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Regal Entertainment Group (RGC)
F3Q08 Earnings Call
October 23, 2008 9:30 am ET
Michael L. Campbell - Chairman, CEO
Amy E. Miles - Chief Financial Officer, Executive Vice President, Treasurer
Donald De Laria - Vice President Investor Relations
Jake Hindelong - Monness Crespi Hardt & Co.
Lloyd Walmsley - Thomas Weisel Partners
Barton Crockett - J.P. Morgan
Anthony DiClemente – Barclay’s Capitol
Hunter R. DuBose - Morgan Stanley
James Marsh – Piper Jaffray
Jeffrey Logsdon – BMO Capital Markets
Previous Statements by RGC
» Regal Entertainment Group, Q1 2009 Earnings Call Transcript
» Regal Entertainment Group Q4 2008 Earnings Call Transcript
» Regal Entertainment F2Q08 (Qtr End 6/26/08) Earnings Call Transcript
I would now like to turn the call over to Don DeLaria, Vice President of Investor Relations.
Donald De Laria
Hi and good morning. Before I begin today I’d like to remind our listeners that 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 facts 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 10-K dated February 26, 2008. All forward-looking statements are expressly qualified in their entirety by such factors.
Now I’ll turn the call over to Mike Campbell.
Michael L. Campbell
Thanks Don and welcome and thank all of you for dialing into our third quarter conference call. Today I will provide an overview of the industry’s and Regal’s third quarter results, a review of current trends in the exhibition industry including some of our expectations regarding box office trends for the holiday films, and provide an update regarding the digital cinema roll out. Following my remarks Amy Mils will provide a summary review of our financial results and as always we will conclude the call with a question and answer session.
Now turning to third quarter industry results, we were pleased with the third quarter industry box office driven primarily by the success of Batman The Dark Knight, Hancock, and Mamma Mia. The Dark Knight set a number of all time box office records, including the highest grossing midnight release with a record box office take for that show of $18.5 million beating Star Wars Episode III which took in just under $17 million. Also the highest grossing one day and weekly total with a box office gross of $68 million during its first day of release and a record $158 million in box office receipts for the opening weekend. The Dark Knight has currently generated just under $527 million in domestic box office which translates to the second highest domestic gross of all time.
As far as the 2008 fiscal year, The Dark Knight currently tops the next highest grossing picture of the year by a margin of over $200 million, $527 million versus $318 million for Iron Man. We are encouraged that The Dark Knight helped the third quarter box office increase 12% over the third quarter of 2006 and also compared well against a record third quarter last year which was up 15% over the prior year.
We were also encouraged with the overall success of the box office during these challenging economic times. The year-to-date box office numbers support our belief that we are primarily a product driven industry.
For the period that corresponds to Regal’s fiscal third quarter, industry sources report a decrease in aggregate box office revenues of approximately 3%. When taken together with an estimated 1% increase in the total number of screens, industry box office per screen decreased approximately 4%. The recent acquisition of Consolidated Theaters clearly benefited our reported box office revenue as we were essentially flat with last year during a period of declining box office revenues for the industry.
On a per screen basis, our box office revenues were down approximately 6%, resulting in part from our 140 basis point outperformance on the top films last year which created a much more difficult comparison for Regal and the current period. As we have discussed on previous calls, Regal outperformed the industry box office in the 2007 fiscal year.
Now turning to third quarter highlights, I’d like to address a few key third quarter highlights that demonstrate our continued commitment to efficient theater operations. During the quarter we benefited from a recently acquired consolidated theater circuit which generated cash flows that were slightly ahead of our expectations.
Also on October 1, digital cinema implantation partners or DCIP announced an agreement with five studios on the digital cinema upgrade, and in a challenging quarter for the box office we continue to focus our attention on pricing opportunities and cost control and we’re pleased with the following quarterly comparisons. Admission revenue per patron increased 3.9%. Concession revenue per patron increased 3% which reversed the slight decline in the second quarter which was down just over [blank audio 6 seconds] 1%. Our film rent and advertising expense increased only 40 basis points to 54.6% despite the upward pressure on this line item due to the phenomenal success of The Dark Knight.