<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 September 30, 1999
Commission file number: 333-52943
---------
REGAL CINEMAS, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
Tennessee 62-1412720
- -------------------------------------- -------------------------------------
(State or Other Jurisdiction of (Internal Revenue Service Employer
Incorporation or Organization) Identification Number)
7132 Commercial Park Drive
Knoxville, TN 37918
- ------------------------------------------ -------------------------------
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, Including Area Code: 865/922-1123
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 and 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 - 216,564,678 shares at November 8, 1999
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,924 $ 20,621
Accounts receivable 3,064 3,161
Inventories 4,823 4,014
Prepaid and other current assets 15,711 12,999
Deferred income tax asset 1,271 1,271
----------- -----------
Total current assets 26,793 42,066
PROPERTY AND EQUIPMENT:
Land 111,333 111,854
Buildings and leasehold improvements 927,603 650,313
Equipment 456,738 368,792
Construction in progress 91,000 103,253
----------- -----------
1,586,674 1,234,212
Accumulated depreciation and amortization (192,671) (139,643)
----------- -----------
Total property and equipment, net 1,394,003 1,094,569
GOODWILL, net of accumulated amortization of
$19,391 and $10,170, respectively 430,703 439,842
DEFERRED INCOME TAX ASSET 37,538 37,538
OTHER ASSETS 66,929 47,989
----------- -----------
TOTAL ASSETS $ 1,955,966 $ 1,662,004
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 6,406 $ 6,524
Accounts payable 58,875 65,592
Accrued expenses 71,697 44,734
----------- -----------
Total current liabilities 136,978 116,850
LONG-TERM DEBT, less current maturities 1,619,162 1,334,542
OTHER LIABILITIES 11,602 8,077
----------- -----------
TOTAL LIABILITIES 1,767,742 1,459,469
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par: 100,000,000 shares
authorized, none issued -- --
Common stock, no par: 500,000,000 shares
authorized; 216,564,678 and 216,552,105
shares issued and outstanding at
September 30, 1999 and December 31, 1998 197,530 197,427
Loans to shareholders (4,143) (4,212)
Retained earnings (deficit) (5,163) 9,320
----------- -----------
TOTAL SHAREHOLDERS' EQUITY $ 188,224 $ 202,535
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,955,966 $ 1,662,004
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statement.
1
<PAGE> 3
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- --------------------------
SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1,
1999 1998 1999 1998
------------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ 205,354 $ 124,563 $ 512,652 $ 315,481
Concessions 84,139 54,966 213,282 137,007
Other operating revenue 15,548 10,196 40,155 25,380
--------- --------- --------- ---------
Total revenues 305,041 189,725 766,089 477,868
OPERATING EXPENSES:
Film rental and advertising 114,669 66,368 287,424 170,355
Cost of concessions 12,175 7,985 30,881 20,016
Theatre operating and other 100,631 64,111 280,700 165,252
General and administrative 8,650 5,732 24,779 13,743
Depreciation and amortization 22,823 15,599 65,915 35,516
Recapitalization (Note 2) -- 2,479 -- 64,526
--------- --------- --------- ---------
Total operating expenses 258,948 162,274 689,699 469,408
OPERATING INCOME 46,093 27,451 76,390 8,460
OTHER INCOME (LOSS):
Interest expense (34,114) (19,508) (95,301) (32,835)
Interest income 89 382 405 849
Other 1 (209) 101 (445)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEM 12,069 8,116 (18,405) (23,971)
BENEFIT FROM (PROVISION
FOR) INCOME TAXES (6,483) (4,012) 3,922 (100)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 5,586 4,104 (14,483) (24,071)
EXTRAORDINARY LOSS:
Loss on extinguishment of debt,
net of applicable taxes -- -- -- (11,890)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 5,586 $ 4,104 $ (14,483) $ (35,961)
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 4
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
SEPTEMBER 30, OCTOBER 1,
1999 1998
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (14,483) $ (35,961)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Non-cash loss on extinguishment of debt -- 11,890
Depreciation and amortization 65,915 35,516
Deferred income taxes -- 7,276
Changes in operating assets and liabilities:
Accounts receivable 97 3,035
Inventories (809) (72)
Refundable income taxes -- (13,230)
Prepaids and other assets (12,674) (2,644)
Accounts payable (6,717) (23,429)
Accrued expenses and other liabilities 30,488 35,353
--------- -----------
Net cash provided by operating activities 61,817 17,734
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (342,500) (157,728)
Net change in reimbursable construction advances (20,000) --
Investment in goodwill and other assets (2,688) (3,499)
--------- -----------
Net cash used in investing activities (365,188) (161,227)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term debt 290,000 1,217,375
Payments made on long-term debt (5,498) (684,500)
Deferred financing costs -- (35,441)
Premium paid to pay off long-term debt -- (14,530)
Proceeds from issuance of stock, net -- 774,717
Purchase and retirement of common stock, net -- (1,117,407)
Exercise of warrants, options and compensation expense 172 42
--------- -----------
Net cash provided by financing activities 284,674 140,256
--------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (18,697) (3,237)
CASH AND CASH EQUIVALENTS, beginning of period 20,621 18,398
--------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,924 $ 15,161
========= ===========
</TABLE>
See accompanying notes to condensed consolidated financial statement.
