Carmike Cinemas’ Third Quarter Revenue Rises 30.2% to $165 Million
November 05, 2013
Carmike Cinemas' President and Chief Executive Officer David Passman stated, "The third quarter was another strong reporting period for Carmike as we posted growth in box office receipts and attendance that exceeded those of the overall domestic exhibition industry. The Company achieved solid increases in key per cap metrics, adjusted EBITDA and theatre level cash flow. We also extended Carmike's streak of increases in year-over-year per patron spending on concessions and other items to 15 consecutive quarters. Carmike's solid third quarter operating performance underscores our Company-wide focus on customer service excellence and patrons are clearly responding.
"We continually strive to provide the best customer experience, and to that end we recently entered into an agreement with IMAX Corporation to add ten additional IMAX® theatre systems to be installed in new construction projects and existing Carmike multiplexes across the U.S. The addition will increase our total number of IMAX auditoriums to 18. We also opened our 20th Big D auditorium last week at our new theatre in Champaign, Illinois. We believe that both of these large format alternatives provide an exceptional movie-going experience for our patrons.
"We continue to prioritize an active expansionary M&A program, seeking attractive acquisition opportunities that will help us further expand the circuit to approximately 300 locations and 3,000 screens, leveraging Carmike's corporate infrastructure as we remain an active participant in the ongoing consolidation of the movie theatre industry. Following our equity offering in early Q3, as previously announced on November 4, we signed a definitive agreement to purchase 9 entertainment complexes and 147 screens based in 3 states from Muvico Entertainment, L.L.C. The Muvico acquisition not only moves us closer to our desired theatre and screen target, but also stretches the Company's footprint into key markets and further expands the Company's cinema-dining presence with the addition of two Bogart's Bar & Grill® restaurants."Carmike Cinemas'
Chief Financial Officer Richard B. Hare stated, "Fueled by recent acquisitions, total operating revenues grew more than 30% to $165 million, with admission receipts increasing 28.7% year-over-year during a quarter when the domestic industry box office grew 6.4% year-over-year. Carmike's concessions and other revenues rose 33%, compared to the year-ago Q3. Average per patron spending increased 5.7% to $10.84. Average per cap admissions rose 4.3% and concessions/other sales expanded 7.9%.
"Film exhibition costs as a percentage of admissions revenue remained steady at 54.9%, as the motion picture slate performed well and a variety of titles contributed to the year-over-year growth in receipts. Concession costs as a percentage of concession and other revenues increased to 13.4% in the third quarter of 2013, primarily due to increases in the cost of concession supplies and discounts and other promotional activities. As a percentage of total operating revenues, other theatre operating costs improved 160 basis points to 40.2%, despite a 25.4% year-over-year increase in costs to $66.3 million. The rise versus the year-ago period was largely a reflection of the 11.6% increase in average screen count, plus higher theatre salaries, wages and occupancy costs. General and administrative expenses were $6.6 million for the three months ended September 30, 2013, compared to $5.7 million for the same period in 2012, primarily due to costs associated with professional fees related to merger and acquisition activities.
"Third quarter theatre level cash flow rose 40.1% to $33.9 million and adjusted EBITDA increased 46.7% to $28.4 million. The Q3 adjusted EBITDA margin was 17.2%, 190 basis points better than the 15.3% margin in the prior year period. We continue to focus on managing Carmike's controllable costs and believe that successful M&A activity will further enhance margins as the infrastructure required to operate a substantially larger circuit is already in place. As such, we expect a higher percentage of theatre level cash flow from future acquisitions to flow directly to our adjusted EBITDA results," concluded Mr. Hare.
Supplemental Financial Measures
Theatre level cash flow, EBITDA, adjusted EBITDA, adjusted net 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 income is defined as net income plus impairment of long-lived assets, loss on sale of property and equipment, loss on extinguishment of debt, lease termination charges, severance agreement charges and merger and acquisition-related expenses, net of tax. Carmike believes adjusted net 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 income plus income tax expense, interest expense and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus income from unconsolidated affiliates, loss from discontinued operations, loss on extinguishment of debt, lease termination charges, severance agreement chargers, merger and acquisition-related expenses, 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.
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