Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Amy E. Miles - Chief Executive Officer and Director

David H. Ownby - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Analysts

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

Eric O. Handler - MKM Partners LLC, Research Division

Townsend Buckles - JP Morgan Chase & Co, Research Division

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

Stan Meyers - Piper Jaffray Companies, Research Division

Anthony Wible - Janney Montgomery Scott LLC, Research Division

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

James C. Goss - Barrington Research Associates, Inc., Research Division

Regal Entertainment Group (RGC) Q2 2013 Earnings Call July 25, 2013 4:30 PM ET

Operator

Good afternoon. My name is Christian, 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 2013 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. 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 25, 2013. 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 joining us to our second quarter conference call our. First and foremost, we are extremely pleased to report that the combination of a robust second quarter box office, the full integration of our recent acquisition and our focus on managing the bearable portion of our cuts for cost structure enabled us to generate the highest quarterly revenue and adjusted EBITDA in our history.

Industry box office receipts for our second fiscal quarter increased approximately 8% versus the same period last year. The string of big-budget, summer action movies headlined by Iron Man 3, Fast and Furious 6 and Man of Steel helped put industry box office revenue to almost $3 billion, a new record for the second quarter.

In total, 11 films released during the quarter went on to gross over $100 million as compared to only 6 films in the same period last year.

We'll highlight some of the key components of the film slate to the back half of '13 later in the call, but it is worth noting that the industry box office deficit of almost $240 million created by the difficult comps in the first quarter has been completely erased by the increases we have experienced in the last 4 months. At just over $6.5 billion, year-to-date industry box office revenue is now slightly ahead of last year's total.

In addition to the healthy box office environment, we were also pleased that our recent acquisitions are already having a meaningful impact on our market share and financial results. The combined impact of the industry box office increase and our acquisition of over 800 screens in the last 12 months led to a $190 million increase in total revenue, the largest quarter-over-quarter increase for us in almost 10 years. As we consider potential uses of our cash and financial flexibility, we continue to believe that strategic acquisitions, at accretive multiples, are a great way to deliver ongoing shareholder value, and we remain optimistic regarding the potential for further industry consolidation.

From an operational standpoint, our sales personnels' ability to provide a great customer experience, while keeping a close watch on our cost structure, was again a key part of our success, both at our existing as well as our newly acquired locations. Their attention to detail, combined with the increase in industry box office revenue, helped us achieve a record adjusted EBITDA of over $178 million and our second highest adjusted EBITDA margin in the last 5 years.

David will provide more financial details behind our operating results later in the call. But I think it goes without saying that we are, again, extremely pleased with our operational execution.

In previous quarters, we have outlined our efforts to bring a premium experience to a larger portion of our customer base, and today, we'd like to take a few moments to provide investors with an update regarding the impact of these efforts. Our 123 premium screens operating under the IMAX and RPX brands benefited from the success of big-budget, action films during the second quarter, generating box office per screen growth of approximately 19%. This is over twice the growth rate of our traditional screens.

The product-driven success of our IMAX screens and our growing portfolio of RPX screens, allowed us to offer a premium auditorium in almost all major markets. And we are excited about the opportunity to add premium screens at key, newly acquired theaters in the near future.

Our expanded food menu continues to gain traction with customers and have accounted for just under $0.01 of the $0.11 increase in our concession per cap this quarter. The success of the new menu, combined with continued increases in the demand for our core concession products helped us achieve a quarterly concession per cap of $3.66. This is the highest quarterly total in our history.

With these and other initiatives, including the widespread availability of mobile ticketing and experiments with luxury seating, it is easy to say that some form of premium experience is available to practically all our customers. We're, obviously, pleased with the incremental revenue and return from our investment in the premium experience, and we expect these programs to benefit our results for the remainder of 2013 and beyond.

As far as the box office environment, despite a difficult comparison with a record July in 2012, industry box office revenue for the first 3.5 weeks of our fiscal third quarter grew by just over 2% as compared to the same period last year, on the strength of Despicable Me 2 and the carryover from a number of titles released late in our second quarter. And while the July box office will ultimately account for a large part of the quarter's results, the titles scheduled for release in the coming weeks, including Wolverine, The Smurfs 2, Elysium, We're the Millers and Kick-Ass 2, should contribute to box office success as the summer movie season comes to a close.