3
<PAGE> 5
REGAL CINEMAS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 THE COMPANY AND BASIS OF PRESENTATION
Regal Cinemas, Inc. and its wholly owned subsidiaries (the "Company" or
"Regal") operate multi-screen motion picture theatres principally
throughout the eastern and northwestern United States. The Company
formally operates on a fiscal year ending on the Thursday closest to
December 31.
The condensed consolidated balance sheet as of September 30, 1999, the
condensed consolidated statements of operations for the three month and
nine month periods ended September 30, 1999 and October 1, 1998, and
the condensed consolidated statements of cash flows for the nine months
ended September 30, 1999 and October 1, 1998 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 in all material respects the financial position, results of
operations and cash flows for all periods presented have been made. The
December 31, 1998 information has been derived from the audited
December 31, 1998 balance sheet of the Company.
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 filed on Form 10-K dated March
31, 1999. The results of operations for the nine month period ended
September 30, 1999 are not necessarily indicative of the operating
results for the full year.
2 RECAPITALIZATION
On May 27, 1998, an affiliate of Kohlberg Kravis Roberts & Co. L.P.
("KKR") and an affiliate of Hicks, Muse, Tate & Furst Incorporated
("Hicks Muse") merged with and into Regal Cinemas, Inc., with the
Company continuing as the surviving corporation of the Merger (the
"Merger"). The Merger and related transactions have been recorded as a
recapitalization (the "Recapitalization"). In the Recapitalization, the
Company's shareholders received cash for their shares of common stock.
In addition, in connection with the Recapitalization, the Company
canceled options and repurchased warrants held by certain former
directors, management and employees of the Company (the "Option/Warrant
Redemption"). The aggregate amount paid to effect the Merger and the
Option/Warrant Redemption was approximately $1.2 billion.
The net proceeds of a $400.0 million senior subordinated note offering,
initial borrowings of $375.0 million under its senior credit
facilities, and the proceeds of $776.9 million from the investment by
KKR, Hicks Muse, DLJ Merchant Banking Partners II, L.P. and affiliated
funds ("DLJ") and management in the Company were used: (i) to fund the
cash payments required to effect the Merger and the Option/Warrant
Redemption; (ii) to repay and retire the Company's existing senior
credit facilities; (iii) to repurchase the Company's
4
<PAGE> 6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
CONTINUED
senior subordinated notes; and (iv) to pay related fees and expenses.
Upon consummation of the Merger, KKR owned $287.3 million of the
Company's equity securities, Hicks Muse owned $437.3 million of the
Company's equity securities and DLJ owned $50.0 million of the
Company's equity securities. Each investor received securities
consisting of a combination of the Company's common stock, no par value
("Common Stock"), and the Company's Series A Convertible Preferred
Stock, no par value ("Convertible Preferred Stock"), which was
converted into Common Stock on June 3, 1998. To equalize KKR's and
Hicks Muse's investments in the Company at $362.3 million each, Hicks
Muse exchanged $75.0 million of Convertible Preferred Stock, with KKR
for $75.0 million of common stock of Act III Cinemas, Inc. ("Act III").
As a result of the Recapitalization and the Act III merger (see Note
3), KKR and Hicks Muse each own approximately 46.3% of the Company's
Common Stock, with DLJ, management and other minority holders owning
the remainder.
During the last three quarters of fiscal 1998, nonrecurring costs of
approximately $65.7 million, including approximately $41.9 million of
compensation costs, were incurred in connection with the
Recapitalization. Financing costs of approximately $34.2 million were
incurred and classified as deferred financing costs which will be
amortized over the lives of the new debt facilities (see Note 4). Of
the total Merger and Recapitalization costs above, an aggregate of
$19.5 million was paid to KKR and Hicks Muse.
3 ACQUISITIONS
On August 26, 1998, the Company acquired Act III Cinemas, Inc. (the
"Act III merger"). The total purchase cost was approximately $312.2
million, representing primarily the value of 60,383,388 shares of the
Company's common stock issued to acquire all of Act III's outstanding
common stock and the value of 5,195,598 options of the Company issued
for Act III options. In connection with the Act III merger, the Company
also amended its credit facilities and borrowed $383.3 million
thereunder to repay Act III's borrowings and accrued interest under Act
III's existing credit facilities and two senior subordinated notes
totaling $150.0 million.
The Act III merger has been accounted for as a purchase, applying the
applicable provisions of Accounting Principles Board Opinion No. 16.
