SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED April 6, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD OF ___________ TO _________
Commission file number 0-24548
Movie Gallery, Inc.
(Exact name of registrant as specified in its charter)
Delaware 63-1120122
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
739 West Main Street, Dothan, Alabama 36301
(Address of principal executive offices) (Zip Code)
(334) 677-2108
(Registrant's telephone number, including area code)
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 filing requirements
for the past 90 days.
YES X NO _______
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 13,420,791 shares of Common
Stock as of May 14, 1997.
The exhibit index to this report appears at page 11 of 13 consecutively numbered
pages.
<PAGE>
Movie Gallery, Inc.
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - April 6, 1997 and January 5, 1997................1
Consolidated Statements of Income - Thirteen weeks ended
April 6, 1997 and March 31, 1996...............................................2
Consolidated Statements of Cash Flows - Thirteen weeks ended
April 6, 1997 and March 31, 1996...............................................3
Notes to Consolidated Financial Statements - April 6, 1997.....................4
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition..........................................7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.....................................11
<PAGE>
Movie Gallery, Inc.
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
April 6 January 5
1997 1997
-------- ---------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,972 $ 3,982
Recoverable income tax 393 224
Merchandise inventory 11,078 10,737
Store supplies and other 3,746 3,885
Deferred income taxes 785 913
-------- --------
Total current assets 20,974 19,741
Videocassette rental inventory, net 92,182 89,929
Property, furnishings and equipment, net 51,941 50,196
Deferred charges, net 10,560 11,151
Excess of cost over net assets acquired, net 86,637 87,822
Deposits and other assets 2,529 2,738
-------- --------
Total assets $264,823 $261,577
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 22,525 $ 24,321
Accrued liabilities 7,651 7,622
Current portion of long-term debt 376 374
-------- --------
Total current liabilities 30,552 32,317
Long-term debt 69,802 67,883
Other accrued liabilities 2,425 2,425
Deferred income taxes 13,324 12,228
Stockholders' equity:
Preferred stock, $.10 par value; 2,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock, $.001 par value; 30,000,000
shares authorized, 13,420,791 shares issued
and outstanding 13 13
Additional paid-in capital 131,686 131,686
Retained earnings 17,021 15,025
-------- --------
Total stockholders' equity 148,720 146,724
-------- --------
Total liabilities and stockholders' equity $264,823 $261,577
======== ========
See accompanying notes.
</TABLE>
1
<PAGE>
Movie Gallery, Inc.
Consolidated Statements of Income
(Unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Thirteen weeks ended
April 6 March 31
1997 1996
---------- -----------
<S> <C> <C>
Revenues:
Rentals $ 55,583 $ 54,376
Product sales 10,095 8,124
----------- -----------
65,678 62,500
Operating costs and expenses:
Store operating expenses 33,154 29,379
Amortization of videocassette rental inventory 16,283 12,098
Amortization of intangibles 1,774 1,626
Cost of sales 5,705 4,821
General and administrative 4,046 5,101
----------- -----------
Operating income 4,716 9,475
Interest expense, net (1,496) (1,176)
----------- -----------
Income before income taxes 3,220 8,299
Income taxes 1,224 3,218
----------- -----------
Net income $ 1,996 $ 5,081
=========== ===========
Net income per share $ .15 $ .39
=========== ===========
Pro forma net income per share:
Income before income taxes $ 8,299
Pro forma income taxes 3,139
-----------
Pro forma net income $ 5,160
===========
Pro forma net income per share $ .39
===========
Weighted average shares outstanding 13,420,791 13,104,857
=========== ===========
See accompanying notes.
