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Section 1: 8-K (8-K)

Q3_18_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): November 8,  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 November 8, 2018, we announced our financial results for the third quarter ended September 30, 2018. 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 November 8, 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.

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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: November 8, 2018

By:

/s/ Craig R. Ramsey

 

            Craig R. Ramsey

 

            Executive Vice President and

            Chief Financial Officer

 

 

 

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Section 2: EX-99.1 (EX-99.1)

Exhibit 991 ER_Q3_18

Exhibit 99.1

 

 

 

Picture 3

INVESTOR RELATIONS:
John Merriwether, 866-248-3872
[email protected]

 

MEDIA CONTACTS:
Ryan Noonan, (913) 213-2183
[email protected]

FOR IMMEDIATE RELEASE

AMC Entertainment Holdings, Inc. Announces

Third Quarter 2018 Results

 

LEAWOOD, KANSAS - (November 8, 2018) -- AMC Entertainment Holdings, Inc. (NYSE: AMC) (“AMC” or “the Company”), today reported results for the third quarter ended September 30, 2018.

 

Highlights for the third quarter ended September 30, 2018, include the following:

 

·

Total revenues increased 3.6% to $1,221.4 million compared to total revenues of $1,178.7 million for the three months ended September 30, 2017. Total revenues in the quarter included approximately $325.8 million of revenues from our international theatres as compared to $333.0 million for the three months ended September 30, 2017.

 

·

Admissions revenues were nearly unchanged at $751.4 million compared to $753.5 million for the same period a year ago, primarily driven by an 8.6% surge in attendance at our U.S. theatres compared to the third quarter a year earlier, which was a U.S. attendance record for the third quarter for AMC, offset by a decline in U.S. average ticket price of 6.6% and industry-wide softness in Europe.

 

·

Food and beverage revenues increased 6.5% to $384.8 million, compared to $361.4 million for the three months ended September 30, 2017, again primarily driven by the increased U.S. attendance.

 

·

Other revenues in the quarter also increased 33.5% to $85.2 million from $63.8 million for the same period in 2017, the result of several of the company’s strategies and the benefit from the adoption of ASC 606.

 

·

Loss before income taxes increased $29.0 million to $89.3 million, compared to a loss of $60.3 million for the same quarter a year ago. Net loss increased $57.7 million to $100.4 million compared to net loss of $42.7 million for the three months ended September 30, 2017.  Included in the loss before income taxes for the third quarter ended September 30, 2018 was $54.1 million of non-cash expense as a result of an increase in fair value of our new derivative liability related to the conversion feature for the Silver Lake convertible notes due 2024, which will be marked to market, quarterly, going forward.  Also included were: a $28.9 million gain on the sale of AMC’s remaining investment in National CineMedia, LLC (“NCM”), a $30.1 million gain on the Screenvision merger, $14.3 million increase related to merger and acquisition costs and $8.1 million increase in general and administrative expenses related to bonus and stock-based compensation expense due to significantly improved operating performance. 


 

 

 

·

Diluted loss per share (“diluted EPS”) increased by $0.49 to $0.82 per share compared to a net loss of $0.33 per share for the same period a year ago.  Weighted average diluted shares outstanding in the third quarter of 2018 decreased approximately 6.1% compared to the third quarter last year as a result of the effect of the 24.1 million Class B Common shares repurchased and canceled from Dalian Wanda Group Co., Ltd (“Wanda”) on September 14, 2018 and the 3.7 million Class A Common shares repurchased on the open market since August 2017. A total of 103,514,196 Class A and Class B Common shares were outstanding as of October 31, 2018, a 19.8% decrease compared to October 31, 2017.

 

·

Total Adjusted EBITDA(1) decreased 3.4% to $142.4 million compared to $147.4 million for the three months ended September 30, 2017.  U.S. markets Adjusted EBITDA for the third quarter declined 2.4% to $105.0 million compared to $107.6 million in the same period last year.  International Adjusted EBITDA for the third quarter declined 6.0% to $37.4 million compared to $39.8 million a year ago.  Included in Total Adjusted EBITDA for the third quarter ended September 30, 2018 is approximately $3.9 million of impact related to salaries and wages related to bonuses and a $3.4 million decline in cash distributions from non-consolidated entities. Adjusted EBITDA was negatively impacted by approximately $6.9 million due to the launch of the AMC Stubs A-List loyalty tier and is in-line with expectations.

