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Executives

Michael Campbell – Chairman of the Board, Chief Executive Officer

Amy Miles – Executive Vice President, Chief Financial Officer and Treasurer

Don De Laria – Vice President, Investor Relations

Analysts

Scott Barry – Credit Suisse

Whitney Goldstein – Lehman Brothers

Lloyd Walmsley – Thomas Weisel Partners

Jeffrey Logsdon – BMO Capital Markets

Hunter DuBose - Morgan Stanley

Barton Crockett – JP Morgan

David Miller – Smh Capital

Drew Crum – Stifel Nicolaus & Company

Regal Entertainment Group (RGC) F1Q08 Earnings Call April 24, 2008 9:30 AM ET

Operator

Thank you for your patience. Your teleconference will begin momentarily.

Good morning. My name is Rob and I will be your conference facilitator today. At this time I would like to welcome everyone to the Regal Entertainment Group first quarter 2008 earnings release conference call with our host, Mike Campbell, Chief Executive Officer of Regal Entertainment Group and Amy Miles, Chief Financial Officer of Regal Entertainment Group.

All lines have been placed on mute to prevent any background noise. After management’s remarks there will be a question-and-answer period. If you would like to ask a question during that time simply press the *1 on your telephone keypad and questions will be taken in the order they are received. If you would like to withdraw your question you may do so by pressing *2.

As a reminder, if you are on a speakerphone please pick up your handset before presenting your question.

I would now like to turn the call over to Don De Laria, Vice President of Investor Relations. Please go ahead, Sir.

Don De Laria

Hi and good morning. Before I begin today I would like to remind our listeners this conference call contains forward-looking statements within the meaning of section 27A of the Private Securities Act of 1933 as amended and section 21A of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical fact communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the company’s expectations are disclosed in the risk factors contained in the company’s annual report on form 10K dated February 26, 2008. All forward-looking statements are expressively qualified in their entirety by such factors.

Now I’ll turn the call over to Mike Campbell.

Michael Campbell

Thanks Don. Welcome and thank you for dialing in to our first quarter conference call. Today we will provide an overview of the industry and Regal’s first quarter results and a review of current trends in the exhibition industry including some of our expectations regarding box office trends for the summer of 2008 film slate.

Following my remarks Amy Miles will provide a summary review of our financial results and as always we will conclude the call with a question-and-answer session.

Now turning to first quarter industry results, the industry box office benefited from solid performances from several films released late in Q4 with National Treasure, Book of Secrets contributing $130 million of its $219 million gross during the first quarter. Additionally, Juno contributed $127 million. Alvin and the Chipmunks contributed $105 million and the Bucket List contributed $92 million and I Am Legend contributed $89 million.

The top ten carry-over films of the current period produced box office receipts during the fiscal first quarter that was 30.8% higher than the top ten carry over films of last year.

Other strong films of the first quarter include Dr. Seuss Horton Hears a Who, 10,000 b.c., Cloverfield, [Camper] and 27 Dresses. We are also very pleased with the box office success of Hannah Montana during the first quarter. The 3-D concert film generated significant box office on a per screen basis benefiting from a premium ticket price and strong attendance. We were very pleased with our approximate 23% market share on the film. Also we generated our 23% market share with only 16% of the total screens that were played in the film.

For the period that corresponds to Regal’s fiscal first quarter, industry sources report an increase in aggregate box office revenues of between 3 and 4.9%. When taken together with an approximately 1% increase in the total number of screens, industry box office per screen increased between 2% and 3.9%.

Regal’s 1% box office per screen growth is primarily the result of last year’s out performance of the movie 300 which created a much more difficult comparison for Regal in the current period and an easier comparison for some of our peers. Just as a reminder, in the first quarter period of 2007 Regal reported box office per screen growth of 10%, out performing the estimated industry box office per screen growth last year of 5-6%. If you exclude the prior year over performance on 300, Regal’s box office per average screen increased in line with the industry range for this quarter.

Now turning briefly to Regal’s first quarter results. We are pleased to report the following highlights. Record first quarter total revenues of $626.8 million beating record Q1 revenue of $625 million last year. We are also pleased to report a record first quarter adjusted EBITDA of $131.1 million, which was an 8.8% increase over the first quarter of 2007.

