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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 December 31, 2017

Commission file number: 001-31315

____________________________________________________________________________

Regal Entertainment Group

(Exact name of Registrant as Specified in Its Charter)



Delaware (State or Other Jurisdiction of Incorporation or Organization)		02-0556934 (I. R. S. Employer Identification Number)
101 East Blount Avenue Knoxville, TN (Address of Principal Executive Offices)		37920 (Zip Code)

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

____________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Class A Common Stock, $.001 par value		New York Stock Exchange

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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: x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes o No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2017, computed by reference to the price at which the registrant's Class A common stock was last sold on the New York Stock Exchange on such date was $2,297,118,163 (112,273,615 shares at a closing price per share of $20.46).

Shares of Common Stock outstanding—1,000 shares at March 1, 2018

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PART I
Item 1.	BUSINESS	4

	THE COMPANY	4

	DESCRIPTION OF BUSINESS	4

	THEATRE OPERATIONS	6

	NATIONAL CINEMEDIA JOINT VENTURE	7

	DCIP AND OPEN ROAD FILMS JOINT VENTURES	7

	FILM DISTRIBUTION	7

	FILM EXHIBITION	7

	CONCESSIONS	8

	COMPETITION	8

	SEASONALITY	9

	EMPLOYEES	9

	EXECUTIVE OFFICERS OF THE REGISTRANT	9

	REGULATION	10

	FORWARD-LOOKING STATEMENTS	10

Item 1A.	RISK FACTORS	10

Item 1B.	UNRESOLVED STAFF COMMENTS	13

Item 2.	PROPERTIES	14

Item 3.	LEGAL PROCEEDINGS	14

Item 4.	MINE SAFETY DISCLOSURES	14

PART II

Item 5.	MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	14

Item 6.	SELECTED FINANCIAL DATA	15

Item 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	17

	Overview And Basis Of Presentation	17

	Critical Accounting Estimates	18

	Results Of Operations	20

	Quarterly Results	25

	Liquidity And Capital Resources	26

	Contractual Cash Obligations and Commitments	28

	Off-Balance Sheet Arrangements	30

	Recent Accounting Pronouncements	30

Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32

Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	33

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Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	83

Item 9A.	CONTROLS AND PROCEDURES	83

Item 9B.	OTHER INFORMATION	83

PART III

Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	83

Item 11.	EXECUTIVE COMPENSATION	84

Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	93

Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	94

Item 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	95

PART IV

Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	97

Item 16.	FORM 10-K SUMMARY	98

SIGNATURES		100

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Explanatory Note

On December 5, 2017, Regal Entertainment Group entered into an Agreement and Plan of Merger (the "Merger Agreement") with Cineworld Group plc, a public limited company incorporated in England and Wales ("Cineworld"), Crown Intermediate Holdco, Inc., a Delaware corporation and an indirect, wholly owned subsidiary of Cineworld ("US Holdco"), and Crown Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of US Holdco (the "Merger Sub"). On February 28, 2018, following the satisfaction of the conditions in the Merger Agreement, Merger Sub was merged with and into the Company (the "Merger") pursuant to the Merger Agreement. As a result of the Merger, the Company became an indirect, wholly-owned subsidiary of Cineworld, the Company’s Class A common stock will no longer be listed on the New York Stock Exchange, and the registration of shares of the Company’s Class A common stock under the Exchange Act will be terminated. Unless otherwise noted, all references in this Annual Report on Form 10-K (this “Form 10-K”) to Regal Entertainment Group, a Delaware corporation, “we,” “us,” “our,” the “Company” or “Regal,” refer to the Company and its business prior to the Merger. This Form 10-K does not reflect any changes in the Company’s business plan that may occur over time as a result of the Merger and the Company becoming part of the Cineworld group of companies.

REGAL ENTERTAINMENT GROUP

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," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as those discussed elsewhere in this Form 10-K.

Item 1. BUSINESS.

THE COMPANY

Regal was organized on March 6, 2002 and is the parent company of Regal Entertainment Holdings, Inc. ("REH"), which is the parent company of Regal Cinemas Corporation ("Regal Cinemas") and its subsidiaries. Regal Cinemas' subsidiaries include Regal Cinemas, Inc. ("RCI") and its subsidiaries, which include Edwards Theatres, Inc. ("Edwards"), Regal CineMedia Corporation ("RCM") and United Artists Theatre Company ("United Artists"). The terms Regal or the Company, REH, Regal Cinemas, RCI, Edwards, RCM and United Artists 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. The Company manages its business under one reportable segment: theatre exhibition operations.

Our Internet address is www.regmovies.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 (the "Commission"). The contents of our Internet website are not incorporated into this report.

DESCRIPTION OF BUSINESS

Overview

We operate one of the largest and most geographically diverse theatre circuits in the United States, consisting of 7,322 screens in 560 theatres in 43 states along with Guam, Saipan, American Samoa and the District of Columbia as of December 31, 2017, with approximately 197 million attendees for the year ended December 31, 2017 ("fiscal 2017"). Our geographically diverse circuit includes theatres in 48 of the top 50 U.S. designated market areas. We develop, acquire and operate multi-screen theatres primarily in mid-sized metropolitan markets and suburban growth areas of larger metropolitan markets throughout the United States. We operate our theatre circuit using our Regal Cinemas, United Artists, Edwards, Great Escape Theatres and Hollywood Theaters brands through our wholly owned subsidiaries.

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 by 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. For fiscal 2017, we reported total revenues, income from operations and net income attributable to controlling interest of $3,163.0 million, $271.7

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million and $112.3 million, respectively. In addition, we generated $409.9 million of cash flows from operating activities during fiscal 2017.

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THEATRE OPERATIONS

The following table details the number of locations and theatre screens in our theatre circuit ranked by the number of screens in each state along with Guam, Saipan, American Samoa and the District of Columbia as of December 31, 2017:



State/District	Locations	Number of Screens
California	87	1,061
Florida	46	683
New York	44	549
Virginia	30	429
Texas	28	415
Washington	29	347
Pennsylvania	23	311
Georgia	20	298
Ohio	19	274
North Carolina	20	256
South Carolina	17	230
Oregon	19	206
Maryland	14	196
Tennessee	13	179
Colorado	13	162
New Jersey	11	154
Nevada	11	141
Indiana	11	139
Illinois	9	129
Missouri	8	114
Massachusetts	9	106
Kansas	8	92
Idaho	5	73
Hawaii	7	72
Oklahoma	5	69
Kentucky	5	60
New Mexico	4	54
Alabama	3	52
Alaska	4	49
Mississippi	6	46
West Virginia	4	46
Connecticut	4	43
Louisiana	4	43
New Hampshire	3	33
Delaware	2	33
Michigan	2	26
Arkansas	2	24
Maine	2	20
Minnesota	1	16
Nebraska	1	16
Arizona	1	14
District of Columbia	1	14
Guam	1	14
Utah	1	14
Montana	1	11
Saipan	1	7
American Samoa	1	2
Total	560	7,322

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NATIONAL CINEMEDIA JOINT VENTURE

We maintain an investment in National CineMedia, which operates the largest digital in-theatre advertising network in North America representing over 20,800 U.S. theatre screens (of which approximately 20,400 are part of National CineMedia's digital content network) as of December 31, 2017.

We receive theatre access fees and mandatory distributions of excess cash from National CineMedia. As of December 31, 2017, we held approximately 27.6 million common units of National CineMedia. On a fully diluted basis, we own a 17.9% interest in NCM, Inc. as of December 31, 2017.

See Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further discussion of National CineMedia and related transactions.

DCIP AND OPEN ROAD FILMS JOINT VENTURES

We maintain an investment in DCIP, a joint venture company formed by Regal, AMC Entertainment Holdings, Inc. ("AMC") and Cinemark Holdings, Inc. ("Cinemark"). DCIP funds the cost of digital projection equipment principally through the collection of virtual print fees from motion picture studios and equipment lease payments from participating exhibitors, including us. In addition to its U.S. digital deployment, DCIP actively manages the deployment of over 1,800 digital systems in Canada for Canadian Digital Cinema Partnership, a joint venture between Cineplex Inc. and Empire Theatres Limited.

The Company holds a 46.7% economic interest in DCIP as of December 31, 2017. As of December 31, 2017, all of our screens were fully outfitted with digital projection systems. Please refer to Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further discussion of DCIP.

On August 4, 2017, the Company sold all of its 50% equity interest in Open Road Films, a film distribution company jointly owned by us and AMC, to a third party for total proceeds of approximately $14.0 million. In accordance with the purchase agreement, approximately $3.7 million of the net proceeds received were in satisfaction of various receivables and other amounts due to the Company related to film marketing services provided to Open Road Films prior to the closing date. As a result of the sale, the Company recorded a gain of approximately $17.8 million, representing the difference between the net proceeds received of $10.3 million (after satisfaction of the above amounts due the Company) and the carrying amount of the Company's investment in Open Road Films (approximately $(7.5) million) as of the closing date. Also effective with closing, the Company and Open Road Films entered into a new marketing agreement with respect to films released by Open Road Films after the closing date.

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 digital sell-through, DVD and Blu-ray, physical and digital rental, subscription video on demand and free and pay television. A strong theatrical opening often establishes a film's success and positively influences the film's potential in these downstream distribution channels.

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 its theatrical release. Historically, this potential for increased revenue after a film's initial theatrical release has enabled major motion picture studios and some independent producers to increase the budgets for film production and advertising.

FILM EXHIBITION

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 may include cast, producer, director, genre, budget, comparative film performances and various other market conditions. 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.

Film Rental Fees. Film licenses typically specify rental fees or formulas by which rental fees may be calculated. The majority of our arrangements use a "sliding scale" formula. Under a sliding scale formula, the distributor receives a percentage of the box office receipts using a pre-determined and mutually agreed upon film rental template. This formula establishes film rental predicated on box office performance and is the predominant formula used by us to calculate film rental fees. To a much lesser extent, we have also used a "firm term" formula and a "review or settlement" method where either (1) the exhibitor and

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distributor agree prior to the exhibition of the film on a specified percentage of the box office receipts to be remitted to the distributor or (2) the exhibitor and distributor negotiate a percentage of the box office receipts to be remitted to the distributor upon completion of the theatrical engagement.

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. We license films from each of the major distributors and believe that our relationships with these distributors are good. For fiscal 2017, films shown from our top ten film distributors accounted for approximately 93% of our admissions revenues. Our revenues attributable to individual distributors may vary significantly from year to year depending upon the commercial success of each distributor's motion pictures in any given year. In 2017, our largest single distributor accounted for 22.1% of our box office admissions.

CONCESSIONS

In addition to box office admissions revenues, we generated approximately 29.4% of our total revenues from concessions sales during fiscal 2017. We emphasize prominent and appealing concession stations designed for rapid and efficient service. We continually seek to increase concessions sales by actively managing concession line congestion, optimizing product mix and through expansion of our concession offerings, introducing special promotions from time to time and offering employee training and incentive programs to up-sell and cross-sell products. We have favorable concession supply contracts and have developed an efficient concession purchasing and distribution supply chain. We have historically maintained strong brand relationships and management negotiates directly with these manufacturers for many of our concession items to obtain competitive prices and to ensure adequate supplies.

To address consumer trends and customer preferences, we have continued to expand our menu of food and alcoholic beverage products to an increasing number of attendees. The enhancement of our food and alcoholic beverage offerings has had a positive effect on our operating results. As of December 31, 2017, we offered an expanded menu of food in 270 locations (reaching 63% of our attendees) and alcoholic beverages in 175 locations (reaching 38% of our attendees).

COMPETITION

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


•	ability to secure films with favorable licensing terms;


•	availability of customer amenities (including luxury reclining seating), location, reputation, stadium seating and seating capacity;


•	quality of projection and sound systems;


•	appeal of our concession products; and


•	ability and willingness to promote the films that are showing.

We have several hundred competitors nationwide that vary substantially in size, from small independent exhibitors to large national chains such as AMC and Cinemark. As a result, our theatres are subject to varying degrees of competition in the regions in which they operate.

We also compete with other motion picture distribution channels including digital sell-through, DVD and Blu-ray, physical and digital rental, subscription video on demand and free and pay television. Other technologies could also have an

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adverse effect on our business and results of operations. When motion picture distributors license their products to the domestic exhibition industry, they refrain from licensing their motion pictures to these other distribution channels for a period of time, commonly called the theatrical release window. Over the past several years, the theatrical release window has contracted to approximately three to four months. Further, some film distributors have experimented with offering alternative distribution methods for certain films that rely on shorter theatrical release windows and in some cases, bypass the theatrical release altogether. We believe that a material contraction of the theatrical release window could significantly dilute the consumer appeal of the out-of-home motion picture offering. As a result, we continue to monitor the status of the theatrical release window during our film licensing decisions.

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.

SEASONALITY

The timing of movie releases can have a significant effect on our results of operations, and the results of one fiscal quarter are not necessarily indicative of results for the next fiscal quarter or any other fiscal quarter. The unexpected emergence of a hit film during other periods can alter the traditional trend. The seasonality of motion picture exhibition, however, has become less pronounced as motion picture studios are releasing motion pictures somewhat more evenly throughout the year.

EMPLOYEES

As of December 31, 2017, we employed approximately 26,000 persons. The Company considers its employee relations to be good.

EXECUTIVE OFFICERS OF THE REGISTRANT

Shown below are the names, ages and positions of our executive officers as of the filing of this Annual Report on Form 10-K. Any changes to be effected as a result of consummation of the Merger are reflected on our Current Report on Form 8-K filed on February 28, 2018. There are no family relationships between any of the persons listed below, or between any of such persons and any of the directors of the Company or any persons nominated or chosen by the Company to become a director or executive officer of the Company.



Name	Age	Position
Amy E. Miles	51	Chief Executive Officer and Chair of the Board of Directors
Gregory W. Dunn	58	President and Chief Operating Officer
Peter B. Brandow	57	Executive Vice President, General Counsel and Secretary
David H. Ownby	48	Executive Vice President, Chief Financial Officer and Treasurer

Amy E. Miles is our Chief Executive Officer and Chair of the Board of Directors. Ms. Miles has served as Chief Executive Officer since June 2009 and became Chair of the Board of Directors in March 2015. Prior thereto, Ms. Miles served as our Executive Vice President, Chief Financial Officer and Treasurer from March 2002 to June 2009. Additionally, Ms. Miles has served as the Chief Executive Officer of Regal Cinemas, Inc. since June 2009. Ms. Miles formerly served as the Executive Vice President, Chief Financial Officer and Treasurer of Regal Cinemas, Inc. from January 2000 to June 2009. Prior thereto, Ms. Miles served as Senior Vice President of Finance from April 1999, when she joined Regal Cinemas, Inc. Prior to joining the Company, Ms. Miles was a Senior Manager with Deloitte & Touche LLP from 1998 to 1999. From 1989 to 1998, she was with PricewaterhouseCoopers LLP.

Gregory W. Dunn is our President and Chief Operating Officer. Mr. Dunn has served as an Executive Vice President and Chief Operating Officer of Regal since March 2002 and became President of Regal in May 2005. Mr. Dunn served as Executive Vice President and Chief Operating Officer of Regal Cinemas, Inc. from 1995 to March 2002. Prior thereto, Mr. Dunn served as Vice President of Marketing and Concessions of Regal Cinemas, Inc. from 1991 to 1995.

Peter B. Brandow is our Executive Vice President, General Counsel and Secretary and has served as such since March 2002. Mr. Brandow has served as the Executive Vice President, General Counsel and Secretary of Regal Cinemas, Inc. since July 2001, and prior to that time he served as Senior Vice President, General Counsel and Secretary of Regal Cinemas, Inc. since February 2000. Prior thereto, Mr. Brandow served as Vice President, General Counsel and Secretary from February 1999 when he joined Regal Cinemas, Inc. From September 1989 to January 1999, Mr. Brandow was an associate with the law firm Simpson Thacher & Bartlett LLP.

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David H. Ownby is our Executive Vice President, Chief Financial Officer and Treasurer and has served in this capacity since June 2009. Mr. Ownby also has served as our Chief Accounting Officer since May 2006. Mr. Ownby served as our Senior Vice President of Finance from March 2002 to June 2009. Prior thereto, Mr. Ownby served as the Company's Vice President of Finance and Director of Financial Projects from October 1999 to March 2002. Prior to joining the Company, Mr. Ownby served with Ernst & Young LLP from September 1992 to October 1999.