Allocation of the purchase price as of September 30, 1999 is as
follows:
<TABLE>
<CAPTION>
(in thousands)
--------------
<S> <C>
Property and equipment $ 343,694
Long-term debt assumed (411,337)
Net working capital acquired (17,167)
Excess purchase cost over fair value of net assets acquired 397,049
-------------
Total purchase cost $ 312,239
=============
</TABLE>
5
<PAGE> 7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
CONTINUED
The following unaudited consolidated pro forma condensed results of
operations data gives effect to the Act III merger and Regal
Recapitalization as if they had occurred as of January 2, 1998 ($'s
millions):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 1, 1998 October 1, 1998
--------------- ---------------
<S> <C> <C>
Revenues $ 247.3 $ 667.1
Income (Loss) Before
Extraordinary Items $ 5.0 $ (42.7)
Net (Loss) $ 5.0 $ (54.8)
-------- -------
</TABLE>
6
<PAGE> 8
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
CONTINUED
4 LONG-TERM DEBT
Long-term debt at September 30, 1999 and December 31, 1998, consists of
the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
----- ----
<S> <C> <C>
9.500% Senior Subordinated Notes $ 600,000 $ 600,000
8.875% Senior Subordinated Notes 200,000 200,000
Term Loans 508,750 512,500
Revolving Credit Facility 290,000 --
Capital lease obligations,
payable in monthly installments
plus interest at 14.000% 22,554 23,809
Other 4,264 4,757
----------- -----------
Total Debt 1,625,568 1,341,066
Less current maturities (6,406) (6,524)
----------- -----------
Long-Term debt, less current maturities $ 1,619,162 $ 1,334,542
=========== ===========
</TABLE>
SENIOR SUBORDINATED NOTES
$600,000 of the Company's senior subordinated notes due June 1, 2008,
with interest payable semiannually at 9.500%. These notes are
redeemable, in whole or in part, at the option of the Company at any
time on or after June 1, 2003, at the redemption prices (expressed as
percentages of principal amount thereof) set forth below together with
accrued and unpaid interest to the redemption date, if redeemed during
the 12 month period beginning on June 1 of the years indicated:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003 104.750%
2004 103.167%
2005 101.583%
2006 and thereafter 100.000%
</TABLE>
7
<PAGE> 9
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
CONTINUED
$200,000 of the Company's senior subordinated notes due December 15,
2010, with interest payable semiannually at 8.875%. These notes are
redeemable, in whole or in part, at the option of the Company at any
time on or after December 15, 2003, at the redemption prices (expressed
as percentages of principal amount thereof) set forth below together
with accrued and unpaid interest to the redemption date, if redeemed
during the 12 month period beginning on December 15 of the years
indicated:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003 104.438%
2004 103.328%
2005 102.219%
2006 101.109%
2007 and thereafter 100.000%
</TABLE>
In addition, prior to December 15, 2001, the Company may, at its
option, use the net cash proceeds of one or more Equity Offerings to
redeem up to 35% of the principal amount of the Debentures at a
redemption price equal to 108.875% of the principal amount thereof plus
accrued and unpaid interest to the redemption date; provided, however,
that after any such redemption, at least 65% of the aggregate principal
amount of the Debentures issued under the Indenture would remain
outstanding immediately after giving effect to such redemption. Any
such redemption will be required to occur on or prior to the date that
is 90 days after the receipt by the Company of the proceeds of an
Equity Offering. The Company shall effect such redemption on a pro rata
basis.
CREDIT FACILITIES -- In connection with the Merger and
Recapitalization, the Company entered into credit facilities provided
by a syndicate of financial institutions. Such credit facilities, as
amended (the "Credit Facilities"), now include a $500,000,000 Revolving
Credit Facility (including the availability of Revolving Loans, Swing
Line Loans, and Letters of Credit) and three term loan facilities: Term
A, Term B, and Term C (the "Term Loans"). The Company must pay an
annual commitment fee ranging from 0.2% to 0.425%, depending on the
Company's Total Leverage Ratio, as defined in the Credit Facilities, of
the unused portion of the Revolving Credit Facility. Borrowings of
$290,000,000 were outstanding under the Revolving Credit Facility at
September 30, 1999. Such facility expires in June 2005.
Borrowings under the Term A Loan or the Revolving Credit Facility can
be made at the Base Rate plus a margin of 0% to 1%, or the LIBOR Rate,
plus .625% to 2.25%, both depending on the Total Leverage Ratio. The
Base Rate on revolving loans is the rate established by the
Administrative Agent in New York as its base rate for dollars loaned in
the United States. The LIBOR Rate is based on the LIBOR rate for the
corresponding length of loan. The outstanding balance of Term A Loans
amounted to $237,600,000 at September 30, 1999, and one percent of the
outstanding balance is due annually through 2004, with the balance of
the loan due in 2005.
Borrowings under the Term B Loan can be made at the Base Rate plus a
margin of 0.75% to 1.25% or the LIBOR Rate plus 2.0% to 2.5%, both
depending on the Total Leverage Ratio. The outstanding balance amounted
to $137,500,000 at September 30, 1999, and the outstanding balance is
due in 2006.
8
<PAGE> 10
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
CONTINUED
Borrowings under the Term C Loan can be made at the Base Rate plus a
margin of 1.0% to 1.5% or the LIBOR Rate plus 2.25% to 2.75%, both
depending on the Total Leverage Ratio. The outstanding balance amounted
to $133,650,000 at September 30, 1999, and one percent of the
outstanding balance is due annually through 2006, with the balance of
the loan due in 2007.
The Credit Facilities contain customary covenants and restrictions on
the Company's ability to issue additional debt, pay dividends or engage
in certain activities and include customary events of default. In
addition, the Credit Facilities specify that the Company must meet or
exceed defined fixed charge coverage ratios and must not exceed defined
leverage ratios. The Company was in compliance with such covenants at
September 30, 1999.
The Credit Facilities are collateralized by a pledge of the stock of
the Company's domestic subsidiaries. The Company's payment obligations
under the Credit Facilities are guaranteed by its direct and indirect
U.S. subsidiaries.
5 INCOME TAXES
The effective income tax rate for the three month and nine month
periods ended September 30, 1999 differs from the statutory income tax
rate principally due to nondeductible goodwill amortization and the
inclusion of state income taxes. The effective tax rate for the three
month and nine month periods ended October 1, 1998 differs from the
statutory income tax rate principally due to certain Recapitalization
expenses which were not deductible for tax purposes.
