-----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, IjYgdNZjjn0Fe+Hmg9F7sSodj5ffTHi6vTnF5LFxVd6ZDw3Ra1cHG38+d3T3rLSQ ghZIV8snMI9v0RaxvHi6wQ== 0000950144-97-009228.txt : 19970815 0000950144-97-009228.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950144-97-009228 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970703 FILED AS OF DATE: 19970814 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: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21772 FILM NUMBER: 97662341 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 CINEMAS, INC. FORM 10-Q 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 July 3, 1997 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 - 33,230,009 shares at August 14, 1997 1 2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. - ------------------------------------------------------------------------------- REGAL CINEMAS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (in thousands of dollars) ASSETS
July 3, January 2, 1997 1997 -------- --------- Current assets: Cash and equivalents............................... $ 11,835 $ 14,778 Accounts receivable................................ 1,110 2,285 Inventories........................................ 1,659 1,240 Prepaids and other current assets.................. 3,949 3,030 Refundable income taxes............................ -- 2,773 -------- -------- Total current assets........................... 18,553 24,106 -------- -------- Property and equipment: Land............................................... 35,573 32,550 Buildings and leasehold improvements............... 247,231 207,412 Equipment.......................................... 125,026 111,358 Construction in progress........................... 45,672 34,247 -------- -------- 453,502 385,567 Accumulated depreciation and amortization.......... (63,068) (54,343) -------- -------- Total property and equipment, net ............. 390,434 331,224 Other assets............................................ 35,428 23,189 -------- -------- Total assets................................... $444,415 $378,519 ======== ========
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
July 3, January 2, 1997 1997 -------- ---------- Current liabilities: Accounts payable ........................................ $ 23,790 $ 26,011 Accrued expenses ........................................ 7,654 6,202 -------- -------- Total current liabilities ......................... 31,444 32,213 Long-term debt, less current maturities .................... 100,000 51,000 Other liabilities .......................................... 3,362 3,420 Deferred income taxes ...................................... 8,725 8,165 -------- -------- Total liabilities ................................. 143,531 94,798 -------- -------- Shareholders' equity: Preferred stock, no par; 1,000,000 shares authorized, none issued ............................... -- -- Common stock, no par; 100,000,000 shares authorized, 33,189,259 and 33,168,573 shares issued and outstanding at July 3, 1997 and January 2, 1997, respectively ......................... 222,317 221,506 Retained earnings .......................................... 78,567 62,215 -------- -------- 300,884 283,721 -------- -------- Total liabilities and stockholders' equity ........ $444,415 $378,519 ======== ========
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 Six Months Ended --------------------------- ---------------------------- July 3, June 27, July 3, June 27, 1997 1996 1997 1996 --------- --------- --------- --------- Revenues: Admissions .................................. $ 52,765 $ 40,734 $ 106,272 $ 79,401 Concessions ................................. 22,376 17,069 43,902 32,565 Other operating revenues .................... 3,158 2,672 5,570 3,572 --------- --------- --------- --------- Total Revenues .............................. 78,299 60,475 155,744 115,538 --------- --------- --------- --------- Operating Expenses: Film rental and advertising costs ........... 29,571 23,040 57,388 43,024 Cost of concessions and other ............... 2,719 2,095 5,533 4,165 Theatre operating expenses .................. 25,353 19,023 50,363 37,724 General & administrative expenses ........... 2,695 2,399 5,453 4,598 Depreciation & amortization ................. 4,670 3,317 9,291 6,459 Merger expenses ............................. -- 1,639 -- 1,639 --------- --------- --------- --------- Total operating expenses ......................... 65,008 51,513 128,028 97,609 Other income (expense): Interest expense ................................. (665) (1,540) (1,102) (2,856) Interest income .................................. 55 55 170 157 Other ............................................ 33 395 (77) 556 --------- --------- --------- --------- Income before provision for taxes ................ 12,714 7,872 26,707 15,786 Provision for income taxes ....................... 4,902 3,326 10,359 6,445 --------- --------- --------- --------- Net income ....................................... $ 7,812 $ 4,546 $ 16,348 $ 9,341 ========= ========= ========= ========= GST Dividends .................................... -- 68 -- 229 --------- --------- --------- --------- Net income applicable to common stock ............ $ 7,812 $ 4,478 $ 16,348 $ 9,112 ========= ========= ========= ========= Earnings per common share: Primary ................................. $ .23 $ .15 $ .48 $ .31 ========= ========= ========= ========= Fully diluted ........................... $ .23 $ .15 $ .47 $ .31 ========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements. 4 5 REGAL CINEMAS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (in thousands of dollars)
Six Months Ended July 3, June 27, 1997 1996 ---------- -------- Cash flows from operating activities: Net income ................................................. $ 16,348 $ 9,341 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...................... 9,291 6,459 Deferred income taxes .............................. 133 573 Changes in operating assets and liabilities: Accounts receivable .............................. 1,175 368 Inventories ...................................... (419) (137) Prepaids and other current assets ................ (489) (213) Refundable income taxes .......................... 2,773 2,493 Accounts payable ................................. (2,221) (2,782) Accrued expenses and other liabilities ........... 1,394 (678) --------- --------- Net cash provided by operating activities ... 27,985 15,424 Cash flows from investing activities: Capital expenditures, net ............................... (67,935) 44,124) Investment in other assets .............................. (12,804) (6,388) --------- --------- Net cash used in investing activities ....... (80,739) (50,512) Cash flows from financing activities: Net borrowings (payments) on long-term debt ............. 49,000 (85,669) Dividends paid to GST shareholders ...................... -- (500) Net proceeds from issuance of common stock .............. 751 127,086 Stock compensation expense .............................. 60 60 --------- --------- Net cash provided by financing activities ... 49,811 40,977 --------- --------- Net increase (decrease) in cash and equivalents ............ (2,943) 5,889 Cash and equivalents at beginning of period ................ 14,778 5,775 --------- --------- Cash and equivalents at end of period ...................... $ 11,835 $ 11,664 ========= =========
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"), Neighborhood Entertainment, Inc. ("Neighborhood") and Georgia State Theatres, Inc. ("GST"); collectively referred to as the "Company" operate multi-screen motion picture theatres principally throughout the eastern United States. During May 1997, Litchfield, Neighborhood and GST were merged with and into Regal. The Company formally operates on a fiscal year ending on the Thursday closest to December 31. On May 30, 1996, Regal issued 1,410,213 shares of its common stock for all of the outstanding common stock of GST. 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 GST. Separate results of the combining entities for the three and six-month periods ended July 3, 1997 and the three and six-month periods ended June 27, 1996 are as follows:
Three Months Three Months Six Months Six Months Ended Ended Ended Ended July 3, 1997 June 27, 1996 July 3, 1997 June 27, 1996 ------------ ------------- ------------ ------------- Revenues: ................................ (in thousands) Regal ................................. $ 78,299 $ 58,586 $ 155,744 $ 110,829 GST (through May 30 for 1996) ......... -- 1,889 -- 4,709 --------- --------- --------- --------- $ 78,299 $ 60,475 $ 155,744 $ 115,538 ========= ========= ========= ========= Net income (loss): Regal ................................. $ 7,812 $ 4,779 $ 16,348 $ 9,251 GST (through May 30 for 1996) ......... -- (233) -- 90 --------- --------- --------- --------- $ 7,812 $ 4,546 $ 16,348 $ 9,341 ========= ========= ========= =========
The net loss for GST for the five months ended May 30, 1996, reflects approximately $1.2 million (net of applicable income taxes) of expense associated with the merger, principally legal and accounting fees, and severance related costs. 2. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheet as of July 3, 1997, the condensed consolidated statements of income for the three months and six months ended July 3, 1997 and June 27, 1996, and the condensed consolidated statements of cash flows for the six months ended July 3, 1997 and June 27, 1996 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 January 2, 1997 information has been derived from the audited January 2, 1997 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. 6 7 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- 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 January 2, 1997. The results of operations for the three and six-month periods ended July 3, 1997 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. LONG-TERM DEBT Long-term debt at July 3, 1997 and January 2, 1997, consists of the following:
July 3, January 2, 1997 1997 --------- ---------- (in thousands) Regal $150,000,000 senior reducing revolving credit facility which expires on June 30, 2003, with interest payable quarterly, at LIBOR (5.78% at July 3, 1997 and 5.6% at January 2, 1997, respectively) plus 0.4%. Draw capability will expire on June 30,1999. Repayment of the outstanding balance on the credit facility will begin September 30, 1999, and consist of 5% of the outstanding balance on a quarterly basis through June 30, 2001. Thereafter, payments will be 7.5% of the balance quarterly through June 30, 2003......................................... $100,000 $51,000 Less current maturities....................................... -- -- -------- ------- $100,000 $51,000 ======== =======
Regal's credit facility contains various restrictive covenants which require Regal to maintain certain financial ratios. During 1996, the Company amended its Loan Agreement to decrease the interest rate, extend the maturity of the facility to June 30, 2003, and modify certain financial covenants. 7 8 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- The Company's debt at July 3, 1997 is scheduled to mature as follows: (in thousands) 1997............... $ -- 1998............... -- 1999............... 10,000 2000............... 20,000 2001............... 20,000 Thereafter......... 50,000 -------- $100,000 ========
5. EARNINGS PER SHARE Primary earnings per share have been computed by dividing net income applicable to common stock (net income less GST dividends) by the weighted average number of common and common equivalent shares outstanding during each period. Shares issued in connection with the GST merger 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 September 1996 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) 34,403 shares for the three month period ended July 3, 1997; and 30,107 shares for the three month period ended June 27, 1996 and 34,339 shares for the six month period ended July 3, 1997 and 29,520 shares for the six month period ended June 27, 1996). Fully diluted earnings per common share utilizes net income before preferred dividends based upon the assumed weighted average number of common and common equivalent shares outstanding in each period ((in thousands) 34,493 shares for the three month period ended July 3, 1997; and 30,129 shares for the three month period ended June 27, 1996 and 34,492 shares for the six month period ended July 3, 1997 and 29,543 shares for the six month period ended June 27, 1996). 6. SUBSEQUENT EVENT -- BUSINESS COMBINATION Subsequent to the end of the three-month period ended July 3, 1997, Regal consummated the acquisition of the business conducted by Cobb Theatres, L.L.C. (the "Cobb Theatres Acquisition"). In the Cobb Theatres Acquisition, Regal issued an aggregate of 2,837,594 shares of its common stock. The acquisition has been accounted for as a pooling of interests. Regal will recognize certain one time charges totaling approximately $4.0 million (net of tax) in its current quarter ending October 2, 1997, related to merger expenses and 8 9 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- severance payments. In connection with the Cobb Theatres Acquisition, Regal assumed approximately $110 million of indebtedness, including $85 million of outstanding Senior Secured Notes (the "Notes"). Regal has commenced an offer to purchase all of the outstanding Notes at a purchase price determined on the basis of a fixed spread over the yield of Treasury Notes to the first call date for the Notes. Regal expects to finance the purchase price of the Notes with borrowings under a loan agreement with a bank lender. Regal will recognize certain one time charges totaling approximately $9.1 million (net of tax) in its current quarter ending October 2, 1997, relating to the purchase of the Notes (assuming all outstanding Notes are purchased). The following unaudited pro forma results of operations for the period ended July 3, 1997 and June 27, 1996, respectively, give retroactive effect to the Cobb Acquisition which has been accounted for as a pooling of interests. The pro forma results of operations assume the acquisition occurred at the beginning of fiscal 1996 and have been prepared for comparative purposes only and do not purport to indicate the results of operations that actually would have occurred had the combination been in effect on the dates indicated, or which may occur in the future. (in thousands, except per share data)
Three Months Ended July 3, 1997 June 27, 1996 ------------ ------------- Revenues: Regal .................................. $ 78,299 $ 60,475 Cobb ................................... 31,879 29,925 --------- --------- $ 110,178 $ 90,400 ========= ========= Net Income (Loss): Regal .................................. $ 7,812 $ 4,478 Cobb ................................... (873) (401) --------- --------- $ 6,939 $ 4,077 ========= ========= Pro forma earnings per common share ......... $ 0.19 $ 0.12 ========= =========
(in thousands, except per share data)
Six Months Ended July 3, 1997 June 27, 1996 ------------ ------------- Revenues: Regal .................................. $ 155,744 $ 115,538 Cobb ................................... 64,644 58,702 --------- --------- $ 220,388 $ 174,240 ========= ========= Net Income (Loss): Regal .................................. $ 16,348 $ 9,112 Cobb ................................... (822) (1,571) --------- --------- $ 15,526 $ 7,541 ========= ========= Pro forma earnings per common share ......... $ 0.42 $ 0.23 ========= =========
9 10 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") includes the results of Litchfield Theatres, Ltd. ("Litchfield"), Neighborhood Entertainment, Inc. ("Neighborhood") and Georgia State Theatres, Inc. ("GST"), collectively referred to as the "Company," and should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included herein. Regal consummated the acquisitions of Litchfield, Neighborhood, and GST on June 15, 1994, April 17, 1995 and May 30, 1996, respectively. These three acquisitions have been accounted for as poolings of interest. During May 1997, Litchfield, Neighborhood and GST were merged with and into Regal. BACKGROUND OF REGAL Regal has achieved significant growth in theatres and screens since its formation in November of 1989. Since inception through July 3, 1997, Regal acquired 118 theatres with 792 screens, developed 49 new theatres with 551 screens and added 74 new screens to acquired theatres. Theatres developed by Regal 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. Regal does not defer any preopening costs associated with opening its theatres and expenses such costs in the period incurred. Theatre closings have had no significant effect on the operations of Regal. 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, and by on-screen advertisements and revenues from the Company's three entertainment centers which are adjacent to theatre complexes. Direct theatre costs consist of film rental 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-packed 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. 10 11 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 Six Months Ended ------------------------- ------------------------- July 3, June 27, July 3, June 27, 1997 1996 1997 1996 -------- -------- -------- -------- Revenues: Admissions ................................ 67.4% 67.4% 68.2% 68.7% Concession ................................ 28.6% 28.2% 28.2% 28.2% Other ..................................... 4.0% 4.4% 3.6% 3.1% ------- ------- ------- ------- Total Revenues ............................ 100.0% 100.0% 100.0% 100.0% Operating Expenses: Film rental and advertising costs ......... 37.8% 38.1% 36.8% 37.2% Cost of concessions and other ............. 3.4% 3.4% 3.6% 3.6% Theatre operating expenses ................ 32.4% 31.5% 32.3% 32.7% General & administrative expenses .............................. 3.4% 4.0% 3.5% 4.0% Depreciation & amortization ............... 6.0% 5.5% 6.0% 5.6% Merger expenses ........................... -- 2.7% -- 1.4% ------- ------- ------- ------- Total operating expenses .............. 83.0% 85.2% 82.2% 84.5% Other income (expense): Interest expense .......................... (.8%) (2.5%) (.7%) (2.5%) Interest income ........................... -- .1% -- .1% Other ..................................... -- .6% -- .5% ------- ------- ------- ------- Income before provision for income taxes .......................... 16.2% 13.0% 17.1% 13.6% Provision for income taxes ..................... (6.2%) (5.6%) (6.6%) (5.5%) ------- ------- ------- ------- NET INCOME ..................................... 10.0% 7.4% 10.5% 8.1% ======= ======= ======= =======
11 12 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED THREE MONTHS ENDED JULY 3, 1997 AND JUNE 27, 1996 TOTAL REVENUES -- Total revenues for the second quarter of fiscal 1997 increased by 29.5% to $78.3 million from $60.4 million in the comparable 1996 period. This increase was due to a 26.2% increase in attendance attributable primarily to the net addition of 254 screens in fiscal 1996 and first six months of 1997. Of the $17.8 million net increase in revenues for the period, a $5.1 million increase was attributed to theatres previously operated by the Company, $3.0 million increase was attributed to theatres acquired by the Company, and $9.7 million increase was attributed to new theatres constructed by the Company. Average ticket prices increased 2.6% during the period, reflecting an increase in ticket prices and a greater proportion of larger market theatres in the 1997 period than in the same period in 1996. Average concession sales per customer increased 3.8% for the period, reflecting both an increase in consumption and, to a lesser degree, an increase in concession prices. DIRECT THEATRE COSTS -- Direct theatre costs increased by 30.5% to $57.6 million in the second quarter 1997 from $44.2 million in the second quarter 1996. Direct theatre costs as a percentage of total revenues increased to 73.6% in the 1997 period from 73.0% in the 1996 period. The increase of direct theatre costs as a percentage of total revenues was primarily attributable to an increase in occupancy expenses as a percentage of total revenues, reflecting a higher mix of leased versus owned properties. GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses increased by 12.3% to $2.7 million in the second quarter 1997 from $2.4 million in the second quarter 1996. As a percentage of total revenues, general and administrative expenses decreased to 3.4% in the 1997 period from 4.0% in the 1996 period. DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased in the second quarter 1997 by 40.8% to $4.7 million from $3.3 million in the second quarter 1996. This increase was primarily the result of theatre property additions associated with the Company's expansion efforts. OPERATING INCOME -- Operating income for the second quarter 1997 increased by 48.3% to $13.3 million, or 17.0% of total revenues, from $9.0 million, or 14.8% of total revenues, in the second quarter 1996. INTEREST EXPENSE -- Interest expense decreased in the second quarter 1997 by 56.8% to $665,000 from $1.5 million in the second quarter 1996. The decrease was primarily due to lower average borrowings outstanding. INCOME TAXES -- The provision for income taxes increased in the second quarter 1997 by 47.4% to $4.9 million from $3.3 million in the second quarter 1996. The effective tax rate was 38.6% in the 1997 period as compared to 42.3% in the 1996 period as the 1996 period reflected certain merger expenses which are not deductible for tax purposes. NET INCOME -- Net income in the second quarter 1997 increased by 71.8% to $7.8 million from $4.5 million in the second quarter 1996. The increase in net income reflects primarily the additional screens operated by the Company. SIX MONTHS ENDED JULY 3, 1997 AND JUNE 27, 1996 TOTAL REVENUES -- Total revenues for the six months ended July 3, 1997 increased by 34.8% to $155.7 million from $115.5 million in the comparable 1996 period. This increase was due to a 29.0% increase in attendance attributable primarily to the net addition of 254 screens in fiscal 1996 and first six months of 1997 as well as strong film releases in the first six months of 1997. Of the $40.2 million net increase in revenues for the period, a $18.5 12 13 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED million increase was attributed to theatres previously operated by the Company, $4.3 million increase was attributed to theatres acquired by the Company, and $17.4 million increase was attributed to new theatres constructed by the Company. Average ticket prices increased 3.8% during the period, reflecting an increase in ticket prices and a greater proportion of larger market theatres in the 1997 period than in the same period in 1996. Average concession sales per customer increased 4.5% for the period, reflecting both an increase in consumption and, to a lesser degree, an increase in concession prices. DIRECT THEATRE COSTS -- Direct theatre costs increased by 33.5% to $113.3 million for the six months ended July 3, 1997 from $84.9 million in the comparable 1996 period. Direct theatre costs as a percentage of total revenues decreased to 72.8% in the 1997 period from 73.5% in the 1996 period. The decrease of direct theatre costs as a percentage of total revenues was primarily attributable to better monitoring and control of costs at the Company's theatres, especially acquired theatres. GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses increased by 18.6% to $5.5 million for the six months ended July 3, 1997 from $4.6 million in the comparable 1996 period. As a percentage of total revenues, general and administrative expenses decreased to 3.5% in the 1997 period from 4.0% in the 1996 period. DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased for the six months ended July 3, 1997 by 43.8% to $9.3 million from $6.5 million in the comparable 1996 period. This increase was primarily the result of theatre property additions associated with the Company's expansion efforts. OPERATING INCOME -- Operating income for the six months ended July 3, 1997 increased by 54.6% to $27.7 million, or 17.8% of total revenues, from $17.9 million, or 15.5% of total revenues, in the comparable 1996 period. INTEREST EXPENSE -- Interest expense decreased for the six months ended July 3, 1997 by 61.4% to $1.1 million from $2.9 million in the comparable 1996 period. The decrease was primarily due to lower average borrowings outstanding. INCOME TAXES -- The provision for income taxes increased for the six months ended July 3, 1997 by 60.7% to $10.4 million from $6.4 million in the comparable 1996 period. The effective tax rate was 38.8% in the 1997 period as compared to 40.8% in the 1996 period as the 1996 period reflected certain merger expenses which are not deductible for tax purposes. NET INCOME -- Net income for the six months ended July 3, 1997 increased by 75.0% to $16.3 million from $9.3 million in the comparable 1996 period. The increase in net income reflects primarily the additional screens operated by the Company, as well as strong film releases in the first six months of 1997. 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 have been financed with borrowings under the Company's loan agreement, equity financings and internally generated cash. On September 30, 1996, the 13 14 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED Company amended its $150 million revolving credit facility. 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, 1999, and at a rate of $11.3 million per quarter commencing with the quarter ending September 30, 2001. The loan agreement requires the Company to comply with certain financial and other covenants, including maintaining a minimum net worth of not less than $230.0 million plus 50%of the Company's net income for each quarter commencing with the quarter ending June 27, 1996. On July 3, 1997, $100.0 million was outstanding under the Company's loan agreement. On May 30, 1996, the Company consummated the acquisition of GST for 1,410,213 shares of Regal common stock. In conjunction with the transaction, the Company refinanced approximately $3 million of GST's debt under the Company's revolving credit facility. On June 10, 1996, the Company completed a secondary stock offering of 4,312,500 shares of the Company's common stock at $30.83 per share. The total proceeds to the Company from the offering were approximately $126.5 million, net of the underwriting discount and other expenses of $6.5 million and were used to repay amounts outstanding under the Company's revolving credit facility. On September 13, 1996, the Company completed the purchase of assets consisting of 8 theatres with 69 screens in California from an individual, George Krikorian, and corporations controlled by him (collectively "Krikorian") for consideration of 703,241 shares of Regal common stock and approximately $14.0 million in cash. On May 9, 1997, the Company completed the purchase of assets consisting of an existing 5 theatres with 32 screens, 4 theatres with 52 screens under development, and a 7 screen addition to an existing theatre from Magic Cinemas LLC, an independent theatre company with operations in New Jersey and Pennsylvania. The consideration paid was approximately $24.5 million in cash. Subsequent to the end of the three-month period ended July 3, 1997, Regal consummated the acquisition of the business conducted by Cobb Theatres, L.L.C. (the "Cobb Theatres Acquisition"). In the Cobb Theatres Acquisition, Regal issued an aggregate of 2,837,594 shares of its common stock. The acquisition has been accounted for as a pooling of interests. Regal will recognize certain one time charges totaling approximately $4.0 million (net of tax) in its current quarter ending October 2, 1997, related to merger expenses and severance payments. In connection with the Cobb Theatres Acquisition, Regal assumed approximately $110 million of indebtedness, including $85 million of outstanding Senior Secured Notes (the "Notes"). Regal has commenced an offer to purchase all of the outstanding Notes at a purchase price determined on the basis of a fixed spread over the yield of Treasury Notes to the first call date for the Notes. Regal expects to finance the purchase price of the Notes with borrowings under a loan agreement with a bank lender. Regal will recognize certain one time charges totaling approximately $9.1 million (net of tax) in its current quarter ending October 2, 1997, relating to the purchase of the Notes (assuming all outstanding Notes are purchased). At July 3, 1997, the Company had 167 multi-screen theatres with an aggregate of 1,417 screens. At such date, the Company had 20 new theatres with 293 new screens and 9 new screens at 2 existing locations under construction. The Company anticipates that its capital expenditures over the next 12 months will approximate $125 to $150 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, internally generated cash flow and available cash and equivalents. 14 15 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED NEW ACCOUNTING PRONOUNCEMENTS In February 1997, the FASB issued Statement of Accounting Standards No. 128, Earnings Per Share (EPS). The Statement simplifies the standards for computing earnings per share by replacing the presentation of primary earnings per share with a presentation of basic earnings per share. Additionally, the Statement requires dual presentation of basic and diluted EPS on the face of the income statement and requires a reconciliation of the numerator and denominator of the diluted EPS calculation. The Company plans to adopt the provisions of the Statement 128 in fiscal year 1997 and the impact on the Company's financial statements has not been determined. 15 16 PART II -- OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES. - -------------------------------------------------------------------------------- On May 1, 1997, the shareholders of the Company approved a proposal to amend Section 5 of the Restated Charter of the Company to increase the number of authorized shares of the Company's common stock, no par value, from 50,000,000 to 100,000,000 shares. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - -------------------------------------------------------------------------------- On May 1, 1997, the Company held its 1997 Annual Meeting of Shareholders. At the Annual Meeting, the shareholders of the Company elected the following persons to serve as directors for a term of three (3) years or until their successors are duly elected and qualified with the number of votes cast for and withheld as set forth opposite their names:
VOTES ------------------------------------ FOR WITHHOLD AUTHORITY ----------- ------------------- Philip D. Borack........................... 25,596,620 396,011 Michael E. Gellert......................... 25,611,337 381,294 William H. Lomicka......................... 25,612,374 380,257
The shareholders of the Company also voted on a proposal to amend to the Company's Restated Charter to increase the number of authorized shares from 50,000,000 to 100,000,000 with the following number of votes cast for, against, abstaining or broker non-votes: - -------------------------------------------------------------------------------- FOR AGAINST ABSTAIN NON-VOTE - -------------------------------------------------------------------------------- 23,767,762 2,069,132 27,911 127,826 The shareholders of the Company also voted on a proposal to amend the Company's 1993 Employee Stock Incentive Plan to increase the number of shares issuable thereunder with the following number of votes cast for, against, abstaining or broker non-votes: - -------------------------------------------------------------------------------- FOR AGAINST ABSTAIN NON-VOTE - -------------------------------------------------------------------------------- 17,322,224 4,774,475 40,830 3,855,102 The shareholders of the Company also voted on a proposal to amend the Company's 1993 Outside Directors' Stock Option Plan to increase the number of shares issuable thereunder and increase the number of options granted to non-employee directors on the date of each annual meeting of shareholders with the following number of votes cast for, against, abstaining or broker non-votes: - -------------------------------------------------------------------------------- FOR AGAINST ABSTAIN NON-VOTE - -------------------------------------------------------------------------------- 21,041,282 1,235,075 47,172 3,669,102 16 17 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) (b) Reports on Form 8-K. No Current Reports on Form 8-K were filed for the quarterly period ended July 3, 1997. 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: August 13, 1997 By: /s/ Michael L. Campbell --------------------------------- Michael L. Campbell, Chairman, President and Chief Executive Officer By: /s/ Lewis Frazer III --------------------------------- Lewis Frazer III, Executive Vice President, Chief Financial Officer and Treasurer 18 19 EXHIBIT INDEX
ITEM DESCRIPTION - ------------ ---------------------------------------------------------- (11) Statement re: computation of per share earnings (27) FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY)
EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE (in thousands, except per share data)
Three Months Ended Six Months Ended ------------------------ ----------------------- July 3, June 27, July 3, June 27, 1997 1996 1997 1996 -------- --------- ------- -------- PRIMARY: Weighted average number of common shares outstanding ............................................. 33,189 28,725 33,189 28,140 Net effect of dilutive stock options and warrants based on the treasury stock method using average market price .................................... 1,214 1,382 1,150 1,380 ------- ------- ------- ------- Weighted average number of common and common equivalent shares outstanding ........................... 34,403 30,107 34,339 29,520 ======= ======= ======= ======= Net income ................................................... $ 7,812 $ 4,546 $16,348 $ 9,341 Less common and preferred dividends .......................... -- 68 -- 229 ------- ------- ------- ------- Net income applicable to common shares ....................... $ 7,812 $ 4,478 $16,348 $ 9,112 ======= ======= ======= ======= Net income per common share as reported ...................... $ .23 $ .15 $ .48 $ .31 ======= ======= ======= ======= FULLY DILUTED: Weighted average number of common shares outstanding ............................................. 33,189 28,725 33,189 28,140 Net effect of dilutive stock options and warrants based on the treasury stock method using ending market price ............................................ 1,304 1,404 1,303 1,403 ------- ------- ------- ------- 34,493 30,129 34,492 29,543 ======= ======= ======= ======= Net income ................................................... $ 7,812 $ 4,546 $16,348 $ 9,341 Less common and preferred dividends related to nonconvertible securities ............................... -- 68 -- 229 ------- ------- ------- ------- Net income applicable to common shares ....................... $ 7,812 $ 4,478 $16,348 $ 9,112 ======= ======= ======= ======= Net income per common share assuming full dilution, as reported ................................... $ .23 $ .15 $ .47 $ .31 ======= ======= ======= =======
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF REGAL CINEMAS, INC. FOR THE SIX MONTHS ENDED JULY 3, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 6-MOS JAN-01-1996 JAN-03-1997 JUL-03-1997 1 11,835 0 1,110 0 1,659 18,553 453,502 63,068 444,415 31,444 100,000 0 0 222,317 78,567 444,415 43,902 155,744 5,533 62,921 65,107 0 1,102 26,707 10,359 16,348 0 0 0 16,348 .48 .47
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