Digital Cinema Destinations Corp. (NasdaqCM:DCIN) (Digiplex), a fast-growing motion picture exhibitor dedicated to transforming movie theaters into digital entertainment centers, today reported its fiscal 2014 third quarter financial results for the three-month period ended March 31, 2014. Separately, the Boards of Directors of both companies have approved a definitive agreement for Carmike to acquire Digiplex. The agreement is a stock-for-stock transaction in which Carmike will acquire 100% of Digiplex’s 7.93 million shares outstanding. Each Digiplex share will be exchanged for 0.1775 shares (subject to certain potential reductions) of Carmike common stock.

[PLEASE NOTE THAT DIGIPLEX MANAGEMENT IS NOT HOSTING A CALL OR WEBCAST TODAY AT 4:30 PM]

       
SUMMARY AND SUPPLEMENTARY FINANCIAL DATA
(unaudited)
 

 

Three Months Ended

March 31,

Nine Months Ended

March 31,

(in thousands)

2014

  

2013

2014

  

2013

Consolidated total revenue $ 10,054 $ 8,765 $ 32,719 $ 19,982
Consolidated net loss (1,194 ) (2,151 ) (3,928 ) (4,047 )
 
Consolidated theater level cash flow (1) 1,506 1,155 5,271 3,624
Adjusted EBITDA of Digital Cinema Destinations Corp. (1) 415 451 2,261 1,452
                     
Theaters (period end) 20 18 20 18
Average screens 188 172 186 113
Average attendance per screen 4,362 4,697 15,554 16,327
Average admission per patron $ 8.31 $ 8.17 $ 7.92 $ 7.78
Average concessions sales per patron $ 3.59 $ 3.04 $ 3.27 $ 3.03
Total attendance (in thousands) 822 810 2,893 1,845
 
(1)   Theater level cash flow and adjusted EBITDA are supplemental non-GAAP financial measures. Reconciliations of these metrics to the net loss for the three and nine months ended March 31, 2014 and 2013 are included in the supplementary tables accompanying this news announcement.

Digiplex Chairman, Chief Executive Officer and Founder Bud Mayo commented, “We view this transaction as a complementary win-win for both organizations. Digiplex holders will benefit by receiving stock in one of the industry-leading exhibitors. David Passman, his fellow senior executives and their customer-centric, theatre-level teams have together orchestrated a fantastic, multi-year turnaround – both operationally and financially.”

(financial tables follow)

       
DIGITAL CINEMA DESTINATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
March 31,

2014

June 30,

2013

(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,417 $ 3,607
Accounts receivable 842 697
Inventories 150 191
Deferred financing costs, current portion 357 357
Prepaid expenses and other current assets   895     1,444  
 
Total current assets 6,661 6,296
Property and equipment, net 29,786 29,171
Goodwill 4,314 3,156
Intangible assets, net 5,401 6,186
Security deposit 189 205
Deferred financing costs, long term portion, net 962 1,225
Other assets   103     9  
 
TOTAL ASSETS $ 47,416   $ 46,248  
 
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,086 $ 2,478
Accrued expenses and other current liabilities 2,616 3,964
Notes payable, current portion 1,718 1,373
Capital lease, current portion 245 121
Earn out from theater acquisitions - 296
Deferred revenue   594     305  
 
Total current liabilities 7,259 8,537
NONCURRENT LIABILITIES
Notes payable, long term portion 7,693 8,615
Capital lease, net of current position 575 239
Unfavorable leasehold liability, long term portion 132 159
Deferred rent expense 707 407
Deferred tax liability   210     199  
 
TOTAL LIABILITIES   16,576     18,156  
 
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY

Preferred Stock, $.01 par value: 10,000,000 shares authorized as of March 31,
2014 and June 30, 2013, 6 shares of Series B Preferred Stock issued and
outstanding as of March 31, 2014 and June 30, 2013, respectively

- -

Class A Common stock, $.01 par value, 20,00,000 shares authorized; and
7,214,073 and 5,511,938 shares issued and outstanding as of March 31, 2014 and
June 30, 2013, respectively

