Business Strategy

Our business strategy is predicated on our ability to allocate capital effectively to enhance value for our stockholders. This strategy focuses on enhancing our position in the motion picture exhibition industry, capitalizing on prudent industry consolidation and partnership opportunities, managing, expanding and upgrading our existing asset base with new technologies and customer amenities and realizing selective growth opportunities through new theatre construction. Our business strategy should enable us to continue to produce the free cash flow necessary to maintain a prudent allocation of our capital among dividend payments, debt service and repayment and investment in our theatre assets, all to provide meaningful value to our stockholders. Key elements of our business strategy include:

Maximizing Stockholder Value
We believe that our cash dividends are an efficient means of distributing value to our stockholders. From our initial public offering ("IPO") in May 2002 through December 31, 2015, we have returned approximately $4.1 billion to our stockholders in the form of quarterly and extraordinary cash dividends.
Pursuing Prudent Acquisitions and Strategic Partnerships

We believe that our acquisition experience and capital structure position us well to take advantage of future acquisition opportunities and to participate in various partnership initiatives. We intend to selectively pursue accretive theatre acquisitions and theatre-related investments that enhance and more fully utilize our asset base to improve our consolidated operating results and free cash flow.

For example, since 2012, we have demonstrated our ability to enhance our asset base, operating results and free cash flow through the successful acquisition of 73 theatres and 875 screens, including the fiscal 2015 acquisition of five theatres with 61 screens from entities affiliated with Georgia Theatre Company.

With respect to partnership initiatives, we own approximately 19.7% of National CineMedia, LLC ("National CineMedia" or "NCM") as of September 30, 2016. National CineMedia operates the largest digital in-theatre advertising network in North America and concentrates on in-theatre advertising for its theatrical exhibition partners, which includes us, AMC Entertainment, Inc. ("AMC"), and Cinemark, Inc. ("Cinemark"). See "National CineMedia Joint Venture" under Part I, Item I of our Form 10-K for further discussion of National CineMedia. We also participate in other joint ventures such as Digital Cinema Implementation Partners, LLC, Open Road Films and AC JV, LLC, which are also further discussed under Part I, Item I of our Form 10-K. Finally, the Company is a party to a joint venture with certain exhibitors and distributors called Digital Cinema Distribution Coalition ("DCDC"). DCDC has established a satellite distribution network that distributes digital content to theatres via satellite. We believe our investment in National CineMedia and other joint venture arrangements generate incremental value for our stockholders.

Pursuing Premium Experience Opportunities

We continue to embrace innovative concepts that generate incremental revenue and cash flows for the Company and deliver a premium movie-going experience for our customers on several complementary fronts:

  • First, we continued to focus on improving customer amenities, primarily through the installation of luxury reclining seats. With respect to our luxury reclining seating initiative, as of September 30, 2016, we offered luxury reclining seating in 1,210 auditoriums at 106 theatre locations.  We expect to install luxury reclining seating in approximately 40-45 locations during 2016 and expect to outfit approximately 30% of the total screens in our circuit by the end of 2017. The costs of these conversions in some cases are partially covered by contributions from our theatre landlords.
  • Second, to address consumer trends and customer preferences, we have continued to expand our menu of food and alcoholic beverage products. The enhancement of our food and alcoholic beverage offerings has had a positive effect on our operating results and we expect to continue to invest in such offerings in our theatres. As of September 30, 2016, we offered an expanded menu of food in 202 locations and alcoholic beverages in 135 locations, and we expect to offer an expanded menu of food in approximately 240 locations and alcoholic beverages in approximately 175 locations by the end of 2016.
  • Third, we maintain a frequent moviegoer loyalty program, named the Regal Crown Club®, to actively engage our core customers. Regal Crown Club® members are eligible for specified awards, such as concession items, based on purchases made at our participating theatres. During the quarter ended March 31, 2016, we completed the national rollout of the new Regal Crown Club®. Members of the new program can earn unlimited credits and have the ability to redeem credits when they desire in an online reward center where members can select the rewards of their choice.  We believe these changes allow us to offer more relevant offers to our members and increase customer engagement in the program.  As of September 30, 2016, we had approximately 12.0 million active members in the Regal Crown Club®, making it the largest loyalty program in our industry.
  • In addition, we continue to develop and enhance other customer engagement initiatives such as mobile ticketing applications, internet ticketing, social media and other marketing initiatives. For example, we have engaged multiple partners to offer our tickets for sale in numerous formats so that our customers can pre-purchase tickets, scan their mobile device and proceed directly to their reserved seat without waiting in line. In addition, at nearly one third of our locations, our newest ticketing partner provides our patrons the ability to bypass concession stand lines by pre-purchasing concession items via their mobile device. We believe these technologies provide a platform for continued improvements in the customer experience and will drive incremental revenues and cash flows in a more cost-effective manner.
  • Finally, we believe that our IMAX® digital projection systems and our proprietary large screen format, RPXSM offer our patrons all-digital, large format premium experiences and generate incremental revenue and cash flows for the Company. As of September 30, 2016, our IMAX® footprint consisted of 89 IMAX® screens and we operated 93 RPXSM screens. We have been encouraged by the operating results of our IMAX® and RPXSM screens and believe such premium motion picture formats allow us to deliver a premium movie-going experience for our customers.

We believe the continued rollout of premium amenities such as luxury reclining seating, a wider array of food and alcoholic beverage offerings and IMAX and RPX screens allow us to deliver a premium movie-going experience for a majority of our customers. We believe this strategy will enable us to better compete for patrons and build brand loyalty, which will provide us the opportunity for incremental revenue and cash flows.

Pursuing Selective Growth Opportunities and Active Asset Management

We intend to selectively pursue expansion opportunities through new theatre construction, expansion and upgrades that meet our strategic and financial return criteria. Additionally, we manage our asset base by opportunistically closing underperforming theatres.  We continued to actively manage our asset base during the three quarters ended September 30, 2016 by opening two new theatres with 17 screens, reopening 5 screens at an existing theatre and closing nine underperforming theatres with 73 screens, ending the quarter with 565 theatres and 7,310 screens.

In summary, we believe our business strategy should enable us to continue to produce the free cash flow necessary to maintain a prudent allocation of our capital among dividend payments, debt service and repayment and investment in our theatres assets, all to provide meaningful value to our stockholders.

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