**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

----

 

**FORM 10-K**

**ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EXCHANGE ACT OF 1934**

For the fiscal year ended**December28, 2006**

Commission file number:**033-49598**

**UNITED ARTISTS THEATRE CIRCUIT, INC.**

(Exact name of registrantas Specified in its Charter) 

| **Maryland**                                                     |   | **13-1424080**                                              |
|------------------------------------------------------------------|--------|-------------------------------------------------------------|
| (State or Other  Jurisdiction of  Incorporation or Organization) |   | (Internal  Revenue Service Employer  Identification Number) |

 

| **7132 Regal Lane**    |   | ** ** |
|------------------------|--------|------------|
| **Knoxville,  TN**     |   | ** ** |
| (Address of  Principal |   | **37918**  |
| Executive  Offices)    |   | (Zip Code) |

Registrant’s Telephone Number, Including Area Code: **865/922-1123**

----

 

Securitiesregistered pursuant to Section 12(b) of the Act: **None**

Securitiesregistered pursuant to Section 12(g) of the Act: **None**

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

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

Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes x  No o

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-Kis not contained herein, and will not be contained, to the best of theregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. x

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer or a non-accelerated filer. Seedefinition of “accelerated filer and larger accelerated filer” in Rule 12b-2 ofthe Exchange Act).(Check one):

| Large accelerated  filer o |   | Accelerated  filer o |   | Non-accelerated  filer x |
|---------------------------------|--------|---------------------------|--------|-------------------------------|

 

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

The registrant isa wholly owned subsidiary of Regal Entertainment Group. As of June 29, 2006,there were no shares of voting or non-voting common stock held bynon-affiliates of the registrant.

The registrantmeets the conditions set forth in General Instruction I(1)(a) and (b) of Form10-K and is therefore filing this form with the reduced disclosure formatpermitted by General Instruction I(2).

The number of shares outstanding of $1.00 par valuecommon stock at March 28, 2007 was 100 shares.

 

----

**TABLE OF CONTENTS**
| **PART I**   |       |                                                                                                                   |       |       |
|--------------|------------|------------------------------------------------------------------------------------------------------------------------|------------|------------|
| Item 1.      |       | Business                                                                                                               |       | 3          |
|         |       | The Company                                                                                                            |       | 3          |
|         |       | Description of Business                                                                                                |       | 4          |
|         |       | Industry  Overview and Trends                                                                                          |       | 4          |
|         |       | Theatre Operations                                                                                                     |       | 5          |
|         |       | Film Distribution                                                                                                      |       | 6          |
|         |       | Film Exhibition                                                                                                        |       | 7          |
|         |       | Concessions                                                                                                            |       | 7          |
|         |       | Competition                                                                                                            |       | 8          |
|         |       | Marketing  and Advertising                                                                                             |       | 8          |
|         |       | Management Information Systems                                                                                         |       | 8          |
|         |       | Seasonality                                                                                                            |       | 9          |
|         |       | Employees                                                                                                              |       | 9          |
|         |       | Regulation                                                                                                             |       | 9          |
| Item 1A.     |       | Risk Factors                                                                                                           |       | 10         |
| Item 1B.     |       | Unresolved Staff Comments                                                                                              |       | 12         |
| Item 2.      |       | Properties                                                                                                             |       | 12         |
| Item 3.      |       | Legal Proceedings                                                                                                      |       | 12         |
| Item 4.      |       | Submission of Matters to a Vote of Security Holders                                                                    |       | 12         |
| ** **   | ** ** | ** **                                                                                                             | ** ** | ** ** |
| **PART II**  | ** ** | ** **                                                                                                             | ** ** | ** ** |
| Item 5.      |       | Market for the Registrant’s Common Equity, Related  Stockholder Matters and Issuer Purchases of Equity Securities |       | 13         |
| Item 6.      |       | Selected Financial Data                                                                                                |       | 13         |
| Item 7.      |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                            |       | 13         |
|         |       | Overview and Basis of Presentation                                                                                     |       | 13         |
|         |       | Results of Operations                                                                                                  |       | 14         |
|         |       | Liquidity and Capital Resources                                                                                        |       | 21         |
|         |       | Contractual Cash Obligations and Commitments                                                                           |       | 22         |
|         |       | Critical  Accounting Estimates                                                                                         |       | 22         |
|         |       | Quarterly Results                                                                                                      |       | 24         |
|         |       | Inflation                                                                                                              |       | 25         |
|         |       | Seasonality                                                                                                            |       | 25         |
|         |       | Recent Accounting Pronouncements                                                                                       |       | 25         |
|         |       | Off-balance  Sheet Arrangements                                                                                        |       | 25         |
| Item 7A.     |       | Quantitative and Qualitative Disclosures About Market  Risk                                                            |       | 25         |
| Item 8.      |       | Financial Statements and Supplementary Data                                                                            |       | 26         |
| Item 9.      |       | Changes in and Disagreements with Accountants on  Accounting and Financial Disclosure                                  |       | 43         |
| Item 9A.     |       | Controls and Procedures                                                                                                |       | 43         |
| Item  9B.    |       | Other  Information                                                                                                     |       | 44         |
|         |       |                                                                                                                   |       |       |
| **PART III** |       |                                                                                                                   |       |       |
| Item 10.     |       | Directors, Executive Officers and Corporate Governance                                                                 |       | 44         |
| Item 11.     |       | Executive Compensation                                                                                                 |       | 44         |
| Item 12.     |       | Security Ownership of Certain Beneficial Owners and  Management and Related Stockholder Matters                        |       | 44         |
| Item 13.     |       | Certain Relationships and Related Transactions, and  Director Independence                                             |       | 44         |
| Item 14.     |       | Principal Accounting Fees and Services                                                                                 |       | 44         |
|         |       |                                                                                                                   |       |       |
| **PART IV**  |       |                                                                                                                   |       |       |
| Item 15.     |       | Exhibits, Financial Statement Schedules                                                                                |       | 45         |
|         |       |                                                                                                                   |       |       |
| Signatures   |       |                                                                                                                   |       | 48         |

 

----

 

**UNITEDARTISTS THEATRE CIRCUIT, INC.**

**PART I**

*Some of the information in this Form 10-Kincludes “forward-looking statements” within the meaning of Section 27A ofthe Securities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended. All statements other than statements ofhistorical facts included in this Form 10-K, including, withoutlimitation, certain statements under “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” and “Business” may constituteforward- looking statements.  In somecases 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 comparablewords.  These forward-looking statementsinvolve risks and uncertainties. Our actual results could differ materiallyfrom those indicated in these statements. The discussion and analysis of ourfinancial condition and results of operations found within “Management’sDiscussion and Analysis of Financial Condition and Results of Operation” shouldbe read in conjunction with the Audited Consolidated Financial Statements andNotes thereto included in Part II, Item8 of this Form 10-K.  The Company’sactual results may differ materially from the results discussed in theforward-looking statements.  Factors thatmight cause such a difference include those discussed in Item 1 and Item 1A aswell as those discussed elsewhere in this Form 10-K.*

**Item 1.**                          BUSINESS

**THE COMPANY**

United Artists Theatre Company (the “Parent” or “UnitedArtists”), a Delaware corporation organized in February 2002, is the parentcompany of United Artists Theatre Circuit, Inc. (“we,” “us,” “our,” the “Company”or “UATC”), a Maryland corporation organized in May 1926, and United ArtistsRealty Company (“UAR”), which is the parent company of United ArtistsProperties I Corp. (“Prop I”). UATC leases certain theatres from Prop I. Theterms UATC and the Company shall be deemed to include the respectivesubsidiaries of such entity when used in discussions included herein regardingthe current operations or assets of such entity.

United Artists became a wholly owned subsidiary ofRegal Entertainment Holdings, Inc. (“REH”) through a series of transactions in2002.  REH is a wholly owned subsidiaryof Regal Entertainment Group (“REG” or “Regal”) who acquired Regal CinemasCorporation (“Regal Cinemas”), United Artists, Edwards Theatres, Inc. (“Edwards”)and Regal CineMedia Corporation (“Regal CineMedia”) through a series oftransactions on April 12, 2002.  For adetailed discussion of the transactions resulting in Regal’s acquisition of itssubsidiaries, see Note 2 to the consolidated financial statements included inPart II, Item 8 of this Form 10-K.

On August 17, 2005, REH transferred the stock ofUnited Artists to Regal Cinemas, Inc. (“RCI”). As a result, United Artists andits subsidiaries became subsidiaries of RCI.

3

----

 

Our Internet address is www.uatc.com.  Our annualreports on Form 10-K, quarterly reports on Form 10-Q and current reports onForm 8-K, and any amendments to these reports, are available free of charge onour Internet website under the heading “Investor Relations” as soon asreasonably practicable after we electronically file such material with, orfurnish it to, the Securities and Exchange Commission.

The Company manages its business under one reportablesegment - theatre exhibition operations.

**DESCRIPTION OFBUSINESS**

As of December 28, 2006, UATC operates 653 screens in75 theatres in 19 states with over 23 million annual attendees.  The UATC theatres are managed by RCI, awholly owned subsidiary of Regal, pursuant to a management arrangementdescribed below.  The Company primarilyoperates multi-screen theatres and has an average of 8.7 screens per location.Theatre operations in seven states (California, New York, Florida, Maryland,Texas, Mississippi and Pennsylvania) accounted for approximately 66.7% and64.9% of UATC’s total theatres and screens, respectively, as of December 28,2006 and 75.3% of UATC’s theatrical revenue for the fiscal year ended December28, 2006.

The Company has historically upgraded its theatrecircuit by adding new screens and retrofitting existing theatres andstrategically closing and disposing of under-performing theatres. Approximately64.9% of the Company’s screens are in theatres with 10 or more screens.  As of December 28, 2006, UATC operates 24theatres (274 screens) which offer stadium seating, representing 42.0% of UATC’sscreens.  Virtually all of the theatresUATC has built or renovated since 1997 have been state-of-the-art, 9 to 16screen multiplex theatres with stadium seating, high-backed rocking seats,digital sound, expanded concession areas and other state-of-the-art designfeatures and amenities.  Thesestate-of-the-art amenities will be included in UATC’s renovations to existingtheatres.  As compared to the priorgeneration of non-stadium theatres, UATC believes that these theatres provide ahigher quality entertainment experience for patrons and significant operatingefficiencies and improved economics for UATC.

In connection with Regal’s acquisition of itssubsidiaries, as more fully described in Note 2 to the consolidated financialstatements included in Part II, Item 8 of this Form 10-K, a managementagreement was executed between RCI and UATC under which RCI manages all aspectsof the theatre operations of UATC and its subsidiaries and makes all businessdecisions on behalf of UATC. In certain markets where UATC operates theatres,RCI operates theatres.

**INDUSTRY OVERVIEWAND TRENDS**

The domestic motion picture exhibition industry is amature business that has historically maintained steady long-term growth inrevenues and attendance. Since 1965, total box office revenues have grown at acompound annual growth rate of approximately 6% with annual attendance ofapproximately 1.4 billion attendees in 2005.  Against this background of steady long-termgrowth in revenues and attendance, the exhibition industry has experiencedperiodic short-term increases and decreases in attendance and, consequently,box office revenues.  We expect thecyclical nature of the domestic motion picture exhibition industry to continuefor the foreseeable future.

Over the past decade, the domestic motion pictureexhibition industry experienced a period of extraordinary new theatreconstruction.  From 1996 to 1999, thenumber of screens increased at a compound annual growth rate of approximately8%, which was more than double the industry’s screen growth rate ofapproximately 3.5% from 1965 to 1995. This industry expansion was primarilydriven by major exhibitors upgrading their asset bases to an attractivemegaplex format, which typically includes 10 or more screens per theatre and featuressuch as stadium seating, improved projection quality and superior soundsystems.  Generally, a modern megaplex ispreferred by patrons over a sloped-floor multiplex theatre, the predominanttheatre-type built prior to 1996.  Webelieve theatres larger than the current 10 to 18 screen megaplex are not ableto generate attractive returns in most locations because of the substantialmarket suitability requirements to generate a level of profitability similar tothe current megaplex format.  We alsobelieve that another evolution of theatre formats beyond the current megaplexis unlikely to occur in the foreseeable future.

4

----

 

More recently, the domestic motion picture exhibitionindustry has experienced increased competition from other methods of deliveringfilms to consumers, including cable television, in-home video and DVD,satellite and pay-per-view services and downloads via the Internet.  Traditionally, when motion picturedistributors licensed their films to the domestic motion picture exhibition industry,they refrained from licensing their products to other delivery channels for aperiod of time, commonly called the theatrical release window.  Over the past several years, the averageperiod between a film’s theatrical release and its in-home video or DVD releasehas shortened.  We believe that thecontraction in the average theatrical release window reflects the shorterperiod of time in which the average motion picture is able to generatemeaningful revenue in its theatrical exhibition license period.  As a consequence, we believe that theshrinking of the theatrical release window over the past five to six years hasnot represented a material change in the studio/exhibition distribution model.  Fundamentally, we believe that movie-going isa convenient, affordable and attractively priced form of out-of-homeentertainment, which, on an average price per patron basis, continues tocompare favorably to other out-of-home entertainment alternatives, such asconcerts and sporting events.

We believe that a material contraction of thetheatrical release window could significantly dilute the consumer appeal of theout-of-home motion picture offering.  Asa result, we continue to monitor the status of the theatrical release windowduring our film exhibition decisions. Our discussions with several film studios lead us to believe that thesestudios continue to realize the value of maintaining meaningful theatricalrelease windows for both distribution and exhibition companies. Consequently,we believe a further material contraction in the theatrical release window isunlikely, but should such a contraction occur we believe that it couldsignificantly impact our business, financial condition and results ofoperations.

The domestic motion picture industry is in the earlystages of conversion from film-based media to electronic based media, includingthe distribution of feature films in a digital format rather than a 35 mmformat. There are a variety of constituencies associated with this anticipatedchange, which may significantly impact industry participants, including contentproviders, distributors, equipment providers and exhibitors. To that end,Regal, along with AMC Entertainment, Inc. (“AMC”) and Cinemark, Inc. (“Cinemark”),have entered into a joint venture company known as Digital CinemaImplementation Partners LLC, a Delaware limited liability company (“DCIP”), toexplore the possibility of implementing digital cinema in our theatres and tocreate a financing model and establish agreements with major motion picturestudios for the implementation of digital cinema. Future digital cinemadevelopments will be managed by DCIP, subject to the approval of Regal, AMC andCinemark.

**THEATRE OPERATIONS**

UATC operates 653 screens in 75 theatres in 19 statesas of December 28, 2006.  We primarilyoperate multi-screen theatres. Our multi-screen theatre complexes typicallyfeature auditoriums ranging from 100 to 500 seats each. As a result, ourtheatres appeal to a diverse group of patrons because we offer a wide selectionof films and convenient show times. In addition, many of our theatres featuremodern amenities such as wall-to-wall screens, digital stereo surround-sound,multi-station concessions stands, computerized ticketing systems, plush stadiumseating with cup holders and retractable armrests, neon-enhanced interiors andexteriors, and video game areas adjacent to the theatre lobby.

Our multi-screen theatres are designed to increaseprofitability by optimizing revenues per square foot and reducing the cost persquare foot of operation. We vary auditorium seating capacities within the sametheatre, allowing us to exhibit films on a more cost effective basis for alonger period of time by shifting films to smaller auditoriums to meet changingattendance levels. In addition, we realize significant operating efficienciesby having common box office, concessions, projection, lobby and restroomfacilities, which enables us to spread some of our costs, such as payroll,advertising and rent, over a higher revenue base. We stagger movie show timesto reduce staffing requirements and lobby congestion and to provide moredesirable parking and traffic flow patterns. We also actively monitor ticketsales in order to quickly recognize demand surges, which enables us to addseating capacity quickly and efficiently. In addition, we believe thatoperating a theatre circuit consisting primarily of multi-screen theatresenhances our ability to attract patrons. 

The following table details thenumber of locations and theatre screens in our theatre circuit ranked by thenumber of locations in each state as of December 28, 2006: 

5

----

 

| State          | ** ** | **Locations** | ** ** | **Number of Screens** | ** ** |
|----------------|------------|---------------|------------|---------------------------------|------------|
| New York       |       | 15            |       | 110                             |       |
| California     |       | 9             |       | 75                              |       |
| Mississippi    |       | 7             |       | 56                              |       |
| Texas          |       | 6             |       | 65                              |       |
| Florida        |       | 5             |       | 44                              |       |
| Pennsylvania   |       | 4             |       | 28                              |       |
| Maryland       |       | 4             |       | 46                              |       |
| North Carolina |       | 3             |       | 23                              |       |
| New Jersey     |       | 3             |       | 31                              |       |
| Louisiana      |       | 3             |       | 26                              |       |
| Colorado       |       | 3             |       | 28                              |       |
| Virginia       |       | 2             |       | 19                              |       |
| Nevada         |       | 2             |       | 18                              |       |
| Indiana        |       | 2             |       | 19                              |       |
| Arkansas       |       | 2             |       | 20                              |       |
| Arizona        |       | 2             |       | 21                              |       |
| Michigan       |       | 1             |       | 14                              |       |
| Massachusetts  |       | 1             |       | 6                               |       |
| Georgia        |       | 1             |       | 4                               |       |
| Total          |       | 75            |       | 653                             |       |

We have implemented best management practices acrossall of our theatres, including daily, weekly and monthly management reportsgenerated for each individual theatre, as well as maintaining activecommunication between the theatres, divisional management and corporatemanagement. We use these management reports and communications to closelymonitor admissions and concessions revenues as well as accounting, payroll andworkforce information necessary to manage our theatre operations effectivelyand efficiently.

We seek experienced theatre managers and require newtheatre managers to complete a comprehensive training program within thetheatres and at the “Regal Entertainment University,” which is held at ourcorporate office.  The program isdesigned to encompass all phases of theatre operations, including our operatingphilosophy, policies, procedures and standards. In addition, we have anincentive compensation program for theatre-level management that rewardstheatre managers for controlling operating expenses while complying with ouroperating standards.

In addition, we have implemented quality assuranceprograms in all of our theatres to maintain clean, comfortable and modernfacilities. To maintain quality and consistency within our theatre circuit,district and regional managers regularly inspect each theatre. We also operatea “mystery shopper” program, which involves unannounced visits by unidentifiedcustomers who report on the quality of service, film presentation and cleanlinessat individual theatres.

**FILM DISTRIBUTION**

Domestic movie theatres are the primary initialdistribution channel for domestic film releases. The theatrical success of afilm is often the most important factor in establishing its value in other filmdistribution channels. Motion pictures are generally made available throughseveral alternative distribution methods after the theatrical release date,including home video and DVD, cable television, broadcast television andsatellite and pay-per-view services. A strong opening run at the theatre canhelp establish a film’s success and substantiate the film’s revenuepotential.  For example, the value ofhome video, DVD and pay cable distribution agreements frequently depends on thesuccess of a film’s theatrical release. As the primary distribution mechanismfor the public’s evaluation of films, we believe that domestic theatricaldistribution remains the cornerstone of a film’s overall financial success.

The development of additional distribution channelshas given motion picture producers the ability to generate a greater portion ofa film’s revenues through channels other than its theatrical release.Historically, this

6

----

 

potentialfor increased revenue after a film’s initial theatrical release has enabled majorstudios and some independent producers to increase the budgets for filmproduction and advertising.

**FILM EXHIBITION**

***Evaluation of Film.***    Welicense films on a film-by-film and theatre-by-theatre basis by negotiatingdirectly with film distributors. Prior to negotiating for a film license, weevaluate the prospects for upcoming films. Criteria we consider for each filmmay include cast, producer, director, genre, budget, comparative filmperformances and various other market conditions. Successful licensing dependsgreatly upon the exhibitor’s knowledge of trends and historical filmpreferences of the residents in markets served by each theatre, as well as theavailability of commercially successful motion pictures.

***Access to Film Product.***    Filmsare licensed from film distributors owned by major film production companiesand from independent film distributors that distribute films for smallerproduction companies. Film distributors typically establish geographic filmlicensing zones and allocate each available film to one theatre within thatzone.

In film licensing zones where we are the soleexhibitor, we obtain film licenses by selecting a film from among those filmsbeing offered and negotiating directly with the distributor. In zones wherethere is competition, a distributor will allocate films among the exhibitors inthe zone. When films are licensed under the allocation process, a distributorwill select an exhibitor who then negotiates film rental terms directly withthe distributor.

***Film Rental Fees.***    Filmlicenses typically specify rental fees or formulas by which rental fees may becalculated.  The primary formulas usedare the “firm term” formula, a “review or settlement” formula and a “slidingscale” formula.  Under the firm termformula, the exhibitor and distributor agree prior to the exhibition of thefilm on a specified percentage of the box office receipts to be remitted to thedistributor.  Under the review orsettlement formula, the exhibitor and distributor negotiate a percentage of thebox office receipts to be remitted to the distributor upon completion of thetheatrical engagement.  These negotiations typically involve the use ofhistorical settlements or past precedent. Lastly, under a sliding scale formula, the distributor receives apercentage of the box office receipts using a pre-determined and mutuallyagreed upon film rental template.  This formula establishes film rentalpredicated on box office performance.

