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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 1, 2004

Commission file number: 333-87930

Regal Cinemas Corporation
(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

        The registrant is a wholly owned subsidiary of Regal Entertainment Group. As of June 26, 2003, there were no shares of voting or non-voting common equity held by non-affiliates of the registrant.

        Common Stock—7,500,000 shares outstanding at March 31, 2004.

TABLE OF CONTENTS

REGAL CINEMAS CORPORATION

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

        Regal Cinemas Corporation, a Delaware corporation organized on January 29, 2002 ("we," "us," "our," the "Company" or "Regal Cinemas"), is the parent company of Regal Cinemas, Inc. ("RCI") and its subsidiaries, which include Edwards Theatres, Inc. ("Edwards"), Regal CineMedia Corporation ("RCM"), Hoyts Cinemas Corporation ("Hoyts"), and United Artists Theatre Group LLC ("UATG"). The terms RCI, Edwards, RCM, Hoyts and UATG shall be deemed to include the respective subsidiaries of such entities when used in discussions included herein regarding the current operations or assets of such entities.

        As described in Note 1 to the consolidated financial statements included in Part II, Item 8, of this Form 10-K, which is incorporated herein by reference, on January 29, 2002, RCI became a wholly owned subsidiary of Regal Cinemas when The Anschutz Corporation and its subsidiaries ("Anschutz") and the other shareholders of RCI exchanged their common stock of RCI for an aggregate of 7,500,000 shares of common stock of Regal Cinemas. Regal Cinemas was formed for the primary purpose of becoming a borrower under the senior credit facilities described below and the issuer of the $200 million of 9³/8% senior subordinated notes due 2012 issued upon RCI's emergence from bankruptcy.

        Each of the theatre circuits operated by RCI and Edwards emerged from bankruptcy reorganization under Chapter 11 of Title 11 of the United States Code prior to the Company's acquisition of such entities. For a detailed discussion of these bankruptcy proceedings, see Notes 1 and 8 to the accompanying consolidated financial statements.

        We became a wholly owned subsidiary of Regal Entertainment Group ("REG") on April 12, 2002 in conjunction with an exchange transaction in which REG, through its wholly owned subsidiary Regal Entertainment Holdings, Inc. ("REH"), also acquired Edwards and RCM. REG is controlled by Anschutz, which controlled each of us, Edwards and RCM prior to REG's acquisition of us and them in the exchange transaction. Following the exchange transaction, RCI acquired Edwards, RCM, Hoyts and UATG from REH or REG in a series of transactions discussed in Note 4 to the accompanying consolidated financial statements. The Company manages its business under one reportable segment—theatre exhibition operations.

        Our Internet address is www.regalcinemas.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports, are available free of charge on our Internet website under the heading "Investor Relations" as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

DESCRIPTION OF BUSINESS

Overview

        Regal Cinemas operates the largest and most geographically diverse theatre circuit in the United States, consisting of 5,110 screens in 430 theatres in 37 states as of January 1, 2004, with over

225 million annual attendees for the fifty-three week fiscal year ended January 1, 2004. In addition, Regal Cinemas operates 935 screens in 120 theatres for United Artists Theatre Circuit, Inc. ("United Artists"), a subsidiary of REG, pursuant to a management agreement. The Company's geographically diverse circuit includes theatres in 9 of the top 10 and 43 of the top 50 U.S. designated market areas, which includes locations in suburban growth areas. The Company primarily operates multi-screen theatres and has an average of 11.9 screens per location, which is well above the 2003 average of 5.9 screens per location for the North American motion picture exhibition industry. The Company develops, acquires and operates multi-screen theatres primarily in mid-sized metropolitan markets and suburban growth areas of larger metropolitan markets throughout the U.S. 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 January 1, 2004, approximately 86.9% of our screens were located in film licensing zones in which we are the sole exhibitor. RCM focuses exclusively on the expansion of ancillary businesses, such as advertising, and the creation of new complementary business lines that leverage the Company's existing asset and customer bases. The Company believes the size, reach and quality of its theatre circuit provide an exceptional platform to realize economies of scale in its theatre operations and capitalize on RCM's ancillary revenue opportunities. RCM has developed our Regal Digital Content Network^SM ("DCN"), the largest digital video and communications network in the world.

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 grew to approximately 1.6 billion attendees in 2003. 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. For example, 2003 was a steady year for the film exhibition industry in which total box office revenues of $9.5 billion approximated that of a record 2002, while attendance declined by approximately 4% to 1.6 billion attendees.

        During the late 1990's, however, the domestic motion picture exhibition industry underwent a period of extraordinary new theatre construction and the upgrade 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 and operating income 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 many 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 in the aggregate over $4.1 billion on capital expenditures to expand and upgrade their theatre circuits. As a result of the extensive capital

investment over the last several years, we believe future capital expenditures needed to maintain these modern theatres will be modest.

        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.

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 12% from 2000 to 2003. 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 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 1993, 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 4.8 to 5.4 times per year.

        Modern Facilities Lower Future Capital Requirements.    We believe that the modern, 10 to 18 screen megaplex theatre is the appropriate facility for most markets. Over the last several years, major exhibitors have 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." 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

        We operate the largest theatre circuit in the United States with 5,110 screens in 430 theatres in 37 states as of January 1, 2004. We operate theatres in 9 of the top 10 and 43 of the top 50 U.S. designated market areas, which include locations in suburban growth areas. We target prime locations with excellent access to large, high patron-traffic areas. We operate our theatre circuit using our Regal Cinemas, Edwards and United Artists brands through our wholly owned subsidiaries, RCI, Edwards, Hoyts and UATG.

        We primarily operate multi-screen theatres. Our multi-screen theatre complexes typically contain 10 to 18 screens, each with auditoriums ranging from 100 to 500 seats. As a result, our theatres appeal to a diverse group of patrons because we offer a wide selection of films and convenient show times. In addition, many of our theatres feature 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 modern, 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 by 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 modern theatres enhances our ability to attract patrons.

        The following table details the number of locations and theatre screens in our theatre circuit ranked by the number of screens in each state as of January 1, 2004:

        In connection with the combination of our theatre circuits, we have implemented best management practices 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. We use these management reports and communications to closely monitor admissions and concessions revenues as well as accounting, payroll and workforce information necessary to manage our theatre operations effectively and efficiently.

        We seek experienced theatre managers and require new theatre managers to complete a comprehensive training program within the theatres and at the "Regal University," which is held at our 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, we have implemented quality assurance programs 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.

REGAL CINEMEDIA OPERATIONS

        RCM focuses on the expansion of ancillary businesses, such as advertising, and the creation of new complementary business lines that utilize our existing theatre operating personnel and leverage our existing asset and customer bases. We have committed resources and dedicated a management team with experience in these new business areas to focus exclusively on these opportunities and on emerging digital distribution and other technologies. Business focus areas include in-theatre advertising, business meetings, and non-feature film content distribution. We have invested in the equipment necessary to create our DCN, the largest digital in-theatre distribution and projection network in the world. While digital projection technologies required to display motion pictures in our theatres are not yet commercially viable, lower-cost digital video and communications technology is available to expand the revenue generating capabilities and opportunities. Through 2003, 4,711 screens within 394 theatres in 58 markets were deployed as part of this digital network of which 70 theatres and 612 screens are represented by United Artists. In addition, our DCN is connected to 1,230 plasma screens (of which 195 plasma screens are represented by United Artists) that have been installed in the lobbies and other high-traffic locations within these theatres to provide additional advertising reach and exposure. We intend to expand our DCN within REG to approximately 5,275 screens in 78 markets in approximately 430 theatres during 2004. Our total investment in our DCN is expected to be approximately $72.9 million, of which we have invested approximately $65.7 million as of January 1, 2004. We believe that this digital network is enabling us to more effectively capitalize on ancillary revenue opportunities.

        In-Theatre Advertising.    We believe that our theatres and DCN provide an attractive platform for advertisers by allowing them to target a large and desirable customer base and improve the efficiency and reduce the cost of in-theatre advertising. We believe on-screen and in-lobby advertising allows advertisers to achieve high impact appeal due to the captive nature of the movie audience and the sound and projection capabilities of our theatres. We have developed proprietary software to distribute digital advertising content to specific screens or markets throughout REG's consolidated theatre circuit. The addition of digital video and communications technologies has improved the quality of our on-screen advertising business and marketing and promotions business by replacing our slide projectors and 35mm "rolling stock" advertising and making the delivery of advertising more time and cost efficient for advertisers and by allowing for more targeted marketing. Prior to the deployment of our DCN, our in-theatre advertising programs consisted primarily of rolling stock (35mm) television commercials, lower quality intermission slides, intermission music, lobby monitor advertising and

entertainment, coupon distribution and customer sampling. With our DCN, the rolling stock commercials, intermission slides, and intermission music were replaced in February 2003 by a "digital pre-show" that we have branded "The 2wenty^SM". "The 2wenty" includes, in addition to 30 and 60 second high quality advertisements, segments of original entertaining and informative content provided by national media companies such as NBC, Turner Broadcasting, Universal Entertainment and Sony Pictures Entertainment (collectively, the "Content Partners"). In addition to the long-term marketing and programming relationships created with the Content Partners, we have strong business relationships with many national advertisers, such as the Coca-Cola Company and Masterfoods, with advertising agency groups, and with a leading Internet ticket provider, Fandango. Approximately 85% of the advertising revenues come from national advertisers, with the remainder coming from regional and local advertisers. Our advertising business generally generates attractive margins because it is able to demand attractive pricing and utilizes the DCN and our existing theatre assets and personnel.

