<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 October 3, 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 - 32,856,971 shares at November 1, 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>
October 3, December 28,
1996 1995
---------- -----------
<S> <C> <C>
Current assets:
Cash and equivalents $ 5,120 $ 5,775
Accounts receivable 836 927
Inventories 1,082 875
Prepaids and other current assets 3,312 3,039
Refundable income taxes 2,025 2,493
Deferred income taxes 148 122
-------- --------
Total current assets 12,523 13,231
-------- --------
Property and equipment:
Land 23,524 25,200
Buildings and leasehold improvements 175,730 133,590
Equipment 105,110 83,523
Construction in progress 39,524 22,391
-------- --------
343,888 264,704
Accumulated depreciation and amortization (50,443) (40,995)
-------- --------
Total property and equipment, net 293,445 223,709
-------- --------
Other assets 22,016 9,941
-------- --------
Total assets $327,984 $246,881
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 3
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
-------------------------------------------------------
(in thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
October 3, December 28,
1996 1995
---------- ------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term obligations $ 73 $ 13,254
Accounts payable 15,132 16,684
Accrued expenses 5,781 5,685
Dividends payable - 271
-------- --------
Total current liabilities 20,986 35,894
Long-term obligations, less current maturities 27,600 95,088
Other liabilities 3,421 3,542
Deferred income taxes 7,269 5,454
-------- --------
Total liabilities 59,276 139,978
-------- --------
Shareholders' equity:
Common stock, no par; 50,000,000 shares authorized,
32,856,971 and 27,666,192 shares issued and
outstanding at October 3, 1996 and December 28,
1995, respectively 215,322 74,484
Retained earnings 53,386 32,419
-------- --------
268,708 106,903
-------- --------
Total liabilities and shareholders' equity $327,984 $246,881
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------------------------
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- ------------------------
October 3, September 28, October 3, September 28,
1996 1995 1996 1995
---------- ------------- --------- ------------
<S> <C> <C> <C> <C>
Revenues:
Admissions $54,260 $42,951 $133,661 $104,157
Concessions 23,094 18,186 55,659 43,158
Other operating revenues 2,392 1,340 5,964 2,955
------- ------- -------- --------
Total Revenues 79,746 62,477 195,284 150,270
------- ------- -------- --------
Operating Expenses:
Film rental and advertising costs 29,478 23,485 72,502 56,271
Cost of concessions and other 2,925 2,388 7,090 5,532
Theatre operating expenses 22,167 17,349 59,891 48,743
General & administrative expenses 2,440 2,112 7,038 5,689
Depreciation & amortization 3,635 2,760 10,094 7,459
Merger expenses - - 1,639 1,246
------- ------- -------- --------
Total operating expenses 60,645 48,094 158,254 124,940
Other income (expense):
Interest expense (263) (1,267) (3,119) (3,407)
Interest income 293 2 450 152
Other 311 38 867 194
------- ------- -------- --------
Income before taxes and
extraordinary item 19,442 13,156 35,228 22,269
Provision for income taxes 7,587 5,209 14,032 9,012
------- ------- -------- --------
Income before extraordinary item 11,855 7,947 21,196 13,257
Extraordinary item net of tax:
Loss on extinguishment of debt - - - (448)
------- ------- -------- --------
Net income $11,855 $ 7,947 $ 21,196 $ 12,809
======= ======= ======== ========
GST Dividends - 244 229 372
------- ------- -------- --------
Net income applicable to common
stock $11,855 $ 7,703 $ 20,967 $ 12,437
======= ======= ======== ========
Earnings per common share before
effect of extraordinary item:
Primary $ .35 $ .26 $ .68 $ .45
Fully diluted $ .35 $ .26 $ .68 $ .45
Extraordinary item:
Primary $ - $ - $ - $ (.02)
Fully diluted $ - $ - $ - $ (.02)
Earnings per common share:
Primary $ .35 $ .26 $ .68 $ .43
======= ======= ======== ========
Fully diluted $ .35 $ .26 $ .68 $ .43
======= ======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------
(in thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------------
October 3, September 28,
1996 1995
---------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 21,196 $12,809
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,094 7,459
Loss on extinguishment of debt - 448
Deferred income taxes 1,788 2,676
Changes in operating assets and liabilities: 92 205
Accounts receivable
Inventories (208) (160)
Prepaids and other current assets (273) 10
Refundable income taxes 1,401 1,151
Accounts payable (1,552) (6,075)
Accrued expenses and other liabilities 25 (75)
-------- -------
Net cash provided by operating activities 32,563 18,448
Cash flows from investing activities:
Capital expenditures, net (73,191) (51,889)
Investment in other assets (5,921) (2,752)
-------- -------
Net cash used in investing activities (79,112) (54,641)
Cash flows from financing activities:
Net borrowings (payments) on long-term debt (80,669) 31,363
Dividends paid to GST shareholders (500) (372)
Redemption of preferred stock - (1,196)
Net proceeds from issuance of common stock 126,973 2,982
Stock compensation expense 90 90
-------- -------
Net cash provided by financing activities 45,894 32,867
-------- -------
Net increase (decrease) in cash and equivalents (655) (3,326)
Cash and equivalents at beginning of period 5,775 7,222
-------- -------
Cash and equivalents at end of period $ 5,120 $ 3,896
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
REGAL CINEMAS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Regal Cinemas, Inc.
Notes to Condensed Consolidated Financial Statements
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. The Company formally
operates on a fiscal year ending on the Thursday closest to December 31.
On June 15, 1994, Regal issued 8,706,068 shares of its common stock for
all of the outstanding common stock of Litchfield. On April 17, 1995,
Regal issued 814,755 shares of its common stock for all of the
outstanding common stock of Neighborhood. On May 30, 1996, Regal issued
1,410,213 shares of its common stock for all of the outstanding common
stock of GST. The mergers have been accounted for as poolings 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 Litchfield, Neighborhood and GST.
