Transcript Document

Investor Presentation
Mike Campbell, Kurt Hall & Amy Miles
Forward-looking Statements
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This presentation includes “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements, other than statements of historical fact, included
herein may constitute forward-looking statements. Although the
Company believes that the expectations reflected in such forwardlooking statements are reasonable, it can give no assurance that
such expectations will prove to be correct. Important factors that
could cause actual results to differ materially from the Company’s
expectations are disclosed in the risk factors contained in the
Company’s prospectus dated May 8, 2002. All forward-looking
statements are expressly qualified in the entirety by such factors.
1
Overview of Regal Entertainment Group
Complementary Growth
Businesses
Largest Domestic
Theatre Circuit
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$2.2 Billion
LTM
Revenues
$461M LTM
EBITDA
21% Margin
2
250+
Million
Attendees
Investment Highlights
Exciting
Growth
Opportunities
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+
Industry
Leading
Theatre
Operations
Steady
Industry
Growth & Solid
Fundamentals
+
=
+
Strong Free
Cash Flow &
Dividend
3
Long-Term
Earnings and
Cash Flow
Opportunities
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Steady Industry Growth & Solid
Industry Fundamentals
Positive Industry Rationalization
‘95 - ‘99:
Unprecedented Screen Growth
‘00 - ‘02:
Major Reduction of 1800+ Screens
2002+:
No New Box, Reduced New Developments
Screen Count – Year over Year Growth
2x LT Growth Rate
7.1% 7.4% 7.6%
9.0%
6.0% 3.7%
4.2% 4.5%
2.5% 1.8%
3.0%
9.1%
First Screen
Decline
Since 1963
0.0%
-3.0%
'65 - '92
'91
'93
'94
'95
'96
'97
'98
(2.3%) (2.3%)
'99 '00 '01
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Screen Reduction Driving Box Office per Screen
Source: NATO
5
Consistent Growth in Demand
Steady Box Office Growth
Healthy Attendance Trends
–
–
–
($ in billions)
$9
3% CAGR over last 10 years
Growth in 3 of the last 5 recessions
1.5 billion patrons in 2001, up 5%
$8
$7
Consistent Box Office Growth
–
–
$6
10th consecutive record year
$8.4 billion in 2001, up 10%
$5
$4
Stable Annual Price Increases
–
$3
92 993 994 995 996 997 998 999 000 001
9
1 1 1 1 1 1 1 1 2 2
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Box Office Revenue
Source: NATO
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3% CAGR over the last 10 years
Beneficiary of Fundamental Patterns & Upcoming
Film Calendar
Q4 2002
Solid Fundamentals
Extended Release Calendar
– Staggering releases reduces
head-to-head competition,
reduces seasonality and
broadens patron traffic
Increased Breadth of Films
– Increasing appeal to a wider
demographic
Increased Emphasis on
Theatrical Success
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– Marketing Expenditures by
Studios increasing at a 10%
CAGR since 1995
7
Beneficiary of Fundamental Patterns & Upcoming
Film Calendar
2003
Solid Fundamentals
Extended Release Calendar
– Staggering releases reduces
head-to-head competition,
reduces seasonality and
broadens patron traffic
Increased Breadth of Films
– Increasing appeal to a wider
demographic
Increased Emphasis on
Theatrical Success
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– Marketing Expenditures by
Studios increasing at a 10%
CAGR since 1995
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Industry Leading Theatre
Operations
National, Geographically Diverse Footprint
5
Largest
Domestic
Exhibitor
37
5,711
Screens
6
26
1
7
4
4
9
13
2
2
8
13
15
20
11
51
As of 9/26/02
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9
10
2
25
8
29
530
Theatres
1
4
15
12
6
1
89
1
26
25
7
1
35
23%
Market
Share
Improved Experience Driving Demand
Rationalized Theatre Portfolio
61% Screens Built Since 1997
60% Feature Stadium Seating
10.5 Screens / Theatre
75% Theatres with 10+ Screens
9 of Top 10, 23 of Top 25 DMAs
Outperforms Industry
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Modern Theatre
Circuit
Minimal Future Cap-X
11
20%+ EBITDA Margins
Superior Operations Management
– Lower rent and occupancy costs
– Effective controls on theatre-level costs
– National contracts and scale drive margins
Leading EBITDA Margins
24%
22%
23.0%
21.7%
22.9%
20.0%
18%
16%
18.2%
20.0%
19.1%
20%
18.5%
16.0%
18.4%
16.3%
14%
15.4%
Industry Average*
Standalone Regal Cinemas
12%
15.4%
13.0%
10%
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1995
1996
1997
1998
1999
2000
* Industry Includes AMC, Carmike, Loews and Cinemark.
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2001
Proven Ability to Integrate Acquisitions
11 Successful Acquisitions Since 1995
Theatre-Level Cash Flow Margin
35%
29.8%
30%
24.1%
25%
20%
23.3%
21.1%
23.1%
16.0%
15%
10%
5%
0%
National
Litchfield
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Pre-Acquisition
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Cobb
Post-Acquisition
Steady Industry Growth
On-track to realize $30 - $40 million of synergies
– G&A reductions
– Concession synergies
– Reductions in advertising expense and other theatre operating costs
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Expect continued benefits during the first half of 2003
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Simple Growth Strategy
Continue Core Theatre Business Momentum
Increase Theatre Margins
Capitalize on Consolidation Opportunities
Pursue High Margin Ancillary Business Opportunities
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Generating significant Free Cash Flow
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Regal CineMedia
Unique National Digital Theatre Network

First of Its Kind

Internally Funded

Initially Focused on Digital
Advertising

End of
Year
DMAs
Built
Screens
Digital Ready
Patrons
To Serve
2002
11
1,335
70 million
2003
51
4,460
200 million
Valuable Long-Term Platform
 Complementary programming
 Digital projectors
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Transforming the Theatre into a Unique Advertising,
Promotional and Communications Platform
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RCM’s Competitive Advantages
Dedicated Focus on Complementary New Business Opportunities
– High level management, sales and advertising expertise
Direct Control of Theatre Venues and Patron Data
– Ability to create of wider variety of products and services
– Better control of delivery of advertising and promotional services
– Attendance data enables capture of valuable in-depth research
Existing Technology Platform Ready
– Network operating center in use
– Satellite delivery of digital content implemented in initial theatres
– Sales, distribution and billing software installed
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– On-going linking of theatres to network represents simple connection process
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Advertising Revenue Opportunity
2001E Advertising Market Sizes
Theatres Provide Better Recall
–
–
($ in billions)
$60
$50
$47.8
Increasing Fragmentation Among
Traditional Mediums
$40
Existing
Market Only
$100+ million
$30
Advertisers Seeking New Platforms
to Create Consumer Touchpoints
$17.8
$20
High impact
Captive audience
$10
$2.4
$0.1
$0
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CPMs
Television
Print
Outdoor
Cinema
$19
$11
$4
$25+
Small Shift
in Ad
Spending
19
+
50% - 70%
EBITDA
Margins
Large
= Impact on
EBITDA
#1 Market Share in Top DMA’s
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DMAs
% National Box
Regal Market Share
New York / LA
17.7%
#1
Top 10
40.3%
#1
Top 25
62.1%
#1
Top 50
77.7%
#1
Source: EDI
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Financial Overview
Revenue and EBITDA Performance
EBITDA*
Revenue*
($ in billions)
($ in millions)
$2.2
$2.3
$2.0
6,100
$2.0
$1.8
$1.8
$500
6,200
$461
$400
6,000
$300
$1.7
$351
$294
$289
5,900
$200
5,
88
6
5,
91
1
$1.5
5,800
5,
71
1
5,
70
9
$1.3
$1.0
5,600
1999
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5,700
.3%
17
20%
.5%
17
18%
.1%
16
16%
$0
14%
2000
EBITDA
*Pro Forma for the combination of Regal, Edwards and UA
Excludes results of theatres closed in connection with reorganizations
2001 excludes the 53rd week in UA’s fiscal year - $17.9m of revenues and $7.3m of EBITDA.
22
22%
$100
1999
2000
2001
LTM
Revenue
Ending Screen Count
2
%
0.8
24%
2001
LTM
Margin
2002 EBITDA Margin Growth
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Regal Improving EBITDA
Margins in 2002 vs. 2001
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•
Strong box office
growth coupled with
maximizing operating
leverage
•
Realized integration
synergies
Conservative Leverage and Excellent Liquidity
As of
9/26/2002
($ in millio ns)
Cash
$216.2
Revolver
Term Loans
Senior Subordinated Notes
Lease Financing Arrangements
Other Debt
Total Debt
$0.0
225.0
350.0
98.3
11.4
$684.7
Shareholders Equity (Mkt. Value)(1)
Total Capitalization
2,517.0
$3,201.7
Net Debt / 9/02 LTM EBITDA (2)
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Conservative Capital Structure
(1)
(2)
As of 11/1/02
Net Debt + Leases / EBITDAR = 3.5x
24
1.0x
Strong Free Cash Flow
($ in millions)
LTM EBITDA
$460.9
Less: Pro Forma Interest Expense, net
(56.0)
Less: Pro Forma Cash Taxes
(83.0)
Less: LTM Theatres’ Capital Expenditures
(55.9)
Less: LTM CineMedia Capital Expenditures
(13.0)
Less: Working Capital
(5.0)
Less: Pro Forma Mandatory Debt Amortization
Cash Flow Before Dividend and Other (1)
(15.0)
$233.0
(1)
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Significant Free Cash Flow Funds Growth Opportunities
(1)
Excludes 2002 reorganization payments of approximately $81 million
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Financial Flexibility for Growth Strategy
Conservative
Capitalization
+
$200M+ Annual
Free Cash Flow
Before Dividend
Flexibility to Execute Growth Strategy
Capitalize on prudent acquisition opportunities
Pursue high margin ancillary business
Make selective investments in asset base
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Provide incremental returns through dividends
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