Carmike Cinemas, Inc. (CKEC)

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Carmike Cinemas (CKEC)

Q2 2013 Earnings Call

July 22, 2013 8:00 am 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

James C. Goss - Barrington Research Associates, Inc., Research Division

Brett Allen Hendrickson - Nokomis Capital, L.L.C.

Jeremy Skrezyna

Chad Beynon - Macquarie Research



Ladies and gentlemen, thank you for standing by. Welcome to the Carmike Cinemas 2013 Q2 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Monday, July 22, 2013. I would now like to turn the conference over to Rob Rinderman, Carmike Cinemas Investor Relations. Please go ahead, sir.

Robert Rinderman

Thank you, Demitra. Good morning, everyone. 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.

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.

This morning, the company announced the commencement of a proposed offering of common stock. Since Carmike is in registration, management's comments on the offering will be limited in our prepared remarks and during the Q&A session of today's call.

I will now turn it over to Carmike Cinemas President and CEO, David Passman, for his opening remarks. David?

S. David Passman

Thank you, Rob. Good morning, everyone. We appreciate you joining us on the call, and as usual, I will briefly summarize what we believe to be the key takeaways for the quarter. Richard Hare, Carmike's Chief Financial Officer, will provide additional color on them. Following our prepared comments, we will be available to address your questions.

Now as you saw in Carmike's financial results this morning, the 3-month period ending June 30 was a very strong quarter as we experienced the operational benefits and financial leverage of our expanded circuit and geographic scale in combination with the ongoing execution of exceptional customer service at the theater level. I'd like to take a second to acknowledge the outstanding job our managers and their hard-working teams at Carmike's 245 locations across the nation are doing day in and day out. This is our busy season.

Carmike's second quarter admissions revenues grew approximately 25% year-over-year or 14% on a per screen basis, reflecting our acquisition and new build growth program. We significantly outperformed the domestic cinema industry increase of just under 8%. Beyond the strong gains in admissions receipts, second quarter concessions and other revenue per patron again rose to an all-time record extending the company's year-over-year per patron spending growth to 14 consecutive quarters.

The domestic 2013 Q2 box office bounced back very sharply from a challenging first quarter, led of course by Iron Man 3, which jump started the summer moviegoing season back in early May. Q3 is also off to a very solid beginning with Despicable Me 2 leading the pack over the July 4th holiday weekend. The industry is now roughly breakeven on a year-to-date box receipts, comping against an all-time record 2012 period.

Taking a high-level view of Carmike's financial performance during the recent period, as we have seen on several occasions in the past, during quarters of strong overall industry box office, we tend to fare relatively well given the aforementioned leverage in our operating model. Conversely, as we saw back in Q1, despite our top line out-performance relative to the industry, the company's bottom line results often don't look as strong during the 3-month period of relatively disappointing industry receipts. Therefore, the expansion of our platform through select, accretive acquisitions is a key component of our going-forward strategy, as we believe improved economies of scale will provide significant operational and financial benefits over the long term creating additional value for all of Carmike's stakeholders.

For those of you that have been following us in recent years, you know that we have placed significant emphasis on our overall concessions strategy. And we are pleased with the 14 quarter consecutive streak of higher year-over-year per patron amounts. In fact, over the last 2 quarters, we also generated more than $4 in concessions and other revenue per patron, Carmike's best per patron metrics in our corporate history. Management's focus on consistently driving solid per cap revenue at the theater level reflects the ongoing success of a wide array of concession strategies and initiatives. These range from our single point-of-sale where patrons purchase movie tickets at the concessions counter, only encountering 1 line instead of the traditional 2, to our 190-ounce refillable Popcorn Bucket with nominally priced refills throughout the year. This very popular program has driven customer loyalty from the moment we introduced it only a few years ago. We are continually trying new programs, utilizing our theater locations as experimental labs and rolling out initiatives that work well on a much wider scale, including circuit wide in a number of cases.

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