<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998

                         COMMISSION FILE NUMBER 1-12360

                               GC COMPANIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                DELAWARE                                        04-3200876
     (State or other jurisdiction of                          (IRS Employer   
     incorporation or organization)                         Identification No.)

           27 BOYLSTON STREET                                     
      CHESTNUT HILL, MASSACHUSETTS                                02467
(Address of principal executive offices)                        (Zip Code)


            REGISTRANT'S TELEPHONE NUMBER AND AREA CODE: 617-264-8000


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


                                                         NAME OF EACH EXCHANGE
    TITLE OF EACH CLASS                                   ON WHICH REGISTERED
----------------------------                            -----------------------

Common Stock, $.01 par value                            New York Stock Exchange


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

         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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [X]

         The aggregate market value of the voting stock held by non-affiliates
of the registrant was approximately $217,868,711 on January 15, 1999.

         There were 7,786,522 shares of Common Stock outstanding as of 
January 15, 1999.




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                           -------------------------

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Company's 1998 Annual Report to Stockholders are
incorporated by reference into Parts I, II and IV of this Report. Portions of
the Proxy Statement for the Company's Annual Meeting of Stockholders to be held
on March 5, 1999 are incorporated by reference into Part III of this Report.







                                        2


<PAGE>   3

                               GC COMPANIES, INC.

                           ANNUAL REPORT ON FORM 10-K

                   FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998

                                TABLE OF CONTENTS



PART I                                                                  PAGE NO.

    Item 1.  Business                                                      4
    Item 2.  Properties                                                    8
    Item 3.  Legal Proceedings                                             9
    Item 4.  Submission of Matters to a Vote of Security Holders           9

PART II

    Item 5.  Market for the Registrant's Common Equity and Related 
             Stockholder Matters                                          10
    Item 6.  Selected Financial Data                                      10  
    Item 7.  Management's Discussion and Analysis of Financial            
             Condition and Results of Operations                          10 
    Item 7a. Quantitative and Qualitative Disclosure about 
             Market Risk                                                  10 
    Item 8.  Financial Statements and Supplementary Data                  12 
    Item 9.  Changes in and Disagreements with Accountants on 
             Accounting and Financial Disclosure                          12

PART III

    Item 10. Directors and Executive Officers of the Registrant           12 
    Item 11. Executive Compensation                                       13
    Item 12. Security Ownership of Certain Beneficial Owners              
             and Management                                               13 
    Item 13. Certain Relationships and Related Transactions               13

PART IV

    Item 14. Exhibits, Financial Statement Schedules and Reports 
             on Form 8-K                                                  13

    Signatures                                                            15  





                                        3


<PAGE>   4
                                     PART I


ITEM 1. BUSINESS

GENERAL

GC Companies, Inc. (the "Company") operates a leading motion picture exhibition
circuit in the United States under the name "General Cinema Theatres," operates
through joint ventures motion picture theatres in South America and Mexico and
also manages a pool of the Company's capital for investments. Through its
investment operations, the Company invests in businesses which have been, and
which may continue to be, unrelated to the Company's theatre business and the
broader entertainment industry. INVESTMENTS MADE BY THE COMPANY MAY BE HIGHLY
ILLIQUID AND MAY INVOLVE CONSIDERABLE RISK. SEE "GCC INVESTMENTS, INC." BELOW.

The Company was incorporated under the laws of the State of Delaware in
September 1993.

GENERAL CINEMA THEATRES, INC.

The Company's theatre operations are the outgrowth of a motion picture
exhibition business which originated in 1922. The predecessors of the Company
are credited with opening two of the first drive-in movie theatres in 1938 and
one of the first indoor shopping center theatres in 1951.

As of October 31, 1998, the Company operated 150 theatres with a total of 1,045
screens in 24 states. The Company provides convenient and comfortable theatres
offering a popular selection of films. Substantially all of the Company's
theatres are state-of-the-art facilities, equipped with high-quality sound and
projection equipment, and exhibit films on a "first run" basis.

Approximately 83% of the Company's theatres, and approximately 88% of the
Company's screens, are located in 30 of the 50 largest Areas of Dominant
Influence (television market areas as defined by Arbitron Company) in the United
States, with approximately 36% of the Company's theatres and approximately 31%
of the Company's screens located in California, Florida and Texas.

From the beginning of fiscal 1988 through the end of fiscal 1998, the Company
increased its average number of screens per theatre from 4.3 to 6.9. All of the
Company's theatres are multi-screen theatres, and approximately 83% of the
Company's screens are located in theatres having 6 to 18 screens. The Company
expects to continue to increase the average number of screens per theatre in its
circuit by selectively closing or selling less productive theatres which
generally have fewer screens, by building theatres with more screens per
theatre, and by adding screens to existing theatres. Since November 1, 1991, the
Company has opened 26 new theatres with an average of 9.3 screens each. In
addition, the Company has opened its first "Premium Cinema" which is an upscale
movie-going experience with features such as large leather seats, a bistro menu
of appetizers, valet parking and an elegant lounge. Key factors which the
Company considers in selecting new theatre sites are demographic trends derived
from statistical sources, distance from competitive theatres, and accessibility
and proximity to retail and other entertainment and dining areas. The Company
expects to concentrate future commitments for new theatres in the Northeast and
Midwest.