Last year's holiday box office provided a great end to fiscal 2012 and the film slate for the upcoming fourth quarter has the potential to do the same for 2013. As was the case last year, the slate is anchored by 3 top profile pictures well spaced throughout the quarter. Thor: The Dark World, The Hunger Games Catching Fire and the second chapter of Peter Jackson's The Hobbit, complemented by a wide variety of films for many different audiences. With these factors in mind, we are optimistic regarding the potential for box office success through the remainder of this year.

In summary, we are again extremely pleased that a healthy box office environment, combined with our recent acquisitions and our operational execution, enabled us to achieve record results is quarter.

I'd now like to turn the presentation over to David for a discussion of our financial performance.

David H. Ownby

Good afternoon, everyone. Today, I'll provide some additional analysis with our second quarter results and an update with respect to our balance sheet and asset base.

For our fiscal second quarter, we generated total revenues of $842.3 million, including $571 million of box office revenue, $227.7 million of concession sales and $43.6 million of other operating revenue. Our recent acquisitions of Great Escape Theaters and Hollywood Theaters had a significant positive impact of on our market shares in the second quarter, as our box office revenue grew by over 15% in the aggregate as compared to an 8% increase for the industry.

The increase was largely driven by attendance growth at both existing locations and as a result of our newly acquired screens. And a decline in the percentage of our revenue generated by premium ticket sales and slightly lower ticket prices at the acquired locations put downward pressure on our average ticket price, which grew by only 0.7% to $9.17. On a pro forma basis, the increase in our per screen box office revenue was in line with the industry growth rate.

Our concession revenue increased by 18.2% in the aggregate and by $0.11 or 3.1% on a per attendee basis. Strategic price increases, improvements in popcorn and beverage volume and the continued success of our expanded food menu, all contributed to the increase and helped drive the highest quarterly concession per cap in our history.

Other operating revenue increased $7.6 million as compared to the same period last year, as revenues from National CineMedia, our vendor marketing programs and our advanced ticket programs all benefited from increased attendance during the quarter. While we are always pleased to see improvements in the top line, it is incumbent on our management team and field personnel to make sure increased revenue translates into increased adjusted EBITDA and free cash flow, particularly, as we integrate acquired screens into our existing circuit. Once again, we were extremely pleased with our operational execution during the second quarter.

Our film and advertising expense of $309.9 million represented 54.3% of admissions revenue, an increase of 70 basis points as compared to the same period last year and slightly above our historical second quarter average. The overall increase in industry box office was the primary driver of the increase.

Our 86.2% concession margins fell by 30 basis points as compared to the same period last year, due primarily to moderate increases in raw material and packaged goods costs and a minor shift in the mix of products sold at the concession stand. Total rent expense of $104.6 million increased 9.8% in the aggregate due primarily to the additional rent associated with the newly acquired Great Escape and Hollywood screens. On a per screen basis, our rent expense declined by approximately 2% as compared with same period last year due to slightly lower rent amounts associated with the acquired theaters and screens.

And as Amy mentioned earlier, our field personnels' focused on cost control continues to have a positive impact on our operating results. Total other operating expenses of $205.4 million increased by 11.6% in the aggregate due, again, to the costs associated with the newly acquired screens, but remained essentially flat on a per screen basis as compared to the second quarter of last year. Once again, our field personnel's ability to control variable costs, while still delivering a great customer experience and a meaningful increase in our concession per caps, was a key driver of our success in the second quarter.

We are extremely pleased that a healthy box office environment, our recent acquisitions and our operational execution all had a positive impact on our second quarter financial results and enabled us to generate total revenue, adjusted EBITDA and adjusted earnings per share that were ahead of consensus Wall Street estimates.

As for our asset base and balance sheet, capital expenditures net of assets sales for the quarter totaled $24.1 million. And in addition to the Hollywood acquisition, we continue to actively manage our asset base, closing 3 theaters with 26 screens to end the quarter with 577 theaters and 7,343 screens.

Based on our development schedule and outlook for the remainder of 2013, we still expect full year capital expenditures to be between $100 million and $115 million. And with the Hollywood locations as part of our asset base, we now expect depreciation expense to be between $51 million and $53 million in the third and fourth quarters. In the back half of the year, we expect to open 6 to 8 new-built theaters with 70 to 100 screens, and close 3 to 5 theaters, with 20 to 40 screens, which would result in ending counts of approximately 580 theaters and 7,398 screens for 2013.

