<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1998
OR
[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from               to
                               -------------    -------------

Commission File Number

                            HOLLYWOOD THEATERS, INC.
                        HOLLYWOOD THEATER HOLDINGS, INC.
                            CROWN THEATER CORPORATION
     (Exact names of registrants as specified in their respective charters)

Delaware                                                  75-2598844
(State or other jurisdiction                   (IRS Employer Identification No.)
of incorporation or organization)

2911 Turtle Creek Blvd., Dallas, Texas                    75219
(Address of principal executive offices)                (Zip Code)

           Registrant's telephone number and area code: (214) 528-9500


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       ---    ---

Indicate the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.

Not Applicable


<PAGE>   2

                HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES


                                Table of Contents
<TABLE>
                                     PART I
<S>                                                                        <C>
Item 1 - Financial Information

                  Consolidated Balance Sheets                                 3

                  Consolidated Statements of Operations                       4

                  Consolidated Statements of Cash Flows                       5

                  Notes to Consolidated Financial Statements                  6

Item 2 - Management's Discussion and Analysis of Financial Condition and
                  Results of Operations                                       8

Item 3 - Quantitative and Qualitative Disclosures about Market Risk          13


                                     PART II

Item 1 - Legal Proceedings                                                   14

Item 2 - Changes in Securities and Use of Proceeds                           14

Item 3 - Defaults upon Senior Securities                                     14

Item 4 - Submission of Matters to a Vote of Security-Holders                 14

Item 5 - Other Information                                                   14

Item 6 - Exhibits and Reports on Form 8-K                                    15

         Signatures                                                          17
</TABLE>


                                       2
<PAGE>   3


ITEM 1 - FINANCIAL INFORMATION
                HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       June 30, 1998 and December 31, 1997
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

                                     ASSETS
                                                                                                         June 30,   December 31,
                                                                                                           1998        1997
                                                                                                        ---------    ---------
                                                                                                       (UNAUDITED)   (AUDITED)
<S>                                                                                                     <C>          <C>      
Current assets:
  Cash and cash equivalents .........................................................................   $   6,773    $   7,379
  Accounts receivable ...............................................................................       1,078        1,562
  Inventories .......................................................................................       2,288        1,012
  Prepaid and other current assets, net .............................................................       3,056          850
  Deposits ..........................................................................................       1,933        1,593
                                                                                                        ---------    ---------
             Total current assets                                                                          15,128       12,396
                                                                                                        ---------    ---------
Property and Equipment, net .........................................................................     127,714      104,376
                                                                                                        ---------    ---------
Goodwill, net .......................................................................................      47,722       49,215
Intangible assets, net ..............................................................................      13,068       14,289
Other ...............................................................................................       3,701        3,744
                                                                                                        ---------    ---------
         Total other assets .........................................................................      64,491       67,248
                                                                                                        ---------    ---------
         Total assets ...............................................................................   $ 207,333    $ 184,020
                                                                                                        =========    =========


                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Accounts payable and accrued expenses .............................................................   $   8,649    $  10,605
  Deferred revenue ..................................................................................         158          158
                                                                                                        ---------    ---------
         Total current liabilities ..................................................................       8,807       10,763
Other liabilities:
  Long-term debt ....................................................................................     143,000      110,000
  Deferred lease expenses ...........................................................................       1,423        1,158
  Deferred revenue ..................................................................................         189          302
                                                                                                        ---------    ---------
         Total liabilities ..........................................................................     153,419      122,223

Commitments and contingencies

Convertible Redeemable Preferred Stock,
  Series B Preferred Stock, $.01 par value, 400,000 shares authorized in 1998 and 1997, 
   177,995 and 178,028 shares issued and outstanding at June 30, 1998 and December 31, 1997, 
   respectively, (redemption preference of $31,149) .................................................           2            2
  Series C Preferred Stock, $.01 par value, 400,000 shares authorized in 1998 and 1997, 
    84,137 shares issued and outstanding at June 30, 1998 and December 31, 1997, (redemption
    preference of $16,407) ..........................................................................           1            1
  Series D Preferred Stock, $.01 par value, 400,000 shares authorized in 1998 and 1997, 61,826
    shares issued and outstanding at June 30, 1998 and December 31, 1997, (redemption preference
    of $12,054) .....................................................................................           1            1
  Additional paid-in capital ........................................................................      62,410       59,610

Redeemable Common Stock:
  Common Stock, 16,413 shares issued and outstanding at June 30, 1998 and December 31, 1997 .........          --           --

  Additional paid-in capital ........................................................................       2,872        2,872

Stockholders' deficit:
  Common stock, $.01 par value, 1,500,000  shares  authorized in 1998 and 1997, 103,659 and
   103,464 shares issued and outstanding at June 30, 1998 and December 31, 1997, respectively .......           1            1
   Additional paid-in capital .......................................................................      15,552       15,508
   Accumulated deficit ..............................................................................     (26,925)     (16,198)
                                                                                                        ---------    ---------
      Total stockholders' deficit ...................................................................     (11,372)        (689)
                                                                                                        ---------    ---------
      Total liabilities and stockholders' deficit ...................................................   $ 207,333    $ 184,020
                                                                                                        =========    =========
</TABLE>

      The accompanying notes are an integral part of these balance sheets.


