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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 December 26, 2002

Commission file number: 033-49598

UNITED ARTISTS THEATRE CIRCUIT, INC.
(Exact name of registrant as Specified in its Charter)

Registrant's Telephone Number, Including Area Code: 865/922-1123

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

        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 o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of regulation S-K 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 an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No ý

        State the aggregate market value of the voting stock held by non-affiliates of the registrant. N/A

        The number of shares outstanding of $1.00 par value common stock at March 26, 2003 was 100 shares.

TABLE OF CONTENTS

UNITED ARTISTS THEATRE CIRCUIT, INC.

PART I

        The information in 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" as well as those discussed elsewhere in this Form 10-K.

Item 1. BUSINESS

THE COMPANY

        United Artists Theatre Company ("the Parent" or "United Artists") is the parent company of United Artists Theatre Circuit, Inc., a Maryland corporation founded in 1926 ("we," "us," "our," the "Company" or "UATC"), and United Artists Realty Company ("UAR"), which is the parent company of United Artists Properties I Corp. ("Prop I") and United Artists Properties II Corp. ("Prop II"). UATC leases certain theatres from both UAR and one of UAR's wholly owned subsidiaries, Prop I. The terms UATC and the Company shall be deemed to include the respective subsidiaries of such entity when used in discussions included herein regarding the current operations or assets of such entity.

        United Artists became a wholly owned subsidiary of Regal Entertainment Holdings, Inc. ("REH") through a series of transactions in April and August 2002. REH is a wholly owned subsidiary of Regal Entertainment Group ("Regal"), which acquired Regal Cinemas Corporation ("Regal Cinemas"), United Artists, Edwards Theatres, Inc. ("Edwards") and Regal CineMedia Corporation ("Regal CineMedia") through a series of transactions on April 12, 2002. For a detailed discussion of the transactions resulting in Regal's acquisition of its subsidiaries, see Note 3 to the financial statements included in Part II, Item 8, of this Form 10-K. UATC, United Artists and certain of its subsidiaries emerged from bankruptcy reorganization under Chapter 11 of Title 11 of the United States Code on March 2, 2001. For a detailed discussion of these bankruptcy proceedings, see Note 1 to such financial statements.

DESCRIPTION OF BUSINESS

        At December 26, 2002, including managed theatres, UATC operated 1,512 screens in 188 theatres in 21 states with over 64 million annual attendees. The UATC operated theatres are managed by Regal Cinemas, Inc., a wholly owned subsidiary of Parent, pursuant to a management arrangement described below. The Company primarily operates multi-screen theatres and has an average of 8.0 screens per location. Theatre operations in seven states (California, New York, Pennsylvania, Florida, Texas, Mississippi and Colorado) accounted for approximately 67.0% and 66.6% of UATC's total theatres and screens, respectively, at December 26, 2002 and 66.5% of UATC's theatrical revenue for the fiscal year ended December 26, 2002. The Company seeks to locate each theatre where it will be the sole or leading exhibitor within a particular geographic film-licensing zone. Management believes that at December 26, 2002, approximately 72.4% of the Company's screens were located in film licensing zones in which the Company was the sole exhibitor.

        The Company has historically upgraded its theatre circuit by opening new theatres, adding new screens to existing theatres, and strategically closing and disposing of under-performing theatres. This strategy has served to establish and enhance the Company's presence in its geographic markets. Approximately 54.8% of the Company's screens are in theatres with 10 or more screens. At December 26, 2002, UATC operates 40 theatres (480 screens) which offer stadium seating, representing 31.7% of UATC's screens. Virtually all of the theatres UATC has built or renovated since 1997 have been state-of-the-art, 9 to 18 screen multiplex theatres with stadium seating, high-backed rocking seats, digital

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sound, expanded concession areas and other state-of-the-art design features and amenities. These state-of-the-art amenities will be included in UATC's renovations to existing theatres as well as construction of any newly built theatres. As compared to the prior generation of non-stadium theatres, UATC believes that these theatres provide a higher quality entertainment experience for patrons and significant operating efficiencies and improved economics for UATC.

        In connection with Regal's acquisition of its subsidiaries, as more fully described in Note 3 to the financial statements included in Part II, Item 8, of this Form 10-K, Regal Cinemas, Inc. agreed to manage the theatre operations of UATC and its subsidiaries pursuant to a form management agreement, the terms of which have been agreed upon in principal.

INDUSTRY OVERVIEW

        The domestic motion picture exhibition industry has historically maintained steady growth in revenues and attendance. Since 1965, total box office revenues have grown at a compound annual growth rate of approximately 6% and annual attendance has grown to approximately 1.6 billion attendees in 2002. The industry has been relatively unaffected by downturns in the economic cycle, with total box office revenues and attendance growing in three of the last five recessions. In 2002, total box office revenues increased for the eleventh consecutive year increasing by approximately 13% to $9.5 billion, and attendance grew approximately 9% to 1.6 billion attendees.

        During the late 1990's, the domestic motion picture exhibition industry underwent a period of extraordinary new theatre construction and re-screening of older theatres. From 1996 to 1999, the number of screens increased at a compound annual growth rate of approximately 8%, which was more than double the industry's screen growth rate of approximately 3.5% from 1965 to 1995. The aggressive building strategies undertaken by exhibitors resulted in intensified competition in once stable markets and rendered many older theatres obsolete more rapidly than anticipated. This effect, together with the fact that many older theatres were under long-term, non-cancelable leases, created an oversupply of screens, which caused both attendance per screen and revenue per screen to decline. Most major exhibitors used extensive debt financing to fund their expansion efforts and experienced significant financial challenges in 1999 and 2000.

        In 2000 and 2001, substantially all of the major exhibitors of motion pictures reduced their expansion plans and implemented screen rationalization plans to close under-performing theatres. During this period, the number of screens declined by approximately 1,800, the first screen decline since 1963. This screen count rationalization has benefited exhibitors as patrons of closed theatres have migrated to remaining theatres, thereby increasing industry-wide attendance per screen and operating efficiencies.

        The recent industry expansion was primarily driven by major exhibitors upgrading their asset bases to an attractive megaplex format that typically included 10 or more screens per theatre and adding enhanced features such as stadium seating, improved projection quality and superior sound systems. From 1996 to 1999, the five largest motion picture exhibitors spent over $4.1 billion on capital expenditures to expand and upgrade their theatre circuits.

        We believe that another evolution of theatre formats beyond the current megaplex is unlikely to occur in the foreseeable future. We 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. In addition, for the foreseeable future we do not believe that additional major amenities will be required to meaningfully enhance the moviegoing experience. Consequently, we believe major exhibitors have reduced capital spending and the rate of new screen growth substantially.

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INDUSTRY TRENDS

        We believe that the U.S. motion picture exhibition industry will benefit from the following trends:

        Increased Marketing of New Releases by Studios.    Movie studios have increased marketing expenditures per new film at a compound annual growth rate of approximately 8% from 1995 to 2002. Because domestic movie theatres are the primary 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, including home video, cable television, broadcast television and international releases. We believe that movie studios have placed an increased emphasis on theatrical success because these secondary distribution channels represent important and growing sources of additional revenues.

