investor presentation mike campbell, kurt hall & amy miles
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Investor Presentation Mike Campbell, Kurt Hall & Amy Miles. Forward-looking Statements. - PowerPoint PPT PresentationTRANSCRIPT
Investor PresentationMike Campbell, Kurt Hall & Amy Miles
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Forward-looking StatementsForward-looking Statements
This presentation includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included herein may constitute forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from the Company’s
expectations are disclosed in the risk factors contained in the Company’s prospectus dated May 8, 2002. All forward-looking
statements are expressly qualified in the entirety by such factors.
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Overview of Regal Entertainment GroupOverview of Regal Entertainment Group
Largest Domestic Largest Domestic Theatre CircuitTheatre Circuit
Complementary Growth Complementary Growth BusinessesBusinesses
$461M LTM $461M LTM EBITDAEBITDA
21% Margin21% Margin
$2.2 Billion $2.2 Billion LTM LTM
RevenuesRevenues
250+ 250+ Million Million
AttendeesAttendees
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++
Investment HighlightsInvestment Highlights
++Exciting Exciting Growth Growth
OpportunitiesOpportunities
Strong Free Strong Free Cash Flow & Cash Flow &
DividendDividend
Steady Steady Industry Industry
Growth & Solid Growth & Solid FundamentalsFundamentals
Industry Industry Leading Leading Theatre Theatre
OperationsOperations
++
Long-Term Long-Term Earnings and Earnings and
Cash Flow Cash Flow Opportunities Opportunities =
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Steady Industry Growth & Solid Steady Industry Growth & Solid Industry FundamentalsIndustry Fundamentals
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Positive Industry RationalizationPositive Industry Rationalization
Screen Count – Year over Year Growth Screen Count – Year over Year Growth
3.7%2.5% 1.8%
4.2%4.5%
7.1% 7.6%9.1%
(2.3%)(2.3%)
7.4%
-3.0%
0.0%
3.0%
6.0%
9.0%
'65 -'91
'92 '93 '94 '95 '96 '97 '98 '99 '00 '01
2x LT Growth Rate2x LT Growth Rate
First Screen First Screen Decline Decline
Since 1963Since 1963
‘95 - ‘99: Unprecedented Screen Growth
‘00 - ‘02: Major Reduction of 1800+ Screens
2002+: No New Box, Reduced New Developments
Screen Reduction Driving Box Office per ScreenScreen Reduction Driving Box Office per Screen
Source: NATO
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Consistent Growth in DemandConsistent Growth in Demand
$3
$4
$5
$6
$7
$8
$9
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Healthy Attendance Trends– 3% CAGR over last 10 years– Growth in 3 of the last 5 recessions – 1.5 billion patrons in 2001, up 5%
Consistent Box Office Growth– 10th consecutive record year– $8.4 billion in 2001, up 10%
Stable Annual Price Increases– 3% CAGR over the last 10 years
($ in billions)
Box Office RevenueBox Office Revenue
Steady Box Office GrowthSteady Box Office Growth
6.2% CAGR
6.2% CAGR
Source: NATO
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Beneficiary of Fundamental Patterns & Upcoming Beneficiary of Fundamental Patterns & Upcoming Film CalendarFilm Calendar
Extended Release Calendar– Staggering releases reduces
head-to-head competition, reduces seasonality and broadens patron traffic
Increased Breadth of Films– Increasing appeal to a wider
demographic
Increased Emphasis on Theatrical Success
– Marketing Expenditures by Studios increasing at a 10% CAGR since 1995
Q4 2002Q4 2002Solid FundamentalsSolid Fundamentals
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Beneficiary of Fundamental Patterns & Upcoming Beneficiary of Fundamental Patterns & Upcoming Film CalendarFilm Calendar
20032003
Extended Release Calendar– Staggering releases reduces
head-to-head competition, reduces seasonality and broadens patron traffic
Increased Breadth of Films– Increasing appeal to a wider
demographic
Increased Emphasis on Theatrical Success
– Marketing Expenditures by Studios increasing at a 10% CAGR since 1995
Solid FundamentalsSolid Fundamentals
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Industry Leading Theatre Industry Leading Theatre OperationsOperations
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National, Geographically Diverse FootprintNational, Geographically Diverse Footprint
As of 9/26/02As of 9/26/02
5
89
9
29
2 13
26
37
7
4
11
51
2098
15
1
6
4
1
4
7 2526
35
2511
2 8
13
15
62
12
1
23% 23% Market Market ShareShare
5,711 5,711 ScreensScreens
Largest Largest Domestic Domestic ExhibitorExhibitor
530 530 TheatresTheatres
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Rationalized Theatre Portfolio
61% Screens Built Since 1997
60% Feature Stadium Seating
10.5 Screens / Theatre
75% Theatres with 10+ Screens
9 of Top 10, 23 of Top 25 DMAs
Improved Experience Driving DemandImproved Experience Driving Demand
Modern Theatre Circuit
Outperforms Industry
Minimal Future Cap-X
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20%+ EBITDA Margins20%+ EBITDA Margins
Leading EBITDA MarginsLeading EBITDA Margins
16.3%
18.4%18.2% 18.5%
15.4%
13.0%
15.4%
20.0%
16.0%
19.1%
22.9%
20.0%21.7%
23.0%
10%
12%
14%
16%
18%
20%
22%
24%
1995 1996 1997 1998 1999 2000 2001
Industry Average*Standalone Regal Cinemas
* Industry Includes AMC, Carmike, Loews and Cinemark.* Industry Includes AMC, Carmike, Loews and Cinemark.