                                       3
<PAGE>   4


                HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED JUNE 30      SIX MONTHS ENDED JUNE 30
                                             --------------------------      ------------------------
                                                  1998        1997               1998         1997
                                                  ----        ----               ----         ----
                                                     (UNAUDITED)                    (UNAUDITED)
<S>                                             <C>         <C>                <C>         <C>     
Revenues:
  Admissions and other operating revenues ...   $ 15,533    $ 10,747           $ 30,932    $ 21,177
  Concessions ...............................      8,231       5,694             16,524      11,116
                                                --------    --------           --------    --------
          Total revenues ....................     23,764      16,441             47,456      32,293
                                                --------    --------           --------    --------
Operating expenses:
  Film rental and advertising costs .........      8,452       5,717             16,795      11,444
  Cost of concessions .......................      1,371         901              2,749       1,754
  Theater operating expenses ................      9,843       7,083             19,146      13,675
  General and administrative expenses .......      1,341       1,271              2,797       2,358
  Depreciation and amortization .............      3,932       2,405              7,543       4,958
                                                --------    --------           --------    --------
          Total operating expenses ..........     24,939      17,377             49,030      34,189
                                                --------    --------           --------    --------
Operating loss ..............................     (1,175)       (936)            (1,574)     (1,896)
Interest expense, net .......................      3,278       1,302              6,341       2,297
                                                --------    --------           --------    --------
Net loss ....................................   $ (4,453)   $ (2,238)          $ (7,915)   $ (4,193)
                                                ========    ========           ========    ========
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       4

<PAGE>   5



                HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                               1998        1997
                                                                             --------    --------
                                                                                  (UNAUDITED)
<S>                                                                          <C>         <C>      
Cash flows from operating activities:
      Net loss ...........................................................   $ (7,915)   $ (4,193)

Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization ......................................      7,543       4,958
      Deferred lease expenses ............................................        327         296

Changes in assets and liabilities:
       Decrease (increase) in accounts receivable ........................        484         (47)
       Increase in prepaids and other current assets .....................     (2,535)       (468)
       Increase in inventories ...........................................     (1,276)       (288)
       Increase in deposits ..............................................       (340)       (631)
       Decrease in deferred revenues .....................................       (113)         --
       Decrease in accounts payable and accrued expenses .................     (1,859)        (39)
                                                                             --------    --------
           Net cash used in operating activities .........................     (5,684)       (412)

Cash flows from investing activities:
       Payments made for theater construction and purchases of property
         and equipment ...................................................    (27,464)    (27,141)
       Payments for business acquisitions net of cash acquired ...........         --     (11,952)
                                                                             --------    --------
           Net cash used in investing activities .........................    (27,464)    (39,093)

Cash flows from financing activities:
       Borrowings under revolving credit facility ........................     33,000      17,800
       Proceeds from issuance of stock ...................................         --      23,517
       Payment of financing fees .........................................       (392)       (473)
       Repurchase of preferred and common stock ..........................        (66)         --
       Repayment of capital lease obligations ............................         --         (20)
                                                                             --------    --------
           Net cash provided by financing activities .....................     32,542      40,824
                                                                             --------    --------

Net increase (decrease) in cash and cash equivalents .....................       (606)      1,319

Cash and cash equivalents, beginning of period ...........................      7,379       3,559
                                                                             --------    --------

Cash and cash equivalents, at end of period ..............................   $  6,773    $  4,878
                                                                             ========    ========

Noncash transactions:
       Preferred stock dividend ..........................................   $  2,805    $  1,517
                                                                             ========    ========
       Issuance of common stock ..........................................   $     97    $     --
                                                                             ========    ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       5

<PAGE>   6


                HOLLYWOOD THEATER HOLDINGS, INC. AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1998
                                   (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

         In the opinion of management, the unaudited Interim Consolidated
Financial Statements of Hollywood Theater Holdings, Inc. ("Holdings") and its
subsidiaries include all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly Holdings' financial position as of June
30, 1998, and the results of its operations for the three month and six month
periods ended June 30, 1998 and 1997. Due to the seasonality of Holdings'
operations, the results of its operations for the interim periods ended June 30,
1998 and 1997, may not be indicative of total results for the full year. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to the rules and regulations promulgated by the Securities and
Exchange Commission. The unaudited Interim Consolidated Financial Statements
should be read in conjunction with the audited Consolidated Financial Statements
of Holdings and the accompanying notes for the years ended December 31, 1997 and
1996. These Consolidated Financial Statements were filed with the Securities and
Exchange Commission in a Special Financial Report in accordance with regulation
15(d) - Reports of Registrants Under the Securities Act of 1933.

NOTE 2. ORGANIZATION

         Holdings and its wholly owned subsidiary, Hollywood Theaters, Inc.,
("HTI") both Delaware corporations, were formed in June 1995 to purchase all of
the outstanding shares of Trans Texas Amusements, Inc. and affiliates. Crown
Theatre Corporation ("CTC") became a wholly owned subsidiary of HTI after it was
acquired by HTI on November 1, 1996, the effective date of the purchase.
Holdings, HTI, and CTC (collectively "The Company") owned and operated 77 motion
picture theaters with 474 screens at June 30, 1998. Holdings currently operates
theaters in Idaho, Kansas, Missouri, Ohio, Oklahoma, and Texas.

NOTE 3. FINANCING ARRANGEMENTS

10 5/8% Senior Notes

         In August 1997 the Company completed an offering of $110.0 million of
senior subordinated notes (the "Offering"). The notes bear interest at 10 5/8%
and are due in 2007. The notes are redeemable, in whole or in part, at the
option of the Company at any time on or after August 1, 2002, at a redemption
price of 105.312% in 2002, 103.542% in 2003, 101.771% in 2004, and 100% in 2005
and thereafter plus any accrued but unpaid interest. In addition, on or before
August 1, 2000, the Company may, at its option and subject to certain
requirements, use an amount equal to the net cash proceeds from one or more
public equity offerings, as defined, to redeem up to an aggregate of 30% of the
principal amount of the notes originally issued at a redemption price of
110.625% plus any accrued but unpaid interest. Upon a change in control of the
Company, as defined in the indenture, the Company will be required to make an
offer to repurchase all or any part of each holder's notes at a price equal to
101% of the principal amount thereof plus interest. The notes also include
restrictive covenants relative to the maintenance of financial ratios and the
incurrence of additional indebtedness. The Company used the net proceeds from
the Offering to repay all of the existing indebtedness under its existing
facility, to finance certain acquisitions, to fund a portion of construction and
other expenses related to the 1997 theater building program, and for general
corporate purposes.