        Affordable and Increasingly Attractive Form of Entertainment.    We believe that patrons are attending movies more frequently because movie-going is convenient, affordable and attractively priced relative to other forms of out-of-home entertainment. The average price per patron continues to compare favorably to other out-of-home entertainment alternatives such as concerts and sporting events. Since 1992, average movie ticket prices have increased at a compound annual growth rate of only 3%, while ticket prices for professional sporting events and concerts have increased at approximately three times that rate. Over the same time period, per capita movie attendance has grown from 4.6 to 5.7 times per year.

        Ongoing Screen Rationalization.    In 2000 and 2001, substantially all of the major motion picture exhibitors reduced their expansion plans and implemented screen rationalization programs to close under-performing theatres. This screen count rationalization benefits exhibitors as patrons of closed theatres migrate to remaining theatres, thereby increasing industry-wide attendance per screen and operating efficiencies.

        Model Facilities Lower Future Capital Requirements.    We believe that the modern, 10 to 18 screen megaplex is the appropriate facility for most markets. Over the last several years, major exhibitors spent substantial capital upgrading their asset bases, including the development of the megaplex format and introducing enhanced amenities such as stadium seating and digital sound. Given the substantial capital spent on theatre circuit expansion and facilities upgrades, we believe that major exhibitors have reduced their capital spending for new theatre construction or further upgrades.

        Increasing Appeal of a Diversity of Films.    Box office revenues are increasingly diversified among a number of strong movies rather than concentrated on a few major "hits." Box office revenues from the top 10 grossing movies as a percentage of annual total box office revenues have declined from an average of 29% during 1990 through 1992 to an average of 26% during 2000 through 2002. This increased appeal in the breadth of films benefits exhibitors by expanding the demographic base of moviegoers and generating greater attendance at a wider variety of movies as opposed to attracting patrons to only a few major releases.

        Extension of Movie Release Calendar Reduces Seasonality.    Distributors have increasingly staggered new releases over more weekends as opposed to opening multiple movies on the same weekend or saving major releases for only a few holiday weekends. This trend has reduced the seasonality of box office revenues by spreading attendance over an extended period of time, which we believe benefits exhibitors by increasing admissions and concessions revenues.

THEATRE OPERATIONS

        UATC operates 1,512 screens in 188 theatres in 21 states as of December 26, 2002.

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        We primarily operate multi-screen theatres. Our multi-screen theatre complexes typically feature auditoriums ranging from 100 to 500 seats each. 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 modern amenities such as wall-to-wall screens, digital stereo surround-sound, multi-station concessions stands, computerized ticketing systems, plush stadium seating with cup holders and retractable armrests, neon-enhanced interiors and exteriors and video game areas adjacent to the theatre lobby.

        Our multi-screen theatres are designed to increase profitability by optimizing revenues per square foot and reducing the cost per square foot of operation. 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 of having common box office, concessions, projection, lobby and restroom facilities, which enables us to spread some of our costs, such as payroll, advertising and rent, over a higher revenue base. We stagger movie show times to reduce staffing requirements and lobby congestion and to provide more desirable parking and traffic flow patterns. In addition, we believe that operating a theatre circuit consisting primarily of multi-screen theatres enhances our ability to attract patrons.

        The following table details the number of locations and theatre screens in our theatre circuit by state as of December 26, 2002:

        Our management, and Regal Cinemas, Inc. through the management arrangement, closely monitors our operations. In connection with the combination of the three theatre circuits, best management practices has been implemented across all of our theatres, including daily, weekly and monthly management reports generated for each individual theatre, as well as maintaining active communication between the theatres, divisional management and corporate management. Management

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reports and communications are used 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 University", which is held at Regal Cinemas's Corporate Headquarters. 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, quality assurance programs have been implemented in all of our theatres to maintain clean, comfortable and modern facilities. To maintain quality and consistency within our theatre circuit, district and regional managers regularly inspect each theatre. We also operate 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.

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 home video, cable television, broadcast television, international distribution and satellite and pay-per-view services. A strong opening run at the theatre can establish a film's success and substantiate the film's revenue potential for both domestic and international distribution channels. For example, the value of home video and pay cable distribution agreements frequently depends on the success of a film's theatrical release. Furthermore, studios' revenue-sharing percentage and ability to control the choice of distribution channels generally declines as a film moves further from its theatrical release. As the primary distribution window for the public's evaluation of films, 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 theatrical release. This increased revenue potential after a film's initial theatrical release has enabled major studios and some independent producers to increase the budgets for film production and advertising. The total cost of producing a film averaged approximately $58.8 million in 2002 compared with approximately $28.9 million in 1992, while the average cost to advertise and promote a film averaged approximately $30.6 million in 2002 compared with approximately $11.5 million in 1992.

FILM LICENSING

        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 include cast, director, plot, performance of similar films, estimated film rental costs and expected rating from the Motion Picture Association of America. 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 on the availability of commercially successful motion pictures.

        Access to Film Product.    Films are licensed from film distributors owned by major film production companies and from independent film distributors that generally distribute films for smaller production companies. Film distributors typically establish geographic film licensing zones and allocate each

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available film to one theatre within that zone. Film licensing zones generally encompass a radius of three to five miles in metropolitan and suburban markets, depending primarily upon population density.

        In film 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 either allocate films among the exhibitors in the zone, or, on occasion, may require the exhibitors in the zone to bid for a film. When films are licensed under the allocation process, a distributor will select an exhibitor who then negotiates film rental terms directly with the distributor. We currently do not bid for films in any of our markets.

        Film Rental Fees.    Film licenses typically specify rental fees based on the higher of a gross receipts formula or a theatre admissions revenues formula. Under a gross receipts formula, the distributor receives a specified percentage of box office receipts, with the percentage declining over the term of the film's run. Under a theatre admissions revenues formula, the distributor receives a specified percentage of the excess of admissions revenues over a negotiated allowance for theatre expenses. Although not specifically contemplated by the provisions of film licenses, rental fees actually paid by us are in some circumstances adjusted subsequent to exhibition in relation to the commercial success of a film in a process known as "settlement."

        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. However, according to industry reports, ten distributors accounted for approximately 94% of admissions revenues and 49 of the top 50 grossing films during 2002. No single distributor dominates the market. 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 27.8% of our total revenues from concessions sales during 2002. We emphasize prominent and appealing concession stations designed for rapid and efficient service. We continually seek to increase concessions sales by optimizing product mix, introducing special promotions from time to time and training employees to cross-sell products. We have favorable concession supply contracts and have developed an efficient concession purchasing and distribution supply chain. Management negotiates directly with manufacturers for many of our concession items to obtain competitive prices and to ensure adequate supplies.

COMPETITION

        The motion picture industry is highly competitive. Motion picture exhibitors generally compete on the basis of the following competitive factors:

•

ability to secure favorable licensing terms;



•

seating capacity, location and reputation of their theatres;



•

quality of projection and sound systems at their theatres; and



•

ability and willingness to promote the films they are showing.

