<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 July 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 (Internal Revenue Service
Incorporation or Organization) Employer Identification Number)
7132 Commercial Park Drive
Knoxville, TN 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 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 - 216,632,105 shares at August 13, 1999
1
<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)
JULY 1, DECEMBER 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 20,621
Accounts receivable 1,245 3,161
Inventories 5,507 4,014
Prepaid and other current assets 20,988 12,999
Deferred income tax asset 1,271 1,271
----------- -----------
Total current assets 29,011 42,066
PROPERTY AND EQUIPMENT:
Land 111,334 111,854
Buildings and leasehold improvements 776,623 650,313
Equipment 429,314 368,792
Construction in progress 135,678 103,253
----------- -----------
1,452,949 1,234,212
Accumulated depreciation and amortization (174,328) (139,643)
----------- -----------
Total property and equipment, net 1,278,621 1,094,569
GOODWILL, net of accumulated amortization of
$16,163 and $10,170, respectively 433,933 439,842
DEFERRED INCOME TAX ASSET 37,538 37,538
OTHER ASSETS 47,983 47,989
----------- -----------
TOTAL ASSETS $ 1,827,086 $ 1,662,004
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 6,406 $ 6,524
Accounts payable 15,160 65,592
Accrued expenses 37,655 44,734
----------- -----------
Total current liabilities 59,221 116,850
LONG-TERM DEBT, less current maturities 1,574,383 1,334,542
OTHER LIABILITIES 10,416 8,077
----------- -----------
TOTAL LIABILITIES 1,644,020 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; 216,632,105 and 216,552,105
shares issued and outstanding at
July 1, 1999 and December 31, 1998 197,875 197,427
Loans to shareholders (4,060) (4,212)
Retained earnings (deficit) (10,749) 9,320
----------- -----------
TOTAL SHAREHOLDERS' EQUITY $ 183,066 $ 202,535
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,827,086 $ 1,662,004
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statement.
2
<PAGE> 3
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
JULY 1, JULY 2, JULY 1, JULY 2,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ 175,055 $ 95,571 $ 307,298 $ 190,918
Concessions 73,534 41,940 129,143 82,041
Other operating revenue 14,121 8,485 24,607 15,184
--------- --------- --------- ---------
Total revenues 262,710 145,996 461,048 288,143
OPERATING EXPENSES:
Film rental and advertising 105,502 55,140 172,755 103,987
Cost of concessions 10,573 6,114 18,706 12,031
Theatre operating and other 94,784 51,021 180,069 101,141
General and administrative 8,532 3,801 16,129 8,011
Depreciation and amortization 23,562 10,336 43,092 19,917
Recapitalization (Note 2) -- 62,047 -- 62,047
--------- --------- --------- ---------
Total operating expenses 242,953 188,459 430,751 307,134
OPERATING INCOME (LOSS) 19,757 (42,463) 30,297 (18,991)
OTHER INCOME (LOSS):
Interest expense (30,996) (8,536) (61,187) (13,327)
Interest income 114 318 316 467
Other 63 4 100 (236)
--------- --------- --------- ---------
LOSS BEFORE INCOME
TAXES AND
EXTRAORDINARY ITEM (11,062) (50,677) (30,474) (32,087)
BENEFIT FROM INCOME
TAXES 3,633 11,162 10,405 3,912
--------- --------- --------- ---------
LOSS BEFORE
EXTRAORDINARY ITEM (7,429) (39,515) (20,069) (28,175)
EXTRAORDINARY LOSS:
Loss on extinguishment of debt,
net of applicable taxes -- (11,890) -- (11,890)
--------- --------- --------- ---------
NET LOSS $ (7,429) $ (51,405) $ (20,069) $ (40,065)
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
REGAL CINEMAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------
JULY 1, JULY 2,
1999 1998
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (20,069) $ (40,065)
Adjustments to reconcile net loss to net cash used by
operating activities:
Non-cash loss on extinguishment of debt -- 3,026
Depreciation and amortization 43,092 19,917
Gain on sale of assets -- (23)
Deferred income taxes -- (9,664)
Changes in operating assets and liabilities:
Accounts receivable 1,916 3,711
Inventories (1,493) (35)
Prepaids and other assets (7,983) (7,198)
Accounts payable (50,432) (400)
Accrued expenses and other liabilities (7,154) 28,855
--------- -----------
Net cash used in operating activities (42,123) (1,876)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (218,737) (91,119)
Investment in goodwill and other assets (84) (8,030)
--------- -----------
Net cash used in investing activities (218,821) (99,149)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term debt 245,000 790,000
Payments made on long-term debt (5,277) (302,314)
Deferred financing costs -- (34,931)
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 600 42
--------- -----------
Net cash provided by financing activities 240,323 110,107
--------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (20,621) 9,082
CASH AND CASH EQUIVALENTS, beginning of period 20,621 18,398
--------- -----------
CASH AND CASH EQUIVALENTS, end of period $ -- $ 27,480
========= ===========
</TABLE>
See accompanying notes to condensed consolidated financial statement.