                                       6
<PAGE>   7


Revolving Credit Facility

         In conjunction with the Senior Notes offering, the Company entered into
a revolving credit facility (the "Senior Bank Facility") to fund working
capital requirements and capital expenditures. The Senior Bank Facility
provides for a $50.0 million revolving credit facility with a five year term,
however, the total amount of available borrowings under the Senior Bank
Facility may be less, based on leverage levels of the Company. At December 31,
1997, the Company was not in compliance with two of the thirteen financial
covenants in the Senior Bank Facility. On January 7, 1998, the Company entered
into an amendment of the Senior Bank Facility amending, among other things,
certain financial covenants. Borrowings under the Senior Bank Facility are
conditioned upon the Company achieving and maintaining certain financial
ratios, including the stipulation that total borrowings are not to exceed 5.75
times the Company's "trailing" twelve-month cash flow, as defined, and certain
other restrictions. As of June 30, 1998, $33.0 million was borrowed under the
Senior Bank Facility. Although the Company was in compliance with all financial
covenants at June 30, 1998 the Company requested and has received a waiver from
the bank to permit continued compliance with certain of the financial covenants
in the Senior Bank Facility. The terms of such waiver include a requirement 
that the Company seek additional equity before October 31, 1998.



                                       7
<PAGE>   8

         Unless the context otherwise requires, references in this 10-Q to the
"Company" includes Hollywood Theaters, Inc.("HTI") and its subsidiary, Crown
Theatre Corporation ("CTC"). The following discussion of the Company's financial
condition and results of operations should be read in conjunction with the
financial information included herein, and the Company's Special Financial
Report filed with the Securities and Exchange Commission (the "SEC") for fiscal
years ended December 31, 1997 and 1996. Except for the historical information
contained herein, the following discussion contains forward-looking statements
that involve a number of risks and uncertainties. Factors which could cause the
Company's actual results in future periods to differ materially include, but are
not limited to, the availability of suitable motion pictures for exhibition in
the Company's markets, the availability of opportunities for expansion and
competition with other forms of entertainment, as well as those discussed or
identified from time to time in the Company's filings with the SEC, including,
but not limited to, the Company's 1997 Special Financial Report.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

         The Company's revenues are generated primarily from box office receipts
and concession sales which constituted approximately 64% and 35% of revenues,
respectively, for the quarters ended June 30, 1998 and 1997 and 64% and 34%
respectively, for the year ended December 31, 1997. Additional revenues are
generated by electronic video games located adjacent to the lobbies of certain
of the Company's theaters and by on-screen advertisements shown prior to each
feature film. The Company's revenues are principally affected by changes in
attendance and average admission and concession revenues per patron. Attendance
is primarily affected by the commercial appeal of the films released by
distributors and, to a lesser extent, by the comfort and quality of the theater,
competition, general economic conditions and population growth in the geographic
markets the Company serves.

         The Company's principal costs of operations are film rentals,
concessions costs and theater operating expenses, such as theater lease rentals,
payroll, utilities, advertising costs and insurance.

         The Company has experienced rapid revenue growth through theater
acquisitions and the construction of new theaters. Since January 1997, the
Company has acquired 13 theaters with 98 screens, constructed six theaters with
73 screens, added 13 screens to existing theaters, closed 13 theaters with 38
screens and swapped six theaters with 31 screens for five theaters with 22
screens and $1.1 million in cash. The results of operations of the acquired and
newly-built theaters are included in the Company's consolidated financial
statements from their respective dates of acquisition or opening dates.

         Currently, the Company operates 77 theaters with 479 screens. These are
composed of eight stadium-style theaters with an aggregate of 103 screens, 50
first run theaters with an aggregate of 280 screens, and 19 discount theaters
(theaters that exhibit second run movies and charge lower admission prices) with
an aggregate of 96 screens. In comparison, at the end of 1997 the Company
operated 81 theaters with 469 screens. These were composed of seven
stadium-style theaters with 80 screens, 53 first run theaters with an aggregate
of 288 screens, and 21 discount theaters with an aggregate of 101 screens.

         The Company's admission and concession revenues are subject to seasonal
fluctuations which affect all motion picture exhibitors. These fluctuations are
the result of the distribution practice of the major motion picture studios,
which have historically concentrated the release of the most marketable films in
the summer season from Memorial Day to Labor Day and the holiday season
extending from Thanksgiving through year-end. There are other factors, however,
which may affect the Company's revenues during any particular quarter, including
the popularity of films released during the quarter and the availability of such
popular films at the Company's theaters.