Multi-screen theatres enable the Company to present a variety of films appealing
to diverse segments of the movie-going public while serving patrons from common
support facilities such as concession stands, box offices and sales outlets. The
Company believes that this strategy enhances attendance, increases the
utilization of theatre capacity and promotes operating efficiencies. Staggered
scheduling of movie starting times minimizes staffing requirements for
auditorium entry and exit and box office and concession stand services, and
reduces congestion throughout the theatre and its parking areas. Multi-screen
theatres also provide increased flexibility in determining the length of time
that a film will run and the size of the auditorium in which it will be shown.

The Company continually seeks to maximize cash flows through adherence to cost
containment practices. In addition, the Company provides incentive compensation
to its theatre managers on the basis of performance, customer service
responsiveness and quality of theatre operations.




                                        4


<PAGE>   5


MARKETING AND ADVERTISING

The Company relies principally upon television, radio and newspaper display
advertisements (substantially paid for by distributors) and newspaper directory
film schedules (generally paid for by the Company) to inform its patrons of film
titles and exhibition times. The Company also shows previews of coming
attractions and films presently playing on the other screens operated by the
Company in the same theatre or geographic area. The Company also benefits from
promotional programs involving various products and merchants.

FILM LICENSING

Consistent with industry practice, and in part required by consent decrees to
which certain film distributors are parties, distributors generally license
films to exhibitors on a screen-by-screen basis. Film licenses are obtained by
negotiating directly with film distributors.

Fees payable to distributors are based upon several factors, including theatre
location, film supply, competition, season and film content. Film licensing
(termed "film buying" in the industry) typically requires payment of a fee based
on the higher of a gross receipts formula or a theatre admissions revenue
sharing formula. Under a gross receipts formula, the distributor receives a
specified percentage of box office receipts, with the percentage declining over
the term of the run. Under a theatre admissions revenue sharing formula, the
distributor receives a specified percentage of the excess of box office receipts
over a negotiated allowance for theatre expenses. The Company may agree to
guarantee minimum license fees or make recoupable advance payments on licensing
fees, or both, in order to obtain a license for a film that is in high demand.

The Company's film buyers evaluate the prospects for upcoming films prior to the
time that distributors solicit interest. Criteria considered for each film
include all of the factors which affect box office potential, including cast,
director, plot, performance of similar films, the production cost and marketing
budget for the film, estimated film licensing costs, estimated impact on
concession sales, and the expected Motion Picture Association of America rating.
The Company maintains records of attendance by film title and theatre location
so as to enable its film buyers to evaluate a prospective film's suitability and
likelihood of success with respect to each theatre location.

The Company's business is dependent upon the availability of motion pictures
that have substantial popular appeal. There are fewer than ten major
distributors which provide a substantial portion of quality first run movies to
the exhibition industry. Historically, and during fiscal 1998, less than 20% of
the Company's total annual box office receipts have been attributable to the
films of any single distributor. From year to year, however, the Company's
revenues attributable to individual distributors may vary significantly
depending upon the commercial success of each distributor's films. The Company
believes that its relationships with each of the major distributors generally
are good.

The failure to maintain good relationships with, or the poor performance by, one
or more of the major distributors, or the disruption in the production of motion
pictures for any reason (such as labor unrest, the increased cost of production
or distribution of films, or the diversion of funds from production and
distribution to other ventures by the major studios or independent producers)
might have a materially adverse effect upon the Company's business and its
results of operations.

CONCESSIONS

The Company owns and operates the concession stands in all of its theatres.
Concession sales are the second largest source of revenue for the Company after
box office receipts and contribute significantly to the Company's earnings.
Concession items consist primarily of popcorn, soft drinks and candy. The
Company is continuing its efforts to increase concession sales through
optimizing product mix, introducing new products such as brand name fast foods,
coffee and other beverages, novelty items and film-related merchandise, offering
bulk candy snacks, training staff to cross- sell products, and making efficient
use of concession facilities and staff. In addition, the introduction of cafes
and the expansion of game rooms in our theatres is also contributing to
increased sales. The Company's strategy emphasizes prominent and appealing
concession counters designed for rapid service, efficiency, and optimal
merchandising of concession items.




                                        5


<PAGE>   6
COMPETITION

The Company's theatres are subject to varying degrees of competition in the
geographic areas in which they operate. Competition is often intense with
respect to licensing films, attracting patrons and finding new theatre sites.

The Company believes that the principal competitive factors with respect to film
licensing include licensing terms, box office grossing histories, seating
capacity, location of theatres, the quality of projection and sound equipment
and the exhibitors' ability and willingness to promote films. The Company
believes that the principal competitive factors with respect to attracting
patrons include the availability and licensing of popular films, the location
and comfort of theatres, the quality of the projection and sound equipment, and
ticket prices.

Industry participants vary substantially in size, from small independent
operators of a single theatre with a single screen to large national chains of
multi-screen theatres. All compete aggressively with the Company for films,
patrons and theatre locations. The Company competes directly with its largest
competitors in most of the geographic areas in which it operates. In recent
years, construction of megaplex theatres has occurred in the industry which has
resulted in significant additions to the total industry screen count. Since
these new screens are being added at a faster rate than the increase in total
industry demand, the Company anticipates intense competition for domestic box
office receipts.