4
<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") 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 July 1, 1999, the
condensed consolidated statements of operations for the three month
and six month periods ended July 1, 1999 and July 2, 1998, and the
condensed consolidated statements of cash flows for the six months
ended July 1, 1999 and July 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 six month period ended July
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 $400.0 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 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
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 July 1, 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>
6
<PAGE> 7
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 Six Months Ended
July 2, 1998 July 2, 1998
------------------ ----------------
<S> <C> <C>
Revenues $211,826 $ 421,018
Loss Before
Extraordinary Items $(46,653) $ (38,516)
Net Loss $(58,543) $ (50,406)
======== =========
</TABLE>
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
4 LONG-TERM DEBT
Long-term debt at July 1, 1999 and December 31, 1998, consists of the
following (in thousands):
<TABLE>
<CAPTION>
JULY 1, 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 245,000 --
Capital lease obligations,
Payable in monthly installments
Plus interest at 14.000% 22,320 23,809
Other 4,719 4,757
---------- ----------
Total Debt 1,580,789 1,341,066
Less current maturities (6,406) (6,524)
---------- ----------
Long-Term Debt, less current maturities $1,574,383 $1,334,542
========== ==========
</TABLE>
SENIOR SUBORDINATED NOTES
$600,000 of the Company's senior subordinated notes are 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>
8
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
$200,000 of the Company's senior subordinated notes are 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>
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
$245,000,000 were outstanding under the Revolving Credit Facility at
July 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
$238,800,000 at July 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 $136,300,000 at July 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 $133,650,000 at July 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
9
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
coverage ratios and must not exceed defined leverage ratios. The
Company was in compliance with such covenants at July 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.
5 INCOME TAXES
The effective income tax rate for the three month and six month periods
ended July 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 and six month periods ended July 2, 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.
10
<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 July 1, 1999 the Company
has acquired 304 theatres with 2,307 screens (net of subsequently closed
locations), developed 117 new theatres with 1,586 screens and added 111 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 July 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.
11
<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>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ------------------
JULY 1, JULY 2, JULY 1, JULY 2,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES:
Admissions 66.6% 65.5% 66.7% 66.2%
Concessions 28.0% 28.7% 28.0% 28.5%
Other operating revenue 5.4% 5.8% 5.3% 5.3%
------ ------ ------ ------
Total revenue 100.0% 100.0% 100.0% 100.0%
OPERATING EXPENSES:
Film rental and advertising 40.2% 37.8% 37.5% 36.1%
Cost of concessions 4.0% 4.2% 4.1% 4.2%
Theatre operating 36.1% 34.9% 39.1% 35.1%
General and administrative 3.2% 2.6% 3.5% 2.8%
Depreciation and amortization 9.0% 7.1% 9.3% 6.9%
Recapitalization (Note 2) -- 42.5% -- 21.5%
------ ------ ------ ------
Total operating expenses 92.5% 129.1% 93.4% 106.6%
OPERATING INCOME (LOSS) 7.5% (29.1)% 6.6% (6.6)%
OTHER INCOME (LOSS):
Interest expense (11.8)% (5.8)% (13.3)% (4.6)%
Interest income 0.0% 0.2% 0.1% 0.2%
Other 0.0% 0.0% 0.0% (0.1)%
------ ------ ------ ------
LOSS BEFORE INCOME
TAXES AND
EXTRAORDINARY ITEM (4.3)% (34.7)% (6.6)% (11.1)%
BENEFIT FROM INCOME
TAXES 1.4% 7.6% 2.3% 1.3%
------ ------ ------ ------
LOSS BEFORE
EXTRAORDINARY ITEM (2.9)% (27.1)% (4.3)% (9.8)%
EXTRAORDINARY LOSS:
Loss on extinguishment of debt,
net of applicable taxes (Note 4) 0.0% (8.1)% 0.0% (4.1)%
------ ------ ------ ------
NET LOSS (2.9)% (35.2)% (4.3)% (13.9)%
====== ====== ====== ======
Film rental and advertising
as a % of Admissions 60.3% 58.0% 56.2% 54.5%
====== ====== ====== ======
Cost of concessions as a %
of Concessions 14.4% 15.2% 14.5% 15.2%
====== ====== ====== ======
</TABLE>
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
THREE MONTHS ENDED JULY 1, 1999 AND JULY 2, 1998
TOTAL REVENUES -- Total revenues for the first quarter of fiscal 1999 increased
by 79.9% to $262.7 million from $146.0 million in the comparable 1998 period.
