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Section 1: 8-K (8-K)

Q4_17_AMC_Earnings_Release_8K

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 1, 2018

 

AMC ENTERTAINMENT HOLDINGS, INC.

(Exact Name of Registrant as Specified in Charter)

 

 

 

 

 

 

 

Delaware

 

001-33892

 

26-0303916

(State or Other Jurisdiction of

 

(Commission File Number)

 

(I.R.S. Employer Identification

Incorporation)

 

 

 

Number)

 

One AMC Way

11500 Ash Street, Leawood, KS 66211

(Address of Principal Executive Offices, including Zip Code)

 

(913) 213-2000

(Registrant’s Telephone Number, including Area Code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

 

 

 


 

 

 

 

Item 2.02Results of Operations and Financial Condition. 

 

On March 1, 2018, we announced our financial results for the fourth quarter and full year ended December 31, 2017. A copy of the press release is furnished as Exhibit 99.1 and a copy of the CFO Commentary is furnished as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

99.1 Earnings press release dated March 1, 2018

99.2 CFO Commentary

 

The information furnished pursuant to Item 2.02 of this Current Report on Form 8-K, including the exhibits, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.

2

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has du1y caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

AMC ENTERTAINMENT HOLDINGS, INC.

 

 

 

 

Date: March 1, 2018

By:

/s/ Craig R. Ramsey

 

            Craig R. Ramsey

 

            Executive Vice President and

            Chief Financial Officer

 

 

 

EXHIBIT INDEX

[[

 

 

Exhibit
Number

 

Document Description

 

 

 

99.1

99.2

 

 

Earnings press release dated March 1, 2018

CFO Commentary

 

 

 

 

 

 

3

 


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1 ER

Exhibit 99.1

 

 

 

 

Picture 3

INVESTOR RELATIONS: 

John Merriwether, 866-248-3872

InvestorRelations@amctheatres.com

 

MEDIA CONTACTS:

Ryan Noonan, (913) 213-2183

rnoonan@amctheatres.com

FOR IMMEDIATE RELEASE

AMC Entertainment Holdings, Inc. Announces

Fourth Quarter and Year-End 2017 Results

 

LEAWOOD, KANSAS - (March 1, 2018) -- AMC Entertainment Holdings, Inc. (NYSE: AMC) (“AMC” or “the Company”), today reported results for the fourth quarter and year ended December 31, 2017.

 

Highlights for the fourth quarter ended December 31, 2017, include the following:

 

·

AMC set fourth quarter records for the three months ended December 31 period for all revenue categories: admissions, food and beverage and other.  Much of the growth in revenue is due in large part to the acquisitions of Odeon Cinemas Group (“Odeon”), Carmike Cinemas, Inc. (“Carmike”) and Nordic Cinema Group Holding AB (“Nordic”).

 

·

Total revenues increased 53.0% to $1,416.8 million compared to total revenues of $926.1 million for the quarter ended December 31, 2016. Total revenues in 2017 included approximately $438.5 million of revenues from our international theatres as compared to $114.1 million in the three-month period a year ago.

 

·

Admissions revenues increased 52.3% to $897.1 million compared to $588.8 million for the same period a year ago.

 

·

Food and beverage revenues increased 47.0% to $415.3 million, compared to $282.5 million for the quarter ended December 31, 2016.

 

·

Earnings before income taxes grew 13.7% to $14.1 million, compared to $12.4 million for the same quarter a year ago.

 

·

Net earnings decreased $305.4 million to a net loss of $276.4 million compared to net earnings of $29.0 million for the quarter ended December 31, 2016.  Included in the net loss for the quarter was approximately $310.0 million of tax expense in our U.S. markets related to the impact of the change in the U.S. enacted federal income tax rate from 35% to 21% and the impact of a full valuation allowance on our deferred income tax assets.

 

·

Diluted earnings per share (“diluted EPS”) decreased $2.43 to a loss of $2.14 per share compared to earnings of $0.29 per share for the same period a year ago.  Average diluted shares outstanding in the fourth quarter of 2017 increased approximately 28.2% compared to the fourth quarter last year as a result of the successful completion of an equity offering in February 2017, less the effect of 3.2 million shares repurchased during 2017. 

 

·

Total Adjusted EBITDA(1) increased 58.7% to $288.2 million compared to $181.6 million for the quarter ended December 31, 2016.  International Adjusted EBITDA for the fourth quarter grew $70.2 million to $98.8 million compared to $28.6 million a year ago.


 

 

"Fiscal year 2017 ended on a very positive note, much like it began, as movie-goers patronized AMC theatres in significant numbers.  The acquisitions of Odeon, Carmike and Nordic, and the investments we made during 2017, both domestically and internationally, in food and beverage initiatives, in our signature recliners and in premium sight and sound experiences, together with previously announced revenue enhancements and cost controls drove record revenues and improved operating margins in the fourth quarter,” said Adam Aron, CEO and President of AMC Entertainment.  “As we look forward to 2018 and beyond, we are pleased and greatly encouraged by the progress we made during and since the fourth quarter of 2017, both operationally and in dealing with several specific industry challenges. And naturally, we are inspired by the record breaking audiences that are coming to our movie theatres across the U.S. and Europe to take in BLACK PANTHER.  With more great movies on the horizon, and further investment at AMC in guest heralded amenities, we are increasingly optimistic about the potential for success at AMC Entertainment in 2018 and the years to come.”

 

 

Highlights for the year ended December 31, 2017 include the following:

 

·

AMC set annual records for the twelve months ended December 31 period for all revenue categories: admissions, food and beverage and other.

 

·

Total revenues increased 57.0% to $5,079.2 million compared to total revenues of $3,235.9 million for the year ended December 31, 2016.  Total revenues for 2017 included approximately $1,355.7 million of revenues from our international theatres as compared to $118.9 million in the period a year ago, due to the acquisitions of Odeon and Nordic.

 

·

Admissions revenues grew 57.6% to $3,229.5 million compared to $2,049.4 million for the year ended December 31, 2016.

 

·

Food and beverage revenues increased 51.9% to $1,548.4 million, compared to $1,019.1 million for the year ended December 31, 2016.

 

·

Loss before income taxes increased $482.8 million to $333.1 million, compared to earnings before income taxes of $149.7 million for the same quarter a year ago.