The Company's theatres compete with other forms of entertainment for the
public's leisure time and disposable income. For example, the Company's theatres
face competition from a number of alternative motion picture exhibition delivery
systems, such as video cassettes and cable television, including pay-per-view,
and satellite entertainment technology. While the future impact of such delivery
systems on the motion picture exhibition industry cannot be determined
precisely, such delivery systems may have had, and in the future may have, an
adverse impact on attendance at the Company's theatres.

SEASONALITY

The major film distributors generally release most of the films which they
anticipate will be the most successful during the summer (Memorial Day weekend
through Labor Day weekend) and holiday (Thanksgiving weekend through New Year's
Day) seasons. Consequently, the Company historically has generated higher
revenues, and substantially all of its earnings, during these periods.

INTERNATIONAL

Effective July 1, 1998, the Company entered into an agreement to form a 50/50
joint venture with Hoyts Cinema Group creating Hoyts General Cinema South
America (HGCSA), a stand-alone theatre circuit which will pursue theatre
opportunities in South America. As of October 31, 1998, HGCSA operated three
theatre units with 34 screens in Argentina, four theatres with 25 screens in
Chile and a joint venture that operates one theatre unit with six screens in
Uruguay. The Company also operates, through its acquisition in 1997 of fifty
percent of the common stock of a company, five theatre units with 55 screens in
Mexico as of October 31, 1998. Key factors which are considered in selecting new
theatre sites are demographic trends derived from statistical sources, distance
from competitive theatres and accessibility and proximity to retail and other
entertainment and dining areas.

Substantially all of the Company's theatres in South America and Mexico, are
state-of-the-art multi-screen facilities, equipped with high quality sound and
projection equipment and exhibit films on a "first-run" basis. Multi-screen
theatres enable the joint ventures to present a variety of films appealing to
diverse segments of the movie-going public while serving patrons from common
support facilities such as concession stands, box office and sales outlets. This
strategy enhances attendance, increases the utilization of theatre capacity and
promotes operating efficiencies. Staggered scheduling of movie starting times
minimizes staffing requirements for auditorium entry and exit and parking areas.
Multi-screen theatres also provide flexibility in determining the length of time
that a film will run and the size of the auditorium in which it will be shown.

As the Company expands internationally, it becomes subject to regulation of
foreign governments. There are significant differences between the theatrical
exhibition industry regulatory environment in the United States and
international markets. Regulatory barriers affecting such matters as the size of
the theatres, the issuance of licenses and the ownership of land may restrict
market entry. The Company's international operations also face the additional
risks of fluctuating currency values. The Company does not hedge against




                                        6


<PAGE>   7
the currency risks. Quota systems used by some countries to protect their
domestic film industry may adversely affect revenues from theatres that the
Company develops in such markets. Such differences in industry structure and
regulatory and trade practices may adversely affect the Company's ability to
expand internationally or to operate at a profit following such expansion.

GENERAL

EMPLOYEES

At October 31, 1998, the Company had approximately 988 full-time and 5,088
part-time theatre employees. The number of part-time employees generally
increases during the summer and holiday seasons in keeping with the seasonal
nature of the motion picture exhibition business.

Approximately 5.8% of the Company's employees are represented by the
International Alliance of Theatrical Stage Employees and Motion Picture Machine
Operators. The Company believes that its relationships with this union and with
its employees generally are good.

GCC INVESTMENTS, INC.

Through GCC Investments, Inc., the Company invests in companies which have been,
and which may continue to be, engaged in businesses which are unrelated to the
Company's theatre business and the broader entertainment industry. These
investment operations are conducted by a team of investment professionals who
evaluate investment opportunities, negotiate and structure the terms of each
investment, monitor the Company's investments and, as designees of the Company,
and serves as members of the boards of directors of such companies. To date, the
Company has financed its investments with existing cash balances. The Company
may use cash generated by theatre operations, sales of existing investments or
borrowings under its line of credit, in addition to cash then on hand, to
finance future investments.

The investments of the Company to date have been, and are expected to continue
to be, minority positions in businesses which the Company believes will provide
substantial returns on the invested cash balances. Although the Company does not
seek to provide day-to-day managerial support to the companies in which it holds
investments, the Company may provide such companies assistance with strategic,
financial and operational matters. It also is possible that the Company may, by
reason of investment, acquisition, conversion of securities, or otherwise,
obtain control of a portfolio company.

INVESTMENTS MADE BY THE COMPANY MAY BE HIGHLY ILLIQUID AND MAY INVOLVE
CONSIDERABLE RISK. BECAUSE OF THE COMPANY'S DESIRE TO MAXIMIZE RETURNS FROM ITS
INVESTMENT OPERATIONS, CURRENT INCOME CONSTITUTES A LOW STRATEGIC PRIORITY.
THERE CAN BE NO ASSURANCE THAT THE COMPANY'S INVESTMENT OPERATIONS WILL MAKE A
CONTRIBUTION TO THE COMPANY'S EARNINGS IN THE FORESEEABLE FUTURE. THE COMPANY'S
INVESTMENT OPERATIONS MAY REDUCE THE COMPANY'S EARNINGS OR CAUSE THE COMPANY TO
INCUR LOSSES. FOR INFORMATION CONCERNING THE INVESTMENTS MADE BY THE COMPANY,
SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND NOTES 2, 4, 6 AND 17 TO THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS, BOTH OF WHICH ARE CONTAINED IN THE COMPANY'S 1998 ANNUAL REPORT TO
STOCKHOLDERS AND INCORPORATED HEREIN BY REFERENCE.

