Circuit holds red ink in check, eyes reorg
HOLLYWOOD — Regal Cinemas, which is working with entertainment entrepreneur Philip Anschutz on a pre-packaged bankruptcy reorganization filing, on Monday reported a roughly flat second-quarter loss as cost savings from theater shutdowns offset higher losses in continuing operations.
The Knoxville, Tenn.-based circuit posted $29 million in red ink for the latest quarter, compared to a $29.4 million loss in the same period last year.
Revenue rose 9% to $292.3 million, despite the shuttering of an unspecified number of venues over the last year. A $15 million gain on operating costs associated with the closed properties was roughly offset by increased operating expenses, with direct theater costs rising 7% to $238.3 million in the latest quarter.
Regal, owned since 1998 by investment firms Hicks, Muse, Tate & Furst and Kohlberg Kravis Roberts, reiterated concerns that debt pressures could cause a bankruptcy filing. Unofficially, it’s known that such a Chapter 11 filing is likely before Labor Day, with Anschutz expected to gain formal control of the circuit in subsequent court proceedings.
Anschutz and investment partner Oaktree Capital already control most Regal debt. Those holdings would convert to equity, an approach Anschutz used in taking over the United Artists Theaters chain earlier this year.
Price of expansion
UA, Regal and most other large exhibs are suffering the after-effects of an industrywide building binge of the last several years, which left circuits piled high with debt even as increased competish hampered their ability to meet obligations.
“The film exhibition industry continues to face severe financial challenges due primarily to the rapid building of state-of-the-art theater complexes that result in an unanticipated oversupply of screens,” Regal stated in a regulatory filing on second-quarter financial results. “The aggressive new build strategies generated significant competition in once stable markets and rendered many older theaters obsolete more rapidly than anticipated. This effect, together with the fact that the company leases many of these now obsolete theaters under long-term commitments, produced an oversupply of screens.”
Like other bankruptcy reorganization filers before it, Regal is expected to use Chapter 11 proceedings to accelerate the closure of many additional money-losing properties.