REGAL CINEMAS INC
10-Q, 1999-05-17
MOTION PICTURE THEATERS
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<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 April 1, 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             (I.R.S. Employer Identification No.)
 Incorporation or Organization)

                                      
   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 - 216,672,105 shares at May 13, 1999.


<PAGE>   2



                         PART I -- FINANCIAL INFORMATION


ITEM 1.
FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------



                               REGAL CINEMAS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    -----------------------------------------
                            (in thousands of dollars)

                                     ASSETS
<TABLE>
<CAPTION>

                                                      APRIL 1,          DECEMBER 31,
                                                       1999                 1998
                                                    -----------         ------------
<S>                                                 <C>                 <C>
Current assets:
   Cash and equivalents .......................     $        --         $    20,621
   Accounts receivable ........................           2,174               3,161
   Inventories ................................           4,304               4,014
   Prepaid and other current assets ...........          16,016              12,999
   Deferred income tax asset ..................           1,271               1,271
                                                    -----------         -----------
      Total current assets ....................          23,765              42,066
                                                    -----------         -----------
Property and equipment:
   Land .......................................         111,692             111,854
   Buildings and leasehold improvements .......         699,159             650,313
   Equipment ..................................         380,053             368,792
   Construction in progress ...................         152,978             103,253
                                                    -----------         -----------
                                                      1,343,882           1,234,212
   Accumulated depreciation and amortization...        (156,485)           (139,643)
                                                    -----------         -----------
      Total property and equipment, net .......       1,187,397           1,094,569

Goodwill, net of accumulated amortization
   of $12,887 and $10,170, respectively .......         437,125             439,842
Deferred income tax asset .....................          37,538              37,538
Other assets ..................................          49,009              47,989
                                                    -----------         -----------

      Total assets ............................     $ 1,734,834         $ 1,662,004
                                                    ===========         ===========

</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)

                      LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                    APRIL 1,          DECEMBER 31,
                                                                     1999                 1998
                                                                  -----------         -----------
<S>                                                               <C>                 <C>
Current liabilities:
   Current maturities of long-term debt ..................        $     6,406         $     6,524
   Accounts payable ......................................             58,382              65,592
   Accrued expenses ......................................             56,241              44,734
                                                                  -----------         -----------
      Total current liabilities ..........................            121,029             116,850
                                                                  -----------         -----------

Long-term debt, less current maturities ..................          1,414,041           1,334,542
Other liabilities ........................................              9,269               8,077
                                                                  -----------         -----------
      Total liabilities ..................................          1,544,339           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;
      216,672,105 and 216,552,105 shares issued and
      outstanding at April 1, 1999 and
      December 31, 1998 ..................................            198,027             197,427
   Loans to shareholders .................................             (4,212)             (4,212)
Retained earnings (deficit) ..............................             (3,320)              9,320
                                                                  -----------         -----------
      Total shareholders' equity .........................        $   190,495         $   202,535
                                                                  -----------         -----------

      Total liabilities and shareholders' equity .........        $ 1,734,834         $ 1,662,004
                                                                  ===========         ===========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.




                                        2


<PAGE>   4



                               REGAL CINEMAS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  --------------------------------------------------------------------------
                            (in thousands of dollars)

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED
                                           -----------------------------
                                             APRIL 1,          APRIL 2,
                                               1999              1998
                                            ----------        ----------
<S>                                         <C>                <C>
Revenue:
  Admissions ........................        $ 132,242         $  95,347
  Concessions .......................           55,609            40,101
  Other operating revenue ...........           10,487             6,698
                                             ---------         ---------
         Total revenues .............          198,338           142,147
                                             ---------         ---------
Operating expenses:
  Film rental and advertising costs .           67,252            48,846
  Cost of concessions and other .....            9,492             6,369
  Theatre operating expenses ........           83,926            49,669
  General and administrative expenses            7,598             4,210
  Depreciation and amortization .....           19,530             9,581
                                             ---------         ---------
         Total operating expenses ...          187,798           118,675
                                             ---------         ---------
Operating income ....................           10,540            23,472
Other income (expense):
     Interest expense ...............          (30,191)           (4,791)
     Interest income ................              202               149
     Other ..........................               38              (240)
                                             ---------         ---------
Income (loss) before (provision for)
  benefit from income taxes .........          (19,411)           18,590
(Provision for) benefit from
  income taxes ......................            6,772            (7,250)
                                             ---------         ---------
Net income (loss) ...................        $ (12,640)        $  11,340
                                             =========         =========


</TABLE>


     See accompanying notes to condensed consolidated financial statements.




