SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended April 30, 1996
Commission File Number 1-12360
GC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3200876
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Boylston Street, Chestnut Hill, MA 02167
(Address of principal executive offices) (Zip Code)
(617) 278-5600
(Registrant's telephone number, including area code)
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
As of June 7, 1996, there were outstanding 7,816,294 shares of the issuer's
common stock, $.01 par value.
GC COMPANIES, INC.
I N D E X
Part I. Financial Information Page Number
Item 1. Condensed Consolidated Balance Sheets as of
April 30, 1996 and October 31, 1995 1
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended April 30, 1996 and 1995 2
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended April 30, 1996 and 1995 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-6
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
Exhibit 11.1 9
Exhibit 27.1 10
GC COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
April 30, October 31,
1996 1995
Assets
Current assets:
Cash and cash equivalents $ 78,066 $ 35,999
Short-term investments 3,753 35,313
Other current assets 3,482 5,664
Deferred income taxes 2,850 2,850
Total current assets 88,151 79,826
Property and equipment, net 169,341 171,276
Other assets 45,539 48,965
Total assets $303,031 $300,067
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term
obligations 717 716
Trade payables 36,860 33,094
Other current liabilities 56,438 61,713
Total current liabilities 94,015 95,523
Long-term liabilities:
Capital lease obligations 3,341 3,623
Other long-term liabilities 28,590 28,156
Total long-term liabilities 31,931 31,779
Deferred income taxes 14,061 14,061
Shareholders' equity
Common stock 78 78
Additional paid-in capital 136,368 136,324
Retained earnings 26,578 22,302
Total shareholders' equity 163,024 158,704
Total liabilities and shareholders' equity $303,031 $300,067
See Notes to Condensed Consolidated Financial Statements.
1
GC COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands except for Six Months Three Months
per share amounts) Ended April 30, Ended April 30,
1996 1995 1996 1995
Revenues
Admissions $151,151 $144,806 $ 65,147 $ 59,530
Concessions 64,422 60,703 27,837 24,968
Other 6,476 5,537 2,583 2,378
222,049 211,046 95,567 86,876
Costs of theatre operations
Film rentals 77,374 71,403 30,423 26,791
Concessions 12,328 12,055 4,694 4,852
Theatre operations and administrative
expenses 110,031 108,219 54,286 51,071
Depreciation and amortization 9,769 9,868 4,739 5,013
209,502 201,545 94,142 87,727
Corporate expenses 3,135 3,307 1,587 1,814
Operating earnings (loss) 9,412 6,194 (162) (2,665)
Investment income (loss) (1,363) (619) (1,602) 1,211
Interest expense (309) (299) (149) (180)
Gain (loss)on disposition of
theatre assets (493) (218) (447) 43
Earnings (loss) before income taxes 7,247 5,058 (2,360) (1,591)
Income tax benefit (expense) (2,971) (2,074) 968 652
Net earnings (loss) $ 4,276 $ 2,984 ($ 1,392) ($ 939)
Weighted average number of common
and common equivalent shares
outstanding 7,850 7,854 7,816 7,813
Net earnings (loss) per common share $ .54 $ .38 ($ .18) ($ .12)
See Notes to Condensed Consolidated Financial Statements.
2
GC COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Six Months
Ended April 30,
1996 1995
Cash flows from operating activities:
Net earnings $ 4,276 $ 2,984
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Loss on disposition of theatre assets 493 218
Loss from minority investments 3,145 2,877
Depreciation and amortization 9,769 9,868
Changes in current assets and liabilities:
Other current assets 2,182 2,002
Trade payables 3,766 (2,970)
Other current liabilities (5,275) (4,644)
Net cash provided by operating activities 18,356 10,335
Cash flows from investing activities:
Capital expenditures (8,112) (10,446)
Proceeds from the disposition of theatre assets 38 2,059
Proceeds from (purchase of) short-term investments 31,560 (17,778)
Investments - (11,091)
Other investing activities 28 (625)
Net cash provided (used) by investing activities 23,514 (37,881)
Net cash provided by financing activities 197 8
Net change in cash and cash equivalents 42,067 (27,538)
Cash and cash equivalents at beginning of period 35,999 85,021
Cash and cash equivalents at end of period $78,066 $57,483
See Notes to Condensed Consolidated Financial Statements.
3
GC COMPANIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of presentation
The condensed consolidated financial statements of GC Companies, Inc.
(the Company or GCC) are submitted in response to the requirements of
Form 10-Q and should be read in conjunction with the consolidated
financial statements included in the Company's Annual Report on Form 10-
K. In the opinion of management, these financial statements contain all
adjustments, consisting only of normal recurring accruals and as
described in note two below, necessary for a fair presentation of the
results for the interim periods presented. The Company's business is
seasonal in nature, and historically the results of operations for these
periods have not been indicative of the results for the full year.
2. Other assets
Included in other assets at April 30, 1996 were a $16.6 million
investment in a privately-held eyeglass retailer, a $13.4 million
investment in a limited partnership established to acquire cable
television system operators in Germany and an $11.8 million investment in
a radio group that owns radio stations in the San Francisco, Las Vegas
and Albuquerque markets. In April 1996, the Company recorded a $2.5
million pretax charge to write off its remaining investment in a
children's clothing retailer as a result of that company's continued cash
flow problems and operating losses.
During late April and early May 1996, the Company's radio group
investment entered into definitive agreements with four separate buyers
to sell all of its radio stations. GCC expects to realize aggregate
pretax gains of approximately $10.0 million upon completion of these
transactions and distribution of the related proceeds by the partnership.
