Carmike Cinemas, Inc. (CKEC)
Q1 2008 Earnings Call
May 12, 2008 5:00 pm ET
Kate Messmer – ICR Inc.
Michael W. Patrick – Chairman and Chief Executive Officer
Fred W. Van Noy – Chief Operating Officer
Richard B. Hare – Chief Financial Officer
David Miller – SMH Capital
Previous Statements by CKEC
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Before we begin let me remind you that in accordance with the Safe Harbor Provisions 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 risk, uncertainties, and other factors that may cause the actual of performance of Carmike to be materially difference than 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 to Michael Patrick, Carmike Cinemas’ Chairman, CEO, and President.
Michael W. 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 first quarter earning conference call. On today’s call we would like to address the first quarter box office performance, the benefits about digital 3D platforms specifically Hannah Montana and U2, the pricing policy which we implemented in our box office and concession stands during the fourth quarter of 2007 and the second quarter of 2008, as well as additional measures to reduce operating cost.
The first quarter got off to a great start with a strong carryover films from the fourth quarter such as National Treasure which contributed significant amount of its $290 million growth during the first quarter 2008. Other fourth quarter films such as Alvin and the Chipmunks, I Am Legend, The Bucket List, and Juno helped to generate positive momentum going into the first quarter.
Our first quarter was helped by strong performance of Dr. Seuss’ Horton Hears a Who, 10000 BC, Cloverfield, Jumper, and 21. Additionally, through our digital 3D cinema platform we were able to play Hannah Montana in 190 theaters during the first two weeks of February. We’re extremely pleased with the results as we posted a 14% market share with this 3D concert event. Hannah Montana was followed by the U2 3D concert which generated additional alternative content revenue during which is typically an extremely slow box office period for commercial films. These movies and Hannah Montana concert gave us an increase in our average attendance per screen of 1% in this year’s quarter that underperformed as an investor.
With the success of this February’s 3D release behind us we are extremely excited with the 3D release schedule in the pipeline. Beginning this July with the Journey to the Center of the Earth 3D followed by Fly Me to the Moon 3D in August, and the reissue of Nightmare Before Christmas 3D in October 2008 looks to be a great year for 3D. We see this 3D technology as a key component in supporting our box office performance against last year’s difficult comps in the same manner Hannah Montana picked up our first quarter this year. Scheduled for release in 2009 is Monsters Vs Aliens 3D in March, Ice Age 3D in July, Toy Story 3D in October, and [inaudible] 3D in December. Currently there are 29 3D releases scheduled in the next several years. Although we have completed our initial plans for 3D installations, we will likely exercise our current agreement with Real D to an additional 100 3D screens prior to the end of 2008.
The admission and concession price increases on November 16, 2007, allowed us to enjoy an average ticket increase of 12 % over the same quarter of last year and an average concession another per cap increase of 6%. We implemented an additional 2% box office admission increase on April 25 of this year and implemented an additional concession price increase on April 28 which should continue to increase our average per cap ratio through this year. With minimum wage and energy costs increasing, we implemented this pricing just prior to the opening of our summer season which begins on May 2 with a strong box office performance of Iron Man opening to a $101-million weekend.
This summer’s lineup is really beginning to shape up. With the current success of Iron Man we are anticipating good results with the remainder of the second quarter films as Disney’s Chronicles of Narnia II, the much anticipated Indiana Jones and the Kingdom of the Crystal Skull, Sex in the City, Kung Fu Panda, You Don’t Mess With the Zohan, The Incredible Hulk, The Happening, Get Smart, Wanted, and finishing our second quarter with Disney-Pixar Wall-E opening on June 27. Compared to what we experienced in 2007, we believe that the release pattern seems to be spread out more evenly throughout this summer rather than last summer where we experienced a more frontloaded lineup during May.
I would like now to turn over the call to Fred Van Noy, our Chief Operating Officer.
Fred W. Van Noy
I would like to begin by reiterating what Mike touched on regarding our revenue performance for the quarter. Our circuit-wide price increases established in November along with the impressive box office carryover from the fourth quarter into the first quarter on movies like Alvin and the Chipmunks, National Treasure II, The Bucket List, and I Am Legend continued the holiday season attendance momentum to the New Year. First quarter film openings such as Cloverfield, Fools Gold, 10,000 BC, Horton Hears A Who, 27 Dresses, Juno, and the Hannah Montana 3D concert were instrumental in sustaining this attendance momentum resulting in a 7.8% increase in total revenue for the first quarter.