With respect to the balance sheet. We ended the quarter with $291 million in cash and a total debt balance of approximately $2.3 billion. The growth in our adjusted EBITDA has had a positive impact on our leverage calculation. And as of the end of the quarter, our overall leverage ratio was 3.3x pro forma for the Great Escape and Hollywood acquisitions.

In mid-April, we took advantage of historically low rates in the leveraged loan market and successfully amended our senior credit facility, providing for a 50 basis point reduction in the LIBOR-based interest rate applicable for our $1 billion term loan. And later in the quarter, we accessed the high-yield market to refinance a portion of our 9 1/8% Regal Entertainment Group senior notes with a new issuance of 5 and 3/4% regular entertainment group senior notes. We were extremely pleased with the outcome of both transactions and, collectively, we expect them to generate annual cash interest savings of approximately $10 million.

With our current capital structure and interest rate swap portfolio and including the capital leases assumed in the Hollywood acquisition, we now expect our interest expense to be approximately $35 million in the third and fourth quarters.

We are extremely pleased with our recent strategic and operational execution, and we remain optimistic regarding the potential for box office success for the remainder of 2013. This concludes our prepared remarks. And we will now open the lines for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Ben Mogil with Stifel, Nicolaus.

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

On the average ticket price, what would it have been excluding the acquisition, like what was sort of the legacy Regal circuit looking like?

David H. Ownby

If you -- Ben, it's a good question. If you exclude the acquisitions, I think our average ticket price is up about 1.9%. And again, there's still downward pressure on that, because we had a lower percentage of premium ticket sales. If you just look at our 2D ticket price for the core circuit, for the existing circuit, kind of a same store number, our 2D price is actually up about 2.9%.

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

So that was really a mix shift that actually brought it back down to the 1.9%?

David H. Ownby

That's correct.

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And can you give what the contribution in the quarter was from premium?

David H. Ownby

In Q2 of last year, Ben, I think our box -- about 23% of our box office is premium. And this quarter, that number was about 20.5%.

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

And then just move into a bit of a broader question. Obviously, this has been a year where there's been a lot of scheduling casualties from the studio's scheduling. Are you getting any sense when you talk to them that there's sort of everyone's sort of finding that this was not the optimal way to go, and that there's -- what, you're going to search for some release dates? Or are we not quite there yet?.

Amy E. Miles

I think you have to think a lot of how these release dates are put in place many years before. The -- or way in advance, I guess, is better way to say that. I mean, the quarter, if you think about it, for May until let's think about the summer season and the aggregate. It started that first week in May until today. The box office is, give or take, double digit. So I think from our perspective, it's been a great summer season. Now in fairness, we have had weekends where you had a series of films opening up that were probably competing for the same audience on an opening weekend. So from our perspective, the years that we think are the best are years where you have a lot of depth in the film slate for something for everyone, and those are spaced out in a way that you're not always competing -- films aren't competing for the same audience. You probably have had some of that this summer. But, I think, when we step back from it we're still up, that double digit increase. So it's hard to say that's been a negative. And going forward, for a lot of year's, it's hard to forecast the scheduling. But I think as we look at the back half of fiscal '13, it looks better.

David H. Ownby

And I do think, Ben, you continue to see the studios try to maybe stretch the schedules a little bit. For example, this year, Oblivion, coming out in mid-April, we tried to stretched that, the beginning of the summer season. And the back half of the year here, Elysium coming out in mid-August, again, maybe just stretching the season a little bit longer than it normally is.

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

That's sounds great. And then last question, then I'll let someone else in the queue. Without naming names, from an M&A perspective, are you seeing the sort of flooded deals that got done by you and by Carmike and by Cinemark in the sort of first half of the year? Are you seeing that bring more people to the table, because there's sort of a whole bunch of benchmarks of assets that's been sold? Or is that -- was that sort of a wave on to itself? And now we get to the middle of the traditional long period?

David H. Ownby

Ben, there are still some things out there in the marketplace for sale that I would continue to classify in the market as somewhat active. We'll see how long it takes for some of those deals to materialize and how that looks for the rest of this year. But we would definitely still classify the M&A market as active and that we still believe there are good factors there that should continue to drive that one forward.

