Carmike Cinemas Second Quarter Revenue Rises 7.9% to a Record $183.0 Million

Carmike Cinemas, Inc. (NASDAQ:CKEC):

Carmike Cinemas, Inc. (NASDAQ:CKEC), a leading entertainment, digital cinema and 3-D motion picture exhibitor, today reported results for the three and six-month periods ended June 30, 2014, as summarized below.

“Carmike’s operating momentum continued in the second quarter of 2014 as admission revenues and concessions and other revenues rose by approximately 7% and 9%, respectively, fueled by our recent acquisitions. Carmike’s Q2 admissions over-indexed the industry on a per screen basis by almost 600 basis points. In addition, we generated our eighteenth consecutive quarter of year-over-year concessions and other per patron spending growth,” stated David Passman, Carmike Cinemas’ President and Chief Executive Officer. “Notwithstanding Carmike’s industry out-performance, the 2014 second quarter presented a challenging year-over-year comparison given the strength of the film slate in the year-ago period. While our film exhibition and concession costs remained relatively constant on a year-over-year basis as a percentage of revenue, adjusted EBITDA declined by approximately 6% as a result of our proportionately higher fixed cost structure.”

“Over the last two years, Carmike has effectively executed its long-term strategy to identify acquisition opportunities that expand our operating platform in attractive, complementary markets which we believe has enhanced long-term value for our shareholders. On May 15, the Company announced a definitive merger agreement to acquire Digital Cinema Destinations Corp (Digiplex) in a stock-for-stock transaction which is expected to close during the third quarter of 2014 and will increase Carmike’s footprint to approximately 280 theatres and over 2,900 screens in 41 states, inclusive of Digiplex’s acquisition pipeline. Digiplex is a circuit of quality theatres and we believe this transaction is another positive strategic development for the Company which brings us closer to our circuit expansion target of 300 theatres and 3,000 screens.

“While the film slate varies from quarter-to-quarter, our growing circuit of high quality theatres and our company-wide emphasis on customer service excellence remain critical factors in our ability to generate positive operating results over the long-term. With a much stronger financial and operating base, our board, management team and I are optimistic about the company’s prospects to further strategically expand the business,” concluded Mr. Passman.

Carmike Cinemas’ Chief Financial Officer Richard B. Hare stated, “Second quarter admissions revenue grew 7.3%, while concessions and other revenues rose 9.0%, leading to 7.9% growth in total Q2 operating revenues. This growth is largely attributable to our recent acquisitions and a 2.4% increase in average admissions per patron, partially offset by a weaker industry box office in Q2 2014. Average concessions and other revenues per patron rose 4.1% to $4.36 quarter over quarter. Overall, combined Q2 2014 average admissions per patron and average concessions/other sales per guest rose approximately 3% to a record level of $11.75 per visit to our entertainment complexes.

“Film exhibition costs as a percentage of admissions revenues decreased by approximately 70 basis points to 56.0% due primarily to less successful industry box office in Q2 2014. Concession costs as a percentage of concessions and other revenues decreased by approximately 50 basis points to 11.8% as a result of more favorable concession costs in Q2 2014.

“Salaries and benefits rose $2.2 million to $23.5 million as a result of our recent acquisitions. Theatre occupancy costs rose $4.9 million to $21.0 million due primarily to recent acquisitions and new build-to-suit theatres. Other theatre operating costs were $28.5 million, compared to $23.9 million in the 2013 period, due primarily to the expected incremental operating expenses resulting from our expanded circuit. General and administrative expenses were $6.5 million, versus $6.0 million in the 2013 period, due to increased legal and professional fees related to our acquisition and expansion initiatives. As expected, quarterly interest expense rose to $13.0 million, due principally to the assumption of long-term lease obligations associated with the acquired Muvico screens.

“Adjusted EBITDA in Q2 2014 was $32.0 million and theatre level cash flow was $37.6 million. While a majority of our costs are largely fixed, we continue to exercise prudent cost management throughout the organization to maximize the performance of our operations and create efficiencies.

“At quarter-end we had $307.2 million of net debt, versus $311.4 million at December 31, 2013, reflecting an aggregate of capital leases and long-term financing obligations, plus senior notes. Carmike's quarter-ending balance sheet included cash of $145.0 million. Our strategy continues to focus on deploying cash to expand our theatre circuit through accretive acquisitions and new locations through build-to-suit arrangements," concluded Mr. Hare.

Supplemental Financial Measures

Theatre level cash flow, EBITDA, adjusted EBITDA, adjusted net income, 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 is defined as net income plus impairment of long-lived assets, merger and acquisition-related expenses, lease termination charges, and loss (gain) on sale of property and equipment, net of tax. Carmike believes adjusted net income 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 capital leases and long-term financing obligations, long-term debt 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 plus income tax expense, interest expense and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus loss (income) from unconsolidated affiliates, loss from discontinued operations, merger and acquisition-related expenses, lease termination charges, loss (gain) on sale of property and equipment, 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, 3-D cinema deployments and one of the nation's largest motion picture exhibitors. Carmike has 253 theatres with 2,670 screens in 37 states. The circuit includes 39 premium large format auditoriums featuring state-of-the-art technology and luxurious seating, including 24 "BigDs," 13 IMAX auditoriums and two MuviXL screens. As "America's Hometown Theatre Chain" Carmike's primary focus is mid-sized communities.

Disclosure Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs, expectations and future performance, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words, “believes,” “expects,” “anticipates,” “plans,” “estimates,” “seeks” or similar expressions. Examples of forward-looking statements in this press release include the Company’s expectations regarding circuit and strategic expansion, the closing of the Digiplex acquisition and additional acquisition opportunities. Forward-looking statements are only predictions and are not guarantees of performance. 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; our ability to achieve expected results from our strategic acquisitions, general economic conditions in our regional and national markets; our ability to comply with covenants contained in our senior secured credit agreement and the indenture governing our 7.375% Senior Secured Notes due 2019; our ability to operate at expected levels of cash flow; financial market conditions including, but not limited to, changes in interest rates and the availability and cost of capital; our ability to meet our contractual obligations, including all outstanding financing commitments; the availability of suitable motion pictures for exhibition in our markets; competition in our markets; competition with other forms of entertainment; and other factors, including the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013, 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 them in light of new information or future events.