and leasehold improvements 134,247 10,915 145,162 4,621 4,247 (1) 154,030 Equipment 82,949 4,938 87,887 3,680 1,495 (1) 93,062 Construction in progress 26,527 0 26,527 0 0 26,527 -------- -------- -------- ------ ------- ------- 264,324 18,279 282,603 8,301 5,742 296,646 Accumulated depreciation and amortization (36,192) (7,845) (44,037) (5,481) 5,481 (1) (44,037) -------- -------- -------- ------ ------- ------- Total property and equipment, net 228,132 10,434 238,566 2,820 11,223 252,609 -------- -------- -------- ------ ------- ------- Other Assets: 9,709 173 9,882 0 14,157 (1) 24,039 -------- -------- -------- ------ ------- ------- Total assets 244,564 12,229 256,793 2,820 25,380 284,993 ======== ======== ======== ====== ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 8,600 $ 3,300 $ 11,900 $ 0 $ 0 11,900 Accounts payable 18,543 908 19,451 0 0 19,451 Other current liabilities 4,258 409 4,667 0 1,100 (2) 5,767 -------- -------- -------- ------ ------- ------- Total current liabilities 31,401 4,617 36,018 0 1,100 37,118 Long term debt, less current maturities 96,450 0 96,450 0 14,100 (1) 110,550 Other liabilities 9,853 2,600 12,453 0 0 12,453 -------- -------- -------- ------ ------- ------- Total liabilities 137,704 7,217 144,921 0 15,200 160,121 Shareholders' equity: Common stock 74,167 652 74,819 0 14,100 (1) 88,919 Retained earnings (deficit) 32,693 4,360 37,053 0 (1,100) (2) 35,953 Investment in Krikorian Theatres 0 0 0 2,820 (2,820) (1) 0 -------- -------- -------- ------ ------- ------- Total shareholders' equity 106,860 5,012 111,872 2,820 10,180 124,872 -------- -------- -------- ------ ------- ------- Total liabilities and shareholders' equity $244,564 12,229 256,793 2,820 25,380 284,993 ======== ======== ======== ====== ======= =======
See notes to pro forma consolidated balance sheet (unaudited) F-7 8 REGAL CINEMAS, INC. NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED) (1) To eliminate Krikorian's historical cost basis in assets to be acquired by the Company and record the allocation of consideration paid by the Company at fair value to the separately identifiable assets of the acquired theatre properties, as well as the debt incurred to finance the transaction. The consideration to be paid is approximately $14.1 million in cash and approximately 470,000 shares of Company common stock with an estimated fair market value of $14.1 million on the date of agreement on the terms of the acquisition. The allocation of the purchase price to assets is expected to be as follows: (IN THOUSANDS) Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,175 Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,868 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,157 ------- 28,200 =======
The allocation of the purchase price is subject to adjustment when additional information concerning asset valuations is obtained. The final asset fair values may differ from those set forth in the accompanying unaudited pro forma consolidated balance sheet; however, the changes are not expected to have a material effect on the consolidated financial position of Regal Cinemas, Inc. (2) This accrual reflects certain non-recurring charges with respect to expenses associated with the GST merger. See Note 6 to Pro Forma Consolidated Statements of Income. F-8 9 GEORGIA STATE THEATRES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS MARCH 28, DECEMBER 28, 1996 1995 --------------- -------------- Current assets: Cash and equivalents $ 1,184,894 $ 738,090 Due from related parties -- 374,956 Inventories 43,502 44,190 Prepaids and other current assets 394,017 17,418 --------------- ------------- Total current assets: 1,622,413 1,174,654 Property and equipment: Land 2,426,143 2,444,643 Buildings and leasehold improvements 8,164,288 8,164,288 Equipment 4,938,170 4,938,170 Property under capital lease 2,750,000 2,750,000 --------------- ------------- 18,278,601 18,297,101 Accumulated depreciation and amortization (7,845,098) (7,668,182) -------------- ------------- Total property and equipment, net 10,433,503 10,628,919 Investment in Gainesville Theatres, LLP 173,325 121,135 --------------- -------------- Total assets $ 12,229,241 $ 11,924,708 =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 3,300,000 $ 3,400,000 Accounts payable and accrued expenses 684,347 209,468 Obligations under capital lease - current portion 50,000 53,681 Income taxes payable 197,598 202,990 Film rental payable 224,257 299,010 Dividends payable 161,474 271,124 -------------- ------------- Total current liabilities: 