Cinemark Holdings Management Discusses Q4 2012 Results - Earnings Call Transcript
February 20, 2013 11:30 PM ET
Cinemark Holdings (CNK)
Q4 2012 Earnings Call
February 20, 2013 4:30 pm ET
Timothy Warner - Chief Executive Officer, President and Chief Operating Officer
Robert D. Copple - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer and Assistant Secretary
Townsend Buckles - JP Morgan Chase & Co, Research Division
Bo Tang - Barclays Capital, Research Division
Eric O. Handler - MKM Partners LLC, Research Division
Eric Wold - B. Riley & Co., LLC, Research Division
Robert Fishman - Nomura Securities Co. Ltd., Research Division
Ryan Fiftal - Morgan Stanley, Research Division
Barton E. Crockett - Lazard Capital Markets LLC, Research Division
James M. Marsh - Piper Jaffray Companies, Research Division
James C. Goss - Barrington Research Associates, Inc., Research Division
Matthew J. Harrigan - Wunderlich Securities Inc., Research Division
Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division
Good afternoon. My name is Britney, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cinemark's Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Chanda Brashears.
Thank you, Britney, and good afternoon, everyone. At this time, I would like to welcome you to Cinemark Holdings Inc.'s Fourth Quarter and Fiscal Year 2012 Earnings Release Conference Call hosted by our Chief Executive Officer, Tim Warner; and our Chief Financial Officer, Robert Copple.
In accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, certain matters that are discussed by members of management during this call may constitute forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause Cinemark's actual performance to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in the company's SEC filings.
I would now like to turn the call over to Tim.
Thank you, and good afternoon, everyone. We appreciate you joining us on the call today. First, I'll provide a brief summary of the overall North American box office and Cinemark's 2012 results. I will then highlight the Q1 2013 industry box office to date and preview the remaining 2013 film slate. Lastly, I'll provide an update on a few of our strategic initiatives. Following my commentary, Robert will further discuss our financial results and capital structure. We'll then open up the lines for the customary question-and-answer session.
In 2012, Cinemark achieved a 6.6% increase in worldwide attendance, setting a company record of 263.7 million patrons. We also reached a milestone in Latin America, surpassing 100 million patrons. Cinemark's worldwide admission revenues increased 7.4% for the year, outperforming the estimated North American industry box office by approximately 130 basis points. Cinemark continues to be the #1 attended worldwide exhibitor.
Our increase in worldwide attendance lifted our total revenues to a new record of approximately $2.5 billion. Our theater personnel focus on operating efficiencies resulted in a 13.4% increase in our adjusted EBITDA to $589.2 million and created a 100-basis-point margin improvement for a year with a 23.8% worldwide adjusted EBITDA margin. Our domestic adjusted EBITDA margins continued to outperform, achieving 24.9% for Q4 2012 to 24.2% for the full year, an increase of 300 basis points and 80 basis points, respectively, compared to the prior year period.
Our growth is reflective of a strong and consistently performing industry. This is the fourth straight year that the North American box office has exceeded $10 billion. The combination of attendance growth and modest ticket price increases lifted the North America box office to a new record of approximately $10.8 billion, a 6.1% increase compared to 2011, reiterating the demand for the theatrical out-of-home entertainment.
We are encouraged by the films and the 3D product that has been announced to date for 2013, including the 32 wide release 3D titles. There are several new concept films we are enthusiastic about such as the Superman reboot titled Man of Steel, Oblivion, After Earth, Pacific Rim, The Lone Ranger, Frozen, World War Z, The Great Gatsby, Epic, and Jack Ryan, among others. There are also a number of tent poles and franchise equals with proven track records that we're actually awaiting, including G.I. Joe: Retaliation, Iron Man 3, Star Trek Into Darkness, Fast & Furious 6, The Hangover III, Monsters University, Despicable Me 2, The Wolverine, Thor: The Dark World, The Hunger Games: Catching Fire and The Hobbit: The Desolation of Smaug, to name a few.
We recognize the challenging comp that 2013 film slate will have to overcome with the box office success in 2012, especially in the first quarter. The January box office performed in line with the prior year due to the holiday carryover and Academy Award nominations. We faced more difficult comps in February and March, as both months set an all-time industry box office highs last year with their respective months. We're looking forward to next month's releases of Oz The Great and Powerful and The Croods both in 3D. These films are up against The Lorax and The Hunger Games, which were released in March last year.
It's our goal to be 100% digital in our Latin American circuit. Similar to our U.S. circuit, we intend to fully digitize the remainder of our international circuit in 2013. We should be completing the agreements with the studios regarding virtual print fees, and we'll accelerate our digital rollout. We are currently 42% digital and 40% 3D-capable in Latin America.
The strength and the momentum of our proprietary Extreme Digital XD premium large-format screens continues with both studio and patron recognition. 20th Century Fox created a national television advertising campaign featuring our XD brand for the last week's release of A Good Day to Die Hard. Notably, these trailers played nationally during peak television view, including the NFL playoff, which emphasized the impact and the success of our XD premium large-format viewing experience. Patrons have also enjoyed the XD experience with our movie marathons, most recently the Die Hard series marathon. We are pleased to report that we broke through the 100 XD auditorium threshold, now have a total of 109 XD auditoriums worldwide, 70 domestically and 39 internationally. We expect to open an additional 40 to 50 XD screens worldwide in 2013.
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