72 55

Class B Common stock, $.01 par value, 9,00,000 shares authorized; 849,000 and
865,000 shares issued and outstanding as of March 31, 2014 and June 30, 2013, respectively

9 9
Additional paid-in capital 33,819 25,816
Accumulated deficit   (9,874 )   (7,049 )
 
TOTAL STOCKHOLDERS’ EQUITY OF DIGITAL CINEMA DESTINATIONS CORP. 24,026 18,831
Noncontrolling interest 8,618 9,261
Treasury stock, 361,599 shares   (1,804 )   -  
 
Total equity   30,840     28,092  
 
TOTAL LIABILITIES AND EQUITY $ 47,416   $ 46,248  
 
           
DIGITAL CINEMA DESTINATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share and per share data)
 
Three Months Ended

March 31,

Nine Months Ended

March 31,

 
2014   2013 2014 2013
REVENUES
Admissions $ 6,662 $ 5,985

$

22,009

$ 13,728
Concessions 2,951 2,461 9,455 5,586
Other   441     319   1,255     668  
 
Total revenues   10,054     8,765  

 

32,719

    19,982  
 
COSTS AND EXPENSES
Cost of operations:
Film rent expense 3,205 2,824 10,920 6,637
Cost of concessions 451 413 1,634 895
Salaries and wages 1,239 1,155 3,986 2,378
Facility lease expense 1,523 1,514 4,653 2,847
Utilities and other 2,227 1,868 6,501 3,794
General and administrative 1,509 1,365 4,175 3,311
Change in fair value of earnout - (79 ) 54 (79 )
Gain on sale of theater (950 ) - (950 ) -
Depreciation and amortization   1,565     1,439   4,279     3,385  
 
Total costs and expenses   10,769     10,499   35,252     23,168  
 
OPERATING LOSS (715 ) (1,734 ) (2,533 ) (3,186 )
OTHER EXPENSE
Interest expense (345 ) (326 ) (1,044 ) (620 )
Non-cash interest expense (71 ) (75 ) (223 ) (153 )
Other expense   (41 )   (38 ) (88 )   (46 )
 
LOSS BEFORE INCOME TAXES (1,172 ) (2,173 ) (3,888 ) (4,005 )
Income tax expense   22     (22 ) 40     42  
 
NET LOSS $ (1,194 ) $ (2,151 )

$

(3,928

) $ (4,047 )
 
Net loss attributable to non-controlling interest   419     620   1,078     713  
 
Net loss attributable to Digital Cinema Destinations Corp. $ (775 ) $ (1,531 )

$

(2,850

) $ (3,334 )
Preferred stock dividends   (5 )   (5 ) (15 )   (11 )
 
Net loss attributable to common stockholders $ (780 ) $ (1,536 )

$

(2,865

) $ (3,345 )
 

Net loss per Class A and Class B common share – basic and
diluted attributable to common stockholders

$

(0.10

)

$

(0.25

)

$

(0.39

)

$

(0.59

)

Weighted average common shares outstanding 7,931,270 6,065,265 7,313,618 5,663,016
 
       
SUPPLEMENTARY NON-GAAP RECONCILIATION
OF THEATER LEVEL CASH FLOW
(Unaudited) ($ in thousands)
 
Three months ended Nine months ended
March 31, March 31,
2014

 

2013 2014

 

2013
Net loss $ (1,194 ) $ (2,151 ) $ (3,928 ) $ (4,047 )
Add back:
General and administrative (1) 1,509 1,365 4,175 3,311
Depreciation and amortization 1,565 1,439 4,279 3,385
Income tax expense 22 (22 ) 40 42
Interest expense 416 401 1,267 773
Other expense 41 38 88 46
Deferred rent expense (5) 97 85 300 114
Less:
Gain on sale of theater   (950 )   -     (950 )   -  
Consolidated TLCF $ 1,506   $ 1,155   $ 5,271   $ 3,264  
 
       
SUPPLEMENTARY NON-GAAP RECONCILIATION
OF ADJUSTED EBITDA
(Unaudited) ($ in thousands)
 