Operator

Our next question comes from the line of Eric Handler with MKM Partners.

Eric O. Handler - MKM Partners LLC, Research Division

With regard to some of your premium business, could you update us on number of RPX screens that you currently have open? Where that might go? And also, now that you've had a little new time with some of those RPX screens, maybe -- can you describe how some of those theaters where you've done the upgrade, how they're performing as an RPX screen versus prior traditional screen?

David H. Ownby

Eric, I'll take the screen counts. We had -- at the end of the quarter, we had 77 IMAX screens, and we had 46 RPX screens. And I believe we're going to get to about 60 RPX screens, give or take, by the end of this year, so that rollout continues. Remember with IMAX it's for 89 screens, and that rollout will happen over the next couple of years. I think the best thing I can tell you about the performance, particularly, on the RPX screens, is that we continue to roll those out and be excited about the opportunities there that are afforded by those screens. And so we -- so far we've been extremely pleased with the performance there.

Amy E. Miles

Yes. And, I guess, maybe that talks a little bit with -- we always target a 20% return on these investments. And we're seeing greater than that with the capital that we're investing on the RPX side and are -- even though we're getting to -- hope to get to that number of 60 that David quoted for this year, we have identified, give or take, right at around 100 auditoriums today where we believe the RPX makes sense. So that's at a minimum where we are starting to go in -- I'm just going to stay here in the near term, and I would define that in the next couple of years.

Eric O. Handler - MKM Partners LLC, Research Division

And is -- are -- is every new theater being built including an RPX or IMAX screen?

Amy E. Miles

Sure is.

Operator

Our next question comes from the line of Townsend Buckles with JPMorgan Chase Company.

Townsend Buckles - JP Morgan Chase & Co, Research Division

Also give the like-for-like concession for cap growth in the quarter or to adjust to the acquisitions? It sounds like it was pretty high. And did the acquisition have any -- notable impact on margins?

David H. Ownby

Townsend, I'm sorry. We missed the first part of that. I think you got cut off, could you just start again?

Townsend Buckles - JP Morgan Chase & Co, Research Division

Yes, sure. It's the like-for-like growth on concessions per cap in the quarter, it sounds like it's was pretty high with 3% just on a reported basis?

David H. Ownby

Yes, the frame store number is pretty -- essentially that same number.

Townsend Buckles - JP Morgan Chase & Co, Research Division

Okay. And did the acquisitions have any notable impacts on margins?

David H. Ownby

Based on our concession margins or EBITDA margins?

Townsend Buckles - JP Morgan Chase & Co, Research Division

No, total company margins.

David H. Ownby

What's good about that is, particularly, the Hollywood theaters, some of those theaters have capital leases on them, so if you're looking purely at the P&L from an EBITDA perspective, the Hollywood theaters, actually, have a pretty high margin. So they actually helped the margin a little bit, just given the relatively small number of screens in the overall base, but they have a very high margin because a lot of those theaters the rent goes to interest expense as opposed to rent expense.

Townsend Buckles - JP Morgan Chase & Co, Research Division

Can you quantify that all, as we think about it going forward?

David H. Ownby

Yes. If you just think about, in general, the acquisitions improve the margin by -- just given that rent dynamic by about 100 basis points.

Townsend Buckles - JP Morgan Chase & Co, Research Division

Got it. And then you talked -- or, Amy, you mentioned bringing more IMAX and RPX screens to your Great Escape and Hollywood theaters. Can you talk a bit more about the timing and CapEx implications there?

Amy E. Miles

Sure. When you think about -- let me talk about IMAX, remember most of that contribution there is made with our IMAX partner, sorry. And we will get to that contractual numbers 89. And I would to that's over the next 18 months, 24 months. but in some of that data, we hesitate just a little bit, because it's based on a newbuild schedule. And then with respect to the RPX locations, David indicated we were operating just under 50 today. We've identified a target risk that gets us close to 100 auditoriums. And we should also have that finished in the next, give or take, 24 months. Oh, and I'm sorry, David just reminded me, I didn't answer the CapEx question. And on the RPX side, the average CapEx has been right around $300,000 or so an auditorium.

Operator

Our next question comes from Barton Crockett with Lazard Capital Markets.