                                        3


<PAGE>   5



                               REGAL CINEMAS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
     ---------------------------------------------------------------------
                            (in thousands of dollars)

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                                                                 --------------------------
                                                                  APRIL 1,         APRIL 2,
                                                                    1999            1998
                                                                 ---------        ---------
<S>                                                              <C>              <C>

Cash flows from operating activities:
Net income (loss) .......................................        $ (12,640)        $ 11,340
   Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
        Depreciation and amortization ...................           20,744            9,581
        Loss (gain) on sale of assets ...................               --              (17)
        Deferred income taxes ...........................               --              948
        Changes in operating assets and liabilities:
          Accounts receivable ...........................              987            3,297
          Inventories ...................................             (290)               5
          Prepaid and other current assets ..............           (3,017)          (1,016)
          Accounts payable ..............................           (7,210)          (2,078)
          Accrued expenses and other liabilities ........           12,699            5,028
                                                                 ---------         --------
               Net cash provided by operating activities            11,273           27,088

Cash flows from investing activities:
   Capital expenditures, net ............................         (109,640)         (48,130)
   Investment in other assets ...........................           (2,234)            (295)
                                                                 ---------         --------
               Net cash used in investing activities ....         (111,874)         (48,425)
Cash flows from financing activities:
   Borrowings under long-term debt ......................           80,000           19,792
   Payments under long-term debt ........................             (620)              --
   Net proceeds from issuance of common stock upon
      exercise of warrants and options ..................              600               27
   Stock compensation expense ...........................               --               25
                                                                 ---------         --------
               Net cash provided by financing activities            79,980           19,844
                                                                 ---------         --------
Net decrease in cash and equivalents ....................          (20,621)          (1,493)
Cash and equivalents at beginning of period .............           20,621           18,398
                                                                 ---------         --------
Cash and equivalents at end of period ...................        $      --         $ 16,905
                                                                 =========         ========

</TABLE>



     See accompanying notes to condensed consolidated financial statements.




                                        4


<PAGE>   6


                               REGAL CINEMAS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      ---------------------------------------------------------------------

1.       THE COMPANY AND BASIS OF PRESENTATION

         Regal Cinemas, Inc. and its wholly owned subsidiaries, collectively
         referred to as the "Company," operates 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 April 1, 1999, the
         condensed consolidated statements of operations for the three months
         ended April 1, 1999 and April 2, 1998 and the condensed consolidated
         statements of cash flows for the three months ended April 1, 1999 and
         April 2, 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 Regal Cinemas, Inc.

         Certain information and footnote disclosures normally included in
         consolidated financial statements prepared in accordance with generally
         accepted accounting principles have been condensed or omitted.

         It is suggested that these condensed consolidated financial statements
         be read in conjunction with the financial statements and notes thereto
         included in the Company's Annual Report filed on Form 10-K dated March
         31, 1999. The results of operations for the three-month period ended
         April 1, 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 existing 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 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 then existing
         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



                                        5


<PAGE>   7


                               REGAL CINEMAS, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
        -----------------------------------------------------------------

         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"). 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 each share 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 April 1, 1999 is as follows:


<TABLE>
<CAPTION>
                                                                ($'s in thousands)
                 <S>                                             <C>
                 Property, plant 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                      396,967
                                                                    ---------
                 Total purchase cost                                $ 312,157
                                                                    =========

</TABLE>



                                        6


<PAGE>   8


                               REGAL CINEMAS, INC.
         NOTES TO CONDENSED CONSOLIDATED 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
       thousands):

<TABLE>
<CAPTION>
                                              Three Months ended
                                              --------------------
                                                    April 2,
                                                     1998
                                                    ------
<S>                                           <C>
                        Revenues                   $208,585

                        Income (Loss) Before
                        Extraordinary Items        $(44,476)

</TABLE>


4.       LONG-TERM DEBT

         Long-term debt at April 1, 1999 and December 31, 1998, consists of the
following:

<TABLE>
<CAPTION>
                                                                  APRIL 1,       DECEMBER 31,
                                                                   1999              1998
                                                                 ---------       ------------
                                                                        (IN THOUSANDS)
         <S>                            <C>                      <C>              <C>
         $600,000 of the Company's senior subordinated
         notes due June 1, 2008, with interest payable
         semiannually at 9.5%. 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
         the 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:

 <CAPTION>
               Year                       Redemption Price
               ----                       ----------------

               2003                       104.750%
               2004                       103.167%
               2005                       101.583%
               2006 and thereafter        100.000%               $   600,000       $    600,000

         $200,000 of the Company's senior subordinated 
         debentures due December 15, 2010, with interest
         payable semiannually at 8.875%. Debentures 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 the 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:
<CAPTION>

               Year                       Redemption Date
               ----                       ---------------

               2003                       104.438%
               2004                       103.328%
               2005                       102.219%
               2006                       101.109%
               2007 and thereafter        100.000%                   200,000            200,000


</TABLE>


                                        7


<PAGE>   9


                               REGAL CINEMAS, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
       -------------------------------------------------------------------

<TABLE>

        <S>                                            <C>              <C>
        Term Loans                                        512,500          512,500

        Revolving Credit Facility                          80,000               --

        Capital lease obligations, payable in monthly
          installments plus interest at 14%                23,440           23,809

        Other                                               4,506            4,757
                                                      -----------       ----------
                                                        1,420,446        1,341,066

        Less current maturities                            (6,405)          (6,524)
                                                      -----------       ----------
                                                      $ 1,414,041        1,334,542
                                                      ===========       ==========

</TABLE>

          CREDIT FACILITIES (In thousands) -- 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 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
          $80,000 were outstanding under the Revolving Credit Facility at April
          1, 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 amounted to
          $240,000 at April 1, 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 at April 1, 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 $135,000 at April 1, 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 April 1, 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.



                                        8


<PAGE>   10


                               REGAL CINEMAS, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
      --------------------------------------------------------------------


5.         INCOME TAXES

           The effective income tax rate for the three month period ended April
           1, 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 period ended April
           2, 1998 differs from the statutory income tax rate principally due to
           the inclusion of state income taxes. The Company's effective tax
           rates for the three-month period ended April 1, 1999 and April 2,
           1998 were 34.9% and 39.0%, respectively.

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 April 1, 1999
the Company has acquired 308 theatres with 2,307 screens (net of subsequently
closed locations), developed 99 new theatres with 1,288 screens and added 101
new screens to existing theatres. Theatres developed by the Company typically
generate positive theatre level cash flow within the first six 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
April 1, 1999, approximately 38% 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


                 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

           The following table sets forth for the fiscal periods indicated the
percentage of total revenues represented by certain items reflected in the
Company's consolidated statements of operations.


<TABLE>
<CAPTION>
                                                             PERCENTAGE OF TOTAL
                                                                  REVENUES
                                                         ---------------------------
                                                              THREE MONTHS ENDED
                                                         ---------------------------
                                                           APRIL 1,        APRIL 2,
                                                             1999            1998
                                                          ----------     -----------
           <S>                                            <C>            <C>
           Revenue:
             Admissions .............................          66.7%         67.1%
             Concessions ............................          28.0%         28.2%
             Other operating revenue ................           5.3%          4.7%
                                                            -------        ------
                    Total revenues ..................         100.0%        100.0%
                                                            -------        ------
           Operating Expenses:
             Film rental and advertising costs ......          33.9%         34.4%
             Cost of concessions and other ..........           4.8%          4.5%
             Theatre operating expenses .............          42.3%         34.9%
             General and administrative expenses ....           3.8%          3.0%
             Depreciation and amortization ..........           9.8%          6.7%
                                                            -------        ------
                    Total operating expenses ........          94.6%         83.5%
                                                            -------        ------
           Operating income .........................           5.4%         16.5%
                                                            -------        ------
           Other income (expense):
                 Interest expense ...................         (15.2)%        (3.4)%
                 Interest income ....................           0.1%          0.1%
                 Other ..............................         --             (0.2%)
                                                            -------        ------
           Income before (provision for) benefit from
             income taxes ...........................          (9.7)%        13.0%
           (Provision for) benefit from income taxes            3.5%         (5.1)%
                                                            -------        ------
           Net income (loss) ........................          (6.4)%         7.9%
                                                            =======        ======
</TABLE>