 

·

Net earnings decreased $598.9 million to a net loss of $487.2 million and diluted earnings per share decreased $4.93 per share to a loss of $3.80 per share compared to net earnings of $111.7 million and net earnings per share of $1.13 per share, respectively, for the year ended December 31, 2016. Included in the net loss for the year ended 2017 were $208.0 million in pre-tax impairment charges related to the NCM investment and approximately $310.0 million of tax expense related to the impact of the change in the U.S. enacted federal income tax rate from 35% to 21% and the impact of a full valuation allowance on our deferred income tax assets. 

 

·

Total Adjusted EBITDA(1) grew 36.6% to $822.5 million compared to $602.0 million for the year ended December 31, 2016.  International Adjusted EBITDA grew $184.1 million to $212.5 million compared to $28.4 million in the same period a year ago.

 

(1) (Reconciliations and definitions of non-GAAP financial measures are provided in the financial schedules accompanying this press release.)

 

 

CFO Commentary

 

Commentary on the quarter by Craig Ramsey, AMC's Executive Vice President and Chief Financial Officer, is available at http://investor.amctheatres.com.  

 


 

Additional information detailing select unaudited pro forma financial data for the quarter and year ended December 31, 2017 is included in the fourth quarter 2017 CFO Commentary. The select unaudited pro forma data for the periods combines the historical financial data of operations of AMC, Odeon, Carmike and Nordic, giving effect to the acquisitions, financings and theatre divestitures as if they had been completed on January 1, 2016. The historical consolidated financial information for Odeon and Nordic has been adjusted to comply with U.S. GAAP. The classification of certain items presented by Odeon under U.K. GAAP has been modified in order to align with the presentation used by AMC under U.S. GAAP. The classification of certain items presented by Nordic under IFRS has been modified in order to align with the presentation used by AMC under U.S. GAAP. In addition to the U.S. GAAP adjustments and the reclassifications, amounts have also been translated to U.S. Dollars. The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what our results of operations would actually have been had the acquisitions occurred on the date indicated. Please refer to the August 1, 2017 Form 8-K and 8-K/A on December 4, 2017 for additional information on pro forma financial statement adjustments.

 

Update of Share Repurchase Program

 

On August 3, 2017, AMC announced that its Board of Directors authorized the repurchase of up to $100 million of the Company’s Class A common stock over a two-year period.

 

As of March 1, 2018, the Company has repurchased approximately 50% of the authorized $100 million, having purchased more than 3.2 million shares of AMC’s Class A common stock for approximately $47.5 million, representing an average share price of $14.86.

 

Dividends

 

On October 27, 2017, the Company declared a regular quarterly dividend of $0.20 per share for the quarter ended September 30, 2017, which was paid on December 18, 2017, to shareholders of record on December 4, 2017. The total dividends paid in the fourth quarter of 2017 were approximately $25.9 million.

 

On February 28, 2018, the Company declared a regular quarterly dividend of $0.20 per share of for the quarter ended December 31, 2017, payable on March 26, 2018 to stockholders of record on March 12, 2018.

 

Income Taxes

 

During the fourth quarter, the Tax Reform Act of 2017 was signed into law. Among other things, the Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018.

 

Income taxes for the first nine months of 2017 were recorded using an estimated effective tax rate of 39%.  During the fourth quarter of 2017, we determined in accordance with accounting standards that a valuation allowance or reserve against our deferred tax assets was required.  Our deferred tax assets primarily relate to deferred revenue and lease accounting items. 

 

Based on the resulting impact of the passage of the Tax Reform Act and the valuation allowance on the Company’s deferred tax assets, the Company recorded a charge of approximately $310.0 million to the income tax provision in our U.S. markets for the fourth quarter ended December 31, 2017.

 

Going forward we expect our consolidated effective tax rate to be between 22% and 26%.

 

Conference Call / Webcast Information

The Company will host a conference call via webcast for investors and other interested parties beginning at 7:30 a.m. CST/8:30 a.m. EST on Thursday, March 1, 2018. To listen to the conference call via the internet, please visit the investor relations section of the AMC website at www.investor.amctheatres.com for a link to the webcast. Investors and interested parties should go to the website at least 15 minutes prior to the call to register, and/or download and install any necessary audio software.


 

 

Participants may also listen to the call by dialing (877) 407-3982, or (201) 493-6780 for international participants.  An archive of the webcast will be available on the Company’s website after the call for a limited time.

 

About AMC Entertainment Holdings, Inc.

AMC (NYSE: AMC) is the largest movie exhibition company in the U.S., in Europe and throughout the world with 1,014 theatres and 11,169 screens across the globe. AMC has propelled innovation in the exhibition industry by: deploying more plush power-recliner seats; delivering enhanced food and beverage choices; generating greater guest engagement through its loyalty program, web site and smart phone apps; offering premium large format experiences and playing a wide variety of content including the latest Hollywood releases and independent programming. AMC operates among the most productive theatres in the United States’ top markets, having the #1 or #2 market share positions in 22 of the 25 largest metropolitan areas of the United States, including the top three markets (NY, LA, Chicago). Through its Odeon subsidiary AMC operates in 14 European countries and is the #1 theatre chain in Estonia, Finland, Italy, Latvia, Lithuania, Spain, Sweden and UK & Ireland. www.amctheatres.com 

 

Website Information

 

This press release, along with other news about AMC, is available at www.amctheatres.com.  We routinely post information that may be important to investors in the Investor Relations section of our website, www.investor.amctheatres.com. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD, and we encourage investors to consult that section of our website regularly for important information about AMC. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document. Investors interested in automatically receiving news and information when posted to our website can also visit www.investor.amctheatres.com to sign up for email alerts.

