News Column

Carmike posts $3.2 million profit amid record $183 million revenue

August 5, 2014

By Tony Adams, Columbus Ledger-Enquirer

Aug. 05--A strong lineup of movies a year ago "challenged" the latest second-quarter financial picture of Carmike Cinemas, even with the company's revenue continuing a steady rise due to a string of movie theater acquisitions.

The Columbus-based motion picture exhibitor on Monday reported net income, or profit, of $3.2 million in the April-June period. That was down 52 percent from $6.7 million a year ago.

It translated to a drop in earnings per share from 37 cents to 14 cents. Wall Street analysts who follow the firm were anticipating earnings of 23 cents per share.

Carmike President and Chief Executive Officer David Passman noted the "momentum" his company continues to see in operating revenue. It rose from $169.5 million a year ago to $183 million in the latest second quarter, up nearly 8 percent.

Admission and concession revenue both increased year over year, "fueled by our recent acquisitions," the CEO said. The company has a goal of operating at least 300 theaters with 3,000 screens. At the end of June, it was at 253 theaters with 2,670 screens in 37 states.

That doesn't include Carmike's pending all-stock purchase of Westfield, N.J.-based Digital Cinema Destinations Corp., or Digiplex, which will bring the Columbus company 21 movie theaters and 206 screens in nine states. Four more theaters and 33 screens also are in the Digiplex pipeline.

"With this transaction our footprint will reach about 280 theaters with over 2,900 screens," Passman said during a conference call with analysts, pointing out the firm has more than $145 million in cash on its balance sheet and an untapped credit line.

Thus, he said, expect Carmike Cinemas to continue its hunger for acquisitions amid a "robust" merger and acquisition environment that has several interested sellers.

That, the CEO said, "could propel us well beyond 300 locations and 3,000 screens. The top priority, of course, will be to generate the best (return on investment) for the benefit of our shareholders."

To that end, Passman said Carmike outperformed the U.S. movie theater industry at the box office, with the overal sector's admissions revenue -- money from people buying movie tickets -- declining nearly 7 percent on average during the quarter.

On the other hand, Carmike's admissions revenue rose by 7 percent, while total attendance at its theaters was up 4 percent. Per screen, the firm's box-office revenue was down less than 1 percent, still much better than the industry average, the CEO said.

"As I've said in the past, while the film slate will vary from quarter to quarter, our expanded scale and companywide emphasis on customer-service excellence, combined with our growing circuit of high quality theaters, remain important factors in our ability to generate favorable operating results over the long term," Passman said on the conference call.

He acknowledged the second-quarter comparison from a year ago was "challenging" with "Iron Man 3" launching in May on the way to a very strong summer season for movie theater operators.

"There were a number of bright spots, though," he said of the this year's April-June film releases. "The top five grossing (second quarter) titles were all released in April or May, helping the quarter to a solid start."

Those hits included "Captain America: The Winter Soldier," "X-Men: Days of Future Past," "Maleficent" and "The Amazing Spider-Man 2." Also performing well was "Godzilla" with a U.S. gross take of just under $200 million, along with "Dawn of the Planet of the Apes" at more than $189 million.

"Melissa McCarthy's 'Tammy,' not surprisingly, failed to rescue the Fourth of July holiday weekend, which came up far short of last year, and it was unable to compete with the 2013 runaway hit, "Despicable Me 2," Passman said.

As for the rest of 2014, the CEO said "Guardians of the Galaxy" had an extremely strong opening last weekend, racking up more than $94 million over three days, an industry record for August. "Teenage Mutant Ninja Turtles," "The Expendables 3," and "Let's Be Cops" should "help shore up" the rest of the July-September quarter, he said.

"We remain optimistic about the upcoming holiday season as well," Passman said.

The November movie lineup includes "The Penguins of Madagascar," "Interstellar" and the highly anticipated, "The Hunger Games: Mockingjay, Part 1."

Coming in December are "The Hobbit: The Battle of the Five Armies," "Night at the Museum: Secret of the Tomb," and "Exodus: Gods and Kings."

On the financial side, the company reported that it charged movie-goers more in the quarter for tickets and concessions (refreshments that include soft drinks, popcorn and candy). Average admission per patron rose from $7.22 a year ago to $7.39 in the latest quarter, while average concession sales per person climbed from $4.19 to $4.36. It was the 18th straight quarter that concession sales per customer has risen.

Total attendance for the chain was up from 14.9 million to nearly 15.6 million, with movie theater acquisitions over the last couple of years adding to that growth.

Aside from buying out other companies, Passman said Carmike will continue to open and remodel its own theaters, while also adding amenities to draw more customers into its entertainment complexes.

"We are currently focused on expanding in-theater casual dining at several select locations, as well as increasing the number of theaters with alcohol service," he said.

The purchase of Digiplex also will give Carmike "unique expertise" in alternative programming such as sporting events, concerts, and special artistic performances such as operas and ballets, the CEO said. That is an area the company, with its digital projection capability, has long wanted to see grow, although it hasn't worked well thus far. Up to 5 percent of Digiplex box-office receipts come from alternative programming.

"While obviously in the early stages, we are setting goals to spread the Digiplex alternative programming model across the Carmike footprint over the next couple of years," Passman said.

Carmike released its quarterly report after the stock markets' close Monday. It finished the day up 74 cents, or 2.3 percent, at $32.39 per share in trading on the Nasdaq exchange. The stock's 52-week trading range is $16.92 to $36.22 per share.

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(c)2014 the Columbus Ledger-Enquirer (Columbus, Ga.)

Visit the Columbus Ledger-Enquirer (Columbus, Ga.) at www.ledger-enquirer.com

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Source: Columbus Ledger-Enquirer (GA)


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