                                       8
<PAGE>   9


RESULTS OF OPERATIONS

The following table sets forth for the fiscal periods indicated the percentage
of total revenues represented by certain items reflected in the Company's
interim condensed consolidated statement of operations (unaudited):

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED JUNE 30  SIX MONTHS ENDED JUNE 30
                                                  --------------------------  ------------------------
                                                       1998      1997             1998       1997
                                                      -----     -----            -----     -----
<S>                                                    <C>       <C>              <C>       <C>  
Revenues:
  Admissions and other operating revenues ...          65.4%     65.4%            65.2%     65.6%
  Concessions ...............................          34.6%     34.6%            34.8%     34.4%
                                                      -----     -----            -----     -----
          Total revenues ....................         100.0%    100.0%           100.0%    100.0%
                                                      -----     -----            -----     -----
Operating expenses:
  Film rental and advertising costs .........          35.6%     34.8%            35.4%     35.5%
  Cost of concessions and other .............           5.8%      5.5%             5.8%      5.4%
  Theater operating expenses ................          41.4%     43.1%            40.3%     42.3%
  General and administrative expenses .......           5.6%      7.7%             5.9%      7.3%
  Depreciation and amortization .............          16.5%     14.6%            15.9%     15.4%
                                                      -----     -----            -----     -----
          Total operating expenses ..........         104.9%    105.7%           103.3%    105.9%
                                                      -----     -----            -----     -----
Operating loss ..............................          (4.9%)    (5.7%)           (3.3%)    (5.9%)
Interest expense, net .......................          13.8%      7.9%            13.4%      7.1%
                                                      -----     -----            -----     -----
Net loss ....................................         (18.7%)   (13.6%)          (16.7%)   (13.0%)
                                                      =====     =====            =====     =====
</TABLE>


COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997

         TOTAL REVENUES. Total revenues for the quarter ended June 30, 1998
increased by 44.5% to $23.8 million from $16.4 million in the comparable 1997
period. This increase in revenues was principally due to a 28.9% increase in
attendance primarily attributable to the Company's acquisition of 13 theaters
with 98 screens, the construction of six theaters with 73 screens and the
addition of 13 screens to existing theaters during 1997 and the first half of
1998.

         The average price of a ticket for the Company's first run and discount
theaters was $4.46 and $1.33, respectively, during the quarter ended June 30,
1998 and $4.37 and $1.20, respectively, during the comparable 1997 period. This
increase was principally due to a change in the mix of theaters (increased
number of all stadium-style-seating theaters that generate higher revenues per
patron) operated by the Company, raising ticket prices and acquiring theaters
with higher average ticket prices than those previously owned. The average
concession sales per customer for the Company's first run and discount
theaters was $2.22 and $1.59, respectively, during the quarter ended June 30,
1998 and $2.06 and $1.44, respectively, during the comparable 1997 period. 
Average concession sales per customer in the Company's theaters increased 
approximately 12.1% during the quarter ended June 30,1998, reflecting both an 
increase in consumption and, to a lesser extent, an increase in prices.

         DIRECT THEATER COSTS. Direct theater costs (which includes film rental
and advertising costs, cost of concessions, and theater operating expenses), for
the quarter ended June 30, 1998 increased by 43.5% to $19.7 million from $13.7
million in the comparable 1997 period. As a percentage of total revenues, direct
theater costs decreased to 82.8% for the quarter ended June 30, 1998 from 83.3%
in the comparable 1997 period. Film rental and advertising costs for the quarter
ended June 30, 1998 increased by 47.8% to $8.5 million from $5.7 million in the
comparable 1997 period. As a percentage of total revenues, film rental and
advertising costs increased to 35.6% for the quarter ended June 30, 1998 from
34.8% in the comparable 1997 period. Cost of concessions for the quarter ended
June 30, 1998 increased by 52.1% to $1.4 million from $901,000 in the comparable
1997 period. As a percentage of total revenues, cost of concessions increased to
5.8% for the quarter ended June 30, 1998 from 5.5% in the comparable 1997
period. Theater operating expenses for the quarter ended June 30, 1998 increased
by 39.0% to $9.8 million from $7.1 million in the comparable 1997 period. As a
percentage of total revenues, theater operating expenses decreased to 41.4% for
the quarter ended June 30, 1998 from 43.1% in the comparable 1997 period. Each
of these dollar increases was principally due to the Company's acquisition and
construction of theaters during 1997.


                                       9
<PAGE>   10


         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the quarter ended June 30, 1998 increased by 5.5% to $1.4 million
from $1.3 million in the comparable 1997 period. As a percentage of total
revenues, general and administrative expenses decreased to 5.6% for the quarter
ended June 30, 1998 from 7.7% in the comparable 1997 period as a result of such
expenses being spread over a greater number of theaters in the 1998 period.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
for the quarter ended June 30, 1998 increased by 63.5% to $3.9 million from $2.4
million in the comparable 1997 period. The increase was principally due to the
Company's acquisition and construction of theaters during 1997. As a percentage
of total revenues, depreciation and amortization expense increased to 16.5% for
the quarter ended June 30, 1998 from 14.6% in the comparable 1997 period.

         OPERATING LOSS. Operating loss was $1.2 million for the quarter ended
June 30, 1998 as compared to $936,000 in the comparable 1997 period.

         INTEREST EXPENSE, NET. Interest expense, net for the quarter ended June
30, 1998 increased by 151.8% to $3.3 million from $1.3 million in the comparable
1997 period. The increase was due to increased borrowings by the Company to
finance the Company's theater construction program and an increase in the
effective interest rate on the Company's borrowings as a result of the Company's
issuance of 10 5/8% Senior Subordinated Notes in August 1997.

         NET LOSS. The Company's net loss was $4.5 million for the quarter ended
June 30, 1998 as compared to $2.2 million in the comparable 1997 period.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997

         TOTAL REVENUES. Total revenues for the six months ended June 30, 1998
increased by 47.0% to $47.5 million from $32.3 million in the comparable 1997
period. This increase in revenues was principally due to a 31.1% increase in
attendance primarily attributable to the Company's acquisition of 13 theaters
with 98 screens, the construction of six theaters with 73 screens and the
addition of 13 screens to existing theaters during 1997 and the first half of
1998.