Separate results of the combining entities for the year ended 1995 and
the three-month and nine-month periods ended October 3, 1996 are as
follows:
<TABLE>
<CAPTION>
(in thousands) THREE NINE
MONTHS MONTHS
ENDED ENDED
OCTOBER 3, OCTOBER 3,
1995 1996 1996
-------- ------- --------
<S> <C> <C> <C>
Revenues:
Regal $184,958 $79,746 $190,575
Neighborhood (through April 27 for 1995) 5,135 - -
GST (through May 30 for 1996) 13,321 - 4,709
-------- ------- --------
$203,414 $79,746 $195,284
======== ======= ========
Net income (loss):
Regal $ 19,061 $11,855 $ 21,106
Neighborhood (through April 27 for 1995) (1,824) - -
GST (through May 30 for 1996) 866 - 90
-------- ------- --------
$ 18,103 $11,855 $ 21,196
======== ======= ========
</TABLE>
The net loss for Neighborhood for the four months ended April 27, 1995,
reflects approximately $1,219,000 (net of applicable income taxes) of
expense associated with the merger, principally legal and accounting
fees, severance costs, and other costs of consolidating. The net loss
for GST for the five months ended May 30, 1996, reflects approximately
$1,200,000 (net of applicable income taxes) of expense associated with
the merger, principally legal and accounting fees, and severance related
costs.
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of October 3, 1996, the
condensed consolidated statements of income for the three months and nine
months ended October 3, 1996 and September 28, 1995, and the condensed
consolidated statements of cash flows for the nine months ended October
3, 1996 and September 28, 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 Report filed on Form 8-K dated July 1, 1996. The
results of operations for the three month and nine month periods ended
October 3, 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 certain merger expenses which are not
deductible for tax purposes and the inclusion of state income taxes.
4. LONG-TERM OBLIGATIONS
Long-term obligations at October 3, 1996 and December 28, 1995, consists
of the following:
<TABLE>
<CAPTION>
October 3, December 28,
1996 1995
---------- ------------
(in thousands)
<S> <C> <C>
Regal $150,000,000 senior reducing revolving credit
facility which expires on June 30, 2003, with
interest payable quarterly, at LIBOR (5.6% and 5.7%
at October 3, 1996 and December 28, 1995,
respectively) plus .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 outstanding
balance quarterly through June 30, 2003. $25,000 $ 92,450
Other obligations 2,673 15,892
------- --------
27,673 108,342
Less current maturities (73) (13,254)
------- --------
$27,600 $ 95,088
======= ========
</TABLE>
<PAGE> 8
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. On
September 30, 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.
The Company's debt at October 3, 1996 is scheduled to mature as follows:
(in thousands)
<TABLE>
<S> <C>
1996 $ 73
1997 54
1998 54
1999 6,304
Thereafter 21,188
-------
Total $27,673
=======
</TABLE>
5. 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, Neighborhood and GST 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 May 1993, November 1994, December 1995 and
September 1996, respectively, common stock splits. 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 (29,111 shares for
the three-month period ended September 28, 1995 and 34,047 shares for the
three-month period ended October 3, 1996 and 28,612 shares for the
nine-month period ended September 28, 1995 and 31,044 shares for the
nine-month period ended October 3, 1996). 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 (29,190 shares for the three-month period
ended September 28, 1995 and 34,047 shares for the three month period
ended October 3, 1996 and 28,815 shares for the nine-month period ended
September 28, 1995 and 31,044 shares for the nine-month period ended
October 3, 1996).
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. ACQUISITION
On September 13, 1996, Regal completed the purchase of assets consisting
of eight 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
with an approximate fair value of $14.0 million and approximately $14.0
million in cash.
7. STOCK OFFERING
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 underwriting discount and certain other expenses of $6.5
million.
8. COMMON STOCK
Regal's common shares authorized, issued and outstanding throughout the
financial statements and notes reflect the authorization of additional
shares and the effect of the two 3-for-2 stock splits authorized in
December 1995 and September 1996.
<PAGE> 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") 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") should be read in conjunction with the Condensed Consolidated
Financial Statements and Notes thereto included elsewhere 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 interests.
BACKGROUND OF REGAL
Regal has achieved significant growth in theatres and screens since its
formation in November of 1989. Since inception through October 3, 1996, Regal
acquired 113 theatres with 757 screens, developed 34 new theatres with 377
screens and added 51 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 pre-opening costs associated with opening its theatres and
expenses such costs in the periods incurred. Theatre closings have had no
significant effect on the operations of Regal.
On April 8, 1994, Regal completed the acquisition of 13 theatres from National
Theatre Holdings Corp. The purchase price of the acquisition was approximately
$24.5 million and the assumption of certain obligations totaling $500,000,
which Regal funded from cash on hand and borrowings available under the then
$60 million revolving credit facility. 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 241,313 shares
of Regal common stock. On September 13, 1996, Regal completed the purchase of
assets consisting of eight theatres with 69 screens in California from an
individual, George Krikorian and corporations controlled by him (collectively
"Krikorian"). The purchase price was approximately $14.0 million cash and
703,241 shares of Regal common stock.
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 two 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-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.
<PAGE> 11
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 Nine Months Ended
------------------------- -------------------------
October 3, September 28, October 3, September 28,
1996 1995 1996 1995
----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Revenues:
Admissions 68.0% 68.7% 68.4% 69.3%
Concession 29.0% 29.2% 28.5% 28.7%
Other 3.0% 2.1% 3.1% 2.0%
----- ------ ----- -----
Total Revenues 100.0% 100.0% 100.0% 100.0%
Operating Expenses:
Film rental and advertising costs 37.0% 37.6% 37.1% 37.4%
Cost of concessions and other 3.7% 3.8% 3.6% 3.7%
Theatre operating expenses 27.8% 27.8% 30.7% 32.4%
General & administrative Expenses 3.1% 3.4% 3.6% 3.8%
Depreciation & amortization 4.6% 4.4% 5.2% 5.0%
Merger expenses 0.0% 0.0% .8% 0.8%
----- ----- ----- -----
Total operating expenses 76.0% 77.0% 81.0% 83.1%
Other income (expense):
Interest expense (.3%) (2.0%) (1.6%) (2.3%)
Interest income .3% 0.0% .2% .1%
Other .4% 0.0% .4% .1%
----- ----- ----- -----
Income before taxes and
extraordinary item 24.4% 21.0% 18.0% 14.8%
Provision for income taxes (9.5%) (8.3%) (7.2%) (6.0%)
----- ----- ----- -----
Income before extraordinary item 14.9% 12.7% 10.8% 8.8%
Extraordinary item:
Loss on extinguishment of debt 0.0% 0.0% 0.0% (0.3%)
----- ----- ----- -----
NET INCOME 14.9% 12.7% 10.8% 8.5%
===== ===== ===== =====
</TABLE>
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED
THREE MONTHS ENDED OCTOBER 3, 1996 AND SEPTEMBER 28, 1995
TOTAL REVENUES -- Total revenues for the third quarter of fiscal 1996 increased
by 27.6% to $79.7 million from $62.5 million in the comparable 1995 period.