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        Our competitors vary substantially in size, from small independent exhibitors to large national chains. 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.

        We also compete with other motion picture distribution channels, including home video, cable television, broadcast television and satellite and pay-per-view services. Other new technologies (such as video on demand) could also have an adverse effect on our business and results of operations. 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.

        We believe that we have enhanced our operational flexibility and created competitive advantages over other major theatre operators who have not entered or completed a bankruptcy reorganization process.

MARKETING AND ADVERTISING

        Currently, film distributors organize and finance multimedia advertising campaigns for major film releases. To market our theatres, we utilize advertisements, including radio advertising, movie schedules published in newspapers and over the Internet informing our patrons of film selections and show times. Newspaper advertisements are typically displayed in a single grouping for all of our theatres located in a newspaper's circulation area. In some of our markets we employ special marketing programs for specific films and concessions items.

        In addition, we seek to develop patron loyalty through a number of marketing programs such as free summer children's film series, frequent moviegoer promotional programs, cross-promotional ticket redemptions and promotions within local communities. We currently offer these programs only in selected markets. We plan to use these programs in markets where we believe patron loyalty can be further enhanced, and we will continue to evaluate our markets on a case-by-case basis to determine the suitability of these programs in individual regions.

MANAGEMENT INFORMATION SYSTEMS

        We make extensive use of information technology in all areas of our business. We provide many ways for our customers to purchase tickets, ranging from the point of sale terminals in each theatre box office, to the self-service kiosks to Internet-based ticketing. We use our information technology systems to manage all aspects of our business. Our point of sale systems enable us to monitor cash transactions and detect fraud and inventory shrinkage, while capturing information about sales and attendance needed for film booking and settlement. Our scheduling systems support the coordination needed to properly allocate our auditoriums between film showings and Regal CineMeetings events while also ensuring that each movie audience views the intended set of advertisements and newspaper advertisements provide the correct show starting times. Our continuing investment in information technology has enabled our management team to operate our theatres efficiently.

SEASONALITY

        Our revenues are usually seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, 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 quarter are not necessarily indicative of results for the next quarter or any other quarter. The seasonality of motion picture exhibition, however, has become less

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pronounced in recent years as studios have begun to release major motion pictures somewhat more evenly throughout the year.

EMPLOYEES

        As of December 26, 2002, we employed approximately 6,455 employees. Film projectionists at certain of the Company's theatres in the New York market are covered by two collective bargaining agreements. The Company considers its employee relations to be good.

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 and theatre-by-theatre 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, an award of damages to private litigants and additional capital expenditures to remedy such non-compliance. United Artists and several of its subsidiaries are subject to a consent decree arising from a lawsuit captioned Connie Arnold et. al. v. United Artists Theatre Circuit, Inc. et. al. Plaintiffs alleged nationwide violations with the ADA for failure to remove barriers to access at existing theatres in a timely manner. In 1996, the parties involved in the case entered into a settlement agreement in which United Artists agreed to remove physical barriers to access at its theatres prior to July 2001. In January 2001, the settlement agreement was amended to, among other things, extend the completion date for barrier removal to July 2006 and require minimum expenditures of $250,000 a year for barrier removal. We do not believe that this settlement will have a material impact on the Company.

        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 above, we do not currently anticipate that compliance will require us to expend substantial funds. Our theatre operations are also subject to federal, state and local laws governing such matters as wages, working conditions, citizenship and health and sanitation requirements. We believe that we are in substantial compliance with all of such laws.

Item 2. PROPERTIES

        As of December 26, 2002, we operated 182 of our theatres pursuant to lease agreements and owned the land and buildings for 4 theatres. For a December 26, 2002 list of the states in which we operated theatres and the number of theatres and screens operated in each such state, see "Business—Theatre Operations" above. The majority of our leased theatres are subject to lease agreements with original terms of 20 years or more and, in most cases, renewal options for up to an additional 10 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.

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        Of the 186 owned and leased theatres, five theatres (11 screens) are held through a corporation that is owned 80% by UATC, and four theatres (44 screens) are held by two partnerships and one corporation, each owned 51% by UATC. The remaining owned and leased theatres are held directly by UATC or its wholly owned subsidiaries. The master leases for theatres associated with the 1995 Sale and Leaseback transaction involving 20 operating properties allows for the exchange and sale of obsolete theatres that are not part of the long-term business plan. Substitutions may be made under certain conditions, during certain time periods in the future. The managed theatres include two theatres (13 screens) located in the United States.

        UATC leases the land, building and equipment in the theatres owned by UAR and Prop I in accordance with two master affiliate leases. The UAR and Prop I master leases expire in 2003 and provide for options to extend the leases at UATC's option for up to an additional ten years.

        UATC owns directly or through its subsidiaries substantially all of the theatre equipment used in its theatres.

Item 3. LEGAL PROCEEDINGS

        UATC had a number of claims arising from its decision to file voluntary petitions for relief under Chapter 11 and to close theatre locations. The Company and its subsidiaries are also presently involved in various legal proceedings arising in the ordinary course of its business operations, including personal injury claims, employment and contractual matters and other disputes. The Company believes it has adequately provided for the settlement of such matters. Management believes any additional liability with respect to the above proceedings will not be material in the aggregate to the Company's consolidated financial position, results of operations or cash flows.

        On March 18, 2003, Reading International, Inc., Citadel Cinemas, Inc. and Sutton Hill Capital, LLC (collectively, the "Plaintiffs") filed a complaint and demand for jury trial in the United States District Court for the Southern District of New York against Oaktree Capital Management LLC, Onex Corporation, Regal, United Artists Theatre Company, United Artists Theatre Circuit, Inc., Loews Cineplex Entertainment Corporation, Columbia Pictures Industries, Inc., The Walt Disney Company, Universal Studios, Inc., Paramount Pictures Corporation, Metro-Goldwyn-Mayer Distribution Company, Fox Entertainment Group, Inc., Dreamworks LLC, Stephen Kaplan and Bruce Karsh (collectively, the "Defendants") alleging various violations by the Defendants of federal and state antitrust laws and New York common law. The Plaintiffs allege, among other things, that the consolidation of the theatre industry has adversely impacted their ability to release first-run industry-anticipated top-grossing commercial films, and are seeking, among other things, a declaration that the Defendants' conduct is in violation of antitrust laws, damages, and equitable relief enjoining Defendants from engaging in future anticompetitive conduct. Management believes that the allegations are without merit and intends to defend vigorously the Plaintiffs' claims.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of UATC's sole shareholder, the Parent, during the fourth quarter of fiscal year 2002.

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PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

        At March 26, 2003, UATC's common stock is held entirely by the Parent. There is no established market for the Company's common stock.