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 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, award of damages to private litigants and additional capital expenditures to remedy such non-compliance.

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 in Note 8 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, 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 and environmental protection requirements. We believe that we are in substantial compliance with all relevant laws and regulations.

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 (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts included in this Form 10-K, including, without limitation, certain statements under "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" 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 under "Risk Factors" below.

Item 1A. RISK FACTORS.

In addition to the other information contained in this Form 10-K, you should consider the following factors.

Our substantial lease and debt obligations could impair our financial condition.

We have substantial lease and debt obligations. If we are unable to meet our lease and debt service obligations, we could be forced to restructure or refinance our obligations and seek additional financing or sell assets. We may be unable to restructure or refinance our obligations and obtain additional financing or sell assets on satisfactory terms or at all. As a result, the inability to meet our lease and debt service obligations could cause us to default on those obligations. Any such defaults could materially impair our financial condition and liquidity.

To service our indebtedness, we will require a significant amount of cash, which depends on many factors beyond our control.

Our ability to make payments on our debt and other financial obligations will depend on the ability of our subsidiaries to generate substantial operating cash flow. This will depend on future performance, which will be subject to prevailing economic conditions and to financial, business and other factors beyond our control. If our and our subsidiaries' cash flows prove inadequate to meet our and their debt service and other obligations in the future, we may be required to refinance all or a portion of our and our subsidiaries' existing or future debt, on or before maturity, sell assets, obtain additional financing or

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suspend the payment of dividends. We cannot assure you that we will be able to refinance any indebtedness, sell any such assets or obtain additional financing on commercially reasonable terms or at all.

We depend on motion picture production and performance and our relationships with film distributors.

Our ability to operate successfully depends upon the availability, diversity and commercial appeal of motion pictures, our ability to license motion pictures and the performance of such motion pictures in our markets. We license first-run motion pictures, the success of which can depend on the marketing efforts of the major motion picture studios. Poor performance of, or any disruption in the production of, these motion pictures (including by reason of a strike or lack of adequate financing), or a reduction in the marketing efforts of the major motion picture studios, could hurt our business and results of operations. In addition, a change in the type and breadth of movies offered by motion picture studios may adversely affect the demographic base of moviegoers.

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 resulting from those cases effectively require major motion picture distributors to offer and license films to exhibitors, including us, on a film-by-film and theatre-by-theatre basis. Consequently, we cannot assure ourselves of a supply of motion pictures by entering into long-term arrangements with major distributors, but must compete for our licenses on a film-by-film and theatre-by-theatre basis. In addition, the film distribution business is highly concentrated, with the top ten film distributors accounting for approximately 93% of our admissions revenues during fiscal 2017. Our business depends on maintaining good relations with these distributors. We are dependent on our ability to negotiate commercially favorable licensing terms for first-run films. A deterioration in our relationship with any of the major film distributors could affect our ability to negotiate film licenses on favorable terms or our ability to obtain commercially successful films and, therefore, could hurt our business and results of operations.

An increase in the use of alternative film delivery methods may drive down movie theatre attendance and reduce our revenue.

We compete with other motion picture distribution channels including digital sell-through, DVD and Blu-ray, physical and digital rental, subscription video on demand and free and pay television. When motion picture distributors license their products to the domestic exhibition industry, they refrain from licensing their motion pictures to these other distribution channels during the theatrical release window. The average theatrical release window has decreased from approximately six months to approximately three to four months over the last decade. Further, some film distributors have experimented with offering alternative distribution methods for certain films that rely on shorter theatrical release windows and in some cases, bypass the theatrical release altogether. We believe that a material contraction of the current theatrical release window could significantly dilute the consumer appeal of the in-theatre motion picture offering, which could have a material adverse effect on our business and results of operations. We can provide no assurance as to the impact or timing of any material contraction to the current theatrical release window.

Our theatres operate in a competitive environment.

The motion picture exhibition industry is fragmented and highly competitive with no significant barriers to entry. Theatres operated by national and regional circuits and by small independent exhibitors compete with our theatres, particularly with respect to film licensing, attracting patrons and developing new theatre sites. Moviegoers are generally not brand conscious and usually choose a theatre based on its location, the films showing there and its amenities.

The motion picture exhibition industry has and continues to implement various initiatives, concepts, customer amenities and technological innovations aimed at delivering a premium movie-going experience for its patrons (including, but not limited to, luxury reclining seating, enhancement of food and alcoholic beverage offerings, the installation of premium format screens, digital 3D, 4DX, satellite distribution technologies and stadium seating). Theatres in our markets without these amenities may be more vulnerable to competition than those theatres with such amenities, and should other theatre operators choose to implement these or other initiatives in these markets, the performance of our theatres may be significantly and negatively impacted. In addition, while we continue to implement these and other initiatives, new innovations and technology will continue to impact our industry. If we are unable to respond to or invest in future technology and the changing preferences of our customers, we may not be able to compete with other exhibitors or other entertainment venues, which could also adversely affect our results of operations. Finally, should other theatre operators embark on aggressive capital spending strategies, our attendance, revenue and income from operations per screen could decline substantially.

We are currently the subject of an investigation by the Antitrust Division of the Department of Justice and Attorneys General in several states and have been named as defendants in third party lawsuits related to similar matters.

We are currently the subject of an investigation by the DOJ regarding potentially anticompetitive conduct and coordination among NCM, AMC, the Company and/or Cinemark, under Sections 1 and 2 of the Sherman Act, 15 U.S.C. § 1 and § 2. Additionally, we are the subject of investigations by various state attorneys general relating to our investments in various joint ventures, including NCM, as well as movie “clearances” whereby film distributors do not license the rights to

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exhibitors to play the same first-run feature length films at the same time in the same theatrical release zones. In addition, in the past, we have been named as defendants in lawsuits commenced by other theatre operators who claim the Company has engaged in anti-competitive conduct by virtue of these clearances.

The Company has cooperated with the Federal and state investigations that have been undertaken. While we do not believe that the Company has engaged in any violation of Federal or state antitrust or competition laws related to its investments in NCM, other joint ventures, or as pertains to movie clearances, and while the Company intends to vigorously defend any allegation that it has done so, we can provide no assurances as to the scope, timing or outcome of the DOJ’s, any other state or Federal governmental reviews of the Company’s conduct. If we are subject to an adverse finding or ruling resulting from any of these investigations, we could be required to pay damages or penalties or have other remedies imposed upon us that could have a material adverse effect on our business. In addition, we have already incurred substantial legal expenses related to these matters and we may incur significant additional expenditures in the future. Furthermore, the period of time necessary to fully respond to and resolve these investigations is uncertain and could require significant management time and financial resources which could otherwise be devoted to the operation of our business.

We may not benefit from our acquisition strategy and strategic partnerships.

Identifying suitable acquisition candidates and partnership opportunities may be difficult. In the case of acquisitions, even if we are able to identify suitable candidates, there can be significant competition from other motion picture exhibitors and financial buyers when trying to acquire these candidates, and there can be no assurances that the Company would be able to acquire such candidates at reasonable prices or on favorable terms. Moreover, some of these possible buyers may be stronger financially than we are. As a result of this competition for limited assets, there is no assurance that the Company could succeed in acquiring suitable candidates or may have to pay more than we would prefer to make an acquisition. If we cannot identify or successfully acquire suitable acquisition candidates, there is no assurance that the Company could successfully expand its operations.

In any acquisition, we expect to benefit from cost savings through, for example, the reduction of overhead and theatre level costs, and from revenue enhancements resulting from the acquisition. There can be no assurance, however, that we will be able to generate sufficient cash flow from these acquisitions to service any indebtedness incurred to finance such acquisitions or realize any other anticipated benefits. Nor can there be any assurance that our profitability will be improved by any one or more acquisitions. If we cannot generate anticipated cash flows resulting from acquisitions or fail to realize their anticipated benefits, our results of operations and profitability could be adversely affected. Any acquisition may involve operating risks, such as:


•	the difficulty of assimilating the acquired operations and personnel and integrating them into our current business;


•	the potential disruption of our ongoing business;


•	the diversion of management's attention and other resources;


•	the possible inability of management to maintain uniform standards, controls, procedures and policies;


•	the risks of entering markets in which we have little or no experience;


•	the potential impairment of relationships with employees and landlords;


•	the possibility that any liabilities we may incur or assume may prove to be more burdensome than anticipated; and


•	the possibility that any acquired theatres or theatre circuit operators do not perform as expected.

We also maintain theatre-related investments and partnership opportunities that enhance and more fully leverage our asset base to improve our consolidated operating results and free cash flow. On a fully diluted basis, we own a 17.9% interest in NCM, Inc. as of December 31, 2017. We also participate in other joint ventures such as DCIP, AC JV, Digital Cinema Distribution Coalition (“DCDC”) and Atom Tickets. Risks associated with pursuing these investments and opportunities include:


•	the difficulties and uncertainties associated with identifying investment and partnership opportunities that will successfully enhance and utilize our existing asset base in a manner that contributes to cost savings and revenue enhancement;


•	our inability to exercise complete voting control over the partnerships and joint ventures in which we participate; and


•	our partners may have economic or business interests or goals that are inconsistent with ours, exercise their rights in a way that prohibits us from acting in a manner which we would like or they may be unable or unwilling to fulfill their obligations under the joint venture or similar agreements.

Although we have not been materially constrained by our participation in National CineMedia or other joint ventures to date, no assurance can be given that the actions or decisions of other stakeholders in these ventures will not affect our investments in National CineMedia, DCIP, AC JV, DCDC and Atom Tickets or other existing or future ventures in a way that hinders our corporate objectives or reduces any anticipated improvements to our operating results and free cash flow.

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In addition, any acquisitions or partnership opportunities are subject to the risk that the Antitrust Division of the DOJ or state or foreign competition authorities may require us to dispose of existing or acquired theatres or other assets in order to complete acquisition and partnership opportunities, pay damages and fines, or otherwise modify our normal operations as a result of our joint venture investments. The DOJ and various state attorneys general are currently investigating our investments in our various joint ventures, including NCM, for potentially anticompetitive conduct, as described more fully herein, and until such investigations are complete, we are not able to predict their outcome.

We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.

The efficient operation of our business is dependent on computer hardware and software systems. Information systems are vulnerable to security breaches by computer hackers, cyber terrorists, employee error or misconduct, viruses and other catastrophic events, leading to unauthorized disclosure of confidential and proprietary information and exposing us to litigation that could adversely affect our reputation. We rely on industry accepted security measures and technology to protect confidential and proprietary information maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business and results of operations.

Economic, political and social conditions could materially affect our business by reducing consumer spending on movie attendance or could have an impact on our business and financial condition in ways that we currently cannot predict.

We depend on consumers voluntarily spending discretionary funds on leisure activities. We also compete for the public's leisure time and disposable income with other forms of entertainment, including sporting events, theme parks, concerts, live theatre and restaurants. Motion picture theatre attendance may be affected by negative trends in the general economy that adversely affect consumer spending. A prolonged reduction in consumer confidence or disposable income in general may affect the demand for motion pictures or severely impact the motion picture production industry, which, in turn, could adversely affect our operations. If economic conditions are weak or deteriorate, or if financial markets experience significant disruption, it could materially adversely affect our results of operations, financial position and/or liquidity. For example, deteriorating conditions in the global credit markets could negatively impact our business partners which may impact film production, the development of new theatres or the enhancement of existing theatres.

Theatre attendance may also be affected by political events, such as terrorist attacks on, or wars or threatened wars involving, the United States, health related epidemics and random acts of violence, any one of which could cause people to avoid our theatres or other public places where large crowds are in attendance. In addition, due to our concentration in certain markets, natural disasters such as hurricanes, earthquakes and severe storms in those markets could adversely affect our overall results of operations.

All of these factors could adversely affect our financial condition and results of operations.

We are subject to substantial government regulation, which could entail significant cost.

We are subject to various federal, state and local laws, regulations and administrative practices affecting our business, and we must comply with provisions regulating health and sanitation standards, equal employment, environmental, and licensing for the sale of food and, in some theatres, alcoholic beverages. Changes in existing laws or implementation of new laws, regulations and practices could have a significant impact on our business. A significant portion of our theatre level employees are paid at or slightly above the applicable minimum wage in the theatre's jurisdiction. Increases in the minimum wage and implementation of reforms requiring the provision of additional benefits will increase our labor costs.

Our theatres must comply with 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, award of damages to private litigants and additional capital expenditures to remedy such non-compliance.

Item 1B. UNRESOLVED STAFF COMMENTS.

None.

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Item 2. PROPERTIES.

As of December 31, 2017, we operated 502 theatre locations pursuant to lease agreements and owned the land and buildings in fee for 58 theatre locations. For a list of the states in which we operated theatres and the number of theatres and screens operated in each such state as of December 31, 2017, please see the chart under Part I, Item 1 of this Form 10-K under the caption "Business—Theatre Operations," which is incorporated herein by reference.

The majority of our leased theatres are subject to lease agreements with original terms of 15 to 20 years or more and, in most cases, renewal options for up to an additional 10 to 20 years. These leases provide for minimum annual rentals and the renewal options generally provide for rent increases. Some leases require, under specified conditions, further rental payments based on a percentage of revenues above specified amounts. A significant majority of the leases are net leases, which require us to pay the cost of insurance, taxes and a portion of the lessor's operating costs. Our corporate office is located in Knoxville, Tennessee. We believe that these facilities are currently adequate for our operations.

Item 3. LEGAL PROCEEDINGS.

Pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, as amended, the information required to be furnished by us under this Part I, Item 3 (Legal Proceedings) is incorporated by reference to the information contained in Note 8 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

In addition, on January 29, 2018 a purported class action complaint relating to the Merger, captioned Baldassano v. Regal Entertainment Group et al., Case No. 195178-3, was filed on behalf of the stockholders against members of the board of directors of the Company, the Company, Cineworld, US Holdco and Merger Sub in the Chancery Court for Knox County, Tennessee in the Sixth Judicial District at Knoxville (the “Action”). The Action alleged that the board of directors of the Company breached its fiduciary duties to the stockholders by means of (A) agreeing to an allegedly unfair price in the proposed merger and (B) allegedly engineering a transaction to benefit themselves and/or Cineworld without regard to the Company’s stockholders. The complaint also generally asserted that the Company, Cineworld, US Holdco and Merger Sub aided and abetted the board of directors’ breach of its fiduciary duties. The Action sought, among other things, to enjoin the consummation of the Merger, rescind the Merger Agreement (to the extent the Merger had already been consummated), damages, and attorneys’ fees and costs. On February 12, 2018, the Company and the plaintiff entered into a memorandum of understanding in which the plaintiff agreed to dismiss his claims with prejudice, and to dismiss claims asserted on behalf of the putative class without prejudice, in return for the Company’s agreement to make certain supplemental disclosures.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Prior to the effective time of the Merger, the Company had two classes of common stock. Our Class A common stock traded on the New York Stock Exchange (the "NYSE") from May 9, 2002 under the symbol "RGC" until February 28, 2018, upon closing of the Merger. All of our Class B common stock was owned by the Anschutz Corporation and the Anschutz Foundation.

The following table sets forth the historical high and low sales prices per share of our Class A common stock as reported by the New York Stock Exchange for the fiscal periods indicated.



	Fiscal 2017
	High		Low
First Quarter (January 1, 2017 - March 31, 2017)	$	23.56	$	20.73
Second Quarter (April 1, 2017 - June 30, 2017)	22.88		19.87
Third Quarter (July 1, 2017 - September 30, 2017)	20.59		13.90
Fourth Quarter (October 1, 2017 - December 31, 2017)	23.09		14.79

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	Fiscal 2016
	High		Low
First Quarter (January 1, 2016 - March 31, 2016)	$	21.82	$	16.50
Second Quarter (April 1, 2016 - June 30, 2016)	22.48		19.35
Third Quarter (July 1, 2016 - September 30, 2016)	24.19		21.13
Fourth Quarter (October 1, 2016 - December 31, 2016)	24.79		20.29

On February 28, 2018, the Company notified the NYSE that the Merger had been completed and requested that

trading of the Company’s Class A common stock on the NYSE be suspended and an application on Form 25 be filed with the Commission by the NYSE to remove the Company's Class A common stock from listing on the NYSE and deregister the Company's Class A common stock under Section 12(b) of the Exchange Act. The Company intends to file a Form 15 with the Commission to terminate registration of the Company's Class A common stock under Section 12(g) of the Exchange Act and suspend reporting obligations relating to the Company's Class A common stock under Section 15(d) of the Exchange Act.