Also our focus on cost control during the quarter resulted in an increase in adjusted EBITDA margin of 160 basis points over the prior year first quarter and produced an adjusted EBITDA margin of 20.9%.

Also on January 15 Regal announced an agreement to acquire Consolidated Theaters, a modern theater circuit with theaters in Georgia, Maryland, North Carolina, South Carolina, Tennessee and Virginia for approximately $210 million cash.

During the quarter we also benefited from an average ticket price growth of 4.3% and concession per cap growth of 1.7%.

Now turning briefly to an update on Consolidated, we are diligently working on the required closing conditions and remain confident regarding the opportunity to close the acquisition within the next several weeks. In the past Regal has been able to significantly enhance cash flow on acquired assets for a combination of synergies that include the benefit of our lower operating expense structure, higher concession margins and the elimination of general and administrative expenses. We expect the Consolidated acquisition to provide similar opportunities.

Now I want to focus for a few minutes on Regal’s strategy to introduce a variety of premium movie experiences to our patrons. 3-D and IMAX are the two primary opportunities for Regal to offer a premium movie experience at a premium price. We continue to believe these technologies will enable Regal to enhance margins and generate incremental cash flow.

Let’s begin with our most recent announcement. On March 24 Regal significantly expanded its joint venture relationship with IMAX by agreeing to install an additional 31 IMAX digital projection systems in 21 major U.S. markets by the end of 2010. This will increase the number of theaters under the joint venture agreement to 38; will bring Regal’s total number of IMAX theaters to 52. We expect the new IMAX digital projection systems installed under the joint venture agreement will minimize Regal’s initial capital investment and translate into superior revenue and margin generating opportunities.

We are also looking forward to beginning a full scale deployment of 3-D technology to further enhance our margins and cash flow generating capability. To date there are 29 3-D films or re-releases slated for the next several years including the next big DreamWorks production, Monsters versus Alien in March 2009, Fox’s Ice Age III in March 2009, James Cameron’s live action Avatar in December 2009, re-releases of Disney’s Toy Story and Toy Story 2 in 3-D in 2009 and 2010 and How to Train Your Dragon and Shrek Goes Forth again both from DreamWorks in the spring of 2010.

We continue to be optimistic about the pricing opportunities created by this exciting premium experience. In order to benefit from a new 3-D content it is necessary to first convert from 35mm to digital projection. As such I would like to spend a few minutes providing an update on the conversion process.

Digital Cinema Implementation Partners (DCIP) the joint venture between Regal, AMC and Cinemark, continues to focus its efforts on finalizing agreements with the various studios to provide for the upgrade to digital cinema. We believe that DCIP is in the final stages of negotiations with several of the major studios. With regard to financing, DCIP engaged JP Morgan to advise on the financing early in the process. Because of their early involvement we expect DCIP and JP Morgan to move quickly to obtain the necessary financing as soon as the studio agreements are finalized.

While the digital conversion process is taking longer than originally expected we continue to believe members of DCIP will benefit from our joint venture structure. At this point we continue to expect to begin a wider scale conversion to digital cinema projection during the second half of this year.

Turning briefly to our outlook for the balance of the second quarter and the upcoming summer film slate, during the first 3-1/2 weeks of the second quarter the industry box office has decreased approximately 20-25% versus the prior comparable period in 2007. We do expect that the success of the quarter, however, will be driven by the May and June film slate and we remain optimistic about the prospect for strong box office results in the coming months.

We expect to kick off the blockbuster summer film slate with the May 2 release of Paramount’s Iron Man. The following week, May 9, Warner Brothers releases the Wachowski Brothers’ film Speed Racer. On May 16 we open Disney’s Chronicles of Narnia: Prince Caspian. Then on May 22 the long awaited sequel to the Indiana Jones series, Indiana Jones and the Crystal Skull. We finish the month on May 30th with the release of New Line’s Sex in the City.

In June our enthusiasm continues with the June 6 release of Paramount’s Kung Fu Panda and Sony’s You Don’t Mess with the Zohan starring Adam Sandler. On June 13th we open Universal’s The Incredible Hulk and M. Night Shyamalan’s next film, The Happening. On June 20th we introduce another Warner Brother’s film, Get Smart and Paramount’s The Love Guru starring Mike Meyers. Finally on June 27th we open the Disney Pixar film Wally and Universal’s Wanted.