        Regal CineMeetings and Events^SM. Our Regal CineMeetings and Events^SM business rents theatres on an individual or networked basis for seminars, corporate training, business meetings, church services, distance learning or business communication uses, product and customer research and other entertainment uses such as concerts and movie premieres. By utilizing our DCN and telephone networks, we can provide an interactive video conferencing network and two-way audio broadcasting and teleconferencing services. Theatre rentals allow us to utilize our assets more effectively during non-peak movie-going periods, including Monday through Thursday and Friday, Saturday, and Sunday mornings.

        Other Ancillary Business Opportunities.    We believe that we will generate additional revenues in the future as we continue to expand our ancillary business activities. These activities are currently focused on creating a new kind of national digital distribution network for the distribution of music, education, sports, entertainment and other forms of digital content to paying customers as well as for educational and promotional purposes. As the new programming "Channels" are developed they will be included as one of the product offerings of RCM. In addition, RCM will work closely with our theatre operations group to leverage new technologies to create a more interactive relationship with patrons, to improve the marketing information we provide advertisers and thus improve the local marketing of motion pictures and provide a better overall movie-going experience for our customers. As part of this effort, our frequent movie-goer program, the "Regal Crown Club^SM", was rolled out in all of our markets during 2003.

        Group Advance Ticket and Gift Certificate Sales.    Regal CineMedia manages the sale of our advance tickets sold to corporations and groups and the sale of gift certificates to individuals and groups. Cross-selling and bundling strategies across the advertising sales and other RCM sales groups and across various of the RCM product offerings provides many sales and operational cost benefits.

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 $63.8 million in 2003, compared with approximately $29.9 million in 1993, while the average cost to advertise and promote a film averaged approximately $39.0 million in 2003, compared with approximately $14.1 million in 1993.

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 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 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. While any one motion picture distributor can dominate any given weekend's business, no single distributor dominates the market for an annual period. 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 25.6% of our total revenues from concessions sales during fiscal 2003. 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 up-sell and cross-sell products. We have favorable concession supply contracts and have developed an efficient concession purchasing and distribution supply chain. Our 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, availability of stadium seating, 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.

        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. As the largest motion picture exhibitor, however, we believe that we will be able to generate economies of scale and operating efficiencies that will give us a competitive advantage over many of our competitors.

        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.

        In addition to the motion picture industry, we also operate in other industries as a result of our ancillary business activities. These industries currently include advertising services and business communications services. Our advertising services compete with other forms of marketing media, including television, radio and billboards, as well as advertising in shopping centers, airports, stadiums, supermarkets and public transportation, including taxis, trains and buses. While we believe that in-theatre advertising and promotions are becoming increasingly common and very effective, advertisers may choose alternative methods of conveying their messages. If this occurs, it may have an adverse effect on our ancillary business activities and may affect our results of operations.

        Our auditorium rental and business communications services compete with other forms of large-scale venues, including hotel conference centers, concert halls, other public meeting venues and in-house communications equipment. We believe that our combination of size, geographic distribution and advanced technology offer customers a unique and effective venue for events such as employee meetings and product demonstrations.

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, and 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 and 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. In addition, we have a frequent moviegoer loyalty program, named the Regal Crown Club, in all of our markets.

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

EMPLOYEES

        As of March 9, 2004, we employed approximately 22,941 persons. Some of our facilities employ union projectionists. The Company's expansion into new markets may increase the number of employees represented by unions. 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 and UATG are subject to a consent decree arising from a lawsuit captioned Connie Arnold et. al. v. United Artists Theatre Circuit, Inc. et. al. The 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.

        On August 13, 2003, the United States Court of Appeals for the Ninth Circuit reversed the United States District Court for the District of Oregon's award of summary judgment in favor of our subsidiaries identified below with respect to an ADA claim on appeal before it, and remanded the case to the district court with instructions to enter summary judgment in favor of the plaintiffs (other than Oregon Paralyzed Veterans of America, which did not join in the appeal). The lawsuit was originally filed in the district court on April 11, 2000 by the Oregon Paralyzed Veterans of America, Kathy Stewmon, Tina Smith and Kathy Braddy against Regal Cinemas, Inc. and Eastgate Theatre Inc. dba Act III Theatre, Inc. The plaintiffs alleged, among other things, that the "stadium seating" plans in six of the defendants' movie theatres violate the ADA and the related regulations of the Department of Justice. The appellate court did not address specific changes, if any, that might be required to bring the stadium-style theatres into compliance with its interpretation of the ADA, and its decision conflicts with a recent decision, based upon substantially similar facts, of the United States Court of Appeals for the Fifth Circuit captioned Lara v. Cinemark USA, Inc. We believe we are in compliance with the ADA regulation with respect to the subject theatres and as such have appealed the Ninth Circuit's decision to the Supreme Court of the United States. No decision has been made by the Supreme Court of the United States on whether or not it will hear our appeal. For additional discussion regarding this and other litigation involving our operations, see Note 8 to the accompanying consolidated financial statements.

        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 January 1, 2004, we operated 357 of our theatres pursuant to lease agreements and owned the land and buildings for 73 theatres. For a January 1, 2004 list of the states in which we operated theatres and the number of theatres and screens operated in each such state, see the chart under "Business—Theatre Operations" above, which is incorporated herein by reference. 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 majority of the leases are net leases, which require us to pay the cost of insurance, taxes and a portion of the lessor's operating costs. Our theatre operating corporate office is located in approximately 96,450 square feet of owned space in Knoxville, Tennessee. RCM's corporate office is located in approximately 47,500 square feet of space in Centennial, Colorado. We believe that these facilities are adequate for our operations.

Item 3. LEGAL PROCEEDINGS

        The information required to be furnished by us under this Part I, Item 3 (Legal Proceedings) is incorporated by reference to the information contained under the captions "Bankruptcy Claims" and "Other" in Note 8 (Commitments and Contingencies) of our notes to consolidated financial statements included in Part II, Item 8 (Financial Statements and Supplementary Data) of this report on Form 10-K.

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

        No matters were submitted to a vote of security holders during the fourth quarter ended January 1, 2004.

PART II

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

        There is no established public trading market for the Company's common stock. At March 31, 2004, there was one stockholder of record of our common stock. The third amended and restated senior credit agreement limits the Company's ability to pay dividends. See Note 6 to the accompanying financial statements included in Item 8 of this Form 10-K.

Item 6. SELECTED FINANCIAL DATA

        The selected historical consolidated financial data set forth below (except operating data) were derived from the consolidated financial statements of the Company. The post-reorganization consolidated financial statements, which reflect the application of reorganization and purchase accounting have not been prepared on a consistent basis with the pre-reorganization financial statements and are not comparable in all respects to the consolidated financial statements prior to the reorganization. Accordingly, for periods prior to January 25, 2002, the assets and liabilities of Regal Cinemas and the related consolidated financial statements are referred to herein as "Predecessor Company," and for periods subsequent to January 24, 2002, the assets and liabilities of Regal Cinemas and the related consolidated financial statements are referred to herein as "Reorganized Company." The "Company" and "Regal Cinemas" refer to both Reorganized and Predecessor Company. The selected historical consolidated financial data (except operating data) as of and for the fifty-three weeks ended January 1, 2004, the forty-eight weeks ended December 26, 2002 and the four weeks ended January 24, 2002 were derived from the audited consolidated financial statements of Regal Cinemas and the notes thereto. The selected historical consolidated financial data as of and for the fiscal years ended December 27, 2001, December 28, 2000 and December 30, 1999 were derived from the audited consolidated financial statements of RCI and the notes thereto. Regal Cinemas was formed in January 2002 and therefore no historical financial data is available prior to that date. The selected historical consolidated financial data set forth below should be read in conjunction with, and are qualified in their entirety by, "Management's Discussion and Analysis of Financial Condition and

Results of Operations" and Regal Cinemas' consolidated financial statements and notes thereto included elsewhere in this document.

(1)

The fiscal year ended January 1, 2004 includes 53 weeks of operations.