As of March 1, 2018, the Company had only one class of common stock and there was one stockholder of record.

Dividend Policy

During the fiscal year ended December 31, 2016 (the "Fiscal 2016 Period"), Regal paid four quarterly cash dividends of $0.22 per share on each outstanding share of the Company's Class A and Class B common stock, or approximately $138.9 million in the aggregate. During the fiscal year ended December 31, 2017 (the "Fiscal 2017 Period"), Regal paid four quarterly cash dividends of $0.22 per share on each outstanding share of the Company's Class A and Class B common stock, or approximately $138.9 million in the aggregate. On February 7, 2018, the Company declared a cash dividend of $0.22 per share on each share of the Company's Class A and Class B common stock (including outstanding restricted stock), which was paid on February 26, 2018 to stockholders of record on February 17, 2018. Declared dividends have been funded through cash flow from operations and available cash on hand.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Issuer Purchases of Equity Securities

None.

Item 6. SELECTED FINANCIAL DATA.

The selected historical consolidated financial data as of and for the fiscal years ended December 31, 2017, December 31, 2016, December 31, 2015, January 1, 2015, and December 26, 2013 were derived from the audited consolidated financial statements of Regal and the notes thereto. The selected historical financial data does not necessarily indicate the operating results or financial position that would have resulted from our operations on a combined basis during the periods presented, nor is the historical data necessarily indicative of any future operating results or financial position of Regal. In addition to the below selected financial data, you should also refer to the more complete financial information included elsewhere in this Form 10-K.

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	Fiscal year ended December 31, 2017		Fiscal year ended December 31, 2016		Fiscal year ended December 31, 2015		Fiscal year ended January 1, 2015 (1)		Fiscal year ended December 26, 2013
	(in millions, except per share data)
Statement of Income Data:
Total revenues	$	3,163.0	$	3,197.1	$	3,127.3	$	2,990.1	$	3,038.1
Income from operations(4)(7)	271.7		339.4		319.3		306.4		339.8
Net income attributable to controlling interest(3)(4)(6)(7)	112.3		170.4		153.4		105.6		157.7
Earnings per diluted share(3)(4)(6)(7)	0.72		1.09		0.98		0.68		1.01
Dividends per common share(2)	$	0.88	$	0.88	$	0.88	$	1.88	$	0.84



	As of or for the fiscal year ended December 31, 2017			As of or for the fiscal year ended December 31, 2016			As of or for the fiscal year ended December 31, 2015			As of or for the fiscal year ended January 1, 2015 (1)			As of or for the fiscal year ended December 26, 2013
	(in millions, except operating data)
Other financial data:
Net cash provided by operating activities(3)(6)	$	409.9		$	410.5		$	434.4		$	349.1		$	346.9
Net cash used in investing activities(3)(6)	(410.6		)	(223.6		)	(183.3		)	(150.4		)	(258.6		)
Net cash provided by (used in) financing activities(2)	(17.0		)	(160.0		)	(178.6		)	(332.5		)	83.1
Balance sheet data at period end:
Cash and cash equivalents	$	228.8		$	246.5		$	219.6		$	147.1		$	280.9
Total assets(5)	2,842.9			2,645.7			2,601.6			2,511.5			2,678.6
Total debt obligations(5)	2,470.3			2,340.1			2,342.4			2,332.2			2,284.6
Deficit	(855.8		)	(838.9		)	(877.6		)	(897.3		)	(715.3		)

_______________________________________________________________________________


(1)	Fiscal year ended January 1, 2015 was comprised of 53 weeks.


(2)	Includes the December 15, 2014 payment of the $1.00 extraordinary cash dividend paid on each share of Class A and Class B common stock.

(3)

During the quarter ended September 26, 2013, we redeemed 2.3 million of our National CineMedia common units for a like number of shares of NCM, Inc. common stock, which the Company sold in an underwritten public offering (including underwriter over-allotments) for $17.79 per share, reducing our investment in National CineMedia by approximately $10.0 million, the average carrying amount of the shares sold. The Company received approximately $40.9 million in proceeds, resulting in a gain on sale of approximately $30.9 million. We accounted for these transactions as a proportionate decrease in the Company's Initial Investment Tranche and Additional Investments Tranche and decreased our ownership share in National CineMedia. See Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information.

(4)

During the years ended December 31, 2017, December 31, 2016, December 31, 2015, January 1, 2015, and December 26, 2013, we recorded long-lived asset and favorable lease impairment charges of $15.0 million, $7.9 million, $15.6 million, $5.6 million, and $9.5 million, respectively, specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. In addition, during the years ended December 31, 2017 and December 31, 2016, we recorded goodwill impairment charges of $7.3 million and $1.7 million, respectively, as the carrying value of one of its reporting units exceeded its estimated fair value. See Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information related to our impairment policies.


(5)	In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest, which intended to simplify the presentation of debt issuance costs. Prior to the issuance of ASU 2015-03, debt issuance costs were reported on

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the balance sheet as assets and amortized as interest expense. ASU 2015-03 requires that they be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability. The costs will continue to be amortized to interest expense using the effective interest method. ASU 2015-03 is to be applied retrospectively and is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company adopted this guidance during the quarter ended March 31, 2016. Debt issuance costs associated with long-term debt, net of accumulated amortization, were $23.1 million, $25.8 million, $30.7 million, $28.0 million, and $26.1 million as of December 31, 2017, December 31, 2016, December 31, 2015, January 1, 2015, and December 26, 2013, respectively. The balance sheet as of December 31, 2015 has been recast to reflect the reclassification of debt issuances costs, net of accumulated amortization, from "Other Non-Current Assets" to a reduction of "Long-Term Debt, Less Current Portion."

(6)


(7)	As discussed in Part I of this Form 10-K, on December 5, 2017, Regal entered into the Merger Agreement and as a result, incurred merger related expenses of approximately $12.5 million during the quarter ended December 31, 2017.

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

This discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of Regal Entertainment Group for the fiscal years ended December 31, 2017, December 31, 2016, and December 31, 2015. The following discussion and analysis should be read in conjunction with the consolidated financial statements of Regal and the notes thereto included elsewhere in this Form 10-K. This discussion and analysis does not reflect any changes that may become relevant as a result of the Company’s becoming a wholly owned, indirect subsidiary of Cineworld.

Overview and Basis of Presentation

We conduct our operations through our wholly owned subsidiaries. We operate one of the largest and most geographically diverse theatre circuits in the United States, consisting of 7,322 screens in 560 theatres in 43 states along with Guam, Saipan, American Samoa and the District of Columbia as of December 31, 2017. We believe the size, reach and quality of our theatre circuit provide an exceptional platform to realize economies of scale from our theatre operations. The Company manages its business under one reportable segment: theatre exhibition operations.

We generate revenues primarily from admissions and concession sales. Additional revenues are generated by our vendor marketing programs, our gift card and bulk ticket programs, various other activities in our theatres and through our relationship with National CineMedia, which focuses on in-theatre advertising. Film rental costs depend primarily on the popularity and box office revenues of a film, and such film rental costs generally increase as the admissions revenues generated by a film increase. 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 maximize our margins by negotiating volume discounts. Other operating expenses consist primarily of theatre labor and occupancy costs.

On December 5, 2017, the Company entered into the Merger Agreement with Cineworld, US Holdco and the Merger

Sub, pursuant to which the Company became a wholly owned, indirect subsidiary of Cineworld upon the consummation of the Merger on February 28, 2018. At the effective time of the Merger, each outstanding share of the Company’s Class A and Class B common stock were converted into the right to receive $23.00 in cash, subject to the terms and conditions of the Merger Agreement. With respect to the periods subsequent to the periods covered hereby, this discussion and analysis is qualified in all

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respects by the fact that the Company became a wholly owned, indirect subsidiary of Cineworld upon consummation of the Merger on February 28, 2018.

Critical Accounting Estimates

Our consolidated financial statements are prepared in conformity with U.S generally accepted accounting principles ("GAAP"), 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. We evaluate and modify on an ongoing basis such estimates and assumptions, which include those related to property and equipment, goodwill, deferred revenue pertaining to gift card and bulk ticket sales, income taxes and purchase accounting as well as others discussed in Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K. 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 elsewhere within this "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 our reported and expected results. Management has discussed the development and selection of its critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed our related disclosures herein.

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 have applied the principles of purchase accounting when recording theatre acquisitions. Under current purchase accounting principles, we are required to use the acquisition method of accounting to estimate the fair value of all assets and liabilities, including: (i) the acquired tangible and intangible assets, including property and equipment, (ii) the liabilities assumed at the date of acquisition (including contingencies), and (iii) the related deferred tax assets and liabilities. Because the estimates we make in purchase accounting can materially impact our future results of operations, for significant acquisitions, we have obtained assistance from third party valuation specialists in order to assist in our determination of fair value. The Company provides assumptions to the third party valuation firms based on information available to us at the acquisition date, including both quantitative and qualitative information about the specified assets or liabilities. The Company primarily utilizes the third parties to accumulate comparative data from multiple sources and assemble a report that summarizes the information obtained. The Company then uses the information to determine fair value. The third party valuation firms are supervised by Company personnel who are knowledgeable about valuations and fair value. The Company evaluates the appropriateness of the valuation methodology utilized by the third party valuation firms. 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. Historically, the estimates made have not experienced significant changes and, as a result, we have not disclosed such changes.

•

FASB Accounting Standards Codification ("ASC") Subtopic 350-20, Intangibles—Goodwill and Other—Goodwill specifies that goodwill and indefinite-lived intangible assets will be subject to an annual impairment assessment. 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. Our goodwill impairment assessment for fiscal 2017 indicated that the carrying value of one of our reporting units exceeded its estimated fair value and as a result, we recorded a goodwill impairment charge of approximately $7.3 million. Our annual goodwill impairment assessment for fiscal 2016 indicated that the carrying value of one of our reporting units exceeded its estimated fair value and as a result, we recorded a goodwill impairment charge of approximately $1.7 million. Based on our annual impairment assessment conducted during fiscal 2015, we were not required to record a charge for goodwill impairment.

•

We depreciate and amortize the components of our property and equipment relating to both owned and leased theatres on a straight-line basis over the shorter of the lease term or 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 estimated useful life of 30 years. Certain of our buildings have been in existence for more than 40 years. With respect to equipment (e.g., concession stand, point-

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of-sale equipment, etc.), a substantial portion is depreciated over seven years or less, which has been our historical replacement period. Seats and digital projection equipment generally have longer useful economic lives, and their depreciable lives (10-17.5 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. To the extent we determine that certain of our assets have become obsolete, we accelerate depreciation over the remaining useful lives of the assets. Actual economic lives may differ materially from these estimates.

Historical appraisals of our properties have 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 generally evaluates assets for impairment on an individual theatre basis. When the estimated 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. During the years ended December 31, 2017, December 31, 2016 and December 31, 2015, we recorded long-lived asset impairment charges of $13.5 million, $7.9 million and $15.6 million, respectively, specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatres we deemed other than temporary.

For the fiscal years ended December 31, 2017, December 31, 2016 and December 31, 2015, 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 December 31, 2017, consolidated depreciation and amortization expense was $249.7 million, representing 7.9% 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 $16.6 million, or 6.7%. 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 $19.2 million, or 7.7%.

•

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 as well as operating loss and tax credit carryforwards. 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 valuation allowance on an ongoing basis. An increase in the valuation allowance generally results in an increase in the provision for income taxes recorded in such period. A decrease in the valuation allowance generally results in a decrease to the provision for income taxes recorded in such period.

Additionally, income tax rules and regulations are subject to interpretation, require judgment by us and may be challenged by the taxing authorities. As described further in Note 7 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, the Company applies the provisions of ASC Subtopic 740-10, Income Taxes—Overview. Although we believe that our tax return positions are fully supportable, in accordance with ASC Subtopic 740-10, we recognize a tax benefit only for tax positions that we determine will more likely than not be sustained based on the technical merits of the tax position. With respect to such tax positions for which recognition of a benefit is appropriate, the benefit is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Tax positions are evaluated on an ongoing basis as part of our process for determining our provision for income taxes. Among other items deemed relevant by us, the evaluations are based on new legislation, other new technical guidance, judicial proceedings, and our specific circumstances, including the progress of tax audits. Any change in the determination of the amount of tax benefit recognized relative to an uncertain tax position impacts the provision for income taxes in the period that such determination is made.

For fiscal 2017, our provision for income taxes was $101.6 million. Changes in management's estimates and assumptions regarding the probability that certain tax return positions will be sustained, the enacted tax rate

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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 impact the provision for income taxes and change the effective tax rate. A one percentage point change in the effective tax rate from 47.5% to 48.5% would have increased the current year income tax provision by approximately $2.1 million.

•

As noted in our significant accounting policies for "Revenue Recognition" under Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, the Company maintains a deferred revenue balance pertaining to cash received from the sale of bulk tickets and gift cards that have not been redeemed. The Company recognizes revenue associated with bulk tickets and gift cards when redeemed, or when the likelihood of redemption becomes remote. We recognize unredeemed gift cards and other advanced sale-type certificates as revenue (known as "breakage" in our industry) based on historical experience, when the likelihood of redemption is remote, and when there is no legal obligation to remit the unredeemed gift card and bulk ticket items to the relevant jurisdiction. The determination of the likelihood of redemption is based on an analysis of historical redemption trends and considers various factors including the period outstanding, the level and frequency of activity, and the period of inactivity.

Results of Operations

Based on our review of industry sources, North American box office revenues for the time period that corresponds to the Fiscal 2017 Period were estimated to have decreased by approximately two to three percent per screen in comparison to the Fiscal 2016 Period. The industry's box office results for fiscal 2017 were negatively impacted by weaker than expected attendance generated by the overall film slate during the year.

The following table sets forth the percentage of total revenues represented by certain items included in our consolidated statements of income for the Fiscal 2017 Period, the Fiscal 2016 Period and the year ended December 31, 2015 (the "Fiscal 2015 Period") (dollars and attendance in millions, except average ticket prices and average concessions per patron):

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	Fiscal 2017 Period					Fiscal 2016 Period					Fiscal 2015 Period
	$			% of Revenue		$			% of Revenue		$			% of Revenue
Revenues:
Admissions	$	2,008.1		63.5	%	$	2,061.7		64.5	%	$	2,038.2		65.2	%
Concessions	930.2			29.4		932.6			29.2		901.7			28.8
Other operating revenues	224.7			7.1		202.8			6.3		187.4			6.0
Total revenues	3,163.0			100.0		3,197.1			100.0		3,127.3			100.0
Operating expenses:
Film rental and advertising costs(1)	1,067.8			53.2		1,107.3			53.7		1,093.1			53.6
Cost of concessions(2)	123.8			13.3		119.5			12.8		114.4			12.7
Rent expense(3)	426.8			13.5		427.6			13.4		421.5			13.5
Other operating expenses(3)	912.6			28.9		883.2			27.6		863.7			27.6
General and administrative expenses (including share-based compensation expense of $9.2 million, $8.8 million and $8.3 million for the Fiscal 2017 Period, the Fiscal 2016 Period and the Fiscal 2015 Period, respectively)(3)	86.6			2.7		84.6			2.6		78.8			2.5
Depreciation and amortization(3)	249.7			7.9		230.7			7.2		216.8			6.9
Net loss on disposal and impairment of operating assets and other(3)	24.0			0.8		4.8			0.2		19.7			0.6
Total operating expenses(3)	2,891.3			91.4		2,857.7			89.4		2,808.0			89.8
Income from operations(3)	271.7			8.6		339.4			10.6		319.3			10.2
Interest expense, net(3)	125.1			4.0		128.1			4.0		129.6			4.1
Loss on extinguishment of debt(3)	1.3			—		2.9			0.1		5.7			0.2
Earnings recognized from NCM(3)	(24.1		)	0.8		(29.4		)	0.9		(31.0		)	1.0
Gain on sale of Open Road Films Investment(3)	(17.8		)	0.6		—			—		—			—
Equity in income of non-consolidated entities and other, net(3)	(39.2		)	1.2		(43.9		)	1.4		(38.3		)	1.2
Merger related expenses(3)	12.5			0.4		—			—		—			—
Provision for income taxes(3)	101.6			3.2		111.2			3.5		100.1			3.2
Net income attributable to controlling interest(3)	$	112.3		3.6		$	170.4		5.3		$	153.4		4.9
Attendance	196.9			*		210.9			*		216.7			*
Average ticket price(4)	$	10.20		*		$	9.78		*		$	9.41		*
Average concessions per patron(5)	$	4.72		*		$	4.42		*		$	4.16		*

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*	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 revenues/attendance.