Looking forward to the July and August film slate in July we are expecting healthy box office receipts from Will Smith starring in Hancock which is on July 2, Batman The Dark Knight on July 18th, Step Brothers starring Will Farrell on July 25th, Mummy Tomb of the Dragon Emperor on August 1, Pineapple Express on August 8th and Tropic Plunder on August 15th.

An encouragingly every weekend between early May and mid-August we expect to benefit from the release of a very solid film.

So in summary we are pleased with the fiscal year-to-date box office environment and we look forward to continued box office success through the rest of the year. I would like to now turn over the presentation to Amy Miles, our CFO to discuss the company’s financial performance.

Amy Miles

Thanks Mike. Good morning. Today I’d like to provide additional detail on Regal’s fiscal first quarter results, an update with respect to our balance sheet and capital expenditures as well as discuss the impact of National Cinemedia Results on our quarterly results.

Regal Entertainment Group reported record total revenues of $626.8 million, consisting of $432 million from box office revenue, $166.1 million from concessions and $28.7 million of other operating revenue. Our admissions revenue this quarter increased approximately 1.2% primarily as the result of an increase in our average admission revenue per patron up 4.3% which was partially offset by a 2.9% decrease in attendance. Concession revenues this quarter decreased 1.3% as the result of a 1.7% increase in concession per cap that was offset by the previously mentioned decline in attendance.

Other revenue during the first fiscal quarter of 2008 decreased 4.3% over the comparable quarter of 2007 as a result to the changes to the NCM agreement and this was partially offset by increases in our other theater revenues.

Looking briefly at our expense line items for the first quarter, film and advertising expense as a percent of box office for the current quarter represented 50% of admissions revenue. Film rental and advertising expense decreased by 110 basis points over the prior comparable quarter primarily as a result of a decline in our advertising expense and the mix of film product during the quarter. The top ten pictures represented 41.8% of our box office revenue this quarter versus 48.2% in the Q1 2007 period.

We are also pleased to report that concession margins increased 120 basis points over the comparable period of 2007 resulting in a margin of 86.3%. The increase in concession margin does include a benefit from our new beverage agreement as a small portion of the vendor marketing funds are now included in our financials as a reduction of concession costs.

Total rent expense increased $2.3 million or 2.8% and that is due to normal inflationary increases and our newer, more productive screens replacing our older, less productive screens. Our other operating expenses for the quarter increased approximately $3.7 million or 2.2% and this was primarily as a result of increases in our non-rent occupancy costs.

We were [throughput payroll] expenses that were flat with the prior fiscal quarter. Also please not that our G&A expense includes approximately $1.4 million of share based compensation expense in the first quarter of 2008. If you exclude the share based compensation all other G&A expenses were down $300,000 or 2.2% from the Q1 period.

The first quarter we produced a record adjusted EBITDA as Mike mentioned earlier of $131.1 million versus $120.5 million for the same quarter last year and resulted in an adjusted EBITDA margin of 20.9%. The adjusted EBITDA and EBITDA margin reflect our continued focus on cost control and we were pleased with our quarterly results.

We also reported adjusted diluted earnings per share of $0.19 for the quarter which was one penny below the Wall Street consensus estimate.

Turning briefly to our balance sheet and asset base, we ended the quarter with approximately $488 million in cash and total debt balance of approximately $2.1 billion. $210 million of our quarter end cash balance will be used to fund the acquisition of Consolidated Theaters and pro forma for the acquisition [free] cash on hand totaled $278 million.

Our pro forma leverage remains conservative versus our peers and continues to provide financial flexibility and supports Regal’s focus on free cash flow and returning value to shareholders.

Turning briefly to our convertible note financing during the quarter. During the quarter we issued $200 million of 6.25 convertible notes to refinance the existing convertible securities that are due May of 2008. We were successful in our planned strategy of buying back a significant portion of the existing convert prior to the stated maturity and this resulted in the $56.8 million pre-tax charge to earnings during the quarter. It is important to note that $13.7 million of this charge was funded by the counter party to our hedge in warrant agreement. The benefit of the funding under the hedge in warrant is reflected in our stockholder’s equity.

At the end of the first fiscal quarter $33.7 million of the existing converts remain outstanding. We expect to settle the remaining balance with cash if tendered early or on the maturity date. Also please note that in accordance with current accounting guidance the impact of the new 6.25 convertible notes on our diluted share count will be calculated using the as-if converted method. On a go forward basis we expect our fully diluted share count to include approximately 8 million shares related to the new convert. Also we would expect our fully diluted share count to approximately 162 to 164 million outstanding shares.

