Tags: Regal | expenses | sales | RGC

Regal Must Control Expenses, Up Sales

By    |   Tuesday, 08 Nov 2011 03:37 PM

Movie theater owner Regal Entertainment Group (RGC) fits the definition of a high-yield stock. Investors should keep an eye on how the company controls costs and increases attendance at the company's theaters.

Regal Entertainment is the largest national movie theater company. At the end of the 2011 third quarter, the screen count was 6,605 in 528 theaters located in 37 states plus the District of Columbia.

The major revenue sources are movie ticket and concession sales. Expenses include film rental expense, cost of concessions, rents and operating expenses. In the third quarter, the average movie ticket cost was $8.78 and average concession spending per person was $3.36

A couple of interesting items from the third quarter balance sheet: Concession revenues were $197 million against costs of $27 million. Serious popcorn profits! General and administrative expenses were the second-highest expense category after film rentals. The breakdown is undisclosed and investors should keep an eye on this number quarter to quarter.

For the 2011 third quarter, Regal Entertainment reported adjusted earnings of 19 cents per share on revenues of $515 million, up from 7 cents and $486 million. For the first nine months, net income was 39 cents, up from 35 cents in 2010.

Dividend support

Currently, Regal Entertainment is paying a 21 cent quarterly dividend. The net income amounts cited above make this level of payout seem unfeasible. However, the non-cash amortization and depreciation expense is currently about double the reported net income.

Cash flow seems sufficient to support the dividend. At the current share price, the dividend rate gives the stock a 6 percent yield.

Higher movie attendance is the key to increased revenues for Regal Entertainment, and that figure is dependent on the movies put out by Hollywood. Management appears to be controlling expenses with movie rental costs and other expenses dropped significantly for the first nine months of 2011.

Recently, analysts at Janney Montgomery Scott upgraded RGC to neutral from sell. Wunderlich Securities analysts reiterated a buy rating based on the sustainability of the current dividend rate.

The company next reports on Feb. 9.

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Movie theater owner Regal Entertainment Group (RGC) fits the definition of a high-yield stock. Investors should keep an eye on how the company controls costs and increases attendance at the company's theaters. Regal Entertainment is the largest national movie theater...
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2011-37-08
Tuesday, 08 Nov 2011 03:37 PM
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