6 CAPITAL STOCK
Earnings per share information is not presented herein as the Company's
shares do not trade in a public market. After the Recapitalization, the
Company effected a stock split in the form of a stock dividend
resulting in a price per share of $5.00, which $5.00 per share price is
equivalent to the $31.00 per share consideration paid in the Merger.
The Company's common shares issued and outstanding throughout the
accompanying financial statements and notes reflect the retroactive
effect of the Recapitalization stock split.
7 RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 financial
statements to conform with the 1999 presentation.
9
<PAGE> 11
ITEM 2.
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. (the "Company") should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes thereto included herein.
BACKGROUND OF REGAL
The Company has achieved significant growth in theatres and screens since its
formation in November of 1989. Since inception through September 30, 1999, the
Company has acquired 296 theatres with 2,277 screens (net of subsequently closed
locations), developed 127 new theatres with 1,743 screens and added 128 new
screens to existing theatres. Theatres developed by the Company typically
generate positive theatre level cash flow within the first nine months following
commencement of operation and reach a mature level of attendance within one to
three years following commencement of operation. Theatre closings have had no
significant effect on the operations of the Company.
RESULTS OF OPERATIONS
The Company's revenues are generated primarily from admissions 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, rebates from concession vendors, and revenues from the Company's
eight entertainment centers which are adjacent to theatre complexes. 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. At September
30, 1999, approximately 21.1% of the Company's employees were paid at the
federal minimum wage and, accordingly, the minimum wage largely determines the
Company's labor costs for those employees. Future increases in minimum wage
requirements or legislation requiring additional employer funding of health
care, among other things, may increase theatre operating expenses as a
percentage of total revenues.
10
<PAGE> 12
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 operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1,
1999 1998 1999 1998
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Admissions 67.3% 65.6% 66.9% 66.0%
Concessions 27.6% 29.0% 27.8% 28.7%
Other operating revenue 5.1% 5.4% 5.3% 5.3%
------ ------ ------ ------
Total revenue 100.0% 100.0% 100.0% 100.0%
OPERATING EXPENSES:
Film rental and advertising 37.6% 35.0% 37.5% 35.6%
Cost of concessions 4.0% 4.2% 4.0% 4.2%
Theatre operating 33.0% 33.8% 36.6% 34.6%
General and administrative 2.8% 3.0% 3.2% 2.9%
Depreciation and amortization 7.5% 8.2% 8.6% 7.4%
Recapitalization (Note 2) -- 1.3% -- 13.5%
------ ------ ------ ------
Total operating expenses 84.9% 85.5% 89.9% 98.2%
OPERATING INCOME (LOSS) 15.1% 14.5% 10.1% 1.8%
OTHER INCOME (LOSS):
Interest expense (11.2)% (10.3)% (12.4)% (6.9)%
Interest income 0.0% 0.2% 0.0% 0.2%
Other 0.0% (0.1)% 0.0% (0.1)%
------ ------ ------ ------
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEM 3.9% 4.3% (2.3)% (5.0)%
BENEFIT FROM (PROVISION
FOR) INCOME TAXES (2.1)% (2.1)% .5% (0.1)%
------ ------ ------ ------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 1.8% 2.2% (1.8)% (5.1)%
EXTRAORDINARY LOSS:
Loss on extinguishment of debt,
net of applicable taxes (Note 4) 0.0% 0.0% 0.0% (2.4)%
------ ------ ------ ------
NET INCOME (LOSS) 1.8% 2.2% (1.8)% (7.5)%
====== ====== ====== ======
Film rental and advertising
as a % of Admissions 55.8% 53.3% 56.1% 54.0%
====== ====== ====== ======
Cost of concessions as a %
of Concessions 14.5% 14.5% 14.5% 14.6%
====== ====== ====== ======
</TABLE>
11
<PAGE> 13
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND OCTOBER 1, 1998
TOTAL REVENUES -- Total revenues for the third quarter of fiscal 1999 increased
by 60.8% to $305.0 million from $189.7 million in the comparable 1998 period.
This increase was due to a 48.7% increase in attendance attributable primarily
to the net addition of 1,690 screens in the last 12 months (853 screens were
added on August 26, 1998, as a result of the merger with Act III Cinemas, Inc.
("Act III")). Of the $115.3 million net increase in revenues for the period, a
$2.0 million decrease was attributed to theatres continuously operated by the
Company, a $64.3 million increase was attributed to theatres acquired by the
Company, and a $53.0 million increase was attributed to new theatres constructed
by the Company. Average ticket prices increased 10.9% during the period,
reflecting an increase in ticket prices and a greater proportion of newer
theatres in the 1999 period than in the same period in 1998. Average concession
sales per customer increased 2.5% for the period, reflecting both an increase in
consumption and, to a lesser degree, an increase in concession prices.
DIRECT THEATRE COSTS -- Direct theatre costs increased by 64.3% to $227.5
million in the third quarter 1999 from $138.5 million in the third quarter 1998.
Direct theatre costs as a percentage of total revenues increased to 74.6% in the
1999 period from 73.0% in the comparable 1998 period. The increase in direct
theatre costs as a percentage of revenue relates to increases in the Company's
film rental costs and advertising primarily related to increases in promotional
advertising costs associated with the Company's expansion efforts. The increase
in direct theatre cost as a percentage of total revenue also reflects the
increased occupancy costs associated with the Company's expansion efforts.
