Carmike Cinemas, Inc. (CKEC)

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Carmike Cinemas (CKEC)

Q1 2013 Earnings Call

May 06, 2013 5:00 pm ET


Robert Rinderman

S. David Passman - Chief Executive Officer, President, Director and Chairman of Executive Committee

Richard B. Hare - Chief Financial Officer, Principal Accounting Officer, Senior Vice President of Finance and Treasurer


James M. Marsh - Piper Jaffray Companies, Research Division

Chad Beynon - Macquarie Research

Harrison Wreschner



Ladies and gentlemen, thank you for standing by. Welcome to the Carmike Cinemas 2013 Q1 Results Conference Call. [Operator Instructions] And as a reminder, today's conference call is being recorded Monday, May 6, 2013. It is now my pleasure to turn the conference over to Rob Rinderman, Carmike Investor Relations. Please go ahead, sir.

Robert Rinderman

Thank you very much, Jennifer. Certain statements by Carmike Cinemas' management on today's call may constitute forward-looking statements that 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, 2012, and in other SEC filings. Carmike undertakes no obligation to publicly update or revise any forward-looking statements.

And today's call and webcast may include non-GAAP financial measures, and when required, a reconciliation of all these measures to the most directly comparable financial measure calculated and presented in accordance with GAAP, can be found in today's press release and on the company's corporate website.

Carmike Cinemas' President and CEO, David Passman, will now make his opening remarks. David?

S. David Passman

Thank you, Rob. Good afternoon, everyone. We appreciate you joining us on the call. I'll try to briefly summarize what we believe are the key takeaways for the quarter. Richard Hare, our Chief Financial Officer, or I, will expand into more detail on each of them. Following our prepared remarks, we, along with Fred Van Noy, our Chief Operating Officer, will be available for a question-and-answer session.

As expected, the 2013 first quarter represented a challenging box office environment when compared to the record-breaking first quarter of a year ago, which of course, benefited from a well-balanced film slate and strong performing titles, including The Hunger Games and The Lorax. Much has already been said and written about the sputtering movie climate in the first quarter, as well as the summer blockbusters, which by the way, got off to a strong start this past weekend with Iron Man's $175 million domestic weekend opening, topping most estimates by a nice margin. I'd also add, it's the second highest weekend opening in U.S. history. I won't dwell on either the first quarter or the industry estimates relative to the box office, as I'd simply be repeating what you already know. Except to say Carmike remains optimistic for the remainder of the year, and we believe that 2013 will be among the best years ever. We'd be pleased to respond to specific questions regarding our views on the box office during the Q&A.

Now turning to Carmike's performance. Let me begin by saying that the Rave assets acquired late in 2012 really helped our first quarter revenue comparison, in what was an otherwise down box office. Likewise, it also impacted our run rates on other theater costs, as well as below the line expenses such as interest and depreciation. Concessions and other revenue continued strong, both in aggregate and per patron metrics. In fact, we experienced the best per patron concessions metrics in our company's history. On the expense side, we bit the bullet and recorded a lease termination charge of just under $2.5 million, reflecting several years of future rentals for a theater we closed on April 1. This particular theater is literally across the street from another of our properties. And we're confident the attendance gained at the remaining theater will provide a net benefit with lower incremental costs. The remaining amount in the lease termination cost line reflects cancellation costs for a potential new build that we determined was no longer feasible.

We are actively evaluating potential acquisitions and new builds as we move toward our target of 300 theaters and 3,000 screens. In the first quarter, we opened 2 new theaters with an aggregate of 22 screens in Decatur, Alabama and Sandestin, Florida, with each location featuring one of Carmike's premium Big D-Large Format auditoriums. The theater in Sandestin also includes an Ovation Dining Club, Carmike's upscale in-theater dining and moviegoing experience. The Ovation auditorium has a diverse menu of quality entrées, appetizers and desserts, plush leather seating, swing-around tables, a large movie screen, and of course, a wide selection of premium beers and wine. We continue to be pleased with the performance of our Big D screens, as audiences in Carmike's markets perceive the nominal $2 average ticket price premium as a reasonably priced option when seeking a more immersive moviegoing experience.

All Big Ds feature floor-to-ceiling and wall-to-wall screens, state-of-the-art sound systems, plush stadium seating and Christie Brilliant flash digital projectors with RealD technology for any 3D showings in those auditoriums. With a number of high profile movies slated for this summer and holiday season, we look forward to taking advantage of the flexibility offered by our Big D screens, where we can offer multiple features on any given day on the same Big D screen. We're also pleased to have 7 IMAX auditoriums as part of our circuit, and believe this popular format and strong brand will benefit our overall premium ticket sales throughout the year. Speaking of which, our premium ticket sales, which include all 3D showings, as well as our Big D and IMAX 2D and 3D presentations, represented almost 16% of total admissions revenue in the first quarter, compared to 17.4% in the same 2012 period.

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