RELATIONSHIP WITH HARCOURT GENERAL, INC.

Harcourt General provides certain corporate services to the Company in
consideration of a fee based on Harcourt General's costs. Harcourt General's
Chairman and Chief Executive Officer also serves as Chairman and Chief Executive
Officer of the Company, and one of Harcourt's Presidents and Co-Chief Operating
Officers serves as President and Chief Operating Officer of the Company. The
fees payable to Harcourt General have been, and will continue to be, subject to
the approval of the Company's Special Review Committee, a committee of the Board
of Directors consisting solely of directors who are not affiliated with Harcourt
General. The fees paid or accrued by the Company for management and other
corporate services were $0.5 million, $0.5 million, and $1.1 million,
respectively, for fiscal years 1998, 1997, and 1996.





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<PAGE>   8
In addition, substantially all of the theatre leases to which the Company is a
party are guaranteed by Harcourt General. Pursuant to a Reimbursement and
Security Agreement entered into between the Company and Harcourt General at the
time of the Spinoff, the Company has agreed to reimburse Harcourt General for
all liabilities, if any, which may be incurred by Harcourt General after the
Spinoff in connection with the theatre leases, and has pledged all of the stock
of its theatre subsidiaries to Harcourt General as security for such agreement.
The Company also agreed to maintain certain financial and operating covenants
designed to minimize Harcourt General's exposure with respect to the theatre
leases. Principally due to the charge described in Note 3 of the Company's
Annual Report to the Stockholders and incorporated herein by reference, waivers
of these financial covenants were obtained, and new covenants and fees were
established by Harcourt General resulting in an amendment and restatement of the
Reimbursement and Security Agreement. In consideration of Harcourt General's
continuing guarantees of the theatre leases, the Company pays Harcourt General a
guarantor's fee measured as a percentage of the present value of all amounts
owing under the theatre leases for which Harcourt General has potential
liability. The guarantor's fees paid by the Company to Harcourt General for
fiscal years 1998, 1997 and 1996 were approximately $230,000, $250,000, and
$271,000, respectively. Harcourt General has not guaranteed any theatre leases
entered into by the Company following the Spinoff.

Although Harcourt General has no equity ownership in the Company, Richard A.
Smith and certain members of his family (the "Smith Family Group") beneficially
own approximately 29.21% of the outstanding shares of Common Stock of the
Company and approximately 27.82% of the outstanding equity securities of
Harcourt General. In addition, Richard A. Smith, the Chairman and Chief
Executive Officer of Harcourt General, serves as the Chairman and Chief
Executive Officer of the Company. Robert A. Smith, one of the Presidents and
Co-Chief Operating Officers of Harcourt General, serves as the President and
Chief Operating Officer of the Company. For additional information concerning
the stock ownership by the Smith Family Group, reference may be made to the
Proxy Statement for the Company's 1999 Annual Meeting (the "Proxy Statement").

ITEM 2. PROPERTIES

DOMESTIC

As of October 31, 1998, the Company operated 150 domestic theatres in 24 states,
with approximately 36% of the Company's domestic theatres and approximately 31%
of the Company's domestic screens located in California, Florida and Texas. As
of such date, virtually all of the Company's theatres were operated pursuant to
leases. The Company's theatre leases are generally entered into on a long-term
basis with terms (including options) ranging from 15 to 40 years. Theatre leases
typically provide for rent based on box office receipts subject to an annual
minimum rental. The Company also is usually obligated to pay taxes, utilities,
common area maintenance costs and certain other expenses related to its leased
theatres.

The Company's corporate, theatre and investment headquarters are located in
Chestnut Hill, Massachusetts, a suburb of Boston. The Company also has regional
theatre offices in Boston, Chicago, and Los Angeles. Corporate headquarters'
functions include overall administration, accounting and management of the
Company and all investment operations. Theatre headquarters' functions include
administration with respect to theatre operations, finance, human resources,
information services, marketing, real estate development and strategic planning.
Regional office functions include film licensing and theatre management with
respect to particular geographic areas. The Company subleases its corporate and
theatre headquarters from Harcourt General and leases its regional offices.

For additional information regarding the Company's lease obligations, see Notes
9 and 14 to the Consolidated Financial Statements contained in the Company's
1998 Annual Report to Stockholders and incorporated herein by reference.

INTERNATIONAL

As of October 31, 1998, the Company operates through its joint venture in South
America, three theatre units with 34 screens in Argentina, four theatre units
with 25 screens in Chile and through a joint venture that operates a theatre
unit with six screens in Uruguay. In addition, through a joint venture in
Mexico, the Company operates five theatre units with a total of 55 screens as of
October 31, 1998. Virtually all of the international theatres were operated
pursuant to leases. The theatre leases are generally entered into on a long-term
basis with terms (including options) ranging from 10 to 30 years. The theatre
leases typically provide for rent based on box office receipts subject to an
annual minimal rental and typically will require for the payment of taxes,
utilities, common area maintenance and certain




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other expenses related to the leased theatre.

