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Regal Entertainment Group 10-K 2015
RGC 2014 10K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 2015
Commission file number: 001-31315
____________________________________________________________________________
Regal Entertainment Group
(Exact name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
 
02-0556934
(I. R. S. Employer
Identification Number)
7132 Regal Lane
Knoxville, TN
(Address of Principal Executive Offices)
 
37918
(Zip Code)
Registrant's Telephone Number, Including Area Code:    865/922-1123
____________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Class A Common Stock, $.001 par value
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:    None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨    No ý
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ý    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: ý 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer ý
 
Accelerated filer ¨
 
Non-accelerated filer ¨
 (Do not check if a
smaller reporting company)
 
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ¨    No ý
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 26, 2014, computed by reference to the price at which the registrant's Class A common stock was last sold on the New York Stock Exchange on such date was $1,699,960,104 (79,922,901 shares at a closing price per share of $21.27).

Shares of Class A common stock outstanding—132,793,216 shares at February 23, 2015
Shares of Class B common stock outstanding—23,708,639 shares at February 23, 2015

DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive proxy statement on Schedule 14A to be used in connection with its 2015 Annual Meeting of Stockholders and to be filed within 120 days after January 1, 2015 are incorporated by reference into Part III, Items 10-14, of this report on Form 10-K.
 



TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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REGAL ENTERTAINMENT GROUP
PART I
The information in this Annual Report on Form 10-K (this "Form 10-K") contains certain forward-looking statements, including statements related to trends in the Company's business. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include those discussed in "Business," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as those discussed elsewhere in this Form 10-K.
Item 1.    BUSINESS.
THE COMPANY
Regal Entertainment Group, a Delaware corporation organized on March 6, 2002 ("we," "us," "our," the "Company" or "Regal"), is the parent company of Regal Entertainment Holdings, Inc. ("REH"), which is the parent company of Regal Cinemas Corporation ("Regal Cinemas") and its subsidiaries. Regal Cinemas' subsidiaries include Regal Cinemas, Inc. ("RCI") and its subsidiaries, which include Edwards Theatres, Inc. ("Edwards"), Regal CineMedia Corporation ("RCM") and United Artists Theatre Company ("United Artists"). The terms Regal or the Company, REH, Regal Cinemas, RCI, Edwards, RCM and United Artists shall be deemed to include the respective subsidiaries of such entities when used in discussions included herein regarding the current operations or assets of such entities.
Our Internet address is www.regmovies.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports, are available free of charge on our Internet website under the heading "Investor Relations" as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the "Commission"). The contents of our Internet website are not incorporated into this report.
The Company manages its business under one reportable segment: theatre exhibition operations.
DESCRIPTION OF BUSINESS
Overview
We operate the largest and most geographically diverse theatre circuit in the United States, consisting of 7,367 screens in 574 theatres in 42 states along with Guam, Saipan, American Samoa and the District of Columbia as of January 1, 2015, with approximately 220 million attendees for the fifty-three week fiscal year ended January 1, 2015 ("fiscal 2014"). Our geographically diverse circuit includes theatres in 46 of the top 50 U.S. designated market areas. We operate multi-screen theatres and, as of January 1, 2015, had an average of 12.8 screens per location, which is well above the North American motion picture exhibition industry average. We develop, acquire and operate multi-screen theatres primarily in mid-sized metropolitan markets and suburban growth areas of larger metropolitan markets throughout the United States.
For fiscal 2014 and prior periods, the Company's fiscal year ended on the first Thursday after December 25, which in certain years (such as fiscal 2014) resulted in a 53-week fiscal year. On August 27, 2014, the Company's Board of Directors approved a change in the Company’s fiscal year from a 52-53 week fiscal year ending on the first Thursday after December 25 of each year to a fiscal year ending on December 31 of each year, effective with the fiscal year commencing January 2, 2015. Beginning January 2, 2015, the Company’s quarterly results will be for three month periods ending March 31, June 30, September 30 and December 31 of each year.
For fiscal 2014, we reported total revenues, income from operations and net income attributable to controlling interest of $2,990.1 million, $306.4 million and $105.6 million, respectively. In addition, we generated $349.1 million of cash flows from operating activities during fiscal 2014.
Business Strategy
Our business strategy is predicated on our ability to allocate capital effectively to enhance value for our stockholders. This strategy focuses on enhancing our position in the motion picture exhibition industry by distributing value to our stockholders, capitalizing on prudent industry consolidation and partnership opportunities, managing, expanding and upgrading our existing asset base with new technologies and customer amenities and realizing selective growth opportunities through new theatre construction. Our business strategy should enable us to continue to produce the free cash flow necessary to maintain a prudent allocation of our capital among dividend payments, debt service and repayment and investment in our theatre assets, all to provide meaningful value to our stockholders. Key elements of our business strategy include:
Maximizing Stockholder Value.    We believe that our cash dividends are an efficient means of distributing value to our stockholders. From our initial public offering ("IPO") in May 2002 through January 1, 2015, we have returned approximately $4.0 billion to our stockholders in the form of quarterly and extraordinary cash dividends, including a recent extraordinary cash

4


dividend of $1.00 per share of Class A and Class B common stock (approximately $156.2 million in the aggregate) paid on December 15, 2014.
On October 27, 2014, the Company announced that its Board of Directors authorized the exploration of strategic alternatives to enhance stockholder value, which included a potential sale of the Company. On January 15, 2015, the Company announced that its Board of Directors, in the course of its examination of strategic alternatives and with the advice of Morgan Stanley & Co. LLC after a thorough market review, has determined that a sale of the Company would not be in the best interest of its stockholders at such time. The Company's Board of Directors, consistent with its fiduciary duties, remains committed to evaluating any alternatives that would enhance stockholder value.
Pursuing Strategic Acquisitions and Partnerships.    We believe that our acquisition experience and capital structure position us well to take advantage of future acquisition opportunities and to participate in various partnership initiatives. We intend to selectively pursue accretive theatre acquisitions and theatre-related investments that enhance and more fully utilize our asset base to improve our consolidated operating results and free cash flow.
For example, during fiscal 2012 and 2013, we completed the acquisitions of Hollywood Theaters and Great Escape Theatres, whereby we acquired a total of 68 theatres with 814 screens for an aggregate net cash purchase price of $284.1 million. The acquisitions enhanced the Company’s presence in 16 states and 3 U.S. territories. See Note 3 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further discussion of these acquisitions.
With respect to partnership initiatives, we own approximately 20.1% of National CineMedia, LLC ("National CineMedia" or "NCM") as of January 1, 2015. National CineMedia operates the largest digital in-theatre advertising network in North America and concentrates on in-theatre advertising for its theatrical exhibition partners, which includes us, AMC Entertainment, Inc. ("AMC"), and Cinemark, Inc. ("Cinemark"). See "National CineMedia Joint Venture" under Part I, Item I of this Form 10-K for further discussion of National CineMedia. We also participate in other joint ventures such as Digital Cinema Implementation Partners, LLC, Open Road Films and AC JV, LLC, which are also further discussed under Part I, Item I of this Form 10-K. Finally, the Company is a party to a joint venture with certain exhibitors and distributors called Digital Cinema Distribution Coalition ("DCDC"). DCDC has established a satellite distribution network that distributes digital content to theatres via satellite. We believe our investment in National CineMedia and other joint venture arrangements generate incremental value for our stockholders.
Pursuing Premium Experience Opportunities.    We intend to continue to embrace innovative concepts that generate incremental revenue and cash flows for the Company and deliver a premium movie-going experience for our customers on several complementary fronts:
First, we intend to continue our focus on improving customer amenities, including the installation of luxury reclining seats, and experimentation with various other customer engagement and marketing initiatives aimed at increasing attendance and enhancing the overall customer experience. With respect to our luxury reclining seating initiative, as of January 1, 2015, we offered luxury reclining seating in 336 auditoriums at 32 select theatre locations. Based on promising initial results, we expect to offer luxury reclining seating in approximately 40 additional locations by the end of fiscal 2015. The costs of these conversions in some cases are partially covered by investments from our theatre landlords.
Second, to continually address consumer trends and customer preferences, we have focused on expanding our menu of food and alcoholic beverage products. We believe that the enhancement of our food and alcoholic beverage offerings has had a positive effect on our operating results and we expect to continue to invest in such offerings in our theatres. As of January 1, 2015, we offered an expanded menu of food and/or alcoholic beverage items in 159 locations. By the end of fiscal 2015, we expect to offer an expanded menu of food in approximately 180 locations and alcoholic beverages in approximately 130 locations. In addition, as of January 1, 2015, we have successfully launched seven Cinebarre locations which offer patrons the convenience of a variety of lunch and dinner menu options, including beer and wine, served at the customer's seat before and during the featured film.
Third, we believe that our IMAX® digital projection systems and our proprietary large screen format, RPXSM offer our patrons all-digital, large format premium experiences and generate incremental revenue and cash flows for the Company. As of January 1, 2015, our IMAX® footprint consisted of a total of 86 IMAX® screens and we also operated a total of 86 RPXSM screens. We have been encouraged by the operating results of our IMAX® and RPXSM screens and to that end, we intend to install additional IMAX® digital projection systems and RPXSM screens during fiscal 2015.
Finally, we maintain a frequent moviegoer loyalty program, named the Regal Crown Club®, to actively engage our core customers. Regal Crown Club® members are eligible for specified awards, such as concession items, based on purchases made at our participating theatres. As of January 1, 2015, we had over 13 million active

5


members in the Regal Crown Club®, making it the largest loyalty program in our industry, and these members accounted for approximately $1.0 billion of the Company's box office and concession revenues during fiscal 2014. In addition, our mobile ticketing application designed to give customers quick access to box office information via their Apple iPhone® or Android™ phone, has been downloaded approximately 2.5 million times since its fiscal 2012 launch. The application provides customers the ability to find films, movie information, showtimes and special offers from Regal (including Regal Crown Club® loyalty program promotions) and the ability to purchase tickets for local theatres, thereby expediting the admissions process.
We believe the experimentation with customer amenities and engagement initiatives, the broadening of our food and alcoholic beverage offerings, coupled with the product-driven success of our IMAX® screens and growing portfolio of RPXSM screens, allow us to deliver a premium movie-going experience for substantially all of our customers. We believe this strategy will enable us to differentiate our services in certain markets and build brand loyalty, which we believe will provide us the opportunity for incremental revenue and cash flows.
Pursuing Selective Growth Opportunities and Active Asset Management.    We intend to selectively pursue expansion opportunities through new theatre construction and acquisitions that meet our strategic and financial return criteria. Additionally, we manage our asset base by opportunistically closing underperforming theatres.  To that end, during fiscal 2014, we continued to actively manage our asset base by opening nine new theatres with 98 screens and closing 15 theatres with 125 screens, ending the year with 574 theatres and 7,367 screens.
In summary, we believe our business strategy should enable us to continue to produce the free cash flow necessary to maintain a prudent allocation of our capital among dividend payments, debt service and repayment and investment in our theatres assets, all to provide meaningful value to our stockholders.
Competitive Strengths
We believe that the following competitive strengths position us to capitalize on future opportunities:
Industry Leader.    We are the largest domestic motion picture exhibitor operating 7,367 screens in 574 theatres in 42 states along with Guam, Saipan, American Samoa and the District of Columbia. We believe that the quality and size of our theatre circuit is a significant competitive advantage for negotiating attractive national contracts and generating economies of scale. We believe that our market leadership allows us to capitalize on favorable attendance trends and attractive consolidation and partnership opportunities.
Superior Management Drives Strong Operating Margins.    Our operating philosophy focuses on efficient operations and strict cost controls at both the corporate and theatre levels. At the corporate level, we are able to capitalize on our size and operational expertise to achieve economies of scale in purchasing and marketing functions. We have developed an efficient purchasing and distribution supply chain that generates favorable concession margins. At the theatre level, management devotes significant attention to cost controls through the use of financial data analysis, detailed management reports and performance-based compensation programs to encourage theatre managers to deliver a premium customer experience while effectively controlling costs and maximizing free cash flow.
Proven Acquisition and Integration Expertise.    We have significant experience identifying, completing and integrating acquisitions of theatre circuits. Since our 2002 IPO, we have demonstrated our ability to enhance revenues and realize operating efficiencies through the successful acquisition and integration of nine theatre circuits, consisting of 225 theatres and 2,622 screens. We have generally achieved immediate cost savings at acquired theatres and improved their profitability through the application of our consolidated operating functions and key supplier contracts.
Quality Theatre Portfolio.    We believe that we operate one of the most modern theatre circuits among major motion picture exhibitors. As of January 1, 2015, approximately 78% of our locations featured stadium seating and approximately 79% of our theatres had 10 or more screens. In addition, approximately 42% of our locations featured one or more premium amenity offerings as of January 1, 2015. Our theatres have an average of 12.8 screens per location, which is well above the North American motion picture exhibition industry average. We believe that our modern theatre portfolio coupled with our operating margins should allow us to generate significant cash flows from operations.
Dividend Policy
We believe that paying dividends on our shares of common stock is important to our stockholders. To that end, during fiscal 2014, we paid to our stockholders four quarterly cash dividends of $0.22 per share on each outstanding share of our Class A and Class B common stock, or approximately $138.6 million in the aggregate. In addition, on December 15, 2014, we paid an extraordinary cash dividend of $1.00 per share on each outstanding share of our Class A and Class B common stock, or approximately $156.2 million. Further, on February 12, 2015, we declared a cash dividend of $0.22 per share on each outstanding share of Class A and Class B common stock. The dividend is payable on March 13, 2015 to our stockholders of record on March 3, 2015. These dividends have been or will be funded through cash flow from operations and available cash

6


on hand. We, at the discretion of our Board of Directors and subject to applicable law, anticipate paying regular quarterly dividends on our Class A and Class B common stock for the foreseeable future. The amount, if any, of the dividends to be paid in the future will depend upon our then available cash, anticipated cash needs, overall financial condition, loan agreement restrictions, future prospects for earnings and cash flows, as well as other relevant factors. Dividends are considered quarterly and may be paid only when, and in such amounts as, approved by our Board of Directors.
INDUSTRY OVERVIEW AND TRENDS
The domestic motion picture exhibition industry is a mature business that has historically maintained steady long-term growth in revenues and attendance. Since 1965, total box office revenues have grown at a compound annual growth rate of approximately 5% with annual attendance of approximately 1.3 billion attendees in 2014. Against this background of steady long-term growth in revenues and attendance, the exhibition industry has experienced periodic short-term increases and decreases in attendance and in turn box office revenues. Consequently, we expect the cyclical nature of the domestic motion picture exhibition industry to continue for the foreseeable future. However, we believe that long-term trends in motion picture attendance in the U.S. will continue to benefit the domestic motion picture exhibition industry. For example, even during the most recent recessionary period, attendance levels remained stable.
Through the years, the domestic motion picture exhibition industry has experienced increased competition from other methods of delivering content to consumers, including network and syndicated television, cable and satellite television services, in-home video and DVD and pay-per-view services such as video on demand, digital downloads and streaming via the Internet. Traditionally, when motion picture distributors license their films to the domestic exhibition industry, they refrain from licensing their products to other delivery channels for a period of time, commonly called the theatrical release window. Over the past several years, the average period between a film's theatrical release and its in-home video or DVD release has contracted slightly to approximately three to four months. We believe that a material contraction of the theatrical release window could significantly dilute the consumer appeal of the out-of-home motion picture offering. As a result, we continue to monitor the status of the theatrical release window during our film licensing decisions. Fundamentally, we believe that movie-going is a convenient, affordable and attractively priced form of out-of-home entertainment, which, on an average price per patron basis, continues to compare favorably to other out-of-home entertainment alternatives, such as concerts and sporting events.
Finally, the domestic motion picture exhibition industry is in the process of experimenting with and implementing various initiatives, concepts and customer amenities aimed at delivering a premium movie-going experience for its customers in order to differentiate services and build brand loyalty, which we believe will provide us the opportunity for incremental revenue and cash flows. These initiatives include reserved seating and luxury reclining seating, broadening food and beverage offerings, in-theatre dining and bar service, the enhancement of loyalty programs and other customer engagement initiatives such as mobile ticketing applications, internet ticketing, social media and other marketing initiatives. In addition, we believe the benefits associated with premium motion picture formats are significant for our industry and provide us with the opportunity for incremental revenue from formats such as IMAX® and our proprietary large screen format, RPXSM. Finally, we believe that operating a digital theatre circuit provides greater flexibility in scheduling our programming content, which has enhanced our capacity utilization, and enables us to generate incremental revenue from differentiated motion picture formats, such as digital 3D, and the exhibition of specialty content offerings through certain distributors of specialty content, such as AC JV, LLC. We are optimistic that these and other recent industry initiatives and trends will drive continued growth and strength for the domestic motion picture industry.
THEATRE OPERATIONS
We operate the largest theatre circuit in the United States with 7,367 screens in 574 theatres in 42 states along with Guam, Saipan, American Samoa and the District of Columbia as of January 1, 2015. We operate theatres in 46 of the top 50 U.S. designated market areas, which include locations in suburban growth areas. We target prime locations with excellent access to large, high patron-traffic areas. We operate our theatre circuit using our Regal Cinemas, United Artists, Edwards, Great Escape Theatres and Hollywood Theaters brands through our wholly owned subsidiaries.
We operate multi-screen theatres. Our multi-screen theatre complexes typically contain 10 to 18 screens, each with auditoriums ranging from 100 to 500 seats. As a result, our theatres appeal to a diverse group of patrons because we offer a wide selection of films and convenient show times. In addition, many of our theatres feature state-of-the-art amenities such as immersive wall-to-wall and floor-to-ceiling screens, Sony Digital CinemaTM 4K projection systems, 3D digital projection systems, digital stereo surround-sound, closed-captioning, multi-station concessions stands, computerized ticketing systems, plush stadium seating with cup holders and retractable armrests and enhanced interiors featuring video game and party room areas adjacent to the theatre lobby. In addition, we have recently begun a strategic initiative to install luxury reclining seating at select locations in certain of our key markets. As of January 1, 2015, we offered luxury reclining seating in 336 auditoriums at 32 select theatre locations. Based on promising initial results, we expect to offer luxury reclining seating in approximately

7


40 additional locations by the end of fiscal 2015. The costs of these conversions in some cases are partially covered by investments from our theatre landlords.
Our modern, multi-screen theatres are designed to increase profitability by optimizing revenues per square foot while reducing our operational costs on a per attendee basis. We vary auditorium seating capacities within the same theatre, allowing us to exhibit films on a more cost effective basis for a longer period of time by shifting films to smaller auditoriums to meet changing attendance levels. In addition, we realize significant operating efficiencies by having common box office, concessions, projection, lobby and restroom facilities, which enables us to spread some of our costs, such as payroll, advertising, rent and utility costs over a higher revenue base. We strategically schedule movie show times to reduce staffing requirements and box office and concession line congestion and to provide more desirable parking and traffic flow patterns. We also actively monitor ticket sales in order to quickly recognize demand surges, which enables us to add seating capacity quickly and efficiently. In addition, we offer various forms of convenient ticketing methods, including print-at-home technology, self-serve kiosks, e-gift cards and mobile ticketing. We believe that operating a theatre circuit consisting primarily of modern theatres enhances our ability to attract patrons and believe theatres larger than the current 10 to 18 screen megaplex are not able to generate attractive returns in most locations because of the substantial market suitability requirements to generate a level of profitability similar to the current megaplex format.