Turning briefly to capEx. Capital expenditures during the first quarter totaled $24.8 million and were not offset by any asset [build] during the quarter. During the first fiscal quarter of 2008 we opened one theater with 16 screens, expanded one location with four additional screens, and closed three theaters with 23 screens bringing our totals to 525 theaters and 6,385 screens.

Based on our development schedule for 2008, we expect the full year capEx to be in the range of $115 to $130 million and that includes $5-10 million of [bells]. We would also expect that our capEx will be slightly weighted to the second half of the year.

For the remainder of 2008 we would expect to open 5-7 theaters with 70-90 screens and close 4-7 theaters with 50-70 screens. In addition, our pending acquisition of Consolidated is expected to add 28 theaters with 400 screens, which would result in an ending theater count of approximately 554 theaters and an ending screen count of 6,808.

Briefly with respect to the impact of National Cinemedia for the quarter, the net revenues related to NCM included in our other revenue line totaled $3.5 million in Q1 of 2008 versus $7.7 million in Q1 of 2007. Also, on a total basis NCM contributed approximately $11.8 million to our adjusted EBITDA in the current quarter versus $5 million in the prior year quarter. Also, subsequent to the end of our fiscal quarter National Cinemedia completed the annual common unit adjustment designed to adjust founding member ownership percentages for change in their respective number of screens and attendance. As a result of this adjustment, Regal received approximately 759,000 additional common units and our ownership now stands at 22.8%. We would expect an additional NCM equity adjustment subsequent to our closing of the Consolidated acquisition.

Looking forward to the balance of the fiscal year, as Mike previously stated we are optimistic regarding the line up of films for the 2008 fiscal year. We are pleased with our first quarter results and look forward to continued success in 2008.

That concludes our remarks today and we’d now like to open up the line to any questions you may have.

Question-And-Answer Session

Operator

Thank you. As a reminder ladies and gentlemen if you would like to ask a question you may press *1 on your telephone keypad. A confirmation tone will indicate your line is in the queue. If you would like to remove your question from the queue you may press *2.

If you are using speaker equipment it may be necessary to pick up your handset before pressing the * keys. One moment please while we poll for questions.

Our first question is from the line of Scott Barry with Credit Suisse.

Scott Barry – Credit Suisse

Good morning. Two questions if I might. That 20.9% adjusted EBITDA margin that is the highest I can recall in the first quarter. Could you talk a little bit about what is driving that? What sources of efficiencies you are seeing? Then I have a follow-up.

Amy Miles

Sure. I think if…we were the beneficiaries of a lot of cost control measures with respect to the quarter. If you look at our theater operating expense which is a big line item for us, most of the big increases there were related to our new theaters. We really focused tighter on our payroll control and you see evidence of that in the quarter. We also have cycled through a lot of the minimum wage increases that were hitting us in 2007 and so as we move into 2008 we get the benefit there. We had a significant reduction in advertising expense during the quarter and some of it is film mix with respect to film and advertising…more of the films are being generated by the top ten pictures last year. Our new beverage agreement is helping on the concession side. Then the other increases with respect to rent again are just primarily related to the newer theaters. Lastly, remember that we do include in the quarter the pick up of about $6 million if you look at this year’s contribution for National Cinemedia versus last year…that is very margin accretive.

Scott Barry – Credit Suisse

Great. Of that 430 basis points in average ticket pricing increase is there any way to estimate how much of that is from premium experience pricing like the IMAX and 3-D?

Amy Miles

I think it is harder to…maybe a good measure would be a lot of it this quarter was Hannah Montana at the $15 price. One way to think about it is 10% of our revenues during the quarter came from rated G pictures. Those have an average ticket price of $8.60. Last year only 2% of our box office came from the rated G products and that had an average ticket price of $6.50. What drove that difference between the $6.50 and the $8.60 is primarily Hannah Montana. It was all Hannah Montana. We would have had some normal price increases in the G products but having a significant high performing picture during the quarter at the premium price you can see the benefit there when you look at just that class of films.

Scott Barry – Credit Suisse

Okay. Great. Amy you wouldn’t happen to have off hand the [state] line rent number for the quarter?

