raymond james 33 rd annual institutional investors conference carmike cinemas march 2012
TRANSCRIPT
Raymond James 33rd Annual Institutional Investors Conference
CARMIKE CINEMAS
March 2012
DISCLAIMER
This presentation contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words, “believes,” “expects,” “anticipates,” “plans,” “estimates” or similar expressions. Examples of forward-looking statements in this presentation include our ticket and concession price increases, our cost control measures, our strategies and operating goals, our plans regarding debt reduction, our film slate for 2012 and future years, and our capital expenditure and theater expansion/closing plans. These statements are based on beliefs and assumptions of management, which in turn are based on currently available information. The forward-looking statements also involve risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include, but are not limited to: The inability to consummate the transactions described in this presentation on terms favorable to us; The inability to satisfy any conditions to closing or to complete any related financing in connection with the transactions described in this presentation; Our ability to comply with covenants contained in our senior secured credit agreement; Our ability to operate at expected levels of cash flow; Our ability to meet our contractual obligations, including all outstanding financing commitments; Financial market conditions including, but not limited to, changes in interest rates and the availability and cost of capital; The availability of suitable motion pictures for exhibition in our markets; Competition in our markets; Competition with other forms of entertainment; The effect of our leverage on our financial condition; and Other factors, including the risk factors disclosed in our annual report on form 10-K for the year ended December 31, 2010 and our quarterly reports on form 10-Q under the caption “risk factors.”
We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of these in light of new information or future events.
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STRICTLY CONFIDENTIAL
COMPANY OVERVIEW
13
Leased, 169, 72%
Owned, 61, 26%
Shared Ownership,
5, 2%
CARMIKE OVERVIEW
4
OH4IL
9
GA22
SD5
ID2
CO6
TX9
WV2
MI13
TN21
FL9
NY1
OR1
MN 6
NE2
OK10
IN3
WI3
SC10
WA1
VA5MO
1
ND5
WY1
PA17
KY5
NC23
AL14
AR7
KS1
IA5
NM1
CA 1
MT6
UT3
SUMMARY OF SITES
DE1
4th largest U.S. exhibitor
— 235 theatres / 2,215 screens
Diversified portfolio with theatres in 36 states
America’s Hometown Theatre
— Target small to mid-size non-urban markets
Favorable recent attendance trends vs. industry
Leading digital and 3D platform poised for growth in 3D-driven film slate
— 2,089 digital screens
— 726 3-D screens
— Introduced Big D large format
Improving operating metrics driven by concessions and cost-cutting measures undertaken
New growth initiatives include 30-year agreement with Screenvision, alternative content, Big D theatre format and VIP Ovation Club offering
Strengthened Balance Sheet through operating and financial discipline
Note: Includes California theatre no longer operated (10/04); excludes 3 MNM theatres acquired 10/21
States with 1 – 9 Theatres
States with 10 – 19 Theatres
States with 20+ Theatres
SMALL MARKET BENEFITS
5
SMALLER FOOTPRINT
UNIQUE HOLLYWOOD FOCUS
SIMPLE EFFICIENT STRATEGY
LIMITED LOCAL ENTERTAINMENT
OPTIONS & COMPETITION
10-12 screens ideal
Offer entertainment in a family-friendly setting
Small town America’s favorite theatre
Presence in locations with minimal entertainment alternatives
3-D / digital strategy
High concession margins
Enhanced cash flow per screen
Connectivity with audience base
Focus on event films, family animation, sequels ideal for hometown audiences
DIGITAL AND 3-D EXHIBITION PIONEER
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Digital Overview
2,089 screens converted to digital including 100% of first-run screens and 94% of total New Big D DIGITAL Entertainment Experience Carmike’s digital large screen format debuted in Columbus, GA - Q3 ’10
– Current footprint includes:– Columbus, GA– Franklin, TN– Canton, GA– Savannah, GA– Tyler, TX – Billings, MT – 4 Openings in Q4 2011 (Chattanooga, TN; Pottstown, PA; St. Clairsville, OH, and Missoula, MT) --with additional theatres opening soon (3 openings in Q1 2012)
3-D Overview
National 3-D footprint:
– 726 3-D capable screens (at 9/30/11)
– 35% penetration of digital footprint
3-D is an important revenue driver for Carmike
– 24% of Q3 box receipts from 3-D titles
– 3-D genre is well-suited for Carmike’s markets (animation, family, action)
CARMIKE IS A LEADER IN THE DEPLOYMENT OF DIGITAL AND 3-D CINEMA
SIGNIFICANT DIGITAL UPSIDE
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HISTORICAL AND UPCOMING RELEASES
RECENT AND UPCOMING 3-D RELEASES
FOCUS ON DIGITAL FORMAT HAS POSITIONED CARMIKE TO CAPITALIZE ON GROWING DIGITAL OPPORTUNITIES
Superior picture quality, brightness and color – no degradation over time
Revenue drivers:
— Improved programming flexibility
— Limit “sell outs”
— Increases revenue and customer satisfaction
— 3-D content
— Alternative content
— Concerts (U2 3-D, Kenny Chesney, Dave Matthews, Foo Fighters)
— Opera and ballet (Emerging Pictures relationship)
— Pay-per-view events
— Live sports (BCS Championship, NCAA Final Four, NBA Skills, FIFA World Cup)
— Religious (Fox Faith)
On-screen advertising (Screenvision) – 3-D format, lobby ads, mobile, etc.
