Dancing in the aisles at Regal

IPO fuels huge Q1; coming attractions look good

Regal Entertainment Group, juiced by the initial public offering of National CineMedia, posted quarterly earnings that soared almost 20-fold compared with the same period last year.

The nation's largest theater chain earned $229.1 million in the first quarter, with $209 million coming from the IPO of National CineMedia, an in-theater advertising company. Regal earned $11.2 million a year ago.

Disregarding the IPO proceeds, the company still earned more than analysts predicted, and shares of the company rose 4.2% to $21.85 on Thursday. Regal also announced its intentions to pay a 30-cent dividend on June 21 to shareholders of record June 13.

Revenue also beat expectations, rising 6.8% to $625 million. Regal said most of that was because of a 7.7% surge in the average ticket price to $7.28, while attendance rose only 1.1%. Concession revenue rose 6.1%.

Regal CEO Michael Campbell said the Imax version "300" gets some of the credit for rising ticket prices and that the popularity of other R- and PG-rated films helped as well because fewer children's tickets were sold.

Analysts were enthusiastic about Regal's results, and some predicted more upside surprises as franchise films begin hitting U.S. screens.

Said Wedbush Morgan Securities analyst William Kidd: "Anecdotally, early sales of 'Spider-Man 3' are reportedly multiples ahead of its predecessors, which is fitting nicely with our expectation that 'Spider-Man' will be the biggest-grossing film in 2007" despite conventional wisdom that it will be "Pirates of the Caribbean: At World's End."

Kidd reiterated his "buy" recommendation and $24 price target on Regal shares.

One of Regal's big initiatives this year is to dramatically increase its 3-D and digital screen count. While Campbell said that 3-D movies outperform regular versions of the same titles by as much as 300%, Kidd noted that the benefits are a bit exaggerated because 3-D gains come at the expense of other screens.

Regal said it expects to end its fiscal year with 6,373 screens, down from the 6,403 it had at the end of its previous fiscal year.
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