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National CineMedia Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 4, 2012 10:38AM
National CineMedia Inc. (NCMI) filed Quarterly Report for the period ended 2012-03-29. Natl Cinemedia has a market cap of $809.1 million; its shares were traded at around $14.57 with a P/E ratio of 22.6 and P/S ratio of 1.9. The dividend yield of Natl Cinemedia stocks is 6.1%.
Highlight of Business Operations:Revenue. Total revenue of the Company for the quarter ended March 29, 2012 was $79.1 million compared to $70.8 million for the quarter ended March 31, 2011, an increase of $8.3 million, or 11.7%. The increase in total revenue was the result of an increase in total advertising revenue of $7.2 million, or 12.2% (including a 19.5% increase in revenue from our founding member beverage concessionaire agreements, or beverage revenue) and a $1.1 million, or 9.4%, increase in Fathom Events revenue.
National advertising revenues of $55.4 million (including $9.8 million of beverage revenue) for the quarter ended March 29, 2012 increased 19.1% from $46.5 million (including $8.2 million of beverage revenue) for the quarter ended March 31, 2011. National advertising revenue (excluding beverage revenue) for the quarter ended March 29, 2012 increased $7.3 million, or 19.1%, to $45.6 million compared to $38.3 million for the quarter ended March 31, 2011. This increase was primarily due to an increase in lower priced airplane deals and more aggressive pricing strategies designed to increase inventory utilization as well as a $2.0 million increase in content partner spending for the quarter ended March 29, 2012. Despite a 28.1% increase in advertising impressions available for sale compared to the prior year period, these aggressive selling tactics contributed to an increase in inventory utilization (excluding beverage revenue) to 76.4% for the quarter ended March 29, 2012 from 71.0% for the quarter ended March 31, 2011. Inventory utilization is calculated based on eleven 30-second salable national advertising units in our pre-show, which can be expanded should market demand dictate. A softer scatter market and our focus on increasing inventory utilization contributed to an 11.5% decrease in national advertising CPMs (excluding beverage revenue). The 19.5% increase in payments from the founding members for their beverage concessionaire agreements was due primarily to the impact of the increase in founding member attendance for the first quarter of 2012 as compared to the 2011 period combined with a slight increase in the beverage revenue CPM. The increase in founding member attendance reflects a more favorable film release schedule.
Local advertising revenue decreased $1.7 million, or 13.5%, to $10.9 million for the quarter ended March 29, 2012 compared to $12.6 million for the quarter ended March 31, 2011. The Companys number of local advertising contracts increased 0.2%, while the average contract value decreased 12.4% due to a decrease in the number of larger regional clients or nationally recognized clients placing ads regionally. Local revenue per theatre attendee decreased 33.3% to $0.06 per attendee for the first quarter of 2012 compared to $0.09 for the first quarter of 2011 due to the local advertising revenue decrease and theatre network attendance increase of 26.9%.
Fathom Events revenue increased 9.4%, to $12.8 million for the quarter ended March 29, 2012 as compared to $11.7 million for the quarter ended March 31, 2011. Our Fathom Consumer events revenue increased $1.7 million, or 21.5%, due to a 56.3% increase in the number of event nights offset by a 13.5% decrease in revenue per event. This net increase was offset by a $0.6 million, or 15.8%, decrease in Fathom Business events revenue due to the wind-down of the Fathom Business division during the first quarter of 2012.
In consideration for NCM LLCs access to the founding members theatre attendees for on-screen advertising and use of off-screen locations within the founding members theatres for the LEN and lobby promotions, the founding members receive a monthly theatre access fee under the ESAs. The theatre access fee is composed of a fixed payment per patron and a fixed payment per digital screen. The payment per theatre patron will increase by 8% every five years with the first such increase taking effect for fiscal year 2012 and the payment per digital screen increases annually by 5%. The theatre access fee paid in the aggregate to all founding members cannot be less than 12% of NCM LLCs aggregate advertising revenue (as defined in the ESA), or it will be adjusted upward to reach this minimum payment. Beginning on October 1, 2010, the theatre access fee paid to the members of NCM LLC included an additional fee for access to the higher quality digital cinema systems for our advertising and Fathom business pursuant to an amendment of the ESAs entered into during 2010, which will increase in 2012 as additional screens will be equipped with the new digital cinema equipment and increases annually by 5%. At the end of the current quarter, 53.3% of our network screens were showing advertising on founding member digital cinema projectors versus 19.1% at the end of the first quarter of 2011.
Stocks Discussed: NCMI,