Amy Miles

It should be…lets see probably right around $1.5 million.

Scott Barry – Credit Suisse

Thanks very much.

Operator

Our next question is from the line of Eric [Hanlon] with Lehman Brothers. Please proceed with your question.

Whitney Goldstein – Lehman Brothers

Hi there. This is actually Whitney Goldstein on the line for Eric. Thanks for taking my question. A few quick ones for you. What is your expected timing for GCI being signed and funded? [inaudible] comes out on 2/27 do you think you will be able to maintain your overall share of domestic box office if you expect similar to Hannah Montana….

Michael Campbell

I think that is a long time in the future and obviously we hope to have additional units deployed by then. Bear in mind that Regal, AMC and Cinemark all will be rolling out through that same DCIP program so its not like a lot of the major circuits are going to have additional incremental rollouts before we participate in that. I would expect also to continue to see out performance on our screens that are deployed already with 3-D versus other circuit screens that are deployed because we did have a significant per screen average premium when we looked at Hannah Montana versus the overall performance of that film.

Whitney Goldstein – Lehman Brothers

Great. Thanks. One more question for you. Do you have a capEx expectation for the 3-D upgrade? What are your plans or expectations for capEx over the next year? Should we expect approximately 25k per screen? Should we expect that you guys are going to buy those 3-D projectors outright or to you believe it will more likely be a revenue share? Thanks for taking my question.

Michael Campbell

We’re still working on various scenarios and obviously negotiating with Real D and others but I would expect our capital expenditures would be much less going forward on any broad based roll out than what you have seen historically.

Whitney Goldstein – Lehman Brothers

Okay great. Thank you very much.

Operator

Our next question is from the line of Lloyd Walmsley with Thomas Weisel Partners.

Lloyd Walmsley – Thomas Weisel Partners

Good morning. Following up on that question when you get through the DCIP finance roll out and look at on a long term cycle, how does the replacement cycle of the digital projection systems look compared to traditional systems in terms of both timing and pricing? Will your capital requirements, for example, on an ongoing basis be different once digital is rolled out?

Michael Campbell

I think that is one of the unknown issues now. We’ve done a lot of testing here in our labs and research but at this point in time there is no way of knowing what the life will be and that is why we are building features into the DCIP agreements that would provide some back stop to replacement and maintenance and obsolescence. That being said we would also expect like any technology that this will continue to decrease in price and perhaps by the time replacement is needed, like computers and other technologies, I think those prices will continue to be driven down.

Lloyd Walmsley – Thomas Weisel Partners

Okay. Thank you.

Operator

Our next question is from the line of Jeffrey Logsdon with BMO Capital Markets.

Jeffrey Logsdon – BMO Capital Markets

Thank you. Do you think we can expect to see a little bit of improvement for you in your film costs this next couple of months? It seems like there are big name titles they don’t seem to have up front attraction that maybe we saw last year with Spiderman, Shrek III and Pirates III.

Michael Campbell

Yeah. I think it will depend on ultimately the performance of those films because a lot of our film cost is pegged to the ultimate domestic performance. Under the assumption that those films under perform last year’s crop of film there would be some assumption that film costs could be a bit lower but here again we are hoping that some of the films that are being released will be comparable to some of the films released last year. Last year we had three $300 million films released in the month of May and I’m not sure we would agree that will be the case this year but still you have got some films that, you know, could approach those numbers that aren’t quite as much of a sure thing or money in the bank as you saw last year. You know we have the Indiana Jones. We have Narnia Prince Caspian and those type of films could easily jump through the roof. We’re hearing very, very good things about Iron Man which is a new franchise but the early tracking on that and the early reactions to screenings have been very, very positive on that film.

Jeffrey Logsdon – BMO Capital Markets

Great. Thanks.

Operator

Our next question comes from the line of Hunter DuBose with Morgan Stanley.

Hunter DuBose - Morgan Stanley

Hi guys. It is Hunter DuBose with Morgan Stanley. Thanks for taking my questions. Do I understand correctly from your comments regarding the common unit adjustment for Consolidated you are electing to go with a lows type structure where you are going to take the units as soon as possible but then actually make interim payments on them until they actually become available for going on NCM?

Amy Miles

Yes. That is what I would call, I guess for lack of a better term the lows type structure. We go ahead and receive the equity, while an existing contract is still in place we would be required to transfer that remaining EBITDA back to National Cinemedia.

