Transcript MACQUARIE CAPITAL

CARMIKE
CINEMAS
Raymond James 33rd Annual
Institutional Investors Conference
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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COMPANY OVERVIEW
1
STRICTLY CONFIDENTIAL
3
CARMIKE OVERVIEW
WA
1
 4th largest U.S. exhibitor
— 235 theatres / 2,215 screens
OR
1
 Diversified portfolio with theatres in 36 states
MT
6
ID
2
WY
1
 America’s Hometown Theatre
— Target small to mid-size non-urban markets
ND
5
CA
1
CO
6
OK
10
NM
1
— 2,089 digital screens
States with 1 – 9 Theatres
— 726 3-D screens
States with 10 – 19 Theatres
— Introduced Big D large format
States with 20+ Theatres
AR
7
IL
9
OH
4
IN
3
KY
5
PA
17
WV
VA
2
5
DE
1
NC
23
TN
21
AL
14
TX
9
GA
22
SC
10
FL
9
Note: Includes California theatre no longer operated (10/04); excludes 3 MNM theatres acquired 10/21
SUMMARY OF SITES
 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
MO
1
NY
1
MI
13
IA
5
KS
1
 Favorable recent attendance trends vs. industry
 Improving operating metrics driven by
concessions and cost-cutting measures
undertaken
WI
3
SD
5
NE
2
UT
3
 Leading digital and 3D platform poised for
growth in 3D-driven film slate
MN
6
Owned, 61,
26%
Leased,
169, 72%
Shared
Ownership,
5, 2%
4
SMALL MARKET BENEFITS
 10-12 screens ideal
SMALLER FOOTPRINT
 Offer entertainment in a family-friendly setting
 Small town America’s favorite theatre
LIMITED LOCAL
ENTERTAINMENT
OPTIONS & COMPETITION
 Presence in locations with minimal entertainment alternatives
 3-D / digital strategy
SIMPLE EFFICIENT
STRATEGY
 High concession margins
 Enhanced cash flow per screen
 Connectivity with audience base
UNIQUE HOLLYWOOD
FOCUS
 Focus on event films, family animation, sequels ideal for hometown
audiences
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DIGITAL AND 3-D EXHIBITION PIONEER
CARMIKE IS A LEADER IN THE DEPLOYMENT OF DIGITAL AND 3-D CINEMA
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)
 National 3-D footprint:
– 726 3-D capable screens (at 9/30/11)
3-D Overview
– 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)
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SIGNIFICANT DIGITAL UPSIDE
FOCUS ON DIGITAL FORMAT HAS POSITIONED CARMIKE TO
CAPITALIZE ON GROWING DIGITAL OPPORTUNITIES
HISTORICAL AND UPCOMING RELEASES
 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)
RECENT AND UPCOMING 3-D RELEASES
— 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.
7
3-D BENEFITS
 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
Enhanced
Experience
− $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
8
BIG D/OVATION CLUB
9
SCREENVISION AGREEMENT
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
10
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
11
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)
1
12
MOVIE-GOING…MOST POPULAR AND BEST VALUE
Most Popular Out-of-Home
Entertainment Experience
Most Attractive Value Proposition
Annual attendance (mm)
1,364
Ticket Price per Patron
$71
$49
$50
Basketball
(NBA)
Hockey
(NHL)
$36
$24
347
$7
80
Cinemas
Theme
Parks
Baseball
(MLB)
22
21
18
Basketball
(NBA)
Hockey
(NHL)
Football
(NFL)
Cinemas
Baseball
(MLB)
Theme
Parks
Football
(NFL)
Source: 2008 MPAA, Pricewaterhouse Coopers
13
FINANCIAL SUMMARY
2
STRICTLY CONFIDENTIAL
14
THEATRE OPERATIONS – YTD 2011
REVENUE MIX1
COSTS AND EXPENSES
G&A
Expenses
4%
Concessions
and Other
36%
Admissions
64%
Other Theatre
2
Operating
Costs
50%
Film
Exhibition
Costs
41%
Concession
Costs
5%
Notes:
1 As percentage of total revenue for YTD 9/30/2011
2 Other theatre operating costs include labor, utilities, occupancy and facility lease expenses
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HISTORICAL FINANCIAL SUMMARY
($ in millions)
Total Revenue
Three Months Ended
Nine Months Ended
Twelve Months Ended
September 30,
September 30,
December 31,
2011
$
2010
134.0
$
2011
123.5
$
362.1
2010
$
372.8
2010
$
491.3
2009
$
2008
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
3.1
0.8
(6.5)
(2.0)
(0.8)
Adjusted Net Income (Loss)
7.6
(4.9)
16
Q3 AND YTD 2011 FINANCIAL UPDATE
Three Months Ended
September 30,
2011
2010
($ in millions)
Financial Summary
Total Revenue