 

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

 

Adam Aron, CEO and President of AMC said, “We are so thoroughly encouraged by AMC’s performance in the third quarter of 2018, both because of the $142.4 million of Adjusted EBITDA we generated and the enormous strategic advances our company made in the quarter. We performed significantly ahead of our expectations going into the quarter, and when combined with our stellar second quarter results, we are now highly confident in saying that from an Adjusted EBITDA perspective, full year 2018 will be the best-ever year in AMC’s 98-year history.“

 

Aron added, “We are especially excited by the extraordinary consumer response to our AMC Stubs loyalty program, now with 17 million member-households in the United States. AMC Stubs members make up more than 40% of AMC’s entire U.S. clientele, and as a result we are now fortunate to have a marketer’s dream, a customer database that is incredibly rich with moviegoing habits and histories. We are even more thrilled by the game changing nature of our new A-List VIP tier of AMC Stubs, which is nothing short of a runaway success for AMC. Launched on June 26 of this year, A-List had some 388,000 enrolled members by quarter-end. In the next couple of days, not even six weeks later, we will cross 500,000 members. That already translates to $120 million of annual recurring revenue for movie admission ticket buying at AMC theatres, even before considering the continued growth in membership and revenue that is surely ahead of us. What’s more, thanks to our intelligent stewardship and management of these programs, we find ourselves in the sweet spot of both offering great value to our guests and running a program that is heavily incremental and which should prove to be intriguingly profitable for AMC. Thanks to all of our compelling marketing initiatives, in 2018 we saw the highest third quarter attendance levels ever for AMC.”

 

Aron concluded, “The third quarter of 2018 was also transformational for AMC as we attracted a new $600 million strategic investment in AMC from private equity giant Silver Lake, the global leader in technology investing, in the form of 6-year 2.95% convertible notes. The proceeds of these notes allowed us to repurchase approximately 24.1 million Class B Common shares from Wanda and issue a $1.55 per share special dividend to all shareholders. Silver Lake, who will add great insight as it enters our Boardroom, believes in the inherent value of AMC now, and in the likelihood of AMC’s success going forward. With a particularly strong industry box office now expected for both 2018 and 2019, and with our company very well positioned as the global leader among theatre operators, the future for AMC looks brighter than ever.”

 

 

 

 

 


 

 

 

Highlights for the nine months ended September 30, 2018, include the following:

 

·

Total revenues increased 10.5% to $4,047.5 million compared to total revenues of $3,662.4 million for the nine months ended September 30, 2017.  Total revenues for 2018 included approximately $1,040.4 million of revenues from our international theatres as compared to $917.2 million in the nine-month period a year ago.

 

·

Admissions revenues grew 8.2% to $2,522.7 million compared to $2,332.4 million for the nine months ended September 30, 2017. Attendance increased globally by 4.1% and increased by 6.4% in the U.S.

 

·

Food and beverage revenues increased 9.1% to $1,236.4 million, compared to $1,133.1 million for the nine months ended September 30, 2017.

 

·

Other revenues increased 46.5% to $288.4 million from $196.9 million for the same period in 2017, the result of several of the company’s strategies, the benefit from the adoption of ASC 606, and the Nordic acquisition

 

·

Loss before income taxes improved $299.9 million to $47.3 million, compared to a loss of $347.2 million for the same quarter a year ago. Net loss improved by $150.3 million to $60.5 million compared to a net loss of $210.8 million for the nine months ended September 30, 2017. Included in the loss before income taxes for the nine months ended September 30, 2017 was a $204.5 million other-than-temporary pre-tax impairment loss related to AMC’s investment in NCM and a $22.2 million loss on sale of NCM shares.