The South American joint venture has a corporate office in Buenos Aires,
Argentina and regional theatre offices in Santiago, Chile and Buenos Aires,
Argentina. The corporate office functions include overall administration,
accounting and management of the joint venture operations. The regional offices'
functions include administration with respect to theatre operations, finance,
human resources, information services, marketing, real estate development, film
licensing and theatre management with respect to particular geographic areas.

The Mexican joint venture has an administrative office in Mexico City, Mexico.
The office functions include administration with respect to theatre operations,
accounting, human resources, information services, marketing, real estate
development and film licensing.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in various legal proceedings arising in the ordinary
course of its business operations. The Company does not believe that the
disposition of any such proceedings will have a material adverse effect on the
financial position or continuing operations of the Company.

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

Not Applicable.





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<PAGE>   10
                                     PART II


ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS 

PRICE RANGE OF COMMON STOCK

The Company's Common Stock trades on the New York Stock Exchange under the
symbol "GCX." The high and low sales prices for the Common Stock on the New York
Stock Exchange for the past two fiscal years were as follows:


<TABLE>
<CAPTION>
                 FISCAL 1998:
                                                     HIGH                 LOW
                                                     ----                 ---

                <S>                                 <C>                 <C>   
                 First Quarter                      $47.94              $41.06
                 Second Quarter                     $53.00              $45.75
                 Third Quarter                      $52.63              $46.00
                 Fourth Quarter                     $49.75              $36.00

                 FISCAL 1997:
                                                     HIGH                 LOW
                                                     ----                 ---

                 First Quarter                      $37.13              $33.50
                 Second Quarter                     $40.38              $35.50
                 Third Quarter                      $46.00              $39.88
                 Fourth Quarter                     $44.00              $39.00

</TABLE>

At January 15, 1999, there were 3,069 record holders of Common Stock.


DIVIDEND POLICY

The Company has not paid and has no current plans to pay cash dividends on its
Common Stock. The Company currently intends to retain earnings for use in its
theatre business and investment operations.

ITEM 6.  SELECTED FINANCIAL DATA

The response to this Item is contained in the Company's 1998 Annual Report to
Stockholders under the caption "Selected Financial Data" on page 3 and is
incorporated herein by reference.

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

The response to this Item is contained in the Company's 1998 Annual Report to
Stockholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 4 through 10 and is
incorporated herein by reference.

ITEM 7a  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

GC Companies, as discussed in the description of its business, operates in six
major reported segments. The first four operate the domestic motion picture
exhibition market. The fifth operates through equity method investees in the
Mexican and South American motion picture exhibition markets. The sixth segment
operates as a venture capital arm making investments in a variety of companies
in several industries. Disclosures under this heading address risks arising from
changes in interest rates, foreign currency exchange rates, commodity prices,
equity



                                        10

<PAGE>   11
prices and other market changes that affect market risk-sensitive instruments.

The domestic motion picture segment is subject primarily to interest rate risks.
It bears this risk in two specific ways. First, the Company borrows money under
its revolving credit facility to fund its operating needs. At October 31, 1998,
the Company had outstanding borrowings of $16.8 million, carrying a variable
interest rate, which was 8% on that date. The Company's exposure related to
variable interest resides in the earnings and cash flow implications caused by
changes in interest rates. However, a 100 basis point change in the variable
rate of interest paid by the Company on its outstanding borrowings under its
revolving credit facility would not have a significant impact on either the
earnings or cash flows of the Company. The second component of interest rate
risk relates to amounts earned on the Company's short-term investments of excess
cash. Such risk affects fair values, earnings and cash flows. The short-term
investment portfolio consists primarily of high grade fixed income investments
such as commercial paper, certificates of deposits, corporate debt securities
and U.S. Government securities and had an average balance of $1.9 million over
the past year. The relatively small size of the portfolio has led the Company to
believe that it is not subject to market fluctuations that would materially
impact its financial condition.

Operations in Mexico and South America are undertaken through equity method
investees. Fluctuations in the market value of the underlying equity are not
reported for financial purposes nor can a sensitivity analysis be performed
relative to the market risk of the underlying equity. Because these investments
are in Mexico and South America and because the operations of each of these
entities are conducted utilizing local currencies, the Company's earnings are
exposed to foreign currency exchange rate changes. In particular, because of the
classification of Mexico as a hyper-inflationary economy, foreign exchange gains
or losses attributable to net monetary assets or liabilities in the Mexican
operations directly impact equity earnings in Mexico. Using the October 31, 1998
net monetary asset (liability) position of the Company's Mexican investment, a
10% negative movement in the peso exchange rate would have a $259,000 impact on
the consolidated earnings of the Company. Such market risk relative to exchange
fluctuations does not exist in the Company's South American locations since
these operate in non hyper-inflationary environments.

The Company does not consider its cash flows to be currently exposed to exchange
rate risk because it has no current intention of repatriating earnings from
these Mexican and South American locations.

The Company's venture capital portfolio is primarily exposed to risks arising
from changes in equity prices. Such portfolio has been segmented into three
categories. The first category includes those securities that have been
classified as trading. A portion of the Company's holding in Global TeleSystems
Group, Inc. ("GTS") is included therein. This security is subject to
considerable market risk due to its volatility. In February, 1998, GTS
successfully completed an initial public offering of its common stock at $20 per
share. Since that point in time, the shares have traded as high as $64.25 and as
low as $22.09. At October 31, 1998, the GTS shares closed at $40.06. Currently,
260,000 shares of GTS are classified by the Company as trading securities. A 20%
fluctuation in the value of these securities from the October 31, 1998 price,
would impact pre-tax earnings and total assets by $2.1 million.