</TABLE>
2
<PAGE>
Movie Gallery, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 6 March 31
1997 1996
----------------------
<S> <C> <C>
Operating activities
Net income $ 1,996 $ 5,081
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 20,605 15,669
Deferred income taxes 1,224 2,675
Changes in operating assets and liabilities:
Recoverable income tax (169) 355
Merchandise inventory (341) 2,453
Other current assets 139 107
Deposits and other assets 209 (548)
Accounts payable (1,796) (5,560)
Accrued liabilities 29 193
-------- --------
Net cash provided by operating activities 21,896 20,425
Investing activities
Business acquisitions -- (5,166)
Purchases of videocassette rental inventory, net (18,536) (19,040)
Purchases of property, furnishings and equipment (4,291) (5,193)
-------- --------
Net cash used in investing activities (22,827) (29,399)
Financing activities
Net proceeds from issuance of common stock -- 24
Net proceeds from issuance of notes payable -- 6,848
Proceeds from issuance of long-term debt 2,000 2,986
Principal payments on long-term debt (79) (5,688)
-------- --------
Net cash provided by financing activities 1,921 4,170
-------- --------
Increase (decrease) in cash and cash equivalents 990 (4,804)
Cash and cash equivalents at beginning of period 3,982 6,255
-------- --------
Cash and cash equivalents at end of period $ 4,972 $ 1,451
======== ========
See accompanying notes.
</TABLE>
3
<PAGE>
Movie Gallery, Inc.
Notes to Consolidated Financial Statements (Unaudited)
April 6, 1997
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, the financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the thirteen week period
ended April 6, 1997, are not necessarily indicative of the results that may be
expected for the fiscal year ended January 4, 1998. For further information,
refer to the consolidated financial statements and footnotes thereto included in
Movie Gallery, Inc.'s annual report on Form 10-K for the fiscal year ended
January 5, 1997.
The Company's historical financial statements for all periods presented have
been restated to include the results of operations of Home Vision Entertainment,
Inc. and Hollywood Video, Inc. (see note 5).
2. Videocassette Rental Inventory
Effective April 1, 1996, the Company changed its method of amortizing
videocassette rental inventory (which includes video games and audio books).
Under the new method, videocassettes considered to be base stock are amortized
over thirty-six months on a straight-line basis to a $5 salvage value. New
release videocassettes are amortized as follows: (i) the fourth and any
succeeding copies of each title per store are amortized on a straight-line basis
over six months to an average net book value of $5 which is then amortized on a
straight-line basis over the next thirty months or until the videocassette is
sold, at which time the unamortized book value is charged to cost of sales; and
(ii) copies one through three of each title per store are amortized as base
stock. Management believes the new method results in a better matching of
expenses with revenues in the Company's current operating environment and that
it is compatible with changes made by its primary competitors.
The new method of amortization was applied to all inventory held at April 1,
1996. The adoption of the new method of amortization was accounted for as a
change in accounting estimate effected by a change in accounting principle.
3. Provision for Business Restructuring
During the third quarter of 1996 the Company began and completed an extensive
analysis of both its store base performance and organizational structure and
adopted a business restructuring plan to close approximately 50 of its stores
and reduce the corporate organizational staff by approximately 15 percent.
Management concluded that certain stores were under-performing and it was not
prudent to continue to operate these locations. These store closings are not
concentrated in a particular geographic area. The principal factors considered
in identifying stores for closure included: (i) whether a store generated
sufficient cash flow at the store level to provide an acceptable return on
current investment; (ii) whether the latest sales trends indicated a likely
improvement in the historical store results; (iii) whether the current or future
4
<PAGE>
Movie Gallery, Inc.
Notes to Consolidated Financial Statements (Unaudited)(continued)
3. Provision for Business Restructuring (continued)
competitive climate had made sales improvements less likely; and (iv) whether a
store's performance warranted lease renewal where the lease was scheduled to
expire within the next year.