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The following table details the number of locations and theatre screens in our theatre circuit ranked by the number of screens in each state along with Guam, Saipan, American Samoa and the District of Columbia as of January 1, 2015:
State/District
 
Locations
 
Number of Screens
California
 
87
 
1,054
Florida
 
48
 
709
New York
 
46
 
559
Virginia
 
32
 
441
Washington
 
32
 
361
Texas
 
29
 
407
Pennsylvania
 
24
 
319
North Carolina
 
22
 
269
Ohio
 
21
 
299
Oregon
 
20
 
214
South Carolina
 
17
 
230
Georgia
 
16
 
251
Maryland
 
15
 
206
Tennessee
 
13
 
179
Colorado
 
13
 
162
Indiana
 
12
 
145
Illinois
 
11
 
148
Nevada
 
11
 
141
New Jersey
 
10
 
142
Massachusetts
 
10
 
118
Missouri
 
8
 
114
Hawaii
 
7
 
72
Mississippi
 
7
 
56
Idaho
 
5
 
73
Kentucky
 
5
 
60
New Mexico
 
5
 
60
Connecticut
 
5
 
57
Louisiana
 
5
 
53
Alaska
 
5
 
52
West Virginia
 
4
 
46
Alabama
 
3
 
52
Kansas
 
3
 
34
Oklahoma
 
3
 
34
New Hampshire
 
3
 
33
Minnesota
 
2
 
36
Delaware
 
2
 
33
Michigan
 
2
 
26
Arkansas
 
2
 
24
Maine
 
2
 
20
Nebraska
 
1
 
16
Arizona
 
1
 
14
Guam
 
1
 
14
District of Columbia
 
1
 
14
Montana
 
1
 
11
Saipan
 
1
 
7
American Samoa
 
1
 
2
Total
 
574
 
7,367

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We have implemented a best practices management program across all of our theatres, including daily, weekly, monthly and quarterly management reports generated for each individual theatre and we maintain active communication between the theatres, divisional management and corporate management. We use these management reports and communications to closely monitor admissions and concessions revenues as well as accounting, payroll and workforce information necessary to manage our theatre operations effectively and efficiently.
We seek experienced theatre managers and require new theatre managers to complete a comprehensive training program within the theatres and at the "Regal Entertainment University," which is held at our corporate office. The program is designed to encompass all phases of theatre operations, including our operating philosophy, policies, procedures and standards. In addition, we have an incentive compensation program for theatre-level management that rewards theatre managers for controlling operating expenses while complying with our operating standards.
In addition, we have implemented quality assurance programs in all of our theatres to maintain clean, comfortable and modern facilities and monitor food service. To maintain quality and consistency within our theatre circuit, district and regional managers and various contractual service partners regularly inspect each theatre and provide recurring feedback. In addition, we consistently solicit feedback from our patrons through an on-line guest experience program whereby our guests rank and provide detailed comments and experiences for each of our theatres. Finally, we also conduct a "mystery shopper" program, which involves unannounced visits by unidentified customers who report on the quality of service, film presentation and cleanliness at individual theatres.
NATIONAL CINEMEDIA JOINT VENTURE
We maintain an investment in National CineMedia, which operates the largest digital in-theatre advertising network in North America representing over 20,100 U.S. theatres screens (of which approximately 19,200 are part of National CineMedia's digital content network) as of January 1, 2015. During 2014, over 700 million patrons attended movies shown in theatres in which National CineMedia currently has exclusive cinema advertising agreements in place. National CineMedia concentrates on in-theatre advertising for its theatrical exhibition partners, which includes us, AMC and Cinemark. As described further in Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, on February 13, 2007, National CineMedia, Inc. ("NCM, Inc."), which serves as the sole manager of National CineMedia, completed an IPO of its common stock. In connection with the IPO of NCM, Inc., RCM, through its wholly owned subsidiary Regal CineMedia Holdings, LLC ("RCH"), AMC and Cinemark amended and restated the operating agreement of National CineMedia and other ancillary agreements. As a result of these agreements, we receive theatre access fees and mandatory distributions of excess cash from National CineMedia.
Subsequent to the IPO of NCM, Inc. and through January 1, 2015, the Company received from National CineMedia approximately 11.2 million newly issued common units of National CineMedia as a result of the adjustment provisions of the Common Unit Adjustment Agreement. These transactions, partially offset by the redemption of approximately 6.6 million of our National CineMedia common units for a like number of shares of NCM, Inc. common stock, which we sold in underwritten public offerings during fiscal 2010 and fiscal 2013, caused a net increase in the Company's ownership share in National CineMedia to 25.8 million common units. As a result, on a fully diluted basis, we own a 20.1% interest in NCM, Inc. as of January 1, 2015.
During fiscal 2013, National CineMedia sold its "Fathom Events" business to AC JV, LLC (“AC JV”), a newly-formed Delaware limited liability company owned 32% by each of RCI, AMC and Cinemark and 4% by National CineMedia. The Fathom Events business focuses on the marketing and distribution of live and pre-recorded entertainment programming to various theatre operators (including us, AMC and Cinemark) to provide additional programs to augment their feature film schedule and includes events such as live and pre-recorded concerts, opera and symphony, DVD product releases and marketing events, theatrical premieres, Broadway plays, live sporting events and other special events. In consideration for the sale, National CineMedia received a total of $25 million in promissory notes from RCI, Cinemark and AMC (one-third or approximately $8.3 million from each). In addition, RCI, AMC and Cinemark each amended and restated its existing exhibitor service agreement with National CineMedia in connection with the sale by National CineMedia of its Fathom Events business.
See Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further discussion of National CineMedia and related transactions, including AC JV.
DIGITAL CINEMA IMPLEMENTATION PARTNERS JOINT VENTURE
We maintain an investment in Digital Cinema Implementation Partners, LLC ("DCIP"), a joint venture company formed by Regal, AMC and Cinemark. DCIP’s initial financing, coupled with a second round of financing completed in March 2011 (which consisted of a new $220.0 million term loan facility), substantially covered the cost of conversion to digital projection for our entire circuit. DCIP funds the cost of conversion to digital projection principally through the collection of virtual print fees from motion picture studios and equipment lease payments from participating exhibitors, including us. The Company effected equity contributions of approximately $3.6 million to DCIP during fiscal 2014, and expects to make additional equity

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contributions in the future. Also during fiscal 2014, the Company received $6.3 million in cash distributions from DCIP as a return on its investment.
The Company holds a 46.7% economic interest in DCIP as of January 1, 2015. As of January 1, 2015, we operated 7,333 screens outfitted with digital projection systems. Please refer to Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further discussion of DCIP.
OPEN ROAD FILMS JOINT VENTURE
We also maintain an investment in Open Road Films, a film distribution company jointly owned by us and AMC. Open Road Films was created to fill a gap in the marketplace created by the major studios’ big-budget franchise film strategy by marketing smaller budget films in a cost-effective manner which we believe will drive additional patrons to our theatres and generate a return on our capital investment. Open Road Films distributed seven films during 2014 which generated national box office revenues of approximately $161.3 million, and intends to distribute approximately six to eight films per year. We believe our investment in Open Road Films will generate incremental value for our stockholders. As of January 1, 2015, we have invested $20.0 million in cash in Open Road Films and may invest an additional $10.0 million in this joint venture. The carrying value of the Company's investment in Open Road Films as of January 1, 2015 was $(10.0) million. Please refer to Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further discussion of Open Road Films.
FILM DISTRIBUTION
Domestic movie theatres are the primary initial distribution channel for domestic film releases. The theatrical success of a film is often the most important factor in establishing its value in other film distribution channels. Motion pictures are generally made available through several alternative distribution methods after the theatrical release date, including network and syndicated television, cable and satellite television services, in-home video and DVD and pay-per-view services such as video on demand, digital downloads and streaming via the Internet. A strong opening run at the theatre often establishes a film's success and substantiates the film's revenue potential. For example, the revenue streams of home video, DVD and pay cable distribution agreements often contractually depend on the success of a film's theatrical release. As the primary distribution mechanism for the public's evaluation of films, we believe that domestic theatrical distribution remains the cornerstone of a film's overall financial success.
The development of additional distribution channels has given motion picture producers the ability to generate a greater portion of a film's revenues through channels other than its theatrical release. Historically, this potential for increased revenue after a film's initial theatrical release has enabled major motion picture studios and some independent producers to increase the budgets for film production and advertising.
FILM EXHIBITION
Evaluation of Film.    We license films on a film-by-film and theatre-by-theatre basis by negotiating directly with film distributors. Prior to negotiating for a film license, we evaluate the prospects for upcoming films. Criteria we consider for each film may include cast, producer, director, genre, budget, comparative film performances and various other market conditions. Successful licensing depends greatly upon the exhibitor's knowledge of trends and historical film preferences of the residents in markets served by each theatre, as well as the availability of commercially successful motion pictures.
Access to Film Product.    Films are licensed from film distributors owned by major production companies and from independent film distributors that distribute films for smaller production companies. Film distributors typically establish geographic licensing zones and allocate each available film to one theatre within that zone.
In licensing zones where we are the sole exhibitor, we obtain film licenses by selecting a film from among those films being offered and negotiating directly with the distributor. In zones where there is competition, a distributor will allocate films among the exhibitors in the zone. When films are licensed under the allocation process, a distributor will select an exhibitor for each film who then negotiates film rental terms directly with the distributor.
Film Rental Fees.    Film licenses typically specify rental fees or formulas by which rental fees may be calculated. The majority of our arrangements use a "sliding scale" formula. Under a sliding scale formula, the distributor receives a percentage of the box office receipts using a pre-determined and mutually agreed upon film rental template. This formula establishes film rental predicated on box office performance and is the predominant formula used by us to calculate film rental fees. We have also used a "firm term" formula and a "review or settlement" method. Under the firm term formula, the exhibitor and distributor agree prior to the exhibition of the film on a specified percentage of the box office receipts to be remitted to the distributor. Lastly, under the review or settlement method, the exhibitor and distributor negotiate a percentage of the box office receipts to be remitted to the distributor upon completion of the theatrical engagement. These negotiations typically involve the use of historical settlements or past precedent.

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Duration of Film Licenses.    The duration of our film licenses are negotiated with our distributors on a case-by-case basis. The terms of our license agreements depend on performance of each film. Marketable movies that are expected to have high box office admission revenues will generally have longer license terms than movies with more uncertain performance and popularity.
Relationship with Distributors.    Many distributors provide quality first-run movies to the motion picture exhibition industry. For fiscal 2014, films shown from our ten major film distributors accounted for approximately 95% of our admissions revenues. Six of the ten major film distributors each accounted for more than 10% of fiscal 2014 admission revenues. No single film distributor accounted for more than 20% of fiscal 2014 admissions revenues. We license films from each of the major distributors and believe that our relationships with these distributors are good. From year to year, the revenues attributable to individual distributors will vary widely depending upon the number and popularity of films that each one distributes.
CONCESSIONS
In addition to box office admissions revenues, we generated approximately 27.7% of our total revenues from concessions sales during fiscal 2014. We emphasize prominent and appealing concession stations designed for rapid and efficient service. We continually seek to increase concessions sales by actively managing concession line congestion, optimizing product mix and through expansion of our concession offerings, introducing special promotions from time to time and offering employee training and incentive programs to up-sell and cross-sell products. We have favorable concession supply contracts and have developed an efficient concession purchasing and distribution supply chain. We have historically maintained strong brand relationships and management negotiates directly with these manufacturers for many of our concession items to obtain competitive prices and to ensure adequate supplies.
To continually address consumer trends and customer preferences, we have focused on expanding our menu of food and alcoholic beverage products. We believe that the enhancement of our food and alcoholic beverage offerings has had a positive effect on our operating results and we expect to continue to invest in such offerings in our theatres. As of January 1, 2015, we offered an expanded menu of food and/or alcoholic beverage items in 159 locations. By the end of fiscal 2015, we expect to offer an expanded menu of food in approximately 180 locations and alcoholic beverages in approximately 130 locations. In addition, as of January 1, 2015, we have successfully launched seven Cinebarre locations which offer patrons the convenience of a variety of lunch and dinner menu options, including beer and wine, served at the customer's seat before and during the featured film.
We believe that the enhancement of our food and alcoholic beverage offerings has had a positive effect on our operating results and we expect to continue to invest in such offerings in our theatres.
COMPETITION
The motion picture exhibition industry is highly competitive. Motion picture exhibitors generally compete on the basis of the following competitive factors:
ability to secure films with favorable licensing terms;
availability of stadium seating and other customer amenities, location, reputation, seating capacity;
quality of projection and sound systems;
appeal of our concession products; and
ability and willingness to promote the films that are showing.
We have several hundred competitors nationwide that vary substantially in size, from small independent exhibitors to large national chains such as AMC and Cinemark. As a result, our theatres are subject to varying degrees of competition in the regions in which they operate. Our competitors, including newly established motion picture exhibitors, may build new theatres or screens in areas in which we operate, which may result in increased competition and excess capacity in those areas. If this occurs, it may have an adverse effect on our business and results of operations. As the largest motion picture exhibitor, however, we believe that we will be able to generate economies of scale and operating efficiencies that will give us a competitive advantage over many of our competitors. As discussed in "Industry Overview and Trends" under Part I, Item I of this Form 10-K, the domestic motion picture exhibition industry is in the process of experimenting with various initiatives and concepts aimed at delivering a premium movie-going experience for its customers in order to differentiate services and build brand loyalty. We are optimistic that these and other recent industry initiatives and trends will drive continued growth and strength for the domestic motion picture industry. To that end, our market share may be positively or negatively impacted by such initiatives and trends during any given fiscal period.
We also compete with other motion picture distribution channels, including network and syndicated television, in-home video and DVD, cable/satellite and pay-per-view services such as video on demand, digital downloads and streaming via the

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Internet. Other technologies could also have an adverse effect on our business and results of operations. When motion picture distributors license their products to the domestic exhibition industry, they refrain from licensing their motion pictures to these other distribution channels for a period of time, commonly called the theatrical release window. Over the past several years, the theatrical release window has contracted slightly to approximately three to four months. We believe that a material contraction of the theatrical release window could significantly dilute the consumer appeal of the out-of-home motion picture offering. As a result, we continue to monitor the status of the theatrical release window during our film licensing decisions.
In addition, we compete for the public's leisure time and disposable income with other forms of entertainment, including sporting events, concerts, live theatre and restaurants.
MARKETING AND ADVERTISING
Currently, film distributors organize and finance multimedia advertising campaigns for major film releases. To market our theatres, we utilize Internet, mobile and social media, print and multimedia advertising to inform our patrons of film selections and show times. In many of our markets, we employ special interactive marketing programs for specific films and concessions items.
Our frequent moviegoer loyalty program, Regal Crown Club®, is designed to actively engage our core customers and is the largest loyalty program in our industry. Regal Crown Club® members are eligible for specified awards, such as concession items, based on purchases made at our theatres. Through the Regal Crown Club®, we seek to enhance the customer experience and increase frequency of purchases to generate additional revenue. As of January 1, 2015, we had over 13 million active members in the Regal Crown Club®, and these members accounted for approximately $1.0 billion of the Company's box office and concession revenues during fiscal 2014. In addition, we seek to develop patron loyalty through a number of other marketing programs such as summer children's film series, cross-promotional ticket redemptions and promotions within local communities. Our mobile ticketing application designed to give customers quick access to box office information via their Apple iPhone® or Android™ phone, has been downloaded approximately 2.5 million times since its fiscal 2012 launch. The application provides customers the ability to find films, movie information, showtimes and special offers from Regal and the ability to purchase tickets for local theatres, thereby expediting the admissions process. Additionally, the application helps customers stay up-to-date on the latest coupons and Regal Crown Club® loyalty program promotions.
INFORMATION TECHNOLOGY SYSTEMS
Information Technology ("IT") is focused on the customer experience and supporting the efficient operation of our theatres, the management of our business and other revenue-generating opportunities. The revenue streams generated by attendance and concession sales are fully supported by information systems to monitor cash flow and to detect fraud and inventory shrinkage. We have implemented software and hardware solutions which provide for enhanced capabilities and efficiency within our theatre operations. These solutions have enabled us to sell gift cards at various major retailers, grocery and warehouse stores and to redeem those gift cards at our theatre box offices and concession stands. We continue to expand our ability to sell tickets remotely by using our Internet ticketing partner, Fandango.com, and by offering self-service alternatives, such as ticketing kiosks, print-at-home ticketing, and mobile ticketing. Our Apple iPhone® or Android™ phone application provides customers the ability to find films, movie information, showtimes, special offers from Regal and the ability to purchase tickets for local theatres, thereby expediting the admissions process. We continue to strategically pursue technologies to improve services to our patrons and provide information to our management, allowing them to operate our theatres efficiently.
In addition, our scheduling systems support the coordination needed to properly allocate our auditoriums between film showings and meetings and events, while also ensuring that movie audiences view the intended advertising and that revenue is allocated to the appropriate business function. The scheduling systems also provide information electronically and automatically to the media outlets, including newspapers and various online media outlets to drive attendance to our theatres. The sales and attendance information collected by the theatre systems is used directly for film booking and settlement as well as being the primary source of data for our financial systems.
SEASONALITY
Our revenues are usually seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, motion picture studios release the most marketable motion pictures during the summer and the 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 our results of operations, and the results of one fiscal quarter are not necessarily indicative of results for the next fiscal quarter or any other fiscal quarter. The seasonality of motion picture exhibition, however, has become less pronounced as motion picture studios are releasing motion pictures somewhat more evenly throughout the year.