Item 6. SELECTED FINANCIAL DATA

        The following table presents selected historical financial data of UATC for the past five years. Effective March 2, 2001 UATC emerged from protection under Chapter 11 of the U.S. Bankruptcy Code pursuant to a reorganization plan that provided for the discharge of significant financial obligations. In accordance with AICPA Statement of Position 90-7, UATC adopted fresh start reporting whereby UATC's assets, liabilities and new capital structure were adjusted to reflect estimated fair values as of March 1, 2001. For the periods prior to March 2, 2001, the assets and liabilities of UATC and the related consolidated results of operations are referred to below as "Predecessor Company", and for periods subsequent to March 1, 2001, the assets and liabilities of UATC and the related consolidated results of operations are referred to as the "Reorganized Company." As a result of the above, the financial data of the Predecessor Company is not comparable to the financial data of the Reorganized Company. The following data should be read in conjunction with UATC's consolidated financial statements and management discussion and analysis (in millions, except operating data).

(1)

Beginning in 1999, UATC changed its reporting period from the traditional calendar year to a fifty-two/fifty-three week presentation. The 2001 year contained 53 weeks and ended on January 3, 2002. The 2000 and 1999 years contained 52 weeks and ended on December 28 and December 30, respectively.

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(2)

On April 12, 2002 Regal acquired United Artists and following the acquisition UATC changed its fiscal year, which used to end on the Thursday closest to December 31 each year, to conform to Regal's fiscal year. The Company's fiscal year now ends on the first Thursday after December 25, which in certain years results in a 53-week fiscal year. The new reporting period is also based on a calendar that coincides with film playweeks. This resulted in 2002 containing one-two less weeks of operating results as compared with the other years.

(3)

Total debt at December 28, 2000 and at March 1, 2001 includes $441.4 million of debt that is a liability subject to compromise as part of UATC's Chapter 11 Reorganization.

(4)

Theatre locations and screens represent the number of theatres and screens operated at the end of the period.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis should be read in conjunction with the consolidated financial statements of UATC and the notes thereto included elsewhere in this Form 10-K.

Overview

        On September 5, 2000 (the "Petition Date") UATC (as it existed before March 2, 2001, the "Predecessor Company") and certain of its subsidiaries, as well as its parent, United Artists Theatre Company (the "Parent" or "United Artists") and certain of the Parent's subsidiaries (collectively, the "Debtors"), filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Chapter 11 Cases"), as well as a joint plan of reorganization. On January 22, 2001 the joint plan of reorganization, as amended (the "Plan"), was approved by the Court, and the Debtors declared the Plan to be effective on March 2, 2001 (the "Effective Date"). In conjunction with the reorganization, the Predecessor Company's bank credit facility as it existed before the Petition Date (the "Pre-Petition Credit Facility") was restructured into a restructured term credit facility (the "Term Facility") of approximately $252.2 million, and an additional $35.0 million revolving credit facility was secured.

        On March 2, 2001, the Reorganized Company (as defined in Note 1 to the financial statements included in Part II, Item 8, of this Form 10-K, which is incorporated by reference herein) adopted fresh-start reporting in accordance with AICPA Statement of Position 90-7 "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). UATC's post-reorganization balance sheet and statement of operations, which reflect the application of fresh-start reporting, have not been prepared on a consistent basis with the pre-reorganization financial statements and are not comparable in all respects to the financial statements prior to the reorganization. For accounting purposes, the inception date of the Reorganized Company was deemed to be March 2, 2001. Due to the occurrence of the Effective Date on March 2, 2001 and the application of fresh-start reporting, UATC's 2001 statements of operations include information reflecting the forty-four weeks ended January 3, 2002, and the nine weeks ended March 1, 2001.

        As a consequence of the Plan, on March 2, 2001, the Parent's capital structure consisted of approximately $252.2 million of debt under the Term Facility, convertible preferred stock with a par value of $0.1 million and a liquidation value of $57 million, 10 million shares of common stock with a par value of $0.01 per share and warrants for 5.6 million shares of common stock of the Parent with a fair value of $0.28 per warrant. The Anschutz Corporation and its subsidiaries ("TAC"), which were pre-petition senior lenders, converted 100% of their senior debt into a combination of convertible preferred stock, common stock and warrants to purchase approximately 3.7 million shares of common stock with an exercise price of $10.00 per share of the Parent, which in aggregate represented at that time approximately 54% of the fully diluted common equity of the Parent. Other senior lenders under the Pre-Petition Credit Facility received common stock in the Parent representing approximately 29% of the fully diluted common equity and subordinated lenders of the Parent received warrants to purchase 1.8 million shares of common stock with an exercise price of $10.00 per share representing

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approximately 7% of the fully diluted common equity, with the remaining fully diluted common stock (approximately 10%) reserved for management stock options.

        On March 8, 2002, TAC entered into an agreement to exchange its controlling interest in United Artists for common stock of Regal Entertainment Group ("Regal"), resulting in Regal being the majority shareholder of United Artists. TAC also exchanged its ownership interests in two other theatre companies for common stock of Regal. The management of these three theatre companies was combined with management of the theatre operations based in Knoxville, Tennessee, while management of certain ancillary businesses is based in Centennial, Colorado. The exchange transaction was consummated on April 12, 2002.

        Following the exchange, UATC changed its fiscal year, which formerly ended on the Thursday closest to December 31 each year, to conform to Regal's fiscal year. The company's fiscal year now ends on the first Thursday after December 25, which in certain years results in a 53-week fiscal year. The new reporting period is also based on a calendar that coincides with film playweeks. This resulted in the fiscal year 2002 containing two less weeks of operating results compared to the fiscal year 2001 and one less week of operating results compared to fiscal year 2000.

Critical Accounting Policies

        Our significant accounting policies are described in Note 4 to the consolidated financial statements included in Item 8 of this Form 10-K. Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, 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. The Company evaluates and modifies such estimates and assumptions on an ongoing basis, including but not limited to those related to film costs, property and equipment, income taxes and reorganization and purchase accounting. 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 from estimates. The impact and any associated risks related to estimates, assumptions, and accounting policies are discussed within Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as in the Notes to the Consolidated Financial Statements, if applicable, where such estimates, assumptions, and accounting policies affect the Company's reported and expected results.

        The Company believes the following accounting policies are critical to its business operations and the understanding of results of operations and affect the more significant judgments and estimates used in the preparation of its consolidated financial statements:

•

The Company estimates its film cost expense and related film cost payable based on management's best estimate of the ultimate settlement of the film costs with the distributors. Film costs and the related film costs payable are adjusted to the final film settlement in the period that the Company settles with the distributors. Actual film costs and film costs payable could differ from those estimates.



•

We depreciate and amortize the components of our property and equipment on a straight-line basis over the estimated useful lives of the assets. The estimates of the assets' useful lives require our judgment and our knowledge of the assets being depreciated and amortized. When necessary, the assets' useful lives are revised and the impact on depreciation and amortization is recognized on a prospective basis. Actual values could differ materially from these estimates. In addition, the Company reviews long-lived assets for impairment whenever events or changes in

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circumstances indicate that the carrying amount of such assets might not be recoverable. When the future undiscounted cash flows of the operations to which the assets relate do not exceed the carrying value of the asset, such assets are written down to fair value.