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

Overview and Basis of Presentation

        We conduct our operations primarily through our subsidiaries: RCI; Edwards; RCM; Hoyts; and UATG. We operate the largest and most geographically diverse theatre circuit in the United States, consisting of 5,110 screens in 430 theatres in 37 states as of January 1, 2004, with over 225 million annual attendees for the fifty-three weeks ended January 1, 2004. In addition, we operate 935 screens in 120 theatres for United Artists pursuant to a management agreement. RCM focuses exclusively on the expansion of ancillary businesses, such as advertising, and the creation of new complementary business lines that leverage the Company's existing asset and customer bases. The Company believes

the size, reach and quality of its theatre circuit provide an exceptional platform to realize economies of scale in its theatre operations and capitalize on RCM's ancillary revenue opportunities.

        We generate revenues primarily from admissions and concession sales. Additional revenues are generated by on-screen advertisements and rental of theatres for business meetings and other events by Regal CineMedia, vendor marketing programs and electronic video games located adjacent to the lobbies of certain of our theatres. 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 we purchase certain concession items, such as fountain drinks and popcorn, in bulk and not pre-packaged for individual servings, we are able to improve our margins by negotiating volume discounts. Other operating expenses consist primarily of theatre labor and occupancy costs.

        We acquired RCI on January 29, 2002, the date it emerged from bankruptcy, by exchanging 7,500,000 shares of our common stock for all of the outstanding shares of common stock of RCI. We were formed for the primary purpose of providing financing to RCI upon RCI's emergence from bankruptcy through borrowings under senior credit facilities and by issuing $200 million of senior subordinated notes.

        We became a wholly owned subsidiary of REG on April 12, 2002 in conjunction with an exchange transaction in which REG, through its wholly owned subsidiary REH, also acquired Edwards and RCM. REG is controlled by Anschutz, which controlled each of us, Edwards and RCM prior to REG's acquisition of us and them in the exchange transaction. Following the exchange transaction, RCI acquired Edwards, RCM, Hoyts and UATG from REH or REG in a series of transactions discussed in Note 4—"Acquisitions" to the accompanying consolidated financial statements. Unless otherwise noted, the "Company" or "Regal Cinemas" refers to Regal Cinemas Corporation and its subsidiaries on a consolidated basis, which includes RCI, Edwards and the assets of UATG as of January 24, 2002 and RCM as of February 21, 2002, the deemed dates at which Anschutz initially held common control in RCI, Edwards, RCM and the assets of UATG, and includes Hoyts as of March 28, 2003, the date at which REG initially held common control in both RCI and Hoyts.

        The Company's combined 2002 statements of operations include information reflecting the four-week period ended January 24, 2002 (Predecessor Company) and the forty-eight week period ended December 26, 2002 (Reorganized Company). As a result, the Company's post-reorganization statements of operations have not been prepared on a consistent basis with the pre-reorganization consolidated financial statements and are not comparable in all respects to the consolidated financial statements prior to the reorganization and RCI's acquisition of Edwards. For financial reporting purposes, the inception date of the Reorganized Company is deemed to be January 24, 2002. As such, operating results and financial position for periods subsequent to January 24, 2002 are herein referred to as the "Reorganized Company" and for all periods ending on or prior to January 24, 2002 as the "Predecessor Company."

        In order to provide a meaningful basis of comparing the years ended January 1, 2004, December 26, 2002 and December 27, 2001 for purposes of the following tables and discussion under "Results of Operations" below, the operating results of the Reorganized Company for the forty-eight weeks ended December 26, 2002, which includes the results of operations of Edwards and UATG for the period from January 24, 2002 to December 26, 2002 and RCM for the period from February 21, 2002 to December 26, 2002, have been combined with the operating results of the Predecessor Company for the four weeks ended January 24, 2002 (collectively, the "Combined Company") ("Fiscal 2002 Period") and are compared to the fifty-three weeks ended January 1, 2004 ("Fiscal 2003 Period") and the year ended December 27, 2001 ("Fiscal 2001 Period"). Depreciation, amortization and certain other line items included in the operating results of the Combined Company are not comparable between periods as the four weeks ended January 24, 2002 of the Predecessor Company do not include

the effects of fresh-start and purchase accounting adjustments. The combining of reorganized and predecessor periods is not in accordance with accounting principles generally accepted in the United States of America.

        For a summary of industry trends as well as other risks and uncertainties relevant to the Company, see "Business- Industry Trends" above and "Results of Operations" below.

Results of Operations

        The theatre exhibition industry fared better than expected against record 2002 box office results. Based on our results and our review of selected industry sources, we believe national box office revenues in calendar year 2003 approximated that of calendar year 2002. Management believes that 2003 box office results benefited from increased average ticket prices per patron, offset by a decline in national attendance. The increase in average ticket price per patron resulted from increases in ticket prices coupled with a favorable film product mix, which resulted in sales of a greater proportion of full-price tickets. Although the film mix favorably impacted average ticket prices per patron, it had a negative impact on concession revenue per patron. The fiscal 2003 film mix consisted of a higher proportion of R-rated and PG-13 rated films.

        Better than expected box office performance (consistent with industry trends), the acquisition of Hoyts, increases in RCM advertising and business meetings and events revenues, the impact of week fifty-three and the other factors described below led to the increases in the Company's total revenues, income from operations and net income. The additional week in fiscal 2003 is significant in that it was the week between Christmas and New Years Day, which is a traditionally high attendance week for the Company and the industry and accounted for approximately 3.9% of the Fiscal 2003 Period total attendance. Total revenues for the Fiscal 2003 Period were $2,158.1 million, a 16.6% increase compared to total revenues of $1,850.9 million for Fiscal 2002 Period. Income from operations for the Fiscal 2003 Period was $355.6 million, a 23.6% increase compared to income from operations of $287.7 million for Fiscal 2002 Period.     Net income decreased 68.0% to $175.2 million for fiscal 2003 compared to net income of $547.0 million in fiscal 2002. The Fiscal 2002 Period included a $661.9 million gain on extinguishment of debt related to the RCI restructuring. Excluding the effects of week fifty-three and the results of Hoyts, Fiscal 2003 Period total revenues, income from operations and net income would have increased (decreased) over the Fiscal 2002 Period by 3.8%, 3.3% and (74.2%), respectively.

        During the Fiscal 2003 Period, the Company made significant progress with its strategic initiatives:

•

We acquired certain Hoyts theatres (consisting of 50 theatres representing 534 screens) in the second quarter of 2003 for an aggregate purchase price of approximately $213.1 million. During 2003, Hoyts contributed approximately 16.1 million attendees or 7.0% to our total attendance. The acquisition of Hoyts provides solid evidence of our commitment to creating growth opportunities with a prudent acquisition strategy.



•

Also during the second quarter of 2003, we acquired all of the outstanding capital stock of UATG from REH, consisting of 438 screens in 46 leased theatres, certain fee properties and certain other assets under construction, for an aggregate cash purchase price of approximately $311.4 million. The Company borrowed an additional $315.0 million under the Regal Cinemas senior credit facility to fund the purchase price.



•

In addition to the Hoyts and UATG acquisition, we opened 4 theatres with 35 screens and closed 7 theaters with 61 screens, ending the Fiscal 2003 Period with 430 theaters and 5,110 screens. For the Fiscal 2003 Period, we invested approximately $93.8 million in capital expenditures to improve our theatre assets and strengthen our existing market position.

•

We continued to gain traction in our Regal CineMedia business and finished the Fiscal 2003 Period ahead of our revenue targets. We continued to expand our DCN and invested approximately $42.7 million in capital expenditures during the Fiscal 2003 Period.



•

We continued to operate the Company with a focus on increasing cash flow from operations and operating margins. During the Fiscal 2003 Period, our net cash provided by operating activities increased 51.1% and we achieved a 90 basis point improvement in our operating margins. Our focus on maximizing operating efficiencies through the integration of Regal Cinemas, United Artists and Edwards and the acquisition of Hoyts and UATG, the growth of revenues in RCM and controlling expenses where possible contributed to the cash flow and operating margin expansion.

        We remain optimistic regarding the 2004 film slate and share the view of a number of film studio executives who believe the industry is poised to benefit from another year of solid box office performance. Evidenced by the film studios' continued efforts to promote and market upcoming film releases, 2004 appears to be another year of an extended film release calendar consisting of high-profile releases such as The Passion of the Christ as well as a few key sequels, such as Harry Potter and the Prisoner of Azkaban, Shrek 2 and Spiderman 2. As a result of the breadth of the anticipated 2004 film product, the Company anticipates a slight increase in industry attendance for the 2004 calendar year as compared to the 2003 calendar year coupled with modest increases in ticket prices and concession revenues per patron.