Hunter DuBose - Morgan Stanley

In terms of the timing of that distribution would that happen in Q1 2009 or would that be an immediate transaction?

Amy Miles

When we close there will have to be an evaluation at that point in time. Typically adjustments are made post year, but there is a provision for extraordinary events and if the Consolidated attendance is greater than 2% then the overall attendees for National Cinemedia that could result in an extraordinary adjustment but we’ll have to wait and evaluate that post closing.

Hunter DuBose - Morgan Stanley

I see. Okay. Then for the purposes of forecasting the regular distribution for NCM for full year 2008, can you give us any guidance as to whether the key variables that we used to talk about in the 2007 distribution such as the attendance for opening screen and for closing screen and the percentage of non-qualifying screens for closed screens will remain constant for 2008?

Amy Miles

Remember that our distribution…are you talking about our circuit entertainment or our dividend distribution?

Hunter DuBose - Morgan Stanley

No. For your common unit adjustment distribution for screen openings and closings for 2008, we’re trying to forecast what that is likely to be for the distribution for the first quarter of 2009…

Amy Miles

Oh okay. I’m sorry. Yeah, I think you could use similar metrics to what happened in 2007 for our 2008. You can have those same expectations for 2009.

Hunter DuBose - Morgan Stanley

Okay. That includes the percent of non-qualifying screens?

Amy Miles

Yes.

Hunter DuBose - Morgan Stanley

Okay. Thank you.

Operator

Our next question is coming from the line of Barton Crockett with JP Morgan.

Barton Crockett – JP Morgan

Okay great. Thanks a lot. I wanted to just make sure I’m clear on the digital projector roll out and earnings expectations. Do you feel like the fact you got the financing done in the next ten months or [inaudible] digital projection roll out.

Michael Campbell

Well here again it is keyed on getting the studio agreements, but as I said earlier JP Morgan has been involved since the beginning of this process so they are up to speed and hopefully we can translate that into a fairly quick financial resolution. In fairness, I think the digital roll out if we were answering this question last year we would have expected something earlier in 2008. I think we’ve probably moved it back to the latter half of 2008 because of some of the complexity of getting this overall deal done. But here again at the end of the day we’re still focused on being sure we get the right deal done and not the quick deal done. Some of the previous questions relating to obsolescence and replacement and maintenance we have got to be sure we’ve got a deal in place that protects us going forward. That may be part of the reason for some slowness in the process.

Barton Crockett – JP Morgan

Okay. So, when would you need to finish the reeling of the studios in, the financing to be able to stick to the idea of a two half 2008 roll out do you think?

Michael Campbell

Probably within the next couple of months.

Barton Crockett – JP Morgan

Okay.

Amy Miles

And I think too we could still start the roll out in the 2008 period. Timing is going to be is that an August, September second half or is it more of a November/December? I think there is still possibility in that window it’s just what happens in the next couple of months will shed light on whether the process really commences early in that second half or later in that second half.

Barton Crockett – JP Morgan

Okay. Switching to the IMAX relationship which was interesting. To my understanding they haven’t really deployed their digital projection system although they have announced it. How confident are you that is ready to be commercially deployed or will be by the time you are ramping up these screens? Along with that can you talk a little bit about the JV structure and how that hits your [inaudible] just to make sure we understand how you are on top of all of that.

Michael Campbell

Regarding the digital projectors, those are stack systems where they are using two projectors. We’ve seen several demonstrations in lab conditions and actual settings. The technology does work and we have always believed that one of the defining moments in Imax’s future would come when they had a digital solution and we believe it is there and all of these new roll outs that we have committed to are contingent upon IMAX deploying their digital system. I think we are far enough as an industry into digital deployment that we are confident it is going to work. We expect those first deployments in some of these initial joint venture agreements to begin within the next few months.

Amy Miles

With respect to how it impacts the company’s financials obviously the capital investment we make is part of our annual capEx. Then with respect to our PNL all the revenues associated with the IMAX screens or auditoriums show up as revenue for us and then we have an offsetting expense which represents Imax’s piece or profit sharing piece.

Barton Crockett – JP Morgan

Okay. Will that flow through the film rental costs or another line?

Amy Miles

Other operating.

Barton Crockett – JP Morgan

Other operating. Okay great. Thank you.