(5)	Calculated as concessions revenues/attendance.

Fiscal 2017 Period Compared to Fiscal 2016 Period

Admissions

During the Fiscal 2017 Period, total admissions revenues decreased $53.6 million, or 2.6%, to $2,008.1 million, from $2,061.7 million in the Fiscal 2016 Period. A 6.6% decrease in attendance (approximately $136.1 million of total admissions revenues), partially offset by a 4.3% increase in average ticket prices (approximately $82.5 million of total admissions

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revenues) led to the overall decrease in the Fiscal 2017 Period admissions revenues. Attendance during the Fiscal 2017 Period in comparison to that of the Fiscal 2016 Period was negatively impacted by the weaker overall film slate during the Fiscal 2017 Period. For the Fiscal 2017 Period, the 4.3% average ticket price increase was due to selective price increases identified during our ongoing periodic pricing reviews (particularly at locations featuring luxury reclining seats), partially offset by a decrease in the percentage of our admissions revenues generated by premium format films exhibited during the Fiscal 2017 Period. Based on our review of certain industry sources, the decrease in our admissions revenues on a per screen basis was slightly greater than the industry’s per screen results for the Fiscal 2017 Period as compared to the Fiscal 2016 Period.

Concessions

Total concessions revenues decreased $2.4 million, or 0.3%, to $930.2 million during the Fiscal 2017 Period, from $932.6 million for the Fiscal 2016 Period. A 6.6% decrease in attendance (approximately $61.6 million of total concessions revenues), partially offset by a 6.8% increase in average concessions revenues per patron (approximately $59.2 million of total concessions revenues) led to the overall decrease in the Fiscal 2017 Period concessions revenues. The 6.8% increase in average concessions revenues per patron for the Fiscal 2017 Period was primarily attributable to an increase in beverage and popcorn sales, selective price increases and the continued rollout of our expanded food and alcohol menu.

Other Operating Revenues

Other operating revenues increased $21.9 million, or 10.8%, to $224.7 million during the Fiscal 2017 Period, from $202.8 million for the Fiscal 2016 Period. Included in other operating revenues are revenues from our vendor marketing programs, other theatre revenues (consisting primarily of internet ticketing surcharges, theatre rentals and arcade games), theatre access fees paid by National CineMedia (net of payments for on-screen advertising time provided to our beverage concessionaire) and revenues related to our gift card and bulk ticket programs. The increase in other operating revenues during the Fiscal 2017 Period was due to an increase in internet ticketing surcharges (approximately $13.6 million), an increase in revenues from our vendor marketing programs (approximately $9.4 million) and incremental National CineMedia revenues (approximately $1.5 million), partially offset by a decrease in revenues related to our gift card and bulk ticket programs (approximately $4.2 million).

Film Rental and Advertising Costs

Film rental and advertising costs as a percentage of admissions revenues decreased to 53.2% during the Fiscal 2017 Period from 53.7% in the Fiscal 2016 Period. The decrease in film rental and advertising costs as a percentage of admissions revenues was primarily attributable to weaker than expected attendance generated by the top tier films exhibited during the Fiscal 2017 Period.

Cost of Concessions

During the Fiscal 2017 Period, cost of concessions increased $4.3 million, or 3.6%, to $123.8 million as compared to $119.5 million during the Fiscal 2016 Period. Cost of concessions as a percentage of concessions revenues for the Fiscal 2017 Period was approximately 13.3% compared to 12.8% during the Fiscal 2016 Period. The increase in cost of concessions as a percentage of concessions revenues during the Fiscal 2017 Period was primarily related to increases in packaged goods and raw material costs and the impact of incremental expanded food and alcohol sales during such periods, partially offset by selective price increases during such periods.

Rent Expense

Rent expense decreased $0.8 million, or 0.2%, to $426.8 million in the Fiscal 2017 Period, from $427.6 million in the Fiscal 2016 Period. The decrease in rent expense in the Fiscal 2017 Period was primarily attributed to the permanent closure of ten theatres with 88 screens subsequent to the end of the Fiscal 2016 Period, along with reductions of contingent rent, partially offset by incremental rent from the opening of two new theatres with 26 screens and the acquisition of nine theatres with 134 screens subsequent to the end of the Fiscal 2016 Period.

Other Operating Expenses

Other operating expenses increased $29.4 million, or 3.3%, to $912.6 million in the Fiscal 2017 Period, from $883.2 million in the Fiscal 2016 Period. The increase in other operating expenses during the Fiscal 2017 Period was primarily due to an increase in other operating expenses from the Fiscal 2017 Period acquisitions (approximately $17.7 million), increases in non-rent occupancy and other costs (approximately $13.8 million) and increased theatre-level payroll and benefit costs (approximately $2.6 million), partially offset by decreased costs associated with lower premium format film revenues (approximately $4.7 million) during the Fiscal 2017 Period.

General and Administrative Expenses

General and administrative expenses increased $2.0 million, or 2.4%, to $86.6 million in the Fiscal 2017 Period, from $84.6 million in the Fiscal 2016 Period. The increase in general and administrative expenses during the Fiscal 2017 Period was

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primarily attributable to expenses associated with the Santikos Theaters, Inc. and Warren Theatres acquisitions described in Note 3 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Depreciation and Amortization

Depreciation and amortization expense increased $19.0 million, or 8.2%, to $249.7 million for the Fiscal 2017 Period, from $230.7 million in the Fiscal 2016 Period. The increase in depreciation and amortization expense during the Fiscal 2017 Period was primarily related to incremental depreciation and amortization expense associated with increased capital expenditures related to the installation of luxury reclining seats, the acquisition of nine theatres with 134 screens and the opening of two new theatres with 26 screens subsequent to the end of the Fiscal 2016 Period, and accelerated depreciation on certain identified assets, partially offset by permanent closure of 10 theatres with 88 screens subsequent to the end of the Fiscal 2016 Period.

Net Loss on Disposal and Impairment of Operating Assets and Other

Net loss on disposal and impairment of operating assets and other increased $19.2 million, to $24.0 million for the Fiscal 2017 Period, from $4.8 million in the Fiscal 2016 Period. Included in net loss on disposal and impairment of operating assets and other during the Fiscal 2017 Period was a $13.5 million impairment of long-lived assets, a $7.3 million impairment of goodwill related to one of the Company's reporting units, and a $1.4 million favorable lease impairment charge related to a theatre scheduled to be closed.

Interest Expense, net

During the Fiscal 2017 Period, net interest expense decreased $3.0 million, or 2.3%, to $125.1 million, from $128.1 million in the Fiscal 2016 Period. The decrease in net interest expense during the Fiscal 2017 Period was primarily due to the impact of a lower effective interest rate under the Amended Senior Credit Facility during such periods, partially offset by additional interest expense attributable to incremental borrowings under the Amended Senior Credit Facility in connection with the June 2017 Refinancing Agreement.

Loss on Extinguishment of Debt

As described more fully in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, during the Fiscal 2017 Period, the Company recorded a loss on debt extinguishment of $1.3 million in connection with the June 2017 Refinancing Agreement. During the Fiscal 2016 Period, the Company recorded an aggregate loss on debt extinguishment of approximately $2.9 million in connection with the June 2016 refinancing and December 2016 refinancing of our Amended Senior Credit Facility.

Gain on Sale of Open Road Films Investment

As described more fully in Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, during the quarter ended September 30, 2017, the Company recorded a gain on the sale of its investment in Open Road Films of $17.8 million.

Earnings Recognized from NCM

Earnings recognized from NCM decreased $5.3 million, or 18.0%, to $24.1 million in the Fiscal 2017 Period, from $29.4 million in the Fiscal 2016 Period. The decrease in earnings recognized from National CineMedia during the Fiscal 2017 Period was primarily attributable to lower equity income (including a $5.6 million change in interest loss as described further in Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K) from National CineMedia, partially offset by an increase in cash distributions from National CineMedia during the Fiscal 2017 Period as compared to that of the Fiscal 2016 Period.

Merger Related Expenses

As discussed in Part I of this Form 10-K, on December 5, 2017, Regal entered into the Merger Agreement and as a result, incurred merger related expenses of approximately $12.5 million during the year ended December 31, 2017.

Income Taxes

The provision for income taxes of $101.6 million and $111.2 million for the Fiscal 2017 Period and the Fiscal 2016 Period, respectively, reflect effective tax rates of approximately 47.5% and 39.5%, respectively. The increase in the effective tax rate for the Fiscal 2017 Period is primarily attributable to the remeasurement of deferred tax assets and liabilities resulting from the U.S. Tax Cuts and Jobs Act, the nondeductible goodwill impairment charge of approximately $7.3 million described further in Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, and nondeductible merger related expenses. The effective tax rates for such periods reflect the impact of certain other non-deductible expenses and other income tax credits.

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Fiscal 2016 Period Compared to Fiscal 2015 Period

Admissions

During the Fiscal 2016 Period, total admissions revenues increased $23.5 million, or 1.2%, to $2,061.7 million, from $2,038.2 million in the Fiscal 2015 Period. A 3.9% increase in average ticket prices (approximately $78.5 million of total admissions revenues), partially offset by a 2.7% decrease in attendance (approximately $55.0 million of total admissions revenues) led to the overall increase in the Fiscal 2016 Period admissions revenues. For the Fiscal 2016 Period, the 3.9% average ticket price increase was due to selective price increases identified during our ongoing periodic pricing reviews (particularly at locations featuring luxury reclining seats), partially offset by a decrease in the percentage of our admissions revenues generated by premium format films exhibited during the Fiscal 2016 Period. The decrease in attendance during the Fiscal 2016 Period was primarily attributable to the strong attendance generated by the commercial appeal of the top tier films exhibited during the Fiscal 2015 Period including, most notably, Star Wars: The Force Awakens and Jurassic World. Based on our review of certain industry sources, the increase in our admissions revenues on a per screen basis was slightly ahead of the industry’s per screen results for the Fiscal 2016 Period as compared to the Fiscal 2015 Period.

Concessions

Total concessions revenues increased $30.9 million, or 3.4%, to $932.6 million during the Fiscal 2016 Period, from $901.7 million for the Fiscal 2015 Period. A 6.3% increase in average concessions revenues per patron (approximately $55.2 million of total concessions revenues), partially offset by a 2.7% decrease in attendance (approximately $24.3 million of total concessions revenues) led to the overall increase in the Fiscal 2016 Period concessions revenues. The 6.3% increase in average concessions revenues per patron for the Fiscal 2016 Period was primarily attributable to an increase in beverage, popcorn, and candy sales, selective price increases and the continued rollout of our expanded food and alcohol menu.

Other Operating Revenues

Other operating revenues increased $15.4 million, or 8.2%, to $202.8 million during the Fiscal 2016 Period, from $187.4 million for the Fiscal 2015 Period. Included in other operating revenues are revenues from our vendor marketing programs, other theatre revenues (consisting primarily of internet ticketing surcharges, theatre rentals and arcade games), theatre access fees paid by National CineMedia (net of payments for onscreen advertising time provided to our beverage concessionaire) and revenues related to our gift card and bulk ticket programs. During the Fiscal 2016 Period, the increase in other operating revenues was primarily due to an increase in revenues related to our gift card and bulk ticket programs (approximately $10.2 million) and an increase in revenues related to internet ticketing surcharges (approximately $3.9 million).

Film Rental and Advertising Costs

Film rental and advertising costs as a percentage of admissions revenues was 53.7% during the Fiscal 2016 Period and was consistent with that of the Fiscal 2015 Period.

Cost of Concessions

During the Fiscal 2016 Period, cost of concessions increased $5.1 million, or 4.5%, to $119.5 million as compared to $114.4 million during the Fiscal 2015 Period. Cost of concessions as a percentage of concessions revenues for the Fiscal 2016 Period was approximately 12.8% and was in line with that of the Fiscal 2015 Period.

Rent Expense

Rent expense increased $6.1 million, or 1.4%, to $427.6 million in the Fiscal 2016 Period, from $421.5 million in the Fiscal 2015 Period. The increase in rent expense in the Fiscal 2016 Period was primarily impacted by incremental rent associated with the opening of two new theatres with 19 screens subsequent to the end of the Fiscal 2015 Period and higher contingent rent associated with the increase in total revenues, partially offset by the closure of 13 theatres with 118 screens subsequent to the end of the Fiscal 2015 Period.

Other Operating Expenses

Other operating expenses increased $19.5 million, or 2.3%, to $883.2 million in the Fiscal 2016 Period, from $863.7 million in the Fiscal 2015 Period. During the Fiscal 2016 Period, the increase in other operating expenses was primarily attributable to increases in theatre level payroll and benefit costs.

General and Administrative Expenses

General and administrative expenses increased $5.8 million, or 7.4%, to $84.6 million in the Fiscal 2016 Period, from $78.8 million in the Fiscal 2015 Period. The increase in general and administrative expenses during the Fiscal 2016 Period was primarily attributable to higher legal and professional fees.

Depreciation and Amortization

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Depreciation and amortization expense increased $13.9 million, or 6.4%, to $230.7 million for the Fiscal 2016 Period, from $216.8 million in the Fiscal 2015 Period. The increase in depreciation and amortization expense during the Fiscal 2016 Period was primarily related to the impact of increased capital expenditures associated with the installation of luxury reclining seats subsequent to the Fiscal 2015 Period, and to a lesser extent, the opening of two new theatres with 19 screens (partially offset by the closure of 13 theatres with 118 screens) subsequent to the end of the Fiscal 2015 Period.

Net Loss on Disposal and Impairment of Operating Assets and Other

Net loss on disposal and impairment of operating assets and other decreased $14.9 million, to $4.8 million for the Fiscal 2016 Period, from $19.7 million in the Fiscal 2015 Period. Included in net loss on disposal and impairment of operating assets and other was a $9.8 million gain on the early termination of a theatre lease during the Fiscal 2016 Period.

Interest Expense, net

During the Fiscal 2016 Period, net interest expense decreased $1.5 million, or 1.2%, to $128.1 million, from $129.6 million in the Fiscal 2015 Period. The decrease in net interest expense during the Fiscal 2016 Period was primarily due to interest savings associated with a lower effective interest rate under the Amended Senior Credit Facility.

Loss on Extinguishment of Debt

During the Fiscal 2016 Period, the Company recorded an aggregate loss on debt extinguishment of approximately $2.9 million in connection with the June 2016 refinancing and December 2016 refinancing of our Amended Senior Credit Facility as further described in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Earnings Recognized from NCM

Earnings recognized from NCM decreased $1.6 million, or 5.2%, to $29.4 million in the Fiscal 2016 Period, from $31.0 million in the Fiscal 2015 Period. The decrease in earnings recognized from NCM during the Fiscal 2016 Period was primarily attributable to lower cash distributions from National CineMedia, partially offset by higher equity income from National CineMedia during the Fiscal 2016 Period.

Income Taxes

The provision for income taxes of $111.2 million and $100.1 million for the Fiscal 2016 Period and the Fiscal 2015 Period, respectively, reflect effective tax rates of approximately 39.5%. The effective tax rates for such periods reflect the impact of certain non-deductible expenses and other income tax credits.

Quarterly Results

The following table sets forth selected unaudited quarterly results for the eight quarters ended December 31, 2017. The quarterly financial data as of each period presented below have been derived from Regal's unaudited condensed consolidated financial statements for those periods. Results for these periods are not necessarily indicative of results for the full year. The comparability of our results between quarters is impacted by certain factors described below and to a lesser extent, seasonality. The quarterly financial data should be read in conjunction with the consolidated financial statements of Regal and notes thereto included in Part II, Item 8 of this Form 10-K.



	Dec. 31, 2017(1)		Sept. 30, 2017(2)		June 30, 2017 (3)		March 31, 2017		Dec. 31, 2016 (4)		Sept. 30, 2016		June 30, 2016 (5)		March 31, 2016
	In millions (except per share data)
Total revenues	$	861.6	$	716.0	$	764.2	$	821.2	$	812.6	$	811.5	$	785.9	$	787.1
Income from operations(6)	90.7		22.5		59.0		99.5		95.0		87.2		76.6		80.6
Net income attributable to controlling interest(6)	28.9		11.4		23.6		48.4		53.9		42.3		33.5		40.7
Diluted earnings per share(6)	$	0.19	$	0.07	$	0.15	$	0.31	$	0.34	$	0.27	$	0.21	$	0.26
Dividends per common share	$	0.22	$	0.22	$	0.22	$	0.22	$	0.22	$	0.22	$	0.22	$	0.22

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(1)	As discussed in Part I of this Form 10-K, on December 5, 2017, Regal entered into the Merger Agreement and as a result, incurred merger related expenses of approximately $12.5 million during the quarter ended December 31, 2017.