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EMPLOYEES
As of January 1, 2015, we employed approximately 23,168 persons. The Company considers its employee relations to be good.
EXECUTIVE OFFICERS OF THE REGISTRANT
Shown below are the names, ages as of January 1, 2015, and current positions of our executive officers. There are no family relationships between any of the persons listed below, or between any of such persons and any of the directors of the Company or any persons nominated or chosen by the Company to become a director or executive officer of the Company.
Name
 
Age
 
Position
Amy E. Miles
 
48
 
Chief Executive Officer
Gregory W. Dunn
 
55
 
President and Chief Operating Officer
Peter B. Brandow
 
54
 
Executive Vice President, General Counsel and Secretary
David H. Ownby
 
45
 
Executive Vice President, Chief Financial Officer and Treasurer
Amy E. Miles is our Chief Executive Officer and has served in this capacity since June 2009. Prior thereto, Ms. Miles served as our Executive Vice President, Chief Financial Officer and Treasurer from March 2002 to June 2009. Additionally, Ms. Miles has served as the Chief Executive Officer of Regal Cinemas, Inc. since June 2009. Ms. Miles formerly served as the Executive Vice President, Chief Financial Officer and Treasurer of Regal Cinemas, Inc. from January 2000 to June 2009. Prior thereto, Ms. Miles served as Senior Vice President of Finance from April 1999, when she joined Regal Cinemas, Inc. Prior to joining the Company, Ms. Miles was a Senior Manager with Deloitte & Touche LLP from 1998 to 1999. From 1989 to 1998, she was with PricewaterhouseCoopers LLP.
Gregory W. Dunn is our President and Chief Operating Officer. Mr. Dunn has served as an Executive Vice President and Chief Operating Officer of Regal since March 2002 and became President of Regal in May 2005. Mr. Dunn served as Executive Vice President and Chief Operating Officer of Regal Cinemas, Inc. from 1995 to March 2002. Prior thereto, Mr. Dunn served as Vice President of Marketing and Concessions of Regal Cinemas, Inc. from 1991 to 1995.
Peter B. Brandow is our Executive Vice President, General Counsel and Secretary and has served as such since March 2002. Mr. Brandow has served as the Executive Vice President, General Counsel and Secretary of Regal Cinemas, Inc. since July 2001, and prior to that time he served as Senior Vice President, General Counsel and Secretary of Regal Cinemas, Inc. since February 2000. Prior thereto, Mr. Brandow served as Vice President, General Counsel and Secretary from February 1999 when he joined Regal Cinemas, Inc. From September 1989 to January 1999, Mr. Brandow was an associate with the law firm Simpson Thacher & Bartlett LLP.
David H. Ownby is our Executive Vice President, Chief Financial Officer and Treasurer and has served in this capacity since June 2009. Mr. Ownby also has served as our Chief Accounting Officer since May 2006. Mr. Ownby served as our Senior Vice President of Finance from March 2002 to June 2009. Prior thereto, Mr. Ownby served as the Company's Vice President Finance and Director of Financial Projects from October 1999 to March 2002. Prior to joining the Company, Mr. Ownby served with Ernst & Young LLP from September 1992 to October 1999.
REGULATION
The distribution of motion pictures is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases. Consent decrees effectively require major film distributors to offer and license films to exhibitors, including us, on a film-by-film and theatre-by-theatre basis. Consequently, exhibitors cannot assure themselves of a supply of films by entering into long-term arrangements with major distributors, but must negotiate for licenses on a film-by-film basis.
Our theatres must comply with Title III of the Americans with Disabilities Act of 1990 (the "ADA") to the extent that such properties are "public accommodations" and/or "commercial facilities" as defined by the ADA. Compliance with the ADA requires that public accommodations "reasonably accommodate" individuals with disabilities and that new construction or alterations made to "commercial facilities" conform to accessibility guidelines unless "structurally impracticable" for new construction or technically infeasible for alterations. Non-compliance with the ADA could result in the imposition of injunctive relief, fines, award of damages to private litigants and additional capital expenditures to remedy such non-compliance.
We believe that we are in substantial compliance with all current applicable regulations relating to accommodations for the disabled. We intend to comply with future regulations in this regard and except as set forth in Note 8 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, we do not currently anticipate that compliance will require us to expend substantial funds.

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Our theatre operations are also subject to federal, state and local laws governing such matters as wages, working conditions, citizenship and health and sanitation and environmental protection requirements. We believe that we are in substantial compliance with all relevant laws and regulations.
FORWARD-LOOKING STATEMENTS
Some of the information in this Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts included in this Form 10-K, including, without limitation, certain statements under "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" may constitute forward-looking statements. In some cases you can identify these forward-looking statements by words like "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of those words and other comparable words. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain risk factors as more fully discussed under "Risk Factors" below.
Item 1A.    RISK FACTORS.
Investing in our securities involves a significant degree of risk. In addition to the other information contained in this Form 10-K, you should consider the following factors before investing in our securities.
Our substantial lease and debt obligations could impair our financial condition.
We have substantial lease and debt obligations. For fiscal 2014, our total rent expense and net interest expense were approximately $423.4 million and $126.5 million, respectively. As of January 1, 2015, we had total debt obligations of $2,360.2 million. As of January 1, 2015, we had total contractual cash obligations of approximately $6,140.9 million. For a detailed discussion of our contractual cash obligations and other commercial commitments over the next several years, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations—Contractual Cash Obligations and Commitments" provided in Part II, Item 7 of this Form 10-K.
If we are unable to meet our lease and debt service obligations, we could be forced to restructure or refinance our obligations and seek additional equity financing or sell assets. We may be unable to restructure or refinance our obligations and obtain additional equity financing or sell assets on satisfactory terms or at all. As a result, the inability to meet our lease and debt service obligations could cause us to default on those obligations. The agreements governing the terms of our debt obligations contain restrictive covenants that limit our ability to take specific actions (including paying dividends to our stockholders) or require us not to allow specific events to occur and prescribe minimum financial maintenance requirements that we must meet. If we violate those restrictive covenants or fail to meet the minimum financial requirements contained in a debt instrument, we could be in default under that instrument, which could, in turn, result in defaults under other debt instruments. Any such defaults could materially impair our financial condition and liquidity. In addition, we may incur additional indebtedness in the future, subject to the restrictions contained in the agreements governing the terms of our debt obligations. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.
To service our indebtedness, we will require a significant amount of cash, which depends on many factors beyond our control.
Our ability to make payments on our debt and other financial obligations will depend on the ability of our subsidiaries to generate substantial operating cash flow. This will depend on future performance, which will be subject to prevailing economic conditions and to financial, business and other factors beyond our control. If our and our subsidiaries' cash flows prove inadequate to meet our and their debt service and other obligations in the future, we may be required to refinance all or a portion of our and our subsidiaries' existing or future debt, on or before maturity, to sell assets, to obtain additional financing or suspend the payment of dividends. We cannot assure you that we will be able to refinance any indebtedness, sell any such assets or obtain additional financing on commercially reasonable terms or at all.
We depend on motion picture production and performance and our relationships with film distributors.
Our ability to operate successfully depends upon the availability, diversity and commercial appeal of motion pictures, our ability to license motion pictures and the performance of such motion pictures in our markets. We license first-run motion pictures, the success of which has increasingly depended on the marketing efforts of the major motion picture studios. Poor performance of, or any disruption in the production of, these motion pictures (including by reason of a strike or lack of adequate financing), or a reduction in the marketing efforts of the major motion picture studios, could hurt our business and results of operations. In addition, a change in the type and breadth of movies offered by motion picture studios may adversely affect the demographic base of moviegoers.

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The distribution of motion pictures is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases. Consent decrees resulting from those cases effectively require major motion picture distributors to offer and license films to exhibitors, including us, on a film-by-film and theatre-by-theatre basis. Consequently, we cannot assure ourselves of a supply of motion pictures by entering into long-term arrangements with major distributors, but must compete for our licenses on a film-by-film and theatre-by-theatre basis. In addition, the film distribution business is highly concentrated, with ten major film distributors accounting for approximately 95% of our admissions revenues during fiscal 2014. Our business depends on maintaining good relations with these distributors. We are dependent on our ability to negotiate commercially favorable licensing terms for first-run films. A deterioration in our relationship with any of the ten major film distributors could affect our ability to negotiate film licenses on favorable terms or our ability to obtain commercially successful films and, therefore, could hurt our business and results of operations.
An increase in the use of alternative film delivery methods may drive down movie theatre attendance and reduce our revenue.
We compete with other movie delivery vehicles, including network and syndicated television, cable and satellite television services, in-home video and DVD and pay-per-view services such as video on demand, digital downloads and streaming via the Internet. When motion picture distributors license their products to the domestic exhibition industry, they refrain from licensing their motion pictures to these other delivery vehicles during the theatrical release window. The average theatrical release window has decreased from approximately six months to approximately three to four months over the last decade. Further, some film studios have experimented with offering consumers a premium video-on-demand option for certain films approximately two months after their theatrical launch. We believe that a material contraction of the current theatrical release window could significantly dilute the consumer appeal of the in-theatre motion picture offering, which could have a material adverse effect on our business and results of operations.
Our theatres operate in a competitive environment.
The motion picture exhibition industry is fragmented and highly competitive with no significant barriers to entry. Theatres operated by national and regional circuits and by small independent exhibitors compete with our theatres, particularly with respect to film licensing, attracting patrons and developing new theatre sites. Moviegoers are generally not brand conscious and usually choose a theatre based on its location, the films showing there and its amenities.
Generally, stadium seating found in modern megaplex theatres is preferred by patrons over slope-floored multiplex theatres, which were the predominant theatre-type built prior to 1996. Although the majority of our locations feature stadium seating, we still serve many markets with sloped-floored multiplex theatres. These theatres may be more vulnerable to competition than our modern megaplex theatres, and should other theatre operators choose to build and operate modern megaplex theatres in these markets, the performance of our theatres in these markets may be significantly and negatively impacted. In addition, should other theatre operators return to the aggressive building strategies undertaken in the late 1990's, our attendance, revenue and income from operations per screen could decline substantially.
Finally, the motion picture exhibition industry continues to experiment with and implement various initiatives, concepts, customer amenities and technological innovations aimed at delivering a premium movie-going experience for its patrons (including, but not limited to, luxury reclining seating, enhancement of food and alcoholic beverage offerings, the installation of premium format screens, digital 3D projection and satellite distribution technologies). While we continue to experiment and implement these initiatives, new innovations will continue to impact our industry. If we are unable to respond to or invest in changes in technology and the preferences of our customers, we may not be able to compete with other exhibitors or other entertainment venues, which could adversely affect our results of operations.
We may not benefit from our strategic acquisition strategy and partnerships.
We may have difficulty identifying suitable acquisition candidates and partnership opportunities. In the case of acquisitions, even if we identify suitable candidates, we anticipate significant competition from other motion picture exhibitors and financial buyers when trying to acquire these candidates, and there can be no assurances that we will be able to acquire such candidates at reasonable prices or on favorable terms. Moreover, some of these possible buyers may be stronger financially than we are. As a result of this competition for limited assets, we may not succeed in acquiring suitable candidates or may have to pay more than we would prefer to make an acquisition. If we cannot identify or successfully acquire suitable acquisition candidates, we may not be able to successfully expand our operations and the market price of our securities could be adversely affected.
In any acquisition, we expect to benefit from cost savings through, for example, the reduction of overhead and theatre level costs, and from revenue enhancements resulting from the acquisition. There can be no assurance, however, that we will be able to generate sufficient cash flow from these acquisitions to service any indebtedness incurred to finance such acquisitions or realize any other anticipated benefits. Nor can there be any assurance that our profitability will be improved by any one or more

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acquisitions. If we cannot generate anticipated cash flows resulting from acquisitions or fail to realize their anticipated benefits, our results of operations and profitability could be adversely affected. Any acquisition may involve operating risks, such as:
the difficulty of assimilating the acquired operations and personnel and integrating them into our current business;
the potential disruption of our ongoing business;
the diversion of management's attention and other resources;
the possible inability of management to maintain uniform standards, controls, procedures and policies;
the risks of entering markets in which we have little or no experience;
the potential impairment of relationships with employees and landlords;
the possibility that any liabilities we may incur or assume may prove to be more burdensome than anticipated; and
the possibility that any acquired theatres or theatre circuit operators do not perform as expected.
We also selectively pursue theatre-related investments and partnership opportunities that enhance and more fully leverage our asset base to improve our consolidated operating results and free cash flow. As of January 1, 2015, we own approximately 20.1% of National CineMedia, and participate in other joint ventures such as DCIP, Open Road Films, AC JV and DCDC. Risks associated with pursuing these investments and opportunities include:
the difficulties and uncertainties associated with identifying investment and partnership opportunities that will successfully enhance and utilize our existing asset base in a manner that contributes to cost savings and revenue enhancement;
our inability to exercise complete voting control over the partnerships and joint ventures in which we participate; and
our partners may have economic or business interests or goals that are inconsistent with ours, exercise their rights in a way that prohibits us from acting in a manner which we would like or they may be unable or unwilling to fulfill their obligations under the joint venture or similar agreements.
Although we have not been materially constrained by our participation in National CineMedia or other joint ventures to date, no assurance can be given that the actions or decisions of other stakeholders in these ventures will not affect our investments in National CineMedia, DCIP, Open Road Films, AC JV and DCDC or other existing or future ventures in a way that hinders our corporate objectives or reduces any anticipated improvements to our operating results and free cash flow.
In addition, any acquisitions or partnership opportunities are subject to the risk that the Antitrust Division of the United States Department of Justice or foreign competition authorities may require us to dispose of existing or acquired theatres in order to complete acquisition and partnership opportunities.
We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.
The efficient operation of our business is dependent on computer hardware and software systems. Information systems are vulnerable to security breaches by computer hackers, cyber terrorists, employee error or misconduct, viruses, power outages and other catastrophic events, leading to unauthorized disclosure of confidential and proprietary information and exposing us to litigation that could adversely affect our reputation. We rely on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business and results of operations.
Economic, political and social conditions could materially affect our business by reducing consumer spending on movie attendance or could have an impact on our business and financial condition in ways that we currently cannot predict.
We depend on consumers voluntarily spending discretionary funds on leisure activities. We also compete for the public's leisure time and disposable income with other forms of entertainment, including sporting events, theme parks, concerts, live theatre and restaurants. Motion picture theatre attendance may be affected by negative trends in the general economy that adversely affect consumer spending. A prolonged reduction in consumer confidence or disposable income in general may affect the demand for motion pictures or severely impact the motion picture production industry, which, in turn, could adversely affect our operations. If economic conditions are weak or deteriorate, or if financial markets experience significant disruption, it

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could materially adversely affect our results of operations, financial position and/or liquidity. For example, deteriorating conditions in the global credit markets could negatively impact our business partners which may impact film production, the development of new theatres or the enhancement of existing theatres.
Theatre attendance may also be affected by political events, such as terrorist attacks on, or wars or threatened wars involving, the United States, health related epidemics and random acts of violence, any one of which could cause people to avoid our theatres or other public places where large crowds are in attendance. In addition, due to our concentration in certain markets, natural disasters such as hurricanes, earthquakes and severe storms in those markets could adversely affect our overall results of operations.
 In addition, our ability to access capital markets may be restricted at times when the implementation of our business strategy may require us to do so, which could have an impact on our flexibility to react to changing economic and business conditions. For example, our future ability to borrow on Regal Cinemas' senior credit facility or the effectiveness of our remaining and future interest rate hedging arrangements could be negatively impacted if one or more counterparties files for bankruptcy protection or otherwise fails to perform their obligations thereunder.
All of these factors could adversely affect our credit ratings, the market price of our Class A common stock and our financial condition and results of operations.
We depend on our senior management.
Our success depends upon the retention of our senior management, including Amy Miles, our Chief Executive Officer. We cannot assure you that we would be able to find qualified replacements for the individuals who make up our senior management if their services were no longer available. The loss of services of one or more members of our senior management team could have a material adverse effect on our business, financial condition and results of operations. The loss of any member of senior management could adversely affect our ability to effectively pursue our business strategy.
We are subject to substantial government regulation, which could entail significant cost.
We are subject to various federal, state and local laws, regulations and administrative practices affecting our business, and we must comply with provisions regulating health and sanitation standards, equal employment, environmental, and licensing for the sale of food and, in some theatres, alcoholic beverages. Changes in existing laws or implementation of new laws, regulations and practices could have a significant impact on our business. A significant portion of our theatre level employees are part time workers who are paid at or slightly above the applicable minimum wage in the theatre's jurisdiction. Increases in the minimum wage and implementation of reforms requiring the provision of additional benefits will increase our labor costs.
 Our theatres must comply with the ADA to the extent that such properties are "public accommodations" and/or "commercial facilities" as defined by the ADA. Compliance with the ADA requires that public accommodations "reasonably accommodate" individuals with disabilities and that new construction or alterations made to "commercial facilities" conform to accessibility guidelines unless "structurally impracticable" for new construction or technically infeasible for alterations. Non-compliance with the ADA could result in the imposition of injunctive relief, fines, award of damages to private litigants and additional capital expenditures to remedy such non-compliance.
The interests of our controlling stockholder may conflict with your interests.
Anschutz Company owns all of our outstanding Class B common stock. Our Class A common stock has one vote per share while our Class B common stock has ten votes per share on all matters to be voted on by stockholders. As a result, as of January 1, 2015, Anschutz Company controlled approximately 78% of the voting power of all of our outstanding common stock. For as long as Anschutz Company continues to own shares of common stock representing more than 50% of the voting power of our common stock, it will be able to elect all of the members of our Board of Directors, effect stockholder actions by written consent in lieu of stockholder meetings and determine the outcome of all matters submitted to a vote of our stockholders, including matters involving mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional shares of common stock or other equity securities and the payment of dividends on our common stock. Anschutz Company will also have the power to prevent or cause a change in control, and could take other actions that might be desirable to Anschutz Company but not to other stockholders. In addition, Anschutz Company and its affiliates have controlling interests in companies in related and unrelated industries, including interests in the sports, motion picture production and music entertainment industries. In the future, it may combine our company with one or more of its other holdings.
Substantial sales of our Class A common stock could cause the market price for our Class A common stock to decline.
We cannot predict the effect, if any, that open-market sales of shares of our Class A common stock or the availability of shares of our Class A common stock for sale will have on the market price of our Class A common stock prevailing from time to time. Sales of substantial amounts of shares of our Class A common stock in the public market, including by the Anschutz