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3-D content is important revenue driver
− 24% of CKEC Q3 box receipts from 3-D titles
3-D film genre well-suited to CKEC markets
− Animation, family, action
Higher ticket prices
− $3.00+ premium
Growing base of 3-D titles and special events
− 23 films released in ’10, 35+ in 11, including numerous ‘franchise’ sequels, 40+ releases for ‘12
EnhancedExperience
Premium Ticket Prices
3-D BENEFITS
BIG D/OVATION CLUB
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SCREENVISION AGREEMENT
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30 YEAR AGREEMENT WITH ADVERTISING PARTNER SCREENVISION PROVIDES FURTHER GROWTH OPPORTUNITIES
Extended long-term on-screen exclusive exhibition agreement with cinema advertising leader for additional 30 years
— Carmike has been Screenvision customer for ~20 years
— Current deal enhances partnership and provides Carmike with equity upside
Carmike received $30 million pre-tax cash payment on 1/4/11
— Prepaid bank debt with $15 million of proceeds, further deleveraging balance sheet
Carmike received 20% ownership interest in Screenvision profits and growth; which can go as high as 25% or as low as 15% depending on screen count, while also giving Carmike rights to distributions upon a monetization event of Screenvision
Perfectly aligned partnership
— Screenvision has similar small-town footprint to Carmike
— Local advertiser focus yields synergies
New relationship forged with respected media investor Shamrock Capital
Cinema advertising regarded as one of the fastest growing media segments in the United States
THEATRE MANAGEMENT STRATEGY
Focus on details “through the eyes of our patrons”
— Refreshing our circuit
— Clean facilities
— Friendly and well-trained associates
— Appropriate number of employees per theatre to achieve better customer experience
Performing general maintenance on older theatres
— Helps compete with other entertainment attractions in Carmike markets
Theatre utilization
— Alternative content – leveraging digital platform
— Staggered show times
Opening larger, state-of-the art theatres averaging ~12 screens
— Third party ‘build-to-suit’ theatres require less upfront investment for Carmike
— Digital entertainment complexes featuring stadium seating
Closing under-performing theatres, exiting expired leases
— Most are smaller theatres with fewer/non-digital screens
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CONCESSIONS SUCCESS
Excellent, industry-leading margins
—Seven straight quarter-over-quarter per cap increases
Streamlined concession offerings
—Focus on highest margin products such as:
—Coca-Cola/fountain drinks, popcorn (including flavored), nachos, cotton candy and select candy offerings (M&M products)
Driving more revenue
—Up-selling patrons with combo / value pricing
—Reusable/refillable popcorn buckets – leads to repeat visits/loyalty
—Stimulus Tuesdays (still going strong after 2.5 years)
—Special Stimulus Tuesday discounted concession offerings
—Single point of sale for tickets and concessions – pilot program
—Promotions – including specialized tie-ins, bounce-backs, etc.
