Regal Entertainment Group (RGC)

RGC 
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Exchange: NYSE
Industry: Consumer Services
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Regal Entertainment Group (RGC)

F4Q12 Earnings Call

February 7, 2013 4:30 pm ET

Executives

Amy E. Miles – Chief Executive Officer

David H. Ownby – Executive Vice President, Chief Financial Officer and Treasurer

Analysts

Benjamin E. Mogil – Stifel, Nicolaus & Co., Inc.

Bo Y. Tang – Barclays Capital, Inc.

Barton Crockett – Lazard Capital Markets

Townsend Buckles – JPMorgan Securities

James M. Marsh – Piper Jaffray, Inc.

Chad Beynon – Macquarie Capital Markets

Ryan Fiftal – Morgan Stanley

Tuna N. Amobi – Standard & Poor’s Investment Advisory Services LLC

Tony Wible – Janney Montgomery Scott LLC

Robert Fishman – Nomura Securities Co. Ltd.

Matthew J. Harrigan – Wunderlich Securities Inc.

James C. Goss – Barrington Research Associates, Inc.

Presentation

Operator

Good afternoon. My name is Robin, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Regal Entertainment Group Fiscal Fourth Quarter and Full Year 2012 Earnings Release Conference Call, with our hosts Amy Miles, Chief Executive Officer of Regal Entertainment Group; and David Ownby, Chief Financial Officer of Regal Entertainment Group. All lines have been placed on mute to prevent any background noise. After management’s remarks, there will be a question-and-answer period. (Operator Instructions)

I would 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 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 10-K dated February 27, 2012. All forward-looking statements are expressly qualified in their entirety by such factors.

Now, I will turn the call over to Amy Miles.

Amy E. Miles

Good afternoon and thank you for dialing into our fourth quarter conference call. For the next few minutes, I’ll provide an overview of the fourth quarter and full year results for both Regal and the industry, a recap of our 2012’s operational and strategic highlights and a look at the 2013 film slate. Following my remarks, David will highlight our financial results and as always, we will conclude the call today with the question-and-answer session.

First and foremost, we are extremely pleased to end 2012 on a high note with significant growth in revenue and adjusted EBITDA for both the fourth quarter and full year. A record industry box office that exceeded $10 billion for the fourth consecutive year and our continued focus on operational execution helped us generate almost $580 million of adjusted EBITDA on 2012. That’s the highest total in our history.

Fiscal 2012 ended in the same way as it started with significant quarterly box office growth. The industry box office receipts for our fiscal fourth quarter increased by approximately 15% versus the same period last year and totaled over $2.6 billion. The second highest fourth quarter total on record.

As expected, Skyfall, the conclusion of the Twilight franchise and Peter Jackson’s The Hobbit led the box office rankings, that the quarter also benefited from a diverse and well spaced slate of films. In total, 12 films released in the fourth quarter went on to gross over $100 million compared to only seven films in the same period last year.

From our perspective, a key takeaway from both the fourth quarter and full year box office performance is the underlying growth in industry attendance. Based on our review of industry sources, we estimate that the industry experienced mid single-digit attendance growth in 2012, and reached its second highest attendance level in the past five years. Increased attendance clearly enables us to further leverage the fixed portion of our cost structure and has a positive impact on our adjusted EBITDA margins.

We are particularly pleased with the industry attendance growth in the fourth quarter and 2012. From an operational perspective, our field personnel’s ability to provide a great customer experience while keeping a close watch on our cost structures was again a key part of our success in both the fourth quarter and all of 2012.

Their attention to detail combined with the healthy industry box office environment helped us achieve an adjusted EBITDA margin improvement of almost 500 basis points in the fourth quarter as well as our highest annual adjusted EBITDA margin in six years for the fiscal period ended 2012. David will provide more financial detail behind our operating results later, but I think it goes without saying; we are extremely pleased with our operational execution.

In addition to the financial success we experienced in 2012, we were also pleased with our progress on numerous, operational and strategic initiatives that should have a positive impact on our results for 2013 and beyond. Our conversion to digital cinema is essentially complete. In a little over 2.5 years, we have taken a giant technological leap forward with practically no disruption to the day-to-day operations of our business or the experience available to our customers.

The financing and subsequent installation of the new projectors was a significant undertaking for everyone involved and we are extremely pleased with the seamless execution of the hardware conversion, the revenue opportunities that have been afforded to us in a digital environment and the financial success and stability of DCIP.

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