 

Forward-Looking Statements

 

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “forecast,” “plan,” “estimate,” “will,” “would,” “project,” “maintain,” “intend,” “expect,” “anticipate,” “prospect,” “strategy,” “future,” “likely,” “may,” “should,” “believe,” “continue,” “opportunity,” “potential,” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements are based on information available at the time the statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks, trends, uncertainties and other facts that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks, trends, uncertainties and facts include, but are not limited to, risks related to: motion picture production and performance; AMC’s lack of control over distributors of films; intense competition in the geographic areas in which AMC operates; increased use of alternative film delivery methods or other forms of entertainment; shrinking exclusive theatrical release windows; international economic, political, regulatory and other risks; risks and uncertainties relating to AMC’s significant indebtedness; AMC’s ability to execute cost cutting and revenue enhancement initiatives; box office performance; additional impairment related to AMC’s NCM investment; limitations on the availability of capital; risks relating to AMC’s inability to achieve the expected benefits and performance from its recent acquisitions; AMC’s ability to comply with a settlement it entered into with the U.S. Department of Justice pursuant to which it agreed to divest holdings in National CineMedia, LLC; AMC’s ability to refinance its indebtedness on favorable terms; optimizing AMC’s theatre circuit through construction and the transformation of its existing theatres may be subject to delay and unanticipated costs; failures, unavailability or security breaches of AMC’s information systems; risks relating to impairment losses, including with respect to goodwill and other intangibles, and theatre and other closure charges; AMC’s ability to utilize net operating loss carryforwards to reduce its future tax liability or valuation allowances taken with respect to deferred tax assets; review by antitrust authorities in connection with acquisition opportunities; risks relating to unexpected costs or unknown liabilities relating to recently completed acquisitions; risks relating to the incurrence of legal liability including costs associated with recently filed class action lawsuits; general political, social and economic conditions and risks, trends, uncertainties and other factors discussed in the reports AMC has filed with the SEC. Should one or more of these risks, trends, uncertainties or facts


 

materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by the forward-looking statements contained herein. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. For a detailed discussion of risks, trends and uncertainties facing AMC, see the section entitled “Risk Factors” in AMC’s Annual Report on Form 10-K, filed with the SEC on March 1, 2018, and the risks, trends and uncertainties identified in its other public filings. AMC does not intend, and undertakes no duty, to update any information contained herein to reflect future events or circumstances, except as required by applicable law.

 

(Tables follow)


 

 

AMC Entertainment Holdings, Inc.

Consolidated Statements of Operations

For the Fiscal Periods Ended 12/31/17 and 12/31/16

(dollars in millions, except share and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2017

 

2016

 

2017

 

2016

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 Admissions

 

$

897.1

 

$

588.8

 

$

3,229.5

 

$

2,049.4

 Food and beverage

 

 

415.3

 

 

282.5

 

 

1,548.4

 

 

1,019.1

 Other theatre

 

 

104.4

 

 

54.8

 

 

301.3

 

 

167.4

   Total revenues

 

 

1,416.8

 

 

926.1

 

 

5,079.2

 

 

3,235.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 Film exhibition costs

 

 

440.1

 

 

305.1

 

 

1,604.3

 

 

1,089.5

 Food and beverage costs

 

 

69.5

 

 

40.2

 

 

252.1

 

 

142.2

 Operating expense

 

 

419.2

 

 

259.6

 

 

1,548.0

 

 

873.5

 Rent

 

 

203.5

 

 

136.2

 

 

794.4

 

 

505.5

 General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

   Merger, acquisition and transaction costs

 

 

5.8

 

 

32.8

 

 

63.0

 

 

47.9

   Other

 

 

20.0

 

 

31.8

 

 

133.4

 

 

90.7

 Depreciation and amortization

 

 

144.7

 

 

82.4

 

 

538.6

 

 

268.2

Impairment of long-lived assets

 

 

43.6

 

 

5.5

 

 

43.6

 

 

5.5

   Operating costs and expenses

 

 

1,346.4

 

 

893.6

 

 

4,977.4

 

 

3,023.0

 

 

 

 

 

 

 

 

 

 

 

 

 

   Operating income (loss)

 

 

70.4

 

 

32.5

 

 

101.8

 

 

212.9

   Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

     Other expense (income)

 

 

0.6

 

 

(0.4)

 

 

(1.7)

 

 

(0.4)

     Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

       Corporate borrowings

 

 

59.9

 

 

36.3

 

 

231.6

 

 

110.7

       Capital and financing lease obligations

 

 

10.7

 

 

4.4

 

 

42.4

 

 

10.8

     Equity in (earnings) loss of non-consolidated entities

 

 

(13.9)

 

 

(19.6)

 

 

185.2

 

 

(47.7)

     Investment income

 

 

(1.0)

 

 

(0.6)

 

 

(22.6)

 

 

(10.2)

       Total other expense

 

 

56.3

 

 

20.1

 

 

434.9

 

 

63.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) before income taxes

 

 

14.1

 

 

12.4

 

 

(333.1)

 

 

149.7

Income tax provision (benefit)

 

 

290.5

 

 

(16.6)

 

 

154.1

 

 

38.0

Net Earnings (loss)

 

$

(276.4)

 

$

29.0

 

$

(487.2)

 

$

111.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 Diluted earnings (loss) per share

 

$

(2.14)

 

$

0.29

 

$

(3.80)

 

$

1.13

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding diluted (in thousands)

 

 

129,265

 

 

100,839

 

 

128,246

 

 

98,872

 

 

 

 

 


 

 

Consolidated Balance Sheet Data (at period end):

(dollars in millions)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

December 31,

 

December 31,

 

 

2017

 

2016

Cash and equivalents

 

$

310.0

 

$

207.1

Corporate borrowings

 

 

4,235.3

 

 

3,760.9

Other long-term liabilities

 

 

903.8

 

 

706.5

Capital and financing lease obligations

 

 

651.4

 

 

675.4

Stockholders' equity

 

 

2,112.4

 

 

2,009.6

Total assets

 

 

9,805.9

 

 

8,641.8

 

 

 

 

 

Consolidated Other Data:

(in millions, except operating data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

Consolidated

 

2017

 

2016

 

2017

 

2016

Net cash provided by operating activities

 

$

329.6

 

$

220.4

 

$

558.7

 

$

431.7

Capital expenditures

 

$

(159.1)

 

$

(165.1)

 

$

(626.8)

 

$

(421.7)

Screen additions

 

 

32

 

 

 5

 

 

96

 

 

17

Screen acquisitions

 

 

16

 

 

5,175

 

 

736

 

 

5,201

Screen dispositions

 

 

 1

 

 

 —

 

 

258

 

 

38

Construction openings (closures), net

 

 

76

 

 

83

 

 

37

 

 

(48)

Average screens

 

 

10,778

 

 

6,516

 

 

10,675

 

 

5,592

Number of screens operated

 

 

11,169

 

 

10,558

 

 

11,169

 

 

10,558

Number of theatres operated

 

 

1,014

 

 

906

 

 

1,014

 

 

906

Screens per theatre

 

 

11.0

 

 

11.7

 

 

11.0

 

 

11.7

Attendance (in thousands)

 

 

92,322

 

 

62,009

 

 

346,763

 

 

215,145

 

 

 

 


 

 

Segment Other Data:

(in millions, except per patron amounts and operating data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2017

 

2016

 