(2)	As described more fully in Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, during the quarter ended September 30, 2017, the Company recorded a gain on the sale of its investment in Open Road Films of $17.8 million.

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(3)

As described further in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, on June 6, 2017, Regal Cinemas entered into a permitted secured refinancing and incremental joinder agreement with REH, the guarantors party thereto, Credit Suisse AG and the lenders party thereto. The permitted secured refinancing agreement further amends the Amended Senior Credit Facility, which was amended by the June 2016 and December 2016 Refinancing Agreements described in (2) and (3) below. In connection with the execution of the permitted secured refinancing agreement, the Company recorded a loss on debt extinguishment of approximately $1.3 million during the quarter ended June 30, 2017.

(4)

As described further in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, on December 2, 2016, Regal Cinemas entered into a permitted secured refinancing agreement with REH, the guarantors party thereto, Credit Suisse AG and the lenders party thereto. The permitted secured refinancing agreement further amends the Amended Senior Credit Facility, which was amended by the June 2016 Refinancing Agreement described in (2) below. In connection with the execution of the permitted secured refinancing agreement, the Company recorded a loss on debt extinguishment of approximately $1.4 million during the quarter ended December 31, 2016.

(5)

As described further in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, on June 1, 2016, Regal Cinemas entered into a permitted secured refinancing agreement with REH, the guarantors party thereto, Credit Suisse AG and the lenders party thereto. In connection with the execution of the permitted secured refinancing agreement, the Company recorded a loss on debt extinguishment of approximately $1.5 million during the quarter ended June 30, 2016.

(6)

During the eight quarters ended December 31, 2017, we recorded long-lived asset and favorable lease impairment charges of $6.5 million, $4.4 million, $2.0 million, $2.1 million, $1.5 million, $3.4 million, $0.8 million, $2.2 million, respectively, specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. In addition, during the quarter ended September 30, 2017 and the quarter ended December 31, 2016, we recorded goodwill impairment charges of $7.3 million and $1.7 million, respectively, as the carrying value of one of its reporting units exceeded its estimated fair value. See Note 2 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information related to our impairment policies.

Liquidity and Capital Resources

The Company believes cash generated from operations and its existing balance of cash and cash equivalents will be sufficient to satisfy its working capital needs, outstanding commitments and other liquidity requirements associated with its existing operations over the next 12 months.

Operating Activities

Our revenues are generated principally through admissions and concessions sales with proceeds received in cash or via credit cards at the point of sale and through our internet ticketing partners. 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 to 35 days from purchase. Our current liabilities include items that will become due within 12 months.

Net cash flows provided by operating activities totaled approximately $409.9 million, $410.5 million and $434.4 million for the Fiscal 2017 Period, the Fiscal 2016 Period and the Fiscal 2015 Period, respectively. The $0.6 million decrease in net cash flows generated by operating activities for the Fiscal 2017 Period as compared to the Fiscal 2016 Period was caused by a decrease in net income excluding non-cash items, partially offset by a positive fluctuation in working capital activity (primarily related to the timing of vendor payments, including film payables, as a result of increased attendance and admissions revenues at our theatres during the latter part of the Fiscal 2017 Period) and an increase in landlord contributions related to our luxury reclining seating initiative. The decrease in net cash flows generated by operating activities for the Fiscal 2016 Period as compared to the Fiscal 2015 Period was caused by a negative fluctuation in working capital activity (primarily related to the timing of vendor payments, including film payables, as a result of increased attendance and admissions revenues at our theatres during the latter part of the Fiscal 2015 Period), partially offset by an increase in landlord contributions and an increase in net income excluding non-cash items.

Investing Activities

Our capital requirements have historically arisen principally in connection with acquisitions of theatres, new theatre construction, strategic partnerships, the addition of luxury amenities in select theatres, other upgrades to the Company’s theatre facilities and equipment replacement. We fund the cost of capital expenditures through internally generated cash flows, cash on

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hand, landlord contributions, proceeds from the disposition of assets and financing activities. We intend to continue to grow our theatre circuit through selective expansion and acquisition opportunities.

During the Fiscal 2017 Period, we received approximately 0.5 million newly issued common units of National CineMedia in accordance with the annual adjustment provisions of the Common Unit Adjustment Agreement. This transaction increased our ownership share in National CineMedia to approximately 27.6 million common units. On a fully diluted basis, we own a 17.9% interest in NCM, Inc. as of December 31, 2017.

As described further in Note 3 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, on April 13, 2017, the Company completed the acquisition of two theatres with 41 screens located in Houston, Texas from Santikos Theaters, Inc. for an aggregate net cash purchase price of $29.8 million. In addition, on April 18, 2017, the Company purchased a parcel of land located in Montgomery County, Texas from an entity affiliated with Santikos Theaters, Inc. for a net cash purchase price, before post-closing adjustments, of approximately $7.3 million. Finally, on May 18, 2017, the Company completed the acquisition of seven theatres with 93 screens located in Kansas and Oklahoma from Warren Theatres for an aggregate net cash purchase price, before post-closing adjustments, of $134.5 million.

On August 4, 2017, the Company sold all of its 50% equity interest in Open Road Films to a third party for total proceeds of approximately $14.0 million. In accordance with the purchase agreement, approximately $3.7 million of the net proceeds received were in satisfaction of various receivables and other amounts due to the Company related to film marketing services provided to Open Road Films prior to the closing date. As a result of the sale, the Company recorded a gain of approximately $17.8 million, representing the difference between the net proceeds received of $10.3 million (after satisfaction of the above amounts due the Company) and the carrying amount of the Company's investment in Open Road Films (approximately $(7.5) million) as of the closing date. Also effective with closing, the Company and Open Road Films entered into a new marketing agreement with respect to films released by Open Road Films after the closing date.

Net cash flows used in investing activities totaled approximately $410.6 million, $223.6 million and $183.3 million for the Fiscal 2017 Period, the Fiscal 2016 Period and the Fiscal 2015 Period, respectively. The $187.0 million increase in cash flows used in investing activities during the Fiscal 2017 Period, as compared to the Fiscal 2016 Period, was primarily attributable to $171.6 million of net cash used to fund acquisitions, a $20.8 million increase in capital expenditures (net of proceeds from disposals), partially offset by approximately $10.3 million of proceeds received from the sale of our Open Road Films investment. The $40.3 million increase in cash flows used in investing activities during the Fiscal 2016 Period, as compared to the Fiscal 2015 Period, was primarily attributable to a $39.8 million increase in capital expenditures (net of proceeds from disposals) and higher capital investments in certain non-consolidated entities, partially offset by the impact of $9.2 million of cash used for a fiscal 2015 acquisition and $3.6 million in proceeds received related to the sale of RealD, Inc. common stock during the Fiscal 2016 Period.

Financing Activities

As described further in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, on June 1, 2016 Regal Cinemas entered into a permitted secured refinancing agreement with REH, the guarantors party thereto, Credit Suisse AG and the lenders party thereto (the "June 2016 Refinancing Agreement"). Pursuant to the June 2016 Refinancing Agreement, Regal Cinemas consummated a permitted secured refinancing of the Term Facility under the Amended Senior Credit Facility, which had an aggregate principal balance of approximately $958.5 million, and in accordance therewith, received term loans in an aggregate principal amount of approximately $958.5 million with a final maturity date in April 2022. Together with other amounts provided by Regal Cinemas, proceeds of the term loans were applied to repay all of the outstanding principal and accrued and unpaid interest on the Term Facility under the Amended Senior Credit Facility. In connection with the execution of the June 2016 Refinancing Agreement, the Company recorded a loss on debt extinguishment of approximately $1.5 million during the quarter ended June 30, 2016.

On December 2, 2016, Regal Cinemas entered into a permitted secured refinancing agreement (the "December 2016 Refinancing Agreement") with REH, the guarantors party thereto, Credit Suisse AG and the lenders party thereto. Pursuant to the December 2016 Refinancing Agreement, Regal Cinemas consummated a permitted secured refinancing of the Term Facility, which had an aggregate principal balance of approximately $956.1 million, and in accordance therewith, received term loans in an aggregate principal amount of approximately $956.1 million with a final maturity date in April 2022. Together with other amounts provided by Regal Cinemas, proceeds of the term loans were applied to repay all of the outstanding principal and accrued and unpaid interest on the Term Facility under the Amended Senior Credit Facility. In connection with the execution of the December 2016 Refinancing Agreement, the Company recorded a loss on debt extinguishment of approximately $1.4 million during the quarter ended December 31, 2016.

On June 6, 2017, Regal Cinemas entered into a permitted secured refinancing and incremental joinder agreement (the "June 2017 Refinancing Agreement") with REH, the guarantors party thereto, Credit Suisse AG and the lenders party thereto. Pursuant to the June 2017 Refinancing Agreement, Regal Cinemas consummated a permitted secured refinancing of the Term Facility, which had an aggregate principal balance of approximately $953.7 million, and in accordance therewith, received term

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loans in an aggregate principal amount of approximately $953.7 million with a final maturity date in April 2022 (the "Refinanced Term Loans"). Together with other amounts provided by Regal Cinemas, proceeds of the Refinanced Term Loans were applied to repay all of the outstanding principal and accrued and unpaid interest on the existing term facility under the Amended Senior Credit Facility in effect immediately prior to the making of the Refinanced Term Loans.

Pursuant to the June 2017 Refinancing Agreement, Regal Cinemas also exercised the "accordion" feature under the Amended Senior Credit Facility to increase the aggregate amount of term loans thereunder by $150.0 million (the "2017 Accordion"). The "accordion" feature provided Regal Cinemas with the option to borrow additional term loans under the Amended Senior Credit Facility in an amount of up to $200.0 million, plus additional amounts as would not cause the consolidated total leverage ratio to exceed 3.00:1.00, in each case, subject to lenders providing additional commitments for such amounts and the satisfaction of certain other customary conditions. The entire $150.0 million under the 2017 Accordion was fully drawn on June 6, 2017 on the same terms as the Refinanced Term Loans (such amounts drawn, the "Incremental Term Loans", and together with the Refinanced Term Loans, the "New Term Loans"). A portion of the proceeds of the Incremental Term Loans were used by Regal Cinemas to pay fees and expenses related to the June 2017 Refinancing Agreement, with the remainder to be used for general corporate purposes of Regal Cinemas and its subsidiaries.

The New Term Loans amortized in equal quarterly installments in an aggregate annual amount equal to 1.0% of the original principal amount of the New Term Loans, with the balance payable on the maturity date of the New Term Loans. In connection with the execution of the June 2017 Refinancing Agreement, the Company recorded a loss on debt extinguishment of approximately $1.3 million during the quarter ended June 30, 2017.

As of December 31, 2017, we had approximately $1,097.2 million aggregate principal amount outstanding (net of debt discount) under the New Term Loans, $775.0 million aggregate principal amount outstanding under the 5³/₄% Senior Notes Due 2022, $250.0 million aggregate principal amount outstanding under the 5³/₄% Senior Notes Due 2023 and $250.0 million aggregate principal amount outstanding under the 5³/₄% Senior Notes Due 2025. As of December 31, 2017, we had approximately $2.7 million outstanding in letters of credit, leaving approximately $82.3 million available for drawing under the Revolving Facility. As of December 31, 2017, we are in full compliance with all agreements, including all related covenants, governing our outstanding debt obligations.

In connection with the consummation of the Merger, on February 28, 2018, all amounts outstanding under the Amended Senior Credit Facility were repaid in full, and the Amended Senior Credit Facility was terminated. Additionally, on February 28, 2018: (i) we notified Wilmington Trust National Association, in its capacity as trustee (the “Trustee”), under the indentures governing our 5³/₄% Senior Notes Due 2022, 5³/₄% Senior Notes Due 2023 and 5³/₄% Senior Notes Due 2025 (collectively, the “Notes”) of our intention to redeem all of the aggregate principal amounts outstanding under the Notes, (ii) at our request, the Trustee distributed an irrevocable notice of redemption to holders of the Notes, and (iii) we deposited with the Trustee funds in trust solely for the benefit of the holders of the Notes sufficient to pay and discharge the entire indebtedness on the Notes and thereby satisfied and discharged the indentures pursuant to the terms therein. The Notes will be redeemed in full on March 30, 2018. For more information regarding financing activities occurring after December 31, 2017, in connection with the Merger, refer to Note 16 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

During the Fiscal 2017 Period, Regal paid four quarterly cash dividends of $0.22 per share on each outstanding share of the Company's Class A and Class B common stock, or approximately $138.9 million in the aggregate. On February 7, 2018, the Company declared a cash dividend of $0.22 per share on each share of the Company's Class A and Class B common stock (including outstanding restricted stock), which was paid on February 26, 2018 to stockholders of record on February 17, 2018. Declared dividends have been funded through cash flow from operations and available cash on hand.

Net cash flows used in financing activities were approximately $17.0 million, $160.0 million and $178.6 million for the Fiscal 2017 Period, the Fiscal 2016 Period and the Fiscal 2015 Period, respectively. The net decrease in cash flows used in financing activities during the Fiscal 2017 Period as compared to the Fiscal 2016 Period of $143.0 million was primarily attributable to incremental borrowings under the Amended Senior Credit Facility in connection with the June 2017 Refinancing Agreement. The net decrease in cash flows used in financing activities during the Fiscal 2016 Period as compared to the Fiscal 2015 Period of $18.6 million was primarily attributable to the net impact of the Amended Senior Credit Facility refinancing effected during the Fiscal 2015 Period.

Sale-Leaseback Transactions

For information regarding our various sale and leaseback transactions, refer to Note 6 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

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Contractual Cash Obligations and Commitments

The Company has assumed long-term contractual obligations and commitments in the normal course of business, primarily debt obligations and non-cancelable operating leases. Other than the operating leases that are detailed below, the Company does not utilize variable interest entities or any other form of off-balance sheet financing. As of December 31, 2017, the Company's estimated contractual cash obligations and commercial commitments over the next several periods are as follows (in millions):



	Payments Due By Period
	Total		Current		13 - 36 months		37 - 60 months		After 60 months
Contractual Cash Obligations:
Debt obligations(1)	$	2,375.0	$	12.4	$	23.5	$	1,839.1	$	500.0
Future interest on debt obligations(2)	559.1		114.1		227.7		174.2		43.1
Capital lease obligations, including interest(3)	12.9		1.0		1.8		2.0		8.1
Lease financing arrangements, including interest(3)	129.7		22.2		35.0		19.8		52.7
Purchase obligations(4)	119.8		87.6		32.2		—		—
Operating leases(5)	3,121.6		446.1		763.6		615.1		1,296.8
FIN 48 liabilities(6)	0.4		0.4		—		—		—
Total	$	6,318.5	$	683.8	$	1,083.8	$	2,650.2	$	1,900.7



	Amount of Commitment Expiration per Period
	Total Amounts Available		Current		13 - 36 months		37 - 60 months		After 60 months
Other Commercial Commitments(7)	$	85.0	$	—	$	—	$	85.0	$	—

_______________________________________________________________________________


(1)	These amounts are included on our consolidated balance sheet as of December 31, 2017. Our Amended Senior Credit Facility provided for mandatory prepayments under certain scenarios. See Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information about our long-term debt obligations and related matters.

(2)

Future interest payments on the Company's unhedged debt obligations as of December 31, 2017 (consisting of approximately $898.2 million of variable interest rate borrowings under the New Term Loans, $775.0 million outstanding under the 5³/₄% Senior Notes Due 2022, $250.0 million outstanding under the 5³/₄% Senior Notes Due 2025, $250.0 million outstanding under the 5³/₄% Senior Notes Due 2023 and approximately $2.8 million of other debt obligations) are based on the stated fixed rate or in the case of the $898.2 million of variable interest rate borrowings under the New Term Loans, the current interest rate specified in our Amended Senior Credit Facility as of December 31, 2017 (3.57%). Future interest payments on the Company's hedged indebtedness as of December 31, 2017 (the remaining $200.0 million of borrowings under the New Term Loans) are based on (i) the applicable margin (as defined in Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K) as of December 31, 2017 (2.0%) and (ii) the expected fixed interest payments under the Company's interest rate swap agreement, which is described in further detail under Note 13 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

(3)

The present value of these obligations, excluding interest, is included on our consolidated balance sheet as of December 31, 2017. Future interest payments are calculated based on interest rates implicit in the underlying leases, which have a weighted average interest rate of 11.22%, maturing in various installments through 2028. Refer to Note 5 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information about our capital lease obligations and lease financing arrangements.