This increase was due to a 17.8% increase in attendance attributable primarily
to the net addition of 231 screens in fiscal 1995 and first nine months of
1996. Of the $17.2 million net increase in revenues for the period, a $5.0
million increase was attributed to theatres previously operated by the Company,
a $9.1 million increase was attributed to theatres acquired by the Company, and
a $3.1 million increase was attributed to new theatres constructed by the
Company. Average ticket prices increased 7.3% 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 7.8% 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 26.4% to $54.6
million in the third quarter 1996 from $43.2 million in the third quarter 1995.
Direct theatre costs as a percentage of total revenues decreased to 68.5% in
the 1996 period from 69.2% in the 1995 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, and to a lesser extent, to a decrease in occupancy expenses as a
percentage of total revenues.
GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses
increased by 15.5% to $2.4 million in the third quarter 1996 from $2.1 million
in the third quarter 1995. As a percentage of total revenues, general and
administrative expenses decreased to 3.1% in the 1996 period from 3.4% in the
1995 period.
DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense
increased in the third quarter 1996 by 31.7% to $3.6 million from $2.8 million
in the third 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 third quarter 1996 increased by
32.8% to $19.1 million, or 24.0% of total revenues, from $14.4 million, or
23.0% of total revenues, in the third quarter 1995.
INTEREST EXPENSE -- Interest expense decreased in the third quarter 1996 by
79.2% to $263,000 from $1.3 million in the third quarter 1995. The decrease
was primarily due to lower average borrowings outstanding.
INCOME TAXES -- The provision for income taxes increased in the third quarter
1996 by 45.7% to $7.6 million from $5.2 million in the third quarter 1995. The
effective tax rate was 39.0% in the 1996 period as compared to 39.6% in the
1995 period.
NET INCOME -- Net income in the third quarter 1996 increased by 49.2% to $11.9
million from $7.9 million in the third quarter 1995. The increase in net
income reflects primarily the additional screens operated by the Company.
NINE MONTHS ENDED OCTOBER 3, 1996 AND SEPTEMBER 28, 1995
TOTAL REVENUES -- Total revenues for the nine months ended October 3, 1996
increased by 30.0% to $195.3 million from $150.3 million in the comparable 1995
period. This increase was due to a 19.1% increase in attendance attributable
primarily to the net addition of 231 screens in fiscal 1995 and first nine
months of 1996 as well as strong film releases in the first six months of 1996.
Of the $45.0 million net increase in revenues for the period, a $16.4 million
increase was attributed to theatres previously operated by the Company, a $16.8
million increase was attributed to theatres acquired by the Company, and an
$11.8 million increase was attributed to new theatres constructed by the
Company. Average ticket prices increased 7.8% during the period, reflecting
a smaller
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED
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 8.3% 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 26.2% to $139.5
million for the nine months ended October 3, 1996 from $110.5 million in the
comparable 1995 period. Direct theatre costs as a percentage of total revenues
decreased to 71.4% in the 1996 period from 73.6% in the 1995 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, and to a lesser extent, to a
decrease in occupancy expenses as a percentage of total revenues.
GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses
increased by 23.7% to $7.0 million for the nine months ended October 3, 1996
from $5.7 million in the comparable 1995 period. As a percentage of total
revenues, general and administrative expenses decreased to 3.6% in the 1996
period from 3.8% in the 1995 period.
DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense
increased for the nine months ended October 3, 1996 by 35.3% to $10.1 million
from $7.5 million in the comparable 1995 period. This increase was primarily
the result of theatre property additions associated with the Company's
expansion efforts.
OPERATING INCOME -- Operating income for the nine months ended October 3, 1996
increased by 46.2% to $37.0 million, or 19.0% of total revenues, from $25.3
million, or 16.9% of total revenues, in the comparable 1995 period.
INTEREST EXPENSE -- Interest expense decreased for the nine months ended
October 3, 1996 by 8.5% to $3.1 million from $3.4 million in the comparable
1995 period. The decrease was primarily due to lower average borrowings
outstanding, net of capitalized interest totaling $1.4 million during the 1996
period, relating to projects under construction.
INCOME TAXES -- The provision for income taxes increased for the nine months
ended October 3, 1996 by 55.7% to $14.0 million from $9.0 million in the
comparable 1995 period. The effective tax rate was 39.8% in the 1996 period as
compared to 40.5% in the 1995 period as each period reflected certain merger
expenses which are not deductible for tax purposes.
NET INCOME -- Net income for the nine months ended October 3, 1996 increased by
65.5% to $21.2 million from $12.8 million in the comparable 1995 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 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 have been financed with borrowings under the
Company's loan agreement, equity financings and internally generated cash. The
Company amended its loan to a $150 million revolving credit facility as of
October 3, 1996. 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
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED
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 October 3, 1996, $25.0 million was outstanding under
the Company's loan agreement.
On April 17, 1995, Regal consummated the acquisition of Neighborhood for
814,755 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.
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 241,313 shares of Regal common stock.
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.
At October 3, 1996, the Company had 147 multi-screen theatres with an aggregate
of 1,184 screens. At such date, the Company had 15 new theatres with 178 new
screens and 8 new screens at 1 existing location under construction. The
Company anticipates that its capital expenditures over the next twelve months
will approximate $150 million. The Company believes that its capital needs for
completion of theatre construction and development for at least the next 12 to
18 months will be satisfied by available credit under the loan agreement, as
amended, internally generated cash flow and available cash and equivalents.