18


Company or its affiliates, or the perception that those sales will occur, could cause the market price of our Class A common stock to decline.
As of February 23, 2015, we had outstanding 23,708,639 shares of Class B common stock that may convert into Class A common stock on a one-for-one basis, all of which shares of common stock constitute "restricted securities" under the Securities Act. Provided the holders comply with the applicable volume limits and other conditions prescribed in Rule 144 under the Securities Act, all of these restricted securities are currently freely tradable.
In addition, Anschutz Company and its affiliates are able to sell their shares pursuant to the registration rights that we have granted and may chose to do so at any time. In addition, we cannot predict whether substantial amounts of our Class A common stock will be sold in the open market in anticipation of, or following, any divestiture by Anschutz Company or our directors or executive officers of their shares of our common stock.
Our amended and restated certificate of incorporation and our amended and restated bylaws contain anti-takeover protections, which may discourage or prevent a takeover of our company, even if an acquisition would be beneficial to our stockholders.
Provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as amended, as well as provisions of the Delaware General Corporation Law, could delay or make it more difficult to remove incumbent directors or for a third party to acquire us, even if a takeover would benefit our stockholders.
Our issuance of shares of preferred stock could delay or prevent a change of control of our company.
Our Board of Directors has the authority to cause us to issue, without any further vote or action by the stockholders (unless otherwise required by the rules of the New York Stock Exchange), up to 50,000,000 shares of preferred stock, par value $0.001 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series. The issuance of shares of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.
Our issuance of preferred stock could dilute the voting power of the common stockholders.
The issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of our other classes of voting stock either by diluting the voting power of our other classes of voting stock if they vote together as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote even if the action were approved by the holders of our other classes of voting stock.
Our issuance of preferred stock could adversely affect the market value of our common stock.
The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive. For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.
We are a holding company dependent on our subsidiaries for our ability to service our debt and pay our dividends.
We are a holding company with no operations of our own. Consequently, our ability to service our and our subsidiaries' debt and pay dividends on our common stock is dependent upon the earnings from the businesses conducted by our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. Any distribution of earnings to us from our subsidiaries, or advances or other distributions of funds by these subsidiaries to us, all of which are subject to statutory or contractual restrictions, are contingent upon our subsidiaries' earnings and are subject to various business considerations. Our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization, and therefore the right of the holders of our 53/4% Senior Notes due 2022 (the "53/4% Senior Notes Due 2022"), our 53/4% Senior Notes due 2023 (the "53/4% Senior Notes Due 2023"), our 53/4% Senior Notes due 2025 (the "53/4% Senior Notes Due 2025") and our common stock to participate in those assets, will be structurally subordinated to the claims of that subsidiary's creditors. In addition, even if we were a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us.
Item 1B.    UNRESOLVED STAFF COMMENTS.
None.

19



Item 2.    PROPERTIES.
As of January 1, 2015, we operated 518 theatre locations pursuant to lease agreements and owned the land and buildings in fee for 56 theatre locations. For a list of the states in which we operated theatres and the number of theatres and screens operated in each such state as of January 1, 2015, please see the chart under Part I, Item 1 of this Form 10-K under the caption "Business—Theatre Operations," which is incorporated herein by reference.
The majority of our leased theatres are subject to lease agreements with original terms of 15 to 20 years or more and, in most cases, renewal options for up to an additional 10 to 20 years. These leases provide for minimum annual rentals and the renewal options generally provide for rent increases. Some leases require, under specified conditions, further rental payments based on a percentage of revenues above specified amounts. A significant majority of the leases are net leases, which require us to pay the cost of insurance, taxes and a portion of the lessor's operating costs. Our corporate office is located in Knoxville, Tennessee. We believe that these facilities are adequate for our operations.
Item 3.    LEGAL PROCEEDINGS.
Pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, as amended, the information required to be furnished by us under this Part I, Item 3 (Legal Proceedings) is incorporated by reference to the information contained in Note 8 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.
Item 4.    MINE SAFETY DISCLOSURES.
Not applicable.
PART II
Item 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common equity consists of Class A and Class B common stock. Our Class A common stock has traded on the New York Stock Exchange since May 9, 2002 under the symbol "RGC." There is no established public trading market for our Class B common stock.
The following table sets forth the historical high and low sales prices per share of our Class A common stock as reported by the New York Stock Exchange for the fiscal periods indicated.
 
 
Fiscal 2014
 
 
High
 
Low
First Quarter (December 27, 2013 - March 27, 2014)
 
$
20.14

 
$
17.97

Second Quarter (March 28, 2014 - June 26, 2014)
 
21.40

 
18.41

Third Quarter (June 27, 2014 - September 25, 2014)
 
21.56

 
19.41

Fourth Quarter (September 26, 2014 - January 1, 2015)
 
23.24

 
17.87

 
 
Fiscal 2013
 
 
High
 
Low
First Quarter (December 28, 2012 - March 28, 2013)
 
$
16.84

 
$
13.72

Second Quarter (March 29, 2013 - June 27, 2013)
 
19.00

 
16.17

Third Quarter (June 28, 2013 - September 26, 2013)
 
19.53

 
17.65

Fourth Quarter (September 27, 2013 - December 26, 2013)
 
19.95

 
18.10

On February 23, 2015, there were approximately 257 stockholders of record of our Class A common stock and one stockholder of record of our Class B common stock. As of February 23, 2015 our officers, directors and key employees hold, or in the case of performance shares are eligible to receive, approximately 1,569,734 restricted shares of our Class A common stock, for which the restrictions lapse or the performance criteria and vesting may be satisfied, at various dates through January 28, 2019. All shares of restricted stock are registered and will be freely tradable when the restrictions lapse, unless such shares are issued to or acquired by an affiliate of Regal, in which case the affiliate may only sell the shares subject to the volume limitations imposed by Rule 144 of the Securities Act.
Dividend Policy

20


During fiscal 2014, we paid to our stockholders four quarterly cash dividends of $0.22 per share on each outstanding share of our Class A and Class B common stock, or approximately $138.6 million in the aggregate. In addition, on December 15, 2014, we paid an extraordinary cash dividend of $1.00 per share on each outstanding share of our Class A and Class B common stock, or approximately $156.2 million. During fiscal 2013, we paid to our stockholders four quarterly cash dividends of $0.21 per share on each outstanding share of our Class A and Class B common stock, or approximately $132.2 million in the aggregate. Finally, on February 12, 2015, we declared a cash dividend of $0.22 per share on each outstanding share of Class A and Class B common stock. The dividend is payable on March 13, 2015 to our stockholders of record on March 3, 2015. These dividends have been or will be funded through cash flow from operations and available cash on hand. We, at the discretion of our Board of Directors and subject to applicable law, anticipate paying regular quarterly dividends on our Class A and Class B common stock for the foreseeable future. The amount, if any, of the dividends to be paid in the future will depend upon our then available cash, anticipated cash needs, overall financial condition, loan agreement restrictions, future prospects for earnings and cash flows, as well as other relevant factors. For a description of the loan agreement restrictions on the payment of dividends, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" included in Part II, Item 7 of this Form 10-K and Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Issuer Purchases of Equity Securities
None.
Item 6.    SELECTED FINANCIAL DATA.
We present below selected historical consolidated financial data for Regal based on historical data, for periods subsequent to the respective acquisition dates, for (i) the fiscal year ended December 30, 2010, considering the results of United Artists, Regal Cinemas, Edwards and the eight theatres acquired from AMC on May 24, 2010 and June 24, 2010 for periods subsequent to their acquisition dates, (ii) the fiscal year ended December 29, 2011, considering the results of United Artists, Regal Cinemas, Edwards and the eight theatres acquired from AMC from December 31, 2010, (iii) the fiscal year ended December 27, 2012, considering the results of United Artists, Regal Cinemas, Edwards, the eight theatres acquired from AMC from December 30, 2011 and the acquisition of Great Escape Theatres, which consists of 25 theatres, for the period subsequent to the acquisition date of November 29, 2012, (iv) the fiscal year ended December 26, 2013, considering the results of United Artists, Regal Cinemas, Edwards, the eight theatres acquired from AMC and the 25 theatres acquired from Great Escape Theatres from December 28, 2012, and the acquisition of Hollywood Theaters, which consists of 43 theatres, for the period subsequent to the acquisition date of March 29, 2013, and (v) the fiscal year ended January 1, 2015, considering the results of United Artists, Regal Cinemas, Edwards, the eight theatres acquired from AMC, the 25 theatres acquired from Great Escape Theatres, and the 43 theatres acquired from Hollywood Theaters from December 27, 2013. The fiscal year ended January 1, 2015 consisted of 53 weeks of operations. The selected historical consolidated financial data as of and for the fiscal years ended January 1, 2015, December 26, 2013, December 27, 2012, December 29, 2011, and December 30, 2010 were derived from the audited consolidated financial statements of Regal and the notes thereto. The selected historical financial data does not necessarily indicate the operating results or financial position that would have resulted from our operations on a combined basis during the periods presented, nor is the historical data necessarily indicative of any future operating results or financial position of Regal. In addition to the below selected financial data, you should also refer to the more complete financial information included elsewhere in this Form 10-K.
 
 
Fiscal year
ended
January 1, 2015 (1)
 
Fiscal year
ended
December 26, 2013
 
Fiscal year
ended
December 27, 2012
 
Fiscal year
ended
December 29, 2011
 
Fiscal year
ended
December 30, 2010
 
 
(in millions, except per share data)
Statement of Income Data:
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
2,990.1

 
$
3,038.1

 
$
2,820.0

 
$
2,675.9

 
$
2,801.9

Income from operations(6)
 
306.4

 
339.8

 
330.0

 
215.5

 
209.8

Net income attributable to controlling interest(5)(6)(7)
 
105.6

 
157.7

 
142.3

 
36.8

 
74.0

Earnings per diluted share(5)(6)(7)
 
0.68

 
1.01

 
0.92

 
0.24

 
0.48

Dividends per common share(2)(3)(4)
 
$
1.88

 
$
0.84

 
$
1.84

 
$
0.84

 
$
2.12


21


 
 
As of or for
the fiscal
year ended
January 1, 2015 (1)
 
As of or for
the fiscal
year ended
December 26, 2013
 
As of or for
the fiscal
year ended
December 27, 2012
 
As of or for
the fiscal
year ended
December 29, 2011
 
As of or for
the fiscal
year ended
December 30, 2010
 
 
(in millions, except operating data)
Other financial data:
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities(5)
 
$
349.1

 
$
346.9

 
$
346.6

 
$
353.1

 
$
259.4

Net cash used in investing activities(5)
 
(150.5
)
 
(258.7
)
 
(183.4
)
 
(101.1
)
 
(82.7
)
Net cash provided by (used in) financing activities(2)(3)(4)
 
(332.4
)
 
83.2

 
(306.7
)
 
(204.3
)
 
(299.5
)
Balance sheet data at period end:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
147.1

 
$
280.9

 
$
109.5

 
$
253.0

 
$
205.3

Total assets
 
2,539.5

 
2,704.7

 
2,222.1

 
2,352.2

 
2,501.2

Total debt obligations
 
2,360.2

 
2,310.7

 
1,995.2

 
2,016.3

 
2,073.0

Deficit
 
(897.3
)
 
(715.3
)
 
(750.4
)
 
(621.8
)
 
(537.5
)
Operating data:
 
 
 
 
 
 
 
 
 
 
Theatre locations
 
574

 
580

 
540

 
527

 
539

Screens
 
7,367

 
7,394

 
6,880

 
6,614

 
6,698

Average screens per location
 
12.8

 
12.7

 
12.7

 
12.6

 
12.4

Attendance (in millions)
 
220.2

 
228.6

 
216.4

 
211.9

 
224.3

Average ticket price
 
$
9.08

 
$
9.01

 
$
8.90

 
$
8.70

 
$
8.72

Average concessions per patron
 
$
3.77

 
$
3.57

 
$
3.46

 
$
3.34

 
$
3.23

_______________________________________________________________________________

(1)
Fiscal year ended January 1, 2015 was comprised of 53 weeks.
(2)
Includes the December 15, 2014 payment of the $1.00 extraordinary cash dividend paid on each share of Class A and Class B common stock.
(3)
Includes the December 27, 2012 payment of the $1.00 extraordinary cash dividend paid on each share of Class A and Class B common stock.
(4)
Includes the December 30, 2010 payment of the $1.40 extraordinary cash dividend paid on each share of Class A and Class B common stock.
(5)
During the quarter ended September 30, 2010, we redeemed 4.3 million of our National CineMedia common units for a like number of shares of NCM, Inc. common stock, which we sold in an underwritten public offering (including underwriter over-allotments) for $16.00 per share, reducing our investment in National CineMedia by $14.0 million, the average carrying amount of the shares sold. We received approximately $66.0 million in proceeds after deducting related fees and expenses payable by us, resulting in a gain on sale of $52.0 million. During the quarter ended September 26, 2013, we redeemed 2.3 million of our National CineMedia common units for a like number of shares of NCM, Inc. common stock, which the Company sold in an underwritten public offering (including underwriter over-allotments) for $17.79 per share, reducing our investment in National CineMedia by approximately $10.0 million, the average carrying amount of the shares sold. The Company received approximately $40.9 million in proceeds, resulting in a gain on sale of approximately $30.9 million. We accounted for these transactions as a proportionate decrease in the Company's Initial Investment Tranche and Additional Investments Tranche and decreased our ownership share in National CineMedia. See Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information.
(6)
During the years ended January 1, 2015, December 26, 2013, December 27, 2012, December 29, 2011, and December 30, 2010, we recorded long-lived asset impairment charges of $5.6 million, $9.5 million, $11.1 million, $17.9 million, and $10.3 million, respectively, specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. See Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information related to our impairment policies.

22


(7)
During the quarter ended December 29, 2011, the Company considered various factors pertaining to its investment in RealD, Inc. as part of its ongoing impairment review and determined that an other-than-temporary impairment existed as of December 29, 2011. Such determination was based primarily on the length (approximately six months) of time during which the fair value of the RealD, Inc. investment remained substantially below the recorded investment cost basis of approximately $19.40 per share, the severity of the decline during such period and the prospects of recovery of the investment to its original cost basis. As a result, the Company recorded a $13.9 million other-than-temporary impairment charge to write-down its cost basis in RealD, Inc. to fair value as of December 29, 2011. The fair value of RealD, Inc. common shares was based on the publicly traded common stock price of RealD, Inc. as of December 29, 2011 of $8.05 per share.