         The average price of a ticket for the Company's first run and discount
theaters was $4.46 and $1.33, respectively, during the six months ended June 30,
1998 and $4.28 and $1.24, respectively, during the comparable 1997 period. This
increase was principally due to a change in the mix of theaters (increased
number of all stadium-style-seating theaters that generate higher revenues per
patron), operated by the Company, raising ticket prices and acquiring theaters
with higher average ticket prices than those previously owned. The average
concession sales per customer for the Company's first run and discount theaters
was $2.19 and $1.60, respectively, during the six months ended June 30, 1998 and
$1.97 and $1.46, respectively, during the comparable 1997 period. Average
concession sales per customer in the Company's theaters increased approximately
13.4% during the six months ended June 30, 1998, reflecting both an increase in
consumption and, to a lesser extent, an increase in prices.

         DIRECT THEATER COSTS. Direct theater costs (which includes film rental
and advertising costs, costs of concessions, and theater operating expenses) for
the six months ended June 30, 1998 increased by 44.0% to $38.7 million from
$26.9 million in the comparable 1997 period. As a percentage of total revenues,
direct theater costs decreased to 81.5% for the six months ended June 30, 1998
from 83.2% in the comparable 1997 period. Film rental and advertising costs for
the six months ended June 30, 1998 increased by 46.8% to $16.8 million from
$11.4 million in the comparable 1997 period. As a percentage of total revenues,
film rental and advertising costs remained consistent at 35.4% for the six
months ended June 30, 1998 and 35.5% in the comparable 1997 period. Cost of
concessions for the six months ended June 30, 1998 increased by 56.7% to $2.7
million from $1.8 million in the comparable 1997 period. As a percentage of
total revenues, cost of concessions increased to 5.8% for the six months ended
June 30, 1998 from 5.4% in the comparable 1997 period. Theater operating
expenses for the six months ended June 30, 1998 increased by 40.0% to $19.1
million from $13.7 million in the comparable 1997 period. As a percentage of
total revenues, theater operating expenses decreased to 40.3% for the six months
ended June 30, 1998 from 42.3% in the comparable 1997 period. Each of these
dollar increases was principally due to the Company's acquisition and
construction of theaters during 1997.


                                       10
<PAGE>   11


         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the six months ended June 30, 1998 increased by 18.6% to $2.8
million from $2.4 million in the comparable 1997 period. As a percentage of
total revenues, general and administrative expenses decreased to 5.9% for the
six months ended June 30, 1998 from 7.3% in the comparable 1997 period as a
result of such expenses being spread over a greater number of theaters in the
1998 period.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
for the six months ended June 30, 1998 increased by 52.1% to $7.5 million from
$5.0 million in the comparable 1997 period. The increase was principally due to
the Company's acquisition and construction of theaters during 1997. As a
percentage of total revenues, depreciation and amortization expense increased to
15.9% for the six months ended June 30, 1998 from 15.4% in the comparable 1997
period.

         OPERATING LOSS. Operating loss was $1.6 million for the six months
ended June 30, 1998 as compared to $1.9 million in the comparable 1997 period.

         INTEREST EXPENSE, NET. Interest expense, net for the six months ended
June 30, 1998 increased by 176.1% to $6.3 million from $2.3 million in the
comparable 1997 period. The increase was due to increased borrowings by the
Company to finance the Company's theater construction program and an increase in
the effective interest rate on the Company's borrowings as a result of the
Company's issuance of 10 5/8% Senior Subordinated Notes in August 1997.

         NET LOSS. The Company's net loss was $7.9 million for the six months
ended June 30, 1998 as compared to $4.2 million in the comparable 1997 period.

LIQUIDITY

         The Company's revenues are collected in cash, primarily through box
office receipts and concession sales. The Company's film rentals for a given
film are ordinarily paid to film distributors 15 to 45 days following receipt of
admissions revenues. As a result of this timing difference, as well as the lack
of significant inventory and accounts receivable, the Company has generally
operated with a minimum working capital position for its ongoing theater
operations.

          Cash used in operating activities was $5.7 million and $412,000 for
the six months ended June 30, 1998 and 1997, respectively. The payment of
accrued interest on the 10 5/8% Senior Subordinated Notes, increased net loss,
increase in prepaids and other current assets, increase in inventories and
decrease in accounts payable in the first quarter of 1998 contributed to the
increase in cash used in operating activities as compared to the first quarter
of 1997.

         Cash used in investing activities was $27.5 million and $39.1 million
for the six months ended June 30, 1998 and 1997, respectively. Investing
activities consist of theater development and acquisition and remodeling and
expansion of existing theaters. Cash provided by financing activities was $32.5
million and $40.8 million for each of the six month periods ended June 30, 1998
and 1997, respectively.

CAPITAL RESOURCES

         In February 1998, the Company completed an offering (the "Exchange
Offering") to exchange the 10 5/8% Senior Subordinated Notes which are
registered under the Securities Act, for its then outstanding 10 5/8% Senior
Subordinated Notes due August 1, 2007, which were initially offered (the "Old
Notes Offering") and sold by Hollywood in August 1997. The Company received net
proceeds of approximately $105.7 million from the Old Notes Offering. Such
proceeds were used by the Company to (i) repay all of the Company's then
outstanding indebtedness under its former credit facility (approximately $64.5
million at June 30, 1997), (ii) finance the acquisition of a newly-built all
stadium-style seating multiplex theater in Waco, Texas (the "Waco Acquisition")
and seven theaters from General Cinema Corp. of Oklahoma, Inc. (the "Oklahoma
Acquisition"), (iii) pay a portion of construction and other expenses relating
to the Company's 1997 theater building program and (iv) fund general corporate
activities. 