***Duration of Film Licenses.***    Theduration of our film licenses are negotiated with our distributors on acase-by-case basis. The terms of our license agreements depend on performanceof each film. Marketable movies that are expected to have high box officeadmission revenues will generally have longer license terms than movies withmore uncertain performance and popularity.

***Relationship with Distributors.***    Manydistributors provide quality first-run movies to the motion picture exhibitionindustry.  During fiscal 2006, ten majorfilm distributors accounted for 92% of the Company’s admissions revenues.  No single film distributor accounted for morethan 20% of fiscal 2006 admissions revenues. We license films from each of themajor distributors and believe that our relationships with these distributorsare excellent. From year to year, the revenues attributable to individualdistributors will vary widely depending upon the number and popularity of filmsthat each one distributes.

**CONCESSIONS**

In addition to box office admissions revenues, wegenerated approximately 27.4% of our total revenues from concessions salesduring fiscal 2006. We emphasize prominent and appealing concession stationsdesigned for rapid and efficient service. We continually seek to increaseconcessions sales by optimizing product mix, introducing special promotionsfrom time to time and offering employee training and incentive programs toup-sell and cross-sell products. We have favorable concession supply contractsand have developed an efficient concession purchasing and distribution supplychain. RCI, pursuant to its management agreement, negotiates directly withmanufacturers for many of our concession items to obtain competitive prices andto ensure adequate supplies.

7

----

 

**COMPETITION**

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

•                  abilityto secure films with favorable licensing terms;

•                  seatingcapacity, availability of stadium seating, location and reputation of theirtheatres;

•                  qualityof projection and sound systems at their theatres; and

•                  abilityand willingness to promote the films they are showing.

Our competitors vary substantially in size, from smallindependent exhibitors to large national chains. As a result, our theatres aresubject to varying degrees of competition in the regions in which they operate.Our competitors, including newly established motion picture exhibitors, maybuild new theatres or screens in areas in which we operate, which may result inincreased competition and excess capacity in those areas. If this occurs, itmay have an adverse effect on our business and results of operations.

We also compete with other motion picture distributionchannels, including home video and DVD, cable television, broadcast televisionand satellite and pay-per-view services. Other technologies such as video ondemand could also have an adverse effect on our business and results ofoperations.  Traditionally, when motionpicture distributors licensed their products to the domestic exhibitionindustry, they refrained from licensing their motion pictures to these otherdistribution channels for a period of time, commonly called the theatricalrelease window.  We believe that theshortening of the theatrical release window over the past five to six yearsdoes not represent a material change in the studio/exhibition distributionmodel.   However, we believe that amaterial contraction of the theatrical release window could significantlydilute the consumer appeal of the out-of-home motion picture offering.  As a result, we continue to monitor thestatus of the theatrical release window during our film exhibition decisions.   In addition, we compete for the public’sleisure time and disposable income with other forms of entertainment, includingsporting events, concerts, live theatre and restaurants.

**MARKETING ANDADVERTISING**

Currently, film distributors organize and financemultimedia advertising campaigns for major film releases. To market ourtheatres, we utilize advertisements, including radio advertising, and movieschedules published in newspapers and over the Internet informing our patronsof film selections and show times. Newspaper advertisements are typically displayedin a single grouping for all of our theatres located in a newspaper’scirculation area. In some of our markets we employ special marketing programsfor specific films and concessions items.

We participate in a frequent moviegoer loyalty programsponsored by REG, named the Regal Crown Club, in all of our markets. RegalCrown Club members are eligible for specified awards, such as concession items,based on purchases made at our participating theatres. In addition, we seek todevelop patron loyalty through a number of marketing programs such as freesummer children’s film series and cross-promotional ticket redemptions andpromotions within local communities. We currently offer these programs only inselected markets. We plan to use these programs in markets where we believepatron loyalty can be further enhanced, and we will continue to evaluate ourmarkets on a case-by-case basis to determine the suitability of these programsin individual regions.

**MANAGEMENTINFORMATION SYSTEMS**

We make extensive use of information technology (IT)for the management of our business, our theatres,

8

----

 

and otherrevenue generating operations. The revenue streams generated by attendance andconcession sales are fully supported by information systems to monitor cashflow and to detect fraud and inventory shrinkage. We have recently implementednew software and hardware solutions, which provide for enhanced capabilitiesand efficiency within our theatre operations. These solutions have enabled us to sell gift cards at most majorretailers, grocery stores and mass discounters and to redeem those gift cardsat our theatre box offices and concession stands.  We continue to expand our ability to selltickets remotely by using our Internet ticketing partner, fandango.com, and bydeploying self-service customer activated terminals (CATs) in appropriatetheatres. The CATs can sell tickets for current and future shows and providethe capability to retrieve tickets purchased through our Internet partner. Wecontinue to investigate and invest in IT technologies to improve services toour patrons and provide information to our management, allowing them to operatethe theatres efficiently.

Our scheduling systems support the coordinationneeded to properly allocate our auditoriums between film showings andmeetings and events, while also ensuring that movie audiences viewthe intended advertising and that revenue is allocated to the appropriatebusiness function. The scheduling systems also provide informationelectronically and automatically to the newspapers, which allows them topublish correct show starting times with approved advertising graphics. Thesales and attendance information developed by the theatre systems is useddirectly for film booking and settlement as well as being the primary source ofdata for our financial systems.

**SEASONALITY**

Our revenues are usually seasonal, coinciding with thetiming of releases of motion pictures by the major distributors. Generally,studios release the most marketable motion pictures during the summer and theholiday season.  The unexpected emergenceof a hit film during other periods can alter the traditional trend. The timingof movie releases can have a significant effect on our results of operations,and the results of one quarter are not necessarily indicative of results forthe next quarter or any other quarter. The seasonality of motion pictureexhibition, however, has become less pronounced as studios are releasing motionpictures somewhat more evenly throughout the year.

**EMPLOYEES**

As of February 19, 2007, we employed approximately2,349 persons.  Film projectionists atcertain of the Company’s theatres in the New York market are covered by twocollective bargaining agreements. The Company considers its employee relationsto be good.

**REGULATION**

The distribution of motion pictures is in large partregulated by federal and state antitrust laws and has been the subject ofnumerous antitrust cases. Consent decrees effectively require major filmdistributors to offer and license films to exhibitors, including us, on afilm-by-film and theatre-by-theatre basis. Consequently, exhibitors cannotassure themselves of a supply of films by entering into long-term arrangementswith major distributors, but must negotiate for licenses on a film-by-filmbasis.

Our theatres must comply with Title III of theAmericans with Disabilities Act of 1990 (the “ADA”) to the extent that suchproperties are “public accommodations” and/or “commercial facilities” asdefined by the ADA. Compliance with the ADA requires that public accommodations“reasonably accommodate” individuals with disabilities and that newconstruction or alterations made to “commercial facilities” conform toaccessibility guidelines unless “structurally impracticable” for newconstruction or technically infeasible for alterations. Non-compliance with theADA could result in the imposition of injunctive relief, fines, an award ofdamages to private litigants and additional capital expenditures to remedy suchnon-compliance.

We believe that we are in substantial compliance withall current applicable regulations relating to accommodations for the disabled.We intend to comply with future regulations in that regard and except as setforth in Note 8 to the consolidated financial statements included in Part II, Item8 of this Form 10-K, we do not currently anticipate that compliance willrequire us to expend substantial funds. Our theatre operations are also subjectto

9

----

 

federal,state and local laws governing such matters as wages, working conditions,citizenship and health and sanitation requirements.  We believe that we are in substantialcompliance with all of such laws.

**Item 1A.**                 RISK FACTORS

***Our substantiallease obligations could impair our financial condition.***

We have substantial lease obligations. For fiscal2006, our total rent expense was approximately $40.6 million. As ofDecember 28, 2006, we had total contractual cash obligations ofapproximately $346.5 million. For a detailed discussion of our contractualcash obligations and other commercial commitments over the next several years,refer to “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Contractual Cash Obligations and Commitments” provided inPart II, Item 7 of this Form 10-K below.

If we are unable to meet our lease obligations, wecould be forced to restructure our obligations and seek additional funding fromour Parent, a wholly owned subsidiary of Regal, or sell assets. We may beunable to restructure our obligations and obtain additional funding from our Parentor sell assets on satisfactory terms or at all. As a result, inability to meetour lease obligations could cause us to default on those obligations. Many ofour lease agreements contain restrictive covenants that limit our ability totake specific actions or require us not to allow specific events to occur andprescribe minimum financial maintenance requirements that we must meet. If weviolate those restrictive covenants or fail to meet the minimum financialrequirements contained in a lease, we would be in default under thatinstrument, which could, in turn, result in defaults under other leases. Anysuch defaults could materially impair our financial condition andliquidity.  In addition, UATC’s abilityto sell assets is restricted by the terms of the Participation Agreemententered into in connection with the 1995 sale and leaseback transactiondescribed in Note 6 to the consolidated financial statements included in PartII, Item 8 of this Form 10-K.

***Our theatresoperate in a competitive environment.***

The motion picture exhibition industry is fragmentedand highly competitive with no significant barriers to entry. Theatres operatedby national and regional circuits and by small independent exhibitors competewith our theatres, particularly with respect to film licensing, attractingpatrons and developing new theatre sites. Moviegoers are generally not brandconscious and usually choose a theatre based on its location, the films showingthere and its amenities.

Over the past decade, motion picture exhibitors havebeen upgrading their asset bases to an attractive megaplex format whichfeatures stadium seating, improved projection quality and superior soundsystems. Generally, stadium seating found in modern megaplex theatres ispreferred by patrons over slope-floored multiplex theatres, which were thepredominant theatre-type built prior to 1996. As of December 28, 2006,approximately 58% of our screens were located in theatres that aresloped-floored multiplex theatres. These theatres may be more vulnerable tocompetition than our modern megaplex theatres, and should other theatreoperators choose to build and operate modern megaplex theatres in thesemarkets, the performance of our theatres in these markets may be significantlyand negatively impacted. In addition, should other theatre operators return tothe aggressive building strategies undertaken in the late 1990’s, ourattendance, revenue and income from operations per screen could declinesubstantially.

***An increase in theuse of alternative film delivery methods may drive down movie theatreattendance and limit ticket prices.***

We also compete with other movie delivery vehicles,including cable television, downloads via the Internet, in-home video and DVD,satellite and pay-per-view services. Traditionally, when motion picturedistributors licensed their products to the domestic exhibition industry, theyrefrained from licensing their motion pictures to these other delivery vehiclesfor a period of time, commonly called the theatrical release window.  We believe that a material contraction of thecurrent theatrical release window could significantly dilute the consumer’sappeal of the in-theatre motion picture offering, which could have a materialadverse effect on our business and results of operations. We also compete forthe public’s leisure time and disposable income with other forms ofentertainment, including sporting events, concerts, live theatre andrestaurants.

10

----

 

***We depend on motionpicture production and performance.***

Our ability to operate successfully depends upon theavailability, diversity and appeal of motion pictures, our ability to licensemotion pictures and the performance of such motion pictures in our markets. Wemostly license first-run motion pictures, the success of which have increasinglydepended on the marketing efforts of the major studios. Poor performance of, orany disruption in the production of (including by reason of a strike) thesemotion pictures, or a reduction in the marketing efforts of the major studios,could hurt our business and results of operations. In addition, a change in thetype and breadth of movies offered by studios may adversely affect thedemographic base of moviegoers.

***We depend on ourrelationships with film distributors.***

The film distribution business is highly concentrated,with ten major film distributors accounting for 92% of our admissions revenuesduring fiscal 2006. Our business depends on maintaining good relations withthese distributors. In addition, we are dependent on our ability to negotiate commerciallyfavorable licensing terms for first-run films. A deterioration in ourrelationship with any of the ten major film distributors could affect ourability to negotiate film licenses on favorable terms or our ability to obtaincommercially successful films and, therefore, could hurt our business andresults of operations.

***No assurance of asupply of motion pictures.***

The distribution of motion pictures is in large partregulated by federal and state antitrust laws and has been the subject ofnumerous antitrust cases. Consent decrees resulting from those caseseffectively require major motion picture distributors to offer and licensefilms to exhibitors, including us, on a film-by-film and theatre-by-theatrebasis. Consequently, we cannot assure ourselves of a supply of motion picturesby entering into long-term arrangements with major distributors, but mustcompete for our licenses on a film-by-film and theatre-by-theatre basis.

***Development ofdigital technology may increase our capital expenses.***

The industry is in the early stages of conversion fromfilm-based media to electronic based media. There are a variety ofconstituencies associated with this anticipated change, which may significantlyimpact industry participants, including content providers, distributors,equipment providers and exhibitors. Should the conversion process rapidlyaccelerate and the major studios not finance the conversion as expected, we mayhave to raise additional capital to finance the conversion costs associatedwith this potential change. The additional capital necessary may not, however,be available to us on attractive terms, if at all. Furthermore, it isimpossible to accurately predict how the roles and allocation of costs(including operating costs) between various industry participants will changeif the industry changes from physical media to electronic media.

***We depend on oursenior management.***

Our success depends upon the retention of our seniormanagement, including Michael Campbell, our President and Chairman of the Board.We cannot assure you that we would be able to find qualified replacements forthe individuals who make up our senior management if their services were nolonger available. The loss of services of one or more members of our seniormanagement team could have a material adverse effect on our business, financialcondition and results of operations. We do not currently maintain key-man lifeinsurance for any of our employees. The loss of any member of senior managementcould adversely affect our ability to effectively pursue our business strategy.

***A prolongedeconomic downturn could materially affect our business by reducing consumerspending on movie attendance.***

We depend on consumers voluntarily spendingdiscretionary funds on leisure activities. Motion picture theatre attendancemay be affected by prolonged negative trends in the general economy thatadversely affect consumer spending, including such trends resulting fromterrorist attacks on, or wars or threatened wars involving, the United States.Any reduction in consumer confidence or disposable income in general may affectthe demand for

11

----

 

motionpictures or severely impact the motion picture production industry, which, inturn, could adversely affect our operations.

**Item 1B.**                 UNRESOLVED STAFFCOMMENTS

Not applicable

**Item 2.**                          PROPERTIES

As of December 28, 2006, we operated 73****of our theatres pursuant to lease agreements and owned theland and buildings for 2 theatres. For a December 28, 2006 list of thestates in which we operated theatres and the number of theatres and screensoperated in each such state, please see the chart under Part I, Item 1 of thisForm 10-K under the caption “Business—Theatre Operations” which is incorporatedherein by reference.  The majority of ourleased theatres are subject to lease agreements with original terms of20 years or more and, in most cases, renewal options for up to anadditional 10 years. These leases provide for minimum annual rentals andthe renewal options generally provide for rent increases. Some leases require,under specified conditions, further rental payments based on a percentage ofrevenues above specified amounts. A significant majority of the leases are netleases, which require us to pay the cost of insurance, taxes and a portion ofthe lessor’s operating costs.

Of the 75 owned and leased theatres, 1 theatre and twoscreens are held through a corporation that is owned 80% by UATC and onetheatre and nine screens is held by a corporation, owned 51% by UATC.  The remaining owned and leased theatres are helddirectly by UATC or its wholly owned subsidiaries.  Certain of our leasedtheatres are subject to sale and leaseback transactions, as further describedin Note 6 to the consolidated financial statements included in Part II, Item 8of this Form 10-K.

UATC also manages one theatre with one screen locatedin the United States and receives a monthly management fee based on apercentage of total revenues.

UATC leases the land, building and equipment in thetheatres owned by Prop I in accordance with a master affiliate lease.  TheProp I master lease expired in 2003 and UATC exercised its option to extend thelease for an additional ten years.

**Item 3.**                          LEGALPROCEEDINGS

Pursuant to General Instruction G(2) to Form 10-K andRule 12b-23 under the Securities Exchange Act of 1934, as amended, theinformation required to be furnished by us under this Part I, Item 3 (LegalProceedings) is incorporated by reference to the information contained in Note8 to the consolidated financial statements included in Part II, Item 8 of thisForm 10-K.

**Item 4.**                          SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

Under the reduced disclosure format permitted byGeneral Instruction I(2) of Form 10-K for wholly owned subsidiaries, theinformation otherwise required by this item has been omitted.

12

----

 

**PART II**

**Item 5.**                          MARKETFOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES

As of March 28, 2007,UATC’s common stock is held entirely by the Parent.  There is no established public trading marketfor the Company’s common stock. During 2004, UATC effected one cash dividendtotaling approximately $21.7 million to the Parent.  During 2005, UATC effected two cash dividendstotaling approximately $32.3 million to the Parent. UATC’s ability to paydividends is restricted by the terms of the Participation Agreement enteredinto in connection with the 1995 sale and leaseback transaction described inNote 6 to the consolidated financial statements included in Part II, Item 8 ofthis Form 10-K.

**Item 6.**                          SELECTEDFINANCIAL DATA

Under the reduced disclosure format permitted byGeneral Instruction I(2) of Form 10-K for wholly owned subsidiaries, theinformation otherwise required by this item has been omitted.

**Item 7.**                          MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

*This discussion summarizes the significant factorsaffecting the consolidated operating results, financial condition, liquidityand cash flows of UATC for the fiscal years December 28, 2006, December29, 2005 and December 30, 2004.**The following discussion and analysis should be read in conjunctionwith the consolidated financial statements of**UATC and the notes thereto included elsewhere inthis Form 10-K.*

***Overviewand Basis of Presentation***

As of December 28, 2006, UATC operates 653screens in 75 theatres in 19 states with over 23 million annual attendees.  The UATC operated theatres are managed byRCI, a wholly owned subsidiary of Regal, pursuant to a management arrangementdescribed below.  The Company primarilyoperates multi-screen theatres and has an average of 8.7 screens per location.Theatre operations in seven states (California, New York, Florida, Maryland,Texas, Mississippi and Pennsylvania) accounted for approximately 66.7% and64.9% of UATC’s total theatres and screens, respectively, as ofDecember 28, 2006 and 75.3% of UATC’s theatrical revenue for the fiscalyear ended December 28, 2006.

United Artists became a wholly owned subsidiary of REHthrough a series of transactions in 2002. REH is a wholly owned subsidiary of Regal who acquired Regal Cinemas,United Artists, Edwards and Regal CineMedia through a series of transactions onApril 12, 2002.  For a detaileddiscussion of the transactions resulting in Regal’s acquisition of itssubsidiaries, see Note 2 to the consolidated financial statements included inPart II, Item 8 of this Form 10-K. On August 17, 2005, REH transferred thestock of United Artists to RCI. As a result, United Artists and itssubsidiaries became subsidiaries of RCI.

The Company generates revenues primarily fromadmissions and concession sales. Additional revenues are generated by on-screenadvertisements, rental of theatres for business meetings, concerts and otherevents distributed on a live or pre-recorded basis provided by RCI pursuant toits management agreement with UATC (described in Note 5 to the consolidatedfinancial statements included in Part II, Item 8 of this Form 10-K), electronicvideo games located adjacent to the lobbies of certain of the Company’stheatres and vendor marketing programs. Film rental costs depend on a varietyof factors including the prospects of a film and the popularity of a film andsuch film rental costs generally increase as the admissions revenues generatedby a film increases. Because the Company purchases certain concession items,such as fountain drinks and popcorn, in bulk and not pre-packaged forindividual servings, the Company is able to improve its margins by negotiatingvolume discounts. Other operating expenses consist primarily of theatre laborand occupancy costs.

13

----

 

In order to provide a meaningful basis of comparingthe fiscal years ended December 28, 2006, December 29, 2005 and December30, 2004 for purposes of the following tables and discussion, the operatingresults for the fifty-two weeks ended December 28, 2006 (“Fiscal 2006Period”) are compared to the fifty-two weeks ended December 29, 2005 (“Fiscal2005 Period”) and the fifty-two weeks ended December 30, 2004 (“Fiscal 2004Period”).

For a summary of industry trends as well as other risksand uncertainties relevant to the Company, see “Business-Industry Overview andTrends” and “Risk Factors.”

**Results ofOperations**

The 2006 fiscal year was a solid year for the filmexhibition industry. Based on our review of industry sources, national boxoffice revenues were estimated to have increased by approximately 4.0% duringfiscal year 2006 in comparison to fiscal year 2005. The industry achieved theseresults with strong attendance from the breadth of the fiscal 2006 film slate,coupled with ticket price increases.

Our total revenue for the Fiscal 2006 Period was$238.3 million, consisting of $163.9 million of admissions revenues, $65.3million from concessions revenues and $9.1 million of other operating revenues,and represented a 5.6% decrease over total revenues of $252.5 million forthe Fiscal 2005 Period.