<PAGE> 15
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
<S> <C>
(a) Exhibits:
(10) Regal Cinemas, Inc. -- Sixth Amendment to Second Amendment
and Restated Loan Agreement dated September 30, 1996
(11) Statement re: computation of per share earnings
(27) Financial Data Schedule (for SEC use only)
(b) The Company filed the following Current Reports on Form 8-K during the
quarter ended October 3, 1996:
Form 8-K dated July 1, 1996 (filed July 1, 1996);
</TABLE>
<PAGE> 16
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: November 5, 1996 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
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION
- --------- -----------------------------------------------------------------
<S> <C>
(10) Regal Cinemas, Inc. -- Sixth Amendment to Second Amendment and
Restated Loan Agreement dated September 30, 1996
(11) Statement re: computation of per share earnings
(27) Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 10
SIXTH AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT (the
"Sixth Amendment"), is made and entered into as of the 30th day of September,
1996, by and among (i) REGAL CINEMAS, INC., a Tennessee corporation with
principal office and place of business in Knoxville, Tennessee (the
"Borrower"), (ii)(a) PNC BANK, KENTUCKY, INC., a Kentucky banking corporation
with principal office and place of business in Louisville, Kentucky ("PNC"),
(b) THE FIRST NATIONAL BANK OF BOSTON, a national banking association with
principal office and place of business in Boston, Massachusetts ("Bank of
Boston"), (c) FIRST UNION NATIONAL BANK OF TENNESSEE, a national banking
association with principal office and place of business in Nashville, Tennessee
("First Union"), (d) FIRST AMERICAN NATIONAL BANK, a national banking
association with principal office and place of business in Knoxville, Tennessee
("First American"), (e) THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH, a Japanese
banking corporation maintaining an office in Chicago, Illinois ("Sumitomo"), in
its capacity as the assignee and successor in interest to The Daiwa Bank,
Limited ("Daiwa"), (f) NATIONSBANK OF TENNESSEE, N.A., a national banking
association with an office and place of business in Knoxville, Tennessee
(NationsBank"), and (g) WACHOVIA BANK OF GEORGIA, N.A., a national banking
association with principal office and place of business in Atlanta, Georgia
("Wachovia") (PNC, Bank of Boston, First Union, First American, Sumitomo,
NationsBank and Wachovia is each hereinafter individually referred to as a
"Bank," and all of the same are hereinafter collectively referred to as the
"Banks"), (iii) PNC BANK, KENTUCKY, INC., in its capacity as agent for the
Banks (in such capacity, the "Agent"), and (iv) THE FIRST NATIONAL BANK OF
BOSTON, in its capacity as Lead Manager.
P R E L I M I N A R Y S T A T E M E N T:
A. Pursuant to that certain Second Amended and Restated Loan Agreement
dated as of July 7, 1993, among the Borrower, PNC, Bank of Boston, First Union,
First American, Daiwa and NationsBank (collectively, the "Original Banks"), the
Agent and Bank of Boston, in its capacity as Lead Manager, as amended pursuant
to (i) that certain First Amendment to Second Amended and Restated Loan
Agreement dated as of May 6, 1994, among the Borrower, the Original Banks and
the Agent (the "First Amendment"), (ii) that certain Second Amendment to Second
Amended and Restated Loan Agreement dated as of June 15, 1994, among the
Borrower, the Original Banks and the Agent (the "Second Amendment"), (iii) that
certain Third Amendment to Second Amended and Restated Loan Agreement dated as
of March 31, 1995, among the Borrower, the Original Banks and the Agent (the
"Third Amendment"), (iv) that certain Fourth Amendment to Second Amended and
Restated Loan Agreement dated as of November 30, 1995, among the Borrower, the
Original Banks, Wachovia and the Agent (the "Fourth Amendment"), and (v) that
certain Fifth Amendment to Second Amended and Restated Loan Agreement dated as
of May 31, 1996, among the Borrower, the Banks and the Agent (the "Fifth
Amendment") (collectively, the "Loan Agreement"), the Banks have established a
reducing revolving credit facility in the principal amount of One Hundred Fifty
Million Dollars ($150,000,000.00) (the "Reducing Revolver") in favor of the
Borrower upon the terms and conditions set forth in the Loan Agreement.
B. The Borrower has now requested that the Banks agree to certain
amendments to the Loan Agreement, which the Banks are willing to do upon the
express condition that the Borrower execute and deliver this Sixth Amendment.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth herein and for other good and valuable consideration, the
mutuality, receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Each capitalized term used herein, unless otherwise expressly
defined herein, shall have the meaning set forth in the Loan Agreement.
2. The term "Applicable Commitment Fee", as defined in Section 1.119
of the Loan Agreement, is hereby re-defined to mean, as of each date of
determination thereof, (a) .225% per annum if, as at the most recent Fiscal
Quarter end of the Borrower, the ratio of the Borrower's Total Funded Debt as at
such Fiscal Quarter end, to the Borrower's Theater Level Cash Flow for the
four-Fiscal Quarter period ended on such Fiscal Quarter end, was greater than
2.5 to 1.0, and (b) .175% per annum if, as at the most recent Fiscal Quarter end
of the Borrower, the ratio of the Borrower's Total Funded Debt as at such Fiscal
Quarter end, to the Borrower's Theater Level Cash Flow for the four-Fiscal
Quarter period ended on such Fiscal Quarter end, was equal to or less than 2.5
to 1.0.
3. The term "Pricing Level", as defined in Section 1.81 of the Loan
Agreement, is hereby redefined to mean, for any Pricing Period, Pricing Level I,
Pricing Level II or Pricing Level III, as may be in effect for such Pricing
Period; provided, however, the Default Rate shall be in effect upon the
occurrence and during the continuation of any Event of Default.
4. The term "Pricing Level I", as defined in Section 1.82 of the Loan
Agreement, is hereby redefined to mean the Pricing Level that will be in effect
for the applicable Pricing Period if, as at the relevant Date of Determination,
the ratio of the Borrower's Total Funded Debt as measured on such Date of
Determination, to the Borrower's Theater Level Cash Flow for the four-Fiscal
Quarter Period ended on such Date of Determination, is greater than 2.5 to 1.0.
5. The term "Pricing Level II", as defined in Section 1.83 of the
Loan Agreement, is hereby redefined to mean the Pricing Level that will be in
effect for the applicable Pricing Period if, as at the relevant Date of
Determination, the ratio of the Borrower's Total Funded Debt as measured on such
Date of Determination, to the Borrower's Theater Level Cash Flow for the
four-Fiscal Quarter Period ended on such Date of Determination, is greater than
1.5 to 1.0 but is equal to or less than 2.5 to 1.0.
6. The term "Pricing Level III", as defined in Section 1.84 of the
Loan Agreement, is hereby redefined to mean the Pricing Level that will be in
effect for the applicable Pricing Period if, as at the relevant Date of
Determination, the ratio of the Borrower's Total Funded Debt as measured on such
Date of Determination, to the Borrower's Theater Level Cash Flow for the
four-Fiscal Quarter Period ended on such Date of Determination, is equal to or
less than 1.5 to 1.0.
7. The term "Pricing Level IV", as defined in Section 1.85 of the
Loan Agreement, and the term "Pricing Level V", as defined in Section 1.117 of
the Loan Agreement, are hereby deleted.