                                       11
<PAGE>   12
         The Company's Senior Bank Facility provides for a $50.0 million
revolving credit facility; however, the total amount of available borrowings
under the Senior Bank Facility may be less depending on leverage levels of the
Company. At December 31, 1997, the Company was not in compliance with two of the
thirteen financial covenants in the Senior Bank Facility. On January 7, 1998,
the Company entered into an amendment of the Senior Bank Facility, amending,
among other things, certain financial covenants. Although the Company was in
compliance with all financial covenants at June 30, 1998 the Company requested
and has received a waiver from the bank to permit continued compliance with
certain of the financial covenants in the Senior Bank Facility. The terms of
such waiver include a requirement that the Company seek additional equity before
October 31, 1998.

         At June 30, 1998, the Company had $143.0 million of indebtedness
outstanding, $33.0 million of which was senior indebtedness outstanding under
the Senior Bank Facility. Amounts outstanding under the Senior Bank Facility
bear interest, at the option of the Company, at either (i) the Eurodollar Rate
(as defined therein) or (ii) the Base Rate (as defined therein), as the case may
be, plus the Applicable Margin (as defined therein). At June 30, 1998, the
applicable interest rate was 8.63%.

         In addition to the primary sources of liquidity discussed above, the
Company has other potential sources of liquidity, including the sale of
securities.

CAPITAL REQUIREMENTS

         Since January 1997, the Company has acquired 13 theaters with 98
screens, constructed six theaters with 73 screens, added 13 screens to existing
theaters, closed 13 theaters with 38 screens and swapped six theaters with 31
screens for five theaters with 22 screens and $1.1 million in cash. The
Company's capital expenditures in connection with such acquisitions and theater
development in 1997 and the first half of 1998 were approximately $130.5
million. The Company funded these capital expenditures through cash flow from
operations, borrowings under the Senior Bank Facility, the proceeds of the
securities offerings and the proceeds from the issuance of shares of Common
Stock and Convertible Preferred Stock.

         The Company currently has three all-stadium-style theaters with 43
screens under construction in Alabama, Missouri and Texas. Including these
current construction projects, the Company's remaining 1998-99 theater
development program provides for the construction of 13 new stadium-style
theaters with 179 screens, the addition of 23 stadium-style auditoriums to six
theaters and the conversion of 46 existing screens into stadium-style
auditoriums at seven theaters. Since January 1998 the Company has closed five
theaters with 18 screens and anticipates closing nine theaters with 35 screens
during the remaining portion of 1998 and 1999. As a result, by the end of fiscal
year 1999, the Company expects to operate approximately 366 stadium screens out
of a total of 646 screens. The Company anticipates that capital expenditures in
connection with its 1998-99 theater development program will be approximately
$129.7 million, of which approximately $4.5 million has been spent by the
Company as of July 31, 1998. The Company has historically funded its capital
expansion needs through the proceeds from issuances of shares of Common Stock
and Convertible Preferred Stock, the sale of securities, the Company's bank
lines of credit and funds generated from its operations.

         Based upon the Company's current level of operations and anticipated
growth, management believes that its cash flow from operations, together with
available borrowings under the Senior Bank Facility (assuming compliance with
the waiver of certain financial covenants discussed above), will be adequate to
meet the Company's requirements for working capital, scheduled lease payments
and scheduled principal payments of interest on its indebtedness, including the
Senior Notes, during the next several years. However, the Company's business may
not generate sufficient cash flow from operations and future borrowings may not
be available under the Senior Bank Facility in an amount sufficient to enable
the Company to service its indebtedness. The Company's current future theater
development and future theater acquisitions will require financing sources in
addition to cash generated from operations and any future borrowings available
under the Senior Bank Facility. Although the Company intends to continue its
theater development program over the next several years, there can be no
assurances that such additional financing for such expansion will be available
to the Company on acceptable terms or at all.


                                       12
<PAGE>   13


YEAR 2000 IMPACT

         The Company has initiated a review of its internal information systems
for Year 2000 transition problems and has purchased and installed new accounting
software that it believes to be Year 2000 compliant. Other internal computer
systems of the Company have not been fully evaluated, but the Company has
initiated a task force to evaluate these systems. The Company has not
extensively investigated the Year 2000 compliance of its customers, suppliers
and other third parties with whom it does business, but has initiated
discussions with its significant suppliers to determine the extent to which
their failure to correct their own Year 2000 issues could affect the Company.
Compliance by such third parties is voluntary and the Company cannot guarantee
that any Year 2000 problems in other companies' systems, on which the Company
relies, will be resolved in a timely manner. The Company cannot guarantee that
other companies' failure to resolve such problems, or resolutions incompatible
with the Company's systems, would not have a material adverse effect on the
Company.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable


                                       13
<PAGE>   14


                                     PART II
ITEM 1 - LEGAL PROCEEDINGS

         From time to time the Company is involved in legal proceedings arising
from the ordinary course of its business operations. The Company does not
believe that the resolution of these proceedings will have a material adverse
effect on the Company's financial condition and results of operations.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

