Can the Hunger Games Save Cinemark?

Erin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Motion picture company Cinemark Holdings, Inc (NYSE: CNK) missed the mark at the box office. Earnings for the fiscal year 2011 dropped by 11% to $130.6 million ($1.14 per share) from $146.1 million the previous year. Meanwhile, annual revenue rose 7% to $2.28 billion from $2.14 billion.

The fourth-quarter and big holiday movie season brought in 2.3% more movie-goers. However, more attendance did not equal improved admissions revenues. (More people going to matinees perhaps?) The company saw a decrease of 1.4% (down to $336.9 million) in admissions revenue, but an increase of 7.9% ($166 million) in concessions revenues. However, not even popcorn sales could keep the company from lowered net income of $18.3 million, compared to $38 million in the same period of 2010. The fourth-quarter of fiscal 2011 saw revenues increase 2.1% to $535.9 million.

Curious if the rumors are true that movie theaters make more money off concessions than ticket sales? Concession revenues for the quarter were $166 million, while concession supplies were only $27 million, for a net income of $139 million. Now the number isn't entirely fair since it does not take into account the manpower that went in to upsizing your drink for just twenty-five cents more, or the utilities for the building, etc. But considering $139 million is nearly half of the revenue from admissions, you better believe that extra twenty-five cents you paid for that drink you will never finish before the movie is over is what lead to the overall net income of the company (no matter how diminished that net income was).

The average ticket price across the US was $6.52 (up 4 cents from the year previous). And the average concessions revenue per patron was $3.18 (up 15 cents from 2010). Personally, I'd just like to know where these movie theatres are that are less than $10 per ticket, and how anyone only spent $3.18 at concessions!

The fourth-quarter included a loss on marketable securities related to the company's stake in 3D technology firm RealD, that reduced earnings by about 7 cents per share. The prior-year period also benefited from a $12.3 million gain on an asset sale.

Cinemark management cited tough year-ago box office comparisons, fewer 3D films in the fourth-quarter, and films overlapping or competing for the same target audiences as reasons for the declines. The company is looking forward to a stronger 2012 and cited the much-anticipated upcoming Hunger Games as a likely strong contributor to improve numbers in the future. Katniss is good, but is she that good?

Overall, 2011 failed to put the tinsel in Tinseltown. The industry sold the lowest number of tickets since 1995 (when Se7en, Toy Story, and Braveheart were released). And box office revenues across the board only reached $10.2 billion ($2.28 billion of that was from Cinemark), down 3.5% from 2010.

Are ticket sales down because of the economy? Downton Abbey on Netflix? Or are movie-goers just not impressed with the offerings? Overall, yes, a weak economy does keep some movie-goers at home, who just can't afford a $12 ticket, plus the rising cost of popcorn.

It also doesn't help that 2011 was the year of the sequel. It is hard to get audiences excited about “Alvin and the Chipmuncks: Chipwrecked.” But on the other hand, we also had two Harry Potter movies, and two or three, or maybe five Twilight films (will they ever end?). Still, sequels all. Unfortunately, 2012 isn't shaping up much better, and looks to feature more sequels or remakes again.

Other motion picture companies include Regal Entertainment Group (NYSE: RGC) who saw total revenues in the fourth-quarter of 2011 at $613.9 million (down $47.1 million from 2010), and a net income of only $4.1 million (down from $13.7 million in 2010)

Carmike Cinemas Inc (NASDAQ: CKEC) is a smaller theater company with a market cap of only $94 million (compared to Cinemark's $2.4B and Regal's $2.12B). The company is the fourth largest motion picture company in the United States with 235 theatres with 2,215 screens. The company reported 49% increase in earnings in the second quarter, and an 8% increase in attendance. Year-end numbers are expected in March, but considering the outcomes of Regal and Cinemark, there aren't many reasons to hope for a happy ending.

Can 2012 do better than 2011? The motion picture companies are hopeful. Mockingjay, we're counting on you!


The Motley Fool has no positions in the stocks mentioned above. ErinAnnie has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. She's also a huge Hunger Games fan, and hates popcorn. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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