8. The term "Revolving Loan Commitment Termination Date", as defined
in Section 1.100 of the Loan Agreement, is hereby redefined to mean the
Revolving Loan Commitment Termination Date then in effect, which shall be the
earliest of (i) June 30, 2003, (ii) the date as of which the Secured Obligations
shall have become immediately due and payable pursuant to Section 9 of the Loan
Agreement, and (iii) the date on which all of the Secured Obligations are paid
in full (including, without limitation, the repayment,
2
<PAGE> 3
expiration, termination or cash collateralization of Letters of Credit pursuant
to this Loan Agreement) and all Revolving Loan Commitments are reduced to zero.
9. The term "Total Funded Debt", as defined in Section 1.113 of the
Loan Agreement, is hereby redefined to mean, as at any date on which the amount
thereof shall be determined, (i) all Indebtedness for borrowed money of the
Borrower as of such date, including, without limitation, all unpaid Secured
Obligations, all unpaid Subordinated Indebtedness and all amounts due under all
Capital Leases entered into or assumed by the Borrower, but excluding all
Net Cash Proceeds on deposit in the account maintained by the Borrower with the
Agent pursuant to Section 2.4(A)(ii)(1) hereof, plus (ii) all Contingent
Obligations of the Borrower.
10. The term "Guaranty Agreement", as defined in Section 1.121 of the
Loan Agreement, is hereby redefined to mean, collectively, (a) that certain
Guaranty Agreement dated as of March 31, 1995, executed and delivered by
Litchfield Theatres, Ltd., a South Carolina corporation, in favor of the Agent,
as amended pursuant to (i) that certain First Amendment to Guaranty Agreement
dated as of November 30, 1995, between Litchfield Theatres, Ltd. and the Agent,
and (ii) that certain Second Amendment to Guaranty Agreement dated as of
September 30, 1996, between Litchfield Theatres, Ltd. and the Agent, together
with all future amendments and modifications thereto, (b) that certain Guaranty
Agreement dated as of November 30, 1995, executed and delivered by Neighborhood
Entertainment, Inc, a Virginia corporation, in favor of the Agent, as amended
pursuant to that certain First Amendment to Guaranty Agreement dated as of
September 30, 1996, between Neighborhood Entertainment, Inc. and the Agent,
together with all future amendments and modifications thereto, and (c) that
certain Guaranty Agreement dated as of September 30, 1996, executed and
delivered by Georgia State Theatres, Inc., a Georgia corporation, in favor of
the Agent, together with all future amendments and modifications thereto.
11. The term "Stock Pledge Agreement", as defined in Section 1.122 of
the Loan Agreement, is hereby redefined to mean that certain Stock Pledge
Agreement dated as of March 31, 1995, between the Borrower and the Agent, as
amended pursuant to (a) that certain First Amendment to Stock Pledge Agreement
dated as of November 30, 1995, between the Borrower and the Agent, and (b) that
certain Second Amendment to Stock Pledge Agreement dated as of September 30,
1996, between the Borrower and the Agent, together with all future amendments
and modifications thereto.
12. Section 2.1E of the Loan Agreement, titled Scheduled Reductions in
Revolving Loan Commitments, as previously amended pursuant to Section 17 of the
First Amendment, Section 7 of the Third Amendment and Section 10 of the Fourth
Amendment, is hereby amended to provide that the Revolving Loan Commitments of
the Banks shall permanently reduce by the following amounts and on the following
dates (the "Revolving Loan Commitment Reduction Dates") in proportion to each
Bank's Pro Rata Share per the following schedule:
3
<PAGE> 4
<TABLE>
<CAPTION>
Revolving Loan Scheduled Reduction Remaining
Commitment in Revolving Revolving
Reduction Date Loan Commitments Loan Commitments
- --------------- ------------------- ----------------
<C> <C> <C>
October 1, 1999 $ 7,500,000 $142,500,000
January 1, 2000 $ 7,500,000 $135,000,000
April 1, 2000 $ 7,500,000 $127,500,000
July 1, 2000 $ 7,500,000 $120,000,000
October 1, 2000 $ 7,500,000 $112,500,000
January 1, 2001 $ 7,500,000 $105,000,000
April 1, 2001 $ 7,500,000 $ 97,500,000
July 1, 2001 $ 7,500,000 $ 90,000,000
October 1, 2001 $11,250,000 $ 78,750,000
January 1, 2002 $11,250,000 $ 67,500,000
April 1, 2002 $11,250,000 $ 56,250,000
July 1, 2002 $11,250,000 $ 45,000,000
October 1, 2002 $11,250,000 $ 33,750,000
January 1, 2003 $11,250,000 $ 22,500,000
April 1, 2003 $11,250,000 $ 11,250,000
June 30, 2003 $11,250,000 0
</TABLE>
The schedule set forth in this Section 12 shall supersede in their
entirety the schedules respectively set forth in Section 2.1E of the Loan
Agreement, Section 17 of the First Amendment, Section 7 of the Third Amendment
and Section 10 of the Fourth Amendment.
13. The schedules of the Applicable Base Rate Margins respectively set
forth in Section 2.2A(i) of the Loan Agreement, Section 18 of the First
Amendment, Section 8 of the Third Amendment and Section 11 of the Fourth
Amendment are hereby amended and restated as follows:
4
<PAGE> 5
<TABLE>
<CAPTION>
Applicable
Pricing Level Base Rate Margin
------------------------ ------------------------
<C> <C>
Pricing Level I 0%
Pricing Level II 0%
Pricing Level III 0%
</TABLE>
The schedule set forth in this Section 13 shall supersede in their entirety the
schedules respectively set forth in Section 2.2A(i) of the Loan Agreement,
Section 18 of the First Amendment, Section 8 of the Third Amendment and Section
11 of the Fourth Amendment.
14. The schedules of the Applicable LIBOR Rate Margins respectively
set forth in Section 2.2A(ii) of the Loan Agreement, Section 19 of the First
Amendment, Section 9 of the Third Amendment and Section 12 of the Fourth
Amendment are hereby amended and restated as follows:
<TABLE>
<CAPTION>
Pricing Level Applicable LIBOR Rate Margin
------------------------ -------------------------------
<C> <C>
Pricing Level I .90%
Pricing Level II .65%
Pricing Level III .40%
</TABLE>
The schedule set forth in this Section 14 shall supersede in their entirety the
schedules respectively set forth in Section 2.2A(ii) of the Loan Agreement,
Section 19 of the First Amendment, Section 9 of the Third Amendment and Section
12 of the Fourth Amendment.