        We intend to grow our theatre circuit through selective expansion and through acquisition opportunities. With respect to capital expenditures, due in part to the timing of certain construction projects, we expect theatre capital expenditures to be in the range of $115 million to $120 million for fiscal 2004, consisting of new theatre development, expansion of existing theatre facilities, upgrades and maintenance. In addition, we are forecasting approximately $15 to $20 million of RCM capital expenditures.

        We will continue to focus on a simple business strategy including continued evaluation of acquisition opportunities to selectively consolidate a fragmented industry, enhancement of attractive business opportunities through RCM and continued pursuit of a growth strategy that will provide incremental returns on our assets. For an understanding of the significant factors that influenced our performance during the past three fiscal years, the preceding and following discussion should be read in conjunction with the consolidated financial statements and the notes thereto presented in this Form 10-K.

        The following table sets forth the percentage of total revenues represented by certain items included in our consolidated statements of operations and other statistical data for the Fiscal 2003 Period, Fiscal 2002 Period and Fiscal 2001 Period (dollars and attendance in millions, except average ticket prices and average concession per patron):

*

Not meaningful.

(1)

Percentage of revenues calculated as a percentage of admissions revenues.

(2)

Percentage of revenues calculated as a percentage of concessions revenues.

(3)

Percentage of revenues calculated as a percentage of total revenues.

(4)

Calculated as admissions revenue/attendance.

(5)

Calculated as concessions revenue/attendance.

(6)

The Fiscal 2003 Period includes 53 weeks of operations.

Fiscal 2003 Period Compared to Fiscal 2002 Period Compared to Fiscal 2001 Period

Admissions

        Total admissions revenues increased $201.1 million, or 16.1%, to $1,454.0 million for the Fiscal 2003 Period, from $1,252.9 million for the Fiscal 2002 Period. The increase in admissions revenues in the Fiscal 2003 Period compared to the Fiscal 2002 Period was primarily attributable to a 9.5% increase in attendance, which is principally related to a full year of operations of Edwards and UATG during the Fiscal 2003 Period, the inclusion of Hoyts from March 28, 2003 and the impact of the 53^rd week of operations, partially offset by the net closure of 26 screens during the Fiscal 2003 Period. These box office results were favorably impacted by a 6.0% increase in average ticket prices, which reflected actual price increases and the impact of a favorable film product mix.

        Total admissions revenues increased $453.1 million, or 56.7%, to $1,252.9 million for the Fiscal 2002 Period, from $799.8 million for the Fiscal 2001 Period. The increase in admissions revenues in the Fiscal 2002 Period compared to the Fiscal 2001 Period was primarily attributable to a 6.9% increase in ticket prices coupled with a 46.5% increase in attendance, which is principally related to the inclusion of Edwards and UATG from January 24, 2002.

Concessions

        Total concessions revenues increased $49.0 million, or 9.7%, to $553.1 million for the Fiscal 2003 Period, from $504.1 million for the Fiscal 2002 Period. The increase in concessions revenues in the Fiscal 2003 Period compared to the Fiscal 2002 Period was due to a 9.5% increase in attendance. Despite modest concession price increases, concession revenue per patron for the Fiscal 2003 Period remained the same as that of the Fiscal 2002 Period. This was primarily attributable to film product mix, which was comprised of a higher proportion of R-rated and PG-13 rated films. These films typically result in lower concession revenue per patron.

        Total concessions revenues increased $182.8 million, or 56.9%, to $504.1 million for the Fiscal 2002 Period from $321.3 million for the Fiscal 2001 Period. The increase in concessions revenues for the Fiscal 2002 Period compared to the Fiscal 2001 Period was due to a 7.1% increase in average concession per patron, coupled with a 46.5% increase in attendance, which is principally related to the inclusion of Edwards and UATG from January 24, 2002. Additionally, the mix of film product during the Fiscal 2002 Period consisted of a higher percentage of family films, which typically generate higher concessions per patron.

Other Operating Revenues

        Total other operating revenues increased $57.1 million, or 60.8%, to $151.0 million for the Fiscal 2003 Period, from $93.9 million for the Fiscal 2002 Period. Included in other operating revenues are on-screen advertising revenues, meetings and events, marketing revenues from our vendor marketing programs, game revenues and our management fees from United Artists. The increase in other operating revenues was primarily attributable to increases in advertising and meetings revenues generated by Regal CineMedia, the inclusion of Hoyts from March 28, 2003 and, to a lesser extent, increases in our revenues from vendor marketing programs during the Fiscal 2003 Period.

        Total other operating revenues increased $49.4 million to $93.9 million for the Fiscal 2002 Period from $44.5 million for the Fiscal 2001 Period. The increase in other operating revenues in the Fiscal 2002 Period compared to the Fiscal 2001 Period is primarily attributable to the inclusion of Edwards

and UATG from January 24, 2002 and RCM from February 21, 2002 and management fee income from United Artists.

Film Rental and Advertising Costs

        Film rental and advertising costs increased $105.3 million, or 15.5%, to $784.9 million in the Fiscal 2003 Period, from $679.6 million in the Fiscal 2002 Period. Film rental and advertising costs as a percentage of admissions revenues decreased slightly to 54.0% in the Fiscal 2003 Period as compared to 54.2% in the Fiscal 2002 Period as a result of a decline in advertising expense and a lower percentage of box office revenues being derived from higher grossing films. The increase in film rental and advertising costs during the Fiscal 2003 Period was primarily attributable to a full year of operations of Edwards and UATG during the Fiscal 2003 Period, the inclusion of Hoyts from March 28, 2003 and the impact of the 53^rd week of operations during the Fiscal 2003 Period.

        Film rental and advertising costs increased $247.2 million, or 57.2%, to $679.6 million in the Fiscal 2002 Period from $432.4 million in the Fiscal 2001 Period. Film rental and advertising costs as a percentage of admissions revenues increased slightly to 54.2% in the Fiscal 2002 Period from 54.1% in the Fiscal 2001 Period. The increase in film rental and advertising costs in the Fiscal 2002 Period was primarily attributable to the inclusion of Edwards and UATG from January 24, 2002, coupled with higher box office revenues, which translated into higher film rental costs.

Cost of Concessions

        Cost of concessions increased $7.2 million, or 10.0%, to $79.5 million in the Fiscal 2003 Period, from $72.3 million in the Fiscal 2002 Period. Cost of concessions as a percentage of concessions revenues increased to 14.4% in the Fiscal 2003 Period as compared to 14.3% in the Fiscal 2002 Period. The increase in the cost of concessions Fiscal 2003 Period was primarily attributable to product mix, partially offset by the realization of operating efficiencies realized through the 2002 integration of Regal Cinemas and Edwards.

        Cost of concessions increased $25.1 million, or 53.2%, to $72.3 million in the Fiscal 2002 Period from $47.2 million in the Fiscal 2001 Period. The decrease in the cost of concessions as a percentage of concessions revenues in the Fiscal 2002 Period compared to the Fiscal 2001 Period is primarily attributable to the realization of operating efficiencies realized through the integration of Edwards and RCI in the Fiscal 2002 Period.

Rent Expense

        Rent expense increased $31.4 million, or 17.2%, to $213.7 million in the Fiscal 2003 Period from $182.3 million in the Fiscal 2002 Period. Rent expense as a percentage of total revenues was 9.9% and 9.8% for the Fiscal 2003 and Fiscal 2002 Periods, respectively. The increase in rent expense in the Fiscal 2003 Period was primarily attributable to a full year of operations of Edwards and UATG during the Fiscal 2003 Period and the inclusion of Hoyts from March 28, 2003, coupled with marginal increases in rent at expanded locations.

        Rent expense increased $55.9 million, or 44.2%, to $182.3 million in the Fiscal 2002 Period from $126.4 million in the Fiscal 2001 Period. Rent expense as a percentage of total revenues was 9.8% and 10.8% for the Fiscal 2002 and Fiscal 2001 Periods, respectively. The increase in rent expense in the Fiscal 2002 Period was primarily attributable to the inclusion of Edwards and UATG from January 24, 2002. The decrease in rent expense as a percentage of total revenues in the Fiscal 2002 Period was primarily attributable to declines in rent associated with the closure of certain under-performing theatres in the Fiscal 2001 Period.

Other Operating Expenses

        Other operating expenses increased $88.1 million, or 21.0%, to $507.8 million in the Fiscal 2003 Period, from $419.7 million in the Fiscal 2002 Period. Other operating expenses as a percentage of total revenues rose to 23.5% in the Fiscal 2003 Period as compared to 22.7% in the Fiscal 2002 Period. The increase in total other operating expenses in the Fiscal 2003 Period was primarily attributable to incremental costs associated with the inclusion of Hoyts from March 28, 2003, the impact of the 53rd week of operations and a full year of operations of Edwards, UATG and Regal CineMedia during the Fiscal 2003 Period coupled with incremental expenses associated with Regal CineMedia, which began substantive operations in the second fiscal quarter of 2002. Such increases are partially offset by operating efficiencies realized through the 2002 integration of Regal Cinemas and Edwards.