The decline in the Company’s operating results wasattributable to a 9.1% decrease in attendance resulting primarily from theclosure of 62 underperforming screens during the Fiscal 2006 Period and fromthe sale of 37 screens to another theatre operator in November 2005.  The decline in box office revenues waspartially offset by the growth in the overall industry box office and a 3.2%increase in the Fiscal 2006 Period average ticket prices per patron resultingfrom periodic pricing reviews conducted by the Company.  Such reviews include an analysis of variousfactors, including general inflationary trends and local market conditions.  During the Fiscal 2006 Period, we experiencedgrowth of 4.8% in average concession revenues per patron. The growth in averageconcession revenues per patron was primarily attributable to the success ofcertain family-oriented and concession-friendly films such as *Pirates of the Caribbean: Dead Man’s Chest, X-Men 3*and *Cars*exhibited during the Fiscal 2006 Period and periodicpricing reviews.

Income from operations increased $5.0 million, or90.9%, to $10.5 million for the Fiscal 2006 Period compared to$5.5 million in the Fiscal 2005 Period. The net increase in income from operations was primarily attributable tothe decrease in total operating expenses during the Fiscal 2006 Perioddescribed in further detail below, partially offset by the decline inattendance during the Fiscal 2006 Period, as described above. Net incomeincreased to $6.2 million in the Fiscal 2006 Period compared to net income of$3.3 million in the Fiscal 2005 Period. The increase in net income was primarily attributable to the increase inoperating income and the increase in interest income net, partially offset byan increase in income taxes during the Fiscal 2006 Period, as described infurther detail below.

We are optimistic regarding the 2007 film slate andshare the view of a number of film studio executives and analysts who believethe industry is poised to benefit from a year of solid box office performance.Evidenced by the film studios’ continued efforts to promote and market upcomingfilm releases, 2007 appears to be another year of high-profile releases such as*Spider-Man 3, Shrek the Third, Pirates ofthe Caribbean: At World’s End, Ocean’s Thirteen, Ratatouille, Harry Potter andthe Order of the Phoenix, The Bourne Ultimatum and Rush Hour 3.*

With respect tocapital expenditures, due in part to the timing of certain construction projects,we expect theatre capital expenditures to be in the range of $5.0 million to$10.0 million for fiscal 2007, primarily consisting of expansion of existingtheatre facilities, upgrades and replacements.

Overall for thefiscal 2007 year, we are forecasting a modest increase in attendance for theexhibition industry as a result of the upcoming high-profile film releasesdescribed above and modest increases in ticket prices and average concessionsper patron.  With respect to UATC, weexpect fiscal 2007 admission and concessions revenues to be supported by ourcontinued focus on efficient theatre operations, however, further closures ofunderperforming screens could offset increases in industry box office andconcessions per patron.  For anunderstanding of the significant factors that influenced our performance duringthe past three fiscal years, the

14

----

 

preceding and followingdiscussion should be read in conjunction with the consolidated financial statements and the notes theretopresented in this Form 10-K.

The following table sets forth the percentage of totalrevenues represented by certain items reflected in UATC’s consolidatedstatements of income for the Fiscal 2006 Period, the Fiscal 2005 Period and theFiscal 2004 Period: 
| ** **                                                                                                                                                                                                                     | ** ** | **Fiscal 2006 Period** | ** ** | **Fiscal 2005 Period** | ** ** | **Fiscal 2004 Period** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| Revenues:                                                                                                                                                                                                                      |       |                             |       |                             |       |                             |       |
| Admissions                                                                                                                                                                                                                     |       | 68.8                             | %          | 69.2                             | %          | 69.6                             | %          |
| Concessions                                                                                                                                                                                                                    |       | 27.4                             |       | 27.2                             |       | 27.1                             |       |
| Other operating revenues                                                                                                                                                                                                       |       | 3.8                              |       | 3.6                              |       | 3.3                              |       |
|                                                                                                                                                                                                                           |       |                             |       |                             |       |                             |       |
| Total revenues                                                                                                                                                                                                                 |       | 100.0                            |       | 100.0                            |       | 100.0                            |       |
| Operating  expenses:                                                                                                                                                                                                           |       |                             |       |                             |       |                             |       |
| Film rental and advertising costs                                                                                                                                                                                              |       | 35.2                             |       | 35.8                             |       | 36.0                             |       |
| Cost of concessions                                                                                                                                                                                                            |       | 4.1                              |       | 3.9                              |       | 4.0                              |       |
| Other operating expenses                                                                                                                                                                                                       |       | 41.5                             |       | 43.5                             |       | 41.5                             |       |
| Sale and leaseback rentals                                                                                                                                                                                                     |       | 6.3                              |       | 6.0                              |       | 5.3                              |       |
| General and administrative expenses (including  share-based compensation expense of $0.2 million, $2.3 million and $2.8  million for the Fiscal 2006 Period, the Fiscal 2005 Period and the Fiscal  2004 Period, respectively) |       | 3.1                              |       | 4.0                              |       | 4.0                              |       |
| Depreciation and amortization                                                                                                                                                                                                  |       | 4.9                              |       | 5.3                              |       | 4.7                              |       |
| Net loss (gain) on disposal and impairments of  operating assets                                                                                                                                                               |       | 0.5                              |       | (0.7                             | )          | 0.6                              |       |
| Net loss on lawsuit settlement                                                                                                                                                                                                 |       | —                           |       | —                           |       | 0.6                              |       |
|                                                                                                                                                                                                                           |       |                             |       |                             |       |                             |       |
| Total operating expenses                                                                                                                                                                                                       |       | 95.6                             |       | 97.8                             |       | 96.7                             |       |
|                                                                                                                                                                                                                           |       |                             |       |                             |       |                             |       |
| Income from  operations                                                                                                                                                                                                        |       | 4.4                              | %          | 2.2                              | %          | 3.3                              | %          |

***Total Revenues***

The following table summarizes revenues andrevenue-related data for the Fiscal 2006 Period, Fiscal 2005 Period and theFiscal 2004 Period (in millions, except averages):
| ** **                          | ** ** | **Fiscal 2006 Period** | ** ** | **Fiscal 2005 Period** | ** ** | **Fiscal 2004 Period** | ** ** |
|-------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| Admissions                          |       | $                                | 163.9      |                             | $          | 174.7                            |       | $ | 204.2 |   |
| Concessions                         |       | 65.3                             |       | 68.7                             |       | 79.5                             |       |
| Other operating  revenues           |       | 9.1                              |       | 9.1                              |       | 9.6                              |       |
|                                |       |                             |       |                             |       |                             |       |
| Total revenues                      |       | $                                | 238.3      |                             | $          | 252.5                            |       | $ | 293.3 |   |
|                                |       |                             |       |                             |       |                             |       |
| Attendance                          |       | 23.1                             |       | 25.4                             |       | 31.4                             |       |
| Average ticket  price (1)           |       | $                                | 7.10       |                             | $          | 6.88                             |       | $ | 6.50 |   |
| Average concessions per  patron (2) |       | $                                | 2.83       |                             | $          | 2.70                             |       | $ | 2.53 |   |

----

(1)             Calculated asadmissions revenue/attendance.

(2)             Calculatedas concessions revenue/attendance.

15

----

 

**Revenues**

*Admissions*

Total admissions revenues decreased $10.8 million, or6.2%, to $163.9 million, for the Fiscal 2006 Period from$174.7 million for the Fiscal 2005 Period. Our Fiscal 2006 Period box office results were unfavorably impacted by a9.1% decrease in attendance. The decrease in attendance during the Fiscal 2006Period compared to the Fiscal 2005 Period was primarily attributable to theclosure of 62 underperforming screens during the Fiscal 2006 Period and thesale of 37 screens to another theatre operator in November 2005. The decline inadmissions revenue was partially offset by the growth in the overall industrybox office and a 3.2% increase in the Fiscal 2006 Period average ticket pricesper patron resulting from periodic pricing reviews conducted by theCompany.  Such reviews include ananalysis of various factors, including general inflationary trends and localmarket conditions.

Total admissions revenues decreased $29.5 million, or 14.4%, to $174.7million for the Fiscal 2005 Period, from $204.2 million for the Fiscal 2004Period.  The Fiscal 2005 Period totaladmissions revenues were unfavorably impacted by a decrease in attendance ofapproximately 19.1%.  The decrease inattendance was primarily due to the closure of 100 underperforming screensduring the Fiscal 2005 Period and weaker film product exhibited during theFiscal 2005 Period.  Also, to alesser extent, the Fiscal 2005 Period admissions revenues were negativelyimpacted by the sale of 37 screens to another theatre operator in November2005.  The decline in total admissionsrevenues for the Fiscal 2005 Period was partially offset by a 5.8% increase inthe Fiscal 2005 Period average ticket prices per patron.  The increase in the Fiscal 2005 Periodaverage ticket price was primarily attributable to periodic pricing reviewsconducted by the Company, which includes analysis of various factors, includinggeneral inflationary trends and local market conditions.

*Concessions*

Total concessions revenues decreased$3.4 million, or 4.9%, to $65.3 million for the Fiscal 2006 Periodfrom $68.7 million for the Fiscal 2005 Period.  The decrease in concessions revenues in theFiscal 2006 Period compared to the Fiscal 2005 Period was primarily due to theaforementioned Fiscal 2006 Period decrease in attendance.   The decline in concessions revenue waspartially offset by a 4.8% increase in the Fiscal 2006 Period averageconcessions per patron, primarily attributable to changes in our concessionsproduct mix (including certain size changes) and increases in concessionprices.  In addition, the success ofcertain family-oriented and concession-friendly films such as *Pirates of the Caribbean: Dead Man’s Chest, X-Men 3 and Cars*benefitedconcession revenues for the Fiscal 2006 Period.

Total concessionsrevenues decreased $10.8 million, or 13.6%, to $68.7 million for theFiscal 2005 Period, from $79.5 million for the Fiscal 2004 Period.  The decrease in concessions revenues in theFiscal 2005 Period compared to the Fiscal 2004 Period was primarily due to a19.1% decrease in attendance, partially offset by a 6.7% increase in averageconcessions per patron.  The net increasein the Fiscal 2005 Period average concessions per patron was primarilyattributable to changes in our concessions product mix (including certainpricing and size changes) and the increased breadth of family-oriented andconcession-friendly film product exhibited during the Fiscal 2005 Period.

*OtherOperating Revenues*

Total other operating revenues were $9.1 million forthe Fiscal 2006 Period and for the Fiscal 2005 Period. Included in otheroperating revenues are on-screen and lobby advertising revenues, businessmeetings and concert event revenues, marketing revenues from certain of theCompany’s vendor marketing programs and game revenues.

16

----

 

Total otheroperating revenues decreased $0.5 million, or 5.2%, to $9.1 million for theFiscal 2005 Period, from $9.6 million for the Fiscal 2004 Period.  The decrease in other operating revenues inthe Fiscal  2005 Period compared to theFiscal 2004 Period was primarily due to the 19.1% decline in attendance duringthe Fiscal 2005 Period, partially offset by increases in revenues from our vendormarketing programs.

***Operating Expenses***

The following table summarizes certain operatingexpenses for the Fiscal 2006 Period, Fiscal 2005 Period and the Fiscal 2004Period (dollars in millions): 
| ****                                     | ** ** | **Fiscal 2006 Period** | ** ** | **Fiscal 2005 Period** | ** ** | **Fiscal 2004 Period** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                               | ** ** | **$**                            | ** ** | **% of  Revenues**          | ** ** | **$**                            | ** ** | **% of  Revenues** | ** ** | **$** | ** ** | **% of  Revenues** | ** ** |
| Film rental and  advertising costs (1)   |       | 83.9                             |       | 51.2                             |       | 90.4                             |       | 51.7 |   | 105.7 |   | 51.8 |   |
| Cost of  concessions (2)                 |       | 9.8                              |       | 15.0                             |       | 10.0                             |       | 14.6 |   | 11.8 |   | 14.8 |   |
| Other theatre  operating expenses (3)    |       | 98.9                             |       | 41.5                             |       | 109.8                            |       | 43.5 |   | 121.7 |   | 41.5 |   |
| Sale and leaseback  rentals (3)          |       | 15.0                             |       | 6.3                              |       | 15.1                             |       | 6.0 |   | 15.4 |   | 5.3 |   |
| General and  Administrative expenses (3) |       | 7.5                              |       | 3.1                              |       | 10.1                             |       | 4.0 |   | 11.8 |   | 4.0 |   |

----

(1)             Percentageof revenues calculated as a percentage of admissions revenues.

(2)             Percentageof revenues calculated as a percentage of concessions revenues.

(3)             Percentageof revenues calculated as a percentage of total revenues.

*Film Rental and Advertising Costs*

 During the Fiscal 2006 Period, film rental andadvertising costs as a percentage of admissions revenues decreased to 51.2% ascompared to 51.7% in the Fiscal 2005 Period. The decrease in film rental and advertising costs as a percentage of boxoffice revenues during the Fiscal 2006 Period compared to the Fiscal 2005Period was primarily the result of a higher percentage of box office revenuesgenerated from lower grossing films, coupled with higher film rental costsassociated with certain Fiscal 2005 Period films such as *Star Wars: Episode III— Revenge of the Sith*.

Film rental and advertisingcosts decreased $15.3 million, or 14.5%, to $90.4 million in the Fiscal 2005Period, from $105.7 million in the Fiscal 2004 Period.  During the Fiscal 2005 Period, filmrental and advertising costs as a percentage of admissions revenues decreasedto 51.7% as compared to 51.8% in the Fiscal 2004 Period.  The decreases in film rental and advertisingcosts during the Fiscal 2005 Period was a result of**lower film rental cost associated with the lacklusterperformance of certain Fiscal 2005 Period films, partially offset by higherfilm rental cost associated with certain Fiscal 2005 films such as *Star Wars: Episode III—Revenge of the Sith.*

*Cost ofConcessions*

Cost of concessions as a percentage of concessionsrevenues increased to 15.0% in the Fiscal 2006 Period as compared to 14.6% inthe Fiscal 2005 Period.  The increase inthe cost of concessions as a percentage of concession revenues during theFiscal 2006 Period compared to the Fiscal 2005 Period was primarily related toa greater percentage of lower margin concession items in the overall mix ofconcession product sold during the Fiscal 2006 Period as compared to the Fiscal2005 Period.

Cost of concessions decreased $1.8 million, or 15.3%,to $10.0 million in the Fiscal 2005 Period, from $11.8 million in the Fiscal2004 Period.  Cost of concessions as apercentage of concessions revenues decreased to 14.6% in the Fiscal 2005 Periodas compared to 14.8% in the Fiscal 2004 Period. The decrease in the cost ofconcessions as a percentage of concession revenues during the Fiscal 2005Period was primarily attributable to the mix of concession product.

*OtherTheatre Operating Expenses*

Other theatre operating expenses decreased $10.9million, or 9.9%, to $98.9 million for the Fiscal 2006

 

17

----

Period,from $109.8 million in the Fiscal 2005 Period. Other theatre operating expenses as a percentage of total revenuesdecreased to 41.5% in the Fiscal 2006 Period as compared to 43.5% in the Fiscal2005 Period. The decrease in other theatre operating expenses in the Fiscal2006 Period compared to the Fiscal 2005 Period was primarily attributable tothe closure of 62 underperforming screens during the Fiscal 2006 Period andfrom the sale of 37 screens to another theatre operator in November 2005.  The decrease in other theatre operatingexpenses as a percentage of total revenues in the Fiscal 2006 Period comparedto the Fiscal 2005 Period was due to a reduction of certain non-rent occupancycosts and certain other variable operating costs.

Other theatre operatingexpenses decreased $11.9 million, or 9.8%, to $109.8 million in the Fiscal 2005Period, from $121.7 million in the Fiscal 2004 Period.  Other theatre operating expenses as apercentage of total revenues increased to 43.5% in the Fiscal 2005 Period ascompared to 41.5% in the Fiscal 2004 Period. The decrease in total othertheatre operating expenses in the Fiscal 2005 Period was primarily attributableto the 19.1% decline in attendance during the Fiscal 2005 Period and decreasein certain non-rent occupancy costs and certain other operating costs.  The increase in other theatre operatingexpenses as a percentage of total revenues in the Fiscal 2005 Period wasprimarily attributable to decreasing revenues coupled with the fixed nature ofvarious theatre operating expenses.

*Sale and Leaseback Rentals*

Sale and leasebackexpenses decreased $0.1 million, or 0.7%, to $15.0 million for the Fiscal 2006Period, from $15.1 million for the Fiscal 2005 Period.  The decrease in sale and leaseback expensesduring the Fiscal 2006 Period compared to the Fiscal 2005 Period was due to adecrease in rent expense related to thesale of certain underperforming properties during the Fiscal 2006 Periodas further described in Note 6 to the consolidated financial statements includedin Part II, Item 8 of this Form 10-K.

Sale and leaseback expensesdecreased $0.3 million, or 1.9%, to $15.1 million during the Fiscal 2005Period, from $15.4 million in the Fiscal 2004 Period.  The decrease in sale and leaseback expensesin the Fiscal 2005 Period was due to a decrease in rent expense related to thesale of certain underperforming properties during the Fiscal 2005 Period asfurther described in Note 6 to the consolidated financial statements includedin Part II, Item 8 of this Form 10-K.

*General and Administrative Expenses*

General and administrative expenses decreased$2.6 million, or 25.7%, to $7.5 million during the Fiscal 2006Period, from $10.1 million in the Fiscal 2005 Period.  As a percentage of total revenues, generaland administrative expenses decreased to 3.1% in the Fiscal 2006 Period, from4.0% in the Fiscal 2005 Period.   Included in general and administrativeexpenses are management fees associated with the management agreement betweenRCI and UATC under which RCI manages the theatre operations of UATC.  The decrease in general and administrativeexpenses during the Fiscal 2006 Period compared to the Fiscal 2005 Period wasprimarily attributable to the reduction in share-based compensation expenseduring the Fiscal 2006 Period, as further described in Note 9 to theconsolidated financial statements included in Part II, Item 8 of this Form10-K, and to a lesser extent, the reduction in management fee costs incurredduring the Fiscal 2006 Period resulting from the decrease in total revenuesduring the Fiscal 2006 Period compared to the Fiscal 2005 Period.

General and administrativeexpenses decreased $1.7 million, or 14.4%, to $10.1 million during the Fiscal2005 Period, from $11.8 million in the Fiscal 2004 Period.  As a percentage of total revenues, generaland administrative expenses were approximately 4.0% for both the Fiscal 2005and Fiscal 2004 Periods.  The decrease ingeneral and administrative expenses during the Fiscal 2005 Period was primarilydue to the reduction in management fee costs incurred during the Fiscal 2005Period resulting from the decrease in total revenues during the Fiscal 2005Period compared to the Fiscal 2004 Period.

***Depreciationand Amortization***

Depreciation and amortization expense decreased $1.7 million,or 12.8%, to $11.6 million for the Fiscal 2006 Period, from$13.3 million for the Fiscal 2005 Period. The decrease in depreciation and amortization expense during the Fiscal2006 Period compared to the Fiscal 2005 Period was primarily due to the closureof 62

18

----

 

underperformingscreens during the Fiscal 2006 Period and the sale of 37 screens to anothertheatre operator in November 2005.

Depreciation and amortization decreased $0.4 million,or 2.9%, to $13.3 million in the Fiscal 2005 Period, from $13.7 million in theFiscal 2004 Period.  The decrease indepreciation and amortization during the Fiscal 2005 Period was primarily dueto the closure of 100 screens duringthe Fiscal 2005 Period.

***Incomefrom Operations***

Income from operations totaled approximately$10.5 million for the Fiscal 2006 Period, which represents an increase of$5.0 million, or 90.9%, from $5.5 million in the Fiscal 2005Period.  The net increase in income fromoperations during the Fiscal 2006 Period compared to the Fiscal 2005 Period wasprimarily attributable to the decrease in total operating expenses, partiallyoffset by a 5.6% decrease in total revenues for the Fiscal 2006 Period,described above and the increase in the net loss on disposal and impairment ofoperating assets during the Fiscal 2006 Period.

Income from operations totaled approximately $5.5million for the Fiscal 2005 Period, which represents a decrease of $4.1million, or 42.7%, from $ 9.6 million for the Fiscal 2004 Period.  The decrease in income from operations duringthe Fiscal 2005 Period was primarily attributable to the reduction in totalrevenues discussed above, partially offset by a decrease in total operatingexpenses, including a net gain on the disposal and impairment of operatingassets for the Fiscal 2005 Period.

***InterestExpense / Income, Net***

Net interest income increased $0.5 million to $0.6million for the Fiscal 2006 Period, from $0.1 million for the Fiscal 2005Period.  The increase in net interestincome during the Fiscal 2006 Period compared to the Fiscal 2005 Period wasprimarily due to the repayment of the mortgage associated with the sale of theland and building related to one theatre location in September 2005 and theinterest earned on the higher cash balance during the Fiscal 2006 Period.