(4)	Includes estimated capital expenditures and investments to which we were contractually obligated as of December 31, 2017, including improvements associated with existing theatres (including luxury reclining seating), the construction of new theatres and investments in non-consolidated entities. Does not include non-committed capital expenditures.

(5)

We enter into operating leases in the ordinary 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 or if we enter into additional operating lease agreements. Our operating lease obligations are further described in Note 6 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.


(6)	The table does not include approximately $6.3 million of recorded liabilities associated with unrecognized state tax benefits because the timing of the related payments was not reasonably estimable as of December 31, 2017.

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(7)	In addition, as of December 31, 2017, Regal Cinemas had approximately $82.3 million available for drawing under the $85.0 million Revolving Facility. Regal Cinemas also maintained a sublimit within the Revolving Facility of $10.0 million for short-term loans and $30.0 million for letters of credit.

Off-Balance Sheet Arrangements

Other than the operating leases detailed above in this Form 10-K, under the heading "Contractual Cash Obligations and Commitments," the Company has no other off-balance sheet arrangements.

Recent Accounting Pronouncements

Adoption of New Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-07, Investments - Equity Method and Joint Ventures (Topic 323). The purpose of ASU 2016-07 is to eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment was held. ASU 2016-07 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years and early adoption is permitted. The Company's adoption of ASU 2016-07 during the quarter ended March 31, 2017 had no impact on the Company's consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which relates to the accounting for employee share-based payments. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years and early adoption is permitted. The Company's adoption of ASU 2016-09 had the impact of reducing income tax expense by approximately $1.3 million pertaining to excess tax benefits related to vesting of 493,516 restricted stock awards and to a lesser extent, dividends paid on restricted stock during the year ended December 31, 2017. Historically, such excess tax benefits would have been recorded as a component of additional paid-in capital.

In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control, which requires when assessing which party is the primary beneficiary in a VIE, the decision maker considers interests held by entities under common control on a proportionate basis instead of treating those interests as if they were that of the decision maker itself, as current U.S. GAAP requires. ASU 2016-17 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years and early adoption is permitted. The Company's adoption of ASU 2016-17 during the quarter ended March 31, 2017 had no impact on the Company's consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The purpose of ASU 2017-04 is to simplify the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within that year. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted ASU 2017-04 in connection with its interim goodwill impairment test performed during the year ended December 31, 2017 as further described in Notes 2 and 14 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Recently Issued FASB Accounting Standard Codification Updates

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard permits the use of either the retrospective or modified retrospective transition method. ASU 2014-09 was originally effective for annual and interim reporting periods beginning after December 15, 2016. However, the standard was deferred by ASU 2015-14, issued by the FASB in August 2015, and is now effective for fiscal years beginning on or after December 15, 2017,

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including interim reporting periods within that reporting period, with early adoption permitted as of the original effective date. In addition, amendments in subsequent Accounting Standards Updates have either clarified or revised guidance as set forth in ASU 2014-09, including ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus

Agent Considerations (Reporting Revenues Gross versus Net), ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing and ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients.

The Company has selected the modified retrospective method for adoption of ASU 2014-09 and its related ASU amendments. Under this method, we will recognize the cumulative effect of the changes in retained earnings at the date of adoption (January 1, 2018) as described below, but will not restate prior periods. The adoption of ASU 2014-09 and its related ASU amendments primarily impacts the Company's accounting for its (i) loyalty program, (ii) gift cards and bulk tickets, including commissions paid to third parties, (iii) the classification of internet ticketing surcharges and (iv) amounts recorded as deferred revenue and the method of amortization for the advanced payment received in connection with the 2007 National CineMedia ESA modification and subsequent receipts of common units of National CineMedia pursuant to the provisions of the Common Unit Adjustment Agreement. While we do not believe the adoption of ASU 2014-09 will have a material impact on our net income or cash flows from operations, we do expect the standard to materially impact the timing and classification of revenues and related expenses in the following key areas:

•

First, we believe the advanced payment received in connection with the 2007 National CineMedia ESA modification and subsequent receipts of common units of National CineMedia pursuant to the provisions of the Common Unit Adjustment Agreement, each as described in Note 4 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, include a significant financing component under ASU 2014-09. Accordingly, we expect advertising revenues will increase materially with a similar offsetting increase in non-cash interest expense beginning January 1, 2018. Through December 31, 2017, the Company utilized the units of revenue method to amortize such amounts, but will change its amortization to a straight-line method under ASU 2014-09 effective January 1, 2018. We do not expect these changes to have a material impact on our net income or cash flows from operations. As of the date of this Form 10-K, the Company expects to reduce its opening January 1, 2018 retained earnings balance (along with a corresponding credit to deferred revenue) by approximately $15 million to $20 million, before related tax effects, to give effect to the change in amortization method with respect to these advanced payments.

•

Second, under ASU 2014-09 and effective January 1, 2018, the Company will record internet ticketing surcharge fees based on the gross transaction price. Previously, the Company recorded such fees net of third-party commission or service fees. This change will have the effect of materially increasing other operating revenues and other operating expenses, but will have no impact on net income or cash flows from operations.

•

Third, with respect to our gift card and bulk ticket programs, the adoption of ASU 2014-09 is not expected to have a material impact on the annual revenue we currently recognize from these programs, but it will change the method in which we recognize revenue from gift cards and bulk tickets. Through December 31, 2017, the Company recognized revenue associated with gift cards and bulk tickets when redeemed, or when the likelihood of redemption became remote (known as "breakage" in our industry) based on historical experience. Under ASU 2014-09 and effective January 1, 2018, the Company will recognize revenue from unredeemed gift cards and bulk tickets as redeemed and will recognize breakage following the proportional method where revenue is recognized in proportion to the pattern of rights exercised by the customer when the Company expects that it is probable that a significant revenue reversal would not occur for any estimated breakage amounts. As of the date of this Form 10-K, the Company expects to reduce its opening January 1, 2018 retained earnings balance (along with a corresponding credit to deferred revenue) by approximately $25 million to $30 million, before related tax effects, to give effect to this change in accounting for our gift card and bulk ticket programs.

With respect to gift card commissions paid to third parties, under ASU 2014-09 and effective January 1, 2018, the Company will begin to amortize the commission fees over the expected redemption period. Previously, such gift card commissions were expensed as incurred. We do not expect these changes to have a material impact on our net income or cash flows from operations, however we do expect to increase our opening January 1, 2018 retained earnings balance (along with a corresponding debit to a gift card commission contract asset) by approximately $18 million to $20 million, before related tax effects, to give effect to this change in accounting for our gift card commissions.

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•

Finally, with respect to other areas impacted by ASU 2014-09 such as our loyalty program, we do not expect those accounting changes to have a material impact on our net income or cash flows from operations. Through December 31, 2017, the Company recorded the estimated incremental cost of providing awards under the Regal Crown Club® loyalty program at the time the awards are earned. Under ASU 2014-09 and effective January 1, 2018, the Company will estimate the fair value of providing such loyalty program awards at the time the related awards are earned. As of the date of this Form 10-K, the Company expects to reduce its opening January 1, 2018 retained earnings balance (along with a corresponding credit to deferred revenue) by approximately $40 million to $50 million, before related tax effects, to give effect to this change in accounting for our loyalty program.

The Company is currently finalizing its review of ASU 2014-09 and its related ASU amendments with respect to required disclosures and financial statement presentation for fiscal 2018.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is evaluating the impact that ASU 2016-02 will have on its consolidated financial statements and related disclosures and believes that the significance of its future minimum rental payments will result in a material increase in ROU assets and lease liabilities.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The purpose of ASU 2016-15 is to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. The Company is evaluating the impact that ASU 2016-15 will have on its consolidated financial statements and related disclosures.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires that an entity recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time of the transfer instead of deferring the tax consequences until the asset has been sold to an outside party, as current U.S. GAAP requires. ASU 2016-16 is effective for annual periods, and interim periods therein, beginning after December 15, 2017. Early application is permitted in any interim or annual period. The Company is evaluating the impact that ASU 2016-16 will have on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The purpose of ASU 2017-01 is to clarify the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. The amendments in ASU 2017-01 should be applied prospectively on or after the effective date. Early adoption is permitted. The Company does not expect that the adoption of ASU 2017-01 will have a material impact on its consolidated financial statements and related disclosures.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which is intended to simplify and amend the application of hedge accounting to more clearly portray the economics of an entity’s risk management strategies in its financial statements. ASU 2017-12 also amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. The Company is evaluating the impact that ASU 2017-12 will have on its consolidated financial statements and related disclosures.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Following the consummation of the Merger, the Company believes that its exposure to market risk is not material.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors

Regal Entertainment Group:

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.

Management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of such controls as of December 31, 2017. This assessment was based on criteria for effective internal control over financial reporting described in the Internal Control - Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management believes that the Company's internal control over financial reporting is effective as of December 31, 2017.

KPMG LLP, independent registered public accounting firm of the Company's consolidated financial statements, has issued an audit report on the effectiveness of the Company's internal control over financial reporting as of December 31, 2017, as stated in their report which is included herein.



/s/ AMY E. MILES		/s/ DAVID H. OWNBY
Amy E. Miles		David H. Ownby
Chief Executive Officer (Principal Executive Officer)		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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Report of Independent Registered Public Accounting Firm

To the Stockholder and Board of Directors

Regal Entertainment Group:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Regal Entertainment Group and subsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income, deficit, and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Mangement’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

We have served as the Company’s auditor since 2001.

Knoxville, Tennessee

March 1, 2018

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REGAL ENTERTAINMENT GROUP

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)



	December 31, 2017			December 31, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	228.8		$	246.5
Trade and other receivables, net	184.0			155.1
Inventories	22.9			20.9
Prepaid expenses and other current assets	27.6			24.4
TOTAL CURRENT ASSETS	463.3			446.9
PROPERTY AND EQUIPMENT:
Land	154.8			131.2
Buildings and leasehold improvements	2,478.7			2,319.7
Equipment	1,083.4			1,065.7
Construction in progress	34.8			20.2
Total property and equipment	3,751.7			3,536.8
Accumulated depreciation and amortization	(2,238.5		)	(2,146.7		)
TOTAL PROPERTY AND EQUIPMENT, NET	1,513.2			1,390.1
GOODWILL	345.8			327.0
INTANGIBLE ASSETS, NET	43.6			46.0
DEFERRED INCOME TAX ASSET	54.5			56.3
OTHER NON-CURRENT ASSETS	422.5			379.4
TOTAL ASSETS	$	2,842.9		$	2,645.7
LIABILITIES AND DEFICIT
CURRENT LIABILITIES:
Current portion of debt obligations	$	26.6		$	25.5
Accounts payable	232.2			194.8
Accrued expenses	73.8			70.7
Deferred revenue	186.2			192.7
Income taxes payable	2.7			6.4
Other current liabilities	39.9			31.2
TOTAL CURRENT LIABILITIES	561.4			521.3
LONG-TERM DEBT, LESS CURRENT PORTION	2,339.4			2,197.1
LEASE FINANCING ARRANGEMENTS, LESS CURRENT PORTION	74.5			84.8
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION	6.7			6.9
NON-CURRENT DEFERRED REVENUE	404.6			412.3
OTHER NON-CURRENT LIABILITIES	312.1			262.2
TOTAL LIABILITIES	3,698.7			3,484.6
COMMITMENTS AND CONTINGENCIES
DEFICIT:
Class A common stock, $0.001 par value; 500,000,000 shares authorized, 133,306,994 and 133,080,279 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively	0.1			0.1
Class B common stock, $0.001 par value; 200,000,000 shares authorized, 23,708,639 shares issued and outstanding at December 31, 2017 and December 31, 2016	—			—
Preferred stock, $0.001 par value; 50,000,000 shares authorized; none issued and outstanding	—			—
Additional paid-in capital (deficit)	(929.4		)	(934.4		)
Retained earnings	70.9			96.5
Accumulated other comprehensive income (loss), net	2.5			(1.3		)
TOTAL STOCKHOLDERS' DEFICIT OF REGAL ENTERTAINMENT GROUP	(855.9		)	(839.1		)
Noncontrolling interest	0.1			0.2
TOTAL DEFICIT	(855.8		)	(838.9		)
TOTAL LIABILITIES AND DEFICIT	$	2,842.9		$	2,645.7

See accompanying notes to consolidated financial statements.

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REGAL ENTERTAINMENT GROUP

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except share and per share data)



	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015
REVENUES:
Admissions	$	2,008.1		$	2,061.7		$	2,038.2
Concessions	930.2			932.6			901.7
Other operating revenues	224.7			202.8			187.4
TOTAL REVENUES	3,163.0			3,197.1			3,127.3
OPERATING EXPENSES:
Film rental and advertising costs	1,067.8			1,107.3			1,093.1
Cost of concessions	123.8			119.5			114.4
Rent expense	426.8			427.6			421.5
Other operating expenses	912.6			883.2			863.7
General and administrative expenses (including share-based compensation of $9.2, $8.8 and $8.3 for the years ended December 31, 2017, December 31, 2016 and December 31, 2015, respectively)	86.6			84.6			78.8
Depreciation and amortization	249.7			230.7			216.8
Net loss on disposal and impairment of operating assets and other	24.0			4.8			19.7
TOTAL OPERATING EXPENSES	2,891.3			2,857.7			2,808.0
INCOME FROM OPERATIONS	271.7			339.4			319.3
OTHER EXPENSE (INCOME):
Interest expense, net	125.1			128.1			129.6
Loss on extinguishment of debt	1.3			2.9			5.7
Earnings recognized from NCM	(24.1		)	(29.4		)	(31.0		)
Gain on sale of Open Road Films investment	(17.8		)	—			—
Equity in income of non-consolidated entities and other, net	(39.2		)	(43.9		)	(38.3		)
Merger related expenses	12.5			—			—
TOTAL OTHER EXPENSE, NET	57.8			57.7			66.0
INCOME BEFORE INCOME TAXES	213.9			281.7			253.3
PROVISION FOR INCOME TAXES	101.6			111.2			100.1
NET INCOME	112.3			170.5			153.2
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST, NET OF TAX	—			(0.1		)	0.2
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	112.3		$	170.4		$	153.4
EARNINGS PER SHARE OF CLASS A AND CLASS B COMMON STOCK (NOTE 12):
Basic	$	0.72		$	1.09		$	0.99
Diluted	$	0.72		$	1.09		$	0.98
AVERAGE SHARES OUTSTANDING (in thousands):
Basic	156,336			155,995			155,680
Diluted	156,986			156,804			156,511
DIVIDENDS DECLARED PER COMMON SHARE	$	0.88		$	0.88		$	0.88

See accompanying notes to consolidated financial statements.

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REGAL ENTERTAINMENT GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)



	Year Ended December 31, 2017		Year Ended December 31, 2016			Year Ended December 31, 2015
NET INCOME	$	112.3	$	170.5		$	153.2
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Change in fair value of interest rate swap transactions	2.0		(2.3		)	(4.3		)
Amounts reclassified to net income from interest rate swaps	1.6		3.6			4.5
Change in fair value of available for sale securities	—		—			(0.2		)
Reclassification adjustment for gain on sale of available for sale securities recognized in net income	—		(0.5		)	—
Change in fair value of equity method investee interest rate swaps	0.2		—			(0.6		)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	3.8		0.8			(0.6		)
TOTAL COMPREHENSIVE INCOME, NET OF TAX	116.1		171.3			152.6
Comprehensive (income) loss attributable to noncontrolling interest, net of tax	—		(0.1		)	0.2
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST, NET OF TAX	$	116.1	$	171.2		$	152.8

See accompanying notes to consolidated financial statements.