—Ovation Room (VIP Auditorium in Chattanooga, TN – nation’s first ‘Green’ theatre)
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MOVIE-GOING…MOST POPULAR AND BEST VALUE
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Most Popular Out-of-Home Entertainment Experience
Cinemas Theme Parks
Baseball (MLB)
Basketball (NBA)
Hockey (NHL)
Football (NFL)
1,364
347
8022 21 18
Most Attractive Value Proposition
Cinemas Baseball (MLB)
Theme Parks
Basketball (NBA)
Hockey (NHL)
Football (NFL)
$7
$24
$36
$49 $50
$71Annual attendance (mm)
Source: 2008 MPAA, Pricewaterhouse Coopers
Ticket Price per Patron
STRICTLY CONFIDENTIAL
FINANCIAL SUMMARY
214
Admissions64%
Concessions and Other
36%
Film Exhibition
Costs41%
Concession Costs
5%
Other Theatre Operating
Costs50%
G&A Expenses
4%
THEATRE OPERATIONS – YTD 2011
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Notes:1 As percentage of total revenue for YTD 9/30/20112 Other theatre operating costs include labor, utilities, occupancy and facility lease expenses
REVENUE MIX1 COSTS AND EXPENSES
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Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, December 31,
($ in millions) 2011 2010 2011 2010 2010 2009 2008
Total Revenue 134.0$ 123.5$ 362.1$ 372.8$ 491.3$ 513.0$ 471.0$
Theatre Level Cash Flow 26.6 18.6 67.5 60.3 82.2 95.2 91.7
Adjusted EBITDA 22.1 14.2 53.8 46.6 64.6 79.1 72.3
Adjusted Net Income (Loss) 3.1 0.8 (6.5) (2.0) (0.8) 7.6 (4.9)
HISTORICAL FINANCIAL SUMMARY
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Three Months Ended Nine Months Ended
September 30, September 30, Q3 Variance YTD Variance
($ in millions) 2011 2010 2011 2010 ($) (%) ($) (%)
Financial Summary
Total Revenue 134.0$ 123.5$ 362.1$ 372.8$ 10.5$ 8.5% (10.7)$ (2.9%)
Theatre Level Cash Flow 26.6 18.6 67.5 60.3 8.0$ 43.0% 7.2$ 11.9%
Adjusted EBITDA 22.1 14.2 53.8 46.6 7.9$ 55.6% 7.2$ 15.5%
Adjusted Net (Loss) Income 3.1 0.8 (6.5) (2.0) 2.3$ 287.5% (4.5)$ NM
Operating Statistics
Average Theatres 235 240 236 242 (5) (2.1%) (6) (2.5%)
Average Screens 2,217 2,244 2,221 2,266 (27) (1.2%) (45) (2.0%)
Average Attendance Per Screen 6,013 5,576 16,106 16,252 437 7.8% (146) (0.9%)
Average Admissions Per Patron 6.49$ 6.61$ 6.51$ 6.78$ (0.12) (1.8%) (0.27) (4.0%)
Average Concessions / other Per Patron 3.57$ 3.36$ 3.63$ 3.44$ 0.21 6.3% 0.19 5.5%
Total Attendance (in thousands) 13,332 12,511 35,776 36,831 821 6.6% (1,055) (2.9%)
September 30, December 31,
Debt Summary 2011 2010
Total Debt 326.2$ 353.4$ (27.2)$ (7.7%)
Net Debt 307.2 340.3 (33.1)$ (9.7%)
Q3 AND YTD 2011 FINANCIAL UPDATE
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Three Months Ended Nine Months Ended Twelve Months EndedSeptember 30, September 30, December 31,
2011 2010 2011 2010 2010 2009 2008
Average Theatres 235 240 236 242 242 247 256
Average Screens 2,217 2,244 2,221 2,266 2,266 2,285 2,309
Average Attendance Per Screen 6,013 5,576 16,106 16,252 21,140 23,070 21,598
Average Admissions Per Patron 6.49$ 6.61$ 6.51$ 6.78$ 6.85$ 6.52$ 6.32$
Average Concessions / other Per Patron 3.57$ 3.36$ 3.63$ 3.44$ 3.43$ 3.21$ 3.24$
Total Attendance (in thousands) 13,332 12,511 35,776 36,831 47,909 52,702 49,872
KEY OPERATING METRICS
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1Operating income is defined as operating revenues less operating expenses which includes film exhibition, concession, theatre operating, G&A, and non-cash operating charges.