2017

 

2016

Other operating data:

 

 

 

 

 

 

 

 

 

 

 

 

Attendance (patrons, in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

 

61,933

 

 

52,894

 

 

240,974

 

 

205,611

International markets

 

 

30,389

 

 

9,115

 

 

105,789

 

 

9,534

Consolidated

 

 

92,322

 

 

62,009

 

 

346,763

 

 

215,145

 

 

 

 

 

 

 

 

 

 

 

 

 

Average ticket price (in dollars):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

9.92

 

$

9.74

 

$

9.67

 

$

9.59

International markets

 

$

9.29

 

$

8.08

 

$

8.49

 

$

8.04

Consolidated

 

$

9.72

 

$

9.50

 

$

9.31

 

$

9.53

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage revenues per patron (in dollars):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

5.09

 

$

4.84

 

$

5.06

 

$

4.82

International markets

 

$

3.29

 

$

2.93

 

$

3.10

 

$

2.94

Consolidated

 

$

4.50

 

$

4.56

 

$

4.47

 

$

4.74

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Screen Count (month end average):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

 

8,087

 

 

5,611

 

 

8,084

 

 

5,350

International markets

 

 

2,691

 

 

905

 

 

2,591

 

 

242

Consolidated

 

 

10,778

 

 

6,516

 

 

10,675

 

 

5,592

 

 

Segment Information

(unaudited, in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2017

 

2016

 

2017

 

2016

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

978.3

 

$

812.0

 

$

3,723.5

 

$

3,117.0

International markets

 

 

438.5

 

 

114.1

 

 

1,355.7

 

 

118.9

Consolidated

 

$

1,416.8

 

$

926.1

 

$

5,079.2

 

$

3,235.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

189.4

 

$

153.0

 

$

610.0

 

$

573.6

International markets

 

 

98.8

 

 

28.6

 

 

212.5

 

 

28.4

Consolidated

 

$

288.2

 

$

181.6

 

$

822.5

 

$

602.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

127.1

 

$

156.1

 

$

543.7

 

$

412.7

International markets

 

 

32.0

 

 

9.0

 

 

83.1

 

 

9.0

Consolidated

 

$

159.1

 

$

165.1

 

$

626.8

 

$

421.7

 


 

 

Reconciliation of Adjusted EBITDA:

(dollars in millions)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2017

 

2016

 

2017

 

2016

Net earnings (loss)

 

$

(276.4)

 

$

29.0

 

$

(487.2)

 

$

111.7

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

290.5

 

 

(16.6)

 

 

154.1

 

 

38.0

Interest expense

 

 

70.6

 

 

40.7

 

 

274.0

 

 

121.5

Depreciation and amortization

 

 

144.7

 

 

82.4

 

 

538.6

 

 

268.2

Impairment of long-lived assets

 

 

43.6

 

 

5.5

 

 

43.6

 

 

5.5

Certain operating expenses (2)

 

 

8.1

 

 

7.2

 

 

20.6

 

 

20.2

Equity in (earnings) loss of non-consolidated entities (3)

 

 

(13.9)

 

 

(19.6)

 

 

185.2

 

 

(47.7)

Cash distributions from non-consolidated entities (4)

 

 

12.3

 

 

18.4

 

 

45.4

 

 

40.1

Attributable EBITDA (5)

 

 

1.6

 

 

 —

 

 

3.4

 

 

 —

Investment expense (income)

 

 

(1.0)

 

 

(0.6)

 

 

(22.6)

 

 

(10.2)

Other expense (income) (6)

 

 

0.5

 

 

0.1

 

 

(1.3)

 

 

 —

General and administrative expense—unallocated:

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs (7)

 

 

5.8

 

 

32.8

 

 

63.0

 

 

47.9

Stock-based compensation expense (8)

 

 

1.8

 

 

2.3

 

 

5.7

 

 

6.8

Adjusted EBITDA(1)

 

$

288.2

 

$

181.6

 

$

822.5

 

$

602.0


1)

We present Adjusted EBITDA as a supplemental measure of our performance.  We define Adjusted EBITDA as net earnings (loss) plus (i) income tax provision (benefit), (ii) interest expense and (iii) depreciation and amortization, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance and to include attributable EBITDA from equity investments in theatre operations in international markets and any cash distributions of earnings from other equity method investees. These further adjustments are itemized above. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.  Adjusted EBITDA is a non-U.S. GAAP financial measure commonly used in our industry and should not be construed as an alternative to net earnings (loss) as an indicator of operating performance (as determined in accordance with U.S. GAAP). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. We have included Adjusted EBITDA because we believe it provides management and investors with additional information to measure our performance and estimate our value.

 

Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. For example,

 

Adjusted EBITDA:

 

·

does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments;

 

·

does not reflect changes in, or cash requirements for, our working capital needs;

 


 

·

does not reflect the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt;

 

·

excludes income tax payments that represent a reduction in cash available to us;

 

·

does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; and

 

·

does not reflect the impact of divestitures that may be required in connection with recently completed acquisitions.

 

2)

Amounts represent preopening expense related to temporarily closed screens under renovation, theatre and other closure expense for the permanent closure of screens including the related accretion of interest, non-cash deferred digital equipment rent expense, and disposition of assets and other non-operating gains or losses included in operating expenses. The Company has excluded these items as they are non-cash in nature, include components of interest cost for the time value of money or are non-operating in nature.

 

3)

Equity in (earnings) loss of non-consolidated entities includes an other-than-temporary impairment charge of $208.0 million to reduce the carrying value of our investment in NCM to Level 1 fair value during the year ended December 31, 2017. An other-than-temporary impairment charge of $204.5 million was recorded on our units and shares at the publicly quoted per share price on June 30, 2017, of $7.42 and an other-than-temporary impairment charge of $3.5 million was recorded on our units and shares at the publicly quoted per share price on December 31, 2017 of $6.86, based on our determination that the decline in the price per share during the respective quarters was other than temporary. Equity in (earnings) loss of non-consolidated entities includes loss on the sale of a portion of our investment in NCM of $22.2 million during the year ended December 31, 2017.

 

4)

Includes U.S. non-theatre distributions from equity method investments and International non-theatre distributions from equity method investments to the extent received. The Company believes including cash distributions is an appropriate reflection of the contribution of these investments to its operations.

