Update: Carmike Cinemas reports $6.7 million profit on record revenue in second quarter

Columbus company’s shares take a hit with profit-mark miss and plans to sell common stock

tadams@ledger-enquirer.comJuly 22, 2013 

Carmike Cinemas, a movie-theater company in aggressive expansion mode, reported Monday a profit of nearly $6.7 million on record quarterly revenue of $170.5 million. The latter was a 28.5 percent improvement over the same period a year ago.

But the performance translated to earnings of 37 cents per share, slightly lower than the consensus 41 cents per share that Wall Street analysts polled by Thomson Financial had been expecting.

The stock market reacted unfavorably to the financial report, released before the opening bell. Carmike’s shares tumbled out of the gate in trading on the Nasdaq exchange, sliding $1.47 per share, or 7.4 percent, to $18.31.

The stock recovered some ground before the end of trading, but still lost 89 cents on the day, closing at $18.89, a decline of 4.5 percent.

In a separate annoucement, Carmike said it is selling 4.5 million shares of common stock “for potential acquisitions, working capital, capital expenditures or other general corporate purposes.” An additional 675,000 shares will be sold, if necessary, to cover any over-allotments that investors snap up in the process.

At the stock’s closing price Monday, the 4.5 million in shares would generate about $85 million in cash, while the 675,000 shares would add about $12.7 million more, minus fees from brokerages handling the transactions.

Aside from needing money for new theaters and maintaining existing ones, Carmike at the end of June carried $433 million in total debt.

Addressing the firm’s earnings, David Passman, president and chief executive officer of Columbus-based Carmike, called the April-June period a “very strong quarter.” He said the additional theaters the company has opened or purchased from other theater chains helped grow admission revenue nearly 25 percent over the same quarter of 2012. The theater industry as a whole averaged nearly 8 percent growth, he said.

“The domestic 2013 Q2 box office bounced back very sharply from a challenging first quarter, led, of course, by ‘Iron Man 3,’ which jumpstarted the summer movie-going season back in early May,” Passman said in a conference call with research analysts who follow the firm.

“Q3 is also off to a very solid beginning, with ‘Despicable Me 2’ leading the pack over the July Fourth holiday weekend,” he said. “The industry is now roughly break even on year-to-date box receipts, comping against an all-time record 2012 period.”

Passman and Carmike Chief Financial Officer Richard Hare said the company will continue to press harder to add revenue in the category of concessions. And they pointed to the success that Carmike had in the second quarter.

Concession sales for things like soft drinks, popcorn and candy, as well as fees for the use of special viewing glasses for 3-D films, pushed the average take from each moviegoer to $4.19, Hare said, an increase of nearly 7 percent from $3.92 per patron a year ago. That’s an all-time concession haul per customer and marks the 14th straight quarter such spending has grown.

Passman said he fully expects to grow concession revenue even more, considering only a third of the chain’s moviegoers make a food or beverage purchase.

“I believe that half of the people who come into our theaters eventually ought to be buying concessions from us,” he said.

On the topic of putting fannies in seats, total attendance for the chain came in at 14.9 million in the quarter, up from 12.6 percent in the same period a year ago, Hare said. The average ticket price was $7.22, up from $6.91.

“That’s primarily due to price increases and the uplift from recent acquisitions,” he said.

The Carmike executives said the motion-picture exhibitor remains focused keenly on growing the company’s presence to 300 theaters and 3,000 screens in the U.S. At the end of June, the firm operated 245 theaters with a total of 2,476 screens in 35 states.

“Theater (merger and acquisition) activity has been high in the past 18 months and we expect circuits will continue to come up for sale,” said Passman, stressing that “we are not seeking fixer-uppers or turnaound projects.”

Carmike last week said it is purchasing three theaters in Kentucky, New Jersey and Texas from rival Cinemark. The company also has been steadily opening theaters in smaller to mid-sized communities, all of them equipped with digital technology and 3-D screens.

Enhanced “Big D” auditoriums also are being rolled out across the country, either in the new properties or with upgrades to existing movie houses. Carmike’s acquisitions also have given it ownership of seven large-format IMAX screens, eight with the pending theater purchase in Louisville, Ky.

Queried by a couple of analysts on the conference call about expanding IMAX and “Big D,” Carmike’s own large-screen offering — perhaps even in the same theater — Passman said management is still studying the possibilities. But he noted Carmike’s “Big D” offers much more flexibility in shifting shows around.

The CEO also said the company is seeing strong results in new theater elements such as single-point-of-sale counters that let customers buy a ticket and concessions at one time. There’s also 190-ounce popcorn buckets that allow “nominally priced” refills throughout the year.

“We are continually trying new programs, utilizing our theater locations as experimental labs, and rolling out initiatives that work well on a much wider scale, including circuitwide in a number of cases,” the CEO said.

Looking ahead, Passman said he believes the third and fourth quarters will be strong for the overall industry. The summer movie blockbuster season will wrap up in August.

“The second quarter was an active and productive period for the cinema exhibition industry and while we are only a little over three weeks into Q3, the industry has continued to generate positive results at the box office and we remain optimistic about the back half of 2013,” he said.

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