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Carmike Cinemas, Inc. (CKEC)
F3Q08 Earnings Call
November 10, 2008 5:00 pm ET
Joe Jaffoni, Investor Relations
Michael W. Patrick - Chairman of the Board, President, Chief Executive Officer
Fred W. Van Noy - Chief Operating Officer, Senior Vice President, Director
Richard B. Hare - Chief Financial Officer, Senior Vice President - Finance, Treasurer
David Miller - Caris & Company
James Marsh - Piper Jaffray
Previous Statements by CKEC
» Carmike Cinemas Q2 2008 Earnings Call Transcript
» Carmike Cinemas, Inc. Q1 2008 Earnings Call Transcript
» Carmike Cinemas Q4 2007 Earnings Call Transcript
Thank you, operator, and good afternoon, everyone, and thank you for joining us.
Before we get started, I’d like to read the Safe Harbor statement. Certain statements by Carmike’s management of today’s 2008 third quarter conference call may constitute forward-looking statements.
Such statements are subject to risks, uncertainties, and other factors that may cause Carmike’s actual performance to be materially different from the performance indicated or implied by such statements.
Such risks, uncertainties, and other factors are set forth in the company’s annual report on Form 10-K for the year ended December 31, 2007 and other filings with the Securities and Exchange Commission. Carmike undertakes no obligation to publicly update or revise any forward-looking statements.
I’d now like to turn the call over to our host, Michael Patrick, Carmike Cinema’s Chief Executive Officer. Michael?
Thank you. I’m Michael Patrick. With me I have Richard Hare, our Chief Financial Officer, and Fred Van Noy, our Chief Operating Officer. We would like to welcome you to our third quarter earnings conference call.
On today’s call, we would like to address our third quarter results, update you on our latest expansion of our 3D footprint, and provide expectation for fourth quarter box office, which will include our holiday lineup of film. We will also discuss our improvements and our per patron metrics, our reduction and the measure we are taking to reduce our leverage.
Our third quarter box office revenue was driven primarily to the success of the Dark Knight. Today, the Dark Knight has generated nearly $527 million in domestic box office and is the second highest domestic growth of all time.
Although we were helped by the strong box office performance of the Dark Knight, our third quarter box office revenue declined approximately 3% on a per screen basis from last year’s third quarter. This was in part due to a record box office during the third quarter of last year, which was carried by strong box office performances of Transformers, Harry Potter, Bourne Ultimatum, and Ratatouville.
During the second quarter of 2008, we implemented a strategic mission and concession price increase, which had allowed us to realize an average kick increase of 7.6% over the third quarter of last year and an average concession per cap increase of 5.9% over the same quarter last year. Average ticket increased by $0.44 from $5.79 to $6.23 and our concession per cap increased by $0.18 from $3.04 to $3.22. Our total average per patron during the third quarter reached $9.45. We are now forced to break the $9.50 per person barrier.
We are closely monitoring our expense controls and have a significant reduction in our operating costs, specifically salaries, and general theater expenses. We realized to export the benefits of our ROI salary control that were implemented during the second quarter of 2008. We had been successful in reducing general and administrative expenses by 14% compared to last year’s third quarter.
We have also made meaningful progress in further reducing our interest expense which declined 17.3% during the period. In addition, we made a $10 million bank debt prepayment in the third quarter. Over the past 12 months, we have made approximately $33 million of payments against our outstanding debt.
The company continues to focus on operating performance improvements and selling surplus property in order to de-leverage our balance sheet. As previously announced, in light of the continuing challenging conditions in the credit market and in the wider economy, the company’s board of directors suspended Carmike’s quarterly dividends.
Over the past four quarters, Carmike’s dividend payments amounted to approximately $9 million dollars. Going forward, the company plans to allocate its capital primary to reducing its overall leverage.
Moving to our digital program, we are in the final phase of our 3D rollout with the installation of 72 more 3D screens scheduled for completion during our fourth quarter. We have completed our capital program for both our digital projection and our 3D rollout. Circuit-wide, we had installed 2,159 digital projectors at 231 locations, which represents 44% of the US domestic total.
Of our 2,159 digital auditoriums, 499 auditoriums are 3D equipped, which represents 38% of the total US domestic number of 3D screens.
Our first run locations are all 100% fully digital and each location has between one and six 3D equipped auditoriums based on the screen count of these theatres. Typically, our six through ten screen locations have two 3D auditoriums. Our 11 through 14 screen locations have three 3D auditoriums. Our 15 through 18 screen locations have four 3D auditoriums and our 20 screen locations have five 3D auditoriums with our thoroughbred 20 located in Franklin, Tennessee having six 3D auditoriums.
With our auditorium right side configuration, along with the amount of 3D auditoriums that we have available, we have the flexibility to place multiple 3D movies in a variety of different size auditoriums. We are very pleased with our industry-leading position in digital projection and 3D.