The sales, which are subject to the approval of the Federal
Communications Commission, are expected to close by calendar year-end.
4
GC COMPANIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Six Months Ended April 30, 1996 Compared with Six Months Ended April 30, 1995
Theatre revenues - Total revenues increased 5.2% to $222.0 million in 1996
from $211.0 million in 1995. The increase in revenues was primarily
attributable to a 10.4% increase in comparable unit patronage, a 2.6% increase
in concession sales per patron and a 0.9% increase in average ticket price.
The increase in concession sales per patron was primarily due to increased
consumption and new product offerings.
Cost of theatre operations - Cost of theatre operations, including theatre
general and administrative expenses, increased 3.9% for the six months ended
April 30, 1996 to $209.5 million from $201.5 million in the same 1995 period.
The increase was primarily attributable to higher film and other variable
costs related to the increase in revenues. As a percentage of revenues, the
cost of theatre operations was 94.3% for the six months ended April 30, 1996
and 95.5% for the six months ended April 30, 1995. The improvement was
primarily a result of higher revenues during the 1996 period as well as
continued efforts to focus on cost containment. The Company operated 1,179
screens at April 30, 1996 compared to 1,180 at October 31, 1995 and 1,202 at
April 30, 1995.
Investment income (loss) - The Company recorded a net investment loss of $1.4
million for the six months ended April 30, 1996 compared to a net investment
loss of $0.6 million in the same 1995 period. The net investment loss for the
first half of 1996 included a first quarter pretax charge of $0.6 million to
record the Company's share of losses incurred by its radio group minority
investment, a $2.5 million second quarter pretax charge to write off its
remaining investment in a children's clothing retailer and pretax dividend and
interest income of $1.8 million. Net investment loss for the comparable 1995
period included a $2.9 million first quarter pretax charge to write off the
Company's investment in a food service company and pretax dividend and
interest income of $2.3 million. The decrease in dividend and interest income
in the 1996 period was due to a lower rate of return on portfolio assets.
Income tax expense - The Company's effective tax rate is expected to be 41.0%
in fiscal 1996, unchanged from fiscal 1995.
Three Months Ended April 30, 1996 Compared with Three Months Ended April 30,
1995
Theatre revenues - Total revenues increased 10.0% to $95.6 million in 1996
from $86.9 million in 1995. The higher revenues primarily resulted from an
11.8% increase in comparable unit patronage, a 2.8% increase in concession
sales per patron, and a 0.9% increase in average ticket price. The increase
in concession sales per patron was primarily due to increased consumption and
new product offerings.
Cost of theatre operations - Cost of theatre operations increased 7.3% for the
three months ended April 30, 1996 to $94.1 million from $87.7 million in the
comparable 1995 quarter. The increase was primarily attributable to higher
film and other variable costs related to the increase in revenues. As a
percentage of revenues, the cost of theatre operations was 98.5% for the
quarter ended April 30, 1996 and 101.0% for the three months ended April 30,
1995. The improvement was primarily a result of higher revenues during the
1996 period as well as continued efforts to focus on cost containment.
5
GC COMPANIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Investment income (loss)- Net investment loss for the three months ended April
30, 1996 included a pretax charge of $2.5 million to write off the Company's
remaining investment in a children's clothing retailer partially offset by
dividend and interest income of $0.9 million. Dividend and interest income of
$1.2 million was reported in the 1995 period.
Liquidity and Capital Resources
Virtually all of GCC's revenues are collected in cash, principally through
theatre admissions and concession sales. Because revenues are received in
cash prior to the payment of related expenses, the Company has historically
not required working capital to finance its growth or to meet its operating
requirements. Cash generated by the business in excess of that needed for
operations and capital expenditures will be available for investment.
The Company's investing activities primarily relate to the construction costs
for new theatres, the renovation of existing theatres and investing in other
companies. For the six months ended April 30, 1996, expenditures of $8.1
million were made primarily to fund improvements to existing theatres and
construction of new theatres. One new unit opened in December 1995 and two
new units are scheduled to open in the first quarter of fiscal 1997. Total
capital expenditures for the motion picture exhibition business are expected
to approximate $16.8 million during fiscal 1996.
The Company received proceeds of $31.6 million from the liquidation of certain
short-term investments during the first six months of fiscal 1996.
The Company has significant lease commitments. Lease payments for the full
fiscal year totaled $62.0 million in 1995 and are expected to approximate
$58.5 million in 1996.
The Company believes that cash generated from operations, cash and short-term
investments on hand, and the $50 million available under the Company's
revolving credit agreement, which expires in March 1997, will be sufficient to
fund operating requirements, capital expenditures and the Company's investment
activities for the foreseeable future.
6
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on March 12, 1996. The
following matters were voted upon at the meeting:
1. Election of the following individual as a Class II Director for
a term of three years:
Peter C. Read
For 7,141,578
Withheld 19,233
2. Ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the 1996 fiscal year.
For 7,150,902
Against 5,164
Abstain 4,745
Non-voting -
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11.1 Computation of weighted average number of shares
outstanding used in determining primary and fully diluted
earnings per share.
27.1 Financial data schedule.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the
quarter ended April 30, 1996.
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GC COMPANIES, INC.
Date: June 11, 1996 s/ Richard A. Smith
Richard A. Smith
Chairman of the Board of
Directors and Chief Executive Officer
Date: June 11, 1996 s/ Stephen C. Richards
Stephen C. Richards
Vice President and Controller
Principal Accounting Officer
8