This analysis resulted in the Company recording a $9.6 million pretax
restructuring charge in the third quarter of 1996. The components of the
restructuring charge include approximately $5.4 million in reserves for future
cash outlays for lease terminations, miscellaneous closing costs and legal and
accounting costs, as well as approximately $4.2 million in asset write downs
(see below). In some situations, the timing of store closures will depend on the
Company's ability to negotiate reasonable lease termination agreements. The
lease commitments associated with the closing stores will be retired entirely or
materially diminished by one of three methods: (i) through the normal expiration
of the lease within the next year; (ii) through the subletting of the property
to another entity; or (iii) through a negotiated lease buyout with the
individual landlord. The store closures are expected to be completed by the end
of fiscal year 1997. Approximately $1.2 million of restructuring costs were paid
and charged against the liability as of April 6, 1997. The stores identified for
closure had revenues and operating losses of approximately $628,000 and
$175,000, respectively, for the thirteen weeks ended April 6, 1997, and
$1,819,000 and $246,000, respectively, for the thirteen weeks ended March 31,
1996. Results for the first quarter of 1996 include all stores identified for
closure under the restructuring plan while results for the first quarter of 1997
include only those stores under the plan which had not been closed as of the
beginning of the quarter.
In conjunction with the business restructuring, an estimated $4.2 million
impairment loss was incurred for those stores identified to close where
projected operating performance indicated an impairment. This impairment loss
related primarily to the write-off of leasehold improvements, fixtures and
intangible assets and a valuation allowance for videocassette rental inventory.
4. Financing Obligations
On July 10, 1996, the Company entered into a Credit Agreement with First Union
National Bank of North Carolina with respect to a reducing revolving credit
facility (the "Facility"). The Facility is unsecured, provides borrowings for up
to $125 million and replaced the Company's previously existing line of credit
agreement.
The available amount of the Facility will reduce quarterly beginning on March
31, 1998 with a final maturity of June 30, 2000. The interest rate of the
Facility is LIBOR-based and the Company may repay the Facility at any time
without penalty. The more restrictive covenants of the Facility restrict
borrowings based upon cash flow levels. At April 6, 1997, $69 million was
outstanding and approximately $9.6 million of the $125 million commitment was
available for borrowing under the Facility.
5. Acquisitions
On July 1, 1996, the Company acquired Home Vision Entertainment, Inc. ("Home
Vision") in a merger transaction accounted for as a pooling-of-interests,
pursuant to which the Company issued approximately 731,000 shares of its common
stock to Home Vision shareholders and assumed approximately $12.5 million in
liabilities. At the time of the merger, Home Vision operated 55 video specialty
stores in Maine, New Hampshire and Massachusetts.
5
<PAGE>
Movie Gallery, Inc.
Notes to Consolidated Financial Statements (Unaudited)(continued)
5. Acquisitions (continued)
On July 1, 1996, the Company acquired Hollywood Video, Inc. ("Hollywood Video")
in a merger transaction accounted for as a pooling-of-interests, pursuant to
which the Company issued approximately 38,000 shares of its common stock to
Hollywood Video shareholders and assumed approximately $11.5 million in
liabilities. At the time of the merger, Hollywood Video operated 43 video
specialty stores in Iowa, Wisconsin and Illinois.
6. Pro Forma Earnings Per Share
Pro forma income taxes reflect income tax expense which would have been
recognized by the Company as a C corporation if the acquisition of Hollywood
Video had been consummated prior to January 1, 1996. Hollywood Video's
historical operating results do not include any provision for income taxes as
Hollywood Video was taxed as an S corporation for all periods prior to the
merger.
7. Recently Issued Accounting Standard
In February 1997, the Financial Accounting Standards Board issued Statement
No.128, Earnings per Share, which revises the disclosure requirements and
increases the comparability of EPS data on an international basis by simplifying
the existing computational guidelines in APB Opinion No. 15. The pronouncement,
effective for the final quarter of the fiscal year ending January 4, 1998, will
require the Company to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact of adopting the pronouncement has not been
determined, however, the Company believes it will not have a material impact on
its primary or fully diluted earnings per share.
6
<PAGE>
Movie Gallery, Inc.