The second category of investments held in the portfolio relate to those
marketable equity securities classified as "available-for-sale." Two holdings
are classified herein: the remainder of the Company's investment in GTS and its
investment in an optical and photo service provider, GrandVision. The market
volatility of the GTS stock has been described above. GrandVision shares, during
1998, have traded as high as 266.97ff and as low as 122.24ff. As of October 31,
1998, the GrandVision shares closed at 143.52ff. Equity market fluctuations,
without taking into account the impact of fluctuations in the French franc
vis-a-vis the US dollar, can impact fair values (although not earnings, unless
such equity positions are actually liquidated). A 20% fluctuation in the value
of the above-mentioned securities would either reduce or increase total assets
by $14.2 million. A 10% fluctuation in the value of the French franc vs. the US
dollar (holding the value of the underlying equity security constant) could
reduce or increase total assets by $0.9 million.

The final category of securities in the Company's venture capital portfolio
include a number of holdings in non-publicly traded companies. The Company
values these at either cost less impairment (if any) or under the equity method
of accounting. Equity method investees are specifically excluded from the scope
of this disclosure. Non-public investees where the Company owns less than a 20%
stake are also subject to fluctuations in value, but their current illiquidity
reduces their exposure to pure market risk.





                                        11


<PAGE>   12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements and supplementary data incorporated by
reference into Item 14 below are incorporated herein by reference.

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

None.



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

The response to this Item regarding the directors of the Company and compliance
with Section 16(a) of the Securities Exchange Act of 1934 by the Company's
officers and directors is contained in the Proxy Statement under the captions
"Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" and is incorporated herein by reference.

EXECUTIVE OFFICERS

Below are the name, age and principal occupations for the last five years of
each current executive officer of the Company. All such persons have been
elected to serve until the next annual election of officers and their successors
are elected or until their earlier resignation or removal.

RICHARD A. SMITH - 74

Chairman and Chief Executive Officer of the Company since 1993 President of the
Company from 1993 until November 1995; Chairman of Harcourt General, Inc.
("Harcourt General") and of The Neiman Marcus Group, Inc., a majority owned
subsidiary of Harcourt General, ("NMG"); Chief Executive Officer of Harcourt
General and of NMG (until December 3, 1998) since January 15, 1997 and prior to
December 1991; Director of NMG. Mr. Smith is the father of Robert A. Smith,
President and Chief Operating Officer of the Company, and the father-in-law of
John G. Berylson, Senior Vice President and Chief Investment Officer of the
Company.

ROBERT A. SMITH - 39

President and Chief Operating Officer of the Company since November 1995;
President and Co-Chief Operating Officer of Harcourt General since January 1997;
Chief Executive Officer of NMG since December 3, 1998; President and Chief
Operating Officer prior thereto; Group Vice President of Harcourt General and of
NMG prior thereto; Director of Harcourt General and NMG. Mr. Smith is the son of
Richard A. Smith, Chairman and Chief Executive Officer of the Company, and the
brother-in-law of John G. Berylson, Senior Vice President and Chief Investment
Officer of the Company.

PAUL R. DEL ROSSI - 56

Chairman of General Cinema Theatres, Inc. since November 1997; President and
Chief Executive Officer of General Cinema Theatres, Inc. from 1993 to November
1997; President of General Cinema Theatres, Inc., a subsidiary of Harcourt
General, prior to the Spinoff since 1983; Director of The DeWolfe Companies,
Inc.

JOHN G. BERYLSON - 45

Senior Vice President and Chief Investment Officer of the Company since 1993;
Managing Director of Advent International Financial Services, a venture capital
and financial services firm, prior thereto. Mr. Berylson is the son-in-law of
Richard A. Smith, Chairman and Chief Executive Officer of the Company, and the
brother-in-law of Robert A. Smith, President and Chief Operating Officer of the
Company.

WILLIAM B. DOEREN - 52






                                        12


<PAGE>   13


President of General Cinema Theatres, Inc. since November 1997; Executive Vice
President and Chief Operating Officer of General Cinema Theatres, Inc. from
October 1995 to November 1997; Chief Executive Officer of MGM International
Cinemas from January 1993 until August 1995; Senior Vice President and Chief
Operating Officer of AMC Entertainment Inc. prior thereto.

G. GAIL EDWARDS - 43

Vice President and Chief Financial Officer of the Company since July 1996; Vice
President and Chief Financial Officer of Delaware North Companies, Incorporated,
a private holding company, prior thereto.

PHILIP J. SZABLA - 44

Vice President, General Counsel and Secretary of the Company since December
1996; Member of the law firm of Albrecht, Maguire, Heffern & Gregg, P.C. prior
thereto.

LOUIS E. CASAVANT - 43

Vice President and Corporate Controller of the Company since December, 1998 and
Corporate Controller prior thereto; Controller of Finast Supermarkets from 1994
to 1997; Controller of Childcraft, Inc. from 1992 to 1994.