 

5)

Attributable EBITDA includes the EBITDA from minority equity investments in theatre operators in certain international markets. See below for a reconciliation of the Company’s equity earnings of non-consolidated entities to attributable EBITDA. Because these equity investments are in theatre operators in regions where the Company holds a significant market share, the Company believes attributable EBITDA is more indicative of the performance of these equity investments and management uses this measure to monitor and evaluate these equity investments. The Company also provides services to these theatre operators including information technology systems, certain on-screen advertising services and our gift card and package ticket program. As these investments relate only to our Nordic acquisition, the second quarter of 2017 represents the first time the Company has made this adjustment and does not impact prior historical presentations of Adjusted EBITDA.

 


 

Reconciliation of Attributable EBITDA (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2017

 

2016

 

2017

 

2016

Equity in (earnings) loss of non-consolidated entities

 

$

(13.9)

 

$

 —

 

$

185.2

 

$

 —

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Equity in (earnings) loss of non-consolidated entities excluding international theatre JV's

 

 

(12.6)

 

 

 —

 

 

187.0

 

 

 —

Equity in earnings of International theatre JV's

 

 

1.3

 

 

 —

 

 

1.8

 

 

 —

Depreciation and amortization

 

 

0.3

 

 

 —

 

 

1.6

 

 

 —

Attributable EBITDA

 

$

1.6

 

$

 —

 

$

3.4

 

$

 —

 

 

6)

Other income for the year ended December 31, 2017 includes $3.0 million financing related foreign currency transaction gains, partially offset by $1.3 million in fees relating to third-party fees related to the Third Amendment to our Senior Secured Credit Agreement, and a $0.4 million loss on the redemption of the Bridge Loan Facility.

 

7)

Merger, acquisition and transition costs are excluded as they are non-operating in nature.

 

8)

Non-cash or non-recurring expense included in General and Administrative: Other.

 

 

 

###

 

 

 

 

 

Picture 2


(Back To Top)

Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2 CFO Commentary_2017

Exhibit 99.2

 

 

Picture 4

11500 Ash Street

Leawood, Kansas 66211

 

March 1, 2018

 

CFO Commentary on

Fourth Quarter and Year-End 2017 Financial Results

 

 

Financial Information

Reconciliations and definitions of non-GAAP financial measures (Adjusted EBITDA, Adjusted EBITDA Margin and constant currency amounts) are provided in the financial schedules included below and in our financial tables that accompany our fourth quarter and year-end 2017 earnings press release issued March 1, 2018 and available at http://investor.amctheatres.com. 

 

Additional information detailing select unaudited pro forma financial data for the quarter and year ended December 31, 2016 and December 31, 2017 is included below in this CFO commentary which has been published in the investor relations section of AMC’s website located at http://investor.amctheatres.com and furnished with the SEC on Form 8-K dated March 1, 2018. The Company believes the pro forma information provides a more comparable view of its results relative to prior periods. The select unaudited pro forma data for the periods combines the historical financial data of operations of AMC, Odeon, Carmike and Nordic, giving effect to the acquisitions, financings and theatre divestitures as if they had been completed on January 1, 2016. The historical consolidated financial information for Odeon, Carmike and Nordic have been adjusted to comply with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), including the effects of purchase accounting adjustments. The classification of certain items presented by Odeon under UK Generally Accepted Accounting Practice (“UK GAAP”) has been modified in order to align with the presentation used by AMC under U.S. GAAP. The classification of certain items presented by Nordic under International Financial Reporting Standards (“IFRS”) has been modified in order to align with the presentation used by AMC under U.S. GAAP. In addition to the U.S. GAAP adjustments and the reclassifications, amounts for Odeon and Nordic have also been translated to U.S. Dollars. The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what our results of operations would actually have been had the acquisitions occurred on the date indicated. Please refer to the August 1, 2017, August 4, 2017 and November 6, 2017, Forms 8-K and December 4, 2017 Form 8-K/A for additional information on pro forma financial statement adjustments.

 

1

 


 

Additional constant currency information adjusting unaudited pro forma financial data for the three-month and twelve-month periods ended December 31, 2017 using average monthly currency rates from the three-month and twelve-month periods ended December 31, 2016 is also presented for comparative purposes.

 

Conference Call

The Company will host a conference call on Thursday, March 1, 2018, at 7:30 a.m. CST/8:30 a.m. EST to review results for the fourth quarter and fiscal year ended December 31, 2017.

 

To listen to the call, please dial (877) 407-3982 in the U.S. or (201) 493-6780 outside the U.S. You may also listen to the conference call via the internet by visiting the investor relations section of the AMC website at www.investor.amctheatres.com for a link to the webcast. Investors and interested parties should go to the website at least 15 minutes prior to the call to register and/or download and install any necessary audio software.

 

Fourth quarter ended December 31, 2017

 

U.S. Industry Box Office: The industry’s box office gained momentum throughout the quarter, shrugging off a weak October to generate the second highest fourth quarter box office ever.  Compared to last year, the 2017 fourth quarter North American industry box office grew approximately 3.1% to $2.9 billion, second only to the fourth quarter of 2015. 

 

Led by STAR WARS: THE LAST JEDI, December 2017 was the highest grossing December of all time, while THOR: RAGNAROK and JUSTICE LEAGUE drove November to the third highest November ever.  Rounding out the industry’s top five box office films for the quarter were COCO and JUMANJI: WELCOME TO THE JUNGLE.  Despite COCO, family-friendly films saw the third consecutive quarterly decline compared to the prior year.

 

 

Consolidated Results

 

Compared to the fourth quarter of 2016, consolidated admissions revenues for the quarter increased 52.3% to $897.1 million while food and beverage revenues grew 47.0% to $415.3 million and other theatre revenues grew 90.5% to $104.4 million. Consolidated total revenues grew 53.0% in the fourth quarter to $1,416.8 million. The increase in revenue was primarily due to the acquisitions of Odeon in November 2016, Carmike in December 2016, and Nordic in March 2017.

 

Consolidated net earnings for the fourth quarter declined $305.4 million to a loss of $276.4 million compared to the same quarter a year ago. Consolidated net earnings margin for the fourth quarter was (19.5%) compared to 3.1% in the fourth quarter of 2016.  Included in the net loss for the quarter was approximately $310.0 million of tax expense in our U.S. markets related to the impact of the change in the U.S. enacted federal income tax rate from 35% to 21% and the impact of a full valuation allowance on our deferred income tax assets.

 

Consolidated diluted earnings per share (“diluted EPS”) decreased $2.43 to a loss of $2.14 per share compared to earnings of $0.29 per share for the same period a year ago. Average diluted shares outstanding in the fourth quarter of 2017 increased approximately 28.2% compared to the fourth quarter last year.