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of Regal Entertainment Group for the fiscal years ended January 1, 2015, December 26, 2013, and December 27, 2012. The following discussion and analysis should be read in conjunction with the consolidated financial statements of Regal and the notes thereto included elsewhere in this Form 10-K.
Overview and Basis of Presentation
We conduct our operations through our wholly owned subsidiaries. We operate the largest and most geographically diverse theatre circuit in the United States, consisting of 7,367 screens in 574 theatres in 42 states along with Guam, Saipan, American Samoa and the District of Columbia as of January 1, 2015. We believe the size, reach and quality of our theatre circuit provide an exceptional platform to realize economies of scale from our theatre operations. We also maintain an investment in National CineMedia, which concentrates on in-theatre advertising. The Company manages its business under one reportable segment: theatre exhibition operations.
We generate revenues primarily from admissions and concession sales. Additional revenues are generated by our vendor marketing programs, our gift card and discount ticket programs, various other activities in our theatres and our relationship with National CineMedia. Film rental costs depend primarily on the popularity and box office revenues of a film, and such film rental costs generally increase as the admissions revenues generated by a film increase. Because we purchase certain concession items, such as fountain drinks and popcorn, in bulk and not pre-packaged for individual servings, we are able to maximize our margins by negotiating volume discounts. Other operating expenses consist primarily of theatre labor and occupancy costs.
The Company's revenues are usually seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, motion picture studios release the most marketable motion pictures during the summer and holiday seasons. The emergence or continuance of a "hit" film during other periods can alter the traditional pattern. The timing of movie releases can have a significant effect on the Company's results of operations, and the results of one fiscal quarter are not necessarily indicative of the results for the next or any other fiscal quarter. The seasonality of motion picture exhibition, however, has become less pronounced as motion picture studios are releasing motion pictures somewhat more evenly throughout the year. The Company does not believe that inflation has had a material impact on its financial position or results of operations.
For a summary of industry trends as well as other risks and uncertainties relevant to the Company, see "Business—Industry Overview and Trends" and "Risk Factors."
Critical Accounting Estimates
Our consolidated financial statements are prepared in conformity with U.S generally accepted accounting principles ("GAAP"), which require management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosures of contingent assets and liabilities as of the date of the balance sheet as well as the reported amounts of revenues and expenses during the reporting period. We routinely make estimates and judgments about the carrying value of our assets and liabilities that are not readily apparent from other sources. We evaluate and modify on an ongoing basis such estimates and assumptions, which include those related to film costs, property and equipment, goodwill, deferred revenue pertaining to gift card and discount ticket sales, income taxes and purchase accounting as well as others discussed in Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K. Estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. The results of these estimates may form the basis of the carrying value of certain assets and liabilities. Actual results, under conditions and circumstances different from those assumed, may differ materially from estimates. The impact and any associated risks related to estimates, assumptions, and accounting policies are discussed elsewhere within this "Management's Discussion and Analysis of Financial Condition and

23


Results of Operations," as well as in the notes to the consolidated financial statements, if applicable, where such estimates, assumptions, and accounting policies affect our reported and expected results. Management has discussed the development and selection of its critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed our related disclosures herein.
We believe the following accounting policies are critical to our business operations and the understanding of our results of operations and affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:
We have applied the principles of purchase accounting when recording theatre acquisitions. Under current purchase accounting principles, we are required to use the acquisition method of accounting to estimate the fair value of all assets and liabilities, including: (i) the acquired tangible and intangible assets, including property and equipment, (ii) the liabilities assumed at the date of acquisition (including contingencies), and (iii) the related deferred tax assets and liabilities. Because the estimates we make in purchase accounting can materially impact our future results of operations, for significant acquisitions, we have obtained assistance from third party valuation specialists in order to assist in our determination of fair value. The Company provides the assumptions to the third party valuation firms based on information available to us at the acquisition date, including both quantitative and qualitative information about the specified assets or liabilities. The Company primarily utilizes the third parties to accumulate comparative data from multiple sources and assemble a report that summarizes the information obtained. The Company then uses the information to determine fair value. The third party valuation firms are supervised by Company personnel who are knowledgeable about valuations and fair value. The Company evaluates the appropriateness of the valuation methodology utilized by the third party valuation firm. The estimation of the fair value of the assets and liabilities involves a number of judgments and estimates that could differ materially from the actual amounts. Historically, the estimates made have not experienced significant changes and, as a result, we have not disclosed such changes.
FASB Accounting Standards Codification ("ASC") Subtopic 350-20, Intangibles—Goodwill and Other—Goodwill specifies that goodwill and indefinite-lived intangible assets will be subject to an annual impairment assessment. Based on our annual impairment assessment conducted during fiscal 2014, fiscal 2013 and fiscal 2012, we were not required to record a charge for goodwill impairment. In assessing the recoverability of the goodwill, we must make various assumptions regarding estimated future cash flows and other factors in determining the fair values of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets in future periods.
We estimate our film cost expense and related film cost payable based on management's best estimate of the expected box office revenue of each film over the length of its run in our theatres and the ultimate settlement of such film costs with the distributors. Generally, less than one-third of our quarterly film expense is estimated at period-end. The length of time until these costs are known with certainty depends on the ultimate duration of the film play, but is typically "settled" within two to three months of a particular film's opening release. Upon settlement with our film distributors, film cost expense and the related film cost payable are adjusted to the final film settlement. The ultimate revenues of a film can be estimated reasonably accurately within a few weeks after the film is released based on the film's initial box office receipts. As a result, there are typically insignificant variances between our estimates of film cost expense and the final film cost payable, because we make such estimates based on each film's box office receipts through the end of the reporting period. For the fiscal years ended January 1, 2015, December 26, 2013 and December 27, 2012, there were no significant changes in our film cost estimation and settlement procedures.
We depreciate and amortize the components of our property and equipment relating to both owned and leased theatres on a straight-line basis over the shorter of the lease term or the estimated useful lives of the assets. Each owned theatre consists of a building structure, structural improvements, seating and concession and film display equipment. While we have assigned an estimated useful life of less than 30 years to certain acquired facilities, we estimate that our newly constructed buildings generally have an estimated useful life of 30 years. Certain of our buildings have been in existence for more than 40 years. With respect to equipment (e.g., concession stand, point-of-sale equipment, etc.), a substantial portion is depreciated over seven years or less, which has been our historical replacement period. Seats and digital projection equipment generally have a longer useful economic life, and their depreciable lives (10-17.5 years) are based on our experience and replacement practices. The estimates of the assets' useful lives require our judgment and our knowledge of the assets being depreciated and amortized. Further, we review the economic useful lives of such assets annually and make adjustments thereto as necessary. To the extent we determine that certain of our assets have become obsolete, we accelerate depreciation over the remaining useful lives of the assets. Actual economic lives may differ materially from these estimates.

24


Historical appraisals of our properties have supported the estimated lives being used for depreciation and amortization purposes. Furthermore, our analysis of our historical capital replacement program is consistent with our depreciation policies. Finally, we review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Such analysis generally evaluates assets for impairment on an individual theatre basis. When the estimated future undiscounted cash flows of the operations to which the assets relate do not exceed the carrying value of the assets, such assets are written down to fair value. Our experience indicates that theatre properties become impaired primarily due to market or competitive factors rather than physical (wear and tear) or functional (inadequacy or obsolescence) factors. In this regard, we do not believe the frequency or volume of facilities impaired due to these market factors are significant enough to impact the useful lives used for depreciation periods.
For the fiscal years ended January 1, 2015, December 26, 2013 and December 27, 2012, no significant changes have been made to the depreciation and amortization rates applied to operating assets, the underlying assumptions related to estimates of depreciation and amortization, or the methodology applied. For the fiscal year ended January 1, 2015, consolidated depreciation and amortization expense was $207.2 million, representing 6.9% of consolidated total revenues. If the estimated lives of all assets being depreciated were increased by one year, the consolidated depreciation and amortization expense would have decreased by approximately $13.0 million, or 6.3%. If the estimated lives of all assets being depreciated were decreased by one year, the consolidated depreciation and amortization expense would have increased by approximately $14.9 million, or 7.2%.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We record a valuation allowance if it is deemed more likely than not that our deferred income tax assets will not be realized. We reassess the need for such valuation allowance on an ongoing basis. An increase in the valuation allowance generally results in an increase in the provision for income taxes recorded in such period. A decrease in the valuation allowance generally results in a decrease to the provision for income taxes recorded in such period.
Additionally, income tax rules and regulations are subject to interpretation, require judgment by us and may be challenged by the taxing authorities. As described further in Note 7 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, the Company applies the provisions of ASC Subtopic 740-10, Income Taxes—Overview. Although we believe that our tax return positions are fully supportable, in accordance with ASC Subtopic 740-10, we recognize a tax benefit only for tax positions that we determine will more likely than not be sustained based on the technical merits of the tax position. With respect to such tax positions for which recognition of a benefit is appropriate, the benefit is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions are evaluated on an ongoing basis as part of our process for determining our provision for income taxes. Among other items deemed relevant by us, the evaluations are based on new legislation, other new technical guidance, judicial proceedings, and our specific circumstances, including the progress of tax audits. Any change in the determination of the amount of tax benefit recognized relative to an uncertain tax position impacts the provision for income taxes in the period that such determination is made.
For fiscal 2014, our provision for income taxes was $73.4 million. Changes in management's estimates and assumptions regarding the probability that certain tax return positions will be sustained, the enacted tax rate applied to deferred tax assets and liabilities, the ability to realize the value of deferred tax assets, or the timing of the reversal of tax basis differences could impact the provision for income taxes and change the effective tax rate. A one percentage point change in the effective tax rate from 41.1% to 42.1% would have increased the current year income tax provision by approximately $1.8 million.
As noted in our significant accounting policies for "Revenue Recognition" under Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, the Company maintains a deferred revenue balance pertaining to cash received from the sale of discount tickets and gift cards that have not been redeemed. The Company recognizes revenue as a component of "Other operating revenues" associated with discount tickets and gift cards when redeemed, or when the likelihood of redemption becomes remote. We recognize unredeemed gift cards and other advanced sale-type certificates as revenue (known as "breakage" in our industry) based on historical experience, when the likelihood of redemption is remote, and when there is no legal obligation to remit the unredeemed gift card and discount ticket items to the relevant jurisdiction. The determination of the

25


likelihood of redemption is based on an analysis of historical redemption trends and considers various factors including the period outstanding, the level and frequency of activity, and the period of inactivity.
Significant Events and Fiscal 2015 Outlook
During the fifty-three week fiscal year ended January 1, 2015 ("Fiscal 2014 Period") and the fifty-two week fiscal years ended December 26, 2013 ("Fiscal 2013 Period") and December 27, 2012 ("Fiscal 2012 Period"), the Company entered into various investing and financing transactions which are more fully described under "Liquidity and Capital Resources" below and in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.
During the Fiscal 2014 Period, we continued to make progress with respect to our business strategy as follows:
We demonstrated our commitment to providing incremental value to our stockholders. During the Fiscal 2014 Period, we paid to our stockholders four quarterly cash dividends of $0.22 per share, or approximately $138.6 million in the aggregate. In addition, on December 15, 2014, we paid an extraordinary cash dividend of $1.00 per share, or approximately $156.2 million.
We continued to actively manage our asset base during the Fiscal 2014 Period by opening nine new theatres with 98 screens and closing 15 underperforming theatres with 125 screens, ending the Fiscal 2014 Period with 574 theatres and 7,367 screens.
We continued to embrace innovative concepts that generate incremental revenue and cash flows for the Company and deliver a premium movie-going experience for our customers on several complementary fronts:
First, we continued our focus on improving customer amenities, including the installation of luxury reclining seats, and experimentation with various other customer engagement and marketing initiatives aimed at increasing attendance and enhancing the overall customer experience. With respect to our luxury reclining seating initiative, as of January 1, 2015, we offered luxury reclining seating in 336 auditoriums at 32 select theatre locations. Based on promising initial results, we expect to offer luxury reclining seating in approximately 40 additional locations by the end of fiscal 2015. The costs of these conversions in some cases are partially covered by investments from our theatre landlords.
Second, to continually address consumer trends and customer preferences, we have focused on expanding our menu of food and alcoholic beverage products. We believe that the enhancement of our food and alcoholic beverage offerings has had a positive effect on our operating results and we expect to continue to invest in such offerings in our theatres. As of January 1, 2015, we offered an expanded menu of food and/or alcoholic beverage items in 159 locations. By the end of fiscal 2015, we expect to offer an expanded menu of food in approximately 180 locations and alcoholic beverages in approximately 130 locations. In addition, as of January 1, 2015, we have successfully launched seven Cinebarre locations which offer patrons the convenience of a variety of lunch and dinner menu options, including beer and wine, served at the customer's seat before and during the featured film.
Third, we believe that our IMAX® digital projection systems and our proprietary large screen format, RPXSM offer our patrons all-digital, large format premium experiences and generate incremental revenue and cash flows for the Company. As of January 1, 2015, our IMAX® footprint consisted of a total of 86 IMAX® screens and we also operated a total of 86 RPXSM screens. We have been encouraged by the operating results of our IMAX® and RPXSM screens and to that end, we intend to install additional IMAX® digital projection systems and RPXSM screens during fiscal 2015.
Finally, we maintain a frequent moviegoer loyalty program, named the Regal Crown Club®, to actively engage our core customers. Regal Crown Club® members are eligible for specified awards, such as concession items, based on purchases made at our participating theatres. As of January 1, 2015, we had over 13 million active members in the Regal Crown Club®, making it the largest loyalty program in our industry, and these members accounted for approximately $1.0 billion of the Company's box office and concession revenues during the Fiscal 2014 Period. In addition, our mobile ticketing application designed to give customers quick access to box office information via their Apple iPhone® or Android™ phone, has been downloaded approximately 2.5 million times since its Fiscal 2012 Period launch. The application provides customers the ability to find films, movie information, showtimes and special offers from Regal (including Regal Crown Club® loyalty program promotions) and the ability to purchase tickets for local theatres, thereby expediting the admissions process.
Finally, we believe Open Road Films fills a gap in the marketplace created by the major studios’ big-budget franchise film strategy by marketing smaller budget films in a cost-effective manner and will drive additional patrons to our theatres and generate a return on our capital investment. Open Road Films distributed seven films

26


during 2014 which generated national box office revenues of approximately $161.3 million, and intends to distribute approximately six to eight films per year. As of January 1, 2015, we have invested $20.0 million in cash in Open Road Films and may invest an additional $10.0 million in this joint venture. We believe our investment in Open Road Films will generate incremental value for our stockholders.
We are optimistic regarding the breadth of the 2015 film slate, including the timing of the release schedule and the number of films scheduled for release. Evidenced by the motion picture studios' continued efforts to promote and market upcoming film releases, 2015 appears to be another year of high-profile releases such as Fifty Shades of Grey, Insurgent, Furious 7, The Avengers: Age of Ultron, Mad Max: Fury Road, Tomorrowland, Jurassic World, Inside Out, Ted 2, Minions, Ant-Man, The Fantastic Four, Spectre, Hunger Games: Mockingjay Part 2, Star Wars: The Force Awakens, and Mission: Impossible 5. 
We intend to grow our theatre circuit through selective expansion and through accretive acquisitions. With respect to capital expenditures, subject to the timing of certain construction projects, we expect capital expenditures (net of proceeds from asset sales and landlord contributions) to be in the range of $135.0 million to $145.0 million for fiscal 2015, consisting of new theatre development, expansion of existing theatre facilities, upgrades for premium amenities, and maintenance.
Overall for the fiscal 2015 year, we expect to benefit from modest increases in ticket prices and average concessions per patron. In addition, we expect fiscal 2015 admissions and concessions revenues to be supported by our continued focus on efficient theatre operations and through opportunities to expand our concession offerings. We will continue to maintain a business strategy focused on the evaluation of accretive acquisition opportunities, selective upgrades and premium experience opportunities and providing incremental returns to our stockholders. For an understanding of the significant factors that influenced our performance during the past three fiscal years, the preceding and following discussion should be read in conjunction with the consolidated financial statements and the notes thereto presented in Part II, Item 8 of this Form 10-K.
Recent Developments
On October 27, 2014, the Company announced that its Board of Directors authorized the exploration of strategic alternatives to enhance stockholder value, which included a potential sale of the Company. On January 15, 2015, the Company announced that its Board of Directors, in the course of its examination of strategic alternatives and with the advice of Morgan Stanley & Co. LLC after a thorough market review, has determined that a sale of the Company would not be in the best interest of its stockholders at such time. The Company's Board of Directors, consistent with its fiduciary duties, remains committed to evaluating any alternatives that would enhance stockholder value.
On February 12, 2015, we declared a cash dividend of $0.22 per share on each outstanding share of Class A and Class B common stock. The dividend is payable on March 13, 2015 to our stockholders of record on March 3, 2015.
Results of Operations
Based on our review of industry sources, North American box office revenues for the time period that corresponds to the Fiscal 2014 Period were estimated to have decreased by approximately one to two percent in comparison to the period of time that corresponds to the Fiscal 2013 Period. The industry's box office results for 2014 were negatively impacted by comparisons to record box office results experienced in the Fiscal 2013 Period.
The following table sets forth the percentage of total revenues represented by certain items included in our consolidated statements of income for the Fiscal 2014 Period, the Fiscal 2013 Period and the Fiscal 2012 Period (dollars and attendance in millions, except average ticket prices and average concessions per patron):

27


 
 
Fiscal 2014 Period
 
Fiscal 2013 Period
 
Fiscal 2012 Period
 
 
$
 
% of
Revenue
 
$
 
% of
Revenue
 
$
 
% of
Revenue
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Admissions
 
$
1,998.9

 
66.9
%
 
$
2,059.6

 
67.8
%
 
$
1,925.1

 
68.3
%
Concessions
 
829.6

 
27.7

 
816.9

 
26.9

 
748.4

 
26.4

Other operating revenues
 
161.6

 
5.4

 
161.6

 
5.3

 
146.5

 
5.2

Total revenues
 
2,990.1

 
100.0

 
3,038.1

 
100.0

 
2,820.0

 
99.9

Operating expenses:
 

 
 
 
 
 
 
 
 
 
 
Film rental and advertising costs(1)
 
1,047.1

 
52.4

 
1,078.0

 
52.3

 
1,000.5

 
52.0

Cost of concessions(2)
 
111.1

 
13.4

 
111.6

 
13.7

 
101.1

 
13.5

Rent expense(3)
 
423.4

 
14.2

 
413.6

 
13.6

 
384.4

 
13.6

Other operating expenses(3)
 
813.2

 
27.2

 
812.8

 
26.8

 
735.9

 
26.1

General and administrative expenses (including share-based compensation expense of $9.4 million, $9.3 million and $10.3 million for the Fiscal 2014 Period, the Fiscal 2013 Period and the Fiscal 2012 Period, respectively)(3)
 
74.4

 
2.5

 
73.7

 
2.4

 
68.8

 
2.4

Depreciation and amortization(3)
 
207.2

 
6.9

 
200.2

 
6.6

 
183.1

 
6.5

Net loss on disposal and impairment of operating assets and other(3)
 
7.3

 
0.2

 
8.4

 
0.3

 
16.2

 
0.6

Total operating expenses(3)
 
2,683.7

 
89.8

 
2,698.3

 
88.8

 
2,490.0

 
88.3

Income from operations(3)
 
306.4

 
10.2

 
339.8

 
11.2

 
330.0

 
11.7

Interest expense, net(3)
 
126.5

 
4.2

 
141.3

 
4.7

 
135.0

 
4.8

Loss on extinguishment of debt(3)
 
62.4

 
2.1

 
30.7

 
1.0

 

 

Earnings recognized from NCM(3)
 
(32.1
)
 
1.1

 
(37.5
)
 
1.2

 
(34.8
)
 
1.2

Gain on sale of NCM, Inc. common stock(3)
 

 

 
(30.9
)
 
1.0

 

 

Provision for income taxes(3)
 
73.4

 
2.5

 
107.0

 
3.5

 
89.5

 
3.2

Net income attributable to controlling interest(3)
 
$
105.6

 
3.5

 
$
157.7

 
5.2

 
$
142.3

 
5.0

Attendance
 
220.2

 
*

 
228.6

 
*

 
216.4

 
*

Average ticket price(4)
 
$
9.08

 
*

 
$
9.01

 
*

 
$
8.90

 
*

Average concessions per patron(5)
 
$
3.77

 
*

 
$
3.57

 
*

 
$
3.46

 
*

_______________________________________________________________________________
*
Not meaningful
(1)
Percentage of revenues calculated as a percentage of admissions revenues.
(2)
Percentage of revenues calculated as a percentage of concessions revenues.
(3)
Percentage of revenues calculated as a percentage of total revenues.
(4)
Calculated as admissions revenue/attendance.
(5)
Calculated as concessions revenue/attendance.

