Regal Entertainment Group (RGC)
Q2 2012 Earnings Call
July 26, 2012 4:30 pm ET
Amy E. Miles - Chief Executive Officer and Director
David H. Ownby - Chief Financial Officer, Executive Vice President, Principal Accounting Officer and Treasurer
Benjamin Mogil - Stifel, Nicolaus & Co., Inc., Research Division
Eric O. Handler - MKM Partners LLC, Research Division
Bo Tang - Barclays Capital, Research Division
Barton E. Crockett - Lazard Capital Markets LLC, Research Division
Townsend Buckles - JP Morgan Chase & Co, Research Division
James M. Marsh - Piper Jaffray Companies, Research Division
Tuna N. Amobi - S&P Equity Research
Bishop Cheen - Wells Fargo Securities, LLC, Research Division
David W. Miller - Caris & Company, Inc., Research Division
Robert Fishman - Nomura Securities Co. Ltd., Research Division
Benjamin Swinburne - Morgan Stanley, Research Division
Matthew J. Harrigan - Wunderlich Securities Inc., Research Division
James C. Goss - Barrington Research Associates, Inc., Research Division
Previous Statements by RGC
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Good afternoon. My name is Luis, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Regal Entertainment Group Fiscal Second Quarter 2012 Earnings Release Conference Call, with our hosts, Amy Miles, Chief Executive Officer of Regal Entertainment Group; and David Ownby, Chief Financial Officer of Regal Entertainment Group. [Operator Instructions]
I would like to remind our listeners that this conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts communicated during this conference call, may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. The important factors that can cause actual results to differ materially from the company's expectations are disclosed in the Risk Factors contained in the company's annual report on Form 10-K dated February 27, 2012. All forward-looking statements are expressly qualified in their entirety by such factors.
Now I will turn the call over to Amy Miles.
Amy E. Miles
Good afternoon, and thank you for dialing into our second quarter conference call. We're here this afternoon to discuss our second quarter financial results with the investment community and intend to conduct our call in a normal fashion. But our thoughts today remain with those affected by the horrific event that transpired in Colorado last Thursday night. We understand that investors have questions about how those events may impact our future operations. We'll do our best today to answer those questions in a respectful matter and with the understanding that some of those questions can only be answered with the passage of time.
We strongly believe that movie theaters have always been, and will continue to be, places where friends, families and communities can safely gather together for a few hours of fun and entertainment, and we remain committed to providing a safe and secure environment for our guests. We were heartbroken by the senseless act that took place last week. And on behalf of everyone here at Regal Entertainment Group, we extend our deepest sympathy to the victims, their families and the overall community.
With that in mind, for the next few minutes, I will provide an overview of second quarter results for both the industry and Regal and update on several strategic initiatives. And following my remarks, David will highlight our financial results and always, we'll conclude the call with a question-and-answer session.
We're extremely pleased with the box office momentum generated in the first quarter, carried over into the start of the summer movie season. The success of The Hunger Games in April and Marvel's The Avengers in early May helped drive second quarter industry box office over the $2.8 billion mark for the third time in the last 4 years, a decline of only 3% as compared to last year's record second quarter.
In a historical context, this quarter's box office was the third highest in the history of our industry.
Premium format films were a key driver of the quarter's box office revenue, as none of the quarter's top 10 films were presented in either IMAX or 3D. Based on our review of industry sources, we estimate that over 20% of second quarter industry box office revenue was generated through premium ticket sales, a significant increase as compared to the same period last year.
As was the case in the first quarter, we again want to point out the continued long-term stability of the domestic box office. Despite the slight decline in the second quarter, industry box office revenue for the trailing 4 quarters just ended totaled approximately $10.5 billion. Our industry has always experienced, and will likely continue to experience, short-term quarterly fluctuations in box office revenue, primarily related to the commercial appeal at the content available in any given period. Recent quarters are no exception. But against that backdrop of quarterly ups and downs, the long-term box office has remained remarkably consistent, following below the $10 billion mark for a trailing 4-quarter period only once since early 2009. We believe that the long-term stability of the box office is an aspect of our business that is often overlooked by the investment community.
From an operational standpoint, our sales personnel once again demonstrated their ability to provide a great customer experience, while at the same time keeping a close watch on our variable costs. The attention to details -- their attention to detail, combined with the healthy industry box office results, helped us achieve an adjusted EBITDA margin of just under 21% for the first half of this year. That's our highest in 8 years.