•

The Company adopted SFAS 142, "Goodwill and Other Intangible Assets" in 2002. SFAS 142 specifies that goodwill and indefinite-lived intangible assets will no longer be amortized but instead will be subject to an annual impairment test. Based on an impairment test conducted during the fourth quarter of 2002, the Company was not required to record a charge for goodwill impairment. The Company will perform a fourth-quarter goodwill impairment test on an annual basis. In assessing the recoverability of the goodwill, the Company 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, the Company may be required to record impairment charges for these assets in future periods.



•

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 and operating loss and tax credit carryforwards. In addition, income tax rules and regulations are subject to interpretation and require judgment by the Company and may be challenged by the tax authorities. 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. The Company records a valuation allowance if it is deemed more likely than not, that its deferred income tax assets will not be realized. The Company expects that certain deferred income tax assets are not more likely than not to be recovered and therefore, has set up a valuation allowance. The Company reassesses its need for such allowance on an ongoing basis. Should the Company realize certain tax assets with a valuation allowance that relate to pre-acquisition periods, goodwill would be reduced. The Company believes that its provision for income taxes is adequate pertaining to any assessments from the tax authorities.



•

We applied the principles of purchase and reorganization accounting when recording the acquisition of controlling equity interest by TAC and the exchange of stock for minority interests and the emergence from bankruptcy of the Company. These accounting principles require that we estimate the fair value of the individual assets and liabilities including estimates of bankruptcy-related claims. The valuation of the fair value of the assets and liabilities involves a number of judgments and estimates that could differ materially from actual amounts.


Basis of Presentation

        In order to provide a meaningful basis of comparing the fifty-one and fifty-three weeks ended December 26, 2002 and January 3, 2002, respectively, for purposes of the following tables and discussion, the operating results of the Reorganized Company for the forty-four weeks ended January 3, 2002 have been combined with the operating results of Predecessor Company for the nine weeks ended March 1, 2001 (collectively referred to as "Combined Company") and are compared to the fifty-one weeks ended December 26, 2002 and the fifty-two weeks ended December 28, 2000. Depreciation, amortization, and certain other line items included in the operating results of the Combined Company are not comparable between periods as the nine weeks ended March 1, 2001 and the fifty-two weeks ended December 28, 2000 of the Predecessor Company do not include the effect of fresh-start reporting adjustments. The combining of reorganized and predecessor periods is not acceptable under accounting principles generally accepted in the United States of America.

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        The following discussion and analysis of UATC's financial condition and results of operations should be read in conjunction with UATC's Consolidated Financial Statements and related notes thereto.

        The Company generates revenues primarily from admissions and concession sales. Additional revenues are generated by electronic video games located adjacent to the lobbies of certain of the Company's theatres, vendor marketing programs and on-screen advertisements and rental of theatres for business meetings and other events generated by Regal CineMedia, which is an affiliate of UATC. Direct theatre costs include film rental and advertising costs, costs of concessions and theatre operating expenses. Film rental costs depend on the popularity of a film and the length of time since the film's release and generally decline as a percentage of admission revenues the longer a film is in exhibition. Because the Company purchases certain concession items, such as fountain drinks and popcorn, in bulk and not pre-packaged for individual servings, the Company is able to improve its margins by negotiating volume discounts. Theatre operating expenses consist primarily of theatre labor and occupancy costs.

Results of Operations for the fiscal years ended December 26, 2002, January 3, 2002 and December 28, 2000

        The following table sets forth for the fiscal periods indicating the percentage of total revenues represented by the specified items included in UATC's statements of operations:

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Total Revenues

        The following table summarizes revenues and revenue-related data for the fiscal years ended 2002, 2001 and 2000 (in millions, except averages):

        Admissions.    Total admissions revenues decreased $0.5 million, or 0.1%, to $390.8 million, for the fiscal year 2002 from $391.3 million for the fiscal year 2001, which increased $18.9 million, or 5.1%, from $372.4 million, for the fiscal year 2000. The decrease in admissions revenues in 2002 compared to 2001 was primarily attributable to a 3.9% decrease in attendance, partially offset by a 3.8% increase in the average ticket price. The decrease in attendance during 2002 was due to the absence of two weeks of operating results during 2002 compared to 2001 along with the closure of under performing theatres during the fiscal year 2002. The increase in admissions revenues in 2001 compared to 2000 was primarily attributable to a 5.2% increase in average ticket prices.

        Concessions.    Total concessions revenues increased $2.7 million, or 1.7%, to $159.7 million for the fiscal year 2002, from $157.0 million for the fiscal year 2001, which increased $2.4 million, or 1.6%, from $154.6 million for the fiscal year 2000. The increase in concessions revenues in 2002 compared to 2001 was primarily due to a 6.0% increase in the average concession sale per patron, partially offset by the absence of two weeks of operating results during 2002 compared to 2001 along with the closure of under performing theatres during the fiscal year 2002. The increase in concession revenues in 2001 compared to 2000 was primarily due to a 1.3% increase in the average concession sale per patron.

        Other Operating Revenues.    Total other operating revenues increased $2.2 million, or 10.0%, to $24.3 million for the fiscal year 2002, from $22.1 million for the fiscal year 2001, which decreased $0.7 million, or 3.1%, from $22.8 million for the fiscal year 2000. The increase in other operating revenues in 2002 compared to 2001 was primarily due to the classification of certain vendor programs as other operating revenues, partially offset by the absence of two weeks of operating results during 2002 compared to 2001. The decrease in other operating revenues in 2001 compared to 2000 was primarily due to the closure of under-performing theatres during 2001.

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Operating Expenses

        The following table summarizes direct theatre costs for fiscal years 2002, 2001 and 2000 (dollars in millions):

(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.

        Film Rental and Advertising Costs.    Film rental and advertising costs decreased $6.0 million, or 2.8%, to $209.5 million for the fiscal year 2002, from $215.5 million for the fiscal year 2001, which increased $10.6 million, or 5.2% from $204.9 million for the fiscal year 2000. Film rental and advertising costs as a percentage of admissions revenue decreased to 53.6% in 2002 from 55.1% in 2001. The decrease in film rental and advertising costs as a percentage of admissions revenue during 2002 was primarily attributable to a decline in advertising costs resulting from the savings realized through the integration of the three theatre circuits during 2002. Film rental and advertising costs as a percentage of admissions revenue increased to 55.1% in 2001 from 55.0% in 2000. During 2001, a slight increase from 2000 in film rental costs as a percentage of admissions revenue was nearly offset by a decrease in advertising costs as a percentage of admissions revenue, thus resulting in film rental and advertising costs as a percentage of admission revenue increasing by 0.1%.

        Cost of Concessions.    Cost of concessions increased $4.2 million, or 23.5%, to $22.1 million for the fiscal year 2002, from $17.9 million for the fiscal year 2001, which decreased $0.1 million or 0.6% from $18.0 million for the fiscal year 2000. Cost of concessions as a percentage of concessions revenue increased to 13.8% in 2002 as compared to 11.4% in 2001. The increase in concession costs as a percentage of concession revenue during 2002 was primarily due to a change in concession contracts in the second quarter of 2002 related to certain concession vendor programs that are classified on the income statement as other operating revenue rather than a reduction of concession costs. Cost of concessions as a percentage of concessions revenues decreased to 11.4% in 2001 as compared to 11.6% in 2000. The decreases in concession costs as a percentage of concessions revenue during 2001 was primarily due to purchasing cost reductions, reduced concession promotional costs and increased rebates from certain concession vendors.

