To: Corporate Employees, Theatre Managers

From: Michael L. Campbell

Date: August 14, 2000

I m sure that all of you are hearing or have heard the rumors
surrounding our industry. These rumors were sparked by last Tuesday s
news of Carmike filing for bankruptcy protection. The press has also been
full of news of other exhibitor s problems, even speculating on future
filings for bankruptcy protection. The industry is going through difficult
times. We are all struggling with excess capacity, over-leveraged balance
sheets, and limited availability to additional capital.

We are no exception. We were obviously very disappointed with the
second quarter results. The June box office was down approximately 16%,
earnings before interest, taxes, depreciation & amortization (EBITDA) was
down approximately 12%.

However, our company has been aggressive and will continue to be
aggressive in dealing with the issues that face us in this difficult
environment. As a circuit, we are curtailing our capital programs and
working to accelerate our screen closings. We have done an extensive
strategic review of each of our theatres and each of our markets and have
targeted a significant number of sites and markets for potential closure or
disposal. We are also pursuing a number of operations / profit enhancing
initiatives.

We have engaged outside resources to help us implement this plan. By
using outside resources, management can focus on maximizing results
from our base of high performance sites that will remain long-term quality
assets for the company.

In addition to our operational restructuring efforts, the Company remains
focused on generating additional sources of liquidity. We believe that as of
today, we have an adequate liquidity reserve for the balance of the fiscal
year. We have negotiated $45 million in sale - leaseback transactions, of
which $20 million has already been received. The company is also
evaluating other liquidity sources including without limitation additional
financing and the sale of certain non - strategic assets.

There is no doubt that this is a tough operating environment, and will likely
remain difficult while the industry rationalization of its screens progresses.

For our part, we intend to continue to be a leader in the industry. We intend
to implement our restructuring plan as quickly and in as non disruptive a
way as possible. We intend to continue to proactively look for solutions.

Even in our tough industry environment, we continue to have our
employees best interests at heart. We appreciate your continued
enthusiasm and commitment to this Company and the theatre industry. As
the dust settles over the next couple of years, we are confident that our
industry will rebound as it has numerous times before in the face of
adversity.

Thank You,

Mike Campbell
Chief Executive Officer
 

Somebody's about to have a big sale! Wouldn't it be funny if such items started turning up on Ebay?
 

Things I never would think about - the owner takes. Door closers, exit signs, emregency lights, railings, etc. EVERYTHING.

Although ususally the seats are old and dingy so we leave those.

If anybody needs a theatre cleaned out --- we're pros.

------------------
Scott D. Neff
----------------
www.cinema-west.com
 

On the October Friday mid-afternoon of my visit shortly after its debut, the Warrinton had a total of 27 paying customers in its 22 screens. Some of the screens were running even without patrons. The 16 plex just up the road (which was showing the exact same movies) had 5 paying customers in the whole place.

With such strategic building decisions, it is hard to see how any amount of belt tightening is going to help.
 

27 people in the afternoon in OCTOBER isn't that unheard of. With kids in school and in the movie off-season, what else do you expect? On friday and Saturday nights it is a different story I assure you.
 

In our hey-day (at my previous company), all concession and booth supplies became sunk costs once they were delivered to theatres.

All of the sudden, corporate had us inventorying and calculating values for all stock and supplies previously delivered.

When my boss (and friend) finally came to me and advised that I have an alternate employer lined up, he was pleased to find that I already had a list of prospects that I shared with him!

Some of these big players today owe more than all of their un-used xenon lamps and popcorn cups will ever add up to.

The president of that chain was a "Mike Cambell" wan-a-be, so that little chain just folded sooner.

Good luck to you.

Russ

 

When I hear that 16 or 20 screen theatres have only 5 oy 27 or even 50 people in them for a weekday matinee I know why they are sinking. Those figures are absurd. I've heard that weeknights at many plexes aren't that much better. Why do they run all those shows then? Only a few years ago it was standard proceedure to run one matinee and two evening shows at many theatres in this area. Some theatres didn't run weekday matinees at all. Why run them if no one comes...it just doesn't make any sense to me.

I on the other hand own and operate a single screen theatre (sub run)in a small town and run a Wednesday matinee every week during the school year, and often every weekday
during the summer vacation period. I'm crying if I have less then 50 people in for my one screen, and that doesn't happen often. I usually get between 50 to 100 people for that matinee. On a good film it will bring in as many as 200 to 250. During the summer months, it is even better. And I'm not the only game around...there are five 8 to 16 screen plexes within ten miles of me.

It seems like there could be a lot of fat trimed from their operations. Now if they would just put me in charge for awhile.

 

Carmike, UA, Regal, and a few others will all be filing by the end of this year. The studios are very worried as this could mean gross revenue adjustments by as high as 60 percent off of reported figures. And with the way this summer went, damn hollywood is in serious trouble.

Dave
 

There have been too many crappy theatres built in the last few years by poorly run companies. Now the better run companies that pay for their film will get the product, and the true nature of darwinism will surface. Not only that but because no one has the cash, digital is that much farther away.
 

Normally if a major player bit the dust,or was even on the verge... the other major players would swoop down like vultures and pick the best that they could aquire as fast as they could.

However with all the major players in the same predicament, none are in a position to do that. Therefore one would think that the next logical scenario would be for the regional or smaller chains to come in and do the picking. But if all the major players default, and the lenders are stuck with astronomical loses the theatre industry will find inself in the same situation that it was in after television took hold. No bank or lending institution will want to have anything to do with theatres and there will be no money for anyone to buyout the bankrupt chains.

This will put the studios in a very precarious position....facing a major lose of income with so many screens unavailable. Either they will have to cut back the size of their release patterns...back to maybe 1000 to 1500 prints or.... buy the theatres themselves and go back into vertical distribution once again. With the justice department having looked the other way back in the late 80s and early 90s, when they got involved in theatre acquisitions once again on a horizontal plain, they might indeed be tempted to go at it vertically once again.

I have also thought about what effect this will have on the coming of digital projection. Always afraid that whatever happened, it would leave out the small independent who could not afford the change. I've often thought that if the little guy can't afford it...then how can the big guys (with thousands of screens) who are already in debt from building all those megaplexes afford it? The bankrupt situation of all the major players proved that they can't afford it either, and based on that I would predict that digital projection is now years away....ten years at least.

But again...if the studios would take over the theatres it could happen much more quickly as they are the ones to benefit from it anyhow.
 

Personally, my feelings are: Sorry, the Twin Cities is full. Pack up and go home, Regal and take your wish-we-were-even-close-to-being-as-busy-as-the-Mall-Of-America amateur-run 16 screen with you.

I'd like to see the Twin Cities remain with Mann, Muller, General Cinema (yay!) and our many wonderful independents. Maybe Kerasotas. Other than that, may your junk bonds bury you.
 

They rose during a phase where they could show the venture capitalists a quick buck.

Now that reality is setting in, everybody sees that there is indeed a fixed ceiling on the entertainment dollars available in these markets.

We are left with the independants who knew better than to seek venture capital (READ: Give your company away), and the big boys who found themselves in possession of more money than brains.

A lot of these companies actually (and do) have decent, trained, professional people working for them. These folks don't have the luxury of the stock splits to fall back on.

Many a CEO saw his stock split numerous times. They will be okay in the long run.

Kinda makes ya long for the union days.

I think that the profitable theatres will be picked up by others, but some of these mega-plexes don't make sense.

I remember a story that I heard where a Regal-plex decided to get itself built in a "Sumner" town.

Darned if that Regal-plex didn't become the most expensive, luxurious sub-run ever!

Russ