ITEM 11. EXECUTIVE COMPENSATION

The response to this Item is contained in the Proxy Statement under the captions
"Directors' Compensation," "Executive Compensation" and "Transactions Involving
Management" and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The response to this Item is contained in the Proxy Statement under the caption
"Stock Ownership of Certain Beneficial Owners and Management" and is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The response to this Item is contained in the Proxy Statement under the captions
"Executive Compensation" and "Transactions Involving Management" and is
incorporated herein by reference.


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

14(A)(1) FINANCIAL STATEMENTS

The documents listed below which are contained in the Company's 1998 Annual
Report to Stockholders are incorporated by reference into this Item 14 and into
Item 8 hereof:

         Consolidated Balance Sheets - October 31, 1998 and 1997.

         Consolidated Statements of Operations for the fiscal years ended
         October 31, 1998, 1997 and 1996.

         Consolidated Statements of Cash Flows for the fiscal years ended
         October 31, 1998, 1997 and 1996.

         Consolidated Statements of Shareholders' Equity for the fiscal years
         ended October 31, 1998, 1997 and 1996.

         Notes to Consolidated Financial Statements. Independent Auditors'
         Report.

14(A)(2) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES





                                        13


<PAGE>   14


All schedules for which provision is made in the applicable regulations of the
Securities and Exchange Commission have been omitted because the information is
disclosed in the Consolidated Financial Statements or because such schedules are
not required or are not applicable.

14(A)(3) EXHIBITS

The exhibits filed as part of this Annual Report on Form 10-K are listed in the
Exhibit Index immediately preceding the exhibits. The Company has identified
with an asterisk (*) in the Exhibit Index each management contract and
compensation plan filed as an exhibit to this Annual Report on Form 10-K in
response to Item 14(c) of Form 10-K.

14(B) REPORTS ON FORM 8-K

The Company did not file any reports on Form 8-K during the quarter ended
October 31, 1998.

14(C) EXHIBITS

See Item 14(a)(3) above.




                                        14


<PAGE>   15

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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.


DATED: JANUARY 26, 1999                  GC COMPANIES, INC.


                                         By: /s/ Richard A. Smith 
                                             -----------------------------------
                                             Richard A. Smith, Chairman and
                                             Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the following capacities and on the dates indicated.


   SIGNATURE                              TITLE                    DATE
   ---------                              -----                    ----


PRINCIPAL EXECUTIVE OFFICER:


/s/ Richard A. Smith                 Chairman and              January 26, 1999
-----------------------------------  Chief Executive Officer
Richard A. Smith


PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER


/s/ G. Gail Edwards                  Vice President,           January 26, 1999
-----------------------------------  Chief Financial Officer
G. Gail Edwards                      and Treasurer



DIRECTORS:


/s/ William L. Brown                                           January 26, 1999
-----------------------------------
William L. Brown



/s/ Peter C. Read                                              January 26, 1999
------------------------------------
Peter C. Read



/s/ Richard A. Smith                                           January 26, 1999
-----------------------------------
Richard A. Smith



/s/ Leonard A. Schlesinger                                     January 26, 1999
-----------------------------------
Leonard A. Schlesinger



/s/ Francis E. Sutherby                                        January 26, 1999
-----------------------------------
Francis E. Sutherby






                                        15


<PAGE>   16


                                  EXHIBIT INDEX

                                    DOCUMENT


3.1      Restated Certificate of Incorporation of the Company, incorporated
         herein by reference to Exhibit 3.1 to the Company's Annual Report on
         Form 10-K for the fiscal year ended October 31, 1995.

3.2      Amended and Restated By-Laws of the Company, incorporated herein by
         reference to Exhibit 3.2 to the Company's Annual Report of Form 10-K
         for the fiscal year ended October 31, 1996.

4.1      Form of Stock Certificate of the Company's Common Stock, incorporated
         herein by reference to Exhibit 4 to the Company's Registration
         Statement on Form 10, as amended.

4.2      Smith-Lurie/Marks Stockholders' Agreement Re GC Companies, Inc., dated
         as of December 15, 1993, incorporated herein by reference to Exhibit
         4.2 to the Company's Annual Report on Form 10-K for the fiscal year
         ended October 31, 1994.

10.1     Distribution Agreement, dated as of December 14, 1993, between Harcourt
         General, Inc. and the Company, incorporated herein by reference to
         Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal
         year ended October 31, 1994.

10.2     Reimbursement and Security Agreement ("Reimbursement and Security
         Agreement"), dated as of December 14, 1993, between Harcourt General,
         Inc. and the Company, incorporated herein by reference to Exhibit 10.2
         to the Company's Annual Report on Form 10-K for the fiscal year ended
         October 31, 1994.

10.3     First Amendment to Reimbursement and Security Agreement, dated as of
         September 29, 1994, between Harcourt General, Inc. and the Company,
         incorporated herein by reference to Exhibit 10.3 to the Company's
         Annual Report on Form 10-K for the fiscal year ended October 31, 1994.

10.4     Intercompany Services Agreement, dated as of December 14,1993, between
         Harcourt General, Inc. and the Company, incorporated herein by
         reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K
         for the fiscal year ended October 31, 1994.

10.5     Amended and Restated Intercompany Services Agreement, dated as of
         November 1, 1995, between Harcourt General, Inc. and the Company,
         incorporated herein by reference to Exhibit 10.5 to the Company's
         Annual Report on Form 10-K for the fiscal year ended October 31, 1995.