 

2

 


 

Consolidated Adjusted EBITDA for the fourth quarter grew 58.7% to $288.2 million and Adjusted EBITDA margin increased to 20.3% from 19.6% in the year ago period.

 

2017 Consolidated Pro Forma Results vs. 2016 Consolidated Pro Forma Results

 

To provide greater transparency and more relevant year-over-year comparisons, we have included pro forma financial data in the tables section of this CFO commentary. The select unaudited pro forma data for the quarters ended December 31, 2016 and December 31, 2017 combines the historical financial data of operations of AMC, Odeon, Carmike and Nordic, giving effect to the acquisitions, financings and theatre divestitures as if they had been completed on January 1, 2016. The historical consolidated financial information for Odeon and Nordic has been adjusted to comply with U.S. GAAP. The classification of certain items presented by Odeon under U.K. GAAP has been modified in order to align with the presentation used by AMC under U.S. GAAP. The classification of certain items presented by Nordic under IFRS has been modified in order to align with the presentation used by AMC under U.S. GAAP. In addition to the U.S. GAAP adjustments and the reclassifications, amounts have also been translated to U.S. Dollars. The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what our results of operations would actually have been had the acquisitions occurred on the date indicated. Please refer to the August 1, 2017, August 4, 2017 and November 6, 2017, Forms 8-K and December 4, 2017 Form 8-K/A for additional information on pro forma financial statement adjustments.

 

Compared to the pro forma fourth quarter of 2016, pro forma fourth quarter 2017 consolidated total revenues increased 5.1% (3.2% increase in constant currency) and were comprised of a 4.5% increase (2.6% Increase in constant currency) in admissions revenues, a 4.7% increase (3.2% Increase in constant currency) in food and beverage revenues, and a 12.4% increase (8.7% Increase in constant currency) in other theatre revenues.

 

Consolidated net loss for the fourth quarter increased $319.8 million to $270.7 million (increased $323.3 million to $274.2 million in constant currency) compared to the pro forma results in the same quarter last year.

 

Consolidated Adjusted EBITDA for the fourth quarter increased 14.7% to $288.2 million (12.4% increase to $282.3 million in constant currency) and Consolidate Adjusted EBITDA margin increased 170 basis points to 20.3% compared to the same pro forma period a year ago.

 

2017 U.S. Segment Pro Forma Results vs. 2016 U.S. Segment Pro Forma Results 

 

Compared to the pro forma U.S. segment fourth quarter of 2016, fourth quarter 2017 pro forma total U.S. revenues increased 3.3% to $978.2 million and were comprised of a 3.3% increase in admissions revenue to $614.6 million (approximately 20 basis point industry outperformance), a 2.9% increase in food and beverage revenues to $315.3 million, and a 6.9% increase in other theatre revenues to $48.3 million.

 

Total U.S. attendance decreased 2.9% to 61.9 million while average ticket price for the quarter increased 6.3% to $9.92 compared to the pro forma results in the same quarter a year ago. This growth in average ticket price is a result of increases in attendance for PLF and IMAX® premium formats and strategic price increases, which more than offset the average ticket price pressure from a decline in 3-D attendance in the fourth quarter.

3

 


 

 

The 2.9% increase in U.S. food and beverage revenues raised food and beverage revenue per patron to $5.09, representing a 5.8% increase compared to the fourth quarter last year.  Our guests continue to enjoy our diverse array of enhanced food and beverage offerings as we roll out additional menu innovations, including our new Feature Fare menu that is now available at more than 300 theatres.  Due in part to the higher cost of food related to the Feature Fare menu, our U.S. food and beverage gross margin for the quarter decreased 170 basis points to 85.2%, however U.S. food and beverage gross profit per patron increased approximately 3.8%.

 

At quarter-end we operated 27 dine-in-theatres and served alcohol at more than 282 locations.

 

U.S. other revenue saw a 6.9% increase to $48.3 million compared to the prior year’s pro forma quarter, due primarily to online ticketing fees and on-screen advertising.

 

AMC’s U.S. film exhibition costs continue to be a bright spot, increasing only 1.0% to $320.0 million compared to last year’s pro forma results, representing 52.1% of admissions revenue, a 110-basis point improvement compared to last year. These results are consistent with the film concentration and studio mix of the top U.S. titles this year versus last year, and the conversion of the former Carmike theatre’s film rent terms to AMC’s terms.

 

Pro forma U.S. operating expenses for the quarter were down slightly to $276.3 million compared to last year and represented 28.2% of revenues as compared to 29.2% in the same pro forma period a year ago. U.S. operating expenses for the fourth quarter pro forma 2017 and pro forma 2016 period include $5.9 million and $6.9 million, respectively, of certain operating expenses that are excluded from our calculation of Adjusted EBITDA. Excluding these costs from both periods, adjusted operating expenses for the fourth quarter increased 0.3% to $270.4 million, and represented 27.6% of revenues, an 90-basis point decrease from the prior year pro forma period. We are disclosing adjusted operating expenses because we believe they are more indicative of our ongoing performance.

 

Pro forma U.S. rent expense for the fourth quarter increased 2.5% to $148.4 million, on roughly 1.4% more average screens. Rent per average screen increased approximately 1.1% compared to the pro forma quarter last year.

 

Pro forma U.S. depreciation and amortization increased 22.1% to $110.0 million in the fourth quarter compared to the same period last year, primarily due to additional capital expenditures during 2017 and calendar year 2016.

 

Pro Forma U.S. net loss for the fourth quarter was $328.2 million compared to a net loss of $4.5 million in the same pro forma period a year ago.  Included in the net loss for the quarter was approximately $310.0 million of tax expense in our U.S. markets related to the impact of the change in the U.S. enacted federal income tax rate from 35% to 21% and the impact of a full valuation allowance on our deferred income tax assets.

 

Pro forma U.S. Adjusted EBITDA for the quarter increased 16.8% to $189.5 million compared to the pro forma fourth quarter last year, as U.S. adjusted EBITDA margins increased 230 basis points to 19.4%.

 

International Industry Box Office: The fourth quarter international box office also saw growth in the countries served by Odeon and Nordic, but not to the same degree as the North American box office.

