Carmike Cinemas’ Fourth Quarter Revenue Rises 7.9% to a Record $185.4 Million (3/02/15)
Carmike Cinemas, Inc. (NASDAQ: CKEC), a leading entertainment, digital cinema and 3-D motion picture exhibitor, today reported results for the three and twelve month periods ended December 31, 2014, as summarized below.
Carmike Cinemas’ President and Chief Executive Officer David Passman stated, “Carmike performed favorably on several key metrics in Q4 2014 despite a third consecutive quarter of year-over-year industry box office declines. Total admission revenues, which increased 5.9% year over year, continues to reach record highs as we complete acquisitions and replace older theatres with state-of-the-art entertainment complexes.
“We believe our theatre-level operating teams performed well in the quarter despite the soft industry trends. Our concessions strategies continue to capture a greater share of concessions spending. Carmike’s 11.2% increase in total concessions and other revenues and 6.5% rise in concessions and other spending per patron during the quarter extends our industry leadership in these performance metrics and highlights the benefit of our focus on delivering a diverse range of food and beverage offerings to theatregoers at affordable price points. In this regard, we are proud that the 2014 fourth quarter marks our twentieth consecutive reporting period of year-over-year concessions and other per patron revenue growth.
“We recently opened our first two theatres providing in-auditorium full service casual dining to an entire theatre complex, in Bloomington, IL and Richmond, VA and plan to open a third dine-in theatre in the second quarter of 2015. Our dine in experience includes reserved seating, friendly wait staff to ensure patrons are greeted both with a menu as well as a helpful guide on using the silent electronic push-button service, which allows patrons to enjoy a convenient in-seat ordering and dining experience, complete with a wide array of food and beverage options while enjoying a movie in our premium seats. Patrons may order as many times as they wish during the movie, allowing for appetizers, entrees, desserts and beverages to be ordered and delivered fresh from the kitchen when the patron is ready to enjoy them.
“Carmike remains focused on its initiatives to build long-term shareholder value. While the film slate varies from quarter-to-quarter, we continue to execute our strategy to identify acquisition and build-to-suit opportunities that expand our theatre circuit and scale in attractive, complementary markets thereby strengthening our platform for sustainable growth. Our year over year average screen count increased nearly 11% to over 2,900 screens in the fourth quarter.
“Given the industry wide year over year increase of approximately 9% through this weekend, we remain cautiously optimistic about the 2015 first quarter box office environment notwithstanding that the first quarter of 2014 provides the most difficult comparison in 2015. We are enthusiastic about the film slate for the remainder of 2015, which contains a robust offering of highly-anticipated tent-pole sequels and exciting new titles. Finally, Carmike’s growing circuit of high quality theatres, ongoing success in maximizing high-margin concessions revenue opportunities and our Company-wide emphasis on customer service excellence remain critical factors in our ability to generate positive operating results over the long-term,” concluded Mr. Passman.
Carmike Cinemas’ Chief Financial Officer Richard B. Hare stated, “Fourth quarter operating revenue growth of 7.9% reflects a 5.9% increase in admissions revenue and an 11.2% rise in concessions and other revenue. Top-line growth is largely attributable to Carmike’s larger theatre circuit, a 1.5% increase in average ticket prices, and a 6.5% rise in concessions spending per patron, which together offset the weaker film slate during the period. Overall, guests spent an average of $11.92 per visit in the fourth quarter, which represents a 3.4% increase in combined per patron spending compared to the prior year.
“Film exhibition costs as a percentage of admissions revenues in the 2014 fourth quarter decreased by approximately 20 basis points to 55.5%. The slight decrease was due to the less successful industry box office performance versus the prior year. Concession and other revenue margin percentage improved by approximately 10 basis points as a result of more favorable concession costs versus the prior year.