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

I was wondering about film margin relative to film concentration. I mean, David, you've said in the past that a good way to think about this is the concentration of the top 3 films as a percentage of total box office. By our math, the top 3 films are actually smaller percent of box office this quarter than they were in the year ago. We should argue that some margins should have been up, but it was actually down. And I was wondering, one, if you could comment on what you saw as the concentration. And two, why the trends might not have moved together. And then with that, is there any impact from natural deals with studios, I mean, obviously, Iron Man 3 was an issue coming into the quarter and or the merger?

David H. Ownby

Yes, Barton, you're right we've indicated previously that, that -- kind of that top 3 number, I think, what you're referring to is a good indicator sometimes about what direction film cost should go. In this particular quarter, I think, particularly, when you have a big box office increase, or conversely when you have big box office decrease, you have to weigh that a little bit with the concentration. If you just think about that I think, Amy out earlier in her prepared remarks, 11 films released this quarter went on to gross over $100 million. That number was only 6 last year. So when you look at that type of math you can see how quickly those films will just move slightly up the scale and impact our film rolls just a little bit. In that situation any time we can do the kind of box office we did this quarter and the number of attendees we did this quarter, quite frankly, we're starting to be happy to pay that amount to get those people in the door and get those folks on the concession stand. So from our perspective, that wasn't -- that number wasn't unexpected and it's still in line with the historical range for the second quarter. I think, the primary ground there again, that was less about the concentration and more about the -- just the overall increase in the box office. And we've talked before about how studio mix can affect some film rental quarter-to-quarter, typically, in a year. That tends to even itself out, but nothing really unusual from that perspective in the second quarter.

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

If it's a merger, what is the acquired theaters running at lower film margins?

David H. Ownby

We -- before we bought them, they were a little bit higher film margins, and as we put them on our film buy-in program we were able to bring them in line with our existing circuit.

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

Okay. So that was a cost synergies thing? And so you would say there was really no impact from a renegotiation with a big studio like Disney and Iron Man 3?

David H. Ownby

Nothing -- that's just normal course. That happens all the time.

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

Okay. Just also question on looking at the comparable trends in box office per screen. You guys acquired the Hollywood theaters, I think, that's at the beginning of the quarter. So the average screen count would have been similar to the ending screen count, I think, just mathematically. If you look at it that way, the box office per screen would have been up only about 3%. But I'm assuming a lot of that is just that these screens came in at a lower, kind of yielding level. So I'm wondering, if we do that mathematical averaging, the next couple of quarters as we factor through this merger, should we see similar delta if 5 percentage points or more in terms of mathematical average versus the comparable trend?

David H. Ownby

Yes, we talked about that some in the first quarter just with Great Escape. And I think we said then that the Hollywood theaters looked a little more like our existing screen, but not as -- is not exactly the same as our existing screen. And there's more of the Hollywood screens. So just pure math I think gets you to that 3% number that you referenced. So when at it on a pro forma on a pro forma basis. Or if you just strip out the acquisitions then look at it on the same-store basis, then we were right in line with the 8% quoted by the industry.

Operator

Our next question comes from the line of Stan Meyers with Piper Jaffray.

Stan Meyers - Piper Jaffray Companies, Research Division

Can you talk a little bit about your experience with World War Z super ticket? What are the economics there? And how big that opportunity could be?

Amy E. Miles

I think at this point, we would say that we were pleased with the experience. Remember that we only tested World War Z at 5 locations, so I wouldn't want to give out any kind of specific information, because that was just a test at 5 key locations. But that it is something that we are continuing to look at and evaluate where we would have additional opportunity, as it relates to bundling products. But it's only theatrical and the downstream revenue side. But I do think the industry and Regal has opportunity there. And I would just say that we were pleased with those results, but, again, remember that was only 5 theaters for us.

Stan Meyers - Piper Jaffray Companies, Research Division

Okay. And also can you discuss what about the slate for Open Roads for the remainder of the year?

David H. Ownby

Stan, they've got a couple of films coming up here over the next few months. They've got the biopic on Steve Jobs coming up in August. That's just the service deal for Open Road, and one that hopefully will be a good one for them. And early October, they've got the Robert Rodriguez film, the sequel film called Machete Kills, sorry, I mispronounced that there. And then they're still working on some films -- some release dates for some films that may fall in the fourth quarter or early in January, an animated film and a comedy and also another drama film. So we're pretty excited about what Open Roads have coming up and, hopefully, it will be a good back half of the year for them.