                                       11


<PAGE>   13


                 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

THREE MONTHS ENDED APRIL 1, 1999 AND APRIL 2, 1998

         TOTAL REVENUES -- Total revenues for the first quarter of fiscal 1999
increased by 39.5% to $198.3 million from $142.1 million in the comparable 1998
period. This increase was due to a 35.0% increase in attendance attributable
primarily to the net addition of 1,359 screens in the last 12 months (853
screens were added August 26, 1998, as a result of the merger with Act III
Cinemas, Inc. ("Act III")). Of the $56.2 million net increase in revenues for
the period, a $28.0 million decrease was attributed to theatres continuously
operated by the Company, a $53.6 million increase was attributed to theatres
acquired by the Company, and a $30.6 million increase was attributed to new
theatres constructed by the Company. Average ticket prices increased 2.5% 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 2.7% 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 53.2% to
$160.7 million in the first quarter 1999 from $104.9 million in the first
quarter 1998. Direct theatre costs as a percentage of total revenues increased
to 81.0% in the 1999 period from 73.8% in the 1998 period. The increase of
direct theatre costs as a percentage of total revenues was primarily
attributable to increased occupancy 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% to $7.6 million in the first quarter 1999 from $4.2
million in the first 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 increased to 3.8% in the 1999 period from 3.0% in the
1998 period.

         DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense
increased in the first quarter 1999 by 103.8% to $19.5 million from $9.6 million
in the first 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 first quarter 1999
decreased to $10.5 million, or 5.4% of total revenues, from $23.5 million, or
16.5% of total revenues, in the first quarter 1998.

         INTEREST EXPENSE -- Interest expense increased in the first quarter
1999 to $30.2 million from $4.8 million in the first quarter 1998. The increase
was primarily due to higher average borrowings outstanding associated with the
recapitalization of the Company and the Act III merger.

         INCOME TAXES -- The (provision for) benefit from income taxes in the
first quarter 1999 was $6.7 million as compared to $(7.3) million in the first
quarter 1998. The effective tax rate was 34.8% in the 1999 period as compared to
39.0% in the 1998 period as 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.

         NET INCOME (LOSS) -- The net loss in the first quarter 1999 was $(12.6)
million as compared to $11.3 million net income in the first quarter 1998. Net
income (loss) was (6.3)% of total revenues in the first quarter of 1999 as
compared to 7.9% of total revenues in the 1998 period.



                                       12


<PAGE>   14


                 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

         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 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 $500,000 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 the United States. The LIBOR Rate is
based on LIBOR for the corresponding length of loan. The outstanding balance
amounted to $240,000 at April 1, 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 $137,500 at April
1, 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 $135,000 at April
1, 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 1/2% 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


                                       13


<PAGE>   15


                 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

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 1/2% 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 7/8% 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.

         During the three months ended April 1, 1999, the Company opened 10 new
theatres with 142 screens. The Company intends to develop approximately 800
screens during fiscal 1999. The Company expects that the capital expenditures in
connection with its development plan will aggregate approximately $350.0 million
to $400.0 million during 1999. The Company believes that its capital needs for
completion of theatre construction and development for at least the next 6 to 12
months will be satisfied by available credit under the Senior Credit Facilities
and internally generated cash flow. The Company's Senior Credit Facilities
provide for borrowings of up to $1,012.5 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 $512.5 million, in the aggregate, of term loan
borrowings under three separate term loan facilities. As of April 1, 1999, the
Company had approximately $414.0 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 expenditure, 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.



                                       14


<PAGE>   16


                 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

         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 construction projects. As a result, management believes the
Company may be required to reflect these lease agreements as on balance sheet
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. The Company is currently pursuing various alternatives including the
amendment of certain existing construction project agreements. The Company is in
the process of evaluating the impact of EITF Issue 97-10 on its consolidated
financial position, results of operations and cash flows.

         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



                                       15


<PAGE>   17


                 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

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 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. 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 utilizes 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 is 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 has 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. Additionally, the Company believes that the
assessment, validation and testing and implementation phases are the most
important phases in the Plan.