4

 


 

The industry box office was up approximately 1.0% in the countries served by Odeon and up approximately 1.3% in the countries served by Nordic. STAR WARS: THE LAST JEDI outperformed ROGUE ONE: A STAR WARS STORY in both Odeon and Nordic markets which helped offset weakness earlier in the quarter from a lack of family product during the autumn holidays.  Strong local product also helped to drive box office growth in Germany, Finland and Sweden.

 

 

2017 International Segment Pro Forma Results vs. 2016 International Segment Pro Forma Results

 

Compared to the pro forma fourth quarter of 2016, fourth quarter total international revenues increased 9.4% to $438.6 million (increased 2.8% to $412.2 million in constant currency) , and were comprised of a 7.4% increase in admissions revenue to $282.5 million (increased 1.0% to $265.5 million in constant currency), a 10.8% increase in food and beverage revenues to $100.0 million (increased 4.2% to $94.0 million in constant currency), and a 17.6% increase in other theatre revenues to $56.1 million (increased 10.5% to $52.7 million in constant currency).

 

Total International attendance decreased 2.0% to 30.4 million and average ticket price for the quarter increased 9.7% to $9.30 (increased 3.1% to $8.74 in constant currency). Odeon’s strategic pricing increases and reduced promotional activity compared to last year’s quarter helped drive the increase in average ticket price.

 

International food and beverage revenue per patron increased 13.1% to $3.29 (increased 6.2% to $3.09 million in constant currency) while International food and beverage gross margin for the quarter increased 90 basis points to 77.4%.

 

AMC’s International film exhibition costs for the quarter increased 10.0% to $120.2 million (increased 3.4% to $112.9 million in constant currency), representing 42.5% of admissions revenue and a 100 basis point increase compared to last year. These results are consistent with the film concentration of the top International titles this year versus last year.

 

International operating expense for the quarter was up $24.7 million to $142.9 million (increased 16.1 million to $134.3 million in constant currency) compared to last year and represented 32.6% of revenues as compared to 29.5% in the same pro forma period a year ago.

 

International rent expense for the fourth quarter increased 9.7% to $55.1 million (increased 3.1% to $51.8 million in constant currency) on roughly 1.2% fewer average screens.

 

International depreciation and amortization declined 11.9% to $34.8 million (declined 17.2% to $32.7 million in constant currency) in the fourth quarter compared to the same period last year.  Despite increased investment, purchase accounting adjustments were made in the fourth quarter that impacted depreciation and amortization.

 

International net earnings for the fourth quarter increased 7.2% to $57.5 million (increased 0.7% to $54.0 million in constant currency), compared to the same pro forma period a year ago.

 

International Adjusted EBITDA for the fourth quarter increased 11.0% to $98.7 million (increased 4.4% to $92.8 million in constant currency) compared to the pro forma fourth quarter last year. International Adjusted EBITDA margins increased 30 basis points to 22.5%. As we continue to integrate

5

 


 

the Odeon circuit, deploy initiatives and manage expenses, we are confident that Adjusted EBITDA and Adjusted EBITDA margins have the potential for improvement.

 

 

AMC Screens

During the fourth quarter of 2017, we opened five new theatres with a total of 32 screens, and acquired two theatres with 16 screens. We permanently closed one screen, temporarily closed 55 screens and reopened 131 screens to implement our strategy and install consumer experience upgrades. As of December 31, 2017, we owned or operated 1,014 theatres with 11,169 screens across 15 countries.

 

Capital Expenditures

Total gross capital expenditures for the quarter ended December 31, 2017 were $159.1 million and after $56.9 million of landlord contributions yielded net capital expenditures of $102.2 million. Recliner renovations accounted for the majority of the capital expenditures in the fourth quarter.

 

We expect gross capital expenditures for 2018 to total approximately $600 million to $640 million, with landlords contributing approximately $140 million to $150 million, resulting in a net cash outlay of approximately $450 to $500 million.

 

Balance Sheet

With respect to the balance sheet, we finished the fourth quarter with $310.0 million in cash and cash equivalents and a total debt balance of approximately $4.89 billion, including capital and financing lease obligations.

 

As of December 31, 2017, we were in compliance with all debt covenants.

 

Dividend

Consistent with our plans to augment shareholder returns through the return of capital, AMC’s Board of Directors, at its regular board meeting on February 28, 2018, authorized the sixteenth consecutive quarterly dividend of $0.20 per share, payable on March 26, 2018, to holders of record on March 12, 2018.

 

Since our IPO on December 18, 2013, AMC has returned nearly $322.2 million to shareholders in the form of dividends or dividend equivalents.

 

Share Repurchase Plan

On August 3, 2017, we announced that our Board of Directors had approved a $100.0 million share repurchase program to repurchase our Class A common stock until mid-August 2019.

 

Repurchases may be made at management's discretion from time to time through open market transactions including block purchases, through privately negotiated transactions, or otherwise until mid-August 2019 in accordance with all applicable securities laws and regulations. The extent to which AMC repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including liquidity, capital needs of the business, market conditions, regulatory requirements and other corporate considerations, as determined by AMC’s management team. Repurchases may be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when our management might otherwise be precluded from doing so under insider trading laws. The repurchase program does not obligate us to repurchase any minimum dollar amount or number of shares and may be suspended for periods or discontinued at any time.

 

6

 


 

During the year ended December 31, 2017, we repurchased 3,195,856 shares of Class A common stock at a cost of $47.5 million.

 

Income Taxes

 

On December 22, 2017, the Tax Reform Act of 2017 was signed into law. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, limiting the amount of deductible interest expense, limiting executive compensation deductions, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. 

 

Income tax expense in our financial statements represents the amounts expected to be reported on our income tax returns plus the tax expense or benefit related to the change in net deferred tax assets and liabilities in our financial statements. Deferred tax assets and liabilities in our financial statements are based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.

 

Judgement is required by management to assess whether sufficient future financial statement taxable income will be generated to permit use of the existing deferred tax assets. The cumulative loss in our financial statements that incurred over the three-year period ended December 31, 2017 is a significant consideration in making this judgement. The $208 million non-cash impairment charge to reduce the carrying value of our investment in National CineMedia, Inc. which was recorded in the second quarter ended June 30, 2017, is a significant contributing factor to our three-year cumulative financial statement losses.

 

Income tax expense in our financial statements for the first nine months of 2017 was recorded using an estimated effective tax rate of 39%.  During the fourth quarter of 2017, we determined in accordance with applicable accounting standards that a valuation allowance or reserve against our deferred tax assets was required. 