        Other Theatre Operating Expenses.    Other theatre operating expenses increased $0.8 million, or 0.3%, to $236.3 million for the fiscal year 2002 from $235.5 million for the fiscal year 2001, which decreased $10.3 million, or 4.2% from $245.8 million for the fiscal year 2000. Other theatre operating expenses as a percentage of total revenue decreased to 41.1% in 2002 from 41.2% during 2001. Other theatre operating expenses as a percentage of total revenues decreased to 41.2% in 2001 from 44.7% during 2000. The decreases in other theatre operating expenses as a percentage of total revenue during 2001 was primarily due to the sale, closure or rejection of under-performing theatres and a reduction in other controllable costs.

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Sale and Leaseback Rentals

        Sale and leaseback expense remained consistent for fiscal year 2002 and fiscal year 2001 at $18.2 million, which decreased $0.3 million, or 1.6% from $18.5 million for the fiscal year 2000.

General and Administrative Expenses

        General and administrative expenses increased $3.6 million, or 18.1%, to $23.5 million for the fiscal year 2002, from $19.9 million for the fiscal year 2001, which decreased $1.4 million, or 6.6% from $21.3 million for the fiscal year 2000. Included in general and administrative expenses for 2002 are management fee costs to Regal Cinemas Inc. associated with the management agreement between Regal Cinemas Inc. and UATC under which Regal Cinemas manages the theatre operations of UATC. As a percentage of total revenues, general and administrative expenses increased to 4.1% in 2002 from 3.5% in 2001. The increase in general and administrative expenses during 2002 was primarily due to additional professional fees incurred during 2002 and other temporary administrative costs associated with the integration of UATC into Regal. As a percentage of total revenues, general and administrative expenses decreased to 3.5% in 2001 from 3.9% in 2000. The decrease in general and administrative expenses during 2001 was primarily due to the elimination of four district offices during late 2000, a reduction in the number of corporate personnel, and other expense efficiency measures.

Depreciation and Amortization

        Depreciation and amortization expenses decreased $13.2 million, or 32.8%, to $27.0 million for the fiscal year 2002, from $40.2 million for the fiscal year 2001 which decreased $2.2 million or 5.2% from $42.4 million for the fiscal year 2000. The 2002 decrease was primarily due to the adoption as of January 4, 2002 of SFAS No. 142, "Goodwill and Other Intangible Assets," which resulted in UATC no longer amortizing the reorganization value in excess of identifiable assets during 2002. The 2001 decrease was primarily due to the closures of under-performing theatres along with the effect of the revaluation of assets resulting from the application of fresh-start accounting during fiscal year 2001.

Loss (Gain) on Disposal and Impairment of Operating Assets

        The Company evaluates assets for impairment on an individual theatre basis, which management believes is the lowest level for which there are identifiable cash flows. If the sum of the expected future cash flows, undiscounted and without interest charges, is less than the carrying amount of the asset, the Company recognizes an impairment charge in the amount by which the carrying value of the assets exceeds their fair market value. The fair value of assets is determined using the present value of the estimated future cash flows or the expected selling price less selling costs for assets of which the Company expects to dispose. The Company also sold properties relating to under-performing theatres and other non-theatre real estate, along with equipment from closed theatres that could not be used at other locations. UATC recorded a loss (gain) on the disposal and impairment of operating assets of $4.0 million, ($2.0) million and $35.4 million for the fiscal years 2002, 2001 and 2000 respectively. Included in the loss on the disposal and impairment of operating assets for fiscal year 2000 were lease exit costs of $11.3 million related to under-performing and non-strategic theatres.

Restructure Costs

        Restructure costs relate to the Company's restructuring and severance plan charges associated with the combination of the Company with two other theatre companies also controlled by Regal. For the fiscal year 2002 a total of $2.9 million was recorded as restructuring costs. This amount includes $2.0 million of termination benefits of which $1.6 million has been paid out to employees through December 26, 2002. Also included in this amount is $0.1 million related to estimated lease termination

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costs and $0.8 million related to legal and professional fees. During fiscal year 2002, amortization of deferred stock compensation of $1.8 million was recorded.

Operating Income

        Operating income increased by $4.3 million to $47.7 million for the fiscal year 2002, from $43.4 million for the fiscal year 2001, which increased $67.4 million from a loss of $24.0 million for fiscal year 2000. Operating income as a percentage of total revenues increased to 8.3% for the fiscal year 2002 from 7.6% for the fiscal year 2001. Operating loss as a percentage of total revenues was 4.4% for the fiscal year 2000. The increase in operating income in 2002 was primarily attributable to the decrease in depreciation and amortization costs during 2002, partially offset by the absence of two weeks of operating results from 2002 as compared to 2001. The increase in operating income in 2001 was primarily attributable to the growth in total revenues along with a decrease in depreciation and amortization costs during 2001 and the amount recorded in 2000 for the disposal and impairment of operating assets related to under-performing theatres.

Interest, Net

        Interest, net, decreased $4.0 million, or 16.7%, to $20.0 million for the fiscal year 2002 from $24.0 million for the fiscal year 2001, which decreased $19.6 million or 45.0% from $43.6 million for the fiscal year 2000. The decrease in interest expense for 2002 and 2001 were primarily due to a lower average debt balance resulting from the completion of the Chapter 11 reorganization, along with lower outstanding interest rates.

Reorganization Items

        Costs associated with the Company's reorganization through the Chapter 11 Cases incurred subsequent to the Petition Date and prior to the Effective Date are classified as reorganization items. As part of the Company's application of fresh-start accounting, an adjustment was recorded to reorganization costs based on the adjustment of assets and liabilities to fair value. For the nine weeks ended March 1, 2001, the Company recorded reorganization costs, including professional fees and asset impairments, of $33.3 million. The Company incurred $18.2 million in reorganization costs during fiscal 2000. This amount consisted of $4.9 million in professional fees related to the Chapter 11 Cases, a $9.1 million write off of deferred loan costs related to debt that was classified as liabilities subject to compromise and was restructured as part of the reorganization, non-cash provisions for asset impairments of $3.8 million, and other miscellaneous costs of $0.4 million.

Income Taxes

        Income taxes increased $7.7 million to a provision of $11.3 million for the fiscal year 2002 from $3.6 million for the fiscal year 2001, which increased $2.9 million from a provision of $0.7 million for fiscal year 2000. Prior to UATC emerging from Chapter 11 on March 2, 2001, UATC had minimal income tax expense due to the Company's ability to utilize NOL carryforwards for the pre-emergence period. The increase in income taxes in 2002 and 2001 was primarily due to UATC's improved operating results and the non-deductible nature of certain of UATC's reorganization costs. Furthermore, the Company has recorded a valuation allowance against deferred tax assets for the years ended December 26, 2002 and January 2, 2002, totaling $53.5 million and $63.8 million, respectively, against pre-acquisition deferred tax assets of UATC. The reduction in valuation allowance for 2002 reduced goodwill related to the acquisition of UATC rather than current period tax expense. Future reductions in the valuation allowance also will reduce goodwill related to the acquisition of UATC.

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Extraordinary Item

        As part of the payoff of UATC'S Term Facility and revolving credit facility during May 2002, deferred loan costs of $1.4 million were written off during the fiscal year 2002. As part of the Company's reorganization through the Chapter 11 cases an extraordinary gain of $187.6 million was recorded in 2001 for the discharge of obligations subject to compromise for less than the recorded amounts.

Liquidity and Capital Resources

        The Company's revenues are generally collected in cash through admissions and concessions revenues. The Company's 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 days from purchase. The Company's revenues are primarily cash transactions from admissions and concessions. The Company's current liabilities, however, generally include items that will become due within twelve months and, as a result, at any given time, the Company's balance sheet is likely to reflect a working capital deficit.

        The Company funds the cost of its capital expenditures through internally generated cash flow and cash on hand. The Company's capital requirements have historically arisen principally in connection with new theatre openings, adding new screens to existing theatres, upgrading the Company's theatre facilities and replacing equipment. The Company intends to continue to grow its theatre circuit through selective expansion. The Company currently expects capital expenditures for theatre development, expansion, upgrading, maintenance and replacements to approximate $25 million in 2003. During the year ended December 26, 2002, the Company invested $22.5 million in the completion of one new theatre and the renovation and expansion of five theatres in UATC's key markets.

        As part of the Company's bankruptcy restructuring, debt was reduced from approximately $439.7 million under the Pre-Petition Credit Facility to approximately $252.1 million under the Term Facility. During fiscal year 2002 a portion of the proceeds from the public offering of Regal were loaned to the Parent by Regal and loaned in turn to the Company to repay the Company's Term Facility. This debt was replaced by a note payable to the Parent, which is obligated under a substantially similar note payable to Regal. The note bears interest at a rate of 9.375% and matures in December of 2006.

Contractual Cash Obligations

        The Company primarily leases its theatres pursuant to long-term non-cancelable operating leases. As of December 26, 2002, the Company's estimated contractual cash obligations over the next several years are as follows (amounts in millions):

United Artists Leveraged Sale and Leaseback

        In December 1995, UATC entered into a sale and leaseback transaction whereby the land and buildings underlying 27 of its operating theatres and four theatres and a screen addition under development were sold to and leased back from an unaffiliated third party. The transaction requires

21

UATC to lease the underlying theatres for a period of 21 years and one month, with the option to extend for up to an additional 10 years. In conjunction with the transaction, the buyer of the properties issued publicly traded pass-through certificates. Several of its properties included in the sale and leaseback transaction have been determined by UATC to be economically obsolete for theatre use. As of December 26, 2002, 27 theatres were subject to the sale leaseback transaction. UATC amended the lease on March 7, 2001 to allow UATC to terminate the master lease with respect to the obsolete properties, to allow the owner trustee to sell those properties and pay down the underlying debt (at a discount to par through September 2002 and par thereafter) and to reduce the amount of rent paid by UATC on the lease. Included in the 2001 amendment is a $35.0 million cap on the ability to sell properties. Through December 26, 2002 approximately $12.1 million of this cap has been utilized through theatre sales. Five additional properties which are no longer operational and are being marketed for sale. The Company evaluates the remaining theatres on an ongoing basis. Approximately $87.5 million in principal amount of pass-through certificates were outstanding as of December 26, 2002.

        In connection with the 1995 sale and leaseback transaction, UATC entered into a Participation Agreement that requires UATC to comply with various covenants, including limitations on indebtedness, restricted payments, transactions with affiliates, guarantees, issuance of preferred stock of subsidiaries and subsidiary distributions, transfer of assets and the ability to pay dividends.

        In November 1996, UATC entered into a sale and leaseback transaction, pursuant to which UATC sold three of its operating theatres and two theatres under development to an unaffiliated third party for approximately $21.5 million and leased back those theatres pursuant to a lease that terminates in 2017. The lease provides UATC with an option to extend the term of the lease for an additional 10 years. Two of the theatres have been determined by UATC to be economically obsolete and are no longer in operation.

        In December 1997, UATC entered into a sale and leaseback transaction, pursuant to which UATC sold two theatres under development and leased them back from an unaffiliated third party for approximately $18.1 million. Approximately $9.2 million of the sales proceeds were paid to UATC during 1999 for reimbursement of some construction costs associated with the two theatres. The lease has a term of 22 years with options to extend the term of the lease for an additional 10 years.

        During 1999, UATC entered into a sale and leaseback transaction on one existing theatre. Proceeds were received in the amount of $5.4 million by UATC during 1999. The lease has a term of 20 years, with an option to extend the term of the lease for up to 20 additional years.

        The Company believes that the amount of cash and cash equivalents on hand and cash flow expected from operations will be adequate for the Company to execute its business strategy and meet anticipated requirements for lease obligations, capital expenditures, working capital and debt service for at least 12 months.

Recent Accounting Pronouncements

        In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 supersedes Accounting Principles Board Opinion No. 16 (APB 16), "Business Combinations," and primarily addresses the accounting for the cost of an acquired business (i.e., the purchase price allocation), including any subsequent adjustment to its cost. SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting) and supersedes APB 17, "Intangible Assets." The most significant changes made by SFAS No. 141 involve the requirement to use the purchase method of accounting for all business combinations, thereby eliminating use of the pooling-of-interests method along with the establishment of new criteria for determining whether the Company should recognize intangible assets

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acquired in a business combination separately from goodwill. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001. The adoption of SFAS No. 141 did not have a material impact on the Company's financial position or results of operations.

        Pursuant to SFAS No. 142, the Company no longer amortizes goodwill, reorganizational value in excess of amounts allocated to identifiable assets or indefinite lived intangible assets, and will test for impairment at least annually at the reporting unit level. Other long-lived assets will continue to be amortized over their useful lives and reviewed for impairment in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," issued in August 2001. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 for all goodwill and other intangible assets, including excess reorganization value, recognized in an entity's statement of financial position at that date, regardless of when those assets were initially recognized. As required by SFAS No. 142, the standard has not been retroactively applied to the results for the period prior to adoption. Amortization relating to goodwill and excess reorganization value was $9.6 million and $0.7 million for the forty-four weeks ended January 3, 2002 and the nine weeks ended March 1, 2001, respectively. The Company's initial and annual goodwill impairment tests for fiscal 2002 indicated that the fair value of its reporting units exceeded the goodwill carrying value and therefore, at this time, goodwill is not deemed to be impaired.

        In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 establishes accounting standards for recognition and measurement of the fair value of obligations associated with the retirement of long-lived assets when there is a legal obligation to incur such costs. Under SFAS No. 143, the costs of retiring an asset will be recorded as a liability when the retirement obligation arises and will be amortized to expense over the life of the asset. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company is evaluating the impact of the adoption of this standard and has not yet determined the effect of adoption on its financial position or results of operations.

