Regal Entertainment Group (RGC)
Q4 2008 Earnings Call
February 19, 2009 9:30 am ET
Michael Campbell – Chairman of the Board, Chief Executive Officer
Amy Miles – Executive Vice President, Chief Financial Officer and Treasurer
Don De Laria – Vice President, Investor Relations
Tony Wible – Janney Montgomery Scott
Analyst for James Marsh – Piper Jaffray
David Miller – Caris & Co.
Barry Scott – Credit Suisse
Ben [Mobile] – Thomas Weisel Partners
Analyst – Waterstone Capital Partners
Jake Hindelong – Monness, Crespi, Hardt & Co.
Eric Wold – Merriman, Curhan Ford & Co.
Jeffrey Logsdon – BMO Capital Markets
Barton Crockett – Lazard Capital Markets
David Gober – Morgan Stanley
Previous Statements by RGC
» Regal Entertainment Group, Q1 2009 Earnings Call Transcript
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I would now like to turn the call over to Don DeLaria, Vice President of Investor Relations.
Don De Laria
Hi and good morning. Before I begin today I would like to remind our listeners this conference call contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933 as amended and section 21E of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical fact communicated during this conference call may constitute forward-looking statements.
These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the company’s expectations are disclosed in the risk factors contained in the company’s annual report on form 10K dated February 26, 2008. All forward-looking statements are expressively qualified in their entirety by such factors.
Now I’ll turn the call over to Mike Campbell.
Thanks Don. Welcome and thank you for dialing in to our fourth quarter conference call. Today I will provide an overview of the industry and Regal’s fourth quarter results, a brief recap of the 2008 fiscal year and review current trends in the exhibition industry including some of our expectations regarding box office trends for the remainder of the first quarter and the summer 2009 film slate and also an update regarding the digital cinema roll out. Following my remarks Amy will provide a summary review of our financial results and as always we will complete the call with a question-and-answer session.
Now turning to fourth quarter industry results we are pleased to report continued strength in domestic box office results in a period when many other businesses are feeling the impact of a weak economy. The fourth quarter benefited from strong performances from the DreamWorks picture Madagascar II: Escape from Africa, from Sony’s James Bond film Quantum of Solace and also the surprise hit Twilight from Summit Entertainment.
Quarterly results were achieved in spite of mid-year change in release date for the next Harry Potter film which was moved from its original release date in November 2008 to July 2009. The good news is Harry Potter should be one of the top grossing films in our 2009 fiscal year.
For the period that corresponds to Regal’s fiscal fourth quarter industry sources indicate that United States box office revenue increased approximately 16%. The increase was driven by an additional accounting week in the fiscal 2008 fourth quarter which generated approximately $378 million of industry and box office revenue making it the second highest grossing week in the history of our industry.
Now turning briefly to Regal’s fourth quarter results we were pleased to report the significant increases in total revenues, EBITDA and net income for the fourth quarter of 2008. Our fourth quarter results include the impact of an additional week in the 2008 quarter. The additional week falls between Christmas and New Year’s and is a significant week for both the company and the industry. Amy will provide additional details with respect to the impact of the calendar on our fourth quarter results a bit later in the call.
The fourth quarter 2008 also includes the operations of the consolidated theaters that we acquired in May 2008 which have continued to meet our expectations and contributed very nicely to the company’s operating results in the quarter and the 2008 fiscal year.
During the quarter we were particularly pleased by continued improvement in many of our key operating metrics. Our average ticket price grew by 2.3%, our average concession sales per patron increased by 5.4% which is our highest increase since the record setting second quarter of 2007, our film and advertising expense as a percentage of admission revenue declined by 10 basis points and we benefited as I said earlier from the 53rd week as our adjusted EBITDA for the current quarter grew by just over $33 million and our net income increased by 29.7%.
Now turning briefly to highlights of the 2008 fiscal year, we remain encouraged with the overall success of the 2008 box office during these challenging economic times. As we have said in the past, film exhibition industry revenues grew in five of the last seven recessions. We believe this supports our belief that the performance of the industry is significantly more correlated to perceived quality and appeal of the film slate rather than to prevailing economic conditions.
According to industry sources, 2008 calendar box office fell just short of a record 2007 which was by the way the highest box office total in nearly 50 years. In 2008 169 films, which compares to 189 films in 2007, reached wide release with 25 films grossing more than $100 million each, 6 films grossing over $200 million each and one film, Batman the Dark Knight, grossing over $500 million.