Fiscal 2014 Period Compared to Fiscal 2013 Period
Admissions
During the Fiscal 2014 Period, total admissions revenues decreased $60.7 million, or 2.9%, to $1,998.9 million, from $2,059.6 million in the Fiscal 2013 Period. A 3.7% decrease in attendance (approximately $76.2 million of total admissions revenues), partially offset by a 0.8% increase in average ticket prices (approximately $15.5 million of total admissions revenues) led to the overall decrease in the Fiscal 2014 Period admissions revenues. The Fiscal 2014 Period results were favorably impacted by the timing of the Fiscal 2014 Period calendar, which consisted of fifty-three weeks compared to the

28


fifty-two weeks during the Fiscal 2013 Period and the inclusion of the 513 screens from Hollywood Theaters for the entire Fiscal 2014 Period (compared to nine months in the Fiscal 2013 Period). The additional week of operations was the week between Christmas and New Years, a traditionally high attendance and revenue week for the Company and the industry. The additional week of operations was significant in that it accounted for approximately 8.7 million attendees, or 4.0%, of the Fiscal 2014 Period total attendance and contributed to approximately $76.5 million, or 3.8%, of the Fiscal 2014 Period total admissions revenues. Excluding week 53, the 513 screens from Hollywood Theaters accounted for 11.8 million attendees, or 5.4%, of the Fiscal 2014 Period total attendance and contributed approximately $90.2 million, or 4.5%, of the Fiscal 2014 Period total admissions revenues. However, these factors were offset by the impact of the decline in industry attendance during the Fiscal 2014 Period and as a result, total attendance for the Company's Fiscal 2014 Period decreased by 3.7%. The overall decline in attendance and admissions revenues during the Fiscal 2014 Period as compared to the Fiscal 2013 Period was primarily a result of strong attendance generated by the breadth and commercial appeal of the overall film slate during the Fiscal 2013 Period, which experienced record box office revenues.
On a comparable screen basis (i.e., excluding the effects of the impact of week 53 in the Fiscal 2014 Period and the 513 screens from Hollywood Theaters for the Fiscal 2014 Period and Fiscal 2013 Period), attendance for the Fiscal 2014 Period was approximately 199.7 million, an 8.6% decrease from the Fiscal 2013 Period, and admissions revenues for the Fiscal 2014 Period was approximately $1,832.2 million, a decrease of $150.6 million or 7.6% from the Fiscal 2013 Period. On a comparable screen basis, an 8.6% decrease in attendance (approximately $170.5 million of admissions revenues), partially offset by a 1.1% increase in average ticket prices (approximately $19.9 million of admissions revenues) led to the net decline in the Fiscal 2014 Period admissions revenues. We believe that our attendance is primarily dependent upon the commercial appeal of content released by the motion picture studios. The decline in comparable screen attendance and admissions revenues was primarily a result of the aforementioned breadth and commercial appeal of the overall film slate during the Fiscal 2013 Period. The increase in our comparable screen average ticket price was due to selective price increases identified during our ongoing periodic pricing reviews, partially offset by a decrease in the percentage of our admissions revenues generated by premium format films exhibited during the Fiscal 2014 Period. Based on our review of certain industry sources, the decrease in our comparable screen admissions revenues on a per screen basis was greater than the industry’s per screen results for the Fiscal 2014 Period as compared to the Fiscal 2013 Period. We believe the greater than industry decrease in comparable screen admissions revenues on a per screen basis in the Fiscal 2014 Period was primarily attributable to premium format film performance and the impact of our competitors' investment in new theatres and customer amenities. We are optimistic that our investments in new theatre construction and premium amenities will provide the opportunity for incremental revenue and cash flows for the Company. To that end, our market share may be positively or negatively impacted by such initiatives and trends during any given fiscal period.
Concessions
Total concessions revenues increased $12.7 million, or 1.6%, to $829.6 million during the Fiscal 2014 Period, from $816.9 million for the Fiscal 2013 Period. A 5.6% increase in average concessions revenues per patron (approximately $42.9 million of total concessions revenues), partially offset by a 3.7% decrease in attendance (approximately $30.2 million of total concessions revenues) led to the overall increase in the Fiscal 2014 Period concessions revenue. On a comparable screen basis, total concessions revenues for the Fiscal 2014 Period was $752.1 million, a decrease of $28.1 million or 3.6% from the Fiscal 2013 Period. Such decrease was primarily attributable to the aforementioned 8.6% decrease in comparable screen attendance (approximately $67.1 million of concessions revenues), partially offset by a 5.6% increase in comparable screen average concessions revenues per patron (approximately $39.0 million of concessions revenues). The increase in comparable screen average concessions revenues per patron for the Fiscal 2014 Period was primarily attributable to an increase in popcorn and beverage sales volume per patron, selective price increases during the period and to a lesser extent, the continued rollout of our expanded food and alcohol menu.
Other Operating Revenues
Other operating revenues of $161.6 million during the Fiscal 2014 Period was consistent with that of the Fiscal 2013 Period. Included in other operating revenues are the theatre access fees paid by National CineMedia (net of payments for onscreen advertising time provided to our beverage concessionaire), revenues from our vendor marketing programs, other theatre revenues (consisting of theatre rentals, internet ticketing surcharges, arcade games and other) and revenues related to our gift card and discount ticket programs. During the Fiscal 2014 Period, other operating revenues were primarily impacted by a decrease in revenues related to our gift card and discount ticket programs (approximately $5.9 million) and decreases in revenues from our vendor marketing programs (approximately $1.0 million), offset by incremental National CineMedia revenues (approximately $3.9 million) and increases in other theatre revenues (approximately $3.0 million).
Film Rental and Advertising Costs
Film rental and advertising costs as a percentage of admissions revenues of 52.4% during the Fiscal 2014 Period was in line with that of the Fiscal 2013 Period.

29


Cost of Concessions
During the Fiscal 2014 Period, cost of concessions decreased $0.5 million, or 0.4%, to $111.1 million as compared to $111.6 million during the Fiscal 2013 Period. Cost of concessions as a percentage of concessions revenues for the Fiscal 2014 Period was approximately 13.4%, compared to 13.7% during the Fiscal 2013 Period. The decrease in cost of concessions as a percentage of concessions revenues during the Fiscal 2014 Period was primarily related to an increase in the amount of vendor marketing revenues recorded as a reduction of cost of concessions and the impact of the aforementioned price increases during the period, partially offset by slight increases in raw material costs.
Rent Expense
Rent expense increased by $9.8 million, or 2.4%, to $423.4 million in the Fiscal 2014 Period, from $413.6 million in the Fiscal 2013 Period. The increase in rent expense during the Fiscal 2014 Period was primarily related to the opening of several new theatres late in the Fiscal 2013 Period, the opening of nine new theatres with 98 screens (partially offset by the closure of 15 theatres with 125 screens) subsequent to the end of the Fiscal 2013 Period and incremental rent associated with the leases acquired as part of the Hollywood Theaters acquisition. On a comparable screen basis, rent expense increased $5.9 million, or 1.5%, during the Fiscal 2014 Period as compared to the Fiscal 2013 Period. On a comparable screen basis, the increase in rent expense in the Fiscal 2014 Period was primarily attributable to the opening of several new theatres late in the Fiscal 2013 Period and the opening of nine new theatres with 98 screens (partially offset by the closure of 15 theatres with 125 screens) subsequent to the end of the Fiscal 2013 Period.
Other Operating Expenses
Other operating expenses increased $0.4 million, to $813.2 million in the Fiscal 2014 Period, from $812.8 million in the Fiscal 2013 Period. During the Fiscal 2014 Period, other operating expenses was primarily impacted by increases in theatre level payroll expenses (approximately $11.1 million for the Fiscal 2014 Period) and increased non-rent occupancy costs (approximately $11.1 million for the Fiscal 2014 Period) primarily associated with the impact of the fifty-three weeks of operations and the inclusion of 513 screens from Hollywood Theaters, partially offset by the impact of the State of New York sales tax refund received by the Company during the Fiscal 2014 Period totaling approximately $16.8 million (described further in Note 8 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K) and decreased costs (approximately $3.5 million) associated with lower premium format film revenues during the Fiscal 2014 Period. On a comparable screen basis, other operating expenses decreased $24.6 million, or 3.2% during the Fiscal 2014 Period as compared to the Fiscal 2013 Period. Such decrease was attributable to the aforementioned State of New York sales tax refund and decreased costs associated with lower premium format film revenues during the Fiscal 2014 Period.
General and Administrative Expenses
General and administrative expenses increased $0.7 million, or 0.9%, to $74.4 million in the Fiscal 2014 Period, from $73.7 million in the Fiscal 2013 Period. The increase in general and administrative expenses during the Fiscal 2014 Period was primarily attributable to higher payroll costs associated with an additional week of operations, partially offset by lower legal and professional fees associated with the Fiscal 2013 Period acquisition of Hollywood Theaters and slightly lower travel costs.
Depreciation and Amortization
Depreciation and amortization expense increased $7.0 million, or 3.5%, to $207.2 million for the Fiscal 2014 Period, from $200.2 million in the Fiscal 2013 Period. The increase in depreciation and amortization expense during the Fiscal 2014 Period was primarily related to incremental depreciation and amortization expense associated with increased capital expenditures during the Fiscal 2014 Period, the addition of the 513 screens from Hollywood Theaters, the opening of several new theatres late in the Fiscal 2013 Period and the opening of nine new theatres with 98 screens subsequent to the end of the Fiscal 2013 Period. On a comparable screen basis, depreciation and amortization expense increased $3.0 million, or 1.6% during the Fiscal 2014 Period as compared to the Fiscal 2013 Period. On a comparable screen basis, the increase in depreciation and amortization expense during the Fiscal 2014 Period was primarily related to incremental depreciation and amortization expense associated with increased capital expenditures during the Fiscal 2014 Period, the opening of several new theatres late in the Fiscal 2013 Period and the opening of nine new theatres with 98 screens subsequent to the end of the Fiscal 2013 Period.
Income from Operations
Income from operations decreased $33.4 million, or 9.8%, to $306.4 million during the Fiscal 2014 Period, from $339.8 million in the Fiscal 2013 Period. On a comparable screen basis, income from operations for the Fiscal 2014 Period decreased $86.8 million, or 26.6%, from $326.3 million in the Fiscal 2013 Period. The decrease in income from operations during the Fiscal 2014 Period was primarily attributable to the decline in total revenues, partially offset by decreases in certain variable operating expense line items described above.


30


Interest Expense, net
During the Fiscal 2014 Period, net interest expense decreased $14.8 million, or 10.5%, to $126.5 million, from $141.3 million in the Fiscal 2013 Period. The decrease in net interest expense during the Fiscal 2014 Period was principally due to interest savings associated with the refinance of approximately $925.0 million aggregate principal amount of the Company's 91/8% Senior Notes and 85/8% Senior Notes with the March 2014 issuance of our 53/4% Senior Notes Due 2022 and the June 2013 issuance of our 53/4% Senior Notes Due 2023, a lower effective interest rate on our Term Facility (including a change in our interest rate swap portfolio) and the aforementioned interest income related to the State of New York sales tax refund, partially offset by incremental interest form the capital lease and lease financing obligations assumed from Hollywood Theaters.
Earnings Recognized from NCM
Earnings recognized from NCM decreased $5.4 million, or 14.4%, to $32.1 million in the Fiscal 2014 Period, from $37.5 million in the Fiscal 2013 Period. The decrease in earnings recognized from NCM during the Fiscal 2014 Period was primarily attributable to lower earnings of National CineMedia during the period.
Income Taxes
The provision for income taxes of $73.4 million and $107.0 million for the Fiscal 2014 Period and the Fiscal 2013 Period, respectively, reflect effective tax rates of approximately 41.1% and 40.4%, respectively. The increase in the effective tax rate for the Fiscal 2014 Period is primarily attributable to changes in uncertain tax positions with state taxing authorities resulting from the lapse of statute of limitations that occurred in the Fiscal 2013 Period and the state tax effects of the $62.4 million ($39.2 million after related tax effects) loss on debt extinguishment associated with the repurchase of approximately $711.4 million aggregate principal amount of the Company's 91/8% Senior Notes and 85/8% Senior Notes that occurred during the Fiscal 2014 Period, which was not deductible in certain states. The effective tax rates for such periods also reflect the impact of certain non-deductible expenses and other income tax credits.
Net Income Attributable to Controlling Interest
Net income attributable to controlling interest for the Fiscal 2014 Period was $105.6 million, which represents a decrease of $52.1 million, from net income attributable to controlling interest of $157.7 million during the Fiscal 2013 Period. The decrease in net income attributable to controlling interest for the Fiscal 2014 Period was primarily attributable to a decline in operating income as described above, the $62.4 million ($39.2 million after related tax effects) loss on debt extinguishment associated with the repurchase of approximately $711.4 million aggregate principal amount of the Company's 91/8% Senior Notes and 85/8% Senior Notes during the Fiscal 2014 Period and the impact of the gain on sale of NCM, Inc. common stock recorded during the Fiscal 2013 Period, partially offset by the impact of the $30.3 million ($19.2 million after related tax effects) loss on debt extinguishment related to the Fiscal 2013 Period repurchase of approximately $213.6 million aggregate principal amount of the Company's 91/8% Senior Notes and a decrease in interest expense during the Fiscal 2014 Period.

Fiscal 2013 Period Compared to Fiscal 2012 Period
Admissions
During the Fiscal 2013 Period, total admissions revenues increased $134.5 million, or 7.0%, to $2,059.6 million, from $1,925.1 million in the Fiscal 2012 Period. A 5.6% increase in attendance (approximately $107.8 million of total admissions revenues) coupled with a 1.2% increase in average ticket prices (approximately $26.7 million of total admissions revenues) led to the increase in the Fiscal 2013 Period admissions revenues. The 814 screens from Great Escape Theatres and Hollywood Theaters accounted for 16.3 million attendees, or 7.1%, of the Fiscal 2013 Period total attendance and contributed approximately $128.6 million, or 6.2%, of the Fiscal 2013 Period total admissions revenues. On a comparable screen basis (i.e., excluding the effects of the inclusion of the 814 screens from Great Escape Theatres and Hollywood Theaters), attendance for the Fiscal 2013 Period was approximately 212.3 million, a 1.7% decrease from the Fiscal 2012 Period, and admissions revenues for the Fiscal 2013 Period was approximately $1,931.0 million, an increase of $9.4 million or 0.5% from the Fiscal 2012 Period. On a comparable screen basis, the 2.2% increase in average ticket prices (approximately $42.1 million of admissions revenues), partially offset by the 1.7% decrease in attendance (approximately $32.7 million of admissions revenues), led to the increase in the Fiscal 2013 Period admissions revenues. The comparable screen average ticket price increase was due to selective price increases identified during our ongoing periodic pricing reviews (which include analysis of various factors such as general inflationary trends and local market conditions). The decrease in comparable screen attendance during the Fiscal 2013 Period was primarily attributable to difficult comparisons with the strong attendance experienced in the Fiscal 2012 Period from such pictures as The Avengers, The Dark Knight Rises and The Hunger Games, partially offset by the breadth and commercial appeal of the overall film slate during the Fiscal 2013 Period. Based on our review of certain industry