Management's Discussion and Analysis of Results of Operations
and Financial Condition
The following table sets forth, for the periods indicated, statement of
operations data expressed as a percentage of total revenue, the percentage
increase or decrease from the comparable period and the number of stores open at
the end of each period.
<TABLE>
<CAPTION>
Thirteen weeks ended
------------------------------------------
April 6 March 31 Increase
1997 1996 (Decrease)
-------- -------- ----------
<S> <C> <C> <C>
Revenues:
Rentals 84.6% 87.0% (2.4)%
Product sales 15.4 13.0 2.4
----- ----- ------
100.0 100.0 --
Operating costs and expenses:
Store operating expenses 50.5 47.0 3.5
Amortization of rental inventory 24.8 19.4 5.4
Amortization of intangibles 2.7 2.6 0.1
Cost of sales 8.7 7.7 1.0
General and administrative 6.1 8.1 (2.0)
----- ----- ------
Total 92.8 84.8 8.0
----- ----- ------
Operating income 7.2 15.2 (8.0)
Interest expense, net (2.3) (1.9) (0.4)
----- ----- ------
Income before income taxes 4.9 13.3 (8.4)
Income taxes 1.9 5.0 (3.1)
----- ----- ------
Net income 3.0% 8.3% (5.3)%
===== ===== ======
Number of stores open at end of period 861 801 60
===== ===== ======
</TABLE>
The results of operations for the periods presented include the combined results
of the Company, Home Vision Entertainment, Inc. and Hollywood Video, Inc.,
acquisitions consummated on July 1, 1996 and accounted for as
poolings-of-interests. For the thirteen weeks ended April 6, 1997, revenues were
$65.7 million, an increase of 5.1% over the comparable period in 1996. The
increase was a result primarily of an increase in the number of stores operated
by the Company, partially offset by a decrease in same-store revenues of 5.7%
for the first quarter at stores operated by the Company for at least 13 months.
The same-store revenue decrease for the first quarter was primarily the result
of: (i) a significant level of competitive openings over the past year in the
Company's urban locations; (ii) unseasonably warm weather within most of the
Company's store base; and (iii) a higher-than-expected level of product sales
relative to rental revenue.
Product sales as a percentage of total revenue for the thirteen weeks ended
April 6, 1997 were 15.4%, an increase from 13.0% for the comparable period in
1996. This increase was primarily the result of both a general effort by the
Company to increase the sale of previously viewed videocassettes and multiple
promotional programs during the quarter that targeted the sale of hit sell-thru
titles.
7
<PAGE>
Movie Gallery, Inc.
Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)
Store operating expenses, which reflect direct store expenses such as lease
payments and in-store payroll, increased as a percentage of revenues to 50.5%
for the thirteen weeks ended April 6, 1997 from 47.0% for the comparable period
in 1996. The increase in store operating expenses as a percentage of revenues
was primarily due to the shortfall in same-store revenues described above. Store
operating expenses were also negatively impacted by an increase in rent and
other expenses in connection with the integration of developed stores into the
Company's store base.
For the first quarter of 1997, amortization of videocassette rental inventory
increased as a percentage of revenue to 24.8% from 19.4% for the comparable
period in 1996. During the second quarter of 1996, the Company adopted a new
policy for amortizing videocassette rental inventory which has the effect of
accelerating the Company's rate of amortization of its inventory.
Cost of sales increased with the increased revenue from product sales and
decreased as a percentage of revenues from product sales from 59.3% for the
thirteen weeks ended March 31, 1996 to 56.5% for the thirteen weeks ended April
6, 1997. The increase in product sales gross margins resulted primarily from an
increase in the sale of previously viewed rental inventory, the unamortized
value of which is expensed to cost of sales and generally generates higher
margins than other product categories.
General and administrative expenses as a percentage of revenue decreased to 6.1%
for the thirteen weeks ended April 6, 1997 versus 8.1% for the comparable period
in 1996. The decrease was primarily due to operating efficiencies attained
through a larger revenue base as well as the third quarter 1996 restructuring
plan, which included the reduction of the corporate staff by approximately 15%.
Net interest expense as a percentage of revenues increased to 2.3% for the first
quarter of 1997 from 1.9% for the first quarter of 1996. The increase was due to
the increased amount of debt financing that has been used to fund the Company's
growth in the past year.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary capital needs have been for opening and
acquiring new stores and for the purchase of videocassette inventory. Other
capital needs include the remodeling of existing stores, relocation of existing
stores, and the continued upgrading and installation of the Company's
point-of-sale and management information systems. The Company has funded
inventory purchases, remodeling and relocation programs, new store opening costs
and acquisitions primarily from cash flow from operations, the proceeds of two
public offerings, loans under revolving credit facilities and seller financing.
During the first quarter of 1997, the Company generated $6.8 million in Adjusted
EBITDA versus $6.1 million for the first quarter of 1996. "Adjusted EBITDA" is
earnings before interest, taxes, depreciation and amortization, excluding
non-recurring charges and less the Company's purchase of videocassette rental
inventory. Included in the Company's videocassette rental inventory purchases
for the first quarter of 1997 is $424,000 associated with inventory purchases
specifically for new store openings. Adjusted EBITDA does not take into account
capital expenditures, other than purchases of videocassette rental inventory,
and does not represent cash generated from operating activities in accordance
with generally accepted accounting principles ("GAAP"), is not to be considered
as an alternative to net income or any other GAAP measurements as a measure of
8
<PAGE>
Movie Gallery, Inc.
Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)
operating performance and is not indicative of cash available to fund cash
needs. The Company's definition of Adjusted EBITDA may not be identical to
similarly titled measures of other companies. The Company believes that in
addition to cash flows and net income, Adjusted EBITDA is a useful financial
performance measurement for assessing the operating performance of the Company
because, together with net income and cash flows, Adjusted EBITDA is widely used
in the videocassette specialty retailing industry to provide investors with an
additional basis to evaluate the ability of the Company to incur and service its
debt and to fund growth.
Net cash provided by operating activities was $21.9 million for the thirteen
weeks ended April 6, 1997 as compared to $20.4 million for the comparable period
in 1996. The increase was primarily due to a relatively smaller decrease in
accounts payable from fiscal year end 1996 to the end of the first quarter
versus the comparable period in fiscal 1996, as well as an increase in net
income before depreciation and amortization for the first quarter of 1997 versus
the first quarter of 1996. The impact of the above changes was offset partially
by a slight net increase in merchandise inventory during the first quarter of
1997 versus a large decrease in merchandise inventory for the first quarter of
1996.
Net cash used in investing activities was $22.8 million for the first quarter of
1997 as compared to $29.4 million for the first quarter of 1996, primarily as a
result of the lack of acquisition activity during the first quarter of 1997. The
Company expended $5.2 million for acquisitions in the first quarter of 1996.
Net cash provided by financing activities decreased from $4.2 million in the
first quarter of 1996 to $1.9 million for the comparable period in 1997. This
decrease was primarily the result of a diminished level of debt financing
activity during the first thirteen weeks of 1997 versus the comparable period in
1996.
The Company grows its store base through internally developed and acquired
stores and requires capital in excess of internally generated cash flow to
achieve its desired growth. To the extent available, future acquisitions may be
completed using funds available under the Facility, financing provided by
sellers, or alternative financing arrangements such as funds raised in public or
private debt or equity offerings. However, there can be no assurance that
financing will be available to the Company on terms which will be acceptable, if
at all.