This increase was due to a 83.2% increase in attendance attributable primarily
to the net addition of 694 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 $116.7 million net increase in revenues for the period, a $2.3
million decrease was attributed to theatres continuously operated by the
Company, a $62.2 million increase was attributed to theatres acquired by the
Company, and a $56.8 million increase was attributed to new theatres
constructed by the Company. Average ticket prices increased 9.9% 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 5.6% 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 87.8% to $210.9
million in the second quarter 1999 from $112.3 million in the second quarter
1998. Direct theatre costs as a percentage of total revenues increased to 80.3%
in the 1999 period from 76.9% in the 1998 period. The increase in direct theatre
costs as a percentage of revenue relates principally to the Company's high film
rental associated with "Star Wars: The Phantom Menance" which alone increased
film rental cost by 300 basis points for the second quarter of 1999. The
increase in direct theatre cost as a percentage of total revenue also reflects
the increased occupancy costs associated with the Company's expansion effects.
Including the additional screens associated with the Act III merger, the Company
has increased its total sreen count by 62.3% since the second quarter of 1998.
GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses
increased by 124.5% to $8.5 million in the second quarter 1999 from $3.8 million
in the second 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 second quarter 1999 by 128.0% to $23.6 million from $10.3 million in the
second 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 (LOSS) -- Operating income (loss) for the second quarter 1999
increased to $19.8 million, or 7.5% of total revenues, from $(42.5) million, or
(29.1)% of total revenues, in the second quarter 1998. Before nonrecurring
expenses associated with the Recapitalization, operating income for the second
quarter 1998 was $19.6 million or 13.4% of total revenues.
INTEREST EXPENSE -- Interest expense increased in the second quarter 1999 to
$31.0 million from $8.5 million in the second quarter 1998. The increase was
primarily due to higher average borrowings outstanding associated with the
Recapitalization and the Act III merger.
INCOME TAXES -- The benefit from income taxes in the second quarter 1999 was
$3.6 million as compared to $11.2 million in the second quarter 1998. The
effective tax rate was 32.8% in the 1999 period as compared to 22.0% in the 1998
period. The 1999 period reflected certain goodwill amortization costs which were
not deductible for tax purposes. Additionally, the 1998 second quarter reflected
certain Recapitalization expenses which were not deductible for tax purposes.
Both periods also differ from the expected statutory rates due to the inclusion
of state income taxes.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
NET LOSS -- The net loss in the second quarter 1999 was $7.4 million as compared
to $51.4 million net loss in the second quarter 1998. Net loss was 2.8% of total
revenues in the second quarter of 1999 as compared to 35.2% of total revenues in
the 1998 period.
SIX MONTHS ENDED JULY 1, 1999 AND JULY 2, 1998
TOTAL REVENUES -- Total revenues for the six months ended July 1, 1999 increased
by 60.0% to $461.0 million from $288.1 million in the comparable 1998 period.
