Carmike Confident Despite Losses
By Tony Adams, Columbus Ledger-Enquirer, Ga.
Mar. 18–Movie theater chain Carmike Cinemas Inc. pointed Monday to “weak” Hollywood offerings in late 2007 as the reason for its losses of $68 million in the fourth quarter and $127 million for the full year.
The Columbus-based motion picture exhibitor also said it has completed its digital upgrade and is banking heavily on the technology — which includes three-dimensional viewing — as well as another ticket and concession price increase this spring to improve its financial picture.
“The fourth quarter got off to a very slow start with a weak release schedule in the month of October, which was compounded by poor holdovers from the third quarter,” said Michael Patrick, Carmike’s chairman, president and chief executive officer.
“Positive traction began, however, in mid-November with the 3D release of ‘Beowulf,’ ” he said. “The return of more mainstream commercial films around the holidays improved box-office performance in December, with momentum carrying into January and February.”
Looking at the numbers, Carmike reported a $68 million net loss, or $5.40 per share, in the three-month period ended Dec. 31. That compares to a $5.7 million loss, or 46 cents per share, during the same period in 2006. Total revenues were $117 million, down from $121 million the year before.
For 2007 as a whole, the company posted its net loss of $127 million, or $10.07 per share, on total revenues of $489 million. That compares to a loss of $19 million, or $1.57 per share, on revenues of $486 million the prior year.
Top film performers for Carmike in the fourth quarter included “Alvin and the Chipmunks,”"I Am Legend,”"Beowulf 3D” and the “National Treasure” sequel.
But those offerings did not keep attendance from dropping nearly 9 percent per screen, the company said.
Carmike, looking to boost income, raised ticket prices by 50 cents Nov. 16 just as “Beowulf” was being released. It also tested in various markets a fee increase from $2 to $2.50 for the special glasses needed to watch 3D movies.
“Because of our technological advantage with 3D, we were convinced that a more aggressive approach to our pricing structure would be acceptable to our audience,” said Fred Van Noy, Carmike’s chief operating officer.
“We found no meaningful negative reaction to the 50-cent increase, giving us the confidence that we can continue to escalate this additional charge to higher levels in the future,” he said.
Concessions — which include popcorn, soft drinks and candy — also saw price increases ranging from 5 to 25 cents on specific menu items, he said.
The price hikes did what they were intended to do. Van Noy said average ticket prices were up more than 9 percent companywide in the fourth quarter, while concession takes per person were up nearly 6 percent.
Another round of price hikes is planned in late April or early May, Van Noy said.
“This increase will probably not be as aggressive as our last increase in November, but we will look at our opportunities on a market by market basis,” he said.
Carmike executives, talking with Wall Street analysts during a conference call Monday, appeared pleased by the initial performance from the chain’s digital and 3D rollout.
The “Hannah Montana” concert earlier this year, which commanded admission prices of $15 (advance) to $18 (at the door), is a prime example, they said. Carmike played it in 190 locations, with the musical phenomenon generating 62 percent of the company’s box-office take in its opening week.
In an interesting comparison, Carmike said the “Hannah” concert drew enough squealing Miley Cyrus fans to outgross the chain’s entire box-office revenues from the same week the year before by 167 percent. Refreshment revenues were up 193 percent.
“Hannah Montana clearly demonstrates to the industry the potential of 3D technology, alternative content and, most importantly, pricing flexibility,” Van Noy said. “We’re convinced the door of opportunity is now completely open. Producers, directors and distributors are excited and motivated to take this technology to the next level.”
Looking at coming attractions, Patrick rattled off several movies that should do well this year. They include a “Chronicles of Narnia” sequel, “Indiana Jones and the Kingdom of the Crystal Skull,”"Incredible Hulk,”"Batman: The Dark Knight,”"High School Musical 3″ and a new Harry Potter film.
He was particularly high on a potential summer blockbuster that will be shown in 3D, “Journey to the Center of the Earth.”
Carmike now has 264 theaters with 2,349 screens in 36 states. Of those, 2,174 screens in 194 theaters have digital projectors, while 429 screens boast 3D capability. There are plans to add 100 more 3D screens.
The company said it will close 13 poorly performing theaters in 2008 because of leases expiring. But there are plans to open four theaters with 42 screens later this year, with seven more theaters and 86 screens on the drawing board for 2009.
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