Superior Operations Management– Lower rent and occupancy costs
– Effective controls on theatre-level costs
– National contracts and scale drive margins
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Proven Ability to Integrate AcquisitionsProven Ability to Integrate Acquisitions
11 Successful Acquisitions Since 1995
Theatre-Level Cash Flow MarginTheatre-Level Cash Flow Margin
24.1%
29.8%
23.1%23.3%
16.0%
21.1%
0%
5%
10%
15%
20%
25%
30%
35%
National Litchfield Cobb
Pre-Acquisition Post-Acquisition
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Steady Industry GrowthSteady Industry Growth
On-track to realize $30 - $40 million of synergies
– G&A reductions
– Concession synergies
– Reductions in advertising expense and other theatre operating costs
Expect continued benefits during the first half of 2003
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Simple Growth StrategySimple Growth Strategy
Continue Core Theatre Business Momentum
Increase Theatre Margins
Capitalize on Consolidation Opportunities
Pursue High Margin Ancillary Business Opportunities
Generating significant Free Cash FlowGenerating significant Free Cash Flow
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Regal CineMediaRegal CineMedia
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Unique National Digital Theatre NetworkUnique National Digital Theatre Network
Transforming the Theatre into a Unique Advertising, Transforming the Theatre into a Unique Advertising, Promotional and Communications PlatformPromotional and Communications Platform
First of Its Kind
Internally Funded
Initially Focused on Digital
Advertising
Valuable Long-Term Platform
Complementary programming
Digital projectors
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RCM’s Competitive AdvantagesRCM’s Competitive Advantages
Dedicated Focus on Complementary New Business Opportunities
– High level management, sales and advertising expertise
Direct Control of Theatre Venues and Patron Data– Ability to create of wider variety of products and services
– Better control of delivery of advertising and promotional services
– Attendance data enables capture of valuable in-depth research
Existing Technology Platform Ready – Network operating center in use
– Satellite delivery of digital content implemented in initial theatres
– Sales, distribution and billing software installed
– On-going linking of theatres to network represents simple connection process
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Theatres Provide Better Recall– High impact– Captive audience
Increasing Fragmentation Among Traditional Mediums
Advertisers Seeking New Platforms to Create Consumer Touchpoints
Advertising Revenue OpportunityAdvertising Revenue Opportunity
Small Shift Small Shift in Ad in Ad
SpendingSpending
50% - 70%50% - 70%EBITDA EBITDA MarginsMargins
++ ==Large Large
Impact on Impact on EBITDAEBITDACPMs
$17.8
$0.1
$47.8
$2.4
$0
$10
$20
$30
$40
$50
$60
Television Print Outdoor Cinema
2001E Advertising Market Sizes2001E Advertising Market Sizes
($ in billions)
Existing Existing Market Only Market Only
$100+ million$100+ million
$19 $11 $4 $25+$25+
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DMAs % National Box Regal Market Share
New York / LA 17.7%
Top 10 40.3%
Top 25 62.1%
Top 50 77.7%
#1 Market Share in Top DMA’s#1 Market Share in Top DMA’s
#1
#1
#1
#1
Source: EDI
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Financial OverviewFinancial Overview
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Revenue and EBITDA PerformanceRevenue and EBITDA Performance
$289 $294
$351
$461
20.8%
17.5%
16.1%17.3%
$0
$100
$200
$300
$400
$500
1999 2000 2001 LTM
14%
16%
18%
20%
22%
24%
EBITDA Margin
EBITDA*EBITDA*($ in millions)
Revenue*Revenue*($ in billions)
*Pro Forma for the combination of Regal, Edwards and UA Excludes results of theatres closed in connection with reorganizations 2001 excludes the 53rd week in UA’s fiscal year - $17.9m of revenues and $7.3m of EBITDA.
$1.7
$1.8
$2.0
$2.2
5,71
1
5,88
65,91
1
5,70
9
$1.0
$1.3
$1.5
$1.8
$2.0
$2.3
1999 2000 2001 LTM
5,600
5,700
5,800
5,900
6,000
6,100
6,200
RevenueEnding Screen Count
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2002 EBITDA Margin Growth2002 EBITDA Margin Growth
Regal Improving EBITDA Regal Improving EBITDA Margins in 2002 vs. 2001 Margins in 2002 vs. 2001
$289 $294
$351
$461
$0
$100
$200
$300
$400
$500
1999 2000 2001 LTM
14%
16%
18%
20%
22%
24%
EBITDA Margin
• Strong box office growth coupled with maximizing operating leverage
• Realized integration synergies
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Conservative Leverage and Excellent LiquidityConservative Leverage and Excellent Liquidity
Conservative Capital StructureConservative Capital Structure
(1) As of 11/1/02(2) Net Debt + Leases / EBITDAR = 3.5x
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Strong Free Cash FlowStrong Free Cash Flow
Significant Free Cash Flow Funds Growth OpportunitiesSignificant Free Cash Flow Funds Growth Opportunities
($ in millions)
(1) Excludes 2002 reorganization payments of approximately $81 million
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Financial Flexibility for Growth StrategyFinancial Flexibility for Growth Strategy
Conservative Conservative CapitalizationCapitalization
$200M+ Annual $200M+ Annual Free Cash FlowFree Cash FlowBefore DividendBefore Dividend++
Flexibility to Execute Growth StrategyFlexibility to Execute Growth Strategy
Capitalize on prudent acquisition opportunities
Pursue high margin ancillary business
Make selective investments in asset base
Provide incremental returns through dividends