Not Applicable

ITEM 5 - OTHER INFORMATION

None


                                       14
<PAGE>   15


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

Exhibits
                           EXHIBIT INDEX
     EXHIBIT
     NUMBER       DESCRIPTION

         *3.1     Amended and Restated Certificate of Incorporation of Hollywood
                  Theaters, Inc.
         *3.2     Restated Certificate of Incorporation of Hollywood Theater
                  Holdings, Inc.
         *3.3     Articles of Incorporation of Crown Theatre Corporation
         *3.4     By-laws of Hollywood Theaters, Inc.
         *3.5     By-laws of Hollywood Theater Holdings, Inc.
         *3.6     By-laws of Crown Theatre Corporation
         *4.1     Indenture dated as of August 7, 1997 between Hollywood
                  Theaters, Inc., Hollywood Theater Holdings, Inc. and Crown
                  Theater Corporation and U.S. Trust Company of Texas, N.A.
         *4.2     Exchange and Registration Rights Agreement, dated a of August
                  7, 1997 among Hollywood Theaters, Inc., Hollywood Theaters
                  Holdings, Inc., Goldman, Sachs, & Co., and BancAmerica
                  Securities Inc.
         *4.3     Second Amendment to Registration Rights Agreement, date as of
                  December 17, 1997 by and between Hollywood Theater Holdings,
                  Inc. and The Beacon Group III - Focus Value Fund, L.P., as
                  amended.
         *4.4     Second Amendment to Registration Rights Agreement, dated as of
                  December 17, 1997, by and among Hollywood Theater Holdings,
                  Inc., Stratford Capital Partners, L.P. and Precept Investors,
                  inc.
         *4.5     Registration Rights Agreement, dated as of November 1, 1996,
                  by and between Hollywood Theater Holdings, Inc. and Richard M.
                  Durwood Revocable Trust.
         *4.6     First Amendment to Registration Rights Agreement, date as of
                  December 17, 1997, by and among Hollywood Theater Holdings,
                  Inc., Hoak Communications Partners, L.P., HCP Capital Fund,
                  L.P. and HCP 1997 Authorized Employee Fund
         *4.7     Amended and Restated Agreement with respect to Registration
                  Rights, dated as of May 13, 1997, by and among Hollywood
                  Theater Holdings, Inc., Stratford Capital Partners, L.P.,
                  Precept Investors, Inc., The Beacon Group III - Focus Value
                  Fund, L.P., Hoak Communications Partners, L.P., HCP Capital
                  Fund, L.P. and HCP 1997 Authorized Employee Fund, L.P.
         *10.1    Purchase Agreement, dated as of July 31, 1997, by and among
                  Hollywood Theaters, Inc., Hollywood Theater Holdings, Inc.,
                  Crown Theater Corporation and Goldman, Sachs, and Co.
         *10.2    Amended and Restated Credit Agreement, dated as of August 7,
                  1997, among Hollywood Theater Holdings, Inc., Hollywood
                  Theaters, Inc., and Bank of America National Trust and Savings
                  Associations.
         *10.3    Amended and Restated Shareholders' and Voting Agreement, dated
                  as of December 17, 1997, by and among Hollywood Theater
                  Holdings, Inc., The Beacon Group III - Focus Value Fund, L.P.,
                  Stratford Capital Partners, L.P., Hoak Communications
                  Partners, L.P., HCP Capital Fund, L.P., and HCP 1997
                  Authorized Employee Fund, L.P.
         *10.4    Purchase and Assignment Agreement, dated as of July 25, 1997,
                  between General Cinema Corp. of Oklahoma, Inc. and Hollywood
                  Theaters, Inc., as amended by Amendment No. 1 to Purchase and
                  Assignment Agreement, dated as of July 30, 1997, between
                  General Cinema Corp. of Oklahoma, Inc. and Hollywood Theaters,
                  Inc.
         *10.5    Agreement of Purchase and Sale, dated as of July 22, 1996, by
                  and among United Artists Theatre Circuit, Inc., United Artists
                  Properties I Corp., Resort Amusement Corporation and Hollywood
                  Theaters, Inc. as amended.
         *10.6    Asset and Stock Purchase Agreement, dated as of August 26,
                  1996, between Crown Cinema Corporation, Crown Theatre
                  Corporation, Hollywood Theaters, Inc., and Hollywood Theater
                  Holdings, Inc., as amended.


                                       15
<PAGE>   16


         *10.7    Asset Purchase Agreement, dated as of August 19, 1997, between
                  Dickinson, Inc. and Hollywood Theaters, Inc.
         *10.8    Employment Agreement, dated as of October 1, 1996, between
                  Hollywood Theaters, Inc. and Thomas W. Stephenson, Jr.
         *10.9    Employment Agreement, dated as of October 1, 1996, between
                  Hollywood Theaters, Inc. and James R. Featherstone.
         *10.10   Employment Agreement, dated as of October 1, 1996, between
                  Hollywood Theaters, Inc. and Robert E. Painter.
         *10.11   Hollywood Theaters, Inc. Savings and Profit Sharing Plan, as
                  amended and restated.
         *10.12   Hollywood Theater Holdings, Inc. 1996 Stock Option and Award
                  Plan, dated December 15, 1996, as amended.
         *10.13   Hollywood Theaters, Inc. 401(k) Savings Plan, as amended.
         *10.14   Indemnification Agreement, dated as of May 15, 1996, by and
                  between Hollywood Theaters, Inc., Hollywood Theater Holdings,
                  Inc., and Thomas W. Stephenson, Jr.
         *10.15   Third Amendment to Amended and Restated Credit Agreement,
                  dated January 7, 1998, among Hollywood Theater Holdings, Inc.,
                  Hollywood Theaters, Inc., and Bank of America National Trust
                  and Savings Association.
         *24.1    Power of Attorney
          27      Financial Data Schedule

* - Incorporated by reference to Hollywood Theaters, Inc.'s Registration
Statement on Form S-4 (File No. 333-36763), dated February 4, 1998.