10.6     Tax Agreement, dated as of December 14, 1993, between Harcourt General,
         Inc. and the Company, incorporated herein by reference to Exhibit 10.6
         to the Company's Annual Report on Form 10-K for the fiscal year ended
         October 31, 1994.

10.7*    GC Companies, Inc. 1993 Equity Incentive Plan, incorporated herein by
         reference to Exhibit 10.8 to the Company's Registration Statement on
         Form 10, as amended.

10.8*    GC Companies, Inc. Retirement Plan, effective December 2, 1993,
         incorporated herein by reference to Exhibit 10.9 to the Company's
         Registration Statement on Form 10, as amended.

10.9     GC Companies, Inc, Supplemental Executive Retirement Plan, effective
         December 1, 1993, incorporated herein by reference to Exhibit 10.10 to
         the Company's Registration Statement on Form 10, as amended.

10.10*   GC Companies, Inc, Key Employee Deferred Compensation Plan, effective
         December 1, 1993, incorporated herein by reference to Exhibit 10.11 to
         the Company's Registration Statement on Form 10, as amended.

10.11*   GC Companies, Inc. Key Executive Stock Purchase Loan Plan, incorporated
         herein by reference to Exhibit 10.6 to the Company's Registration
         Statement on Form 10, as amended.





                                        16


<PAGE>   17


10.12*   Agreement, dated as of December 14, 1993, between Paul R. Del Rossi and
         the Company, incorporated herein by reference to Exhibit 10.8 to the
         Company's Annual Report on Form 10- K for the fiscal year ended October
         31, 1994.

10.13*   Termination Agreement dated as of August 17, 1995 between William B.
         Doeren and the Company, "incorporated herein by reference to Exhibit
         10.13 (or .14, respectively) to the Company's Annual Report on Form
         10-K for the fiscal year ended October 31, 1996."

10.14*   Master Lease Agreement dated as of November 21, 1996 between General
         Electric Capital Corporation, for itself and as agent for certain
         participants and General Cinema Theatres, Inc., "incorporated herein by
         reference to Exhibit 10.13 (or .14, respectively) to the Company's
         Annual Report on Form 10-K for the fiscal year ended October 31, 1996."

10.15*   GC Companies, Inc. 1993 Incentive Plan First Amendment incorporated
         herein by reference to Exhibit 10.15 to the Company's Quarterly Report
         on Form 10-Q for the Quarter ended April 30, 1997.

10.16*   GC Companies, Inc. Key Executive Stock Purchase Loan Plan First
         Amendment, incorporated herein by reference to Exhibit 10.16 to the
         Company's Quarterly Report or Form 10-Q for the Quarter ended April 30,
         1997.

10.17*   GCC Investments, Inc. Incentive Pool Plan, incorporated herein by
         reference to Exhibit 10.17 to the Company's Quarterly Report on form
         10-Q for the quarter ended April 30, 1997.

10.18    Stock Purchase Agreement, dated as of July 25, 1997, by and among
         General Cinema International, Inc., United Artists Theatre Circuit,
         Inc., UA Mexico Holdings, S.A. de C.V., UATC Europe B.V. and Fondo
         Optima, S.A. de C.V., incorporated herein by reference to Exhibit 10.18
         to the Company's Form 8-K filed September 30, 1997.

10.19    Amendment No. 1, dated as of September 24, 1997, by and among General
         Cinema International, Inc., United Artists Theatre Circuit, Inc., UA
         Mexico Holdings, S.A. de C.V., UATC Europe B.V. and Fondo Optima, S.A.
         de C.V., incorporated herein by reference to Exhibit 10.19 to the
         Company's Form 8-K filed September 30, 1997.

10.20*   Amended and Restated Employment Agreement between Paul R. Del Rossi and
         the Company, dated as of November 1, 1997 incorporated herein by
         reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K
         for the fiscal year ended October 31, 1997.

10.21*   GC Companies, Inc. Deferred Compensation Plan for Non-Employee
         Directors, Effective May 1, 1997.

10.22*   First Amendment to GCC Investments, Inc. Incentive Pool Plan
         incorporated herein by reference to Exhibit 10.21 of the Company's
         Annual Report on Form 10-K for the fiscal year ended October 31, 1997.

10.23*   Amendment No. 1 to the GC Companies, Inc. Deferred Compensation Plan
         for Non-Employee Directors, dated as of May 1, 1998, incorporated
         herein by reference to Exhibit 10-23 to the Company's Quarterly Report
         on form 10-Q for the quarter ended July 31, 1998.

10.24    Revolving Credit Agreement dated as of January 26, 1999 among GC 
         Companies, Inc., BancBoston Robertson Stephens Inc., The Bank of Nova 
         Scotia and BankBoston, N.A.

10.25    Amended and Restated Reimbursement and Security Agreement dated as of
         January 26, 1999 between Harcourt General, Inc. and GC Companies, Inc.

11.1     Statement regarding computation of per share earnings.

13.1     1998 Annual Report to Stockholders (which is not deemed to be filed
         except to the extent that portions thereof are expressly incorporated
         by reference into this Annual Report on Form 10- K).

21.1     Subsidiaries of the Company.

23.1     Consent of Deloitte & Touche LLP.

27.1     Financial Data Schedule


-----------
*   Exhibits filed pursuant to Item 14(c) of Form 10-K.