        Other operating expenses increased $117.7 million, or 39.0%, to $419.7 million in the Fiscal 2002 Period from $302.0 million in the Fiscal 2001 Period. Other operating expenses as a percentage of total revenues decreased to 22.7% in the Fiscal 2002 Period from 25.9% in the Fiscal 2001 Period. The decrease in other operating expenses as a percentage of total revenues in the Fiscal 2002 Period was primarily attributable to declines in occupancy costs associated with the closure of certain under-performing theatres in 2001 coupled with operating efficiencies realized through the integration of Edwards and RCI in the Fiscal 2002 Period.

General and Administrative Expenses

        General and administrative expenses decreased $1.5 million, or 2.5%, to $58.1 million during the Fiscal 2003 Period, from $59.6 million in the Fiscal 2002 Period. As a percentage of total revenues, general and administrative expenses were approximately 2.7% and 3.2% in the Fiscal 2003 and Fiscal 2002 Periods, respectively. The decrease in general and administrative expenses as a percentage of total revenues during the Fiscal 2003 Period was primarily attributable to operating efficiencies realized through the 2002 integration of Regal Cinemas and Edwards, coupled with an increase in total revenues.

        General and administrative expenses increased $28.0 million or 88.6%, to $59.6 million in the Fiscal 2002 Period from $31.6 million in the Fiscal 2001 Period. As a percentage of total revenues, general and administrative expenses increased to 3.2% in the Fiscal 2002 Period from 2.7% in the Fiscal 2001 Period. The increase during the Fiscal 2002 Period in general and administrative expense was primarily attributable to higher staffing levels maintained during the Fiscal 2002 Period and other costs associated with the integration of RCI, Edwards and RCM.

Depreciation and Amortization

        Depreciation and amortization increased $22.8 million, or 19.2%, to $141.8 million in the Fiscal 2003 Period, from $119.0 million in the Fiscal 2002 Period. The increase in depreciation and amortization during the Fiscal 2003 Period is primarily due to a full year of operations of Edwards, UATG and Regal CineMedia during the Fiscal 2003 Period and the inclusion of Hoyts from March 28, 2003.

        Depreciation and amortization increased $28.0 million, or 30.8%, to $119.0 million in the Fiscal 2002 Period from $91.0 million in the Fiscal 2001 Period. The increase during the Fiscal 2002 Period in depreciation and amortization is due to the inclusion of Edwards, UATG and RCM, offset by the closure of certain under-performing theatres and write down of property and equipment associated with RCI's reorganization, and the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets," which resulted in the Company no longer amortizing goodwill.

Merger and Restructuring Expenses and Amortization of Deferred Stock Compensation

        Merger and restructuring expenses and amortization of deferred stock compensation decreased $8.9 million, or 65.0%, to $4.8 million in the Fiscal 2003 Period from $13.7 million in the Fiscal 2002 Period. The decrease in merger and restructuring expenses in the Fiscal 2003 Period as compared to the Fiscal 2002 Period is due primarily to higher legal and professional fees incurred during the Fiscal 2002 Period associated with Regal Cinemas Inc.'s Chapter 11 bankruptcy reorganization. RCI emerged from bankruptcy on January 29, 2002.

        Merger and restructuring expenses and amortization of deferred stock compensation decreased $7.1 million, or 34.1%, to $13.7 million in the Fiscal 2002 Period from $20.8 million in the Fiscal 2001 Period. The increase in merger and restructuring expenses in the Fiscal 2001 Period as compared to the Fiscal 2002 Period is due primarily to legal and professional fees associated with Regal Cinemas Inc.'s Chapter 11 bankruptcy reorganization.

Theatre Closing Costs and Loss (Gain) on Disposal and Impairment of Operating Assets

        Theatre closing costs and loss (gain) on disposal and impairment of operating assets decreased $5.2 million to ($2.0) million in the Fiscal 2003 Period from $3.2 million in the Fiscal 2002 Period. Theatre closing costs and loss (gain) on disposal of operating assets decreased $108.8 million to $3.2 million in the Fiscal 2002 Period from $112.0 million in the Fiscal 2001 Period. The increase in theatre closing costs and loss on disposal of operating assets during the Fiscal 2001 Period as compared to the Fiscal 2002 Period is due to expenses associated with the closure of under-performing theatres.

Income (Loss) From Operations

        Income from operations totaled approximately $355.6 million for the Fiscal 2003 Period, which represents an increase of $67.9 million, or 23.6%, from $287.7 million in the Fiscal 2002 Period. The increase in operating income during the Fiscal 2003 Period is primarily attributable to the growth in total revenues related to the inclusion of Edwards, UATG and RCM for a full year during the Fiscal 2003 Period, the inclusion of Hoyts from March 28, 2003 and the impact of the 53rd week of operations during the Fiscal 2003 Period, coupled with the realized benefits of the 2002 integration of Edwards and Regal Cinemas. The increase in operating income during the Fiscal 2003 Period was also attributable to a reduction of merger and restructuring expenses, partially offset by increases in certain other operating expense items described in previous sections.

        Income from operations increased $295.3 million to $287.7 million in the Fiscal 2002 Period from a loss from operations of $7.6 million in the Fiscal 2001 Period. Income (loss) from operations as a percentage of total revenues increased to 15.5% during the Fiscal 2002 Period as compared to (0.7%) in the Fiscal 2001 Period.

Interest Expense

        Interest expense increased $3.8 million, or 6.0%, to $67.4 million in the Fiscal 2003 Period, from $63.6 million in the Fiscal 2002 Period. The increase in interest expense in the Fiscal 2003 Period is attributable to additional borrowings under the amended and restated Regal Cinemas senior credit facility related to the purchase of UATG during the second fiscal quarter of 2003.

        Interest expense decreased $110.6 million, or 63.5%, to $63.6 million in the Fiscal 2002 Period from $174.2 million in the Fiscal 2001 Period. The decrease in interest expense in the Fiscal 2002 Period is due to RCI's debt restructuring associated with its Chapter 11 bankruptcy filing, coupled with lower average outstanding interest rates on our new outstanding debt.

Income Taxes

        The provision for income taxes of $114.5 million for the Fiscal 2003 Period reflects an effective tax rate of approximately 39.5%. The provision for income taxes of $84.8 million for the forty-eight weeks ended December 26, 2002 reflects an effective tax rate of approximately 40.2%. No benefit for income taxes was recorded for the four weeks ended January 24, 2002 or for the Fiscal 2001 Period because we recorded an offsetting valuation allowance against the resulting deferred tax assets, as it was more likely than not that such deferred tax assets would not be realized. Accordingly, the effective tax rate for the four weeks ended January 24, 2002 and the Fiscal 2001 Period was 0%.

Net Income/(Loss)

        Net income totaled $175.2 million for the Fiscal 2003 Period, which represents a decrease of $371.8 million from net income of $547.0 million in the Fiscal 2002 Period. The Fiscal 2002 Period included a $661.9 million gain on extinguishment of debt related to the RCI restructuring. Net income increased $718.5 million to $547.0 million in the Fiscal 2002 Period from a net loss of $171.5 million for the Fiscal 2001 Period.

Cash Flows

        The following table summarizes certain cash flow data for the Fiscal 2003, 2002 and 2001 Periods:

Fiscal 2003 Period Compared to Fiscal 2002 Period

        Net cash provided by operating activities was approximately $462.3 million for the Fiscal 2003 Period compared to approximately $306.0 million for the Fiscal 2002 Period. The net increase was attributable to an increase in net income of $49.0 million, which is attributable to a full year of operations of Edwards, UATG and RCM in 2003, the inclusion of Hoyts from March 28, 2003 and the impact of the 53^rd week of operations during the Fiscal 2003 Period, coupled with certain increases in various components of current liabilities, partially offset by a net decrease in non-cash items (primarily deferred income taxes). Cash flows used in investing activities increased by $497.4 million during the Fiscal 2003 Period and is primarily attributable to the second quarter 2003 acquisitions of Hoyts and UATG, coupled with increased capital expenditures as a result of a full year of operations for Edwards and RCM during the Fiscal 2003 Period and the inclusion of Hoyts from March 28, 2003. Cash flows provided by financing activities were approximately $213.8 million for the Fiscal 2003 Period compared to cash flows used in financing activities of approximately $252.6 million for the Fiscal 2002 Period. The increase in cash flows provided by financing activities was primarily attributable to additional borrowings under the third amended and restated Regal Cinemas senior credit facility related to the purchase of UATG in the second quarter of the Fiscal 2003 Period and a reduction in the payment of RCI and Edwards bankruptcy claims during the Fiscal 2003 Period.