 

Based on the resulting impact of the passage of the Tax Reform Act and the valuation allowance on the Company’s deferred tax assets, the Company recorded a charge of approximately $310.0 million to the income tax provision for the fourth quarter ended December 31, 2017.

 

For federal income tax purposes, we are currently projecting under the new tax legislation that we may be limited in our ability to currently deduct all our interest expense, but expect to fully utilize all of our net operating losses.  In addition, the liberal expensing provisions on capital expenditures is expected to minimize cash taxes to approximately $8 to $10 million per year over the next 8 -10 years. 

 

Going forward we expect our consolidated financial statement effective tax rate to be between 22% and 26%.

 

 

Website Information

This CFO Commentary, along with other news about AMC, is available at www.amctheatres.com. We routinely post information that may be important to investors in the Investor Relations section of our website, www.investor.amctheatres.com. We use this website as a means of disclosing material, non-public

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information and for complying with our disclosure obligations under Regulation FD, and we encourage investors to consult that section of our website regularly for important information about AMC. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document. Investors interested in automatically receiving news and information when posted to our website can also visit www.investor.amctheatres.com to sign up for E-mail Alerts.

 

 

Forward-Looking Statements

This CFO Commentary includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “forecast,” “guidance,” “plan,” “estimate,” “will,” “would,” “project,” “maintain,” “intend,” “expect,” “anticipate,” “prospect,” “strategy,” “future,” “likely,” “may,” “should,” “believe,” “continue,” “opportunity,” “potential,” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements are based on information available at the time the statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks, trends, uncertainties and other facts that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks, trends, uncertainties and facts include, but are not limited to, risks related to: motion picture production and performance; AMC’s lack of control over distributors of films; intense competition in the geographic areas in which AMC operates; AMC’s ability to execute cost-cutting and revenue enhancement initiatives; box office performance; increased use of alternative film delivery methods or other forms of entertainment; additional impairment related to AMC’s NCM investment; shrinking exclusive theatrical release windows; the performance of AMC’s non-consolidated entities; international economic, political, regulatory and other risks; risks and uncertainties relating to AMC’s significant indebtedness; limitations on the availability of capital; risks relating to AMC’s inability to achieve the expected benefits and performance from its recent acquisitions; AMC’s ability to comply with a settlement it entered into with the U.S. Department of Justice pursuant to which it agreed to divest holdings in National CineMedia, LLC; AMC’s ability to refinance its indebtedness on favorable terms; optimizing AMC’s theatre circuit through construction and the transformation of its existing theatres may be subject to delay and unanticipated costs; failures, unavailability or security breaches of AMC’s information systems; risks relating to impairment losses, including with respect to goodwill and other intangibles, and theatre and other closure charges; AMC’s ability to utilize net operating loss carryforwards to reduce its future tax liability or valuation allowances taken with respect to deferred tax assets; review by antitrust authorities in connection with acquisition opportunities; risks relating to unexpected costs or unknown liabilities relating to recently completed acquisitions; risks relating to the incurrence of legal liability including costs associated with recently filed class action lawsuits; general political, social and economic conditions and risks, trends, uncertainties and other factors discussed in the reports AMC has filed with the SEC. Should one or more of these risks, trends, uncertainties or facts materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by the forward-looking statements contained herein. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. For a detailed discussion of risks, trends and uncertainties facing AMC, see the section entitled “Risk Factors” in AMC’s Annual Report on Form 10-K, filed with the SEC on March 1, 2018 and the risks, trends and uncertainties identified in its other public filings. AMC does not intend, and undertakes no duty, to update any information contained herein to reflect future events or circumstances, except as required by applicable law.

 

(tables follow)

 

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Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin:

(dollars in millions) (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2017

 

2016

 

2017

 

2016

Net earnings (loss)

 

$

(276.4)

 

$

29.0

 

$

(487.2)

 

$

111.7

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

290.5

 

 

(16.6)

 

 

154.1

 

 

38.0

Interest expense

 

 

70.6

 

 

40.7

 

 

274.0

 

 

121.5

Depreciation and amortization

 

 

144.7

 

 

82.4

 

 

538.6

 

 

268.2

Impairment of long-lived assets

 

 

43.6

 

 

5.5

 

 

43.6

 

 

5.5

Certain operating expenses (2)

 

 

8.1

 

 

7.2

 

 

20.6

 

 

20.2

Equity in (earnings) losses of non-consolidated entities (3)

 

 

(13.9)

 

 

(19.6)

 

 

185.2

 

 

(47.7)

Cash distributions from non-consolidated entities(4)

 

 

12.3

 

 

18.4

 

 

45.4

 

 

40.1

Attributable EBITDA (5)

 

 

1.6

 

 

 —

 

 

3.4

 

 

 —

Investment expense (income)

 

 

(1.0)

 

 

(0.6)

 

 

(22.6)

 

 

(10.2)

Other expense (income) (6)

 

 

0.5

 

 

0.1

 

 

(1.3)

 

 

 —

General and administrative expense—unallocated:

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs(7)

 

 

5.8

 

 

32.8

 

 

63.0

 

 

47.9

Stock-based compensation expense (8)

 

 

1.8

 

 

2.3

 

 

5.7

 

 

6.8

Adjusted EBITDA(1)

 

$

288.2

 

$

181.6

 

$

822.5

 

$

602.0

Adjusted EBITDA Margin(1)

 

 

20.3%

 

 

19.6%

 

 

16.2%

 

 

18.6%

Total revenues

 

$

1,416.8

 

$

926.1

 

$

5,079.2

 

$

3,235.9

Net earnings (loss) margin (9)

 

 

-19.5%

 

 

3.1%

 

 

-9.6%

 

 

3.5%

 

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Select pro forma financial data:

 Three Months Ended December 31, 2017 and Three Months Ended December 31, 2016:

(dollars in millions),  (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

December 31, 2017

 

December 31, 2016

 

 

Pro Forma

 

Pro Forma

 

 

US

 

International

 

Total

 

US

 

International

 

Total

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Admissions

 

$

614.6

 

$

282.5

 

$

897.1

 

$

595.1

 

$

263.0

 

$

858.1

 Food and beverage

 

 

315.3

 

 

100.0

 

 

415.3

 

 

306.5

 

 

90.2

 

 

396.7

 Other theatre

 

 

48.3

 

 

56.1

 

 

104.4

 

 

45.2

 

 

47.7

 

 

92.9

   Total revenues

 

 

978.2

 

 

438.6

 

 

1,416.8

 

 

946.8

 

 

400.9