Carmike Cinemas’ Chief Financial Officer Richard B. Hare stated, “On the expense side, the majority of our key costs were generally in-line with our expectations during the quarter, leading to solidly profitable bottom-line results, after accounting for a one-time $5.0 million non-cash loss on debt extinguishment, in conjunction with our term debt pay-down and notes offering in April. Film exhibition costs increased 70 basis points compared to the year-earlier quarter due primarily to the concentration of blockbuster feature films in 2012. Other theatre operating costs were $52.7 million, an increase of 6.6% over the same period last year. A combination of higher salaries and wages expense, occupancy costs and repairs and maintenance accounted for the modest increase. General and administrative expenses rose to $5.2 million from $4.5 million, primarily due to higher salaries and wages, professional fees. Q2 interest expense was unchanged at $8.6 million. Our income tax expense for the quarter was 44.8%, or $0.9 million.
“Carmike ended Q2 with $239.6 million in net debt, a 20.6% reduction from our 2011 year-end level. We finished the recent quarter with a cash balance of $85.8 million and we are looking to deploy a significant portion of that balance for future growth as we believe that the Company’s present level of infrastructure can support a larger theatrical circuit,” Mr. Hare concluded.
Supplemental Financial Measures
Theatre level cash flow, EBITDA, adjusted EBITDA, adjusted net income (loss), 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 (loss) is defined as net income (loss) plus impairment of long-lived assets, loss on extinguishment of debt, write-off of note receivable, and severance agreement charges. Carmike believes adjusted net income (loss) 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 long-term debt, capital leases and long-term financing obligations, long-term debt (less current maturities) 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 (loss) plus income tax expense, interest expense and depreciation and amortization. Adjusted EBITDA is defined as net income (loss) plus income tax expense, interest expense, depreciation and amortization, loss (income) from unconsolidated affiliates, (income) loss from discontinued operations, loss on extinguishment of debt, severance agreement charges, loss on sale of property and equipment, write-off of note receivable 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.About Carmike Cinemas ( www.carmike.com ) Carmike Cinemas, Inc. is a U.S. leader in digital cinema and 3-D cinema deployments and one of the nation’s largest motion picture exhibitors. As of June 30, 2012, Carmike had 233 theatres with 2,245 screens in 35 states. Carmike’s digital cinema footprint reached 2,122 screens, including 209 theatres with 750 screens that are also equipped for 3-D. The circuit also includes 13 Big D large format digital experience auditoriums, featuring state-of-the-art equipment and luxurious seating. As ‘America’s Hometown Theatre chain,’ Carmike’s primary focus for its locations is small to mid-sized communities.