THEATRE LEVEL CASH FLOW (unaudited)
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(in thousands) 2011 2010 2011 2010 2010 2009
Operating Income1 (loss) $13,812 $6,726 $26,841 $18,558 $24,088 $22,277
Separation Agreement Charges - - 845 - - 5,462
(Gain) Loss on Sale of Property and Equipment 47 (658) 108 (649) (667) (425)
Write-off of note receivable - - 750 - - -
Impairment of Long-Lived Assets 18 220 1,342 3,832 8,188 17,554
Sales and Use Tax Audit - - - 1,000 1,000 -
Depreciation and Amortization 8,260 7,947 23,948 23,857 32,017 34,216
Adj. EBITDA $22,137 $14,235 $53,834 $46,598 $64,626 $79,084
General and Administrative Expenses $4,458 $4,365 $13,687 $13,669 $17,570 $16,139
Theatre Level Cash Flow $26,595 $18,600 $67,521 $60,267 $82,196 $95,223
Nine Months EndedSeptember 30,
Three Months EndedSeptember 30,
Twelve Months EndedDecember 31,
TOTAL DEBT AND BANK DEBT (unaudited)
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September 30,
December 31,
December 31,
2011 2010 2009Current Maturities of Long-Term Debt, Capital Leasesand Long-Term Financing Obligations
Long-Term Debt Less Current Maturities 207,153 233,092 248,171
Capital Leases and Long-Term Financing Obligations 115,022 116,036 116,684
Total Debt $326,182 $353,368 $369,116
Less Cash and Cash Equivalents (18,999) (13,066) (25,696)
Net Debt $307,183 $340,302 $343,420
Interest Expense $25,833 $35,985 $33,067
(in thousands)
$4,240 $4,261 $4,007
1 Financing obligations are not included as debt under the terms of the Company’s debt agreement.2 The Company has prepaid $110 million of debt in the last four years.
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STRATEGIC INITIATIVES TO ENHANCE BALANCE SHEET
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DIGITAL SCREEN IMPLEMENTATION
Improves revenue (increased exhibition options and 3-D) and cost efficiency
SUSPENSION OF CASH DIVIDEND
Allowed for cash allocation to repay term loan principal
LIMITED CAPEX SPEND
Only theater chain to complete its digital roll-out, limiting need for significant future capex
LOCALIZATION RATIONALIZATION
Rationalized asset base by purging under-performing and non-strategic locations
DEBT REPAYMENTCarmike improving its future capital position through repayment of outstanding term loans
G&A REDUCTIONCarmike has lowered general and administrative costs
STATED OBJECTIVE IS TO IMPROVE FREE CASH FLOW GENERATION AND CONTINUE TO REDUCE LEVERAGE
CARMIKE HAS UNDERTAKEN SEVERAL INITIATIVES TO IMPROVE CASH FLOW AND FURTHER STRENGTHEN ITS CAPITAL STRUCTURE POSITION
KEY FINANCIAL TAKEAWAYS
Continue to utilize free cash to voluntarily pre-pay bank debt and strengthen balance sheet
— Goal of $200 million bank debt in reach (~$211 million at quarter-end)
Strengthened balance sheet to continue to pursue growth opportunities (upgrade equipment, new builds, acquisitions, etc.) vs. paying dividends or repurchasing stock
— Want to take advantage of the expiring window of opportunity to go digital that some smaller circuits are either unwilling or unable to do
Concessions success with industry-leading margins
— Seven straight quarters of higher per caps
— Creative experimentation with promotions and merchandising strategies to up-sell patrons and foster loyalty/repeat visits
Continue focus on ‘details matter’ strategy
— Improving attendance metrics and encouraging repeat business with customer-centric attitude
High margins and free cash flow conversion to serve as catalysts to strengthen balance sheet and pre-pay existing debt
Screenvision partnership, strategic new builds / closures and improved pricing
Further capitalize upon digital/3-D circuit advantages
— Admission premiums, programming flexibility, high-quality image/sound, alternative content, etc.
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CLOSING REMARKS
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Refreshed Circuit
Screenvision
Investment
Growth via New Builds & Acquisitions
Strong Concessions Per Cap Growth
Strengthened
Balance Sheet
BIG D
Q&A SESSION
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Thank You!
Investor Relations contacts:Richard Hare, CFOCarmike Cinemas
(706)[email protected]
Robert RindermanJaffoni & Collins212/[email protected]