 

·

Diluted loss per share decreased by $1.17 to $0.48 per share compared to a loss of $1.65 per share for the same period a year ago.  Weighted average diluted shares outstanding for the nine months ended September 30, 2018 decreased approximately 1.2% compared to the third quarter last year as a result of the 24.1 million Class B Common shares repurchased and canceled from Wanda on September 14, 2018 and the 3.7 million Class A Common shares repurchased on the open market since August 2017 offset by the additional public offering of 20.3 million Class A Common shares in February 2017.

 

·

Total Adjusted EBITDA(1) grew 24.5% to $665.1 million compared to $534.3 million for the nine months ended September 30, 2017.  U.S. markets Adjusted EBITDA for the nine months grew 27.3% to $535.6 compared to $420.6 million in the same period last year.  International Adjusted EBITDA grew 13.9% to $129.5 million compared to $113.7 million in the same period a year ago.  Much of the growth in international Adjusted EBITDA is due to the March 28, 2017 acquisition of Nordic Cinema Group Holding AB (“Nordic”).

 

(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.  

 

 

Dividends

 

On May 3, 2018, the Company declared a regular quarterly dividend of $0.20 per share for the quarter ended March 31, 2018, payable on June 25, 2018 to stockholders of record on June 11, 2018. The total dividends paid in the second quarter of 2018 were approximately $25.6 million.

 

On July 24, 2018, the Company declared a regular quarterly dividend of $0.20 per share for the quarter ended June 30, 2018, payable on September 24, 2018 to stockholders of record on September 10, 2018.


 

 

On September 16, 2018 the Company declared a special dividend of $1.55 per share, payable on September 28, 2018 to stockholders of record on September 25, 2018.

 

The total dividends paid in the third quarter of 2018 were approximately $186.0 million.

 

On November 1, 2018, the Company declared a regular quarterly dividend of $0.20 per share for the quarter ended September 30, 2018, payable on December 26, 2018 to stockholders of record on December 10, 2018.

 

Conference Call / Webcast Information

 

The Company will host a conference call via webcast for investors and other interested parties beginning at 4:00 p.m. CST/5:00 p.m. EST on Thursday, November 8, 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 is the largest movie exhibition company in the U.S., in Europe and throughout the world with more than 1,000 theatres and nearly 11,000 screens across the globe. AMC has propelled innovation in the exhibition industry by: deploying its Signature power-recliner seats; delivering enhanced food and beverage choices; generating greater guest engagement through its loyalty program, web site and mobile 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, Norway, Spain, Sweden and UK & Ireland. For more information, visit 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; 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 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 Quarterly Report on Form 10-Q filed with the SEC on November 8, 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 9/30/18 and 9/30/17

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

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2018

 

2017

 

2018

 

2017

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 Admissions

 

$

751.4

 

$

753.5

 

$

2,522.7

 

$

2,332.4

 Food and beverage

 

 

384.8

 

 

361.4

 

 

1,236.4

 

 

1,133.1

 Other theatre

 

 

85.2

 

 

63.8

 

 

288.4

 

 

196.9

   Total revenues

 

 

1,221.4

 

 

1,178.7

 

 

4,047.5

 

 

3,662.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 Film exhibition costs

 

 

378.8

 

 

364.8

 

 

1,276.7

 

 

1,164.2

 Food and beverage costs

 

 

63.6

 

 

60.7

 

 

202.0

 

 

182.6

 Operating expense, excluding depreciation and amortization below

 

 

400.5

 

 

383.2

 

 

1,236.9

 

 

1,128.8

 Rent

 

 

203.7

 

 

200.7

 

 

593.1

 

 

590.9

 General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

   Merger, acquisition and transaction costs

 

 

18.1

 

 

5.6

 

 

27.1

 

 

57.2

   Other, excluding depreciation and amortization below

 

 

48.4

 

 

32.6

 

 

135.6

 

 

113.0

 Depreciation and amortization

 

 

130.2

 

 

135.2

 

 

398.4

 

 

393.9

   Operating costs and expenses

 

 

1,243.3

 

 

1,182.8

 

 

3,869.8

 

 

3,630.6

 

 

 

 

 

 

 

 

 

 

 

 

 

   Operating income (loss)

 

 

(21.9)

 

 

(4.1)

 

 

177.7

 

 

31.8

   Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

     Other expense (income)