Including the additional screens associated with the Act III merger, the company
has increased its total screen count by 25.3% since the third quarter of 1998.
GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses
increased by 50.9% to $8.7 million in the third quarter 1999 from $5.7 million
in the third quarter 1998. The increase reflects additional costs related to the
Act III merger included in the Company's results subsequent to the Act III
merger. As a percentage of total revenues, general and administrative expenses
decreased to 2.8% in the 1999 period from 3.0% in the comparable 1998 period.
DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased
in the third quarter 1999 by 46.3% to $22.8 million from $15.6 million in the
third quarter 1998. This increase was primarily the result of theatre property
additions associated with the Company's expansion efforts and the Act III
merger.
OPERATING INCOME -- Operating income for the third quarter 1999 increased to
$46.1 million, or 15.1% of total revenues, from $27.5 million, or 14.5% of total
revenues, in the third quarter 1998. Before nonrecurring expenses associated
with the Recapitalization, operating income for the third quarter 1998 was $29.9
million or 15.8% of total revenues.
INTEREST EXPENSE -- Interest expense increased in the third quarter 1999 to
$34.1 million from $19.5 million in the third quarter 1998. The increase was
primarily due to higher average borrowings outstanding associated with the
Recapitalization and the Act III merger.
INCOME TAXES -- The provision for income taxes in the third quarter 1999 was
$6.5 million as compared to $4.0 million in the third quarter 1998. The
effective tax rate was 53.7% in the 1999 period as compared to 49.4% in the
comparable 1998 period. The 1999 period reflected certain goodwill amortization
costs, which were not deductible for
12
<PAGE> 14
tax purposes. Both periods also differ from the expected statutory rates due to
the inclusion of state income taxes.
NET INCOME -- The net income in the third quarter 1999 was $5.6 million as
compared to $4.1 million in the third quarter 1998. Net income was 1.8% of total
revenues in the third quarter of 1999 as compared to 2.2% of total revenues in
the comparable 1998 period.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND OCTOBER 1, 1998
TOTAL REVENUES -- Total revenues for the nine months ended September 30, 1999
increased by 60.3% to $766.1 million from $477.9 million in the comparable 1998
period. This increase was due to a 50.1% increase in attendance attributable
primarily to the net addition of 1,690 screens in the last 12 months (853
screens were added August 26, 1998, as a result of the merger with Act III). Of
the $288.2 million increase in revenues for the period, a $29.9 million decrease
was attributed to theatres continuously operated by the Company, a $177.0
million increase was attributed to theatres acquired by the Company, and a
$141.1 million increase was attributed to new theatres constructed by the
Company. Average ticket prices increased 8.2% during the period, reflecting an
increase in ticket prices and a greater proportion of newer multiplex theatres
in the 1999 period than in the same period in 1998. Average concession sales per
customer increased 3.6% 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 68.4% to $599.0
million for the first nine months of 1999 from $355.6 million in the comparable
1998 period. Direct theatre costs as a percentage of total revenues increased to
78.2% in the 1999 period from 74.4% in the comparable 1998 period. The increase
of direct theatre costs as a percentage of total revenues was primarily
attributable to increased film rental costs during the second quarter of 1999
associated with Star Wars "The Phantom Menace", coupled with increased occupancy
and promotional advertising costs resulting from the additional theatre
locations associated with the Act III merger and the Company's expansion
efforts.
GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses
increased by 80.3% to $24.8 million in the nine months ended September 30, 1999
from $13.7 million in the comparable 1998 period. The increase reflects
additional costs related to the Act III merger included in the Company's results
subsequent to the Act III merger. As a percentage of total revenues, general and
administrative expenses increased to 3.2% in the 1999 period from 2.9% in the
comparable 1998 period.
DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased
in the first nine months of 1999 by 85.6% to $65.9 million from $35.5 million in
the comparable 1998 period. This increase was primarily the result of theatre
property additions associated with the Company's expansion efforts and the Act
III merger.
OPERATING INCOME -- Operating income for the nine months ended September 30,
1999 increased to $76.4 million, or 10.1% of total revenues, from $8.5 million,
or 1.8% of total revenues, in the comparable 1998 period.
INTEREST EXPENSE -- Interest expense increased for the nine months ended
September 30, 1999 to $95.3 million from $32.8 million in the comparable 1998
period. The increase was primarily due to higher average borrowings outstanding
associated with the recapitalization of the Company and the Act III merger.
13
<PAGE> 15
INCOME TAXES -- The benefit from income taxes in the first nine months of 1999
was $3.9 million as compared to a provision for income taxes of $0.1 million in
the comparable 1998 period. The effective tax rate was 21.3% in the 1999 period
as compared to 0.4% in the comparable 1998 period. The 1999 period reflected
certain goodwill amortization costs, which were not deductible for tax purposes.
Both periods also differ from the expected statutory rates due to the inclusion
of state income taxes. Additionally, the first nine months of 1998 reflected
certain Recapitalization expenses, which were not deductible for tax purposes.
NET LOSS -- The net loss in the nine months ended September 30, 1999 was $14.5
million as compared to $36.0 million net loss in the nine months ended October
1, 1998. Net loss was 1.8% of total revenues in the nine months ended September
30, 1999 as compared to 7.5% of total revenues in the comparable 1998 period.