Net interest income increased $0.7 million to $0.1million for the Fiscal 2005 Period.  Theincrease in net interest income during the Fiscal 2005 Period was primarily dueto the repayment of the mortgage associated with the sale of the land andbuilding related to one location and the increase in interest income during theFiscal 2005 Period.

***IncomeTaxes***

The provision for income taxes increased $2.3 million,or 92.0%, to $4.8 million for the Fiscal 2006 Period, from $2.5 million for theFiscal 2005 Period.  Accordingly, theeffective tax rate was 43.6% and 43.1% for the Fiscal 2006 and Fiscal 2005Periods, respectively.  The effective taxrate for each period reflects the impact of certain non-deductible expenses.

The provision for income taxes increased $0.2 million,or 8.7%, to $2.5 million for the Fiscal 2005 Period, from $2.3 million for theFiscal 2004 Period.  Accordingly, theeffective tax rate was 43.1% and 143.8% for the Fiscal 2005 and Fiscal 2004Periods, respectively.  The decrease inthe effective tax rate was primarily attributable to a nondeductible lossrecorded as a result of the purchase by UATC of a partnership interest in oneof its subsidiaries on March 29, 2004 as described in Note 1 to the consolidated financial statementsincluded in Part II, Item 8 of this Form 10-K, as well as certain othernondeductible expenses, including minority interest.

As discussed in Note 7 to the consolidatedfinancial statements included in Part II, Item 8 of this Form 10-K,during 2005, REG, the parent company of the consolidated tax group whichincludes activity of the Company, was notified that the Internal RevenueService (“IRS”) would examine its 2002 and 2003 federal income taxreturns.  In October 2005, theexamination of REG’s federal tax returns for such years was completed, andREG and the IRS agreed to certain adjustments to the years under audit.  Such adjustments did not have a materialimpact on the Company’s provision for income taxes.

19

----

 

***NetIncome (Loss)***

Net income totaled $6.2 million for the Fiscal2006 Period, which represents an increase of $2.9 million, from$3.3 million in the Fiscal 2005 Period. The increase in net income for the Fiscal 2006 Period compared to theFiscal 2005 Period was primarily attributable to the increase in operatingincome described above and the increase in interest income, partially offset byan increase in income taxes during the Fiscal 2006 Period.

Net income totaled $3.3 million for the Fiscal 2005Period, which represents an increase of $4.0 million from a net loss of ($0.7)million for the Fiscal 2004 Period.  Theincrease in net income for the Fiscal 2005 Period was primarily attributable tothe decreases in interest expense, minority interest expense and the Fiscal 2004Period expense related to the purchase of the partnership interests in one ofour subsidiaries included as a component of “Other net,” partially offset by anincrease in income taxes and the decrease in income from operations, asdiscussed above.

***CashFlows***

The following table summarizes certain cash flow datafor the Fiscal 2006 Period, Fiscal 2005 Period and Fiscal 2004 Period (dollarsin millions):
| ** **                                            | ** ** | **Fiscal 2006 Period** | ** ** | **Fiscal 2005 Period** | ** ** | **Fiscal 2004 Period** | ** ** |
|-------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| Net cash  provided by operating activities            |       | $                                | 16.1       |                             | $          | 19.5                             |       | $ | 32.8 |   |
| Net cash provided  by (used in) investing activities  |       | (4.1                             | )          | 9.5                              |       | (5.8                             | )          |
| Net cash used in  financing activities                |       | (3.8                             | )          | (33.0                            | )          | (13.3                            | )          |
| Net increase (decrease)  in cash and cash equivalents |       | 8.2                              |       | (4.0                             | )          | 13.7                             |       |
|                                                       |            |                                  |            |                                  |            |                                  |            |  |  |  |

*Fiscal 2006 Period Compared toFiscal 2005 Period*

Net cash flows provided by operating activities wereapproximately $16.1 million for the Fiscal 2006 Period, which represents adecrease of $3.4 million compared to $19.5 million in the Fiscal 2005Period. Fiscal 2006 Period net cash flows generated from operating activitieswere impacted by several factors including an approximate $2.7 milliondecrease in adjustments (primarily a decrease in depreciation expense, areduction in share-based compensation expense, a decrease in escalating rentand in deferred income tax expense, partially offset by an increase in minorityinterest expense and a greater loss on disposal and impairment of operatingassets) to reconcile net income to cash provided by operating activities and a$3.6 million reduction of changes in operating assets and liabilities,partially offset by a $2.9 million increase in net income contributed tothe net decrease in net cash provided by operating activities. The net decreasein the changes in operating assets and liabilities and other working capitalitems was primarily related to the timing of certain vendor payments and incometax payments (including a reclassification of excess tax benefits fromshare-based payment arrangements to cash flows used in financing activitiesdiscussed further in Note 9 to the consolidated financial statements includedin Part II, Item 8 of this Form 10-K) and decreases in prepaid expenses andother current assets, partially offset by an increase in certain accrued expensesand other liabilities.

Net cash flows used in investing activities totaledapproximately $4.1 million for the Fiscal 2006 Period compared to cashflows provided by investing activities of approximately $9.5 million for theFiscal 2005 Period.  The net decrease incash flows provided by investing activities during the Fiscal 2006 Period wasprimarily attributable to a decrease in proceeds from the disposition of assetsof $13.5 million and an increase in capital expenditures of $0.1 million duringthe Fiscal 2006 Period as compared the Fiscal 2005 Period.

20

----

 

Net cash flows used in financing activities wereapproximately $3.8 million for the Fiscal 2006 Period compared to cashflows used in financing activities of approximately $33.0 million for theFiscal 2005 Period. The net decrease in cash flows used in financing activitiesduring the Fiscal 2006 Period was primarily attributable to a decrease in cashdividends to the Parent of $32.3 million, a $2.7 million mortgage repaymentduring the Fiscal 2005 Period, fewer debt payments and the reclassification ofexcess tax benefits from share-based payment arrangements from cash flows fromoperating activities discussed further in Note 9 to the consolidated financialstatements included in Part II, Item 8 of this Form 10-K, partially offset bythe net increase in the change in the related party receivable of $7.4 millionduring the Fiscal 2006 Period as compared to the Fiscal 2005 Period, describedfurther in Note 5 to the consolidated financial statements included in Part II,Item 8 of this Form 10-K.

*Fiscal 2005 Period Compared to Fiscal 2004 Period*

Cash flows generated from operating activities wereapproximately $19.5 million for the Fiscal 2005 Period compared toapproximately $32.8 million for the Fiscal 2004 Period. Fiscal 2005 Period cashflows generated from operating activities were impacted by several factorsincluding a decrease in income from operations during the Fiscal 2005 Periodrelated to a reduction in total revenues, partially offset by decreases inoperating expenses including a net gain on the disposal and impairment ofoperating assets for the Fiscal 2005 Period. The $13.3 million net decrease in net cash provided by operatingactivities was attributable to a net decrease of $9.9 million in adjustments toreconcile net income to cash provided by operating activities and a netdecrease of $7.4 million in changes in operating assets and liabilities,partially offset a $4.0 million increase in net income.  Such adjustments included a decrease in depreciationand amortization of $0.4 million, a decrease in minority interest expense of$1.1 million, an increase in the net gain on the disposal and impairment ofoperating assets of $3.5 million and a loss of $7.4 million related to thepurchase of the partnership interests in one of the Company’s subsidiariesduring the Fiscal 2004 Period, partially offset by an increase of $1.9 millionin deferred income tax expense.  The netdecrease in the changes in operating assets and liabilities was primarilyrelated to the timing of certain vendor payments and income tax payments anddecreases in prepaid expenses and other current assets.

Cash flows provided by investing activities wereapproximately $9.5 million for the Fiscal 2005 Period compared to cash flowsused in investing activities of approximately $5.8 million for the Fiscal 2004Period.  The $15.3 million net increasein cash flows provided by investing activities was attributable to a $3.5million decrease in capital expenditures and a $4.7 million increase inproceeds from the disposition of assets during the Fiscal 2005 Period and $9.9million used to purchase the partnership interests in one of the Company’ssubsidiaries during the Fiscal 2004 Period, partially offset by $2.8 million inproceeds received from the sale of the Company’s interest in a limitedliability company during the Fiscal 2004 Period.

Cash flows used in financing activities wereapproximately $33.0 million for the Fiscal 2005 Period compared to cash flowsused in financing activities of approximately $13.3 million for the Fiscal 2004Period. The $19.7 million net increase in cash flows used in financingactivities was primarily attributable to the increase in cash dividends to theParent of $10.6 million and the $2.7 million mortgage repayment during theFiscal 2005 Period and the net decrease in the change in the related partyreceivable of $6.8 million during the Fiscal 2005 Period as compared to theFiscal 2004 Period, described in Note 5 to the consolidated financialstatements included in Part II, Item 8 of this Form 10-K.

***Liquidityand Capital Resources***

The Company’s revenues are generally collected in cashthrough admissions and concessions revenues. The Company’s operating expensesare primarily related to film and advertising costs, rent and occupancy, andpayroll. Film costs are ordinarily paid to distributors within 30 daysfollowing receipt of admissions revenues and the cost of the Company’sconcessions are generally paid to vendors approximately 30 days frompurchase.  The Company’s currentliabilities, however, generally include items that will become due withintwelve months and, as a result, at any given time, the Company’s balance sheetis likely to reflect a working capital deficit.

The Company funds the cost of its capital expendituresthrough internally generated cash flow and cash on hand. The Company’s capitalrequirements have historically arisen principally in connection with adding new

21

----

 

screensand retrofitting existing theatres, upgrading the Company’s theatre facilitiesand replacing equipment.  The Companycurrently expects capital expenditures for theatre expansion, upgrading andreplacements to be in the range of $5.0 million to $10.0 million in fiscal2007. During the Fiscal 2006 Period, the Company invested an aggregate ofapproximately $5.6 million in capital expenditures.

On October 11, 2005, UATC entered into a purchaseand sale agreement with Boardwalk Ventures, LLC (“Boardwalk”) to sell a totalof 5 theatres and 37 screens in Mississippi and Louisiana for cash in theamount of approximately $5.5 million. The disposition was completed onNovember 4, 2005.

**Contractual CashObligations and Commitments**

The Company primarily leases its theatres pursuant tolong-term non-cancelable operating leases, including leases that are subject tosale and leaseback transactions, as further described in Note 6 to theconsolidated financial statements included in Part II, Item 8 of this Form10-K.  Other than operating leases whichare detailed below, the Company does not utilize variable interest entities orany other form of off-balance sheet financing. As of December 28, 2006, the Company’s estimated contractual cashobligations over the next several periods are as follows (dollars in millions):
| ** **                                         | ** ** | **Payments Due By Period** | ** ** |
|----------------------------------------------------|------------|-------------------------------------------|------------|
| **Contractual cash obligations**         | ** ** | **Total**                                 | ** ** | **Current** | ** ** | **13-36 Months** | ** ** | **37-60 Months** | ** ** | **After 60 Months** | ** ** |
| Capital lease  obligations, including interest (1) |       | $                                         | 3.3        |   | $ | 0.3 |   | $ | 0.7 |   | $ | 0.7 |   | $ | 1.6 |   |
| Operating leases  (2)                              |       | 343.2                                     |       | 39.2 |   | 78.7 |   | 71.5 |   | 153.8 |   |
| Total contractual cash  obligations                |       | $                                         | 346.5      |   | $ | 39.5 |   | $ | 79.4 |   | $ | 72.2 |   | $ | 155.4 |   |

----

(1)             Thepresent value of these obligations, excluding interest, is included on ourconsolidated balance sheet as of December 28, 2006.  Future interest payments are calculated basedon interest rates implicit in the underlying leases, which have an interestrate of 10.0%, maturing in 2016. Refer to Note 4 to the consolidated financialstatements included in Part II, Item 8of this Form 10-K for additional information about our capital leaseobligations.

(2)             Weenter into operating leases in the normal course of business.  Such lease agreements provide us with theoption to renew the leases at defined or then fair value rental rates forvarious periods.  Our future operatinglease obligations would change if we exercised these renewal options or if weenter into additional operating lease agreements.  Our operating lease obligations are furtherdescribed in Note 6 to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

We believe that the amount of cash and cashequivalents on hand and cash flow expected from operations will be adequate forthe Company to execute its business strategy and meet anticipated requirementsfor lease obligations, capital expenditures, working capital and debt servicefor the next 12 months.

***Sale-LeasebackTransactions***

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

**CriticalAccounting Estimates**

Our consolidated financial statements are prepared inconformity with accounting principles generally accepted in the United Statesof America, which require management to make estimates and assumptions thataffect the reported amounts of the assets and liabilities and disclosures ofcontingent assets and liabilities as of the date of the balance sheet as wellas the reported amounts of revenues and expenses during the reporting period.We routinely make estimates and judgments about the carrying value of ourassets and liabilities that are not readily apparent from other sources. Weevaluate and modify on an ongoing basis such estimates and assumptions, whichinclude those related to film costs, property and equipment, goodwill andincome taxes as well as others discussed in Note 3 to the consolidatedfinancial statements included in Part II, Item 8 of this Form 10-K. Estimatesand assumptions are based on historical and other factors believed to bereasonable under the circumstances. The results of these estimates may form thebasis of the carrying value of certain assets and liabilities. Actual results,under

 

22

----

conditionsand circumstances different from those assumed, may differ materially fromestimates. The impact and any associated risks related to estimates,assumptions, and accounting policies are discussed within “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”, aswell as in the notes to the consolidated financial statements, if applicable,where such estimates, assumptions, and accounting policies affect our reportedand expected results. Management has discussed the development and selection ofits critical accounting estimates with the audit committee of our Board ofDirectors and the audit committee has reviewed our related disclosures herein.

We believe the following accounting policies arecritical to our business operations and the understanding of our results ofoperations and affect the more significant judgments and estimates used in thepreparation of our consolidated financial statements:

·                  Statement of Financial AccountingStandards (SFAS) No. 142, “Goodwill and Other Intangible Assets” specifies thatgoodwill and indefinite-lived intangible assets will be subject to an annualimpairment assessment. Based on our annual impairment assessment conductedduring fiscal 2006, fiscal 2005 and fiscal 2004, we were not required to recorda charge for goodwill impairment. In assessing the recoverability of thegoodwill, we must make various assumptions regarding estimated future cashflows and other factors in determining the fair values of the respectiveassets. If these estimates or their related assumptions change in the future,we may be required to record impairment charges for these assets in futureperiods.

·                  We estimate our film cost expense andrelated film cost payable based on management’s best estimate of the ultimatesettlement of the film costs with the distributors. Generally, less thanone-third of our quarterly film expense is estimated at period-end. The lengthof time until these costs are known with certainty depends on the ultimateduration of the film play, but is typically “settled” within two to threemonths of a particular film’s opening release. Upon settlement with our filmdistributors, film cost expense and the related film cost payable are adjustedto the final film settlement. Such adjustments have been historicallyinsignificant. Actual film costs and film costs payable could differ materiallyfrom those estimates. For the fiscal years ended December 28, 2006,December 29, 2005 and December 30, 2004, there were no significant changesin our film cost estimation and settlement procedures.

·                  We depreciate and amortize thecomponents of our property and equipment relating to both owned and leasedtheatres on a straight-line basis over the shorter of the lease term or theestimated useful lives of the assets. Each owned theatre consists of a buildingstructure, structural improvements, seating and concession and film displayequipment. While we have assigned an estimated useful life of less than30 years to certain acquired facilities, we estimate that our newlyconstructed buildings generally have an average economic useful life to us of30 years. Certain of our buildings have been in existence for more than 40years. With respect to equipment (e.g., concession stand, point-of-saleequipment, etc.), a substantial portion is depreciated over seven years orless, which has been our historical replacement period. Seats and projectionequipment generally have a longer useful economic life, and their depreciablelives (12-15 years) are based on our experience and replacement practices.The estimates of the assets’ useful lives require our judgment and ourknowledge of the assets being depreciated and amortized. Further, we review theeconomic useful lives of such assets annually and make adjustments thereto asnecessary. Actual economic lives may differ materially from these estimates.

The majority of our properties were appraised as part of the bankruptcyprocess. Such appraisals supported the estimated lives being used fordepreciation and amortization purposes. Furthermore, our analysis of ourhistorical capital replacement program is consistent with our depreciationpolicies. Finally, we review long-lived assets for impairment whenever eventsor changes in circumstances indicate that the carrying amounts of the assetsmay not be fully recoverable. Such analysis generally evaluates assets forimpairment on an individual theatre basis. When the estimated futureundiscounted cash flows of the operations to which the assets relate do notexceed the carrying value of the assets, such assets are written down to fairvalue. Our experience

23

----

 

indicates that theatre properties become impaired primarily due tomarket or competitive factors rather than physical (wear and tear) orfunctional (inadequacy or obsolescence) factors. In this regard, we do notbelieve the frequency or volume of facilities impaired due to these marketfactors are significant enough to impact the useful lives used for depreciationperiods.

For the fiscal years ended December 28, 2006, December 29, 2005 andDecember 30, 2004, no significant changes have been made to thedepreciation and amortization rates applied to operating assets, the underlyingassumptions related to estimates of depreciation and amortization, or themethodology applied. For the fiscal year ended December 28, 2006, consolidateddepreciation and amortization expense was $11.6 million, representing 4.9%of consolidated total revenues. If the estimated lives of all assets beingdepreciated were increased by one year, the consolidated depreciation andamortization expense would have decreased by approximately $0.9 million or7.8%. If the estimated lives of all assets being depreciated were decreased byone year, the consolidated depreciation and amortization expense would have increasedby approximately $1.1 million or 9.5%.

·                  Income taxes are accounted for underthe asset and liability method. Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences betweenthe financial statement carrying amounts of existing assets and liabilities andtheir respective tax bases as well as operating loss and tax creditcarryforwards based on their probable tax treatment. Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxableincome in the years in which those temporary differences are expected to berecovered or settled. The effect on deferred tax assets and liabilities of achange in tax rates is recognized in income in the period that includes theenactment date. We record a valuation allowance if it is deemed more likelythan not that our deferred income tax assets will not be realized. We reassessthe need for such valuation allowance on an ongoing basis. An increase in thevaluation allowance generally results in an increase in the provision forincome taxes recorded in such period. With the exception of valuationallowances recorded relative to pre-acquisition periods, decreases in thevaluation allowance generally result in a decrease in the provision for incometaxes. Should we ultimately realize a benefit from tax assets in excess of theamount recorded that relates to pre-acquisition periods, goodwill would bereduced to the extent of such excess or recorded goodwill, as appropriate.

Additionally, income tax rules and regulations are subject tointerpretation and require judgment by us and may be challenged by the taxauthorities. Accordingly, although we believe that our tax return positions arefully supportable, we establish accruals relative to tax uncertainties that wedeem to be probable of loss and that can be reasonably estimated. Such accrualsare evaluated on an ongoing basis as part of our process for determining ourprovision for income taxes. Among other items deemed relevant by us, theevaluations are based on new legislation, other new technical guidance,judicial proceedings, and our specific circumstances, including the progress oftax audits. With the exception of certain changes in pre-acquisition taxuncertainties, any change in the balance of an accrual established relative toa tax uncertainty impacts the provision for income taxes in the period that theadjustment is made to the accrual.

For the fiscal year ended December 28, 2006, our provision for incometaxes was $4.8 million. Changes in management’s estimates and assumptionsregarding the probability that certain tax return positions will be sustained,the enacted tax rate applied to deferred tax assets and liabilities, theability to realize the value of deferred tax assets, or the timing of thereversal of tax basis differences could impact the provision for income taxesand change the effective tax rate.  A onepercentage point change in the effective tax rate from 43.6% to 44.6% wouldhave increased the current year income tax provision by approximately $0.1million.

**Quarterly Results**

The following tables set forth selected unauditedquarterly results for the eight quarters ended December 28, 2006. The quarterlyfinancial data as of each period presented below have been derived from UATC’sunaudited

24

----

 

consolidatedfinancial statements for those periods. Results for these periods are notnecessarily indicative of results for the full year. The quarterly financialdata should be read in conjunction with the consolidated financial statementsof UATC and notes thereto included elsewhere in this Form 10-K. 
| **(In millions)**      | ** ** | **Dec. 28,  2006** | ** ** | **Sept. 28,  2006** | ** ** | **June 29,  2006** | ** ** | **March 30,  2006** | ** ** | **Dec. 29,  2005** | ** ** | **Sept. 29,  2005** | ** ** | **June 30,  2005** | ** ** | **March 31,  2005** | ** ** |
|-----------------------------|------------|-------------------------|------------|--------------------------|------------|-------------------------|------------|--------------------------|------------|-------------------------|------------|--------------------------|------------|-------------------------|------------|--------------------------|------------|
| **Total  revenues**         |       | $                       | 57.7       |                     | $          | 61.6                    |       | $                        | 63.2       |                    | $          | 55.8                     |       | $                       | 62.0       |                     | $          | 63.1 |   | $ | 64.9 |   | $ | 62.5 |   |
| **Income  from operations** |       | 2.9                     |       | 2.3                      |       | 3.8                     |       | 1.5                      |       | 3.2                     |       | 1.5                      |       | —                  |       | 0.8                      |       |
| **Net income**              |       | 1.4                     |       | 1.5                      |       | 2.4                     |       | 0.9                      |       | 2.1                     |       | 0.7                      |       | —                  |       | 0.5                      |       |
|                             |            |                         |            |                          |            |                         |            |                          |            |                         |            |                          |            |                         |            |                          |            |  |  |  |  |  |  |  |  |

 

**Inflation**

The Company does not believe that inflation has had amaterial impact on its financial position or results of operations.