At April 6, 1997, the Company had a working capital deficit of $9.6 million, due
to the accounting treatment of its inventory. Videocassette and video game
rental inventory are treated as non-current assets under generally accepted
accounting principles because they are not assets which are reasonably expected
to be completely realized in cash or sold in the normal business cycle. Although
the rental of this inventory generates the major portion of the Company's
revenue, the classification of these assets as noncurrent results in their
exclusion from working capital. The aggregate amount payable for this inventory,
however, is reported as a current liability until paid and, accordingly, is
included in working capital. Consequently, the Company believes that working
capital is not an appropriate measure of its liquidity and it anticipates that
it will continue to operate with a working capital deficit.
The Company believes its projected cash flow from operations, borrowing capacity
with the Facility, cash on hand and trade credit will provide the necessary
capital to fund its current plan of operations for Fiscal 1997, including its
anticipated new store openings. However, to fund a resumption of the Company's
acquisition program (which was temporarily suspended in the latter half of
1996), to provide funds in the event that the Company's need for funds is
9
<PAGE>
Movie Gallery, Inc.
Management's Discussion and Analysis of Results of Operations
and Financial Condition (continued)
greater than expected, if certain of the financing sources identified above are
not available to the extent anticipated or if the Company increases its growth
plan, the Company will need to seek additional or alternative sources of
financing. This financing may not be available on terms satisfactory to the
Company. Failure to obtain financing to fund the Company's expansion plans or
for other purposes could have a material adverse effect on the Company.
This report contains certain forward-looking statements regarding the Company.
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 and in that regard is
cautioning the readers of this report that a number of important risk factors
could affect the Company's actual results of operations and may cause changes in
the Company's strategy with the result that the Company's operations and results
may differ materially from those expressed in any forward-looking statements
made by, or on behalf of, the Company. These risk factors include competitive
factors and weather conditions within the Company's geographic markets, adequate
product availability from Hollywood, and the risk factors that are discussed
from time-to-time in the Company's SEC reports, including, but not limited to,
the report on Form 10-K for the fiscal year ended January 5, 1997.
10
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11 Computation of Earnings Per Share
27 Financial Data Schedule
b) Reports on Form 8-K
None.
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.
Movie Gallery, Inc.
(Registrant)
Date: May 21, 1997 /s/ J. Steven Roy
____________________________________
J. Steven Roy, Senior Vice President
and Chief Financial Officer
11
<PAGE>
Exhibit 11
Movie Gallery, Inc.
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Thirteen weeks ended
April 6 March 31
1997 1996
----------- -----------
<S> <C> <C>
Net income $ 1,996,000 $ 5,081,000
========== ==========
Shares:
Weighted average common shares
outstanding 13,420,791 12,907,032
Net effect of dilutive stock options -- 197,825
---------- ----------
Weighted average common and common
equivalent shares outstanding 13,420,791 13,104,857
========== ==========
Net income per common and
common equivalent share $ .15 $ .39
========== ==========
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000925178
<NAME> Movie Gallery, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-04-1998
<PERIOD-START> JAN-06-1997
<PERIOD-END> APR-06-1997
<CASH> 4,972
<SECURITIES> 0
<RECEIVABLES> 910
<ALLOWANCES> 0
<INVENTORY> 11,078
<CURRENT-ASSETS> 20,974
<PP&E> 266,013<F1>
<DEPRECIATION> 121,890<F2>
<TOTAL-ASSETS> 264,823
<CURRENT-LIABILITIES> 30,552
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 148,707
<TOTAL-LIABILITY-AND-EQUITY> 264,823
<SALES> 10,095
<TOTAL-REVENUES> 65,678
<CGS> 5,705
<TOTAL-COSTS> 60,962
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,496
<INCOME-PRETAX> 3,220
<INCOME-TAX> 1,224
<INCOME-CONTINUING> 1,996
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,996
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0
<FN>
<F1> INCLUDES $195,204 OF VIDEOCASSETTE RENTAL INVENTORY.
<F2> INCLUDES $103,022 OF ACCUMULATED AMORTIZATION ON VIDEOCASSETTE RENTAL
INVENTORY.
</FN>
</TABLE>