        In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which provides clarifications of certain implementation issues with SFAS No. 121 along with additional guidance on the accounting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121 and applies to all long-lived assets (including discontinued operations) and consequently amends APB 30, "Reporting the Effects of Disposal of a Segment of a Business." SFAS No. 144 develops one accounting model (based on the model in SFAS No. 121) for long-lived assets that are to be disposed of by sale, as well as addresses the principal implementation issues. SFAS No. 144 requires that entities measure long-lived assets that are to be disposed of by sale at the lower of book value or fair value less cost to sell. That requirement eliminates APB 30's requirement that discontinued operations be measured at net realizable value or that entities include under "discontinued operations" in the financial statements amounts for operating losses that have not yet occurred. Additionally, SFAS No. 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) the entity can distinguish from the rest of the entity and (2) the entity will eliminate from the ongoing operations of the entity in a disposal transaction. The Company adopted SFAS No. 144 in the first quarter of 2002. The adoption of SFAS No. 144 did not have a material impact on the Company's financial position or results of operations.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 updates, clarifies and simplifies existing accounting pronouncements including the rescission of Statement 4, which required all gains and losses from extinguishments of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in APB Opinion No. 30 will now be used to classify those gains and losses. The provisions of SFAS No. 145 related to the rescission of Statement 4 is effective for fiscal years beginning after May 15, 2002.

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        In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses significant issues relating to the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities, and nullifies the guidance in Emerging Issues Task Force (EITF) Issue No. 94-3 (EITF 94-3), "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring.)" The provisions of SFAS No. 146 are effective for exit or disposal activities initiated after December 31, 2002. Retroactive application of SFAS No. 146 is prohibited and, accordingly, liabilities recognized prior to the initial application of SFAS No. 146 should continue to be accounted for in accordance with EITF 94-3 or other applicable preexisting guidance.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." The interpretation will significantly change current practice in the accounting for, and disclosure of, guarantees. Guarantees meeting the characteristics described in the interpretation are required to be initially recorded at fair value, which is different from general current practice of recognition of a liability only when loss is probable and reasonably estimable, as prescribed in SFAS No. 5, "Accounting for Contingencies." The interpretation also requires a guarantor to make significant new disclosures for virtually all guarantees even if the likelihood of the guarantor's having to make payments under the guarantee is remote. The disclosure requirements in this interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The initial recognition and initial measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The adoption of this interpretation is not expected to have a material impact on the Company's financial position or results of operations.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51." This interpretation addresses consolidation by business enterprises of entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Variable interest entities are required to be consolidated by their primary beneficiaries if they do not effectively disperse risks among parties involved. The primary beneficiary of a variable interest entity is the party that absorbs a majority of the entity's expected losses and receives a majority of its expected residual returns. The consolidation requirements of this interpretation apply immediately to variable interest entities created after January 31, 2003 and apply to existing entities in the first fiscal year or interim period beginning after June 15, 2003. Certain new disclosure requirements apply to all financial statements issued after January 31, 2003. The Company is evaluating the impact of adopting this interpretation.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." SFAS No.148 amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to SFAS No. 123's fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No.123 and APB Opinion No. 28, "Interim Financial Reporting," to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS No. 148 does not amend SFAS No. 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions are applicable to all companies with stock-based employee compensation, regardless of whether they account for such compensation using the fair value method of SFAS No. 123 or the intrinsic value method of APB No. 25, "Accounting for Stock Issued to Employees", and related interpretations. The disclosure requirements are effective for fiscal years

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ending after December 15, 2002. The Company has elected to continue the intrinsic value method of accounting for its Parent's employee stock options in accordance with APB Opinion No. 25 and as a result, the adoption of SFAS No. 148 did not have a material impact on the Company's financial position or results of operations.

Quarterly Results

        The following tables set forth selected unaudited quarterly results for the eight quarters ending December 26, 2002. The quarterly financial data as of each period presented below have been derived from UATC's unaudited 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 UATC and notes thereto included in Item 8—Financial Statements and Supplemental Data.

*

The quarter ended March 29, 2001 includes the combination of the pre and post bankruptcy results.

Inflation

        The Company does not believe that inflation has had a material impact on its financial position or results of operations.

Seasonality

        The Company's revenues are usually seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, studios release the most marketable motion pictures during the summer and the holiday seasons. The unexpected emergence 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 quarter are not necessarily indicative of the results for the next or any other quarter. The seasonality of motion picture exhibition, however, has become less pronounced in recent years as studios have begun to release major motion pictures somewhat more evenly throughout the year.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        UATC's market risk is confined to interest rate exposure of its debt obligations that bear interest based on floating rates. As described in Note 5 to the financial statements included in Part II, Item 8, of this Form 10-K, which is incorporated by reference herein, the United Artists Term Facility was repaid in connection with Regal's May 2002 initial public offering. As of December 26, 2002, the Company maintained no debt obligations bearing floating interest rates.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

The Board of Directors
United Artists Theatre Circuit, Inc.:

        We have audited the accompanying consolidated balance sheets of United Artists Theatre Circuit, Inc. and subsidiaries as of December 26, 2002 and January 3, 2002 ("Reorganized Company"), and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year ended December 26, 2002 and the forty-four weeks ended January 3, 2002 (Reorganized Period) and for the nine weeks ended March 1, 2001 and for the year ended December 28, 2000 (Predecessor Periods). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of United Artists Theatre Circuit, Inc. and subsidiaries as of December 26, 2002 and January 3, 2002 (Reorganized Company), and the results of their operations and their cash flows for the year ended December 26, 2002 and the forty-four weeks ended January 3, 2002 (Reorganized Periods) and for the nine weeks ended March 1, 2001 and for the year ended December 28, 2000 (Predecessor Periods), in conformity with accounting principles generally accepted in the United States of America.

        As described in Note 1 and 2 to the consolidated financial statements, effective March 1, 2001, the Company emerged from protection under Chapter 11 of the U.S. Bankruptcy Code pursuant to a reorganization plan, which was confirmed by the Bankruptcy Court on January 22, 2001. In accordance with AICPA Statement of Position 90-7, the Company adopted fresh start reporting whereby its assets, liabilities and new capital structure were adjusted to reflect estimated fair values as of March 1, 2001. As a result, the consolidated financial statements for the periods subsequent to March 1, 2001 reflect the Reorganized Company's new basis of accounting and are not comparable to the Predecessor Company's pre-reorganization consolidated financial statements.

        As discussed in Note 2 to the accompanying consolidated financial statements, the Company changed its method of accounting for goodwill and other intangible assets during the year ended December 26, 2002.

/s/ KPMG LLP

Nashville, Tennessee
January 24, 2003

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UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in millions, except share data)

See accompanying notes to consolidated financial statements.

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UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations

(Amounts in Millions)

See accompanying notes to consolidated financial statements.

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UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

Consolidated Statement of Stockholder's Equity (Deficit)
(Amounts in Millions)

See accompanying notes to consolidated financial statements.

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UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(Amounts in Millions)