Fiscal 2002 Period Compared to Fiscal 2001 Period

        Net cash provided by operating activities was approximately $306.0 million for the Fiscal 2002 Period compared to approximately $152.0 million for the Fiscal 2001 Period. The increase was attributable to an increase in net income due to the acquisitions of Edwards and RCM during 2002 and RCI's debt restructuring associated with its Chapter 11 bankruptcy filing, coupled with certain increases in non-cash (principally depreciation and amortization and deferred income taxes) and certain working capital items. Cash flows used in investing activities increased by $67.9 million during the Fiscal 2002 Period and is primarily attributable to increased capital expenditures as a result of the acquisition of Edwards and the initial deployment of our DCN during the Fiscal 2002 Period. Cash flows used in financing activities were approximately $252.6 million for the Fiscal 2002 Period compared to cash flows used in financing activities of approximately $9.9 million for the Fiscal 2001 Period. The increase in cash flows used in financing activities was primarily related to cash used to redeem Edwards preferred stock and other Edwards debt obligations during the second quarter of the Fiscal 2002 Period and the payment of bankruptcy claims and other obligations associated with RCI's and Edwards' bankruptcy filings.

Liquidity and Capital Resources

        We expect our primary uses of cash to be for operating expenses, general corporate purposes related to our corporate operations and debt service. Our principal sources of liquidity are from our operating subsidiaries. Our operating subsidiaries' principal uses of cash will be for operating expenses, capital expenditures, and debt service. The principal sources of liquidity for our subsidiaries are cash generated from operations, cash on hand and the revolving credit facilities provided for under the Regal Cinemas' third amended and restated credit agreement.

        Our revenues are generally collected in cash through admissions and concessions revenues. Our operating expenses are primarily related to film and advertising costs, rent and occupancy, and payroll. Film costs are ordinarily paid to distributors within 30 days following receipt of admissions revenues and the cost of the Company's concessions are generally paid to vendors approximately 30 days from purchase. Our current liabilities generally include items that will become due within twelve months and, as a result, at any given time, our balance sheet is likely to reflect a working capital deficit.

        We fund the cost of our operating subsidiaries' capital expenditures through internally generated cash flow, cash on hand and financing activities. Our capital requirements have historically arisen principally in connection with acquisitions of theatres, new theatre openings, adding new screens to existing theatres, development of our DCN, upgrading the Company's theatre facilities and replacing equipment. We intend to continue to grow our theatre circuit through selective expansion and acquisition opportunities. We currently expect capital expenditures for theatre development, replacement, expansion, upgrading and maintenance to be in the range of $115 million to $120 million in fiscal 2004. In addition to capital expenditures associated with our theatre operations, we expect to incur capital expenditures of approximately $15 million to $20 million in connection with RCM during fiscal 2004. RCM capital expenditures will be made in connection with the deployment of our DCN to provide advertising and promotional services and digital distribution content capabilities to additional markets coupled with expenditures for other in-lobby advertising and promotional initiatives. During the Fiscal 2003 Period, we invested an aggregate of approximately $136.5 million in capital expenditures.

        On March 28, 2003, RCI acquired all of the outstanding capital stock of Hoyts from REG for a purchase price of approximately $213.1 million. The purchase price includes cash of approximately $188.1 million, and the assumption of certain capital lease and other obligations with a fair value of approximately $25.0 million. The acquired Hoyts theatre assets is comprised of a total of 50 theatres and 534 screens located in 10 states in the Northeastern United States.

        On June 6, 2003, RCI acquired all of the outstanding capital stock of UATG from REH, consisting of 438 screens in 46 leased theatres, certain fee properties and certain other assets under construction, for an estimated cash purchase price of approximately $311.4 million. The Company borrowed an additional $315.0 million under the Regal Cinemas senior credit facility to fund the purchase price. See Note 6—"Long-Term Obligations" to the accompanying consolidated financial statements for further description of Regal Cinemas' third amended and restated credit agreement.

        As of January 1, 2004, Regal Cinemas had $145 million available under its undrawn amended and restated senior revolving credit facility, $509.6 million outstanding under its senior secured term loan and $350 million principal amount of 9³/8% senior subordinated notes due 2012. Regal Cinemas also maintains letters of credit of $30 million as of January 1, 2004 (of which approximately $15.9 million was outstanding as of January 1, 2004) which reduces the availability under its senior revolving credit facility.

Contractual Cash Obligations and Commitments

        The Company primarily leases its theatres pursuant to long-term non-cancelable operating leases. As of January 1, 2004, the Company's estimated contractual cash obligations and commercial commitments over the next several years are as follows (in millions):

(1)

These amounts are included on our consolidated balance sheet as of January 1, 2004. A portion of this debt is backed by letters of credit as described in footnote (5) below. See Note 6 to the accompanying consolidated financial statements included in Item 8 of this Form 10-K for additional information about our long-term debt obligations and related matters.

(2)

The present value of these obligations, excluding interest, is included on our consolidated balance sheet as of January 1, 2004. See Note 6 to the accompanying consolidated financial statements included in this Form 10-K for additional information about our capital lease obligations and lease financing arrangements.

(3)

These amounts are included on our consolidated balance sheet as of January 1, 2004. See Note 8 to the accompanying consolidated financial statements included in this Form 10-K for additional information about our bankruptcy related matters.

(4)

We enter into operating leases in the normal course of business. Such lease agreements provide us with the option to renew the leases at defined or then fair value rental rates for various periods. Our future operating lease obligations would change if we exercised these renewal options and if we enter into additional operating lease agreements. Our operating lease obligations are further described in Note 8 to the accompanying consolidated financial statements included in this Form 10-K.

(5)

As of January 1, 2004, Regal Cinemas had $145 million available under its undrawn senior revolving credit facility. Regal Cinemas also maintain letters of credit of $30 million (of which approximately $15.9 million was outstanding as of January 1, 2004) which reduces the availability under its senior revolving credit facility.

        The Company believes that the amount of cash and cash equivalents on hand, cash flow expected from operations and availability under its revolving credit facilities 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.

Ratings

        The Company is rated by nationally recognized rating agencies. The significance of individual ratings varies from agency to agency. However, companies assigned ratings at the top end of the range have, in the opinion of certain rating agencies, the strongest capacity for repayment of debt or payment of claims, while companies at the bottom end of the range have the weakest capability. Ratings are always subject to change and there can be no assurance that the Company's current ratings will continue for any given period of time. A downgrade of the Company's debt ratings, depending on the extent, could increase the cost to borrow funds. Below are our latest ratings per category, which were current as of January 1, 2004:

Long-term Obligations

        The following is a description of the Company's material indebtedness as of January 1, 2004:

Amended and Restated Regal Cinemas Senior Credit Facility

        On August 27, 2003, Regal Cinemas entered into a new term loan facility ("New Term Loan D") under the third amended and restated credit agreement of Regal Cinemas for approximately $523.1 million to refinance, at a more favorable interest rate, the aggregate outstanding principal amount under the former Term Loan C and Term Loan D facilities. The amortization schedule under the New Term Loan D is equal to the sum of the scheduled quarterly amortization payments under the former Term Loan C and Term Loan D facilities. The New Term Loan D facility amortizes at a rate of 5.2% per annum for each of the first three years of the loan, with the remaining 84.4% of principal becoming due in years four through six of the loan, maturing June 30, 2009. The New Term Loan D facility is guaranteed by substantially all direct and indirect subsidiaries of Regal Cinemas and by substantially all real and personal property of Regal Cinemas and its subsidiaries, as set forth in the third amended and restated credit agreement. The third amended and restated credit agreement carries identical covenants to those in the Regal Cinemas credit agreement that was amended and restated. As of January 1, 2004, Regal Cinemas had $145 million available under its undrawn senior revolving credit facility. Regal Cinemas also maintains letters of credit of $30 million (of which approximately

$15.9 million was outstanding as of January 1, 2004), which reduces the availability under its senior revolving credit facility.

        Borrowings under the term facility bear interest, at Regal Cinemas' option, at either the base rate or Eurodollar rate plus, in each case, an applicable margin, subject to adjustment based upon the consolidated total leverage ratio of Regal Cinemas. The base rate is a fluctuating interest rate equal to the higher of (a) the British Banking Association's prime rate or (b) the Federal Funds Effective Rate plus 0.5%. At January 1, 2004, the interest rate on the amended and restated senior secured credit facility was approximately 3.7%.

        Regal Cinemas may prepay borrowings under the third amended and restated senior credit agreement in whole or in part, in minimum amounts and subject to other conditions set forth in the third amended and restated senior credit agreement. Regal Cinemas is required to make mandatory prepayments to the lenders from:

•

the net cash proceeds from asset sales in particular circumstances specified in the third amended and restated senior credit agreement; and



•

the net cash proceeds from new debt issuances in particular circumstances specified in the third amended and restated senior credit agreement.

        The mandatory prepayment of the obligations under the third amended and restated senior credit agreement is subject to specified exceptions. The lenders under the term credit facility may elect to decline any mandatory prepayment.

        Regal Cinemas' obligations are secured by, among other things, the capital stock of most of its subsidiaries, mortgages on most of its properties and a security interest in substantially all of its assets.

        The third amended and restated senior credit agreement includes several financial covenants. Regal Cinemas cannot permit, at the end of each applicable fiscal quarter:

•

its ratio of consolidated total debt to consolidated EBITDA for the trailing four quarters (as defined in the third amended and restated senior credit agreement) to exceed the ratio of (a) 3.5 to 1 for the third fiscal quarter in 2002 through the fourth fiscal quarter in 2004 and (b) 3.25 to 1 for the first fiscal quarter in 2005 through the fourth fiscal quarter in 2007 and thereafter;



•

its ratio of consolidated EBITDA plus consolidated rent expense to interest plus rent expense to be less than 1.50 to 1 for any period of four consecutive fiscal quarters;



•

its ratio of consolidated senior debt to consolidated EBITDA for the trailing four quarters to exceed the ratio of (a) 2.50 to 1 for the third fiscal quarter in 2002 through the fourth fiscal quarter in 2003, (b) 2.25 to 1 for the first fiscal quarter 2004 through the fourth fiscal quarter in 2004, and (c) 2.00 to 1 from the first fiscal quarter in 2005 through the fourth fiscal quarter in 2007, and thereafter;



•

Its ratio of consolidated adjusted debt to consolidated EBITDA for the trailing four quarters plus consolidated rent expense for the trailing four quarters to exceed the ratio of (a) 5.50 to 1 for the third fiscal quarter in 2002 through the fourth fiscal quarter in 2004, and (b) 5.25 to 1 for the first fiscal quarter in 2005 through the fourth fiscal quarter in 2007 and thereafter; or



•

its capital expenditures as a percentage of the prior year's EBITDA to exceed 25% for fiscal 2002 and up to 35% for each year thereafter.

        The third amended and restated senior credit agreement also contains customary covenants, including limitations on Regal Cinemas' ability to incur debt, and events of default, including a change of control, as defined in the third amended and restated senior credit agreement. The third amended

and restated senior credit agreement also limits Regal Cinemas' ability to pay dividends, to make advances and otherwise to engage in intercompany transactions. These limitations will restrict its ability to fund operations outside of Regal Cinemas with funds generated at Regal Cinemas.

Regal Cinemas Senior Subordinated Notes

        On January 29, 2002, Regal Cinemas issued $200.0 million aggregate principal amount of 9³/8% senior subordinated notes due 2012. Subsequently, on April 17, 2002, Regal Cinemas issued an additional $150.0 million aggregate principal amount of 9³/8% senior subordinated notes due 2012 with identical terms. The January notes were initially purchased by Credit Suisse First Boston Corporation and Lehman Brothers Inc., and the April notes were initially purchased by Credit Suisse First Boston Corporation. In each instance, the notes were resold to various qualified institutional buyers and non-U.S. persons pursuant to Rule 144A and Rule 903 or Rule 904, respectively, under the Securities Act of 1933. Interest on the notes is payable semi-annually on February 1 and August 1 of each year, and the notes mature on February 1, 2012. The notes are guaranteed by most of Regal Cinemas' existing subsidiaries, and, under the circumstances specified in the indenture, future subsidiaries will also be required to guarantee the notes. The notes are unsecured and rank behind Regal Cinemas' obligations under its senior credit facility and any future senior indebtedness.

        Regal Cinemas has the option to redeem the notes, in whole or in part, at any time on or after February 1, 2007 at redemption prices declining from 104.688% of their principal amount on February 1, 2007 to 100% of their principal amount on or after February 1, 2010, plus accrued interest. At any time on or prior to February 1, 2005, Regal Cinemas may also redeem up to 35% of the aggregate principal amount of the notes at a redemption price of 109.375% of their principal amount, plus accrued interest, within 90 days of an underwritten public offering of common stock of Regal Cinemas or of a future underwritten public offering of the Company's common stock, the proceeds of which are used as a contribution to the equity of Regal Cinemas. Upon a change of control, as defined in the indenture pursuant to which the notes were issued, Regal Cinemas is required to offer to purchase the notes at a purchase price equal to 101% of their principal amount, plus accrued interest. In addition, the indenture limits Regal Cinemas' and its subsidiaries' ability to, among other things, incur additional indebtedness and pay dividends on or repurchase capital stock.

        In May 2002, Regal Cinemas filed a registration statement (Registration No. 333-87930) under the Securities Act of 1933 pursuant to a registration rights agreement entered into in connection with the 9³/8% senior subordinated notes offerings. The registration statement was declared effective by the Securities and Exchange Commission on July 10, 2002, enabling the eligible holders of the notes to exchange their notes for notes registered under the Securities Act of 1933. The transaction described in the registration statement, pursuant to which all of the note holders exchanged their notes for registered notes, closed on August 14, 2002. Regal Cinemas did not receive any proceeds from the transaction.

RCI Leveraged Sale and Leaseback

        During 2000, RCI entered into a sale and leaseback transaction with an unaffiliated third party involving 15 of its owned theatres. Under the terms of this transaction, RCI sold the land and related improvements of the theatres for $45.2 million and leased them back for an initial lease term of 20 years, with an option to extend it for up to 20 additional years. Regal Cinemas accounts for these leases as operating leases.

Regal Cinemas Lease Financing Arrangements

        For some of the Company's new theatre sites built in fiscal years 1999, 2000 and 2001, the Company was considered the owner (for accounting purposes) of the theatre during the construction

period. In accordance with Emerging Issues Task Force No. 97-10, "The Effect of Lessee Involvement in Asset Construction," the Company was required to record the balance sheet obligations ($96.0 million at January 1, 2004) when the construction of the theatre was completed resulting in payments being recorded as interest expense and principal reduction rather than rent expense. These leases typically run for a period of 20 years.

Bankruptcy Claims

        Regal Cinemas, Inc. and Edwards have bankruptcy claims that remain unsettled and are subject to ongoing negotiation and possible litigation. At January 1, 2004, Regal Cinemas had accrued approximately $3.5 million for the estimated costs to resolve such bankruptcy claims. In the opinion of management, based on its examination of these matters, its experience to date and discussions with legal counsel, the outcome of these legal matters, after taking into consideration the amounts already accrued, is not expected to have a material effect on the Company's liquidity or results of operations. To the extent claims are allowed by the bankruptcy court, they will be funded with cash on hand, cash flow from operations or borrowings under Regal Cinemas' revolving credit facility.

Critical Accounting Estimates

        Our consolidated 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 on an ongoing basis such estimates and assumptions, which include, but are not limited to, those related to film costs, property and equipment, goodwill, 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 materially 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.

•

We believe the following accounting policies are critical to our business operations and the understanding of our results of operations and affect the more significant judgments and estimates used in the preparation of our consolidated financial statements: We applied the principles of purchase and reorganization accounting when recording the acquisitions of controlling equity interests by Anschutz and the exchange of stock for minority interests and the emergence from bankruptcy of the theatre companies and the subsequent acquisition of Hoyts. These accounting principles require that we estimate the fair value of the individual assets and liabilities, including estimates of bankruptcy-related claims and the related deferred tax assets and liabilities related to such amounts. The estimation of the fair value of the assets and liabilities involves a number of judgments and estimates that could differ materially from the actual amounts.



•

We 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 assessment. Based on our annual impairment assessment conducted during the fourth quarter of fiscal 2003, we were not required to record a charge for goodwill impairment. In assessing the recoverability of the goodwill, we must make various

assumptions regarding estimated future cash flows and other factors in determining the fair values of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets in future periods.

•

We estimate our film cost expense and related film cost payable based on management's best estimate of the ultimate settlement of the film costs with the distributors. Generally, less than one-third of our quarterly film expense is estimated at period-end. The length of time until these costs are known with certainty depends on the ultimate duration of the film play, but is typically "settled" within two to three months of a particular film's opening release. Upon settlement with our film distributors, film cost expense and the related film cost payable are adjusted to the final film settlement. Such adjustments have been historically insignificant. Actual film costs and film costs payable could differ materially from those estimates. For the fifty-three weeks ended January 1, 2004 and the fiscal years ended December 26, 2002 and December 27, 2001, there were no significant changes in our film cost estimation and settlement procedures.