4,617,676 4,436,273 Obligations under capital lease, less current portion 2,600,000 2,638,344 -------------- ------------- Total liabilities 7,217,676 7,074,617 Commitments Shareholders' equity: Common Stock 388,040 shares of $1 par value voting common stock and 50,000 shares each of no par value series A and series B nonvoting common stock; all shares are authorized, issued and outstanding 388,040 388,040 Additional paid-in capital 263,996 263,996 Retained earnings 4,359,529 4,198,055 --------------- -------------- Total shareholders' equity 5,011,565 4,850,091 --------------- -------------- Total liabilities and shareholders' equity $ 12,229,241 $ 11,924,708 =============== ==============
See accompanying notes to condensed consolidated financial statements. F-9 10 GEORGIA STATE THEATRES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended -------------------------------------- MARCH 28, MARCH 30, 1996 1995 -------------------------------------- Revenues: Admissions $ 1,929,825 $ 1,864,938 Concessions 820,940 720,270 Other operating revenues 68,935 69,019 ------------- ------------ Total revenues 2,819,700 2,654,227 ------------- ------------ Operating expenses: Film rental costs 958,089 863,533 Cost of concessions 177,552 188,848 Theatre operating expenses 889,675 1,065,134 General and administrative expenses 191,268 93,023 Depreciation 176,916 143,491 ------------- ------------ Total operating expenses 2,393,500 2,354,029 ------------- ------------ Operating Income 426,200 300,198 ------------- ------------ Other income (expense): Interest expense (71,987) (74,705) Interest income 6,319 76 Rental income 1,449 1,542 Equity in income of investee 52,190 -- Gain (Loss) on sale of assets 106,375 (70,983) ------------- ------------ Income before income taxes 520,546 156,128 Income tax expense (197,599) (59,266) ------------- ------------ Net income $ 322,947 $ 96,862 Dividends to Series A Shareholders 161,474 48,431 ------------- ------------ Net income applicable to all shareholders $ 161,473 $ 48,431 ============= ============ Earnings per share $ 0.33 $ 0.10 ============= ============
See accompanying notes to condensed consolidated financial statements. F-10 11 GEORGIA STATE THEATRES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended --------------------------------------- March 28, March 30, 1996 1995 --------------------------------------- Cash flows from operating activities: Net income $ 322,947 $ 96,862 Adjustments to reconcile net income to net cash [used in] provided by operating activities: Depreciation 176,916 143,491 Loss(gain) on sale of assets (106,375) 70,983 Changes in operating assets and liabilities: Inventories 688 (1,374) Prepaids and other current assets (376,599) (248,707) Accounts payable and accrued expenses 474,754 (11,009) Amounts due from related parties 374,956 (341,200) Income taxes payable (5,391) (118,919) Film rental payable (74,752) (19,804) Other liabilities -- 72,073 -------------- ------------- Net cash [used in] provided by operating activities 787,144 (357,604) Cash flows from investing activities: -------------- ------------- Cash received from sale of assets 125,000 Capital expenditures -- (391,778) Investment in Gainesville Theatres, LLP (52,190) (65,734) -------------- ------------- Net cash (used in) provided by investing activities 72,810 (457,512) -------------- ------------- Cash flows from financing activities: Dividends paid (271,124) (170,041) Borrowings under long-term debt 803,699 Payments on long-term debt (100,000) -- Payments on capital lease (42,026) -- -------------- ------------- Net cash [used in] provided by financing activities (413,150) 633,658 Net increase(decrease) in cash and equivalents 446,804 (181,458) Cash and cash equivalents at beginning of period 738,090 293,245 -------------- ------------- Cash and cash equivalents at end of period $ 1,184,894 $ 111,787 ============== =============