**Seasonality**

The Company’s revenues are usually seasonal,coinciding with the timing of releases of motion pictures by the majordistributors. Generally, studios release the most marketable motion picturesduring the summer and the holiday seasons. The unexpected emergence of a “hit”film during other periods can alter the traditional pattern. The timing ofmovie releases can have a significant effect on the Company’s results ofoperations, and the results of one quarter are not necessarily indicative ofthe results for the next or any other quarter. The seasonality of motionpicture exhibition, however, has become less pronounced as studios arereleasing motion pictures somewhat more evenly throughout the year.

**Recent AccountingPronouncements**

Fora discussion of the recent accounting pronouncements relevant to ouroperations, please refer to the information provided under Note 3 to theconsolidated financial statementsincluded in Part II, Item 8 of this Form 10-K, which information is incorporated herein by reference.

**Off-Balance SheetArrangements**

Otherthan the operating leases detailed above under “Contractual Cash Obligationsand Commitments,” the Company has no other off-balance sheet arrangements.

**Item 7A.**                 QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK

UATC’s market risk is confined to interest rateexposure of its debt obligations that bear interest based on floatingrates.  As of December 28, 2006, theCompany maintained no debt obligations bearing floating interest rates.

25

----

 

**Item 8.**                          FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA

**REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM**

The Board of DirectorsUnited Artists Theatre Circuit,Inc:

We have audited theaccompanying consolidated balance sheets of United Artists Theatre Circuit,Inc. and subsidiaries as of December 28, 2006 and December 29, 2005, and therelated consolidated statements of operations, stockholders’ equity andcomprehensive income, and cash flows for each of the years in the three-yearperiod ended December 28, 2006. These consolidated  financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion onthese consolidated financial statements based on our audits.

We conducted our audits inaccordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes consideration of internal control overfinancial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of United Artists Theatre Circuit,Inc. and subsidiaries as of December 28, 2006 and December 29, 2005, and theresults of their operations and their cash flows for each of the years in thethree-year period ended December 28, 2006, in conformity with U.S. generallyaccepted accounting principles.

As discussed in Notes 2 and 9to the consolidated financial statements, effective December 30, 2005, theCompany adopted the fair value method of accounting for stock-based compensationas required by Statement of Financial Accounting Standards No. 123(revised), *Share-Based Payment*.

 

Nashville, TennesseeMarch 28, 2007

26

----

 

**UNITED ARTISTSTHEATRE CIRCUIT, INC.AND SUBSIDIARIES**

Consolidated Balance Sheets

(Amounts in millions, except share data)
| **Assets**                                                                                                                                                 | ** ** | **December 28, 2006** | ** ** | **December 29, 2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Current assets:                                                                                                                                            |       |                            |       |                            |       |
| Cash and cash  equivalents                                                                                                                                 |       | $                               | 39.7       |                            | $          | 31.5 |   |
| Receivables, net                                                                                                                                           |       | 2.0                             |       | 1.0                             |       |
| Prepaid  expenses, concession inventory and other current assets                                                                                           |       | 1.1                             |       | 0.9                             |       |
| Deferred income  tax asset                                                                                                                                 |       | —                          |       | 0.1                             |       |
| Total current assets                                                                                                                                       |       | 42.8                            |       | 33.5                            |       |
| Property and equipment:                                                                                                                                    |       |                            |       |                            |       |
| Land                                                                                                                                                       |       | 3.3                             |       | 3.3                             |       |
| Buildings,  leasehold improvements and equipment                                                                                                           |       | 134.2                           |       | 134.5                           |       |
| Total property and  equipment                                                                                                                              |       | 137.5                           |       | 137.8                           |       |
| Accumulated  depreciation and amortization                                                                                                                 |       | (63.9                           | )          | (56.2                           | )          |
| Total property and  equipment, net                                                                                                                         |       | 73.6                            |       | 81.6                            |       |
| Goodwill                                                                                                                                                   |       | 36.4                            |       | 36.4                            |       |
| Investments and related  receivables                                                                                                                       |       | 0.2                             |       | 0.2                             |       |
| Other non-current assets                                                                                                                                   |       | 0.3                             |       | 0.5                             |       |
| Total assets                                                                                                                                               |       | $                               | 153.3      |                            | $          | 152.2 |   |
| **Liabilities and Stockholder’s  Equity**                                                                                                             | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Current liabilities:                                                                                                                                       |       |                            |       |                            |       |
| Accounts payable                                                                                                                                           |       | $                               | 11.4       |                            | $          | 15.6 |   |
| Accrued expenses                                                                                                                                           |       | 7.4                             |       | 7.1                             |       |
| Deferred income  tax liability                                                                                                                             |       | 0.5                             |       | —                          |       |
| Current portion  of debt obligations                                                                                                                       |       | 0.1                             |       | 0.1                             |       |
| Total current  liabilities                                                                                                                                 |       | 19.4                            |       | 22.8                            |       |
| Other non-current  liabilities                                                                                                                             |       | 3.2                             |       | 3.4                             |       |
| Long-term debt                                                                                                                                             |       | 2.0                             |       | 2.2                             |       |
| Deferred income tax  liability                                                                                                                             |       | 52.3                            |       | 50.3                            |       |
| Total liabilities                                                                                                                                          |       | 76.9                            |       | 78.7                            |       |
| Minority interest                                                                                                                                          |       | 1.9                             |       | 1.8                             |       |
|                                                                                                                                                       |       |                            |       |                            |       |
| Stockholder’s equity                                                                                                                                  | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Preferred stock,  $1.00 par value; 5,000,000 shares authorized, no shares issued and  outstanding at December 28, 2006 and December 29, 2005, respectively |       | —                          |       | —                          |       |
| Common stock,  $1.00 par value; 1,000 shares authorized, 100 shares issued and outstanding  at December 28, 2006 and December 29, 2005, respectively       |       | —                          |       | —                          |       |
| Additional  paid-in capital                                                                                                                                |       | 92.8                            |       | 92.0                            |       |
| Unamortized  deferred stock compensation                                                                                                                   |       | —                          |       | (0.8                            | )          |
| Retained  earnings                                                                                                                                         |       | 6.9                             |       | 0.7                             |       |
| Related party  receivables                                                                                                                                 |       | (25.2                           | )          | (20.2                           | )          |
| Total stockholder’s equity                                                                                                                            |       | 74.5                            |       | 71.7                            |       |
| Total liabilities and stockholder’s equity                                                                                                            |       | $                               | 153.3      |                            | $          | 152.2 |   |

 

See accompanying notes to consolidated financialstatements.

27

----

 

**UNITED ARTISTSTHEATRE CIRCUIT, INC.AND SUBSIDIARIES**

Consolidated Statements ofOperations

(Amounts in Millions)
| ** **                                                                                                                                                                                                                      | ** ** | **Year Ended  December 28, 2006** | ** ** | **Year Ended  December 29, 2005** | ** ** | **Year Ended  December 30, 2004** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Revenues:                                                                                                                                                                                                                       |       |                                             |       |                                             |       |                                             |       |
| Admissions                                                                                                                                                                                                                      |       | $                                                | 163.9      |                                             | $          | 174.7                                            |       | $ | 204.2 |   |
| Concessions                                                                                                                                                                                                                     |       | 65.3                                             |       | 68.7                                             |       | 79.5                                             |       |
| Other operating  revenue                                                                                                                                                                                                        |       | 9.1                                              |       | 9.1                                              |       | 9.6                                              |       |
| Total revenue                                                                                                                                                                                                                   |       | 238.3                                            |       | 252.5                                            |       | 293.3                                            |       |
| Operating expenses:                                                                                                                                                                                                             |       |                                             |       |                                             |       |                                             |       |
| Film rental and  advertising costs                                                                                                                                                                                              |       | 83.9                                             |       | 90.4                                             |       | 105.7                                            |       |
| Cost of  concessions                                                                                                                                                                                                            |       | 9.8                                              |       | 10.0                                             |       | 11.8                                             |       |
| Other operating  expenses                                                                                                                                                                                                       |       | 98.9                                             |       | 109.8                                            |       | 121.7                                            |       |
| Sale and  leaseback rentals                                                                                                                                                                                                     |       | 15.0                                             |       | 15.1                                             |       | 15.4                                             |       |
| General and  administrative expenses (including share-based compensation expense of $0.2  million, $2.3 million and $2.8 million for the years ended December 28, 2006,  December 29, 2005 and December 30, 2004, respectively) |       | 7.5                                              |       | 10.1                                             |       | 11.8                                             |       |
| Depreciation and  amortization                                                                                                                                                                                                  |       | 11.6                                             |       | 13.3                                             |       | 13.7                                             |       |
| Net loss (gain)  on disposal and impairment of operating assets                                                                                                                                                                 |       | 1.1                                              |       | (1.7                                             | )          | 1.8                                              |       |
| Net loss on  lawsuit settlement                                                                                                                                                                                                 |       | —                                           |       | —                                           |       | 1.8                                              |       |
| Total operating  expenses                                                                                                                                                                                                       |       | 227.8                                            |       | 247.0                                            |       | 283.7                                            |       |
| Income from operations                                                                                                                                                                                                          |       | 10.5                                             |       | 5.5                                              |       | 9.6                                              |       |
| Other expense (income):                                                                                                                                                                                                         |       |                                             |       |                                             |       |                                             |       |
| Interest expense  (income), net                                                                                                                                                                                                 |       | (0.6                                             | )          | (0.1                                             | )          | 0.6                                              |       |
| Minority  interest in earnings (loss) of consolidated subsidiaries                                                                                                                                                              |       | 0.1                                              |       | (0.2                                             | )          | 0.9                                              |       |
| Other, net                                                                                                                                                                                                                      |       | —                                           |       | —                                           |       | 6.5                                              |       |
| Total other expense  (income), net                                                                                                                                                                                              |       | (0.5                                             | )          | (0.3                                             | )          | 8.0                                              |       |
| Income before income  taxes                                                                                                                                                                                                     |       | 11.0                                             |       | 5.8                                              |       | 1.6                                              |       |
| Provision for income  taxes                                                                                                                                                                                                     |       | 4.8                                              |       | 2.5                                              |       | 2.3                                              |       |
| Net income (loss)                                                                                                                                                                                                               |       | $                                                | 6.2        |                                             | $          | 3.3                                              |       | $ | (0.7 | ) |

 

See accompanying notes to consolidated financialstatements.

28

----

 

**UNITED ARTISTSTHEATRE CIRCUIT, INC.AND SUBSIDIARIES**

ConsolidatedStatements of Stockholder’s Equity and Comprehensive Income (Loss)(Amounts in Millions)

 
| ** **                                   | ** ** | **Preferred  stock** | ** ** | **Common  stock** | ** ** | **Additional  paid-in  capital** | ** ** | **Deferred  stock  compensation** | ** ** | **Retained  earnings/  (accumulated  deficit)** | ** ** | **Intercompany  and  Related  party  receivable** | ** ** | **Total  stockholder’s  equity** | ** ** |
|----------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------------------------|------------|-----------------------------------|------------|-------------------------------------------------|------------|---------------------------------------------------|------------|---------------------------------------|------------|
| Balances at January 1,  2004                 |       | $                    | —     |              | $          | —                           |       | $                                 | 130.3      |                                            | $          | (5.9                                              | )          | $                                     | 9.3        |   | $ | (31.8 | ) | $ | 101.9 |   |
| Net loss and  comprehensive loss             |       | —               |       | —            |       | —                           |       | —                            |       | (0.7                                            | )          | —                                            |       | (0.7                                  | )          |
| Dividend to Parent                           |       | —               |       | —            |       | (10.5                            | )          | —                            |       | (11.2                                           | )          | —                                            |       | (21.7                                 | )          |
| Amortization of deferred  stock compensation |       | —               |       | —            |       | —                           |       | 2.8                               |       | —                                          |       | —                                            |       | 2.8                                   |       |
| Tax benefit from  exercise of stock options  |       | —               |       | —            |       | 3.3                              |       | —                            |       | —                                          |       | —                                            |       | 3.3                                   |       |
| Change in related party  receivable          |       | —               |       | —            |       | —                           |       | —                            |       | —                                          |       | 9.2                                               |       | 9.2                                   |       |
| Sale of certain theatre  assets to UATG      |       | —               |       | —            |       | (2.3                             | )          | —                            |       | —                                          |       | —                                            |       | (2.3                                  | )          |
| Balances at December 30,  2004               |       | —               |       | —            |       | 120.8                            |       | (3.1                              | )          | (2.6                                            | )          | (22.6                                             | )          | 92.5                                  |       |
| Net income and  comprehensive income         |       | —               |       | —            |       | —                           |       | —                            |       | 3.3                                             |       | —                                            |       | 3.3                                   |       |
| Dividends to Parent                          |       | —               |       | —            |       | (32.3                            | )          | —                            |       | —                                          |       | —                                            |       | (32.3                                 | )          |
| Amortization of deferred  stock compensation |       | —               |       | —            |       | —                           |       | 2.3                               |       | —                                          |       | —                                            |       | 2.3                                   |       |
| Tax benefit from  exercise of stock options  |       | —               |       | —            |       | 3.5                              |       | —                            |       | —                                          |       | —                                            |       | 3.5                                   |       |
| Change in related party  receivable          |       | —               |       | —            |       | —                           |       | —                            |       | —                                          |       | 2.4                                               |       | 2.4                                   |       |
| Balances at December 29,  2005               |       | —               |       | —            |       | 92.0                             |       | (0.8                              | )          | 0.7                                             |       | (20.2                                             | )          | 71.7                                  |       |
| Net income and  comprehensive income         |       | —               |       | —            |       | —                           |       | —                            |       | 6.2                                             |       | —                                            |       | 6.2                                   |       |
| Adoption of SFAS No.  123R                   |       | —               |       | —            |       | (0.8                             | )          | 0.8                               |       | —                                          |       | —                                            |       | —                                |       |
| Share-based compensation  expense            |       | —               |       | —            |       | 0.2                              |       | —                            |       | —                                          |       | —                                            |       | 0.2                                   |       |
| Tax benefit from  exercise of stock options  |       | —               |       | —            |       | 1.4                              |       | —                            |       | —                                          |       | —                                            |       | 1.4                                   |       |
| Change in related party  receivables         |       | —               |       | —            |       | —                           |       | —                            |       | —                                          |       | (5.0                                              | )          | (5.0                                  | )          |
| Balances at December 28, 2006                |       | $                    | —     |              | $          | —                           |       | $                                 | 92.8       |                                            | $          | —                                            |       | $                                     | 6.9        |   | $ | (25.2 | ) | $ | 74.5 |   |

 

See accompanying notes to consolidated financialstatements.

29

----

**UNITED ARTISTSTHEATRE CIRCUIT, INC.AND SUBSIDIARIES**

Consolidated Statements of Cash Flows(Amounts in Millions)
| ** **                                                                                            | ** ** | **Year ended  December 28, 2006** | ** ** | **Year ended  December 29, 2005** | ** ** | **Year ended  December 30, 2004** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Cash flow from  operating activities:                                                                 |       |                                             |       |                                             |       |                                             |       |
| Net income (loss)                                                                                     |       | $                                                | 6.2        |                                             | $          | 3.3                                              |       | $ | (0.7 | ) |
| Adjustments to  reconcile net income (loss) to cash provided by operating activities:                 |       |                                             |       |                                             |       |                                             |       |
| Effect of leases  with escalating minimum annual rentals                                              |       | (0.1                                             | )          | 0.2                                              |       | —                                           |       |
| Depreciation and  amortization                                                                        |       | 11.6                                             |       | 13.3                                             |       | 13.7                                             |       |
| Share-based  compensation expense                                                                     |       | 0.2                                              |       | 2.3                                              |       | 2.8                                              |       |
| Net loss (gain)  on disposal and impairment of operating assets                                       |       | 1.1                                              |       | (1.7                                             | )          | 1.8                                              |       |
| Gain on sale of  LLC interest                                                                         |       | —                                           |       | —                                           |       | (0.9                                             | )          |
| Loss on purchase  of partnership interests                                                            |       | —                                           |       | —                                           |       | 7.4                                              |       |
| Minority  interest in earnings (loss) of consolidated subsidiaries                                    |       | 0.1                                              |       | (0.2                                             | )          | 0.9                                              |       |
| Deferred income  tax expense                                                                          |       | 3.1                                              |       | 4.8                                              |       | 2.9                                              |       |
| Change in  operating assets and liabilities (excluding effects of acquisition and and  dispositions): |       |                                             |       |                                             |       |                                             |       |
| Receivables                                                                                           |       | (1.0                                             | )          | (0.2                                             | )          | —                                           |       |
| Prepaid expenses  and concession inventory                                                            |       | (0.2                                             | )          | 4.4                                              |       | 0.3                                              |       |
| Other assets                                                                                          |       | 0.2                                              |       | 0.4                                              |       | 0.8                                              |       |
| Accounts payable                                                                                      |       | (4.2                                             | )          | (0.5                                             | )          | (7.8                                             | )          |
| Accrued expenses  and other liabilities                                                               |       | (0.9                                             | )          | (6.6                                             | )          | 11.6                                             |       |
| Net cash provided by  operating activities                                                            |       | 16.1                                             |       | 19.5                                             |       | 32.8                                             |       |
| Cash flow from  investing activities:                                                                 |       |                                             |       |                                             |       |                                             |       |
| Capital  expenditures                                                                                 |       | (5.6                                             | )          | (5.5                                             | )          | (9.0                                             | )          |
| Proceeds from  disposition of fixed assets, net                                                       |       | 1.5                                              |       | 15.0                                             |       | 10.3                                             |       |
| Cash used to  purchase partnership interests                                                          |       | —                                           |       | —                                           |       | (9.9                                             | )          |
| Proceeds from  the disposition of partnership interest                                                |       | —                                           |       | —                                           |       | 2.8                                              |       |
| Net cash provided by  (used in) investing activities                                                  |       | (4.1                                             | )          | 9.5                                              |       | (5.8                                             | )          |
| Cash flow from  financing activities:                                                                 |       |                                             |       |                                             |       |                                             |       |
| Debt payments                                                                                         |       | (0.2                                             | )          | (0.4                                             | )          | (0.5                                             | )          |
| Decrease  (increase) in related party receivables                                                     |       | (5.0                                             | )          | 2.4                                              |       | 9.2                                              |       |
| Payment of  mortgage                                                                                  |       | —                                           |       | (2.7                                             | )          | —                                           |       |
| Dividend to  Parent                                                                                   |       | —                                           |       | (32.3                                            | )          | (21.7                                            | )          |
| Other, net                                                                                            |       | —                                           |       | —                                           |       | (0.3                                             | )          |
| Excess tax  benefit from share-based payment arrangements                                             |       | 1.4                                              |       | —                                           |       | —                                           |       |
| Net cash used in  financing activities                                                                |       | (3.8                                             | )          | (33.0                                            | )          | (13.3                                            | )          |
| Net increase (decrease)  in cash and cash equivalents                                                 |       | 8.2                                              |       | (4.0                                             | )          | 13.7                                             |       |
| Cash and cash  equivalents:                                                                           |       |                                             |       |                                             |       |                                             |       |
| Beginning of  period                                                                                  |       | 31.5                                             |       | 35.5                                             |       | 21.8                                             |       |
| End of period                                                                                         |       | $                                                | 39.7       |                                             | $          | 31.5                                             |       | $ | 35.5 |   |
|                                                                                                  |       |                                             |       |                                             |       |                                             |       |
| Supplemental cash flow  information:                                                                  |       |                                             |       |                                             |       |                                             |       |
| Cash paid for  interest                                                                               |       | $                                                | 0.1        |                                             | $          | 0.2                                              |       | $ | 0.4 |   |
| Cash paid for income  taxes                                                                           |       | $                                                | 0.5        |                                             | $          | 0.3                                              |       | $ | 3.6 |   |

 

See accompanying notes to consolidated financialstatements.

