Carmike Cinemas, Inc. (CKEC)

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Carmike Cinemas, Inc. (CKEC)

Q2 2008 Earnings Call

August 11, 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


David Miller - Caris & Company



Good day and welcome to the Carmike Cinemas Incorporated second quarter 2008 earnings conference call. As a reminder, this call is being recorded. It is now my pleasure to turn the floor over to your host, Ms. Nicki Sacks of ICR. Please go ahead.

Nicki Sacks

Thank you. Good afternoon. This is Nicki Sacks with ICR. Before we begin, let me remind you in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, the company notes 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. I’m Michael 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 second quarter earnings conference call.

On today’s call, we would like to address the second quarter box office performance, the expense initiatives that were implemented to reduce operational costs, and the benefits of our digital 3D platform.

Our second quarter box office lineup was driven primarily by this summer’s blockbuster release of Iron Man, Kung Fu Panda, WALL•E, and the highly anticipated Indiana Jones and The Kingdom of the Crystal Skull. Although these films generated good box office performance, overall second quarter box office declined in part due to the different year-over-year comparisons with last May’s release of Pirates of the Caribbean 3, Shrek 3, and Spider-man 3, each of which generated over $300 million in domestic box office.

As mentioned on our previous call, during our second quarter we implemented a strategic admission and concession price increase on April the 25th, which provided us with an average ticket increase of 5.5% over the same quarter last year and an average concession per cap increase of 4.8% over the same quarter last year. Average ticket increased by $0.32 from $5.84 to $6.16 and our concession per cap increased by $0.15 from $3.14 to $3.29.

We have finally broke the $9 per patron barrier on small-town America by recording a $9.45 per patron for the quarter. We implemented our revised pricing just prior to the opening of our summer season, which began on May 2nd with a strong box office performance of Iron Man opening to a $101 million weekend.

I am pleased to report that by closely monitoring our expense controls, we were able to show significant reduction in our operational costs, specifically salaries, concession costs, and general theater expenses. We realized a 24% reduction in our hourly payroll quarter over quarter compared to 2007. This was accomplished through implementation of controls designed to analyze and compare on a day-by-day basis the actual hours used during a specific period. The precise hourly allowance are sent through our operational department to each individual theater, dictating the allocation of hours to be used based on the anticipated business demand. Richard and Fred will speak to these initiatives in more detail later in our call.

Through our cost reduction and sale of excess property, we have been able to focus on reducing our debt. During the second quarter of this year, we made a $5 million principal pre-payment of debt and at the end of last year, we made a $15 million prepayment of debt. In total, we have reduced our bank debt of $23 million over the past 12 months.

Moving briefly to our third quarter box office, through our digital 3D cinema platform, we were able to show Journey to the Center of the Earth 3D on 327 screens and generate a combined box office concession revenue of approximately $6.5 million. We are pleased with the results from this 3D presentation, which generated fives times the per screen revenue compared to our 2D average screen performance. This allowed us to enjoy nearly a 100% increase in our normal share of the industry domestic market.

Additionally, we experienced no customer push-back from our $2 3D surcharge.

With the success of Hannah Montana during our first quarter, followed by Journey to the Center of the Earth 3D, we remain optimistic regarding the upcoming 3D release of Fly Me to the Moon in August, a re-release of Nightmare Before Christmas in October, and Bolt in November. We see this 3D technology as a key component in supporting our box office performance during the upcoming years. The schedule for 3D release in 2009 is My Bloody Valentine in January, [Cora Line] and Disney’s Jonas Brothers in Concert, both in February, Monsters Versus Aliens in March, Ice Age in July, Toy Story 3D in October, A Christmas Story in November, and of course, Avatar in December.

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