Friday, February 20, 2009

Regal Entertainment Earnings Report and 3D Outlook

  • Reuters, Thursday February 19 2009
* EPS ex-items 18 cents vs Wall Street view 26 cents
* Q4 revenue $712 million vs view $726 million
* Shares fall 9 percent (Adds comments from conference call)
By Sue Zeidler

LOS ANGELES, Feb 19 (Reuters) - Regal Entertainment Group, the No.1 U.S. movie theater operator, posted lower-than-expected operating earnings and revenue on Thursday, but presented an upbeat outlook based partly on hopes for 3-D offerings.
Regal, whose shares fell 9 percent, said fourth-quarter net income rose to $30.1 million, or 20 cents a share, from $23.2 million, or 15 cents a share, a year earlier.
Excluding special items, profit was 18 cents a share, far short of analysts' average forecast of 26 cents, according to Reuters Estimates. Revenue rose 18 percent to $711.7 million, shy of the $726.4 million average forecast.
Still, CEO Mike Campbell said he was upbeat about 2009, based on a strong film slate and the rollout of several 3-D films, which are expected to command premium ticket prices.
"We believe the 3-D film slate, which includes approximately 45 future films -- that breaks down to 18 films in 2009, 16 listed films in 2010, and 11 films already listed in 3D for 2011 -- will create significant incremental margin opportunity," he said on a conference call.
Campbell said year-to-date industry-wide box office receipts were up 15 percent through the most recent weekend in February versus the same period last year.
Wedbush Morgan Securities analyst Chris White said the revenue shortfall reflected lower-than-expected attendance. Regal said total attendance rose 15.8 percent, but White put the increase at 8.7 percent when adjusted for screen count.
"This came in below our comparable 11 percent gain in attendance-per-average-screen estimate," White said, noting Regal's core attendance trends have lagged the industry in recent quarters.
Campbell said a $1 billion plan to upgrade 20,000 screens, involving Hollywood studios and exhibitors including Regal, remained on hold due to tight credit market conditions.
Once outfitted with digital projectors, theaters can then add on 3-D capability.
There are now about 1,700 3-D screens industry-wide.
Regal expects to have a minimum of 232 3-D screens in time for DreamWorks Animation's "Monsters vs Aliens" release on March 27.
David Miller, an analyst with Caris & Co, said Regal may have to raise additional capital to finance the conversion if studios do not finance the conversion as expected.
Campbell said he would review National Amusements Inc's theater assets if they were put on the market, but noted that financing for such an acquisition remained difficult.
"Historically as a company, Regal has been a major acquirer of properties for two decades now, and as a result we have an opportunity to review most anything that is available on the market. That would include, you know, probably National Amusements," he told analysts on the call.
"But bottom line in this environment...clearly financing would be an issue," he said.
Regal ended the quarter with about $170 million in cash and a total debt balance of about $2 billion.
National Amusements is valued by analysts at about $500 million to $700 million.
Asked if Regal would consider buying any of National Amusements' overseas assets, Campbell said the company has been content to be a domestic operator. Regal would likely be "more conservative than not" in the current environment, he said.
Most of National Amusements' screens are concentrated in New England, the mid-Atlantic states and the Midwest.
Another possible bidder could be Cinemark Holdings Inc, according to analysts.
Regal Chief Financial Officer Amy Miles forecast 2009 capital expenditures in the range of about $85 to $100 million, with asset sales in the $5 million range.
For 2009, Regal expects to open three to five theaters, with 50 to 75 screens, and close 10 to 15 theaters with 75 to 100 screens. This would result in a theater count of about 545 and a screen count of 6,775.
Shares of Regal fell 95 cents to $9.35 on the New York Stock Exchange. (Additional reporting by Franklin Paul in New York; Editing by Ted Kerr)

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