 

 

54.1

 

 

(0.4)

 

 

57.5

 

 

(1.9)

     Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

       Corporate borrowings

 

 

64.3

 

 

60.8

 

 

188.2

 

 

171.7

       Capital and financing lease obligations

 

 

9.4

 

 

10.6

 

 

29.5

 

 

31.7

 Non-cash NCM exhibitor service agreement

 

 

10.3

 

 

 —

 

 

31.2

 

 

 —

     Equity in (earnings) loss of non-consolidated entities

 

 

(70.0)

 

 

1.8

 

 

(74.0)

 

 

199.1

     Investment income

 

 

(0.7)

 

 

(16.6)

 

 

(7.4)

 

 

(21.6)

       Total other expense

 

 

67.4

 

 

56.2

 

 

225.0

 

 

379.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(89.3)

 

 

(60.3)

 

 

(47.3)

 

 

(347.2)

Income tax provision (benefit)

 

 

11.1

 

 

(17.6)

 

 

13.2

 

 

(136.4)

Net loss

 

$

(100.4)

 

$

(42.7)

 

$

(60.5)

 

$

(210.8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 Diluted loss per share

 

$

(0.82)

 

$

(0.33)

 

$

(0.48)

 

$

(1.65)

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding diluted (in thousands)

 

 

123,126

 

 

131,077

 

 

126,386

 

 

127,902

 

 

 

 

 


 

 

Consolidated Balance Sheet Data (at period end):

(dollars in millions)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

September 30,

 

December 31,

 

 

2018

 

2017

Cash and cash equivalents

 

$

333.3

 

$

310.0

Corporate borrowings

 

 

4,855.5

 

 

4,235.3

Other long-term liabilities

 

 

980.7

 

 

903.8

Capital and financing lease obligations

 

 

584.5

 

 

651.4

Stockholders' equity

 

 

1,254.5

 

 

2,112.4

Total assets

 

 

9,363.0

 

 

9,805.9

 

 

 

 

 

Consolidated Other Data:

(in millions, except operating data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

Consolidated

 

2018

 

2017

 

2018

 

2017

Net cash provided by operating activities

 

$

1.7

 

$

111.2

 

$

298.8

 

$

229.6

Capital expenditures

 

$

(133.8)

 

$

(149.7)

 

$

(374.9)

 

$

(467.7)

Screen additions

 

 

 6

 

 

22

 

 

46

 

 

64

Screen acquisitions

 

 

 8

 

 

15

 

 

39

 

 

720

Screen dispositions

 

 

43

 

 

21

 

 

177

 

 

257

Construction openings (closures), net

 

 

12

 

 

(53)

 

 

(106)

 

 

(39)

Average screens

 

 

10,626

 

 

10,707

 

 

10,699

 

 

10,640

Number of screens operated

 

 

10,971

 

 

11,046

 

 

10,971

 

 

11,046

Number of theatres operated

 

 

1,002

 

 

1,006

 

 

1,002

 

 

1,006

Screens per theatre

 

 

10.9

 

 

11.0

 

 

10.9

 

 

11.0

Attendance (in thousands)

 

 

82,662

 

 

79,451

 

 

264,838

 

 

254,441

 

 

 

 


 

 

Segment Other Data:

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

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2018

 

2017

 

2018

 

2017

Other operating data:

 

 

 

 

 

 

 

 

 

 

 

 

Attendance (patrons, in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

 

58,935

 

 

54,269

 

 

190,542

 

 

179,041

International markets

 

 

23,727

 

 

25,182

 

 

74,296

 

 

75,400

Consolidated

 

 

82,662

 

 

79,451

 

 

264,838

 

 

254,441

 

 

 

 

 

 

 

 

 

 

 

 

 

Average ticket price (in dollars):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

9.15

 

$

9.80

 

$

9.65

 

$

9.59

International markets

 

$

8.95

 

$

8.81

 

$

9.22

 

$

8.17

Consolidated

 

$

9.09

 

$

9.48

 

$

9.53

 

$

9.17

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage revenues per patron (in dollars):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

5.11

 

$

5.13

 

$

5.15

 

$

5.05

International markets

 