30

----

**UNITED ARTISTSTHEATRE CIRCUIT, INC.AND SUBSIDIARIESNotes to Consolidated Financial StatementsDecember 28, 2006**

**(1) TheCompany and Basis of Presentation**

United Artists Theatre Company (the “Parent” or “United Artists”), aDelaware corporation, is the parent company of United Artists Theatre Circuit,Inc. (“we,” “us,” “our,” the “Company” or “UATC”) and United Artists RealtyCompany (“UAR”), which is the parent company of United Artists Properties ICorp. (“Prop I”).  UATC leases certaintheatres from Prop I.  The terms UATC andthe Company shall be deemed to include the respective subsidiaries of suchentity when used in discussions included herein regarding the currentoperations or assets of such entity.

The accompanying consolidated financial statements include the accountsof the Company and those of all majority owned subsidiaries.  All significant intercompany accounts andtransactions have been eliminated in consolidation.

UATC operates 653 screens in 75 theatres in 19 states as of December28, 2006. As of December 29, 2005, UATC operated 715 screens in 85 theatres in19 states. The Company formally operates on a 52-week fiscal year with eachquarter generally consisting of 13 weeks, unless otherwise noted.  The Company’s fiscal year ends on the firstThursday after December 25, which in certain years results in a 53-week fiscalyear.

The Company became a subsidiary of Regal Entertainment Group (“REG” or “Regal”)on April 12, 2002, in conjunction with an exchange transaction in which REG,through its wholly owned subsidiary Regal Entertainment Holdings, Inc. (“REH”),also acquired Edwards Theatres, Inc. (“Edwards”), Regal Cinemas Corporation (“RegalCinemas”) and Regal CineMedia Corporation (“Regal CineMedia”). REG iscontrolled by the Anschutz Company (“Anschutz”), which indirectly controlledeach of us, Edwards, Regal Cinemas, United Artists and Regal CineMedia prior toREG’s acquisition of us and them in the exchange transaction. For a detaileddiscussion of the transactions resulting in Regal’s acquisition of itssubsidiaries, see Note 2 to the consolidated financial statements.  On August 17, 2005, REH transferred the stockof United Artists to Regal Cinemas, Inc. (“RCI”).  As a result, United Artists and itssubsidiaries became subsidiaries of RCI.

In connection with Regal’s acquisition of its subsidiaries, RCI, anindirect subsidiary of Regal, agreed to manage all aspects of the theatreoperations of UATC and its subsidiaries and make all business decisions onbehalf of UATC pursuant to a management agreement.  In certain markets where UATC operatestheatres, RCI also operates theatres.

On March 29, 2004 and June 30, 2004, UATC acquired the remainingpartnership interest of two of the partners in one of its subsidiaries for anaggregate purchase price of $9.9 million, which resulted in a loss of $7.4million.  The loss was recorded in theaccompanying consolidated statement of operations as a component of “Other net.”In addition, on June 30, 2004, UATC sold its interest in a limited liabilitycompany for $2.8 million, which resulted in a gain of $0.9 million.  The gain was recorded in the accompanyingconsolidated statement of operations as a component of “Other net.”

On October 11, 2005, UATC entered into a purchaseand sale agreement with Boardwalk Ventures, LLC (“Boardwalk”) to sell a totalof 5 theatres and 37 screens in Mississippi and Louisiana for cash in theamount of approximately $5.5 million. The disposition was completed onNovember 4, 2005.

**(2)     Formationof Regal Entertainment Group**

*ExchangeTransaction*

On March 8, 2002, Anschutz entered into anagreement to exchange its controlling interest in United Artists for commonstock of Regal, resulting in Regal being the majority shareholder of UnitedArtists. Anschutz

31

----

 

alsoexchanged its ownership interests in two other theatre companies for commonstock of Regal.  The management of thesethree theatre companies was combined, with management of the theatre operationsbased in Knoxville, Tennessee, while management of certain ancillary businesseswas based in Centennial, Colorado.  Asdescribed below, the exchange transaction was consummated on April 12,2002.

On April 12, 2002, through a series oftransactions, Regal issued (1) 70,538,017 shares of Class B commonstock to Anschutz in exchange for its controlling equity interests in RegalCinemas, United Artists, Edwards and Regal CineMedia, (2) 14,052,320shares of Class B common stock to OCM Principal Opportunities Fund II,L.P. and its subsidiaries (“Oaktree’s Principal Activities Group”) in exchangefor its contribution of capital stock of Regal Cinemas and Edwards and(3) 27,493,575 shares of Class A common stock to the otherstockholders of Regal Cinemas, United Artists, Edwards and Regal CineMediaparty to an exchange agreement in exchange for their capital stock of RegalCinemas, United Artists, Edwards and Regal CineMedia.

Upon the closing of the exchange transaction, theholders of outstanding options of United Artists received replacement optionsto purchase 2,287,552 shares of Regal Class A common stock at pricesranging from $4.44 to $12.87 per share. Regal also granted to certain holdersof United Artists warrants in exchange for their contribution to Regal ofoutstanding warrants to purchase 3,750,000 shares of United Artists’ commonstock, warrants to purchase 3,928,185 shares of Regal Class B common stockat $8.88 per share and warrants to purchase 296,129 shares of RegalClass A common stock at $8.88 per share. Following the exchange transaction, Anschutz transferred beneficialownership of 1,455,183 shares of Class B common stock to Oaktree’sPrincipal Activities Group. In addition, Anschutz acquired an additional697,620 shares of Class B common stock in May 2002.

Anschutz controls approximately 79.0% of the combinedvoting power of Regal’s outstanding common stock and, therefore, has theability to direct the election of members of Regal’s board of directors and todetermine the outcome of other matters submitted to the vote of Regal’sstockholders. Because Anschutz controls Regal, the Company’s Parent and solestockholder, it has the ability to control the Company.

*InitialPublic Offering of Regal Entertainment Group*

In May 2002, REG issued 18.0 million shares of itsClass A common stock in an initial public offering at a price of $19.00 pershare, receiving aggregate net offering proceeds, net of underwritingdiscounts, commissions and other offering expenses, of $314.8 million.  A portion of the proceeds from this offeringwere used to repay UATC’s term bank credit facility, which was replaced by anote payable to the Parent, which was obligated under a substantially similarnote payable to Regal.

On August 16, 2002, REH, a wholly owned subsidiary ofRegal, acquired the remaining outstanding shares of common stock of United Artistsheld by the United Artists’ minority stockholders and warrants to acquireshares of common stock of United Artists held by various institutional holdersfor approximately $34.0 million. Immediately prior to the acquisition, the common stock of United Artistswas the only outstanding class of voting stock, of which the minoritystockholders owned approximately 9.9%, and REH owned the remaining 90.1%.  As a result of this transaction, UnitedArtists became a wholly owned subsidiary of REH.

**(3)      Summary of Significant AccountingPolicies**

***Principles of Consolidation***

The consolidated financial statements include theaccounts of UATC.  All significantintercompany  accounts and transactionshave been eliminated in consolidation. The portion of UATC equity relating to shares not owned by the Companyand the related earnings or losses were included in minority interest.

***Revenue Recognition***

 Revenues aregenerated principally through admissions and concessions sales with proceedsreceived in cash at the point of sale. Other operating revenues consistprimarily of product advertising (including vendor marketing programs) andother ancillary revenues which are recognized as income in the period earned.The Company recognizes payments received attributable to the marketing andadvertising services provided by the

32

----

 

Companyunder certain vendor programs as revenue in the period in which the relatedimpressions are delivered. Such impressions are measured by the concessionproduct sales volume, which is a mutually agreed upon proxy of attendance andreflects the Company’s marketing and advertising services delivered to itsvendors. The Company recognizes revenue associated with gift certificates andadvanced ticket sales at such time as the items are redeemed.

***Cash Equivalents***

The Company considers all unrestricted highly liquiddebt instruments and investments purchased with an original maturity of threemonths or less to be cash equivalents. At December 28, 2006, the Company held substantially all of its cash intemporary cash investments in the form of certificates of deposit and variablerate investment accounts with major financial institutions.

***Inventories***

Inventories consist of concession products and theatresupplies. 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 repairswhich do not improve or extend the lives of the respective assets, are expensedcurrently.  Gains and losses fromdisposition of property and equipment are included in income and expense whenrealized. The Company records depreciation and amortization using the straight-linemethod over the following estimated useful lives:

| Buildings              |   | 20-30 years                       |   |
|------------------------|--------|----------------------------------------|--------|
| Equipment              |   | 3-20 years                        |   |
| Leasehold improvements |   | Lesser of term of lease  or asset life |   |

Included in property and equipment is $2.1 million,$2.3 million and $2.4`million of assets accounted for under capital leases asof December 28, 2006, December 29, 2005 and December 30, 2004, respectively.The Company records amortization using the straight-line method over theshorter of the lease terms or the estimated useful lives noted above.

***Goodwill***

The changes in the carrying amount of goodwill for theyears ended December 28, 2006 and December 29, 2005 are as follows (inmillions):
| ** **                                             | ** ** | **Year Ended   December 28, 2006** | ** ** | **Year Ended   December 29, 2005** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|
| Balance at beginning  of year                          |       | $                                                      | 36.4       |                                                   | $          | 29.5 |   |
| Adjustments  related to certain deferred taxes of UATC |       | —                                                 |       | 6.9                                                    |       |
| Balance at end of year                                 |       | $                                                      | 36.4       |                                                   | $          | 36.4 |   |

Under Statement of Financial Accounting Standards (“SFAS”)No. 142, “Goodwill and Other Intangible Assets,” the Company has identified itsreporting units to be the designated market areas in which the Company conductsits theatre operations.  The fair valueof the Company’s identified reporting units were estimated using the expectedpresent value of associated future cash flows and market values of theunderlying theatres within each reporting unit. The Company’s annual goodwill impairment assessments for the years endedDecember 28, 2006 and December 29, 2005 indicated that the fair value of itsreporting units exceeded their carrying value and therefore, goodwill was notdeemed to be impaired.

33

----

 

***Impairment of Long-Lived Assets***

The Company reviews long-lived assets for impairmentwhenever events or changes in circumstances indicate that the carrying amountsof the assets may not be fully recoverable. The Company generally evaluates assets for impairment on an individualtheatre basis, which management believes is the lowest level for which thereare identifiable cash flows.  If the sumof the expected future cash flows, undiscounted and without interest charges,is less than the carrying amount of the assets, the Company recognizes animpairment charge in the amount by which the carrying value of the assetsexceeds their fair market value. The fair value of assets is determined usingthe present value of the estimated future cash flows or the expected sellingprice less selling costs for assets of which the Company expects todispose.  This analysis resulted in therecording of impairment charges of $0.2 million, $0.8 million and $0.2 millionfor the years ended December 28, 2006, December 29, 2005 and December 30, 2004,respectively.

***Leases***

Themajority of the Company’s operations are conducted in premises occupied undernon-cancelable lease agreements with initial base terms ranging generally from15 to 20 years. The Company, at its option, can renew a substantial portion ofthe leases at defined or then fair rental rates for various periods. Certainleases for Company theatres provide for contingent rentals based on the revenueresults of the underlying theatre and require the payment of taxes, insurance,and other costs applicable to the property. Also, certain leases containescalating minimum rental provisions.

The Company accounts forleased properties under the provisions of SFAS No. 13, “Accounting for Leases” (“SFAS 13”) and other authoritativeaccounting literature. SFAS 13 requires that the Company evaluate each leasefor classification as either a capital lease or an operating lease. The Companyperforms this evaluation at the inception of the lease and when a modificationis made to a lease. As to those arrangements that are classified as capitalleases, the Company records property under capital leases and a capital leaseobligation in an amount equal to the lesser of the present value of the minimumlease payments to be made over the life of the lease at the beginning of thelease term, or the fair value of the leased property. The property undercapital lease is amortized on a straight-line basis as a charge to expense overthe lease term, as defined, or the economic life of the leased property,whichever is less. During the lease term, as defined, each minimum leasepayment is allocated between a reduction of the lease obligation and interestexpense so as to produce a constant periodic rate of interest on the remainingbalance of the lease obligation. The Company does not believe that exercise ofthe renewal options in its leases are reasonably assured at the inception ofthe lease agreements and therefore, considers the initial base term as thelease term under SFAS 13.

The Company records rentexpense for its operating leases with contractual rent increases in accordancewith Financial Accounting Standards Board (“FASB”) Technical Bulletin 85-3, “Accountingfor Operating Leases with Scheduled Rent Increases,” on a straight-line basisfrom the “lease commencement date” as specified in the lease agreement untilthe end of the base lease term.

For leases in which the Company is involved withconstruction of the theatre, the Company accounts for the lease during theconstruction period under the provisions of Emerging Issues Task Force (“EITF”)97-10, “The Effect of Lessee Involvement in Asset Construction.” The landlordis typically responsible for constructing a theatre using guidelines andspecifications agreed to by the Company and assumes substantially all of therisk of construction. In accordance with EITF 97-10, if the Company concludesthat it has substantially all of the construction period risks, it records aconstruction asset and related liability for the amount of total project costsincurred during the construction period. Once construction is completed, theCompany considers the requirements under SFAS No. 98, “Accounting for Leases:Sale-Leaseback Transactions Involving Real Estate: Sales-Type Leases of RealEstate; Definition of the Lease Term; and Initial Direct Costs of DirectFinancing Leases”, for sale-leaseback treatment, and if the arrangement doesnot meet such requirements, it records the project’s construction costs fundedby the landlord as a financing obligation. The obligation is amortized over thefinancing term based on the payments designated in the contract.

34

----

 

***IncomeTaxes***

Income taxes are accounted for under the asset andliability method. Deferred tax assets and liabilities are recognized for thefuture tax consequences attributable to differences between the financialstatement carrying amounts of existing assets and liabilities and theirrespective tax bases and operating loss and tax credit carryforwards. Inaddition, income tax rules and regulations are subject to interpretation andrequire judgment by the Company and may be challenged by the taxationauthorities.  The Company establishes accrualsrelative to tax uncertainties that we deem to be probable of loss and that canbe reasonably estimated.  Deferred taxassets and liabilities are measured using enacted tax rates expected to applyto taxable income in the years in which those temporary differences areexpected to be recovered or settled. The effect on deferred tax assets andliabilities of a change in tax rates is recognized in income in the period thatincludes the enactment date. The Company records a valuation allowance if it isdeemed more likely than not that its deferred income tax assets will not berealized.

The Company expects that certain deferred income taxassets are not more likely than not to be recovered and therefore, hasestablished a valuation allowance. The Company reassesses its need for thevaluation allowance for its deferred income taxes on an ongoing basis. Shouldthe Company realize certain tax assets with a valuation allowance that relateto pre-acquisition periods, goodwill would be reduced.

***Deferred Rent***

The Company recognizes rent on a straight-line basisafter considering the effect of rent escalation provisions resulting in a levelmonthly rent expense for each lease over its term. The deferred rent liabilityis included in other non-current liabilities.

***Film Costs***

The Company estimates its film cost expense andrelated film cost payable based on management’s best estimate of the ultimatesettlement of the film costs with the distributors. Generally, less thanone-third of our quarterly film expense is estimated at period-end. The lengthof time until these costs are known with certainty depends on the ultimateduration of the film play, but is typically “settled” within two to threemonths of a particular film’s opening release. Upon settlement with our filmdistributors, film cost expense and the related film cost payable are adjustedto the final film settlement.

***Advertising and Start-Up Costs***

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

***Stock-Based Compensation***

Asdescribed in Note 9—”Share-Based Compensation,” effective December 30, 2005, weadopted SFAS No. 123 (revised), “Share-Based Payment” (“SFAS 123R”) utilizingthe modified prospective approach. Under SFAS 123R, share-based compensationcost is measured at the grant date, based on the  estimated fair value of the award, and isrecognized as expense over the employee’s requisite service period. Prior tothe adoption of SFAS 123R, we accounted for stock option grants in accordancewith Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued toEmployees” (“APB 25”) (the intrinsic value method), and accordingly, recognizedno compensation expense for stock option grants when the exercise price equaledthe fair value of common stock on the date of grant.

In connection with the adoption of SFAS 123R, theCompany also elected to adopt the alternative transition method provided inFASB Staff Position No. SFAS 123(R)-3, “Transition Election Related toAccounting for Tax Effects of Share-Based Payment Awards” for calculating thetax effects of share-based compensation pursuant to SFAS 123R. The alternativetransition method includes a simplified method to establish the beginningbalance of the additional paid-in capital pool (“APIC pool”) related to the taxeffects of employee share-based compensation, which is available to absorb taxdeficiencies which could be recognized subsequent to the adoption of SFAS 123R.

35

----

***Estimates***

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period.  Significant estimates include, but are not limitedto, those related to film costs, property and equipment, goodwill and incometaxes.  Actual results could differ fromthose estimates.

***Segments***

UATC manages itsbusiness under one reportable segment ―theatre exhibition operations.

***Comprehensive Income***

Net income and comprehensive income were the same for all yearspresented.

***Reclassifications***

Certainreclassifications have been made to the 2004 and 2005 consolidated financialstatements to conform to the 2006 presentation.

***Recent Accounting Pronouncements***

During June 2006, the FASB issued FASB InterpretationNo. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASBStatement No. 109.”  This Interpretationclarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements in accordance with FASB Statement No. 109, “Accountingfor Income Taxes” and prescribes a recognition threshold and measurementattribute for the financial statement recognition and measurement of a taxposition taken or expected to be taken in a tax return. This Interpretationalso provides guidance on derecognition, classification, interest andpenalties, accounting in interim periods, disclosure, and transition.

Theevaluation of a tax position in accordance with this Interpretation is atwo-step process. The first step is recognition: The enterprise determineswhether it is more likely than not that a tax position will be sustained uponexamination, including resolution of any related appeals or litigationprocesses, based on the technical merits of the position. In evaluating whethera tax position has met the more-likely-than-not recognition threshold, theenterprise should presume that the position will be examined by the appropriatetaxing authority that would have full knowledge of all relevant information. Thesecond step is measurement: A tax position that meets the more-likely-than-notrecognition threshold is measured to determine the amount of benefit torecognize in the financial statements. The tax position is measured at thelargest amount of benefit that is greater than 50 percent likely of beingrealized upon ultimate settlement. Differences between tax positions taken in atax return and amounts recognized in the financial statements will generallyresult in (1) an increase in a liability for income taxes payable or (2) areduction of an income tax refund receivable or a reduction in a deferred taxasset or an increase in a deferred tax liability or both (1) and (2). ThisInterpretation is effective for fiscal years beginning after December 15, 2006.The Company is currently evaluating the impact the Interpretation may have onits consolidated financial position, cash flows and results of operations. 

InSeptember 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair ValueMeasurements.” Among other requirements, SFAS 157 defines fair value andestablishes a framework for measuring fair value and also expands disclosureabout the use of fair value to measure assets and liabilities. SFAS 157 iseffective beginning the first fiscal year that begins after November 15, 2007.The Company continues to evaluate the adoption of SFAS 157 and its impact onthe Company’s consolidated financial position, cash flows and results ofoperations.

In September 2006, the Securities and ExchangeCommission issued Staff Accounting Bulletin No. 108,

36

----

 

“Consideringthe Effects of Prior Year Misstatements when Quantifying Misstatements inCurrent Year Financial Statements” (“SAB 108”). This bulletin expresses theSecurities and Exchange Commission’s views regarding the process of quantifyingfinancial statement misstatements. The interpretations in this bulletin wereissued to address diversity in practice in quantifying financial statementmisstatements and the potential under current practice for the build up ofimproper amounts on the balance sheet. The Company adopted the provisions ofSAB 108 for the year ended December 28, 2006. Such adoption had no impact on theCompany’s consolidated financial position, cash flows and results ofoperations.

**(4)      DebtObligations**

Debt obligations are summarized as follows (amounts inmillions):

|                       | ** ** | **December 28, 2006** | ** ** | **December 29, 2005** | ** ** |
|-----------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Debt obligations  (a) |       | $                               | 2.1        |                            | $          | 2.3 |   |
| Less current  portion |       | (0.1                            | )          | (0.1                            | )          |
| Long-term debt        |       | $                               | 2.0        |                            | $          | 2.2 |   |

----

(a)             Debtobligations include $2.1 million and $2.3 million of capital lease obligationsas of December 28, 2006 and December 29, 2005, respectively.

In September 2005, UATC repaid the $2.7 millionmortgage collateralized by land and building resulting from the sale of atheatre property located in Staten Island, NY.