REPORTS ON FORM 8-K

         None


                                       16
<PAGE>   17


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                      HOLLYWOOD THEATERS, INC. AND SUBSIDIARIES




Date: August 14, 1998                             /s/ Thomas W. Stephenson, Jr.
     -----------------                            -----------------------------
                                                  Thomas W. Stephenson, Jr.
                                                  Chief Executive Officer




Date: August 14, 1998                             /s/ James R. Featherstone
     -----------------                            -----------------------------
                                                  James R. Featherstone
                                                  Chief Financial Officer


                                       17
<PAGE>   18

                                 EXHIBIT INDEX
<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER       DESCRIPTION
     -------      -----------
<S>               <C>
         *3.1     Amended and Restated Certificate of Incorporation of Hollywood
                  Theaters, Inc.
         *3.2     Restated Certificate of Incorporation of Hollywood Theater
                  Holdings, Inc.
         *3.3     Articles of Incorporation of Crown Theatre Corporation
         *3.4     By-laws of Hollywood Theaters, Inc.
         *3.5     By-laws of Hollywood Theater Holdings, Inc.
         *3.6     By-laws of Crown Theatre Corporation
         *4.1     Indenture dated as of August 7, 1997 between Hollywood
                  Theaters, Inc., Hollywood Theater Holdings, Inc. and Crown
                  Theater Corporation and U.S. Trust Company of Texas, N.A.
         *4.2     Exchange and Registration Rights Agreement, dated a of August
                  7, 1997 among Hollywood Theaters, Inc., Hollywood Theaters
                  Holdings, Inc., Goldman, Sachs, & Co., and BancAmerica
                  Securities Inc.
         *4.3     Second Amendment to Registration Rights Agreement, date as of
                  December 17, 1997 by and between Hollywood Theater Holdings,
                  Inc. and The Beacon Group III - Focus Value Fund, L.P., as
                  amended.
         *4.4     Second Amendment to Registration Rights Agreement, dated as of
                  December 17, 1997, by and among Hollywood Theater Holdings,
                  Inc., Stratford Capital Partners, L.P. and Precept Investors,
                  inc.
         *4.5     Registration Rights Agreement, dated as of November 1, 1996,
                  by and between Hollywood Theater Holdings, Inc. and Richard M.
                  Durwood Revocable Trust.
         *4.6     First Amendment to Registration Rights Agreement, date as of
                  December 17, 1997, by and among Hollywood Theater Holdings,
                  Inc., Hoak Communications Partners, L.P., HCP Capital Fund,
                  L.P. and HCP 1997 Authorized Employee Fund
         *4.7     Amended and Restated Agreement with respect to Registration
                  Rights, dated as of May 13, 1997, by and among Hollywood
                  Theater Holdings, Inc., Stratford Capital Partners, L.P.,
                  Precept Investors, Inc., The Beacon Group III - Focus Value
                  Fund, L.P., Hoak Communications Partners, L.P., HCP Capital
                  Fund, L.P. and HCP 1997 Authorized Employee Fund, L.P.
         *10.1    Purchase Agreement, dated as of July 31, 1997, by and among
                  Hollywood Theaters, Inc., Hollywood Theater Holdings, Inc.,
                  Crown Theater Corporation and Goldman, Sachs, and Co.
         *10.2    Amended and Restated Credit Agreement, dated as of August 7,
                  1997, among Hollywood Theater Holdings, Inc., Hollywood
                  Theaters, Inc., and Bank of America National Trust and Savings
                  Associations.
         *10.3    Amended and Restated Shareholders' and Voting Agreement, dated
                  as of December 17, 1997, by and among Hollywood Theater
                  Holdings, Inc., The Beacon Group III - Focus Value Fund, L.P.,
                  Stratford Capital Partners, L.P., Hoak Communications
                  Partners, L.P., HCP Capital Fund, L.P., and HCP 1997
                  Authorized Employee Fund, L.P.
         *10.4    Purchase and Assignment Agreement, dated as of July 25, 1997,
                  between General Cinema Corp. of Oklahoma, Inc. and Hollywood
                  Theaters, Inc., as amended by Amendment No. 1 to Purchase and
                  Assignment Agreement, dated as of July 30, 1997, between
                  General Cinema Corp. of Oklahoma, Inc. and Hollywood Theaters,
                  Inc.
         *10.5    Agreement of Purchase and Sale, dated as of July 22, 1996, by
                  and among United Artists Theatre Circuit, Inc., United Artists
                  Properties I Corp., Resort Amusement Corporation and Hollywood
                  Theaters, Inc. as amended.
         *10.6    Asset and Stock Purchase Agreement, dated as of August 26,
                  1996, between Crown Cinema Corporation, Crown Theatre
                  Corporation, Hollywood Theaters, Inc., and Hollywood Theater
                  Holdings, Inc., as amended.
</TABLE>


<PAGE>   19

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER       DESCRIPTION
     -------      -----------
<S>               <C>
         *10.7    Asset Purchase Agreement, dated as of August 19, 1997, between
                  Dickinson, Inc. and Hollywood Theaters, Inc.
         *10.8    Employment Agreement, dated as of October 1, 1996, between
                  Hollywood Theaters, Inc. and Thomas W. Stephenson, Jr.
         *10.9    Employment Agreement, dated as of October 1, 1996, between
                  Hollywood Theaters, Inc. and James R. Featherstone.
         *10.10   Employment Agreement, dated as of October 1, 1996, between
                  Hollywood Theaters, Inc. and Robert E. Painter.
         *10.11   Hollywood Theaters, Inc. Savings and Profit Sharing Plan, as
                  amended and restated.
         *10.12   Hollywood Theater Holdings, Inc. 1996 Stock Option and Award
                  Plan, dated December 15, 1996, as amended.
         *10.13   Hollywood Theaters, Inc. 401(k) Savings Plan, as amended.
         *10.14   Indemnification Agreement, dated as of May 15, 1996, by and
                  between Hollywood Theaters, Inc., Hollywood Theater Holdings,
                  Inc., and Thomas W. Stephenson, Jr.
         *10.15   Third Amendment to Amended and Restated Credit Agreement,
                  dated January 7, 1998, among Hollywood Theater Holdings, Inc.,
                  Hollywood Theaters, Inc., and Bank of America National Trust
                  and Savings Association.
         *24.1    Power of Attorney
          27      Financial Data Schedule
</TABLE>

* - Incorporated by reference to Hollywood Theaters, Inc.'s Registration
Statement on Form S-4 (File No. 333-36763), dated February 4, 1998.