Theatre Level Cash Flow
Adjusted EBITDA
Adjusted Net (Loss) Income
Operating Statistics
Average Theatres
Average Screens
Average Attendance Per Screen
Average Admissions Per Patron
Average Concessions / other Per Patron
Total Attendance (in thousands)
Debt Summary
Total Debt
Net Debt
$
$
$
134.0 $
26.6
22.1
3.1
123.5
18.6
14.2
0.8
235
2,217
6,013
6.49 $
3.57 $
13,332
240
2,244
5,576
6.61
3.36
12,511
Nine Months Ended
September 30,
2011
2010
$
$
$
362.1 $
67.5
53.8
(6.5)
372.8
60.3
46.6
(2.0)
236
2,221
16,106
6.51 $
3.63 $
35,776
242
2,266
16,252
6.78
3.44
36,831
September 30, December 31,
2011
2010
$
326.2 $
353.4
307.2
340.3
Q3 Variance
($)
(%)
YTD Variance
($)
(%)
$ 10.5 8.5%
$ 8.0 43.0%
$ 7.9 55.6%
$ 2.3 287.5%
$ (10.7) (2.9%)
$ 7.2 11.9%
$ 7.2 15.5%
$ (4.5) NM
(5)
(27)
437
(0.12)
0.21
821
(2.1%)
(1.2%)
7.8%
(1.8%)
6.3%
6.6%
(6)
(45)
(146)
(0.27)
0.19
(1,055)
(2.5%)
(2.0%)
(0.9%)
(4.0%)
5.5%
(2.9%)
$ (27.2) (7.7%)
$ (33.1) (9.7%)
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KEY OPERATING METRICS
Three Months Ended
September 30,
2011
2010
Nine Months Ended
September 30,
2011
2010
Twelve Months Ended
December 31,
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
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THEATRE LEVEL CASH FLOW (unaudited)
Three Months Ended
September 30,
(in thousands)
2011
Operating Income1 (loss)
$13,812
Separation Agreement Charges
(Gain) Loss on Sale of Property and Equipment
Write-off of note receivable
Impairment of Long-Lived Assets
Sales and Use Tax Audit
Depreciation and Amortization
Adj. EBITDA
General and Administrative Expenses
Theatre Level Cash Flow
Nine Months Ended
September 30,
2010
Twelve Months Ended
December 31,
2011
2010
2010
2009
$6,726
$26,841
$18,558
$24,088
$22,277
-
-
845
-
-
5,462
47
(658)
108
(649)
(667)
(425)
-
-
750
-
-
-
18
220
1,342
3,832
8,188
17,554
-
-
-
1,000
1,000
-
8,260
7,947
23,948
23,857
32,017
34,216
$22,137
$14,235
$53,834
$46,598
$64,626
$79,084
$4,458
$4,365
$13,687
$13,669
$17,570
$16,139
$26,595
$18,600
$67,521
$60,267
$82,196
$95,223
1Operating
income is defined as operating revenues less operating expenses which includes film exhibition, concession, theatre operating, G&A, and
non-cash operating charges.
19
TOTAL DEBT AND BANK DEBT (unaudited)
(in thousands)
September
30,
2011
December
31,
2010
December
31,
2009
Current Maturities of Long-Term Debt, Capital Leases
and Long-Term Financing Obligations
Long-Term Debt Less Current Maturities
$4,007
$4,240
$4,261
207,153
233,092
248,171
Capital Leases and Long-Term Financing Obligations1
115,022
116,036
116,684
$326,182
$353,368
$369,116
(18,999)
(13,066)
(25,696)
$307,183
$340,302
$343,420
$25,833
$35,985
$33,067
Total Debt
2
Less Cash and Cash Equivalents
Net Debt
Interest Expense
1
2
Financing obligations are not included as debt under the terms of the Company’s debt agreement.
The Company has prepaid $110 million of debt in the last four years.
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STRATEGIC INITIATIVES TO ENHANCE
BALANCE SHEET
CARMIKE HAS UNDERTAKEN SEVERAL INITIATIVES TO IMPROVE CASH FLOW AND FURTHER STRENGTHEN ITS
CAPITAL STRUCTURE POSITION
DIGITAL SCREEN
IMPLEMENTATION
SUSPENSION OF
CASH DIVIDEND
LIMITED CAPEX
SPEND
Improves revenue
(increased exhibition options
and 3-D) and cost efficiency
Allowed for cash allocation
to repay term loan principal
Only theater chain to
complete its digital roll-out,
limiting need for significant
future capex
LOCALIZATION
RATIONALIZATION
DEBT REPAYMENT
G&A REDUCTION
Rationalized asset base by
purging under-performing
and non-strategic locations
Carmike improving its future
capital position through
repayment of outstanding
term loans
Carmike has lowered
general and administrative
costs
STATED OBJECTIVE IS TO IMPROVE FREE CASH FLOW GENERATION AND CONTINUE TO REDUCE LEVERAGE
21
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.
22
CLOSING REMARKS
23
Q&A SESSION
Thank You!
Investor Relations contacts:
Richard Hare, CFO
Carmike Cinemas
(706)576-3415
[email protected]
Robert Rinderman
Jaffoni & Collins
212/835-8500
[email protected]
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