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 and
reduces 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 equity (including
equity issued in connection with acquisitions and public offerings), debt and
internally generated cash.
On May 27, 1998, an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR") and
an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") merged
with and into the Company (the "Regal Merger"), with the Company continuing as
the surviving corporation. The consummation of the Regal Merger resulted in a
recapitalization (the "Recapitalization") of the Company. In the
Recapitalization, existing holders of the Company's common stock (the "Common
Stock") received cash for their shares of Common Stock, and KKR, Hicks Muse, DLJ
Merchant Banking Partners II, L.P. and affiliated funds ("DLJ") and certain
members of the Company's management acquired the Company. In addition, in
connection with the Recapitalization, the Company canceled options and
repurchased warrants held by certain directors, management and employees of the
Company (the "Option/Warrant Redemption"). The aggregate purchase price paid to
effect the Regal Merger and the Option/Warrant Redemption was approximately $1.2
billion.
In connection with the Regal Merger and Recapitalization, the Company entered
into credit facilities provided by a syndicate of financial institutions. Such
credit facilities, as amended (the "Senior Credit Facilities"), now include a
$500.0 million revolving credit facility (including the availability of
Revolving Loans, Swing Line Loans, and Letters of Credit) (the "Revolving Credit
Facility") and three term loan facilities: Term A, Term B and Term C (the "Term
Loans"). The Company must pay an annual commitment fee ranging from 0.2% to
0.425% depending on the Company's Total Leverage Ratio, as defined, of the
unused portion of the Revolving Credit Facility. The Revolving Credit Facility
expires in June 2005.
Borrowings under the Term A Loan or the Revolving Credit Facility can be made at
the Base Rate plus a margin of 0% to 1%, or the LIBOR Rate, plus 0.625% to
2.25%, both depending on the Total Leverage Ratio. The Base Rate on revolving
loans is the rate established by the Administrative Agent in New York as its
base rate for dollars loaned in
14
<PAGE> 16
the United States. The LIBOR Rate is based on LIBOR for the corresponding length
of loan. The outstanding balance of Term A Loans amounted to $237.6 million at
September 30, 1999, and one percent of the outstanding balance on the Term A
Loan is due annually through 2004 with the balance of the Term A Loan due in
2005.
Borrowings under the Term B Loan can be made at the Base Rate plus a margin of
0.75% to 1.25% or the LIBOR Rate plus 2.0% to 2.5%, both depending on the Total
Leverage Ratio. The outstanding balance amounted to $137.5 million at September
30, 1999, and the outstanding balance is due in 2006.
Borrowings under the Term C Loan can be made at the Base Rate plus a margin of
1.0% to 1.5% or the LIBOR Rate plus 2.25% to 2.75%, both depending on the Total
Leverage Ratio. The outstanding balance amounted to $133.7 million at September
30, 1999, and one percent of the outstanding balance is due annually through
2006, with the balance of the loan due in 2007.
Additionally, on May 27, 1998, the Company issued $400.0 million aggregate
principal amount of 9.5% Senior Subordinated Notes due 2008 (the "Original
Notes"). The net proceeds from the sale of the Original Notes, initial
borrowings of $375.0 million under the Company's Senior Credit Facilities and
$776.9 million in proceeds from the investment by KKR, Hicks Muse, DLJ and
management in the Company were used: (i) to fund the cash payments required to
effect the Regal Merger and the Option/Warrant Redemption; (ii) to repay and
retire the Company's then existing senior credit facilities; (iii) to repurchase
all of the Company's then existing senior subordinated notes (the "Old Regal
Notes"); and (iv) to pay related fees and expenses.
On August 26, 1998, the Company acquired Act III. In the Act III merger, Act III
became a wholly owned subsidiary of the Company and each share of Act III's
outstanding common stock was converted into the right to receive one share of
the Company's Common Stock. In connection with the Act III merger, the Company
amended its Senior Credit Facilities and borrowed $383.3 million thereunder to
repay Act III's then existing bank borrowings and two senior subordinated
promissory notes, each in the aggregate principal amount of $75.0 million, which
were owned by KKR and Hicks Muse.
On November 10, 1998, the Company issued an additional $200.0 million aggregate
principal amount of 9.5% Senior Subordinated Notes due 2008 (the "Tack-On
Notes") under the same indenture governing the Original Notes. The proceeds of
the offering of the Tack-On Notes were used to repay and retire portions of the
Senior Credit Facilities. (The Original Notes and the Tack-On Notes are
collectively referred to herein as the "Regal Notes".)
On December 16, 1998, the Company issued $200.0 million aggregate principal
amount of 8.875% Senior Subordinated Debentures due 2010 (the "Regal
Debentures"). The proceeds of the offering of the Regal Debentures were used to
repay all of the then outstanding indebtedness under the Revolving Credit
Facility and the excess was used for working capital purposes.
Interest payments on the Regal Notes and the Regal Debentures and interest
payments and amortization with respect to the Senior Credit Facilities represent
significant liquidity requirements for the Company.