Three months ended Nine months ended
March 31, March 31,
2014   2013 2014

 

2013
Net loss $ (1,194 ) $ (2,151 ) $ (3,928 ) $ (4,047 )
Add back:
Depreciation and amortization 1,565 1,439 4,279 3,385
Interest expense 416 401 1,267 773
Income tax expense 22 (22 ) 40 42
Other expense 41 38 88 46
Deferred rent expense (5) 97 85 300 200
Stock-based compensation (2) 133 79 494 148
Non-recurring organizational and M&A-related professional fees (3) 104 315 110 552
Management fees (4) 245 203 805 255
Start Media's share of Adjusted EBITDA (64 ) 64 (244 ) 98
Less:
Gain on sale of theater   (950 )   -     (950 )   -  
Adjusted EBITDA of Digital Cinema Destinations Corp. $ 415   $ 451   $ 2,261   $ 1,452  
 
(1)   TLCF is intended to be a measure of theater profitability. Therefore, our corporate general and administrative expenses have been excluded.
(2) Represents the fair value of shares of Class A common stock and restricted stock awards issued to employees and non-employees for services rendered. As these are non-cash charges, we believe that it is appropriate to show Adjusted EBITDA excluding this item.
(3) Primarily represents professional fees incurred in connection with start-up activities, the creation of acquisition template documents that will be used by us for future transactions, and certain other costs related to our acquisition strategy. Since we intend to acquire additional theaters, we have laid the groundwork for our acquisition program and we expect to incur reduced legal fees in connection with future acquisitions. We therefore believe that it is appropriate to exclude these items from Adjusted EBITDA.
(4) To add back management fees to Digiplex from JV.
(5) Represents non-cash deferred rent expense which is included in our facility lease expense in the consolidated statements of operations. As these are non-cash changes, we believe it is appropriate to show TLCF and Adjusted EBITDA excluding this item.

Disclosure Regarding Forward-Looking Statements

This press release and other written or oral statements made by or on behalf of Digital Cinemas Destination Corp. may contain 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 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. Risk factors are disclosed in our Form 10-K for the year ended June 30, 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.

About Digital Cinema Destinations Corp. (www.digiplexdest.com)

Digital Cinema Destinations Corp. (NasdaqCM: DCIN) is Digiplex Destinations, a fast-growing theatrical exhibitor dedicated to transforming its movie theaters into interactive digital entertainment centers featuring ‘something for everyone.’ The Company provides consumers with uniquely satisfying experiences combining state-of-the-art technology with engaging, dynamic content that far transcends traditional cinematic fare. Digiplex customers enjoy live opera, ballet, Broadway shows, sports events, concerts and, on an ongoing basis, the very best major motion pictures. You can connect with Digiplex via Facebook, Twitter, YouTube and Blogger.

Additional Information and Where to Find it

In connection with the proposed transaction, Carmike will file a registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”). DIGIPLEX STOCKHOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, INCLUDING THE PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION. The final proxy statement/prospectus will be mailed to stockholders of Digiplex. Investors and security holders will be able to obtain the documents free of charge at the SEC’s web site, www.sec.gov, or by directing a request to Digiplex at 250 East Broad Street, Westfield, New Jersey, 07090 or (908) 396-1360. In addition, investors and security holders may access copies of the documents filed with the SEC by Carmike on its web site at www.carmike.com or Digiplex on its web site at http://digiplexdest.com, when they become available.

Participants in Solicitation

Carmike, Digiplex and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the transaction.  Information concerning Carmike’s participants is set forth in the proxy statement dated April 18, 2014 for Carmike’s 2014 annual meeting of shareholders as filed with the SEC on Schedule 14A.  Information concerning Digiplex’s participants is set forth in the proxy statement dated October 25, 2013 for Digiplex’s 2013 annual meeting of stockholders as filed with the SEC on Schedule 14A.  Additional information regarding the interests of participants of Carmike and Digiplex in the solicitation of proxies in respect of the proposed transaction will be included in the registration statement and proxy statement/prospectus contained therein, to be filed with the SEC.