Operator

[Operator Instructions] Our next question comes from the line of Tony Wible with Janney.

Anthony Wible - Janney Montgomery Scott LLC, Research Division

Questions around 3D. What was the 3D ticket price in the quarter? Where do you think pricing increases go longer term? And then with the acquisition that you've now done, what's the 3D screen count up to?

David H. Ownby

Let's see, Tony, let's go in reverse order there. At the end of the quarter, the 3D screen count was just over 3,000 screens, it's 3,004 screens. This number is a little bit confusing, but the 3D ticket price was $11.98 in the second quarter, that's compared to the $12.11 last year, but remember we're averaging in the smaller markets screens with Hollywood and Great Escape. So I now have this number in front of me, but I believe that, excluding the Great Escape and Hollywood acquisition, that number would have been up about 1%.

Anthony Wible - Janney Montgomery Scott LLC, Research Division

Okay. And what do you think longer term happens with 3D pricing? Can it keep pace with 2D? Or do you think there's convergence because of the delta in the prices?

David H. Ownby

I think the way we have talked about it before, Tony, is that we believe the dollar value of the premium will stay pretty constant in the near term. And maybe the near to midterm. And we'll continue to take our normal price increases on the underlying base price of the 2D price. That's how we feel about it for the, like I said, the near to midterm. And there'll be a point that somewhere in the future, depending on the demand and those types of things for 3D, that we may be able to revisit the premium. But for now, we believe just a dollar value of the premium's going to stay the same. And for us that's an average of about $3.50.

Anthony Wible - Janney Montgomery Scott LLC, Research Division

Got it. And last question, is there anything you can do on your end to accommodate the crowded slate issue that you guys have already talked about and has affected a good number films? Is there anything you can do by extending windows for showing these films?

Amy E. Miles

No, I think it's harder. I mean, we're probably in a better position than others, because we have a high screen count per theater. So when you're in that situation, and you have a lot of films that have demand, and we have a lot of screens to serve that demand, so from that perspective, I think we're creative with our showtimes. And, particularly, we're trying to match the showtimes with the demand and the number of showing per the demand. So I think if Regal were probably suited than a lot of circuits could deal with that, but from that perspective, most of the things that we can do relate to scheduling inside the theater.

Operator

Our next question comes from the line of Matthew Harrigan with Wunderlich Securities.

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

It's pretty obvious you're getting great results in these premium screens, and you can see the momentum with the Wanda, AMC, IMAX announcement as well. But is there anything you're looking at more on the specky side as everything continues to evolve in the home with 4K and all of that. I mean, at theme parks, and I think even in some limited theaters. You see some things with 4D effects, low-frequency audio transducers, et cetera, and then the super high-end sound systems like Atmos. So is the game kind of evolving, almost to become more local, location-based entertainment, even beyond IMAX and RPX. And then secondly, can you talk -- I mean some of your competitors are pretty effusive about the outlook for alternative content. Concerts and sports and all that. Sometimes you touched on that in past, but it didn't -- I don't think you focused on it too much in this call.

Amy E. Miles

Yes. I'm going to take the first part of your question there first. And with respect to -- we are spending a lot of time, and we think we're going to be successful as an industry going forward. Not only investing inside our theater auditoriums. And to your point, we're doing a lot of the things there. We're putting in place a lot of the RPX. We're looking at a lot of luxury amenities. And we're letting our customers drive how we change the inside of the auditorium. We're doing a lot more customer surveys, with respect to what they would like to see happen when they come to the theater. So that's driving some of the investments in the sound systems. You mentioned the Dolby Sound System. And, again, having the premium auditoriums from the RPX side and changing what we do in the concession stand to increase or enhance that offering, all driven under that kind of, I would say, strategic umbrella of providing that premium movie-going experience. And we'll find a lot of different practical ways to execute, but that's the strategic goal with respect to that. And then I'm sorry, Matthew, you'll have to help me again with respect to your -- the second part of your question.

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

On the first part there, you're not looking so much to the extend in a almost quasi theme park effect. You feel the sound and all that. And then the second part of the question was just on events, concerts and sports. You talked about that opportunity before, but I don't think you touched on it that much in your preamble this time?