The aggregate annual maturities of debt obligationsare as follows (amounts in millions):

| 2007                             |   | $    | 0.3    |   |
|----------------------------------|--------|------|--------|--------|
| 2008                             |   | 0.3  |   |
| 2009                             |   | 0.4  |   |
| 2010                             |   | 0.3  |   |
| 2011                             |   | 0.4  |   |
| Thereafter                       |   | 1.6  |   |
|                             |   | 3.3  |   |
| Less interest on  capital leases |   | (1.2 | )      |
| Totals                           |   | $    | 2.1    |   |

**(5)      RelatedParty Transactions**

UATC leases certain of its theatres from Prop I inaccordance with a master lease (the “Master Lease”).  The Master Leaseprovides for basic monthly or quarterly rentals and may require additionalrentals, based on the revenue of the underlying theatre.  In order to fundthe cost of additions and/or renovations to the theatres leased by UATC fromProp I, UATC has periodically made advances to Prop I.  As part of theapplication of fresh-start reporting the receivable was reclassified from otherassets to stockholder’s equity and interest no longer accrues on thisaccount. The receivable will be reduced upon any sale of properties byProp I, with UATC receiving the net proceeds of the sale.

RCI manages all aspects of the theatre operations ofUATC and its subsidiaries pursuant to the terms of a management agreement,which includes all of its cash collections, cash disbursements and other cashmanagement functions. During the years ended December 28, 2006, December 29,2005 and December 30, 2004, UATC recorded management fee expenses ofapproximately $7.1 million, $7.6 million and $8.6 million, respectively,related to this arrangement.  Such feeshave been recorded in the accompanying consolidated statements of operations asa component of “General and Administrative” expenses.

37

----

 

Pursuant to the Company’s management agreement withRCI, RCI, through an RCI affiliate, provides all on-screen and lobbyadvertising and event services to UATC. UATC receives a net fee for the use of its theatres for such advertisingand event services that is recorded in other revenue and totaled $2.0 million,$1.5 million and $1.7 million in the years ended December 28, 2006, December29, 2005 and December 30, 2004, respectively.

As of December 28, 2006, the Company’s related partyreceivables totaled approximately $25.2 million, which represents an increaseof $5.0 million from $20.2 million as of December 29, 2005. The increase inthese receivables is primarily attributable to the timing of the intercompanycash collections and disbursements, as described above.

In November 2004, UATC effected a cash dividend ofapproximately $21.7 million to the Parent. The dividend was recorded as an$11.2 million reduction of retained earnings and a $10.5 million reduction ofadditional paid-in capital upon declaration. In March 2005 and October 2005, UATC effected cash dividends ofapproximately $21.8 million and $10.5 million, respectively to the Parent.  The dividends were recorded as a reduction ofadditional paid-in capital upon declaration.

On August 17, 2005 REH, transferred the stock ofUnited Artists to RCI. As a result, United Artists and its subsidiaries becamesubsidiaries of RCI.

**(6)      Leases**

The Company accounts for a majority of its leases asoperating leases. The Company, at its option, can renew a substantial portionof the leases at defined or then fair rental rates for various periods. Certainleases for Company theatres provide for contingent rentals based on the revenueresults of the underlying theatre and require the payment of taxes, insurance,and other costs applicable to the property. Also, certain leases containescalating minimum rental provisions that have been accounted for on a straight-linebasis over the initial term of the leases. Minimum rentals payable under all non-cancelable operating leases withterms in excess of one year as of December 28, 2006, are summarized for thefollowing fiscal years: 

|            | ** ** | **(In Millions)** | ** ** |
|------------|------------|------------------------|------------|
| 2007       |       | $                      | 39.2       |   |
| 2008       |       | 39.3                   |       |
| 2009       |       | 39.4                   |       |
| 2010       |       | 37.5                   |       |
| 2011       |       | 34.0                   |       |
| Thereafter |       | 153.8                  |       |
|            |            |                        |            |  |

Rent expense including sale and leaseback rentals of$15.0 million, $15.1 million and $15.4 million, for the years ended December28, 2006, December 29, 2005 and December 30, 2004 under such operating leasesamounted to $40.6 million, $44.5 million and $46.8 million for the years endedDecember 28, 2006, December 29, 2005 and December 30, 2004, respectively.Contingent rent expense was $1.1 million, $1.1 million and $1.5 million for theyears ended December 28, 2006, December 29, 2005 and December 30, 2004,respectively.

***Sale-LeasebackTransactions***

The Company has historically entered into sale andleaseback transactions whereby owned properties were sold and leased back underoperating leases. The minimum rentals for these operating leases are includedin the table above.

In December 1995, UATC entered into a sale andleaseback transaction whereby 31 owned properties were sold to and leased backfrom an unaffiliated third party. In conjunction with the transaction, thebuyer of the properties issued publicly traded pass-through certificates. Inconnection with this sale and leaseback transaction, UATC entered into aParticipation Agreement that requires UATC to comply with various covenants,including limitations on indebtedness, restricted payments, transactions withaffiliates, guarantees, issuance of preferred stock

38

----

 

ofsubsidiaries and subsidiary distributions, transfer of assets and payment ofdividends. As of December 28, 2006, 14 theaters were subject to the saleleaseback transaction and approximately $53.8 million in principal amount ofpass-through certificates were outstanding.

**(7)           Income Taxes**

The components of the provision for income taxes forincome from operations for each of the fiscal years were as follows (inmillions):

|                             | ** ** | **Year Ended**             | ** ** | **Year Ended**             | ** ** | **Year Ended**             | ** ** |
|-----------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                  | ** ** | **December 28, 2006** | ** ** | **December 29, 2005** | ** ** | **December 30, 2004** | ** ** |
| Federal:                    |       |                            |       |                            |       |                            |       |
| Current                     |       | $                               | 1.4        |                            | $          | (1.9                            | )          | $ | (0.5 | ) |
| Deferred                    |       | 2.6                             |       | 4.0                             |       | 2.4                             |       |
| Total Federal               |       | 4.0                             |       | 2.1                             |       | 1.9                             |       |
| State:                      |       |                            |       |                            |       |                            |       |
| Current                     |       | 0.3                             |       | (0.4                            | )          | (0.1                            | )          |
| Deferred                    |       | 0.5                             |       | 0.8                             |       | 0.5                             |       |
| Total State                 |       | 0.8                             |       | 0.4                             |       | 0.4                             |       |
| Total income tax  provision |       | $                               | 4.8        |                            | $          | 2.5                             |       | $ | 2.3 |   |

During the years ended December 28, 2006, December 29,2005 and December 30, 2004 a current tax benefit of $1.4 million, $3.5 millionand $3.3 million, respectively, was allocated directly to stockholder’s equityfor the exercise of stock options.

The reconciliation of the provision for income taxesas reported and the amount computed by multiplying the income before taxes andextraordinary item by the U.S. federal statutory rate of 35% was as follows (inmillions): 

|                                                            | ** ** | **Year Ended  December 28, 2006** | ** ** | **Year Ended  December 29, 2005** | ** ** | **Year Ended  December 30, 2004** | ** ** |
|------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Provision  calculated at federal statutory income tax rate |       | $                                                | 3.8        |                                             | $          | 2.0                                              |       | $ | 0.6 |   |
| State and local  income taxes, net of federal benefit      |       | 0.5                                              |       | 0.3                                              |       | 0.3                                              |       |
| Disallowed loss                                            |       | —                                           |       | 0.3                                              |       | 1.2                                              |       |
| True-up  provision to return                               |       | 0.4                                              |       | —                                           |       | —                                           |       |
| Minority  interest                                         |       | —                                           |       | (0.1                                             | )          | 0.3                                              |       |
| Other                                                      |       | 0.1                                              |       | —                                           |       | (0.1                                             | )          |
| Total income tax  provision                                |       | $                                                | 4.8        |                                             | $          | 2.5                                              |       | $ | 2.3 |   |

Significantcomponents of the Company’s net deferred tax liability consisted of thefollowing at (in millions):

39

----

 

|                                                           | ** ** | **December 28, 2006** | ** ** | **December 29, 2005** | ** ** |
|-----------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Deferred tax  assets                                      |       |                            |       |                            |       |
| Net operating loss carryforward                           |       | $                               | 28.1       |                            | $          | 28.1 |   |
| Excess of tax basis over book basis of fixed assets       |       | 14.3                            |       | 17.4                            |       |
| Accrued expenses                                          |       | 1.2                             |       | 1.2                             |       |
| Total deferred tax assets before valuation allowance      |       | 43.6                            |       | 46.7                            |       |
| Valuation allowance                                       |       | (28.1                           | )          | (28.1                           | )          |
| Total deferred tax assets after valuation allowance       |       | 15.5                            |       | 18.6                            |       |
| Deferred tax  liabilities                                 |       |                            |       |                            |       |
| Deferred gain on sale of theatres                         |       | (45.1                           | )          | (53.0                           | )          |
| Excess of book basis over tax basis of intangible  assets |       | (22.6                           | )          | (15.8                           | )          |
| Other                                                     |       | (0.6                            | )          | —                          |       |
| Total deferred tax liabilities                            |       | (68.3                           | )          | (68.8                           | )          |
| Net deferred tax  liability                               |       | $                               | (52.8      | )                               | $          | (50.2 | ) |

At December 28, 2006, the Company has net operatingloss carryforwards for federal income tax purposes of approximately $67.9million with expiration commencing during 2007. The Company’s net operatingloss carryforwards were generated by the predecessor entities of UATC. The TaxReform Act of 1986 imposed substantial restrictions on the utilization of netoperating losses in the event of an “ownership change” of a corporation.Accordingly, the Company’s ability to utilize the net operating losses may beimpaired as a result of the “ownership change” limitations.

In assessing the valuation of deferred tax assets,management considers whether it is more likely than not that some portion orall of the deferred tax assets will not be realized. The ultimate realizationof deferred tax assets is dependent upon the generation of future taxableincome during the periods in which these temporary differences becomedeductible. The Company has recorded a valuation allowance against deferred taxassets totaling $28.1 million at December 28, 2006 and December 29, 2005 asmanagement believes it more likely than not that certain deferred tax assetswill not be realized in future tax periods. The valuation allowance relates topre-acquisition deferred tax assets of UATC. Accordingly, future reductions inthe valuation allowance associated with a change in management’s determinationof the Company’s ability to realize these deferred tax assets will reducegoodwill related to the acquisition of UATC.

In June 2005, REG, the parent company of theconsolidated tax group which includes activity of the Company, was notifiedthat the IRS would examine its 2002 and 2003 federal income tax returns. DuringOctober 2005, the IRS completed its examination of REG’s federal taxreturns for such years and REG and the IRS agreed to certain adjustmentsto the Company’s 2002 and 2003 federal tax returns. Such adjustments did nothave a material impact on the Company’s provision for income taxes.

**(8)     Litigation and contingencies**

On March 18, 2003, Reading International, Inc.,Citadel Cinemas, Inc. and Sutton Hill Capital, LLC (each a “Plaintiff” andcollectively the “Plaintiffs”) filed a complaint and demand for jury trial inthe United States District Court for the Southern District of New York againstOaktree Capital Management LLC, Onex Corporation (“Loews”), Regal, UnitedArtists, UATC, Loews Cineplex Entertainment Corporation, Columbia PicturesIndustries, Inc., The Walt Disney Company, Universal Studios, Inc., ParamountPictures Corporation, Metro-Goldwyn-Mayer Distribution Company, FoxEntertainment Group, Inc., Dreamworks LLC, Stephen Kaplan and Bruce Karsh

40

----

 

(collectively,the “Defendants”) alleging various violations by the Defendants of federal andstate antitrust laws and New York common law. The Plaintiffs allege, among other things, that the consolidation of thetheatre industry and alleged agreements between and among Regal, moviedistributors, and Loews, have adversely impacted their ability to exhibit first-runindustry-anticipated top-grossing commercial films at their Village Easttheatre in Lower Manhattan, and are seeking, among other things, a declarationthat the Defendants’ conduct is in violation of antitrust laws, damages, andequitable relief enjoining Defendants from engaging in future anticompetitiveconduct.  On December 10, 2003, the courtgranted Defendant’s motion to dismiss in part, thereby dismissing several ofPlaintiffs’ claims and dismissing Sutton Hill as a Plaintiff.  On December 24, 2003, Plaintiffs amendedtheir complaint to add Village East Limited Partnership as a Plaintiff.  Management believes that the remainingallegations and claims are without merit and intends to vigorously defendagainst the Plaintiffs’ claims. On July 29, 2005, Regal filed a motion forsummary judgment as to all counts asserted against it and its subsidiaries. OnJanuary 8, 2007, the court granted Regal’s motion for summary judgement in itsentirety and dismissed the Plaintiffs claims with prejudice.

Our theatres must comply with Title III of theAmericans with Disabilities Act of 1990 (the “ADA”) to the extent that suchproperties are “public accommodations” and/or “commercial facilities” asdefined by the ADA. Compliance with the ADA requires that public accommodations“reasonably accommodate” individuals with disabilities and that newconstruction or alterations made to “commercial facilities” conform toaccessibility guidelines unless “structurally impracticable” for newconstruction or technically infeasible for alterations. Non-compliance with theADA could result in the imposition of injunctive relief, fines, awards ofdamages to private litigants and additional capital expenditures to remedy suchnon­compliance.

From time to time, we have received letters from theattorneys general of states in which we operate theatres regardinginvestigation into the accessibility of our theatres to persons with visual orhearing impairments.  We believe weprovide the members of the visually and hearing impaired communities withreasonable access to the movie-going experience.

We believe that we are in substantial compliance withall current applicable regulations relating to accommodations for the disabled.We intend to comply with future regulations in that regard, and except as setforth above, we do not currently anticipate that compliance will require us toexpend substantial funds.  Our theatreoperations are also subject to federal, state and local laws governing suchmatters as wages, working conditions, citizenship and health and sanitationrequirements.  We believe that we are insubstantial compliance with all of such laws.

On or about January 3, 2007, suit was initiatedagainst the Company in Federal Court, Central District of California, styled, *Bateman, individually and on behalf of all otherssimilarly situated, v. Regal Cinemas, Inc. and United Artists Theatre Circuit,Inc., et al.,* alleging violations of the Fair and AccurateTransaction Act, for allegedly printing expiration dates and credit cardnumbers on customer receipts. The plaintiff seeks to represent a class ofindividuals allegedly harmed by this alleged practice. The complaint seeks actualdamages and/or statutory damages of at least one hundred dollars or up to onethousand dollars per violation, and attorney fees and costs. We believe we arein substantial compliance with all applicable federal and state laws governingthese trade practices.

The Company and its subsidiaries are also presentlyinvolved in various legal proceedings arising in the ordinary course of itsbusiness operations, including personal injury claims, employment andcontractual matters and other disputes. The Company believes it has adequatelyprovided for the settlement of such matters. Management believes any additionalliability with respect to the above proceedings will not be material in theaggregate to the Company’s consolidated financial position, results of operationsor cash flows.

** (9)    Capital Stock andShare Based Compensation**

*Commonand Preferred Stock*

UATC is authorized to issue 1,000 shares of its $1.00par value common stock, of which 100 shares are issued and outstanding atDecember 28, 2006, and are all held by the Parent.  At December 28, 2006,the Company has 5,000,000 shares of preferred stock authorized with noneissued.

41

----

 

*ShareBased Compensation*

Upon the closing of the exchange transaction describedin Note 2, the holders of outstanding options of United Artists receivedreplacement options to purchase 2,287,552 shares of Regal Class A common stockat prices ranging from $4.44 to $12.87 per share.  Such replacement options were fully vested asof March 2, 2006.  Regal elected tocontinue accounting for its stock option plan using the intrinsic value methodin accordance with the provisions of APB 25 (the intrinsic value method), andrelated interpretations, which requires compensation costs to be recognized forthe excess of the fair value of options on the date of grant over the optionexercise price.

Effective December 30, 2005, Regal and the Companyadopted SFAS 123R utilizing the modified prospective approach. Prior to theadoption of SFAS 123R, we accounted for stock option grants in accordance withAPB 25 and accordingly, recognized no compensation expense for those stockoptions having an exercise price equal to the market value of Regal’s Class Acommon stock on the date of the grant.

Under the modified prospective approach, SFAS 123Rapplies to awards that were outstanding on December 30, 2005 and to new awardsand the modification, repurchase or cancellation of awards after December 30,2005.  Under the modified prospectiveapproach, compensation cost recognized in the first quarter of fiscal 2006includes share-based compensation cost for all share-based payments grantedprior to, but not yet vested as of December 30, 2005, based on the grant-datefair value estimated in accordance with the original provisions of SFAS No.123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and recognized asexpense over the remaining requisite service period. Share-based compensationcost for all share-based payments granted subsequent to December 30, 2005 arebased on the grant-date fair value estimated in accordance with the provisionsof SFAS 123R and recognized as expense over the employee’s requisite serviceperiod.  Prior periods were not restatedto reflect the impact of adopting the new standard.

On November 10, 2005, the FASB issued FASB StaffPosition No. SFAS 123(R)-3, “Transition Election Related to Accounting for TaxEffects of Share-Based Payment Awards.” The Company has elected to adopt thealternative transition method provided in this FASB Staff Position forcalculating the tax effects of share-based compensation pursuant to SFAS 123R.The alternative transition method includes a simplified method to establish thebeginning balance of the APIC pool related to the tax effects of employeeshare-based compensation, which is available to absorb tax deficienciesrecognized subsequent to the adoption of SFAS 123R.

During the year ended December 28, 2006, the Companyrecognized approximately $0.2 million of share-based compensation expenserelated to stock options.  Such expenseis presented as a component of general and administrative expenses for the yearended December 28, 2006.

We receive a tax deduction for certain stock optionexercises during the period the options are exercised, generally for the excessof the price at which the stock is sold over the exercise price of theoptions.  Prior to adoption of SFAS 123R,we reported all tax benefits resulting from the exercise of stock options asoperating cash flows in our consolidated statements of cash flows. Inaccordance with SFAS 123R, we are required to report excess tax benefits fromthe award of equity instruments as financing cash flows.  Excess tax benefits are recorded when adeduction reported for tax return purposes for an award of equity instrumentsexceeds the cumulative compensation cost for the instruments recognized forfinancial reporting purposes.  For theyear ended December 28, 2006, our statements of cash flows reflects $1.4million of excess tax benefits as financing cash flows rather than operatingcash flows.

**(10)   Employee Benefits Plan**

REG sponsors an employee benefit plan, the RegalEntertainment Group 401(k) Profit Sharing Plan (the “Plan”), undersection 401(k) of the Internal Revenue Code of 1986, as amended, for thebenefit of substantially all full-time employees of UATC.  The Plan provides that participants maycontribute up to 20% of their compensation, subject to Internal Revenue Servicelimitations.  The Plan currently matchesan amount equal to 40% of the participant’s contributions up to 6% of theparticipant’s compensation.  Employeecontributions are invested in various investment funds based upon electionsmade by the employee.

42

----

 

**(11)    FairValue of Financial Instruments**

The methods and assumptions used to estimate the fairvalue of each class of financial instrument are as follows:

*Cash andcash equivalents, accounts receivable, inventory, accounts payable and accruedliabilities:*

The carrying amounts approximate fair value because ofthe short maturity of these instruments.

*Long termobligations, excluding capital lease obligations:*

The fair value of the Company’s debt obligations werebased on recent financing transactions for similar debt issuances and thecarrying amounts approximates the fair value.

**Item 9.**                          CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

**Item 9A.**                 CONTROLS ANDPROCEDURES

***Evaluation of Disclosure Controls and Procedures***

We maintain disclosure controls and procedures thatare designed to ensure that information required to be disclosed by us in thereports that we file or submit to the Securities and Exchange Commission underthe Securities Exchange Act of 1934 (the “Exchange Act”), as amended, isrecorded, processed, summarized and reported within the time periods specifiedby the Commission’s rules and forms, and that information is accumulated andcommunicated to our management, including our principal executive and principalfinancial officers (whom we refer to in this periodic report as our CertifyingOfficers), as appropriate to allow timely decisions regarding requireddisclosure. Our management evaluated, with the participation of our CertifyingOfficers, the effectiveness of our disclosure controls and procedures as ofDecember 28, 2006, pursuant to Rule 13a-15(b) under the Exchange Act. Basedupon that evaluation, our Certifying Officers concluded that, as of December28, 2006, our disclosure controls and procedures were effective.

***Changesin Internal Control Over Financial Reporting***

There were no changes in our internal control overfinancial reporting that occurred during our fiscal quarter ended December 28,2006  that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

***Limitations on the Effectiveness ofControls***

Management is responsible for the preparation and fairpresentation of the consolidated financial statements included in this annualreport. The consolidated financial statements have been prepared in conformitywith accounting principles generally accepted in the United States of Americaand reflect management’s judgments and estimates concerning effects of eventsand transactions that are accounted for or disclosed. The Company’s internalcontrol over financial reporting includes those policies and procedures thatpertain to the Company’s ability to record, process, summarize and reportreliable financial data. Management recognizes that there are inherentlimitations in the effectiveness of any internal control over financialreporting, including the possibility of human error and the circumvention oroverriding of internal control. Accordingly, even effective internal controlover financial reporting can provide only reasonable assurance with respect tofinancial statement preparation. Further, because of changes in conditions, theeffectiveness of internal control over financial reporting may vary over time.