31


sources, the increase in our admissions revenues on a comparable screen basis was in line with the industry’s per screen results for the Fiscal 2013 Period as compared to the Fiscal 2012 Period.
Concessions    
Total concessions revenues increased $68.5 million, or 9.2%, to $816.9 million during the Fiscal 2013 Period, from $748.4 million for the Fiscal 2012 Period. A 5.6% increase in attendance (approximately $41.9 million of total concessions revenues) coupled with a 3.2% increase in average concessions revenues per patron (approximately $26.6 million of total concessions revenues), led to the increase in the Fiscal 2013 Period concessions revenue. On a comparable screen basis, total concessions revenues for the Fiscal 2013 Period was $757.6 million, an increase of $10.8 million or 1.4% from the Fiscal 2012 Period. On a comparable screen basis, the increase in total concessions revenues during the Fiscal 2013 Period was primarily attributable to a 3.2% increase in comparable screen average concessions revenues per patron (approximately $23.5 million of concessions revenues), partially offset by the aforementioned 1.7% decrease in comparable screen attendance (approximately $12.7 million of concessions revenues) during the period. The increase in comparable screen average concessions revenues per patron for the Fiscal 2013 Period was primarily a result of an increase in popcorn and beverage sales volume and to a lesser extent, selective price increases and the continued rollout of our expanded food menu during the period.
Other Operating Revenues
During the Fiscal 2013 Period, other operating revenues increased $15.1 million, or 10.3%, to $161.6 million, from $146.5 million in the Fiscal 2012 Period. Included in other operating revenues are the theatre access fees paid by National CineMedia (net of payments for onscreen advertising time provided to our beverage concessionaire), revenues from our vendor marketing programs, other theatre revenues (consisting of theatre rentals, internet ticketing surcharges, arcade games and other) and revenue related to our gift card and discount ticket programs. The increase in other operating revenues during the Fiscal 2013 Period was principally due to increases in revenues from our vendor marketing programs (approximately $9.2 million) and increases in other theatre revenues (approximately $4.8 million).
Film Rental and Advertising Costs
Film rental and advertising costs as a percentage of admissions revenues increased to 52.3% during the Fiscal 2013 Period from 52.0% in the Fiscal 2012 Period. The increase in film rental and advertising costs as a percentage of box office revenues during the Fiscal 2013 Period was primarily attributable to the overall increase in box office revenues associated with the breadth and commercial appeal of the overall film slate during the Fiscal 2013 Period and an increase in promotional costs associated with new theatre openings.
Cost of Concessions
During the Fiscal 2013 Period, cost of concessions increased $10.5 million, or 10.4%, to $111.6 million as compared to $101.1 million during the Fiscal 2012 Period. Cost of concessions as a percentage of concessions revenues for the Fiscal 2013 Period was approximately 13.7%, compared to 13.5% during the Fiscal 2012 Period. The increase in cost of concessions as a percentage of concessions revenues during the Fiscal 2013 Period was primarily related to slightly higher raw material and packaged good costs, partially offset by an increase in the amount of vendor marketing revenue recorded as a reduction of cost of concessions.
Rent Expense
Rent expense increased by $29.2 million, or 7.6%, to $413.6 million in the Fiscal 2013 Period, from $384.4 million in the Fiscal 2012 Period. The increase in rent expense during the Fiscal 2013 Period was primarily related to incremental rent associated with the leases acquired as part of the Great Escape Theatres and Hollywood Theaters acquisitions. On a comparable screen basis, rent expense increased $6.0 million, or 1.6%, during the Fiscal 2013 Period as compared to the Fiscal 2012 Period. On a comparable screen basis, the increase in rent expense in the Fiscal 2013 Period was primarily attributable to higher contingent rent associated with increased admissions and concessions revenues during the Fiscal 2013 Period and incremental rent associated with the opening of eight new theatres with 98 screens subsequent to the end of the Fiscal 2012 Period, partially offset by the closure of 11 theatres with 101 screens subsequent to the end of the Fiscal 2012 Period.
Other Operating Expenses
Other operating expenses increased $76.9 million, or 10.4%, to $812.8 million in the Fiscal 2013 Period, from $735.9 million in the Fiscal 2012 Period. The increase in other operating expenses during the Fiscal 2013 Period was attributable to increases in certain non-rent occupancy costs (approximately $30.3 million for the Fiscal 2013 Period) and theatre level payroll expenses (approximately $25.4 million for the Fiscal 2013 Period) associated with the impact of the 814 screens from Great Escape Theatres and Hollywood Theaters. On a comparable screen basis, other operating expenses increased $24.0 million, or 3.3% during the Fiscal 2013 Period as compared to the Fiscal 2012 Period. On a comparable screen basis, the increase in other operating expenses during the Fiscal 2013 Period was also attributable to increases in theatre level payroll expenses and certain

32


non-rent occupancy costs and increased costs associated with higher premium format film revenues during the Fiscal 2013 Period.
General and Administrative Expenses
General and administrative expenses increased $4.9 million, or 7.1%, to $73.7 million in the Fiscal 2013 Period, from $68.8 million in the Fiscal 2012 Period. The increase in general and administrative expenses during the Fiscal 2013 Period was primarily attributable to transaction costs associated with our recent acquisitions (approximately $3.2 million) and higher corporate payroll costs during the period, partially offset by slightly lower share-based compensation expense.
Depreciation and Amortization
Depreciation and amortization expense increased $17.1 million, or 9.3%, to $200.2 million for the Fiscal 2013 Period, from $183.1 million in the Fiscal 2012 Period. The increase in depreciation and amortization expense during the Fiscal 2013 Period was primarily related to incremental depreciation and amortization expense associated with the addition of the 814 screens from Great Escape Theatres and Hollywood Theaters. On a comparable screen basis, depreciation and amortization expense decreased $0.1 million, or 0.1% during the Fiscal 2013 Period as compared to the Fiscal 2012 Period.
Income from Operations
Income from operations increased $9.8 million, or 3.0%, to $339.8 million during the Fiscal 2013 Period, from $330.0 million in the Fiscal 2012 Period. The increase in income from operations during the Fiscal 2013 Period was primarily attributable to the increase in total revenues, partially offset by increases in certain variable operating expense line items described above.
Interest Expense, net
During the Fiscal 2013 Period, net interest expense increased $6.3 million, or 4.7%, to $141.3 million, from $135.0 million in the Fiscal 2012 Period. The increase in net interest expense during the Fiscal 2013 Period was principally due to incremental interest associated with the issuance of our 53/4% Senior Notes Due 2025 and the capital lease and lease financing obligations assumed from Hollywood Theaters, partially offset by interest savings associated with the partial refinance of approximately $213.6 million aggregate principal amount of our 91/8% Senior Notes with the proceeds from the second quarter of 2013 issuance of our 53/4% Senior Notes Due 2023 and a lower effective interest rate on our Term Facility (including a change in our interest rate swap portfolio).
Earnings Recognized from NCM
Earnings recognized from NCM increased $2.7 million, or 7.8%, to $37.5 million in the Fiscal 2013 Period, from $34.8 million in the Fiscal 2012 Period. The increase in earnings recognized from NCM during the Fiscal 2013 Period was primarily attributable to higher earnings of National CineMedia during such period.
Income Taxes
The provision for income taxes of $107.0 million and $89.5 million for the Fiscal 2013 Period and the Fiscal 2012 Period, respectively, reflect effective tax rates of approximately 40.4% and 38.6%, respectively. The increase in the effective tax rate for the Fiscal 2013 Period is primarily attributable to changes in uncertain tax positions with state taxing authorities resulting from the lapse of statute of limitations that occurred in the Fiscal 2012 Period. The effective tax rates for such periods also reflect the impact of certain non-deductible expenses and other income tax credits.
Net Income Attributable to Controlling Interest
Net income attributable to controlling interest for the Fiscal 2013 Period was $157.7 million, which represents an increase of $15.4 million, from net income attributable to controlling interest of $142.3 million during the Fiscal 2012 Period. The increase in net income attributable to controlling interest for the Fiscal 2013 Period was primarily attributable to an increase in operating income as described above, the impact of the gain on sale of NCM, Inc. common stock recorded during the third quarter of the Fiscal 2013 Period and higher equity earnings generated by certain of our equity method investments, partially offset by the impact of the $30.3 million ($19.2 million after related tax effects) loss on debt extinguishment related to the repurchase of approximately $213.6 million aggregate principal amount of the Company's 91/8% Senior Notes.
Quarterly Results
The Company's consolidated financial statements for the Fiscal 2013 Period include the results of operations of Hollywood Theaters, consisting of 43 theatres and 513 screens, for the period subsequent to the acquisition date of March 29, 2013. The acquisition of Hollywood Theaters is further described in Note 3 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K. The comparability of our results between quarters is impacted by the inclusion from the

33


acquisition date of the results of operations of Hollywood Theaters plus certain other factors described below and to a lesser extent, seasonality.
The following table sets forth selected unaudited quarterly results for the eight quarters ended January 1, 2015. The quarterly financial data as of each period presented below have been derived from Regal's unaudited condensed consolidated financial statements for those periods. Results for these periods are not necessarily indicative of results for the full year. The quarterly financial data should be read in conjunction with the consolidated financial statements of Regal and notes thereto included in Part II, Item 8 of this Form 10-K.
 
Jan. 1, 2015 (1)
 
Sept. 25, 2014 (2)
 
June 26, 2014 (3)
 
March 27, 2014 (4)
 
Dec. 26, 2013
 
Sept. 26, 2013 (5)
 
June 27, 2013 (6)
 
March 28, 2013
 
In millions (except per share data)
Total revenues
$
799.1

 
$
693.8

 
$
770.3

 
$
726.9

 
$
739.9

 
$
813.1

 
$
842.3

 
$
642.8

Income from operations(7)
91.7

 
58.6

 
85.8

 
70.3

 
55.7

 
109.8

 
117.1

 
57.2

Net income (loss) attributable to controlling interest(7)
46.3

 
26.7

 
33.8

 
(1.2
)
 
24.0

 
75.1

 
36.1

 
22.5

Diluted earnings (loss) per share(7)
0.30

 
0.17

 
0.22

 
(0.01
)
 
0.15

 
0.48

 
0.23

 
0.14

Dividends per common share(8)
$
1.22

 
$
0.22

 
$
0.22

 
$
0.22

 
$
0.21

 
$
0.21

 
$
0.21

 
$
0.21

_______________________________________________________________________________
(1)
The fiscal quarter ended January 1, 2015 was comprised of 14 weeks.
(2)
On July 10, 2014, the State of New York approved a sales tax refund claim filed by the Company to recover sales taxes paid on certain nontaxable purchases made by the Company during the fiscal 2008 through fiscal 2012 periods. The refund totaled approximately $17.4 million, including interest. The Company recorded the refund during the quarter ended September 25, 2014 by reducing "Other operating expenses" by approximately $16.8 million and "Interest expense, net" by approximately $0.6 million.
(3)
Reflects the impact of the $10.5 million ($6.6 million after related tax effects) loss on debt extinguishment recorded during the quarter ended June 26, 2014 related to the redemption of the remaining $133.3 million aggregate principal amount of the Company's 91/8% Senior Notes and Regal Cinemas' 85/8% Senior Notes.
(4)
Reflects the impact of the $51.9 million ($32.6 million after related tax effects) loss on debt extinguishment recorded during the quarter ended March 27, 2014 related to the repurchase of approximately $578.1 million aggregate principal amount of the Company's 91/8% Senior Notes and Regal Cinemas' 85/8% Senior Notes.
(5)
During the quarter ended September 26, 2013, we redeemed 2.3 million of our National CineMedia common units for a like number of shares of NCM, Inc. common stock, which we sold in an underwritten public offering (including underwriter over-allotments) for $17.79 per share, reducing our investment in National CineMedia by approximately $10.0 million, the average carrying amount of the shares sold. We received approximately $40.9 million in proceeds after deducting related fees and expenses payable by us, resulting in a gain on sale of approximately $30.9 million.
(6)
Reflects the impact of the $30.3 million ($19.2 million after related tax effects) loss on debt extinguishment recorded during the quarter ended June 27, 2013 related to the repurchase of approximately $213.6 million aggregate principal amount of the Company's 91/8% Senior Notes.
(7)
During the eight quarters ended January 1, 2015, we recorded long-lived asset impairment charges of $0.0 million, $1.9 million, $3.3 million, $0.4 million, $1.6 million, $5.8 million, $2.1 million, and $0.0 million, respectively, specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. See Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information related to our impairment policies.
(8)
Includes the December 15, 2014 payment of the $1.00 extraordinary cash dividend paid on each share of Class A and Class B Common Stock. See Note 9 to the accompanying consolidated financial statements included in Item 8 of this Form 10-K for further discussion.




34


Liquidity and Capital Resources
On a consolidated basis, we expect our primary uses of cash to be for operating expenses, capital expenditures, investments, acquisitions, general corporate purposes related to corporate operations, debt service and the Company's dividend payments. The principal sources of liquidity are cash generated from operations, cash on hand and borrowings under the Credit Agreement described below. Under the terms of the Credit Agreement, Regal Cinemas is restricted as to how much it can advance or distribute to Regal, its indirect parent. Since Regal is a holding company with no significant assets other than the stock of its subsidiaries, this restriction could impact Regal's ability to effect future debt or dividend payments, pay corporate expenses, repurchase or retire for cash its 53/4% Senior Notes Due 2022, its 53/4% Senior Notes Due 2023 and its 53/4% Senior Notes Due 2025. In addition, as described further below, the indentures under which the 53/4% Senior Notes Due 2022, the 53/4% Senior Notes Due 2023, and the 53/4% Senior Notes Due 2025 are issued limit the Company's (and its restricted subsidiaries') ability to, among other things, incur additional indebtedness, pay dividends on or make other distributions in respect of its capital stock, purchase or redeem capital stock, make loans or advances to its subsidiaries, or purchase, redeem or otherwise acquire or retire certain subordinated obligations.
Operating Activities
Our revenues are generated principally through admissions and concessions sales with proceeds received in cash or via credit cards at the point of sale. Our operating expenses are primarily related to film and advertising costs, rent and occupancy and payroll. Film costs are ordinarily paid to distributors within 30 days following receipt of admissions revenues and the cost of the Company’s concessions are generally paid to vendors approximately 30 to 35 days from purchase. Our current liabilities include items that will become due within 12 months. In addition, from time to time, we use cash from operations and borrowings to fund dividends in excess of net income attributable to controlling interest and cash flows from operating activities less cash flows from investing and other financing activities. As a result, at any given time, our balance sheet may reflect a working capital deficit.
Net cash flows provided by operating activities totaled approximately $349.1 million, $346.9 million and $346.6 million for the Fiscal 2014 Period, the Fiscal 2013 Period and the Fiscal 2012 Period, respectively. The $2.2 million increase in net cash flows generated by operating activities for the Fiscal 2014 Period as compared to the Fiscal 2013 Period increase was caused by a $40.1 million increase in net income excluding non-cash items, largely offset by a negative fluctuation in working capital activity of approximately $37.9 million. Working capital activity was primarily impacted by changes in accrued expense and other activity and deferred revenue, partially offset by changes in accounts receivable activity during the Fiscal 2014 Period as compared to the Fiscal 2013 Period. The change in accrued expense and other activity was primarily due to the timing of vendor payments associated with increased attendance and admissions revenues at our theatres during the latter part of the Fiscal 2014 Period. The change in deferred revenue was primarily due to increased redemptions during our 53rd week of operations in the Fiscal 2014 Period. The change in accounts receivable activity was attributable to the timing of collections as a result of the additional week of operations during Fiscal 2014 Period
The $0.3 million increase in net cash flows generated by operating activities for the Fiscal 2013 Period as compared to the Fiscal 2012 Period increase was caused by a positive fluctuation in working capital activity of approximately $63.3 million, partially offset by a $63.0 million decrease in net income excluding non-cash items. Working capital activity was primarily impacted by changes in accrued expense and other activity, accounts payable activity (primarily film rental liabilities) and income taxes payable during the Fiscal 2013 Period as compared to the Fiscal 2012 Period. The change in accrued expense and other activity and accounts payable activity was primarily due to the timing of film and certain other vendor payments associated with increased attendance and admissions revenues at our theatres during the latter part of the Fiscal 2013 Period. The change in income taxes payable activity during the Fiscal 2013 Period as compared to the Fiscal 2012 Period was primarily associated with the timing of our estimated federal and state income tax payments during such periods.
Investing Activities
Our capital requirements have historically arisen principally in connection with acquisitions of theatres, new theatre construction, strategic partnerships, adding new screens to existing theatres, upgrading the Company’s theatre facilities and replacing equipment. We fund the cost of capital expenditures through internally generated cash flows, cash on hand, landlord contributions and proceeds from disposition of assets and financing activities.
We intend to continue to grow our theatre circuit through selective expansion and acquisition opportunities. The Company has a formal and intensive review procedure for the authorization of capital projects, with the most important financial measure of acceptability for a discretionary non-maintenance capital project being whether its projected discounted cash flow return on investment meets or exceeds the Company’s internal rate of return targets. We currently expect capital expenditures (net of proceeds from asset sales and landlord contributions) for theatre development, expansion, upgrading and replacements to be in the range of approximately $135.0 million to $145.0 million in fiscal year 2015, exclusive of acquisitions.

35


As described further in Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, on March 31, 2014, the junior capital raised by DCIP in the initial financing transactions was paid in full by DCIP. In connection with this repayment, the Master Lease was amended to eliminate the incremental minimum rent payment provision of $2,000 per digital projection system.
During the Fiscal 2014 Period, the Company sold a total of 500,000 shares of RealD, Inc. common stock at prices ranging from $11.27 to $12.47 per share. In connection with the sales, the Company received approximately $6.0 million in aggregate net proceeds (after deducting related fees and expenses) and recorded a gain on sale of approximately $2.0 million.
During the Fiscal 2014 Period, we received approximately 0.4 million newly issued common units of National CineMedia in accordance with the annual adjustment provisions of the Common Unit Adjustment Agreement. This transaction caused a proportionate increase in the Company's ownership share in National CineMedia to 25.8 million common units. On a fully diluted basis, we own a 20.1% interest in NCM, Inc. as of January 1, 2015. On May 5, 2014, NCM, Inc. announced that it has entered into an agreement to acquire Screenvision, LLC for $375 million, consisting of cash and NCM, Inc. common stock. Consummation of the transaction is subject to antitrust clearance and other customary closing conditions. On November 3, 2014, the DOJ filed an antitrust lawsuit seeking to enjoin the proposed merger between NCM, Inc. and Screenvision, LLC. If NCM, Inc. does not receive this approval or if the closing conditions in the agreement cannot be satisfied, NCM, Inc. may be required to pay a termination fee of approximately $28.8 million. National CineMedia has indemnified NCM, Inc. for the termination fee. Accordingly, each founding member bears a pro rata portion of this fee based upon their ownership percentage in National CineMedia. As of January 1, 2015, National CineMedia did not have a liability recorded for this termination fee as it does not believe payment to be probable.
Net cash flows used in investing activities totaled approximately $150.5 million, $258.7 million and $183.4 million for the Fiscal 2014 Period, the Fiscal 2013 Period and the Fiscal 2012 Period, respectively. The $108.2 million decrease in cash flows used in investing activities during the Fiscal 2014 Period, as compared to the Fiscal 2013 Period, was primarily attributable to the impact of the $194.4 million acquisition of Hollywood Theaters during the Fiscal 2013 Period, partially offset by a $50.3 million increase in capital expenditures (net of proceeds from disposals) during the Fiscal 2014 Period and the impact of proceeds of $40.9 million related to the sale of NCM, Inc. common stock during the Fiscal 2013 Period. The $75.3 million increase in cash flows used in investing activities during the Fiscal 2013 Period, as compared to the Fiscal 2012 Period, was primarily attributable to the impact of the $194.4 million acquisition of Hollywood Theaters during the Fiscal 2013 Period and a $21.4 million increase in capital expenditures (net of proceeds from disposals) during the Fiscal 2013 Period, partially offset by the impact of proceeds of $40.9 million related to the sale of NCM, Inc. common stock, $5.9 million received related to the sale of RealD, Inc. common stock, and a $1.3 million decrease in cash contributions to our various investments in non-consolidated entities during the Fiscal 2013 Period.
Financing Activities
As described further in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, on March 11, 2014, the Company issued the 53/4% Senior Notes Due 2022 in a registered public offering. Net proceeds from the offering were approximately $760.1 million, after deducting underwriting discounts and offering expenses. In connection with the issuance of the 53/4% Senior Notes Due 2022, on February 25, 2014, the Company commenced tender offers to purchase for cash its 91/8% Senior Notes and Regal Cinemas' 85/8% Senior Notes. Total offer consideration for each $1,000 principal amount of 91/8% Senior Notes tendered was $1,081.97, including an early tender premium payment of $30.00 per $1,000 principal amount of 91/8% Senior Notes for those holders who properly tendered their 91/8% Senior Notes on or before March 10, 2014. Total offer consideration for each $1,000 principal amount of Regal Cinemas' 85/8% Senior Notes tendered was $1,070.73, including an early tender premium payment of $30.00 per $1,000 principal amount of 85/8% Senior Notes for those holders who properly tendered their 85/8% Senior Notes on or before March 10, 2014. Upon consummation of the tender offers, approximately $222.3 million aggregate principal amount of the 91/8% Senior Notes were purchased and approximately $355.8 million aggregate principal amount of the 85/8% Senior Notes were purchased. Total additional consideration paid in the tender offers, including the early tender premium payment, was approximately $43.4 million. The tender offers were financed with a portion of the net proceeds from the issuance of the 53/4% Senior Notes Due 2022. As discussed further under Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, on April 10, 2014, the remaining 91/8% Senior Notes and 85/8% Senior Notes were fully redeemed by the Company and Regal Cinemas for an aggregate purchase price of $144.9 million (including accrued and unpaid interest) using the remaining net proceeds from 53/4% Senior Notes Due 2022 and available cash on hand. As a result the tender offers and the subsequent redemption, the Company recorded an aggregate $62.4 million loss on extinguishment of debt during the Fiscal 2014 Period.
As of January 1, 2015, we had approximately $965.8 million aggregate principal amount outstanding under the Term Facility, $250.0 million aggregate principal amount outstanding under the 53/4% Senior Notes Due 2025, $250.0 million aggregate principal amount outstanding under the 53/4% Senior Notes Due 2023 and $775.0 million aggregate principal amount outstanding under the 53/4% Senior Notes Due 2022. As of January 1, 2015, we had approximately $2.7 million outstanding in letters of credit, leaving approximately $82.3 million available for drawing under the Revolving Facility.