15. Section 2.3B of the Loan Agreement, titled Commitment Fee, as
amended pursuant to Section 11 of the Third Amendment and Section 13 of the
Fourth Amendment, is hereby amended to provide that the Borrower shall pay to
the Agent, for the benefit of the Banks in proportion to their respective Pro
Rata Shares, commitment fees for the period from and including the effective
date of this Sixth Amendment to and excluding the date the Revolving Loan
Commitments expire, equal to the average of the daily excess of the Revolving
Loan Commitments (as reduced in accordance with the schedule set forth in
Section 12 of this Sixth Amendment or pursuant to Section 2.4C of the Loan
Agreement) over the aggregate principal amount of Revolving Loans outstanding
plus the Letter of Credit Usage multiplied by the Applicable Commitment Fee,
such commitment fees to be calculated on the basis of a 360-day year and the
actual number of days elapsed and to be payable quarterly in arrears on the last
day of each Fiscal Quarter, commencing on the first such date to occur after the
date of this Sixth Amendment, and on the date the Revolving Loan Commitments
expire. Reductions in the amounts available for borrowing under the Revolving
Loan Commitments arising from the operation of the limitation set forth in the
second paragraph of Section 2.1A of the Loan Agreement shall not constitute
usages of Revolving Loan Commitments for purposes of this Section 15 or Section
2.3B of the Loan Agreement and shall not reduce the amount of the commitment
fees payable by the Borrower under this Section 15 or Section 2.3B of the Loan
Agreement.
5
<PAGE> 6
16. The schedules of the Applicable Letter of Credit Fee Percentages
respectively set forth in Section 2.7F(ii) of the Loan Agreement, Section 20 of
the First Amendment, Section 13 of the Third Amendment and Section 14 of the
Fourth Amendment are hereby amended and restated as follows:
<TABLE>
<CAPTION>
Pricing Level Applicable Letter of Credit Fee Percentage
--------------------- ------------------------------------------
<S> <C>
Pricing Level I .90%
Pricing Level II .65%
Pricing Level III .40%
</TABLE>
The schedule set forth in this Section 16 shall supersede in their entirety the
schedules respectively set forth in Section 2.7F(ii) of the Loan Agreement,
Section 20 of the First Amendment, Section 13 of the Third Amendment and
Section 14 of the Fourth Amendment.
17. Section 8.10 of the Loan Agreement, titled Total Funded Debt to
Theater Level Cash Flow, as previously amended pursuant to Section 22 of the
First Amendment and Section 17 of the Third Amendment, is hereby amended to
provide that the Borrower will not permit, as at each Fiscal Quarter end, the
ratio of (a) its Total Funded Debt as at such Fiscal Quarter end, to (b) its
Theater Level Cash Flow for the four-Fiscal Quarter period ended on such Fiscal
Quarter end:
i. To exceed 3.0 to 1.0 at any Fiscal Quarter end
during the period from the date hereof through June 30, 1999; and
ii. To exceed 2.5 to 1.0 at any Fiscal Quarter end
after June 30, 1999.
For purposes of determining the Borrower's compliance with the provisions
of this Section 17 as of each Funding Date and/or Transaction Date, the
Borrower's Total Funded Debt shall also be determined as of the particular
Funding Date and/or Transaction Date, the Borrower's Theater Level Cash Flow
shall be determined for the twelve full calendar months preceding the
particular Funding Date and/or Transaction Date, and the Borrower will not
permit the ratio of the Borrower's Total Funded Debt as of the particular
Funding Date and/or Transaction Date to the Borrower's Theater Level Cash Flow
for the twelve full calendar months preceding the particular Funding Date
and/or Transaction Date:
i. To exceed 3.0 to 1.0 on any Funding Date and/or
Transaction Date during the period from the date hereof through June 30, 1999;
and
ii. To exceed 2.5 to 1.0 on any Funding Date and/or
Transaction Date after June 30, 1999.
18. Section 8.11 of the Loan Agreement, titled Fixed Charge Coverage
Ratio, as previously amended pursuant to Section 18 of the Third Amendment, is
hereby amended to provide that the Borrower will not permit, as at each Fiscal
Quarter end, the ratio of (a) its Cash Flow Available for Fixed Charges for the
four-Fiscal Quarter period ended on such
6
<PAGE> 7
Fiscal Quarter end, to (b) its Fixed Charges for the four-Fiscal Quarter period
ended on such Fiscal Quarter end to be less than 1.75 to 1.0 as at any Fiscal
Quarter end, commencing with the Fiscal Quarter ending September 30, 1996.
19. Section 8.12 of the Loan Agreement, titled Pro Forma Debt Service
Coverage, as previously amended pursuant to Section 23 of the First Amendment,
Section 19 of the Third Amendment and Section 15 of the Fourth Amendment, is
hereby amended to provide that the Borrower will not permit, as at each Fiscal
Quarter end, the ratio of (a) its Cash Flow From Operations for the four-Fiscal
Quarter period ended on such four-Fiscal Quarter end, to (b) its Pro Forma Debt
Service in respect of the four (4) immediately succeeding Fiscal Quarters, to
be less than 1.25 to 1.0 as at any Fiscal Quarter end, commencing with the
Fiscal Quarter ending September 30, 1996.
For purposes of determining the Borrower's compliance with the provisions
of this Section 19 as of each Funding Date and/or Transaction Date, the
Borrower's Cash Flow From Operations shall be determined for the twelve full
calendar months preceding the particular Funding Date and/or Transaction Date,
the Borrower's Pro Forma Debt Service shall be determined for the twelve full
calendar months commencing with the calendar month in which the particular
Funding Date and/or Transaction Date occurs, and the Borrower will not permit
the ratio of the Borrower's Cash Flow From Operations for the twelve full
calendar months preceding the particular Funding Date and/or Transaction Date
to the Borrower's Pro Forma Debt Service for the twelve full calendar months
commencing with the calendar month in which the particular Funding Date and/or
Transaction Date occurs to be less than 1.25 to 1.0 as at any calendar month
end occurring after August 31, 1996.