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REGAL ENTERTAINMENT GROUP

CONSOLIDATED STATEMENTS OF DEFICIT

(in millions, except amounts of cash dividends declared per share)



	Class A Common Stock				Class B Common Stock			Additional Paid-In Capital (Deficit)			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Deficit of Regal Entertainment Group			Noncontrolling Interest			Total Deficit
	Shares		Amount		Shares	Amount		Additional Paid-In Capital (Deficit)			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Deficit of Regal Entertainment Group			Noncontrolling Interest			Total Deficit
Balances, January 1, 2015	132.5		$	0.1	23.7	$	—	$	(941.8	)	$	48.4		$	(1.5	)	$	(894.8	)	$	(2.5	)	$	(897.3	)
Net income attributable to controlling interest	—		—		—	—		—			153.4			—			153.4			—			153.4
Other comprehensive income (loss)	—		—		—	—		—			—			(0.6		)	(0.6		)	—			(0.6		)
Purchase of noncontrolling interest	—		—		—	—		(5.5		)	—			—			(5.5		)	2.9			(2.6		)
Other noncontrolling interest adjustments	—		—		—	—		—			—			—			—			(0.2		)	(0.2		)
Share-based compensation expense	—		—		—	—		7.7			—			—			7.7			—			7.7
Tax benefits from vesting of restricted stock and other	(0.3	)	—		—	—		(0.3		)	—			—			(0.3		)	—			(0.3		)
Issuance of restricted stock	0.5		—		—	—		—			—			—			—			—			—
Cash dividends declared, $0.88 per share	—		—		—	—		(0.1		)	(137.6		)	—			(137.7		)	—			(137.7		)
Balances, December 31, 2015	132.7		0.1		23.7	—		(940.0		)	64.2			(2.1		)	(877.8		)	0.2			(877.6		)
Net income attributable to controlling interest	—		—		—	—		—			170.4			—			170.4			—			170.4
Other comprehensive income (loss)	—		—		—	—		—			—			0.8			0.8			—			0.8
Share-based compensation expense	—		—		—	—		7.9			—			—			7.9			—			7.9
Tax benefits from vesting of restricted stock and other	(0.1	)	—		—	—		(2.3		)	—			—			(2.3		)	—			(2.3		)
Issuance of restricted stock	0.5		—		—	—		—			—			—			—			—			—
Cash dividends declared, $0.88 per share	—		—		—	—		—			(138.1		)	—			(138.1		)	—			(138.1		)
Balances, December 31, 2016	133.1		0.1		23.7	—		(934.4		)	96.5			(1.3		)	(839.1		)	0.2			(838.9		)
Net income attributable to controlling interest	—		—		—	—		—			112.3			—			112.3			—			112.3
Other comprehensive income (loss)	—		—		—	—		—			—			3.8			3.8			—			3.8
Other noncontrolling interest adjustments	—		—		—	—		—			—			—			—			(0.1		)	(0.1		)
Share-based compensation expense	—		—		—	—		8.6			—			—			8.6			—			8.6
Tax benefits from vesting of restricted stock and other	(0.2	)	—		—	—		(3.6		)	0.3			—			(3.3		)	—			(3.3		)
Issuance of restricted stock	0.4		—		—	—		—			—			—			—			—			—
Cash dividends declared, $0.88 per share	—		—		—	—		—			(138.2		)	—			(138.2		)	—			(138.2		)
Balances, December 31, 2017	133.3		$	0.1	23.7	$	—	$	(929.4	)	$	70.9		$	2.5		$	(855.9	)	$	0.1		$	(855.8	)

See accompanying notes to consolidated financial statements.

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REGAL ENTERTAINMENT GROUP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)



	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	112.3		$	170.5		$	153.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	249.7			230.7			216.8
Amortization of debt discount	0.3			0.3			0.3
Amortization of debt acquisition costs	4.8			4.6			4.7
Share-based compensation expense	9.2			8.8			8.3
Deferred income tax provision (benefit)	(0.6		)	2.4			(10.9		)
Net loss on disposal and impairment of operating assets and other	24.0			14.6			19.7
Gain on lease termination	—			(9.8		)	—
Equity in income of non-consolidated entities	(41.2		)	(51.4		)	(44.6		)
Gain on sale of Open Road Films investment	(17.8		)	—			—
Proceeds from business interruption insurance claim	0.3			—			—
Loss on extinguishment of debt	1.3			2.9			5.7
Gain on sale of available for sale securities	—			(1.0		)	—
Non-cash (gain) loss on interest rate swaps	(0.6		)	(0.1		)	0.7
Non-cash rent income	(7.0		)	(6.3		)	(6.2		)
Cash distributions on investments in other non-consolidated entities	12.3			12.0			3.6
Excess cash distribution on NCM shares	15.6			13.8			15.4
Landlord contributions	91.8			75.3			32.2
Proceeds from litigation settlement	1.9			—			—
Proceeds from lease termination and other	—			10.6			—
Changes in operating assets and liabilities, net of effects of acquisitions:
Trade and other receivables	(27.7		)	—			(19.0		)
Inventories	(1.3		)	1.5			(4.7		)
Prepaid expenses and other assets	(3.6		)	(2.5		)	1.5
Accounts payable	31.1			(38.3		)	63.1
Income taxes payable	(3.8		)	6.7			0.2
Deferred revenue	(20.5		)	(23.6		)	3.6
Accrued expenses and other liabilities	(20.6		)	(11.2		)	(9.2		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	409.9			410.5			434.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(250.4		)	(214.9		)	(185.7		)
Proceeds from disposition of assets	16.1			1.4			12.0
Investment in non-consolidated entities	(11.9		)	(13.7		)	(0.4		)
Net cash used for acquisitions	(171.6		)	—			(9.2		)
Proceeds from sale of Open Road Films investment	10.3			—			—
Proceeds from sale of available for sale securities	—			3.6			—
Change in other long-term assets	(3.1		)	—			—
NET CASH USED IN INVESTING ACTIVITIES	(410.6		)	(223.6		)	(183.3		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash used to pay dividends	(138.9		)	(138.9		)	(139.1		)
Payments on long-term obligations	(23.5		)	(21.7		)	(23.3		)
Landlord contributions received from lease financing arrangements	2.5			6.0			3.9
Cash paid for tax withholdings and other	(3.7		)	(3.3		)	(4.4		)
Proceeds from Amended Senior Credit Facility	1,103.7			1,914.6			963.3
Payoff of Amended Senior Credit Facility	(953.7		)	(1,914.6		)	(963.2		)
Payment of debt acquisition costs	(3.4		)	(2.1		)	(13.2		)
Purchase of noncontrolling interest	—			—			(2.6		)
NET CASH USED IN FINANCING ACTIVITIES	(17.0		)	(160.0		)	(178.6		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(17.7		)	26.9			72.5
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	246.5			219.6			147.1
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	228.8		$	246.5		$	219.6
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes	$	105.9		$	101.9		$	105.9
Cash paid for interest, net of amounts capitalized	$	121.4		$	124.3		$	125.3
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Investment in NCM	$	6.3		$	9.9		$	9.0
Increase in property and equipment and other from lease financing arrangements	$	3.2		$	13.1		$	3.2

See accompanying notes to consolidated financial statements.

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REGAL ENTERTAINMENT GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017, December 31, 2016, and December 31, 2015

1. THE COMPANY AND BASIS OF PRESENTATION

Regal Entertainment Group (the "Company," "Regal," "we" or "us") is the parent company of Regal Entertainment Holdings, Inc. ("REH"), which is the parent company of Regal Cinemas Corporation ("Regal Cinemas") and its subsidiaries. Regal Cinemas' subsidiaries include Regal Cinemas, Inc. ("RCI") and its subsidiaries, which include Edwards Theatres, Inc. ("Edwards") and United Artists Theatre Company ("United Artists"). The terms Regal or the Company, REH, Regal Cinemas, RCI, Edwards and United Artists 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. Certain amounts in prior fiscal years have been reclassified to conform with the presentation adopted in the current year.

Regal operates one of the largest and most geographically diverse theatre circuits in the United States, consisting of 7,322 screens in 560 theatres in 43 states along with Guam, Saipan, American Samoa and the District of Columbia as of December 31, 2017.

During 2001 and 2002, Anschutz Company and its subsidiaries ("Anschutz") acquired controlling equity interests in United Artists, Edwards and RCI upon each of the entities' emergence from bankruptcy reorganization. In May 2002, the Company sold 18.0 million shares of its Class A common stock in an initial public offering at a price of $19.00 per share, receiving aggregate net offering proceeds, net of underwriting discounts, commissions and other offering expenses, of $314.8 million. In 2015, as a result of an internal restructuring, Anschutz Company changed its name to The Anschutz Corporation.

On December 5, 2017, Regal entered into an Agreement and Plan of Merger (the "Merger Agreement") with Cineworld Group plc, a public limited company incorporated in England and Wales ("Cineworld"), Crown Intermediate Holdco, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Cineworld ("US Holdco"), and Crown Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of US Holdco (the "Merger Sub"). The Merger Agreement provides, subject to its terms and conditions, for the acquisition of Regal by Cineworld at a price of $23.00 in cash for each share of Regal’s Class A common stock and Class B common stock (each, a "Share"), without interest and subject to deduction for any required withholding tax (the "Merger Consideration"), through the merger of the Merger Sub with and into Regal (the "Merger"), with Regal surviving the Merger as a wholly owned, indirect subsidiary of Cineworld. Regal’s Board of Directors unanimously approved the Merger and the Merger Agreement and recommended that stockholders adopt the Merger Agreement. See Note 16—"Subsequent Events," for further developments occurring after December 31, 2017 with respect to the Merger.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Regal and its subsidiaries. Majority-owned subsidiaries that the Company controls are consolidated while those affiliates of which the Company owns between 20% and 50% and does not control are accounted for under the equity method. Those affiliates of which the Company owns less than 20% are generally accounted for under the cost method, unless the Company is deemed to have the ability to exercise significant influence over the affiliate, in which case the Company would account for its investment under the equity method. The results of these subsidiaries and affiliates are included in the consolidated financial statements effective with their formation or from their dates of acquisition. All significant intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition

Revenues are generated principally through admissions and concessions sales with proceeds received in cash or via credit card at the point of sale. Other operating revenues consist primarily of product advertising (including vendor marketing programs) and other ancillary revenues that are recognized as income in the period earned. The Company generally recognizes payments received attributable to the marketing and advertising services provided by the Company under certain vendor programs as revenue in the periods in which the advertising is displayed or when the related impressions are delivered. Such impressions are measured by the concession product sales volume, which is a mutually agreed upon proxy of attendance and reflects the Company's marketing and advertising services delivered to its vendors. In instances where the consideration received is in excess of fair value of the advertising services provided, the excess is recorded as a reduction of concession costs.

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REGAL ENTERTAINMENT GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017, December 31, 2016 and December 31, 2015

The Company maintains a deferred revenue balance pertaining to amounts received for agreeing to the 2007 National CineMedia exhibitor services agreement ("ESA") modification, amounts recorded in connection with the receipt of newly issued common units of National CineMedia pursuant to the provisions of the Common Unit Adjustment Agreement described in Note 4—"Investments," and amounts received from the sale of bulk tickets and gift cards that have not been redeemed. Amortization of deferred revenue related to the amount we received for agreeing to the existing National CineMedia exhibitor services agreement modification and amounts recorded in connection with the receipt of newly issued common units of National CineMedia pursuant to the provisions of the Common Unit Adjustment Agreement are described below in this Note 2 under "Deferred Revenue" and in Note 4—"Investments." The Company recognizes revenue associated with bulk tickets and gift cards when redeemed, or when the likelihood of redemption becomes remote. The determination of the likelihood of redemption is based on an analysis of actual historical redemption trends.

Cash Equivalents

The Company considers all unrestricted highly liquid debt instruments and investments purchased with an original maturity of 3 months or less to be cash equivalents. At December 31, 2017, the Company held substantially all of its cash in temporary cash investments in the form of certificates of deposit and variable rate investment accounts with major financial institutions.

Inventories

Inventories consist of concession products and theatre supplies. The Company states inventories on the basis of first-in, first-out (FIFO) cost, which is not in excess of net realizable value.

Property and Equipment

The Company states property and equipment at cost. Major renewals and improvements are capitalized, while maintenance and repairs that do not improve or extend the lives of the respective assets are expensed currently. Gains and losses from disposition of property and equipment are included in income and expense when realized.

The Company capitalizes the cost of computer equipment, system hardware and purchased software ready for service. During the years ended December 31, 2017 and December 31, 2016, the Company capitalized approximately $14.3 million and $8.0 million, respectively, of such costs, which were associated primarily with (i) new point-of-sale devices at the Company's box offices and concession stands, (ii) new ticketing kiosks, and (iii) computer hardware and software purchased for the Company's theatre locations and corporate office. The Company also capitalizes certain direct external costs associated with software developed for internal use after the preliminary software project stage is completed and Company management has authorized further funding for a software project and it is deemed probable of completion. The Company capitalizes these external software development costs only until the point at which the project is substantially complete and the software is ready for its intended purpose.

The Company records depreciation and amortization using the straight-line method over the following estimated useful lives:



Buildings		20 - 30 years
Equipment		3 - 20 years
Leasehold improvements		Lesser of term of lease or asset life
Computer equipment and software		3 - 5 years

As of December 31, 2017 and December 31, 2016, included in property and equipment is $189.3 million and $190.6 million of assets accounted for under capital leases and lease financing arrangements, before accumulated depreciation of $128.6 million and $118.0 million, respectively. The Company records amortization using the straight-line method over the shorter of the lease terms or the estimated useful lives noted above.

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REGAL ENTERTAINMENT GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017, December 31, 2016 and December 31, 2015

Impairment of Long-Lived Assets

The Company reviews long-lived assets (including intangible assets, marketable equity securities and investments in non-consolidated entities as described further below) for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. The Company generally evaluates assets for impairment on an individual theatre basis, which management believes is the lowest level for which there are identifiable cash flows. If the sum of the expected future cash flows, undiscounted and without interest charges, is less than the carrying amount of the assets, the Company recognizes an impairment charge in the amount by which the carrying value of the assets exceeds their fair market value.

The Company considers historical theatre level cash flows, estimated future theatre level cash flows, theatre property and equipment carrying values, intangible asset carrying values, the age of the theatre, competitive theatres in the marketplace, the impact of recent pricing changes, strategic initiatives, available lease renewal options and other factors considered relevant in its assessment of whether or not a triggering event has occurred that indicates impairment of individual theatre assets may be necessary. For theatres where a triggering event is identified, impairment is measured based on the estimated cash flows from continuing use until the expected disposal date or the fair value of furniture, fixtures and equipment. The expected disposal date does not exceed the remaining lease period unless it is probable the lease period will be extended and may be less than the remaining lease period when the Company does not expect to operate the theatre to the end of its lease term. The fair value of assets is determined using the present value of the estimated future cash flows or the expected selling price less selling costs for assets of which the Company expects to dispose. Significant judgment is involved in determining whether a triggering event has occurred, estimating future cash flows and determining fair value. Management's estimates (Level 3 inputs as described in FASB Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures) are based on historical and projected operating performance, recent market transactions, and current industry trading multiples.

The Company's analysis relative to long-lived assets resulted in the recording of impairment charges of $13.5 million, $7.9 million and $15.6 million for the years ended December 31, 2017, December 31, 2016 and December 31, 2015, respectively. The long-lived asset impairment charges recorded were specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatres we deemed other than temporary.

Leases

The majority of the Company's operations are conducted in premises occupied under non-cancelable lease agreements with initial base terms generally ranging from 15 to 20 years. The Company, at its option, can renew a substantial portion of the leases at defined or then fair rental rates for various periods. Certain leases for our theatres provide for contingent rentals based on the revenue results of the underlying theatre and require the payment of taxes, insurance, and other costs applicable to the property. Also, certain leases contain escalating minimum rental provisions. There are no conditions imposed upon us by our lease agreements or by parties other than the lessor that legally obligate the Company to incur costs to retire assets as a result of a decision to vacate our leased properties. None of our lease agreements require us to return the leased property to the lessor in its original condition (allowing for normal wear and tear) or to remove leasehold improvements at our cost.

