Carmike posts $20.7 million loss in third quarter

A slow start at the box office and rising theater operating costs sliced into Carmike Cinemas’ third-quarter performance.

But it was a $17.2 million non-cash impairment, or write-off, that took the biggest bite out of the motion picture exhibitor’s earnings, dropping it to a $20.7 million loss for the three-month period that ended Sept. 30.

That compares to a loss of about $200,000, or 2 cents per share, in the third quarter of 2008.

It also translates to a loss of $1.63 per share for Columbus-based Carmike. Analysts surveyed by Thomson Reuters were expecting earnings of 14 cents per share.

David Passman, Carmike’s president and chief executive officer, said the write-off was primarily due to competition entering some of the chain’s markets. The company also has written down the value of 35mm projectors and other equipment it no longer needs because of its move to digital projection.

Management did not disclose which markets have become more competitive, other than to say they are its larger ones.

“This year, there have been three theaters built in our markets that have impacted us, and all three of them were markets that we were the sole exhibitor in the market,” Fred Van Noy, Carmike chief operating officer, said in a conference call with stock market analysts after the earnings were released.

Carmike has been spending money on underperforming theaters this year, doing things like installing new carpet, lighting and marquees, as well as training its employees on proper customer service.

“The company’s focus on theater level operations is now centered around the philosophy that we must offer our valued patrons an excellent experience each and every time they visit us,” Passman said.

But that focus is putting upward pressure on expenses as the company on Monday reported virtually flat revenue in the quarter of $122.4 million.

Theater operating costs climbed 13 percent from a year ago, the company said. It attributed the rise to new theater openings, higher salary and wage expenses, repairs and maintenance and an increase in service charges for 3D equipment.

Price increases likely

This quarter’s flow of red ink already has management contemplating increases in ticket and concession prices. The firm has been aggressive on that front in recent years.

“We’re going to have a modest increase, probably in the fourth quarter,” Passman said.

The company is betting that raising admission and refreshment prices won’t turn off moviegoers and hurt attendance.

So far this year, total attendance stands at 39 million patrons, up from just under 38 million during the first nine months of 2008.

The average ticket price per customer is $6.28, while the average concessions take is $3.23 per person.

Passman said the third quarter started slow out of the gate, but picked up momentum, with admissions revenue rising 1.8 percent compared to a slight decline for the theater industry as a whole.

“Transformers” and the latest “Harry Potter” installment anchored Carmike theaters, the CEO said, with the 3D version of “Ice Age” and “G Force” also performing well. But those offerings were facing stiff financial comparison from a year ago with the Batman sequel, “The Dark Knight,” becoming a blockbuster.

Upcoming movies

The fourth quarter of this year should do well, Passman said. The movie schedule includes several major draws, including James Cameron’s “Avatar” and Disney’s “A Christmas Carol” in 3D. The end-of-the-world film, “2012,” loaded with special effects, also could help pump up ticket and concession sales.

“We’re a little more than a month into the fourth quarter, and we’re expecting robust box office receipts to top off a strong year,” Passman said. “Despite all of the economic challenges, consumers continue to visit the movies and have been opting for this reasonably priced entertainment option during these recessionary times.”

As of Sept. 30, Carmike operated 246 theaters in 35 states. It has closed eight movie houses this year and 66 altogether since January 2006, Van Noy said.

“We continue to actively evaluate our entire theater circuit,” he said.

Carmike reported it now has total debt of about $375 million, down from $392 million at the end of 2008.

Through the first nine months of this year, the company is operating at a loss of $21.8 million on total revenue of $377.3 million. That compares to a $6.8 million loss on revenue of $355.7 million a year ago.

Operating income through the first nine months is $4.2 million. That’s off from $24.6 million during the same period a year ago.

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