20. Section 8.13 of the Loan Agreement, titled Minimum Tangible Net
Worth, and renamed Minimum Net Worth pursuant to the Fourth Amendment, as
previously amended pursuant to Section 24 of the First Amendment, Section 20 of
the Third Amendment and Section 16 of the Fourth Amendment, is hereby amended to
provide that the Borrower will not permit its Net Worth, as such term has been
defined in the Fourth Amendment, (a) to be less than Two Hundred Thirty Million
Dollars ($230,000,000.00) as of June 27, 1996, and (b) with respect to each
Fiscal Quarter of the Borrower after Fiscal Quarter ended June 27, 1996, to be
less than the minimum Net Worth required of the Borrower as at its immediately
preceding Fiscal Quarter end plus the sum of (i) 50% of its Net Income (but not
including any net losses) for its Fiscal Quarter then ended, (ii) 100% of all
proceeds (net of underwriters' discount and other customary and usual closing
costs) realized by the Borrower from the private placement and/or public
offering of any shares of its stock during the Borrower's Fiscal Quarter then
ended, and (iii) 100% of all additions to the Borrower's stockholders' equity
resulting from the issuance by the Borrower of its capital stock to pay in whole
or in part the purchase price of Theaters acquired by the Borrower during the
Borrower's Fiscal Quarter then ended.
21. Section 8.14 of the Loan Agreement, titled Capital Expenditures,
as previously amended pursuant to Section 25 of the First Amendment, Section 21
of the Third Amendment, Section 17 of the Fourth Amendment and Section 2 of the
Fifth Amendment, is hereby deleted in its entirety.
22. The Borrower hereby confirms to the Banks that the Borrower has
formed a Tennessee limited liability company known as Green Hills Commons, LLC
(the "Company") with GH Company, LLC to construct a theater and adjacent
FunScape in Nashville, Tennessee. The Borrower further desires to lend up to
Fifteen Million Dollars ($15,000,000.00) to the Company to enable the Company to
purchase the land upon which the theaters and FunScape shall be constructed and
to finance certain of the costs of constructing the theaters and FunScape. In
order to permit the Borrower to consummate the foregoing transactions without
violating certain provisions of the Loan Agreement, the Borrower has requested,
and the Banks have agreed, to the following amendments to the Loan Agreement:
7
<PAGE> 8
(a) The Banks hereby waive the provisions of Section
8.1(d) of the Loan Agreement in order to permit the Borrower to own an interest
in the Company without violating the Loan Agreement; and
(b) The Banks hereby waive the provisions of Section 8.5
of the Loan Agreement through April 1, 1997, in order to permit the Borrower to
lend up to Fifteen Million Dollars ($15,000,000.00) to the Company without
violating the Loan Agreement. The foregoing waiver of the provisions of Section
8.5 of the Loan Agreement shall be in effect only through April 1, 1997, by
which date all amounts lent by the Borrower to the Company shall be required to
have been repaid to the Borrower.
The Borrower's share of the net income (or net loss) of the Company, as
determined in accordance with GAAP, shall be included in the Borrower's Net
Income, Cash Flow Available for Fixed Charges, Cash Flow from Operations,
EBITDA and Theater Level Cash Flow for purposes of Sections 8.10, 8.11 and 8.12
of the Loan Agreement.
The Borrower hereby acknowledges and agrees that, except to the
limited extent set forth in this Section 22, the Banks have not waived any of
the provisions of Sections 8.1 or 8.5 of the Loan Agreement or have otherwise
modified the defined terms Net Income, Cash Flow Available for Fixed Charges,
Cash Flow from Operations, EBITDA and Theater Level Cash Flow and/or the
provisions of Sections 8.10, 8.11 or 8.12 of the Loan Agreement.
23. Pursuant to Section 22(e) of the Third Amendment, (a) the
Borrower hereby confirms to the Banks that Georgia State Theatres, Inc., a
Georgia corporation, is a Consolidated Subsidiary of the Borrower, (b) the
Borrower shall pledge to the Agent, on behalf of the Banks, all of the issued
and outstanding shares of capital stock of Georgia State Theatres, Inc. pursuant
to that certain Second Amendment to Stock Pledge Agreement dated as of September
30, 1996, between the Borrower and the Agent, and (c) the Borrower shall cause
Georgia State Theatres, Inc. to guarantee the payment of the Revolving Notes to
the Banks pursuant to that certain Guaranty Agreement dated as of September 30,
1996, between Georgia State Theatres, Inc. and the Agent.
24. This Sixth Amendment may be executed in one or more counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument.
25. Except to the extent expressly amended or modified hereby, the
Borrower hereby ratifies and reaffirms each of its covenants, agreements,
obligations, representations and warranties set forth in the Loan Agreement.
26. The Borrower agrees to pay all out-of-pocket fees and expenses,
including, without limitation, reasonable attorneys' fees, incurred by the Agent
in preparing, negotiating and obtaining the execution and delivery of this Sixth
Amendment and the other documents and instruments referred to herein and in
consummating the transactions described herein.
27. This Sixth Amendment shall be effective as of the later of (a)
September 30, 1996, or (b) the date of delivery of the following documents to
the Banks and/or the Agent:
i. This Sixth Amendment, duly executed by the
Borrower and each of the Banks;
ii. That certain Second Amendment to Stock Pledge
Agreement dated as of September 30, 1996, between the Borrower and the Agent,
duly executed by the Borrower, together with (1) the stock
8
<PAGE> 9
certificates evidencing all of the issued and outstanding shares of capital
stock of Georgia State Theatres, Inc. with duly executed blank stock powers
attached thereto, and (2) any written evidence of the Borrower's fifty percent
(50%) financial interest in the Company;
iii. That certain Second Amendment to Guaranty
Agreement dated as of September 30, 1996, between Litchfield Theatres, Ltd. and
the Agent, duly executed and delivered by Litchfield Theatres, Ltd.;
iv. That certain First Amendment to Guaranty
Agreement dated as of September 30, 1996, between Neighborhood Entertainment,
Inc. and the Agent, duly executed and delivered by Neighborhood Entertainment,
Inc.;
v. That certain Guaranty Agreement dated as of
September 30, 1996, from Georgia State Theatres, Inc. to the Agent, duly
executed and delivered by Georgia State Theatres, Inc.;
vi. Certified resolutions of the Board of Directors
of the Borrower, authorizing the Borrower's execution and delivery of this Sixth
Amendment and the other documents referred to herein to be executed by the
Borrower;
vii. Certified resolutions of the Board of Directors
of Georgia State Theatres, Inc., authorizing the execution and delivery of the
Guaranty Agreement referred to in subpart (v) above;
viii. An opinion of counsel on behalf of the Borrower
and Georgia State Theatres, Inc., in form and substance satisfactory to the
Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to
Second Amended and Restated Loan Agreement to be duly executed as of the day
and year first above written.
REGAL CINEMAS, INC.