Amy E. Miles

Yes. And we like to talk about things more when we have the results versus our expectations of those results. So we're doing a lot of things that I think are going to help the industry from an alternative content perspective. We just talked about now that the circuit is 100% digital, that's taken away kind of the physical barriers that existed from on alternative content perspective and we've also recently signed and announced our DCDC agreement, which provides for satellite delivery of alternative content. So from an asset-base perspective, a delivery perspective, so on a distribution side, I think we've made great strides in helping to grow that business. And then we're also spending a lot of time working with National CineMedia to find new and unique ways to grow alternative content now that we have put in place a network that's going to support it.

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

By the way, I can't resist commenting. I think we were about 40 times as many comments in the press about The Lone Ranger writeoff versus the Despicable Me 2 animated 5 day record. It was like headlines come out about teams winning instead of -- teams losing, instead of winning the Super Bowl or the World Series. It's amazing how negative the press is.

Amy E. Miles

Yes, we just sit back and say, at the end of the day from a box office perspective, remember, that when we look at the September season, it's up double digit. So I think the numbers speak for themselves.

Operator

Our next question comes from the line of Jim Goss with Barrington Research.

James C. Goss - Barrington Research Associates, Inc., Research Division

Actually, Amy, just becoming -- somebody was observing that while the bunched up release slate is a challenge for the studios, it's actually a benefit to the theater operators, especially, ones like yours, where you have a lot of auditoriums to fill. I would think that should have helped.

Amy E. Miles

Yes, we are a portfolio approach. We do play all the films, so that's good from our perspective. But, again, a lot of times we like to see -- we think about the movie business as a 12-month movie business, not just, say, seasonal business. So the more spacing we get can see in the films, we like that, as much as we like variety in the film slate. But we are to your point better suited than a lot of markets that can't service that demand.

James C. Goss - Barrington Research Associates, Inc., Research Division

I was wondering, with the lower premium prices on average, was that more related to the premium large formats or 3D?

David H. Ownby

You're talking about the lower ticket prices for premium or just the lower. . .

James C. Goss - Barrington Research Associates, Inc., Research Division

Yes, the lower ticket price that was driven by the premium formats. What part of the premium format accounted for which?

David H. Ownby

Yes, we typically talk about it all in one bucket, Jim. But if you kind of a break it down, I think, what you would see there is -- and part of the math here, essentially, that we have a lot more screens to spread those premium screens overs. So it's -- the acquisitions were a little bit dilutive to that number. I think the actual math wasn't quite as bad as that 23% down to 20.5% that I referenced earlier. So -- but when you look inside there, I think we had maybe just a little more IMAX and RPX and a little bit less 3D.

James C. Goss - Barrington Research Associates, Inc., Research Division

Okay. One of the other change was discussing the share of attendees that make concession purchases. I was wondering, what, if you had a number for Regal in that regard?

David H. Ownby

Historically...

James C. Goss - Barrington Research Associates, Inc., Research Division

It's an opportunity for perhaps increasing the concession volume.

David H. Ownby

Yes, historically, Jim, for us that number has covered right around 1/3 of our attendees actually going by concessions at the concession stand. I think we talked before about how -- our updated goal of our expanded food menu is to try to capture some of those 2/3 of people who might be walking by the stand. And, certainly, given the results that's working for us a little bit, but so far, that number hasn't moved dramatically.

James C. Goss - Barrington Research Associates, Inc., Research Division

All right. And that's similar to the other numbers, I heard. And then finally, I wanted to ask about the extent you have gotten into some smaller markets with your acquisitions. If you have noticed any differences that may persist even in the context of your own, and then you don't have the advantage of, say, home rentals where you might be able to get a little bit of a benefit as part of the bigger whole?

David H. Ownby

No. I mean, for the most part, at least, domestically, a theater in a small town operates much like a theater in a big town, so nothing really there that I would call a surprise to us as we took over the 800 screens.

Amy E. Miles

So the good news, Jim, there too is all our deals are national deals. So they're -- it's geography neutral and its market-size neutral.

Operator

Thank you. There are no further questions at this time. I would like to turn the floor back over to management for any closing comments you may have.

Amy E. Miles

Thank you, guys, for joining us this afternoon, and we look forward to speaking with you after our third quarter. Thanks again.

Operator

Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time. And we thank you, all, for your participation. Good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Regal Entertainment Group (RGC) Management Discusses Q2 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts