<PAGE> 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
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(in thousands of dollars)
ASSETS
<TABLE>
<CAPTION>
March 28, December 28,
1996 1995
--------- ------------
<S> <C> <C>
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
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
-------------------------------------------------
(in thousands of dollars, except share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 28, December 28,
1996 1995
---------- -------------
<S> <C> <C>
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
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
March 28, March 30,
1996 1995
-----------------------------------
<S> <C> <C>
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
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
March 28, March 30,
1996 1995
--------- ---------
<S> <C> <C>
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
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 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:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 28, 1996 March 30, 1995
-------------- --------------
Revenues: (in thousands)
<S> <C> <C>
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
======= =======
</TABLE>
6
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
March 28, December 28,
1996 1995
--------- ------------
(in thousands)
<S> <C> <C>
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
======== ========
</TABLE>
8
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
(in thousands, except per share data)
Three Months Ended
March 28, 1996 March 30, 1995
-------------- --------------
<S> <C> <C>
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
======= =======
</TABLE>
10
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
Percentage of Total Revenues
Three Months Ended
-----------------------------
March 28, March 30,
1996 1995
------------ ------------
<S> <C> <C>
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 %
===== =====
</TABLE>
13
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
ITEM DESCRIPTION PAGE NO.
- ---------- ----------------------------------------------- -------------
<S> <C>
(11) Statement re: computation of per share earnings
(27) Financial Data Schedule (for SEC use only)
(99) Index to Financial Statements
</TABLE>
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
March 30, March 30,
1996 1995
---------- ---------
<S> <C> <C>
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
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1997
<PERIOD-START> DEC-29-1995
<PERIOD-END> MAR-28-1996
<EXCHANGE-RATE> 1
<CASH> 1,148
<SECURITIES> 0
<RECEIVABLES> 660
<ALLOWANCES> 0
<INVENTORY> 825
<CURRENT-ASSETS> 6,723
<PP&E> 264,324
<DEPRECIATION> 36,192
<TOTAL-ASSETS> 244,564
<CURRENT-LIABILITIES> 31,397
<BONDS> 105,050
0
0
<COMMON> 74,167
<OTHER-SE> 32,697
<TOTAL-LIABILITY-AND-EQUITY> 244,564
<SALES> 14,675
<TOTAL-REVENUES> 52,243
<CGS> 1,892
<TOTAL-COSTS> 20,814
<OTHER-EXPENSES> 22,888
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,244
<INCOME-PRETAX> 7,393
<INCOME-TAX> 2,921
<INCOME-CONTINUING> 4,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,472
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
<PAGE> 1
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
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
</TABLE>
F-1
<PAGE> 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
<PAGE> 3
REGAL CINEMAS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
Regal
Cinemas,
Inc. Acquisition
Three Three Acquisition
Months Months Pro Regal/
Ended Ended Forma Acquisition
3/30/95 3/30/95 Adjustment Pro Forma
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
<CAPTION>
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
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
See notes to pro forma consolidated statements of income (unaudited)
F-3
<PAGE> 4
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED) THREE MONTHS ENDED
MARCH 28, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
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
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
See notes to pro forma consolidated statements of income (unaudited)
F-4
<PAGE> 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)
<TABLE>
<CAPTION>
Depreciation Expense
Purchase Price Three Months Ended
Acquisition Allocation Depreciation Period 3/30/95
- -------------- -------------------- ------------------- ---------------------
<S> <C> <C> <C>
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
====
</TABLE>
<TABLE>
<CAPTION>
Depreciation Expense
Purchase Price Three Months Ended
Krikorian Allocation Depreciation Period 3/31/95
--------- -------------- ------------------- --------------------
<S> <C> <C> <C>
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
====
</TABLE>
F-5
<PAGE> 6
<TABLE>
<CAPTION>
Depreciation Expense
Purchase Price Three Months Ended
Krikorian Allocation Depreciation Period 3/31/96
------------ -------------- ------------------- --------------------
<S> <C> <C> <C>
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
====
</TABLE>
(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
<PAGE> 7
REGAL CINEMAS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF MARCH 28, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C>
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
======== ======== ======== ====== ======= =======
</TABLE>
See notes to pro forma consolidated balance sheet (unaudited)
F-7
<PAGE> 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)
<TABLE>
<S> <C>
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,175
Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,868
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,157
-------
28,200
=======
</TABLE>
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
<PAGE> 9
GEORGIA STATE THEATRES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS MARCH 28, DECEMBER 28,
1996 1995
--------------- --------------
<S> <C> <C>
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
=============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-9
<PAGE> 10
GEORGIA STATE THEATRES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------
MARCH 28, MARCH 30,
1996 1995
--------------------------------------
<S> <C> <C>
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
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-10
<PAGE> 11
GEORGIA STATE THEATRES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------
March 28, March 30,
1996 1995
---------------------------------------
<S> <C> <C>
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
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-11
<PAGE> 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
<PAGE> 13
KRIKORIAN THEATRES
COMBINED HISTORICAL SUMMARY OF NET THEATRE ASSETS ACQUIRED
(SEE NOTE 1)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
<S> <C> <C>
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
============ =============
</TABLE>
F-13
<PAGE> 14
KRIKORIAN THEATRES
COMBINED HISTORICAL SUMMARY OF DIRECT THEATRE OPERATING REVENUES AND EXPENSES
(SEE NOTE 1)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
----------- -----------
<S> <C> <C>
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
============ ============
</TABLE>
F-14
<PAGE> 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