By: /s/ Lewis Frazer III
--------------------------------
Lewis Frazer III, Executive
Vice President, Chief Financial
Officer and Treasurer
(the "Borrower")
9
<PAGE> 10
PNC BANK, KENTUCKY, INC.
By: /s/ Toby B. Rau
--------------------------------
Title: AVP
-----------------------------
Address: PNC Bank, Kentucky, Inc.
Citizens Plaza
500 West Jefferson Street
Louisville, KY 40202
Attn: Benjamin Willingham
Regional Corporate
Banking Group
("PNC")
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Reginald T. Dawson
--------------------------------
Title: Director
-----------------------------
Address: The First National Bank of Boston
Media & Communications Dept.
100 Federal Street
Mail Stop 01-08-08
Boston, MA 02110
Attn: Matthew E. Murphy,
Vice President
("Bank of Boston")
10
<PAGE> 11
FIRST UNION NATIONAL BANK OF TENNESSEE
By: Deborah L. Hurley
-------------------------------------
Title: AVP
----------------------------------
Address: First Union National Bank
of Tennessee
150 4th Avenue
Box 2648
Nashville, TN 37219
Attn: S. Scott Miler,
Vice President
("First Union")
FIRST AMERICAN NATIONAL BANK
By: /s/ J. Harvey White
-------------------------------------
Title: Executive Vice President
----------------------------------
Address:First American National Bank
505 S. Gay Street
Knoxville, TN 37902
Attn: Eric Schwarzentraub,
Vice President
("First American")
11
<PAGE> 12
THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Sybil H. Weldon
--------------------------------
Title: Vice President & Manager
-----------------------------
Address: The Sumitomo Bank, Limited
One Peachtree Center
303 Peachtree Street
Suite 4420
Atlanta, GA 30308
Attn: Manager
("Sumitomo")
NATIONSBANK OF TENNESSEE, N.A.
By: /s/ John F. Fisher
--------------------------------
Title: Senior Vice President
-----------------------------
Address: NationsBank of Tennessee, N.A.
550 Main Avenue
Knoxville, TN 37901-0017
Attn: John F. Fisher,
Senior Vice President
("NationsBank")
12
<PAGE> 13
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ John B. Tribe
-----------------------------------
Title: AVP
--------------------------------
Address: 191 Peachtree St, N.E.
Mail Code 3940
Atlanta, GA 30303
Attn: John Tibe,
Vice President
("Wachovia")
(collectively, the "Banks")
PNC BANK, KENTUCKY, INC., in its
capacity as Agent
By: /s/ Toby B. Rau
-----------------------------------
Title: AVP
--------------------------------
(the "Agent")
THE FIRST NATIONAL BANK OF BOSTON,
in its capacity as Lead Manager
By: /s/ Reginald T. Dawson
-----------------------------------
Title: Director
--------------------------------
Litchfield Theatres, Ltd., a South Carolina corporation ("Litchfield"), in
its capacity as the issuer of that certain Guaranty Agreement dated as of March
31, 1995, in favor of PNC Bank, Kentucky, Inc., as the Agent, and Neighborhood
Entertainment, Inc., a Virginia corporation ("Neighborhood"), in its capacity
as the issuer of that certain Guaranty Agreement dated as of November 30, 1995,
in favor of PNC Bank, Kentucky, Inc., as the Agent, each hereby consents to the
amendment of the Loan Agreement in the manner set forth in this Sixth
13
<PAGE> 14
Amendment, and each hereby ratifies and reaffirms all of its representations,
warranties, covenants, agreements and obligations under the Guaranty Agreement
to which it is a party.
LITCHFIELD THEATERS, LTD.
By: /s/ Lewis Frazer III
--------------------------------
Title: Secretary
-----------------------------
Date: September 30, 1996
NEIGHBORHOOD ENTERTAINMENT, INC.
By: /s/ Lewis Frazer III
--------------------------------
Title: Secretary
-----------------------------
Date: September 30, 1996
14
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
October 3, September 28, October 3, September 28,
1996 1995 1996 1995
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average number of common shares
outstanding $ 32,810 $ 28,173 $ 29,839 $ 27,805
Net effect of dilutive stock options and
warrants based on the treasury stock method
using average market price 1,237 938 1,205 807
---------- ----------- -------- ----------
Weighted average number of common and
common equivalent shares outstanding 34,047 29,111 31,044 28,612
========== =========== ======== ==========
Net income $ 11,855 $ 7,947 $ 21,196 $ 12,809
Less common and preferred dividends - 244 229 372
---------- ----------- -------- ----------
Net income applicable to common shares $ 11,855 $ 7,703 $ 20,967 $ 12,437
========== =========== ======== ==========
Net income per common share as reported $ .35 $ .26 $ .68 $ .43
========== =========== ======== ==========
FULLY DILUTED:
Weighted average number of common shares
outstanding 32,810 28,173 29,839 27,805
Net effect of dilutive stock options and
warrants based on the treasury stock method
using ending market price 1,237 1,017 1,205 1,010
---------- ----------- -------- ----------
34,047 29,190 31,044 28,815
========== =========== ======== ==========
Net income $ 11,855 $ 7,947 $ 21,196 $12,809
Less common and preferred dividends related
to nonconvertible securities - 244 229 372
---------- ----------- -------- ----------
Net income applicable to common shares $ 11,855 $ 7,703 $ 20,967 $ 12,437
========== =========== ======== ==========
Net income per common share assuming full
dilution, as reported $ .35 .26 .68 .43
========== =========== ======== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REGAL CINEMAS, INC. FOR THE NINE MONTHS ENDED OCTOBER 3,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1997
<PERIOD-START> DEC-29-1995
<PERIOD-END> OCT-03-1996
<EXCHANGE-RATE> 1
<CASH> 5,120
<SECURITIES> 0
<RECEIVABLES> 836
<ALLOWANCES> 0
<INVENTORY> 1,082
<CURRENT-ASSETS> 12,523
<PP&E> 343,888
<DEPRECIATION> 50,443
<TOTAL-ASSETS> 327,984
<CURRENT-LIABILITIES> 20,986
<BONDS> 27,673
0
0
<COMMON> 215,322
<OTHER-SE> 53,386
<TOTAL-LIABILITY-AND-EQUITY> 327,984
<SALES> 55,659
<TOTAL-REVENUES> 195,284
<CGS> 7,090
<TOTAL-COSTS> 79,592
<OTHER-EXPENSES> 78,662
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,119
<INCOME-PRETAX> 35,228
<INCOME-TAX> 14,032
<INCOME-CONTINUING> 21,196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,196
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