43

----

 

**Item 9B.**                 OTHER INFORMATION

None.

**PART III**

**Item 10.**                   DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Under the reduceddisclosure format permitted by General Instruction I(2) of Form 10-K for whollyowned subsidiaries, the information otherwise required by this item has beenomitted.

**Item 11.**                   EXECUTIVECOMPENSATION

Under the reduceddisclosure format permitted by General Instruction I(2) of Form 10-K for whollyowned subsidiaries, the information otherwise required by this item has beenomitted.

**Item 12.**                   SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED    STOCKHOLDER MATTERS

Under the reduceddisclosure format permitted by General Instruction I(2) of Form 10-K for whollyowned subsidiaries, the information otherwise required by this item has beenomitted.

**Item 13.**                   CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDECE

Under the reduceddisclosure format permitted by General Instruction I(2) of Form 10-K for whollyowned subsidiaries, the information otherwise required by this item has beenomitted.

**Item 14.**                   PRINCIPALACCOUNTING FEES AND SERVICES

**Independent Auditors**

KPMG, LLP served as ourindependent auditors for the fiscal years ended December 28, 2006 andDecember 29, 2005.  For such fiscal years we paid fees forservices from KPMG as discussed below.

·                  *Audit Fees*. The aggregate fees billed for professionalservices rendered by KPMG for the audit of our annual financial statementsincluded in our Form 10-K and the review of the financial statementsincluded in our Forms 10-Q were approximately $117,300 for the fiscal yearended December 28, 2006 and $102,120for the fiscal year ended December 29, 2005.

·                  *Audit-Related Fees*. The Company did not incur any aggregate fees forprofessional services rendered by KPMG for assurances and related services thatare reasonably related to the performance of the audit or review of ourfinancial statements for the fiscal year ended December 28, 2006 and forthe fiscal year ended December 29, 2005.

·                  *Tax Fees*. The Company did not incur any aggregate fees billed for professionalservices rendered by KPMG related to federal and state tax compliance,tax advice and tax planning for the fiscal year ended December 28, 2006 and forthe fiscal year ended December 29, 2005.All of these services are permitted non-audit services.

44

----

 

·                  *All Other Fees.*The Company did notincur any aggregate fees for all other services rendered by KPMG for the fiscalyear ended December 28, 2006 and for the fiscal year ended December 29,2005.

**Boardof Directors Pre-Approval Policy**

Our Board of Directors pre-approves all audit and permissible non-auditservices provided by the independent auditors on a case-by-case basis.  These services may include audit services,audit related services, tax services and other services.  Our Vice President and Treasurer isresponsible for presenting the board with an overview of all proposed audit,audit related, tax or other non-audit services to be performed by theindependent auditors.  The presentationmust be in sufficient detail to define clearly the services to beperformed.  The board does not delegatethe responsibilities to pre-approve services performed by the independentauditors to management or to an individual member of the board.

**PART IV**

**Item 15.**                   EXHIBITS, FINANCIALSTATEMENT SCHEDULES

(a)          The following documentsare filed as a part of this report on Form 10-K:

(1)                  Consolidatedfinancial statements of United Artists Theatre Circuit, Inc.:

Report of Independent Registered Public AccountingFirm - Consolidated Financial Statements

UATC’s Consolidated Balance Sheets as of December 28,2006 and December 29, 2005

UATC’s Consolidated Statements of Operations for thefiscal years ended December 28, 2006, December 29, 2005 and December 30, 2004

UATC’s Consolidated Statements of Stockholder’s Equityand Comprehensive Income (Loss) for the fiscal years ended December 28, 2006,December 29, 2005 and December 30, 2004 UATC’s Consolidated Statements of Cash Flows for the fiscal years endedDecember 28, 2006, December 29, 2005 and December 30, 2004

Notes to UATC’s Consolidated Financial Statements

(2)                  FinancialStatement Schedules have been omitted because of the absence of conditionsunder which they are required, or because the information is shown elsewhere in thisForm 10-K.

(3)                  Exhibits: Thefollowing exhibits are filed as part of the annual report on Form 10-K.
| ExhibitNumber | ** ** | **Description**                                                                                                                                                                                                                                              |
|---------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1           |       | United Artists Second Amended Joint Plan of  Reorganization (filed as exhibit 2 to United Artists Theatre Circuit, Inc.’s  Current Report on Form 8-K filed on February 9, 2001 (Commission File  No. 033-49598), and incorporated herein by reference) |
|          |       |                                                                                                                                                                                                                                                         |
| 3.1           |       | Restated Articles of Incorporation of United Artists  Theatre Circuit, Inc. (filed as exhibit 3.1 to United Artists Theatre  Circuit, Inc.’s Form S-1 (Commission File No. 033-49598) filed on October 5,  1992, and incorporated herein by reference)  |
|          |       |                                                                                                                                                                                                                                                         |
| 3.2           |       | Bylaws of United Artists Theatre Circuit, Inc.  (filed as exhibit 3.2 to United Artists Theatre Circuit, Inc.’s Form S-1  (Commission File No. 033-49598) filed on October 5, 1992, and incorporated  herein by reference)                              |

45

----

 
| ExhibitNumber | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|---------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.1           |       | Amendment to Leveraged Lease Facility and Second  Supplemental Indenture, dated as of March 7, 2001, among United Artists  Theatre Circuit, Inc., Wilmington Trust Company, William J. Wade,  Theatre Investors, Northway Associates Limited Partnership, State Street Bank  and Trust Company, Susan Keller and MacKay Shields LLC (filed as exhibit 10.2  to United Artists Theatre Circuit, Inc.’s Form 10-Q for the fiscal  quarter ended March 29, 2001 (Commission File No. 033-49598), and  incorporated herein by reference) |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.2           |       | Trust Indenture and Security Agreement, dated as of  December 13, 1995, between Wilmington Trust Company, William J. Wade and  Fleet National Bank of Connecticut and Alan B. Coffey (filed as exhibit 4.2  to United Artists Theatre Circuit, Inc.’s Form S-2 (Commission  File No. 333-1024) filed on February 5, 1996, and incorporated herein  by reference)                                                                                                                                                                |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.3           |       | Pass Through Certificates, Series 1995-A  Registration Rights Agreement, dated as of December 13, 1995, among United  Artists Theatre Circuit, Inc., Morgan Stanley & Co. Incorporated and  Merrill Lynch, Pierce, Fenner & Smith Incorporated (filed as exhibit 4.3  to United Artists Theatre Circuit, Inc.’s Form S-2 (Commission File  No. 333-1024) filed on February 5, 1996, and incorporated  herein by reference)                                                                                              |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.4           |       | Participation Agreement, dated as of December 13,  1995, among United Artists Theatre Circuit, Inc., Wilmington Trust Company,  William J. Wade, Theatre Investors, Inc., Northway Mall Associates, LLC,  Wilmington Trust Company, William J. Wade, Fleet National Bank of  Connecticut, Alan B. Coffey and Fleet National Bank of Connecticut (filed as  exhibit 4.4 to United Artists Theatre Circuit, Inc.’s Form S-2  (Commission File No. 333-1024) filed on February 5, 1996, and  incorporated herein by reference)          |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.5           |       | Pass Through Trust Agreement, dated as of December  13, 1995, between United Artists Theatre Circuit, Inc. and Fleet National  Bank of Connecticut (filed as exhibit 4.5 to United Artists Theatre Circuit,  Inc.’s Form S-2 (Commission File No. 333-1024) filed on  February 5, 1996, and incorporated herein by reference)                                                                                                                                                                                                        |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.6           |       | Lease Agreement, dated as of December 13, 1995,  between Wilmington Trust Company and William J. Wade and United Artists  (filed as exhibit 4.6 to United Artists Theatre Circuit, Inc.’s Form S-2  (Commission File No. 333-1024) filed on February 5, 1996, and incorporated  herein by reference)                                                                                                                                                                                                                                 |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.7           |       | Lease Agreement, dated as of October 1, 1988,  between United Artists Properties I Corporation and United Artists Theatre  Circuit, Inc. (filed as exhibit 10.1 to United Artists Theatre Circuit,  Inc.’s Form S-1 (Commission File No. 033-49598) filed on October 5, 1992, and  incorporated herein by reference)                                                                                                                                                                                                                      |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.1          |       | Trademark Agreement as of May 12, 1992 by United  Artists Entertainment Company, United Artists Holdings, Inc., United Artists  Cable Holdings, Inc., United Artists Theatre Holding Company, on the one hand  and United Artists Theatre Circuit, Inc., United Artists Realty Company, UAB,  Inc., and UAB II, Inc., on the other hand (filed as exhibit 10.9 to United  Artists Theatre Circuit, Inc.’s Form S-1 (Commission File No. 033-49598)  filed on October 5, 1992, and incorporated herein by reference)                       |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.2          |       | Tax Sharing Agreement, dated as of May 12, 1992,  between United Artists Theatre Company and United Artists Theatre Circuit,  Inc. (filed as exhibit 10.11 to United Artists Theatre Circuit, Inc.’s Form  S-1 (Commission File No. 033-49598) filed on October 5, 1992, and  incorporated herein by reference)                                                                                                                                                                                                                           |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.3          |       | Management Agreement, dated as of May 27, 2003,  between Regal Cinemas, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

46

----

 
| ExhibitNumber | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                        |
|---------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       | and United Artists Theatre Circuit, Inc. (filed as  exhibit 10.3 to United Artists Theatre Circuit, Inc.’s Form 10-K (Commission  File No. 033-49598) filed on March 31, 2004, and incorporated herein by  reference)                                                                                                                             |
|          |       |                                                                                                                                                                                                                                                                                                                                                   |
| 10.4*         |       | Employment Agreement, dated May 3, 2002,  between Regal Entertainment Group and Michael L. Campbell (filed as exhibit  10.4 to Amendment No. 2 to the Registration Statement of Regal  Entertainment Group on Form S-1 (Commission File No. 333-84096) on  May 6, 2002, and incorporated herein by reference)                 |
|          |       |                                                                                                                                                                                                                                                                                                                                                   |
| 10.5*         |       | Employment Agreement, dated May 3, 2002,  between Regal Entertainment Group and Gregory W. Dunn (filed as exhibit 10.7  to Amendment No. 2 to the Registration Statement of Regal Entertainment  Group on Form S-1 (Commission File No. 333-84096) on May 6,  2002, and incorporated herein by reference)                     |
|          |       |                                                                                                                                                                                                                                                                                                                                                   |
| 10.6*         |       | Employment Agreement, dated May 3, 2002,  between Regal Entertainment Group and Amy E. Miles (filed as exhibit 10.6 to  Amendment No. 2 to the Registration Statement of Regal Entertainment  Group on Form S-1 (Commission File No. 333-84096) on May 6,  2002, and incorporated herein by reference)                        |
|          |       |                                                                                                                                                                                                                                                                                                                                                   |
| 10.7          |       | Purchase and Sale Agreement by and between United  Artists Theatre Circuit, Inc., as seller, and Boardwalk Ventures, LLC, as  purchaser, dated as of October 11, 2005 (filed as exhibit 10.7 to United  Artists Theatre Circuit, Inc.’s Form 10-K (Commission File No. 033-49598)  filed on March 29, 2006, and incorporated herein by reference) |
|          |       |                                                                                                                                                                                                                                                                                                                                                   |
| 31.1          |       | Rule 13(a)-14(a) Certification of Principal  Executive Officer                                                                                                                                                                                                                                                                                         |
|          |       |                                                                                                                                                                                                                                                                                                                                                   |
| 31.2          |       | Rule 13(a)-14(a) Certification of Principal  Financial Officer                                                                                                                                                                                                                                                                                         |

----

*                    Identifieseach management contract or compensatory plan or arrangement.

(b)            Theexhibits required to be filed herewith are listed above.

(c)             Notapplicable.

 

47

----

 

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant has duly caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized.
|                |   |   | UNITED ARTISTS THEATRE CIRCUIT, INC. |
|----------------|--------|--------|--------------------------------------|
|           |   |   |                                 |   |
|           |   |   |                                 |   |
|           |   |   | By:                                  | /s/  MICHAEL  L. CAMPBELL |
| March 28, 2007 |   |   |                                 | Michael L. Campbell |
|           |   |   |                                 | *President* |

Pursuant to the requirements of the SecuritiesExchange Act 1934, this report has been signed below by the following persons onbehalf of the registrant and in the capacities and on the dates indicated.
| Signature                           | ** ** | **Title**                                                       | ** ** | **Date**       |
|-------------------------------------|------------|-----------------------------------------------------------------|------------|----------------|
|                                |       |                                                            |       |           |
| /s/  MICHAEL  L. CAMPBELL |       | President and Chairman of the Board                             |       | March 28, 2007 |
| Michael L.  Campbell                |       | (Principal Executive Officer)                                   |       |           |
|                                |       |                                                            |       |           |
| /s/  AMY  E. MILES        |       | Director, Vice President and Treasurer                          |       | March 28, 2007 |
| Amy E. Miles                        |       | (Principal Financial Officer and Principal  Accounting Officer) |       |           |
|                                |       |                                                            |       |           |
| /s/  GREGORY  W. DUNN     |       | Director                                                        |       | March 28, 2007 |
| Gregory W. Dunn                     |       |                                                            |       |           |
|                                |       |                                                            |       |           |

 

**Supplemental Information to beFurnished with Reports Filed Pursuant to Section 15(d) of the Act byRegistrants Which Have Not Registered Securities Pursuant to Section 12 of theAct**

The registrant hasnot sent to its sole stockholder an annual report to security holders coveringthe registrant’s last fiscal year or any proxy statement, form of proxy orother proxy soliciting material with respect to any annual or other meeting ofsecurity holders.

48

----

 

**ExhibitIndex**
| ExhibitNumber | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|---------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1           |       | United Artists Second Amended Joint Plan of  Reorganization (filed as exhibit 2 to United Artists Theatre Circuit, Inc.’s  Current Report on Form 8-K filed on February 9, 2001 (Commission File  No. 033-49598), and incorporated herein by reference)                                                                                                                                                                                                                                                                                   |
| 3.1           |       | Restated Articles of  Incorporation of United Artists Theatre Circuit, Inc. (filed as exhibit 3.1  to United Artists Theatre Circuit, Inc.’s Form S-1 (Commission File No.  033-49598) filed on October 5, 1992, and incorporated herein by reference)                                                                                                                                                                                                                                                                                    |
| 3.2           |       | Bylaws of United  Artists Theatre Circuit, Inc. (filed as exhibit 3.2 to United Artists Theatre  Circuit, Inc.’s Form S-1 (Commission File No. 033-49598) filed on October 5,  1992, and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                |
| 4.1           |       | Amendment to Leveraged  Lease Facility and Second Supplemental Indenture, dated as of March 7, 2001,  among United Artists Theatre Circuit, Inc., Wilmington Trust Company,  William J. Wade, Theatre Investors, Northway Associates Limited  Partnership, State Street Bank and Trust Company, Susan Keller and MacKay  Shields LLC (filed as exhibit 10.2 to United Artists Theatre Circuit, Inc.’s  Form 10-Q for the fiscal quarter ended March 29, 2001 (Commission File  No. 033-49598), and incorporated herein by reference) |
| 4.2           |       | Trust Indenture and  Security Agreement, dated as of December 13, 1995, between Wilmington Trust  Company, William J. Wade and Fleet National Bank of Connecticut and Alan B.  Coffey (filed as exhibit 4.2 to United Artists Theatre Circuit, Inc.’s  Form S-2 (Commission File No. 333-1024) filed on  February 5, 1996, and incorporated herein by reference)                                                                                                                                                                |
| 4.3           |       | Pass Through  Certificates, Series 1995-A Registration Rights Agreement, dated as of  December 13, 1995, among United Artists Theatre Circuit, Inc., Morgan Stanley  & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith  Incorporated (filed as exhibit 4.3 to United Artists Theatre Circuit, Inc.’s  Form S-2 (Commission File No. 333-1024) filed on  February 5, 1996, and incorporated herein by reference)                                                                                              |
| 4.4           |       | Participation  Agreement, dated as of December 13, 1995, among United Artists Theatre  Circuit, Inc., Wilmington Trust Company, William J. Wade, Theatre Investors,  Inc., Northway Mall Associates, LLC, Wilmington Trust Company, William J.  Wade, Fleet National Bank of Connecticut, Alan B. Coffey and Fleet National  Bank of Connecticut (filed as exhibit 4.4 to United Artists Theatre Circuit,  Inc.’s Form S-2 (Commission File No. 333-1024) filed on  February 5, 1996, and incorporated herein by reference)          |
| 4.5           |       | Pass Through Trust  Agreement, dated as of December 13, 1995, between United Artists Theatre  Circuit, Inc. and Fleet National Bank of Connecticut (filed as exhibit 4.5 to  United Artists Theatre Circuit, Inc.’s Form S-2 (Commission File No.  333-1024) filed on February 5, 1996, and incorporated herein by  reference)                                                                                                                                                                                                       |
| 4.6           |       | Lease Agreement, dated  as of December 13, 1995, between Wilmington Trust Company and William J. Wade  and United Artists (filed as exhibit 4.6 to United Artists Theatre Circuit,  Inc.’s Form S-2 (Commission File No. 333-1024) filed on  February 5, 1996, and incorporated herein by reference)                                                                                                                                                                                                                                 |
| 4.7           |       | Lease Agreement, dated  as of October 1, 1988, between United Artists Properties I Corporation and  United Artists Theatre Circuit, Inc. (filed as exhibit 10.1 to United Artists  Theatre Circuit, Inc.’s Form S-1 (Commission File No. 033-49598)                                                                                                                                                                                                                                                                                       |

49

----

 
| ExhibitNumber | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|---------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       | filed on October 5,  1992, and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.1          |       | Trademark Agreement as  of May 12, 1992 by United Artists Entertainment Company, United Artists  Holdings, Inc., United Artists Cable Holdings, Inc., United Artists Theatre  Holding Company, on the one hand and United Artists Theatre Circuit, Inc.,  United Artists Realty Company, UAB, Inc., and UAB II, Inc., on the other hand  (filed as exhibit 10.9 to United Artists Theatre Circuit, Inc.’s Form S-1  (Commission File No. 033-49598) filed on October 5, 1992, and incorporated  herein by reference) |
| 10.2          |       | Tax Sharing Agreement,  dated as of May 12, 1992, between United Artists Theatre Company and United  Artists Theatre Circuit, Inc. (filed as exhibit 10.11 to United Artists  Theatre Circuit, Inc.’s Form S-1 (Commission File No. 033-49598) filed on  October 5, 1992, and incorporated herein by reference)                                                                                                                                                                                                      |
| 10.3          |       | Management Agreement,  dated as of May 27, 2003, between Regal Cinemas, Inc. and United Artists  Theatre Circuit, Inc. (filed as exhibit 10.3 to United Artists Theatre  Circuit, Inc.’s Form 10-K (Commission File No. 033-49598) filed on March 31,  2004, and incorporated herein by reference)                                                                                                                                                                                                                   |
| 10.4*         |       | Employment Agreement,  dated May 3, 2002, between Regal Entertainment Group and Michael L.  Campbell (filed as exhibit 10.4 to Amendment No. 2 to the Registration  Statement of Regal Entertainment Group on Form S-1 (Commission File  No. 333-84096) on May 6, 2002, and incorporated herein by  reference)                                                                                                                                                                                   |
| 10.5*         |       | Employment Agreement,  dated May 3, 2002, between Regal Entertainment Group and Gregory W. Dunn  (filed as exhibit 10.7 to Amendment No. 2 to the Registration Statement  of Regal Entertainment Group on Form S-1 (Commission File  No. 333-84096) on May 6, 2002, and incorporated herein by  reference)                                                                                                                                                                                       |
| 10.6*         |       | Employment Agreement,  dated May 3, 2002, between Regal Entertainment Group and Amy E. Miles (filed  as exhibit 10.6 to Amendment No. 2 to the Registration Statement of  Regal Entertainment Group on Form S-1 (Commission File  No. 333-84096) on May 6, 2002, and incorporated herein by  reference)                                                                                                                                                                                          |
| 10.7          |       | Purchase and Sale  Agreement by and between United Artists Theatre Circuit, Inc., as seller, and  Boardwalk Ventures, LLC, as purchaser, dated as of October 11, 2005 (filed as  exhibit 10.7 to United Artists Theatre Circuit, Inc.’s Form 10-K (Commission  File No. 033-49598) filed on March 29, 2006, and incorporated herein by  reference)                                                                                                                                                                   |
| 31.1          |       | Rule 13(a)-14(a)  Certification of Principal Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 31.2          |       | Rule 13(a)-14(a)  Certification of Principal Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

----

*                    Identifieseach management contract or compensatory plan or arrangement.

(b)            Theexhibits required to be filed herewith are listed above.

(c)             Notapplicable.

50

----