•

We depreciate and amortize the components of our property and equipment on a straight-line basis over the estimated useful lives of the assets. Each owned theatre consists of a building structure, structural improvements, seating and concession and film display equipment. While we have assigned an estimated useful life of less than 30 years to certain acquired facilities, we estimate that our newly constructed buildings generally have an average economic useful life to us of 30 years. Certain of our buildings have been in existence for more than forty years. With respect to equipment (e.g., concession stand, point-of-sale equipment and certain DCN assets), a substantial portion is depreciated over seven years or less, which has been our historical replacement period. Seats and projection equipment generally have a longer useful economic life, and their depreciable lives (12-15 years) are based on our experience and replacement practices. The estimates of the assets' useful lives require our judgment and our knowledge of the assets being depreciated and amortized. Further, we review the economic useful lives of such assets annually and make adjustments thereto as necessary. Actual economic lives may differ materially from these estimates.

The majority of our properties were appraised as part of the bankruptcy process. Such appraisals supported the estimated lives being used for depreciation and amortization purposes. Furthermore, our analysis of our historical capital replacement program is consistent with our depreciation policies. Finally, we review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Such analysis evaluates assets for impairment on an individual theatre basis. When the future undiscounted cash flows of the operations to which the assets relate do not exceed the carrying value of the assets, such assets are written down to fair value. Our experience indicates that theatre properties become impaired primarily due to market or competitive factors rather than physical (wear and tear) or functional (inadequacy or obsolescence) factors. In this regard, we do not believe the frequency or volume of facilities impaired due to these market factors are significant enough to impact the useful lives used for depreciation periods.

For the fiscal year ended January 1, 2004 and the fiscal years ended December 26, 2002 and December 27, 2001 no significant changes have been made to the depreciation and amortization rates applied to operating assets, the underlying assumptions related to estimates of depreciation and amortization, or the methodology applied. For the fiscal year ended January 1, 2004, consolidated depreciation and amortization expense was $141.8 million, representing 6.6% of consolidated total revenues. If the estimated lives of all assets being depreciated were increased by one year, the consolidated depreciation and amortization expense would have decreased by approximately $10.2 million or 7.2%. If the estimated lives of all assets being depreciated were decreased by one year, the consolidated depreciation and amortization expense would have increased by approximately $11.8 million or 8.3%.

•

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 based on their probable tax treatment. In addition, income tax rules and regulations are subject to interpretation and require judgment by us 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. We record a valuation allowance if it is deemed more likely than not that our deferred income tax assets will not be realized. We reassess the need for such allowance on an ongoing basis. Should we ultimately realize a benefit from tax assets in excess of the amount recorded that relate to pre-acquisition periods, goodwill would be reduced.

For the fiscal year ended January 1, 2004, our provision for income taxes was $114.5 million. Changes in management's estimates and assumptions regarding the enacted tax rate applied to deferred tax assets and liabilities, the ability to realize the value of deferred tax assets, or the timing of the reversal of tax basis differences could potentially impact the provision for income taxes. Changes in these assumptions could potentially change the effective tax rate. A one percent change in the effective tax rate from 39.5% to 40.5% would have increased the current year income tax provision by approximately $3.0 million.

Quarterly Results

        We became a wholly owned subsidiary of REG on April 12, 2002 in conjunction with an exchange transaction in which REG, through its wholly owned subsidiary REH, also acquired Edwards and RCM. REG is controlled by Anschutz, which controlled each of us, Edwards and RCM prior to REG's acquisition of us and them in the exchange transaction. Following the exchange transaction, RCI acquired Edwards, RCM, Hoyts and UATG from REH or REG in a series of transactions discussed in Note 4—"Acquisitions" to the accompanying consolidated financial statements. The Company's financial statements reflect the results of operations of Regal Cinemas and its subsidiaries on a consolidated basis, which includes RCI, Edwards and the assets of UATG as of January 24, 2002 and RCM as of February 21, 2002, the deemed dates at which Anschutz initially held common control in RCI, Edwards, RCM and the assets of UATG. On March 28, 2003, we acquired Hoyts. Accordingly, the results of operations of the acquired Hoyts theatre locations have been included in the accompanying consolidated financial statements for the periods subsequent to the acquisition date of March 28, 2003.

        The following tables set forth selected unaudited quarterly results for the eight quarters ended January 1, 2004. The quarterly financial data as of each period presented below have been derived from the Company'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 Regal Cinemas and notes thereto included elsewhere in this Form 10-K.

(1)

The fourth quarter of the Fiscal 2003 Period includes one additional week of operations.

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.

Recent Accounting Pronouncements

        For a discussion of the recent accounting pronouncements relevant to our operations, please refer to the information provided under Note 2 to the accompanying consolidated financial statements, which information is incorporated herein by reference.

Forward-looking Statements

        Some of the information in this Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this Form 10-K, including, without limitation, certain statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" may constitute forward-looking statements. In some cases you can identify these "forward-looking statements" by words like "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of those words and other comparable words. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain risk factors as more fully discussed below and under the heading "Risk Factors" contained in our final prospectus dated and filed with the Securities and

Exchange Commission on July 10, 2002. 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. The following analysis of our financial condition and results of operations should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company's market risk is confined to interest rate exposure of its and its wholly owned subsidiaries' debt obligations that bear interest based on floating rates. The third amended and restated credit agreement provides for variable rate interest that could be adversely affected by an increase in interest rates. As of January 1, 2004, term borrowings of $509.6 million under the third amended and restated credit agreement were outstanding. Borrowings under this facility bear interest, at the Company's option, at either a base rate (which is the higher of the prime rate of British Banking Association's or the federal funds rate plus 0.5%) or the Eurodollar rate plus, in each case, an applicable margin. The applicable margin can range from 1.50% to 3.25% for the revolving credit facility and 2.25% to 2.50% for the term loan facility. The borrowings outstanding under the New Term Loan D facility bore interest of approximately 3.7% as of January 1, 2004. A one-half percent rise in the interest rate on the Company's variable rate indebtedness held at January 1, 2004, would have increased reported interest expense by approximately $2.5 million for the year ended January 1, 2004.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Regal Cinemas Corporation:

        We have audited the accompanying consolidated balance sheets of Regal Cinemas Corporation and subsidiaries (Reorganized Company) as of January 1, 2004 and December 26, 2002 and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows of the Reorganized Company for the fifty-three weeks ended January 1, 2004 and the forty-eight weeks ended December 26, 2002 (Reorganized Periods), and of Regal Cinemas, Inc. and subsidiaries (Predecessor Company) for the four weeks ended January 24, 2002 (Predecessor Period). 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 aforementioned Reorganized Company consolidated financial statements present fairly, in all material respects, the financial position of Regal Cinemas Corporation and subsidiaries as of January 1, 2004 and December 26, 2002, and the results of their operations and their cash flows for the fifty-three weeks ended January 1, 2004 and the forty-eight weeks ended December 26, 2002, in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the aforementioned Predecessor Company consolidated financial statements present fairly, in all material respects the results of operations and cash flows of Regal Cinemas, Inc. and subsidiaries for the four weeks ended January 24, 2002 in conformity with accounting principles generally accepted in the United States of America.

        As described in Notes 1 and 5 of the consolidated financial statements, effective January 24, 2002, Regal Cinemas, Inc. 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 December 7, 2001. The Company applied the principles of purchase and reorganization accounting when recording the acquisition and controlling interest by The Anschutz Corporation (Anschutz) whereby its assets, liabilities and new capital structure were adjusted to reflect estimated fair values and Anschutz' cost basis as of January 24, 2002. As a result, the consolidated financial statements for the periods subsequent to January 24, 2002 reflect the Reorganized Company's new basis of accounting and are not comparable to the Predecessor Company's pre-organization 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 2002.

Nashville, Tennessee
February 6, 2004

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Regal Cinemas, Inc.
Knoxville, Tennessee

        We have audited the accompanying consolidated statements of operations, shareholders' equity (deficit), and cash flows for the year ended December 27, 2001 of Regal Cinemas, Inc. and subsidiaries (debtors-in-possession as of October 11, 2001). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audit.

        We conducted our audit 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 audit provides a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of Regal Cinemas, Inc. and subsidiaries for the year ended December 27, 2001, in conformity with accounting principles generally accepted in the United States of America.

        As discussed in Note 1 to the consolidated financial statements, the Company filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the District of Middle Tennessee on October 11, 2001. The Bankruptcy Court confirmed the plan of reorganization on December 7, 2001 and the plan became effective January 29, 2002, the date the Company emerged from bankruptcy. As described in Note 3, the Company was acquired subsequent to its emergence from bankruptcy. No effects of accounting for the reorganization or the acquisition are reflected in the 2001 financial statements.

Nashville, Tennessee
February 15, 2002

Regal Cinemas Corporation

Consolidated Balance Sheets

(In millions, except share data)

See accompanying notes to consolidated financial statements.

Regal Cinemas Corporation

Consolidated Statements of Operations

(In millions)

See accompanying notes to consolidated financial statements.

Regal Cinemas Corporation

Consolidated Statements of Shareholders' Equity (Deficit)

(In millions, except share amounts)