See accompanying notes to condensed consolidated financial statements. F-11 12 GEORGIA STATE THEATRES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY AND BASIS OF PRESENTATION: Georgia State Theatres, Inc. and its wholly owned subsidiary, United Vendors, Inc. collectively referred to as "the Company", operate multi-screen motion picture theatres in and around Atlanta, Georgia. The Company formally operates on a fiscal year ending on the Thursday closest to December 31. 2. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheets as of March 28, 1996, the condensed consolidated statements of income for the three months ended March 28, 1996 and March 30, 1995, and the condensed consolidated statements of cash flows for the three months ended March 28, 1996 and March 30, 1995 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The December 28, 1995 information has been derived from the audited December 28, 1995 balance sheet of Georgia State Theatres, Inc. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Amendment No. 2 to Form S-4 Registration Statement under the Securities Act of 1933 of Regal Cinemas, Inc. (as filed with the Securities and Exchange Commission on May 1, 1996) for the year ended December 28, 1995. The results of operations for the three-month period ended March 28, 1996 are not necessarily indicative of the operating results for the full year. 3. INCOME TAXES The company's effective income tax rate differs from the expected federal income tax rate of 35% due to the inclusion of state income taxes. 4. PENDING MERGER The Company has entered into an Agreement and Plan of Merger with Regal Cinemas, Inc. ("Regal"). The terms of the Merger Agreement provide that the holders of the Company's common stock will receive shares of Regal Common Stock in exchange for the Company's stock. Provided shareholder approval of the merger is obtained, the parties intend to close the transaction and effect the merger following a special meeting of the shareholders on May 30, 1996. F-12 13 KRIKORIAN THEATRES COMBINED HISTORICAL SUMMARY OF NET THEATRE ASSETS ACQUIRED (SEE NOTE 1)
March 31, December 31, 1996 1995 ----------- ------------ Property and equipment: Leasehold improvements $ 4,620,995 $ 4,595,416 Equipment 3,680,199 3,659,827 ------------ ------------- 8,301,194 8,255,243 Accumulated depreciation (5,481,267) (5,264,483) ------------ ------------- Total property and equipment, net 2,819,927 2,990,760 ------------ ------------- Total net theatre assets to be acquired $ 2,819,927 $ 2,990,760 ============ =============
F-13 14 KRIKORIAN THEATRES COMBINED HISTORICAL SUMMARY OF DIRECT THEATRE OPERATING REVENUES AND EXPENSES (SEE NOTE 1)
Three Months Ended March 31, March 31, 1996 1995 ----------- ----------- Direct theatre operating revenues: Admissions $ 3,217,559 $ 2,996,792 Concessions 1,225,296 1,175,370 ------------ ------------ Total direct theatre operating revenues 4,442,855 4,172,182 ------------ ------------ Direct theatre operating expenses: Film rental and booking costs 1,796,338 1,604,507 Cost of concessions 248,969 222,031 Theatre operating expenses 2,130,365 2,104,938 Depreciation 216,783 216,784 ------------ ------------ Total direct theatre operating expenses 4,392,455 4,148,260 ------------ ------------ Excess of direct theatre operating revenues over expenses $ 50,400 $ 23,922 ============ ============
F-14 15 KRIKORIAN THEATRES NOTES TO HISTORICAL SUMMARIES 1. BASIS OF PRESENTATION On February 2, 1996, Regal Cinemas, Inc. (Regal) entered into a letter of intent to acquire certain theatre assets, comprising eight theatres with 69 screens from the following entities: Del Rosa Cinema, Inc. (8 screens) Diamond Bar Cinema, Inc. (8 screens) El Cajon Cinema, Inc. (8 screens) Hemet Cinema, Inc. (12 screens) Lake Elsinore Cinema, Inc. (8 screens) Peninsula Cinema, Inc. (9 screens) Terrace Cinema, Inc. (6 screens) Whittwood Cinema, Inc. (10 screens) The combined Historical Summaries include certain accounts of all of the above entities, which are organized as Subchapter S corporations, and are owned solely by Mr. George Krikorian, an individual. Such entities are hereinafter collectively referred to and presented as "Krikorian Theatres." The consideration to be paid by Regal will consist of $14.1 million in cash and $14.1 million of Regal common stock, and the assumption of certain existing operating leases. As the theatre assets to be acquired by Regal are components of the above described entities, no separate legal entity or organization exists. The accompanying combined historical summary of net theatre assets acquired and the related combined historical summary of direct theatre operating revenues and expenses were prepared for the purpose of complying with certain rules and regulations of the Securities Exchange Commission (for inclusion in the registration statement on Form S-3 of Regal), and are not intended to be a complete presentation of the entities' assets or revenues and expenses. The results of operations for the three-month period ended March 31, 1996 are not necessarily indicative of the operating results for the full year. F-15 -----END PRIVACY-ENHANCED MESSAGE-----