This increase was due to a 51.0% increase in attendance attributable primarily
to the net addition of 1,537 screens in the last 12 months (853 screens were
added August 26, 1998, as a result of the merger with Act III). Of the $172.9
million net increase in revenues for the period, a $28.1 million decrease was
attributed to theatres continuously operated by the Company, a $113.5 million
increase was attributed to theatres acquired by the Company, and a $87,5 million
increase was attributed to new theatres constructed by the Company. Average
ticket prices increased 6.7% 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
4.2% 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 71.1% to $371.5
million for the first six months of 1999 from $217.2 million in the comparable
1998 period. Direct theatre costs as a percentage of total revenues increased to
80.6% in the 1999 period from 75.4% in the 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 coupled with
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 101.3% to $16.1 million in the six months ended July 1, 1999 from
$8.0 million in the comparable period in 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 3.5% in the 1999 period from 2.8% in the
1998 period.
DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased
in the first six months of 1999 by 116.4% to $43.1 million from $19.9 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 (LOSS) -- Operating income for the six months ended July 1,
1999 increased to $30.3 million, or 6.6% of total revenues, from $(19.0)
million, or 6.6% of total revenues, in the comparable 1998 period.
INTEREST EXPENSE -- Interest expense increased in the first six months of 1999
to $61.2 million from $13.3 million in the comparable 1998 period. The increase
was primarily due to higher average borrowings outstanding associated with the
Recapitalization and the Act III merger.
INCOME TAXES -- The benefit from income taxes in the first six months of 1999
was $10.4 million as compared to $3.9 million in the comparable 1998 period. The
effective tax rate was 34.1% in the 1999 period as compared to 12.2% in the 1998
period. The 1999 period reflected certain goodwill amortization costs which were
not deductible for tax
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
purposes. Additionally, the first six months of 1998 include certain
Recapitalization expenses that were not deductible for tax purposes. Both
periods also differ from the expected statutory rates due to the inclusion of
state income taxes.
NET LOSS -- The net loss in the second quarter 1999 was $20.1 million as
compared to $40.1 million net loss in the second quarter 1998. Net loss was 4.4%
of total revenues in the second quarter of 1999 as compared to 13.9% of total
revenues in the 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,
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
$500.0 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 the United States. The LIBOR Rate is based on
LIBOR for the corresponding length of loan. The outstanding balance amounted to
$238.8 million at July 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.
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
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 $136.3 million at July 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 $133.7 million at July 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 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 9.500% 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.
During the three months ended July 1, 1999, the Company opened 18 new theatres
with 298 screens, acquired 3 theatres with 36 screens, added 10 screens to
existing theatre locations and disposed of 7 theatres with 36 screens. The
Company intends to develop approximately 350 screens during the remainder of
fiscal 1999. The Company expects that the capital expenditures in connection
with its development plan will aggregate
16
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
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 six 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 July 1, 1999, the Company had approximately $255.0 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.
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
17
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
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 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
18
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
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 July 1, 1999, has renovated 99% of those
systems that require renovation as a result of the Year 2000 issue. In the
aggregate, as of July 1, 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. 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 July 1, 1999, has renovated
99% of those systems that require renovation as a result of the Year 2000 issue.
In the aggregate, as of July 1, 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 July 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
19
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
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 July 1, 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.
20
<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 first quarter of fiscal 1999 ended April 1, 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: August 15, 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
Item Description
- ---- -----------
(27) Financial Data Schedule (for SEC use only).
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REGAL CINEMAS, INC. FOR THE SIX MONTHS ENDED JULY 2,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUL-01-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,245
<ALLOWANCES> 0
<INVENTORY> 5,507
<CURRENT-ASSETS> 29,011
<PP&E> 1,452,949
<DEPRECIATION> (174,328)
<TOTAL-ASSETS> 1,827,086
<CURRENT-LIABILITIES> 59,221
<BONDS> 0
0
0
<COMMON> 197,875
<OTHER-SE> (14,809)
<TOTAL-LIABILITY-AND-EQUITY> 1,827,086
<SALES> 129,143
<TOTAL-REVENUES> 461,048
<CGS> 18,706
<TOTAL-COSTS> 191,461
<OTHER-EXPENSES> 239,290
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,187
<INCOME-PRETAX> (30,474)
<INCOME-TAX> 10,405
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,069)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