The Company accounts for leased properties under the provisions of ASC Topic 840, Leases and other authoritative accounting literature. ASC Subtopic 840-10, Leases—Overview requires that the Company evaluate each lease for classification as either a capital lease or an operating lease. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. As to those arrangements that are classified as capital leases, the Company records property under capital leases and a capital lease obligation in an amount equal to the lesser of the present value of the minimum lease payments to be made over the life of the lease at the beginning of the lease term, or the fair value of the leased property. The property under capital lease is amortized on a straight-line basis as a charge to expense over the lease term, as defined, or the economic life of the leased property, whichever is less. During the lease term, as defined, each minimum lease payment is allocated between a reduction of the lease obligation and interest expense so as to produce a constant periodic rate of interest on the remaining balance of the lease obligation. The Company does not believe that exercise of the renewal options in its leases are reasonably assured at the inception of the lease agreements because such leases: (i) provide for either (a) renewal rents based on market rates or (b) renewal rents that equal or exceed the initial rents, and (ii) do not impose economic penalties upon the determination whether or not to exercise the renewal option. As a result, there are not sufficient economic incentives at the inception of the leases to consider the lease renewal options to be reasonably assured of being exercised and therefore, the initial base term is generally considered as the lease term under ASC Subtopic 840-10.

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REGAL ENTERTAINMENT GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017, December 31, 2016 and December 31, 2015

The Company records rent expense for its operating leases with contractual rent increases in accordance with ASC Subtopic 840-20, Leases—Operating Leases, on a straight-line basis from the "lease commencement date" as specified in the lease agreement until the end of the base lease term.

The Company accounts for lease incentive payments received from a landlord in accordance with ASC Subtopic 840-20, Leases—Lease Incentives, and records the proceeds as a deferred lease incentive liability and amortizes the liability as a reduction in rent expense over the base term of the lease.

For leases in which the Company is involved with construction of the theatre, the Company accounts for the lease during the construction period under the provisions of ASC Subtopic 840-40, Leases—Sale-Leaseback Transactions. The landlord is typically responsible for constructing a theatre using guidelines and specifications agreed to by the Company and assumes substantially all of the risk of construction. In accordance with ASC Subtopic 840-40, if the Company concludes that it has substantially all of the construction period risks, it records a construction asset and related liability for the amount of total project costs incurred during the construction period. Once construction is completed, the Company considers the requirements under ASC Subtopic 840-40, for sale-leaseback treatment, and if the arrangement does not meet such requirements, it records the project's construction costs funded by the landlord as a financing obligation. The obligation is amortized over the financing term based on the payments designated in the contract.

In accordance with ASC Subtopic 840-20, we expense rental costs incurred during construction periods for operating leases as such costs are incurred. For rental costs incurred during construction periods for both operating and capital leases, the "lease commencement date" is the date at which we gain access to the leased asset. Historically, and for the years ended December 31, 2017, December 31, 2016 and December 31, 2015, these rental costs have not been significant to our consolidated financial statements.

Sale and Leaseback Transactions

The Company accounts for the sale and leaseback of real estate assets in accordance with ASC Subtopic 840-40. Losses on sale leaseback transactions are recognized at the time of sale if the fair value of the property sold is less than the undepreciated cost of the property. Gains on sale and leaseback transactions are deferred and amortized over the remaining lease term.

Goodwill

The carrying amount of goodwill at December 31, 2017 and December 31, 2016 was approximately $345.8 million and $327.0 million, respectively. The $18.8 million net increase in goodwill during year ended December 31, 2017 was primarily attributable to $26.2 million of goodwill recorded in connection with the Company's acquisitions of nine theatres with 134 screens, which are more fully described in Note 3—"Acquisitions," partially offset by a $7.3 million impairment charge to one of the Company’s reporting units as described below. The Company evaluates goodwill for impairment annually or more frequently as specific events or circumstances dictate. Under ASC Subtopic 350-20, Intangibles-Goodwill and Other-Goodwill, the Company has identified its reporting units to be the designated market areas in which the Company conducts its theatre operations. Goodwill impairment is evaluated using an approach requiring the Company to compute the fair value of a reporting unit and compare it with its carrying value. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The purpose of ASU 2017-04 was to simplify the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The Company early adopted ASU 2017-04 in connection with its interim goodwill impairment test performed during the quarter ended September 30, 2017 as further described below. The Company determines fair value by using an enterprise valuation methodology determined by applying multiples to cash flow estimates less net indebtedness, which the Company believes is an appropriate method to determine fair value. There is considerable management judgment with respect to cash flow estimates and appropriate multiples and discount rates to be used in determining fair value and such management estimates fall under Level 3 within the fair value measurement hierarchy.

As part of the Company’s ongoing operations, we may close certain theatres within a reporting unit containing goodwill due to underperformance of the theatre or inability to renew our lease, among other reasons. Additionally, we generally abandon certain assets associated with a closed theatre, primarily leasehold improvements. Under ASC Topic 350, Intangibles—Goodwill and Other, when a portion of a reporting unit that constitutes a business is disposed of, goodwill associated with that

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December 31, 2017, December 31, 2016 and December 31, 2015

business shall be included in the carrying amount of the business in determining the gain or loss on disposal. We evaluate whether the portion of a reporting unit being disposed of constitutes a business on the date of closure. Generally, on the date of closure, the closed theatre does not constitute a business because the Company retains assets and processes on that date essential to the operation of the theatre. These assets and processes are significant missing elements impeding the operation of a business. Accordingly, when closing individual theatres, we generally do not include goodwill in the calculation of any gain or loss on disposal of the related assets.

The Company evaluates goodwill for impairment annually or more frequently as specific events or circumstances dictate. After considering various industry specific factors, the Company conducted an interim goodwill impairment assessment during the quarter ended September 30, 2017, which indicated that the carrying value of one of its reporting units exceeded its estimated fair value. As a result, the Company recorded a goodwill impairment charge of approximately $7.3 million. The Company's annual goodwill impairment assessment for the year ended December 31, 2016 indicated that the carrying value of one of its reporting units exceeded its estimated fair value and as a result, the Company recorded a goodwill impairment charge of approximately $1.7 million. The Company's annual goodwill impairment assessment for the year ended December 31, 2015 indicated that the estimated fair value of each of its reporting units exceeded their carrying value and therefore, goodwill was not deemed to be impaired.

Intangible Assets

As of December 31, 2017 and December 31, 2016, intangible assets totaled $69.6 million and $66.8 million, respectively, before accumulated amortization of $26.0 million and $20.8 million, respectively. Such intangible assets are recorded at fair value and are amortized on a straight-line basis over the estimated remaining useful lives of the assets. The Company's identifiable intangible assets substantially consist of favorable leases acquired in connection with various acquisitions since fiscal 2008. During the years ended December 31, 2017, December 31, 2016 and December 31, 2015, the Company recognized $3.8 million, $3.8 million and $3.7 million of amortization, respectively, related to these intangible assets.

Estimated amortization expense for the next five fiscal years for such intangible assets as of December 31, 2017 is projected below (in millions):



2018	$	3.8
2019	3.7
2020	3.5
2021	3.3
2022	3.2

During the year ended December 31, 2017, the Company recorded a favorable lease impairment charge of approximately $1.4 million related to a theatre scheduled to be closed. During the year ended December 31, 2016, the Company recorded a favorable lease impairment charge of approximately $0.3 million related to a theatre closure. The Company did not record an impairment of any intangible assets during the year ended December 31, 2015.

Debt Acquisition Costs

Debt acquisition costs are deferred and amortized to interest expense using the effective interest method over the terms of the related agreements. In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest, which intended to simplify the presentation of debt issuance costs. Prior to the issuance of ASU 2015-03, debt issuance costs were reported on the balance sheet as assets and amortized as interest expense. ASU 2015-03 requires that they be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability. The costs will continue to be amortized to interest expense using the effective interest method. The Company adopted this guidance during the quarter ended March 31, 2016. Debt issuance costs associated with long-term debt, net of accumulated amortization, were $23.1 million and $25.8 million as of December 31, 2017 and December 31, 2016, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017, December 31, 2016 and December 31, 2015

Investments

The Company primarily accounts for its investments in non-consolidated subsidiaries using the equity method of accounting and has recorded the investments within "Other Non-Current Assets" and "Other Non-Current Liabilities" as applicable in its consolidated balance sheets. The Company records equity in earnings and losses of these entities in its consolidated statements of income. As of December 31, 2017, the Company holds a 17.9% interest in National CineMedia, LLC ("National CineMedia" or "NCM") and a 46.7% interest in Digital Cinema Implementation Partners, LLC. The carrying value of the Company's investment in these and other entities as of December 31, 2017 and December 31, 2016 was approximately $407.1 million and $367.7 million, respectively.

The Company reviews investments in non-consolidated subsidiaries accounted for under the equity method for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be fully recoverable. The Company reviews unaudited financial statements on a quarterly basis and audited financial statements on an annual basis for indicators of triggering events or circumstances that indicate the potential impairment of these investments as well as current equity prices for its investment in National CineMedia and discounted projections of cash flows for certain of its other investees. Additionally, the Company has periodic discussions with the management of significant investees to assist in the identification of any factors that might indicate the potential for impairment. In order to determine whether the carrying value of investments may have experienced an other-than-temporary decline in value necessitating the write-down of the recorded investment, the Company considers various factors, including the period of time during which the fair value of the investment remains substantially below the recorded amounts, the investees' financial condition and quality of assets, the length of time the investee has been operating, the severity and nature of losses sustained in current and prior years, a reduction or cessation in the investees dividend payments, suspension of trading in the security, qualifications in accountant's reports due to liquidity or going concern issues, investee announcement of adverse changes, downgrading of investee debt, regulatory actions, changes in reserves for product liability, loss of a principal customer, negative operating cash flows or working capital deficiencies and the recording of an impairment charge by the investee for goodwill, intangible or long-lived assets. Once a determination is made that an other-than-temporary impairment exists, the Company writes down its investment to fair value.

There was no impairment of the Company's investments during the years ended December 31, 2017, December 31, 2016 and December 31, 2015.

Income Taxes

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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance if it is deemed more likely than not that its deferred income tax assets will not be realized. The Company expects that certain deferred income tax assets are not more likely than not to be recovered and therefore has established a valuation allowance. The Company reassesses its need for the valuation allowance for its deferred income taxes on an ongoing basis.

Additionally, income tax rules and regulations are subject to interpretation, require judgment by the Company and may be challenged by the taxation authorities. As described further in Note 7—"Income Taxes," the Company applies the provisions of ASC Subtopic 740-10, Income Taxes—Overview. In accordance with ASC Subtopic 740-10, the Company recognizes a tax benefit only for tax positions that are determined to be more likely than not sustainable based on the technical merits of the tax position. With respect to such tax positions for which recognition of a benefit is appropriate, the benefit is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Tax positions are evaluated on an ongoing basis as part of the Company's process for determining the provision for income taxes.

Interest Rate Swaps

Regal Cinemas has entered into hedging relationships via interest rate swap agreements to hedge against interest rate exposure of its variable rate debt obligations under Regal Cinemas' Amended Senior Credit Facility. Certain of these interest rate swaps qualify for cash flow hedge accounting treatment and as such, the change in the fair values of the interest rate swaps is recorded on the Company's consolidated balance sheet as an asset or liability with the effective portion of the interest rate

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December 31, 2017, December 31, 2016 and December 31, 2015

swaps' gains or losses reported as a component of other comprehensive income and the ineffective portion reported in earnings. As interest expense is accrued on the debt obligation, amounts in accumulated other comprehensive income/loss related to the interest rate swaps will be reclassified into earnings. In the event that an interest rate swap is terminated or de-designated prior to maturity, gains or losses accumulated in other comprehensive income or loss remain deferred and are reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings. See Note 14—"Fair Value of Financial Instruments" for discussion of the Company’s interest rate swaps’ fair value estimation methods and assumptions. The fair value of the Company's interest rate swaps is based on Level 2 inputs as described in ASC Topic 820, Fair Value Measurements and Disclosures, which include observable inputs such as dealer quoted prices for similar assets or liabilities, and represents the estimated amount Regal Cinemas would receive or pay to terminate the agreements taking into consideration various factors, including current interest rates, credit risk and counterparty credit risk. The counterparties to the Company’s interest rate swaps are major financial institutions. The Company evaluates the bond ratings of the financial institutions and believes that credit risk is at an acceptably low level.

Deferred Revenue

Deferred revenue relates primarily to the amount we received for agreeing to the 2007 ESA modification, amounts recorded in connection with the receipt of newly issued common units of National CineMedia, cash received from the sale of bulk tickets and gift cards, and amounts received in connection with vendor marketing programs. The amount we received for agreeing to the ESA modification is being amortized to advertising revenue over the 30 year term of the agreement following the units of revenue method. In addition, as described in Note 4—"Investments," amounts recorded as deferred revenue in connection with the receipt of newly issued common units of National CineMedia pursuant to the provisions of the Common Unit Adjustment Agreement are being amortized to advertising revenue over the remaining term of the ESA following the units of revenue method. As of December 31, 2017 and December 31, 2016, approximately $418.5 million and $425.0 million of deferred revenue, respectively, related to the ESA was recorded as components of current and non-current deferred revenue in the accompanying consolidated balance sheets. Deferred revenue related to gift cards and bulk ticket sales and vendor marketing programs is recognized as revenue as described above in this Note 2 under "Revenue Recognition." As of December 31, 2017 and December 31, 2016, approximately $168.6 million and $175.6 million of deferred revenue, respectively, related to the gift cards and bulk tickets was recorded as a component of current deferred revenue in the accompanying consolidated balance sheets.

Deferred Rent

The Company recognizes rent on a straight-line basis after considering the effect of rent escalation provisions resulting in a level monthly rent expense for each lease over its term. The deferred rent liability is included in other non-current liabilities in the accompanying consolidated balance sheets.

Film Costs

The Company estimates its film cost expense and related film cost payable based on management's best estimate of the ultimate settlement of the film costs with the distributors. 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's theatrical run, but is typically "settled" within 2 to 3 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.

Loyalty Program

Members of the Regal Crown Club® earn credits for each dollar spent at the Company's theatres and can redeem such credits for movie tickets, concession items and movie memorabilia at the theatre or in an online reward center. Because the Company believes that the value of the awards granted to Regal Crown Club® members is insignificant in relation to the value of the transactions necessary to earn the award, the Company records the estimated incremental cost of providing awards under the Regal Crown Club® loyalty program at the time the awards are earned. Historically, and for the years ended December 31, 2017, December 31, 2016 and December 31, 2015, the costs of these awards have not been significant to the Company's consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017, December 31, 2016 and December 31, 2015

Advertising and Start-Up Costs

The Company expenses advertising costs as incurred. Start-up costs associated with a new theatre are also expensed as incurred.

Share-Based Compensation

As described in Note 9—"Capital Stock and Share-Based Compensation," we apply the provisions of ASC Subtopic 718-10, Compensation—Stock Compensation—Overall. Under ASC Subtopic 718-10, share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee's requisite service period.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, but are not limited to, deferred revenue, property and equipment, goodwill, income taxes and purchase accounting. Actual results could differ from those estimates.

Segments

As of December 31, 2017, December 31, 2016 and December 31, 2015, the Company managed its business under one reportable segment: theatre exhibition operations.

Acquisitions

The Company accounts for acquisitions under the acquisition method of accounting. The acquisition method requires that the acquired assets and liabilities, including contingencies, be recorded at fair value determined on the acquisition date and changes thereafter reflected in income. For significant acquisitions, the Company obtains independent third party valuation studies for certain of the assets acquired and liabilities assumed to assist the Company in determining fair value. The estimation of the fair values of the assets acquired and liabilities assumed involves a number of estimates and assumptions that could differ materially from the actual amounts recorded. The results of the acquired businesses are included in the Company's results from operations beginning from the day of acquisition.

Comprehensive Income

Total comprehensive income, net of tax, for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 was $116.1 million, $171.3 million and $152.6 million, respectively. Total comprehensive income consists of net income and other comprehensive income, net of tax, related to the change in the aggregate unrealized gain/loss on the Company's interest rate swap arrangement, the change in fair value of available for sale equity securities (including other-than-temporary impairments), the reclassification adjustment for gain on sale of available for sale securities recognized in net income and the change in fair value of equity method investee interest rate swap transactions during each of the years ended December 31, 2017, December 31, 2016 and December 31, 2015. The Company's interest rate swap arrangements and available for sale equity securities are further described in Note 13—"Derivative Instruments" and Note 14—"Fair Value of Financial Instruments."

Recent Accounting Pronouncements

Adoption of New Accounting Pronouncements

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December 31, 2017, December 31, 2016 and December 31, 2015

periods within those fiscal years and early adoption is permitted. The Company's adoption of ASU 2016-07 during the quarter ended March 31, 2017 had no impact on the Company's consolidated financial statements and related disclosures.

REGAL ENTERTAINMENT GROUP 10-K