“Salaries/benefits rose by $2.5 million to $24.0 million and theatre occupancy costs rose by $5.3 million to $23.8 million, due primarily to increased screen count from recent acquisitions and new build-to-suit theatres. Other theatre operating costs were $31.7 million, compared to $26.0 million in the 2013 period, due primarily to the expected incremental operating expenses resulting from our expanded circuit. General and administrative expenses were $9.8 million, versus $7.2 million in the 2013 period, due to increased legal and professional fees related to our acquisition and expansion initiatives and accelerated share-based compensation expense. Quarterly interest expense rose to $12.7 million, due principally to the assumption of long-term lease obligations associated with screens acquired in late 2013.
“Fourth quarter adjusted EBITDA was $27.1 million and theatre level cash flow was $34.5 million. While a majority of our costs are largely fixed, we continue to exercise prudent cost management throughout the organization to maximize the performance of our operations and create efficiencies where possible.
“On a full-year basis, Carmike’s total operating revenues grew 8.7% to $689.9 million. Adjusted EBITDA declined 13.4% to $98.3 million in 2014 and theatre-level cash flow decreased 8.0% to $124.3 million year over year, primarily due to the increase in fixed costs associated with our recent acquisitions combined with a decline in industry box office.
“Reflecting cash of $97.5 million at December 31, 2014, we ended the year with $352.0 million of net debt, compared with $311.4 million of net debt at December 31, 2013. Our capital allocation strategy continues to focus on deploying cash to expand our theatre circuit through accretive acquisitions and new locations through build-to-suit arrangements," concluded Mr. Hare.
Supplemental Financial Measures
Theatre level cash flow, EBITDA, adjusted EBITDA, adjusted net (loss) income, total debt and net debt are supplemental non-GAAP financial measures used by Carmike to evaluate its operating performance. Carmike defines theatre level cash flow as adjusted EBITDA, as defined below, plus general and administrative expenses. Carmike believes that theatre level cash flow is an important supplemental measure of operating performance for a motion picture exhibitor’s operations because it provides a measure of the core operations, rather than factoring in items such as general and administrative expenses and depreciation and amortization, among others. In addition, Carmike believes that theatre level cash flow, as defined, is a widely accepted measure of comparative operating performance in the motion picture exhibition industry. Adjusted net (loss) income is defined as net (loss) income plus impairment of long-lived assets, merger and acquisition-related expenses, accelerated share-based compensation expense for certain retirement eligible employees, lease termination charges, (gain) loss on sale of property and equipment and severance agreement charges, net of tax. Carmike believes adjusted net (loss) income is an important supplemental measure of operating performance for a motion picture exhibitor because it provides a measure of core operations. Total debt is defined as the sum of current maturities of capital leases and long-term financing obligations, long-term debt and capital leases and long-term financing obligations (less current maturities). Net debt is defined as total debt less cash and cash equivalents. EBITDA is defined as net (loss) income plus income tax (benefit) expense, interest expense and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus (loss) income from unconsolidated affiliates, loss from discontinued operations, merger and acquisition-related expenses, accelerated share-based compensation expense for certain retirement eligible employees, severance agreement charges, lease termination charges, (gain) loss on sale of property and equipment, and impairment of long-lived assets. Carmike believes that EBITDA and adjusted EBITDA are important supplemental measures of operating performance for a motion picture exhibitor’s operations because they provide measures of core operations.
About Carmike Cinemas
Carmike Cinemas, Inc. is a U.S. leader in digital cinema, 3-D cinema deployments and one of the nation's largest motion picture exhibitors. Carmike has 273 theatres with 2,892 screens in 41 states. The circuit includes 45 premium large format (PLF) auditoriums featuring state-of-the-art technology and luxurious seating, including 27 "BigDs," 16 IMAX auditoriums and two MuviXL screens. As "America's Hometown Theatre Chain" Carmike's primary focus is mid-sized communities. Visit www.carmike.com for exact show times and to purchase tickets. http://www.businesswire.com/news/home/20150302006710/en/Carmike-Cinemas%E2%80%99-Fourth-Quarter-Revenue-Rises-7.9#.VPWh3YktGUk