Operator

Our next question is coming from the line of David Miller with Smh Capital.

David Miller – Smh Capital

Hey guys. Good morning. I thought it was a kind of interesting dichotomy with the quarter ending here with some of these numbers. Admission revenue up 1.4%. Concession revenue down 1.2%. Per cap spending basis, average ticket price up 4.3%. Average concession up 1.7%. Amy, you alluded to Hannah Montana and the price there of $15. Was there anything else that drove that average ticket price increase? That is very impressive. Were you guys able to push through necessary price increases just as a result of cost of doing business or was this driven completely by Hannah Montana? Then I have a follow-up. Thanks.

Amy Miles

Typically you’ll see the company on the end is taking advantage of what I’ll call normal inflationary increases in ticket prices that have been, and I’m not talking about concession prices right now I’m talking about the box office, that have been 3-4%. So we had the benefit of normal inflationary increases this quarter supplemented by the premium price increases we had with Hannah Montana. The combination of those two resulted in or produced the 4.3%.

David Miller – Smh Capital

Okay great. Then I apologize in advance, my audio sort of faded out when you were going over the debt extinguishment charge on a convert. Could you just briefly talk about that? That would be great. Thanks.

Amy Miles

Because the converts were in the money for the quarter…we retired a face value amount of converts. There were $123 million outstanding at the beginning of the quarter and roughly $33 million. So call it we paid in advance $90 million and the associated in the money amount of those converts resulted in a $52 million charge for the quarter. Again that is a pre-tax number.

David Miller – Smh Capital

Got it. Thank you very much.

Operator

Our next question is coming from the line of Drew Crum with Stifel Nicolaus & Company.

Drew Crum – Stifel Nicolaus & Company

Great thanks. Good morning everyone. I want to follow-up on the pricing question or topic. What is the strategy going forward? Is there any change in strategy with pricing given the weakening economy? Should we still think about 3-4% plus some incremental upside from 3-D, IMAX, etc.?

Michael Campbell

I think we are obviously sensitive to economic conditions and we realize that over time our industry has been somewhat recession resistant but I wouldn’t say recession proof. So certainly any decisions we make regarding inflationary ticket price increases would be based on all of that. That being said we still believe that market by market we shouldn’t have any problem seeing that 3% or so increase. That is kind of on the low end of what we have seen the last few years but it is certainly in line with what we have seen over a longer time period as far as ticket price inflation. The economy in general, we get this question a lot. I think what drives this business is still primarily film related. Just witness, we have been in a soft economy for several months now but we had very, very solid months at the box office in January and February and then there was a fairly significant downturn in March which can only be attributed to just the customer response to the product. We are probably being impacted like all businesses are around the edges of our business by the economy and fortunately we are in a business that is somewhat resistant to that.

Drew Crum – Stifel Nicolaus & Company

Mike, was the total number of 3-D screens at the end of the quarter 134? Is that still a good number?

Michael Campbell

Yes.

Drew Crum – Stifel Nicolaus & Company

And once you roll out digital cinema and 3-D screens is there an expectation as far as 3-D screens or a range per quarter? Is that the way to think about it?

Michael Campbell

We believe that just in general…we have the capability internally rolling out those screens. We’re not going to outsource it. We have staff internally. Once we roll out we can convert about 200 screens per month and that would be to digital systems. Obviously not all of that would be the 3-D systems as well. At the end of the roll out I think we said we would have 1200 to 1500 3-D screens by the time the roll out is complete, which would be give or take 20% of our total screen base.

Drew Crum – Stifel Nicolaus & Company

Okay thanks. That is very helpful. One last question. Was there any income tax receivable from National Cinemedia in the quarter?

Amy Miles

No there was not.

Drew Crum – Stifel Nicolaus & Company

Okay. Do you still expect that to slow in 2008? I believe your guidance was $6 million.

Amy Miles

Yes we do.

Drew Crum – Stifel Nicolaus & Company

Okay. Thank you.

Operator

Ladies and gentlemen we have reached the end of our allotted time for questions. I would now like to turn the floor back over to management for closing comments.

Michael Campbell

Well we appreciate everybody dialing in and look forward to having our next call in three months. Thank you.

Amy Miles

Thank you.

Operator

Ladies and gentlemen this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Source: Regal Entertainment Group F1Q08 (Qtr End 03/27/08) Earnings Call Transcript
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