15
<PAGE> 17
During the nine months ended September 30, 1999, the Company opened 38 new
theatres with 597 screens, acquired 4 theatres with 45 screens, added 39 screens
to existing theatre locations and disposed of 22 theatres with 105 screens. The
Company intends to develop approximately 270 screens during the remainder of
fiscal 1999. The Company expects that the capital expenditures in connection
with its development plan will total approximately $400.0 million to $425.0
million during 1999. The Company believes that its capital needs for completion
of theatre construction and development for at least the next three months will
be satisfied by available credit under the Senior Credit Facilities and
internally generated cash flow. The Company's Senior Credit Facilities provide
for borrowings of up to $1,008.8 million in the aggregate, consisting of the
Revolving Credit Facility, which permits the Company to borrow up to $500.0
million on a revolving basis and $508.8 million, in the aggregate, of term loan
borrowings under three separate term loan facilities. As of September 30, 1999,
the Company had approximately $210.0 million of capacity available under the
Senior Credit Facilities.
Based on the current level of operations and anticipated future growth (both
internally generated as well as through acquisitions), the Company anticipates
that its cash flow from operations, together with borrowings under the Senior
Credit Facilities should be sufficient to meet its anticipated requirements for
working capital, capital expenditures, lease commitments, interest payments and
scheduled principal payments. The Company's future operating performance and
ability to service or refinance the Regal Notes, the Regal Debentures and to
extend or refinance the Senior Credit Facilities will be subject to future
economic conditions and to financial, business and other factors, many of which
are beyond the Company's control.
The Regal Notes, Regal Debentures and Senior Credit Facilities impose certain
restrictions on the Company's ability to make capital expenditures and limit the
Company's ability to incur additional indebtedness. Such restrictions could
limit the Company's ability to respond to market conditions, to provide for
unanticipated capital investments or to take advantage of business or
acquisition opportunities. The covenants contained in the Senior Credit
Facilities and/or the indentures governing the Regal Notes and the Regal
Debentures also, among other things, limit the ability of the Company to dispose
of assets, repay indebtedness or amend other debt instruments, pay
distributions, enter into sale and leaseback transactions, make loans or
advances and make acquisitions.
INFLATION; ECONOMIC DOWNTURN
The Company does not believe that inflation has had a material impact on its
financial position or results of operations. In times of recession, attendance
levels experienced by motion picture exhibitors may be adversely affected. For
example, revenues declined for the industry in 1990 and 1991.
NEW ACCOUNTING PRONOUNCEMENTS
During fiscal 1998, the Emerging Issues Task Force ("EITF") released EITF Issue
No. 97-10, The Effect of Lessee Involvement in Asset Construction. The EITF
addresses how an entity (lessee) that is involved with the construction of an
asset that the entity subsequently plans to lease when construction is completed
should determine whether it should be considered the owner of that asset during
the construction period. The Task Force reached a consensus that a lessee should
be considered the owner of a real estate project during the construction period
if the lessee has substantially all of the construction period risk. As the
Company's construction project agreements are currently structured, management
believes the Company would be considered the owner of certain pending
16
<PAGE> 18
construction projects. As a result, management believes the Company will be
required to reflect these lease agreements on its balance sheet as financing
transactions. The EITF is applicable to all construction projects committed to
subsequent to May 21, 1998 and to all construction projects committed to on May
21, 1998 if construction does not commence prior to December 31, 1999.
On June 15, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative and Financial
Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 establishes a
new model for accounting for derivatives and hedging activities based on these
fundamental principles: (i) derivatives represent assets and liabilities that
should be recognized at fair value on the balance sheet; (ii) derivative gains
and losses do not represent liabilities or assets and, therefore, should not be
reported on the balance sheet as deferred credits or deferred debits; and (iii)
special hedge accounting should be provided only for transactions that meet
certain specified criteria, which include a requirement that the change in the
fair value of the derivative be highly effective in offsetting the change in the
fair value or cash flows of the hedged item. This Statement is effective for
fiscal years beginning after June 15, 1999. The Company is currently evaluating
the effect that SFAS No. 133 will have on the Company's consolidated financial
statements.
During fiscal 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1") and SOP 98-5, Reporting on
the Costs of Start-up Activities ("SOP 98-5"). SOP 98-1 requires companies to
capitalize certain internal-use software costs once certain criteria are met.
SOP 98-5 requires costs of start-up activities to be expensed when incurred.
Adoption of these statements did not have a material impact on the Company's
consolidated financial position, results of operations or cash flows.
SEASONALITY
The Company's revenues are usually seasonal, coinciding with the timing of
releases of motion pictures by the major distributors. Generally, the most
marketable motion pictures are released during the summer and the Thanksgiving
through year-end holiday season. The unexpected emergence of a hit film during
other periods can alter the traditional trend. The timing of movie releases can
have a significant effect on the Company's results of operations, and the
results of one quarter are not necessarily indicative of results for the next
quarter. The seasonality of motion picture exhibition, however, has become less
pronounced in recent years as studios have begun to release major motion
pictures somewhat more evenly throughout the year.
YEAR 2000 - STATE OF READINESS
POTENTIAL IMPACT ON THE COMPANY. The failure of information technology ("IT")
and any embedded, or non-IT systems, because of the Year 2000 issue or otherwise
could adversely affect the Company's operations. If not corrected, many
computer-based systems and theatre equipment, such as air conditioning systems
and fire and sprinkler systems, could encounter difficulty differentiating
between the year 1900 and the year 2000 and interpreting other dates, resulting
in system malfunctions, corruption of date or system failure. Additionally, the
Company relies upon outside third parties ("business partners") to supply many
of the products and services that it needs in its business. Such products
include films, which it exhibits, and concession products, which it sells.
