Regal Entertainment Group Earnings Call Highlights: Capital Expenditures and Revenue per Cost
On Monday, Regal Entertainment Group (NYSE:RGC) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Benjamin Mogil – Stifel Nicolaus: So just a couple of questions. On the CapEx number, sort of obviously a lot higher than what you ended up doing in 2011, and if we go back to ’11 I think almost every single quarter, you ended up ratcheting down the number. How firm is that $105 million to $120 million, sort of how much wiggle room do you have in terms of the commitments you’ve made and how far long you are in the process?
David H. Ownby – EVP, CFO and Treasurer: Ben, about half of that number remember is what we would call kind maintenance type CapEx. It’s fairly set. The other half really is dependent on its more of a new theater construction and that’s really dependent on the projects that we are involved in around the country in different retail centers. So, based on what we know today, certainly we feel like that sort of will end up for 2011 – for 2012, but going forward, those projects certainly could be delayed or that the timing for those could change.
Benjamin Mogil – Stifel Nicolaus: Was your maintenance CapEx number – and I think generally between 1.5% to 2% of box office is a reasonable maintenance CapEx range. Was your maintenance CapEx this year kind of in that range, though?
David H. Ownby – EVP, CFO and Treasurer: Yeah, we think about it on per screen basis Ben, but it’s kind of $8,500 per screen is what we’ve averaged over time.
Benjamin Mogil – Stifel Nicolaus: You captured that in ’11?
David H. Ownby – EVP, CFO and Treasurer: Yeah, that’s correct. Just one clarification Ben that number does include – we would probably use it for all definition of maintenance CapEx that includes everything from replacing carpet and packing holes in the wall, all the way to making sure their IT systems are up to date in the theaters. That’s a broad definition.
Benjamin Mogil – Stifel Nicolaus: Then sort of on that, maybe you could talk about the overall build environment, not just with you guys, but just the whole industry? Are you still seeing well below industry levels of build?
David H. Ownby – EVP, CFO and Treasurer: Ben, for 2011 based on the rent track data, it appears to me that the screen count, but the industry was probably flat to maybe just slightly down. As we look ahead that certainly we don’t see a rush to build, but it does start to feel like things are picking up a little bit. I wouldn’t say will get back to normal to what we would call any time in 2012, but certainly it does look like it’s going to pick up a little bit.
Benjamin Mogil – Stifel Nicolaus: Then just last question the fourth quarter obviously across the border was weaker than the original expectations. When you talk to the studios sort of on a postmortem and without studios specific, any kind of feedback that you could share about what you think is working, what isn’t working, because something like I get the stance that they were surprised by the magnitude of the erosion in 4Q as well?
Amy E. Miles – CEO: I think the only think that I will comment there Ben, is that, I think there was some disappointment in hindsight, obviously with individual picture performance. But I think when some of the dates were originally scheduled for some of the pictures and then you had movements in film dates, what happened when you think about it is, is you had a lot of weekends from a scheduling perspective. Thanksgiving comes to mind where it was primarily at that time, the box office was dominated by kids’ pictures. And then as we moved into the holiday season, and I am thinking more being closer to the Christmas week, we had Mission Impossible and Sherlock again going after similar audiences. So I guess the scene from the studios was more maybe we can do a better job with scheduling more than it was any other kind of specific item from a film production perspective.
Benjamin Mogil – Stifel Nicolaus: And when you look at this year for the dates that haven’t yet been totally firmed. Are you seeing a little bit more religion if you will, at the studios around that? I mean, certainly Lions Gate just sort of mentioned, a lot of people are clearing away from Hunger Games just to avoid scheduling conflicts with that, another great busy weekend in general. But when you get over to the busy time periods of the year, you are seeing a little bit more thoughtfulness around the scheduling?
Amy E. Miles – CEO: As we look at it today, it feels better when you are looking at the schedule and you can see how the picture has phased over the summer holiday season and then again, over the Christmas season. So from that perspective, as we stand right now, I do think there is better spacing with respect to film product.
Revenue per Cost
Barton Crockett – Lazard Capital Markets: I was wondering about the admissions revenue per cost down 8%. I think the industry number on a weekly basis, that corresponds to Regal might have been more like 6%. So a little bit of a variance there. I was wondering if you could discuss what drove that variance?
David H. Ownby – EVP, CFO and Treasurer: Sure Barton, a couple of things. One, I am not sure, which source you are using. I think we typically look at the rent track, as being maybe the most accurate, and this shifts down 7% out here, so that’s one end of the equation I guess. Really, on the other end of the equation, if you really think about our circuit, you kind of have to think about – I was talking in two buckets. We have the IMAX (NASDAQ:IMAX) screens, which play a subset of the product, and further they depended on just a few films every quarter. And while in practically every quarter, we would expect the IMAX screens to be drivers of our performance, that just really wasn’t the case this quarter. Puss in Boots and Mission Impossible Ghost Protocol, both fared fairly well in the IMAX format, but there also were a couple of really misses there on the IMAX screens. So if you look at our circuit without – absent those IMAX screens, I think we were down just a little bit over 7% per screen, so just a little bit off that rent track numbers. But the primary difference you see there, relates to that underperformance on the IMAX screens, and again over time, this quarter notwithstanding, we would expect those to be drivers of our performance, not underperformance.
Barton Crockett – Lazard Capital Markets: Then on the CapEx outlook, could just update us on when you refer to the number for this year is, CapEx net of proceeds from dispositions, and you are guiding next year, I think just CapEx. Can you talk about dispositions, kind of inflow was in ’11, and is there any way that we can think of (indiscernible) more, less or about the same as ’11 in terms of proceeds from dispositions?
David H. Ownby – EVP, CFO and Treasurer: That number I gave you, $105 million to $120 million, that’s a net number Barton, and we expect that to be the net number. Our proceeds in 2011 were about $20 million, but that maybe a little misleading. There was a couple in there that probably were a little bit unusual, so I would not expect it to be that high again.