         Based on the weighting methodology described above, the Company has
assessed all of its corporate IT systems and, as of April 1, 1999, has renovated
95% of those systems that require renovation as a result



                                       16


<PAGE>   18


                 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

of the Year 2000 issue. In the aggregate, as of April 1, 1999, 95% 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.
Although the Company has plans to test and verify Global Software, Inc.'s
financial applications to validate that the implementation is in fact Year 2000
ready, it 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 April 1, 1999, has
renovated 85% of those systems that require renovation as a result of the Year
2000 issue. In the aggregate, as of April 1, 1999, 85% 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 95% complete as of April 1, 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 is in the process of identifying and
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.

         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 April 1, 1999, was approximately $1,500,000. 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.



                                       17


<PAGE>   19


                 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED

ITEM 3.    QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------

         Interest Rate Sensitivity. The table below provides information about
the Company's derivative financial instruments and other financial instruments
that are sensitive to changes in interest rates, including interest rate swaps
and debt obligations. For debt obligations, the table presents principal cash
flows and related weighted average interest rates by expected maturity dates.
The Company's fixed rate obligations consist primarily of $600 million senior
subordinated notes due June 1, 2008 and $200 million senior subordinated
debentures due December 15, 2010. For interest rate swaps, the table presents
notional amounts and weighted average interest rates by expected (contractual)
maturity dates. Notional amounts are used to calculate the contractual payments
to be exchanged under the contract. Weighted average variable rates are based on
implied forward rates in the yield curve at the reporting date.

($'s in thousands)

DEBT OBLIGATIONS:

<TABLE>
<CAPTION>

                                                                  Fiscal Year Ending

                                   1999            2000            2001           2002           2003         Thereafter
<S>                               <C>              <C>             <C>            <C>            <C>          <C>
Long-term Debt:
  Fixed Rate.................     804,469          804,070         803,629        803,143        802,606      801,955
    Average interest rate....     9.34%            9.34%           9.34%          9.34%          9.34%        --
  Variable Rate..............     509,500          507,400         504,850        502,300        499,750      497,200
     Average interest rate...     5.44%            5.67%           5.78%          5.89%          6.00%        --

INTEREST RATE DERIVATIVES:

Interest Rate Swaps:
 Variable to Fixed                270,000          270,000         270,000        270,000        250,000      --
    Average pay rate.........     5.48%            5.48%           5.48%          5.48%          5.34%        --
    Average receive rate.....     5.44%            5.67%           5.78%          5.89%          6.00%        --
</TABLE>



                                       18


<PAGE>   20



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 first quarter of fiscal 1999 ended April 1, 1999, the
          Registrant filed no Current Reports on Form 8-K.




                                       19


<PAGE>   21



                                   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: May 17, 1999                  By:  /s/ Michael L. Campbell
                                        ----------------------------------------
                                        Michael L. Campbell, Chairman, President
                                        and Chief Executive Officer


                                    By: /s/ Amy E. Miles
                                       -----------------------------------------
                                       Amy E. Miles, Senior Vice
                                       President of Finance





                                       20


<PAGE>   22





                                  EXHIBIT INDEX


<TABLE>
<CAPTION>

        ITEM                                   DESCRIPTION
- ---------------------       ----------------------------------------------------
<S>                         <C>
        (27)                Financial Data Schedule (For SEC Use Only).




</TABLE>



<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REGAL CINEMAS, INC. FOR THE THREE MONTHS ENDED 
APRIL 1, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-30-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               APR-01-1999
<EXCHANGE-RATE>                                      1
<CASH>                                               0
<SECURITIES>                                         0
<RECEIVABLES>                                    2,174
<ALLOWANCES>                                         0
<INVENTORY>                                      4,304
<CURRENT-ASSETS>                                23,765
<PP&E>                                       1,343,882
<DEPRECIATION>                                 156,485
<TOTAL-ASSETS>                               1,734,834
<CURRENT-LIABILITIES>                          121,029
<BONDS>                                      1,414,041
                                0
                                          0
<COMMON>                                       198,027
<OTHER-SE>                                      (7,532)
<TOTAL-LIABILITY-AND-EQUITY>                 1,734,534
<SALES>                                         55,609
<TOTAL-REVENUES>                               198,338
<CGS>                                            9,492
<TOTAL-COSTS>                                   76,744
<OTHER-EXPENSES>                               111,054
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              30,191
<INCOME-PRETAX>                                (19,411)
<INCOME-TAX>                                     6,722
<INCOME-CONTINUING>                            (12,640)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   (12,640)
<EPS-PRIMARY>                                        0
<EPS-DILUTED>                                        0
        

</TABLE>


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