Carmike Cinemas reports $2.2 million profit as it awaits buyout

Carmike Cinemas, on the path to being purchased by AMC Entertainment Holdings, reported Monday a profit of $2.2 million, or 9 cents per share, on total operating revenue of $206.2 million in the first quarter of 2016.

That was up from a profit, or net income, of $391,000, or 2 cents per share, on total operating revenue of $184.3 million in the January-March period of 2015.

“Our first-quarter results reflect a favorable U.S. box office environment that included blockbuster releases, as well as the successful execution of our theater-level initiatives and the effective integration of recent acquisitions,” Carmike President and Chief Executive Officer David Passman said in a statement.

Monday’s earnings release follows the March 3 announcement by Columbus-based Carmike and Leawood, Kan.-based AMC that they had signed an agreement in which AMC will acquire the smaller theater chain in a deal valued at $1.1 billion. The purchase is pending approval by federal regulators and shareholders. A class-action lawsuit was filed recently in U.S. District Court claiming the $30-per-share that AMC has pledged to pay Carmike shareholders is too low.

Carmike issued its quarterly earnings report Monday after the stock markets closed. In earlier trading, its shares slipped 8 cents, or 0.2 percent, to $29.91, the general vicinity its stock has been treading since the major acquisition announcement. The stock’s 52-week range is $18.52 to $32.70 per share.

Major numbers in the report showed the theater firm’s theater-level cash flow rising from $35.5 million to $43.1 million and operating income climbing from $12 million to $15.6 million in the quarter year over year. Revenue from ticket admissions and concessions both rose, as did film exhibition and concession costs, salaries and benefits, and theater occupancy expenses — all indicative of a theater chain that has grown since Passman took the helm in June 2009.

That growth has included new theaters constructed in leased buildings and acquisitions of smaller theater company’s movie complexes. The company also has renovated some of its older theaters along the way. As of March 31, Carmike operated 276 theaters and 2.947 screens in 41 states. It’s total debt stands at $463.3 million, up from $454.7 million at the end of December.

“Our focus on delivering differentiated food and beverage offerings and innovative dining concepts supported strong first quarter concessions and other spending per patron, marking 25 consecutive reporting periods of year-over-year concessions and other per patron spending growth,” Passman said. “Carmike’s 14 percent increase in total concessions and other revenues and 12 percent rise in concessions and other spending per patron again highlight the value of our strategies to drive food, beverage and concession growth.”

The theater firm reported average admissions revenue per customer of $7.80, with average concessions of $5.31 per person.

“In summary, we are pleased with the first quarter financial and operating performance ... and remain optimistic that the positive consumer, economic and box office environments will continue for the remainder of 2016,” Passman said.

Typically, after its earnings reports are released, Carmike conducts a conference call and webcast with Wall Street analysts who track the firm and its industry. It said recently that no call would be held this quarter in light of its pending buyout by AMC Entertainment, which operates AMC Theatres.

Class-action lawsuit

Not everyone is happy with the acquisition terms. San Diego-based law firm Robbins Arroyo LLP filed the class-action lawsuit April 25 on behalf of John Solak and “all others similarly situated” in the Columbus division of U.S. District Court of the Middle District of Georgia. The suit names Columbus-based Carmike, its board of directors, AMC Entertainment Holdings and Congress Merger Subsidiary Inc., alleging U.S. Securities and Exchange Commission violations.

Solak, using Robbins Arroyo and its attorney Darnell Donahue, alleges the defendants in the lawsuit filed a preliminary proxy statement with the SEC that contained “materially false and misleading” information in order to gain support of shareholders for the sale. It says the filing did not have enough information for shareholders to make an “informed decision” concerning the sale of Carmike.

Specifically, according to court documents, the plaintiff alleges that Carmike and its board are not receiving fair-market value for the company based on previous theater acquisitions in the industry. It also notes that analysts who follow Carmike, AMC and others in the motion-picture exhibition sector have placed target prices of between $33 and $36 per share on the company’s stock.

“Despite Carmike’s continued success and impressive admissions revenues per screen growth, defendants agreed to sell the company to AMC for a meager purchase price per screen of only $372,376,” the court filing says, pointing toward the median per screen price of $497,002 and average per screen price of $544,632 in six other theater industry transactions since 2012.

“We believe this suit is without merit and intend to defend ourselves vigorously,” Carmike said through a public relations firm.

The legal filing by Robbins Arroyo said the lawsuit is open to those owning stock shares as of March 3, and asks for anyone who wishes to serve as a lead plaintiff to step forward within 60 days of April 28.

Robbins Arroyo LLP, in a release, said it has gained more than $1 billion for shareholders and investors in previous lawsuits it has spearheaded. Major moves by companies, including sales and critical decisions made by management and boards of directors, often are the target of law firms seeking to file suits on behalf of shareholders.

Carmike Cinemas and AMC Entertainment Holdings have said they expect the acquisition to be completed before the end of this year. The Columbus company has roughly 8,000 employees, all but the corporate staff working inside its movie complexes scattered across the country.

This story was originally published May 2, 2016 at 12:25 PM with the headline "Carmike Cinemas reports $2.2 million profit as it awaits buyout."