36


As of January 1, 2015, we are in full compliance with all agreements, including all related covenants, governing our outstanding debt obligations.
The Company is rated by nationally recognized rating agencies. The significance of individual ratings varies from agency to agency. However, companies assigned ratings at the top end of the range have, in the opinion of certain rating agencies, the strongest capacity for repayment of debt or payment of claims, while companies at the bottom end of the range have the weakest capability. Ratings are always subject to change and there can be no assurance that the Company's current ratings will continue for any given period of time. An upgrade or downgrade of the Company's debt ratings, depending on the extent, could affect the cost to borrow funds. There were no upgrades or downgrades to the Company's debt ratings that materially impacted our ability or cost to borrow funds during the fiscal year ended January 1, 2015.
During the Fiscal 2014 Period, Regal paid four quarterly cash dividends of $0.22 per share on each outstanding share of the Company's Class A and Class B common stock, or approximately $138.6 million in the aggregate. In addition, on December 15, 2014, Regal paid an extraordinary cash dividend of $1.00 per share on each outstanding share of its Class A and Class B common stock, or approximately $156.2 million. On February 12, 2015, the Company declared a cash dividend of $0.22 per share on each share of the Company's Class A and Class B common stock (including outstanding restricted stock), payable on March 13, 2015, to stockholders of record on March 3, 2015. These dividends have been or will be funded through cash flow from operations and available cash on hand. We, at the discretion of the Board of Directors and subject to applicable law, anticipate paying regular quarterly dividends on our Class A and Class B common stock for the foreseeable future. The amount, if any, of the dividends to be paid in the future will depend upon our then available cash, anticipated cash needs, overall financial condition, loan agreement restrictions, future prospects for earnings and cash flows, as well as other relevant factors.
Net cash flows provided by (used in) financing activities were approximately $(332.4) million, $83.2 million and $(306.7) million for the Fiscal 2014 Period, the Fiscal 2013 Period and the Fiscal 2012 Period, respectively. The net increase in cash flows used in financing activities during the Fiscal 2014 Period as compared to the Fiscal 2013 Period of $415.6 million was primarily attributable to $764.3 million of cash used to repurchase our 91/8% Senior Notes and 85/8% Senior Notes during the Fiscal 2014 Period, the impact of $500.0 million in gross proceeds from the issuance of our 53/4% Senior Notes Due 2025 and 53/4% Senior Notes Due 2023 in the Fiscal 2013 Period and a $162.6 million increase in dividends paid to stockholders during the 2014 Fiscal Period as compared to the 2013 Fiscal Period, partially offset by $775.0 million in gross proceeds received in connection with the Fiscal 2014 Period issuance of our 53/4% Senior Notes Due 2022 and the impact of $244.3 million of cash used to repurchase a portion of our 91/8% Senior Notes during the Fiscal 2013 Period. The net increase in cash flows provided by financing activities during the Fiscal 2013 Period as compared to the Fiscal 2012 Period of $389.9 million was primarily attributable to the impact of receiving $250.0 million in gross proceeds from the issuance of our 53/4% Senior Notes Due 2025, receiving $250.0 million in gross proceeds from the issuance of our 53/4% Senior Notes Due 2023 in the Fiscal 2013 Period and a $155.1 million decrease in dividends paid to stockholders during the 2013 Fiscal Period as compared to the 2012 Fiscal Period, partially offset by the impact of $244.3 million of cash used to repurchase a portion of our 91/8% Senior Notes, $13.5 million of cash paid for debt acquisition costs during the Fiscal 2013 Period and a $3.1 million increase in net payments on long-term debt obligations during the Fiscal 2013 Period.
EBITDA
Earnings before interest, taxes, depreciation and amortization ("EBITDA") was approximately $512.7 million, $606.2 million and $549.9 million for the Fiscal 2014 Period, the Fiscal 2013 Period and the Fiscal 2012 Period, respectively. The decrease in EBITDA for the Fiscal 2014 Period was primarily attributable to a decline in operating income as described above, the $62.4 million loss on debt extinguishment associated with the refinance of approximately $711.4 million aggregate principal amount of the Company's 91/8% Senior Notes and Regal Cinemas' 85/8% Senior Notes during the Fiscal 2014 Period and the impact of the $30.9 million gain on sale of NCM, Inc. common stock recorded during the Fiscal 2013 Period, partially offset by the impact of the $30.3 million loss on debt extinguishment related to the Fiscal 2013 Period refinance of approximately $213.6 million aggregate principal amount of the Company's 91/8% Senior Notes. The increase in EBITDA for the Fiscal 2013 Period was primarily attributable to an increase in operating income as described above, the impact of the gain on sale of NCM, Inc. common stock and higher equity earnings generated by certain of our equity method investments, partially offset by the impact of the $30.3 million loss on debt extinguishment related to the repurchase of approximately $213.6 million aggregate principal amount of the Company's 91/8% Senior Notes. The Company uses EBITDA as a supplemental liquidity measure because we find it useful to understand and evaluate our capacity, excluding the impact of interest, taxes, and non-cash depreciation and amortization charges, for servicing our debt, paying dividends and otherwise meeting our cash needs, prior to our consideration of the impacts of other potential sources and uses of cash, such as working capital items. We believe that EBITDA is useful to investors for these purposes as well. EBITDA should not be considered an alternative to, or more meaningful than, net cash provided by or used in operating activities, as determined in accordance with U.S. generally accepted accounting principles ("GAAP"), since it omits the impact of interest, taxes and changes in working capital that use or provide cash (such as receivables, payables and inventories) as well as the sources or uses of cash associated

37


with changes in other balance sheet items (such as long-term loss accruals and deferred items). Because EBITDA excludes depreciation and amortization, EBITDA does not reflect any cash requirements for the replacement of the assets being depreciated and amortized, which assets will often have to be replaced in the future. Further, EBITDA, because it also does not reflect the impact of debt service, income taxes, cash dividends, capital expenditures and other cash commitments from time to time as described in more detail elsewhere in this Form 10-K, does not represent how much discretionary cash we have available for other purposes. Nonetheless, EBITDA is a key measure expected by and useful to our fixed income investors, rating agencies and the banking community all of whom believe, and we concur, that these measures are critical to the capital markets’ analysis of our ability to service debt, fund capital expenditures, pay dividends and otherwise meet cash needs, respectively. We also evaluate EBITDA because it is clear that movements in these non-GAAP measures impact our ability to attract financing and pay dividends. EBITDA, as calculated, may not be comparable to similarly titled measures reported by other companies. A reconciliation of EBITDA to net cash provided by operating activities is calculated as follows (in millions):
 
 
Fiscal 2014 Period
 
Fiscal 2013 Period
 
Fiscal 2012 Period
EBITDA
 
$
512.7

 
$
606.2

 
$
549.9

Interest expense, net
 
(126.5
)
 
(141.3
)
 
(135.0
)
Provision for income taxes
 
(73.4
)
 
(107.0
)
 
(89.5
)
Deferred income taxes
 
6.6

 
(11.8
)
 
52.4

Changes in operating assets and liabilities
 
(42.9
)
 
(5.0
)
 
(68.3
)
Loss on extinguishment of debt
 
62.4

 
30.7

 

Gain on sale of NCM, Inc. common stock
 

 
(30.9
)
 

Landlord contributions
 
8.8

 
3.5

 

Other items, net
 
1.4

 
2.5

 
37.1

Net cash provided by operating activities
 
$
349.1

 
$
346.9

 
$
346.6

Interest Rate Swaps
As described in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, as of January 1, 2015, the Company maintained three effective hedging relationships via three distinct interest rate swap agreements (maturity dates ranging from June 30, 2015 through December 31, 2016), which require Regal Cinemas to pay interest at fixed rates ranging from 0.817% to 1.820% and receive interest at a variable rate. These interest rate swap agreements are designated to hedge $450.0 million of variable rate debt obligations at an effective rate of approximately 3.88% as of January 1, 2015.
Under the terms of the Company’s three effective interest rate swap agreements as of January 1, 2015 detailed below, Regal Cinemas currently receives interest at a variable rate based on the 3-month LIBOR on the first $300.0 million of aggregate borrowings under the Term Facility and receives 1-month LIBOR on the next $150.0 million of borrowings under the Term Facility. In addition, the Company will receive 1-month LIBOR on the next $200.0 million of borrowings under the Term Facility once the remaining interest rate swap agreement becomes effective. With respect to the Company's three effective interest rate swap agreements as of January 1, 2015, the 3-month LIBOR rate and the 1-month LIBOR rate on each respective reset date determines the variable portion of the interest rate swaps for the following three-month and one-month periods, respectively. The interest rate swaps settle any accrued interest for cash on the last day of each calendar month or calendar quarter, as applicable, until expiration. At such dates, the differences to be paid or received on the interest rate swaps will be included in interest expense. No premium or discount was incurred upon the Company entering into the interest rate swaps, because the pay and receive rates on the interest rate swaps represented prevailing rates for the counterparty at the time the interest rate swaps were entered into. The interest rate swaps qualify for cash flow hedge accounting treatment and as such, the change in the fair value of the interest rate swaps are recorded on the Company’s consolidated balance sheet as an asset or liability with the effective portion of the interest rate swaps’ gains or losses reported as a component of other comprehensive income (loss) and the ineffective portion reported in earnings (interest expense). As interest expense is accrued on the debt obligation, amounts in accumulated other comprehensive income (loss) related to the interest rate swaps will be reclassified into earnings to obtain a net cost on the debt obligation equal to the effective yield of the fixed rate of each swap. In the event that an interest rate swap is terminated prior to maturity, gains or losses accumulated in other comprehensive income or loss remain deferred and are reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings. 
Below is a summary of the Company’s current interest rate swap agreements designated as hedge agreements as of January 1, 2015:

38


Nominal Amount
 
 
Effective Date
 
Base Rate
 
Receive Rate
 
Expiration Date
$200.0 million
(1)
 
June 30, 2012
 
1.820%
 
3-month LIBOR
 
June 30, 2015
$100.0 million
(1)
 
December 31, 2012
 
1.325%
 
3-month LIBOR
 
December 31, 2015
$150.0 million
(2)
 
December 31, 2013
 
0.817%
 
1-month LIBOR
 
December 31, 2016
$200.0 million
(3)
 
June 30, 2015
 
1.828%
 
1-month LIBOR
 
June 30, 2018
 ________________________________
(1)
During the year ended December 29, 2011, Regal Cinemas entered into two hedging relationships via two distinct interest rate swap agreements with effective dates beginning on June 30, 2012 and December 31, 2012, respectively, and maturity terms ending on June 30, 2015 and December 31, 2015, respectively.  These swaps require Regal Cinemas to pay interest at fixed rates ranging from 1.325% to 1.820% and receive interest at a variable rate. The interest rate swaps are designated to hedge $300.0 million of variable rate debt obligations.

(2)
During the year ended December 27, 2012, Regal Cinemas entered into one additional hedging relationship via one distinct interest rate swap agreement with an effective date beginning on December 31, 2013 and a maturity date of December 31, 2016. This swap requires Regal Cinemas to pay interest at a fixed rate of 0.817% and receive interest at a variable rate. The interest rate swap is designated to hedge $150.0 million of variable rate debt obligations.

(3)
During the year ended December 26, 2013, Regal Cinemas entered into one additional hedging relationship via one distinct interest rate swap agreement with an effective date beginning on June 30, 2015, and a maturity date of June 30, 2018. This swap will require Regal Cinemas to pay interest at a fixed rate of 1.828% and receive interest at a variable rate. The interest rate swap is designated to hedge $200.0 million of variable rate debt obligations.

The fair value of the Company's interest rate swaps is based on Level 2 inputs as described in ASC Topic 820, Fair Value Measurements and Disclosures, which include observable inputs such as dealer quoted prices for similar assets or liabilities, and represents the estimated amount Regal Cinemas would receive or pay to terminate the agreements taking into consideration various factors, including current interest rates, credit risk and counterparty credit risk. The counterparties to the Company's interest rate swaps are major financial institutions. The Company evaluates the bond ratings of the financial institutions and believes that credit risk is at an acceptably low level. See Note 13 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional discussion of the Company's interest rate swaps' fair value estimation methods and assumptions.
Sale-Leaseback Transactions
For information regarding our various sale and leaseback transactions, refer to Note 6 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.
Contractual Cash Obligations and Commitments
The Company has assumed long-term contractual obligations and commitments in the normal course of business, primarily debt obligations and non-cancelable operating leases. Other than the operating leases that are detailed below, the Company does not utilize variable interest entities or any other form of off-balance sheet financing. As of January 1, 2015, the Company's estimated contractual cash obligations and commercial commitments over the next several periods are as follows (in millions):
 
 
Payments Due By Period
 
 
Total
 
Current
 
13 - 36 months
 
37 - 60 months
 
After 60 months
Contractual Cash Obligations:
 
 
 
 
 
 
 
 
 
 
Debt obligations(1)
 
$
2,252.6

 
$
13.8

 
$
961.0

 
$
2.8

 
$
1,275.0

Future interest on debt obligations(2)
 
691.3

 
105.4

 
196.7

 
148.4

 
240.8

Capital lease obligations, including interest(3)
 
22.0

 
3.4

 
6.0

 
1.8

 
10.8

Lease financing arrangements, including interest(3)
 
138.9

 
20.7

 
41.3

 
39.8

 
37.1

Purchase commitments(4)
 
38.4

 
15.4

 
23.0

 

 

Operating leases(5)
 
2,997.0

 
425.2

 
784.8

 
639.2

 
1,147.8

FIN 48 liabilities(6)
 
0.7

 
0.7

 

 

 

Total
 
$
6,140.9

 
$
584.6

 
$
2,012.8

 
$
832.0

 
$
2,711.5


39


 
 
Amount of Commitment Expiration per Period
 
 
Total Amounts Available
 
Current
 
13 - 36 months
 
37 - 60 months
 
After 60 months
Other Commercial Commitments(7)
 
$
85.0

 
$

 
$
85.0

 
$

 
$

_______________________________________________________________________________
(1)
These amounts are included on our consolidated balance sheet as of January 1, 2015. Our Credit Agreement provides for mandatory prepayments under certain scenarios. See Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information about our long-term debt obligations and related matters.
(2)
Future interest payments on the Company's unhedged debt obligations as of January 1, 2015 (consisting of approximately $515.8 million of variable interest rate borrowings under the Term Facility, $775.0 million outstanding under the 53/4% Senior Notes Due 2022, $250.0 million outstanding under the 53/4% Senior Notes Due 2025, $250.0 million outstanding under the 53/4% Senior Notes Due 2023 and approximately $11.8 million of other debt obligations) are based on the stated fixed rate or in the case of the $515.8 million of variable interest rate borrowings under the Term Facility, the current interest rate specified in our Credit Agreement as of January 1, 2015 (2.67%). Future interest payments on the Company's hedged indebtedness as of January 1, 2015 (the remaining $450.0 million of borrowings under the Term Facility) are based on (1) the applicable margin (as defined in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K) as of January 1, 2015 (2.50%) and (2) the expected fixed interest payments under the Company's interest rate swap agreements, which are described in further detail under Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.
(3)
The present value of these obligations, excluding interest, is included on our consolidated balance sheet as of January 1, 2015. Future interest payments are calculated based on interest rates implicit in the underlying leases, which have a weighted average interest rate of 11.24%, maturing in various installments through 2028. Refer to Note 5 to the consolidated financial statements included in Part II, Item 8