17
<PAGE> 19
Attendance at the Company's theatres could be severely impacted if one or more
film producers are unable to produce new films because of Year 2000 issues. The
Company could suffer other business disruptions and loss of revenues if any
other types of material business partners fail to supply the goods or services
necessary for the Company's operations.
IT SYSTEMS. The Company has utilized a weighted methodology to evaluate the
readiness of its corporate and theatre level IT systems. For this purpose,
corporate and theatre system types include commercial off-the-shelf software,
custom in-house developed software, ticketing system software, concession system
software and hardware systems such as workstations and servers. The Company has
weighted each corporate and theatre system based on its overall importance to
the organization. The Company's readiness has been evaluated in terms of a
five-phase process utilized in the Year 2000 strategic plan (the "Plan") with
appropriate weighting given to each phase based on its relative importance to IT
system Year 2000 readiness. The phases may generally be described as follows:
(i) develop company-wide awareness; (ii) inventory and assess internal systems
and business partners and develop contingency plans for systems that cannot be
renovated; (iii) renovate critical systems and contact material business
partners; (iv) validate and test critical systems, analyze responses from
critical business partners and develop contingency plans for non-compliant
partners; and (v) implement renovated systems and contingency plans. The Company
has placed a high level of importance on its corporate and theatre software
systems and a lesser degree of importance on its hardware systems when
evaluating Year 2000 readiness. As a result, the Company focused more of its
initial efforts toward Year 2000 readiness with respect to its software systems
than it has with respect to its hardware systems.
Based on the weighting methodology described above, the Company has assessed all
of its corporate IT systems and, as of September 30, 1999, has renovated 99% of
those systems that require renovation as a result of the Year 2000 issue. In the
aggregate, as of September 30, 1999, 99% of the Company's corporate IT systems
have been tested and verified as being Year 2000 ready. The percentage of
corporate IT systems that has been tested and verified as being Year 2000 ready
assumes that a significant component of commercial-off-the-shelf software, the
Global Software, Inc. financial applications, is Year 2000 ready. This system
was warranted to be Year 2000 ready when purchased. The Company has performed
certain test procedures related to the Global Software, Inc.'s financial
applications to validate that the implementation is in fact Year 2000 ready, and
does not believe that it has a significant risk with respect to such software.
Based on the weighting methodology described above, the Company has also
assessed all of its theatre IT systems and, as of September 30, 1999, has
renovated 99% of those systems that require renovation as a result of the Year
2000 issue. In the aggregate, as of September 30, 1999, 99% of the Company's
theatre IT systems have been tested and verified as being Year 2000 ready.
Overall, the Company has assessed the Plan with respect to IT systems as being
99% complete as of September 30, 1999. Although, no assurance can be given, the
Company does not believe that it has material exposure to the Year 2000 issue
with respect to its internal IT systems.
NON-IT SYSTEMS. The Company completed the process of assessing potential Year
2000 readiness risks associated with its non-IT systems and with systems of its
business partners. Based on budgeted and expended personnel hours, assessment of
the Company's non-IT systems and with systems of its business partners was
substantially complete as of December 31, 1998.
18
<PAGE> 20
COSTS. Although a definitive estimate of costs associated with required
modifications to address the Year 2000 issue cannot be made until the Company
has at least completed the assessment phase of the Plan, management presently
does not expect such costs to be material to the Company's results of
operations, liquidity or financial condition. The total amount expended from
January 1, 1996 through September 30, 1999, was approximately $2,400,000. Based
on information presently known, the total amount expected to be expended on the
Year 2000 effort for IT systems is approximately $2,500,000, primarily comprised
of software upgrades and replacement costs, internal personnel hours and
consulting costs. To date, the Year 2000 effort has been funded primarily from
the existing IT budget.
The following special factors could affect the Company's ability to be Year 2000
ready: (i) the Company's ability to implement the Plan; (ii) cooperation and
participation by business partners; (iii) the availability and cost of trained
personnel and the ability to recruit and retain them; and (iv) the ability to
locate all system coding requiring correction.
19
<PAGE> 21
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------------
(a) Exhibits:
(27) Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
During the third quarter of fiscal 1999 ended September 30, 1999, the
Registrant filed no Current Reports on Form 8-K.
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 8, 1999 By: /s/ Michael L. Campbell
Michael L. Campbell, Chairman, President
and Chief Executive Officer
By: /s/ Neal Rider
Executive Vice President and
Chief Financial Officer
Exhibit Index
<TABLE>
<CAPTION>
Item Description
- --------------- ---------------------------------------------------
<S> <C>
(27) Financial Data Schedule (for SEC use only).
</TABLE>
20
<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 SEPTEMBER
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,924
<SECURITIES> 0
<RECEIVABLES> 3,064
<ALLOWANCES> 0
<INVENTORY> 4,823
<CURRENT-ASSETS> 26,793
<PP&E> 1,586,674
<DEPRECIATION> (192,671)
<TOTAL-ASSETS> 1,955,966
<CURRENT-LIABILITIES> 136,978
<BONDS> 0
0
0
<COMMON> 197,530
<OTHER-SE> (9,306)
<TOTAL-LIABILITY-AND-EQUITY> 1,955,966
<SALES> 213,282
<TOTAL-REVENUES> 766,089
<CGS> 30,881
<TOTAL-COSTS> 318,305
<OTHER-EXPENSES> 371,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,301
<INCOME-PRETAX> (18,405)
<INCOME-TAX> 3,922
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,483)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
