Carmike Cinemas, Inc. (CKEC)
Q4 2007 Earnings Call
March 17, 2008 5:00 pm ET
Nicki Sacks - ICR
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
Jeff Logsdon - BMO Capital Markets
Previous Statements by CKEC
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Thank you. Good evening. This is Nicki Sacks with ICR. Before we begin, let me remind you in accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, the company knows certain measures to be discussed during this call may constitute forward-looking statements. Such statements are subject to risks, uncertainties, and other factors that may cause the actual performance of Carmike to be materially different from the performance indicated or implied by such statements. Such risks and factors are set forth in the company’s annual report on Form 10-K for the year ended December 31, 2007.
I would now like to turn the call over to Michael Patrick, Carmike Cinema’s Chairman, CEO, and President. Michael.
Michael W. Patrick
Thank you. 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 fourth quarter earnings conference call.
On today’s call, we would like to address the fourth quarter box office performance, the completion of our digital rollout, the pricing opportunity in our box office and concession stands, specific 3D performance, as well as some recent financial and early 2000 box office performance results.
The fourth quarter got off to a very slow start with a weak release schedule in the month of October, which was compounded by poor holdovers from the third quarter. Expectations into November were fairly optimistic with a few movies hitting expectations but there was little support from the second tier product that would allow us to regain our box office momentum.
Positive traction began, however, in mid-November with the 3D release of Beowulf. The return of more mainstream commercial films around the holidays drove improved box office performance in December with momentum carrying into January and February. Our top performing films in the quarter included Alvin and the Chipmunks, National Treasure, I Am Legend, and Beowulf 3D.
On a per screen basis, our attendance was down during the quarter by approximately 8.9%. I would like to point out that according to some industry reports, Beowulf 3D represented approximately 28% of the weekend national box office. However, Carmike's Beowulf 3D [play dates] opening weekend accounted for almost 35% of our box office.
As a reminder, we have typically implemented a $2 service charge for 3D but for this picture, we tested a $2.50 service charge in several locations to test the ability to move this fee to a higher range. We did not experience any major push-backs from our customer base on this test.
In addition to the 3D fee, we also continued a very aggressive across the board ticket and concession price increase, allowing us to report a 9.2% increase in average ticket price and a 5.9% average per cap increase on our concession and other category for the quarter.
Along with our price increases, we also established our Hannah Montana advanced ticket sales program soon after the opening of Beowulf in preparation for the Christmas holiday season, as we believed these tickets would be great stocking stuffers. Since this was a concert and not a movie, and in 3D, not 2D, Carmike experimented with a new pricing policy of all seats, one price -- $15 advanced tickets and $18 at the door. In a few minutes, Fred will give you some more highlights on the Hannah Montana event.
As other circuits continue to negotiate and/or test digital technology and 3D, we are happy to report that we have completed our digital and 3D installations prior to the opening of Beowulf. With this retooling cost behind us, we are now in position to capitalize on this investment with events such as the Hannah Montana phenomena and upcoming movies such as Journey to the Center of the Earth 3D, exclusively playing in 3D, and a number of other major events announced in the near future. We now operate 2,174 digital projectors in 194 locations with 429 3D systems. Although we have completed our initial plans for 3D installations, we do have an option to add an additional 100 screens, which we plan to utilize in the near future.
December’s box office performance, along with our surplus property sales generated in the fourth quarter gave us the ability to prepay $15 million of bank debt in December. With LIBOR resetting at current levels in the first quarter, we should also see a reduction in interest costs of approximately $6 million over the next 12 months.
With the success of the December box office and without any event picture in January, we were able to carry the holiday season momentum throughout January and February, providing very positive results coming into 2008. The results of these two months prove that having product that appeals to the general audience will stimulate results we’d like to see from our industry.