$

3.51

 

$

3.30

 

$

3.42

 

$

3.03

Consolidated

 

$

4.66

 

$

4.55

 

$

4.67

 

$

4.45

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Screen Count (month end average):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

 

7,992

 

 

8,028

 

 

8,032

 

 

8,083

International markets

 

 

2,634

 

 

2,679

 

 

2,667

 

 

2,557

Consolidated

 

 

10,626

 

 

10,707

 

 

10,699

 

 

10,640

 

 

Segment Information

(unaudited, in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2018

 

2017

 

2018

 

2017

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

895.6

 

$

845.7

 

$

3,007.1

 

$

2,745.2

International markets

 

 

325.8

 

 

333.0

 

 

1,040.4

 

 

917.2

Consolidated

 

$

1,221.4

 

$

1,178.7

 

$

4,047.5

 

$

3,662.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

105.0

 

$

107.6

 

$

535.6

 

$

420.6

International markets

 

 

37.4

 

 

39.8

 

 

129.5

 

 

113.7

Consolidated

 

$

142.4

 

$

147.4

 

$

665.1

 

$

534.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

U.S. markets

 

$

92.9

 

$

126.9

 

$

264.9

 

$

416.6

International markets

 

 

40.9

 

 

22.8

 

 

110.0

 

 

51.1

Consolidated

 

$

133.8

 

$

149.7

 

$

374.9

 

$

467.7

 


 

 

Reconciliation of Adjusted EBITDA:

(dollars in millions)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2018

 

2017

 

2018

 

2017

Net loss

 

$

(100.4)

 

$

(42.7)

 

$

(60.5)

 

$

(210.8)

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

11.1

 

 

(17.6)

 

 

13.2

 

 

(136.4)

Interest expense

 

 

84.0

 

 

71.4

 

 

248.9

 

 

203.4

Depreciation and amortization

 

 

130.2

 

 

135.2

 

 

398.4

 

 

393.9

Certain operating expenses (2)

 

 

6.6

 

 

3.7

 

 

16.2

 

 

12.5

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

 

 

(70.0)

 

 

1.8

 

 

(74.0)

 

 

199.1

Cash distributions from non-consolidated entities (4)

 

 

3.1

 

 

6.5

 

 

30.9

 

 

33.1

Attributable EBITDA (5)

 

 

2.1

 

 

0.8

 

 

3.7

 

 

1.8

Investment income

 

 

(0.7)

 

 

(16.6)

 

 

(7.4)

 

 

(21.6)

Other expense (income) (6)

 

 

54.1

 

 

(0.6)

 

 

57.7

 

 

(1.8)

General and administrative expense—unallocated:

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs (7)

 

 

18.1

 

 

5.6

 

 

27.1

 

 

57.2

Stock-based compensation expense (income) (8)

 

 

4.2

 

 

(0.1)

 

 

10.9

 

 

3.9

Adjusted EBITDA(1)

 

$

142.4

 

$

147.4

 

$

665.1

 

$

534.3


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 were 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)

During the three months ended September 30, 2018, we recorded equity in earnings related to our sale of all remaining NCM units of $28.9 million and a gain of $30.1 million related to the Screenvision merger. Equity in loss of non-consolidated entities also includes loss on the surrender (disposition) of a portion of our investment in NCM of $1.1 million during the nine months ended September 30, 2018. Equity in (earnings) loss of non-consolidated entities includes a lower of carrying value or fair value impairment loss of the held-for sale portion of our investment in NCM of $16.0 million for the nine months ended September 30, 2018. The nine months ended September 30, 2017 included an other-than-temporary impairment loss of $204.5 million, on our investment in NCM. The three months ended September 30, 2017 included a loss on the sale of NCM shares of $21.0 million. The impairment charges reflect recording our held-for-sale units and other-than-temporary impaired shares at the publicly quoted per share price on March 31, 2018 of $5.19 and June 30, 2017 of $7.42.

 

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) loss 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2018

 

2017

 

2018

 

2017

Equity in (earnings) loss of non-consolidated entities

 

$

(70.0)

 

$

1.8

 

$

(74.0)

 

$

199.1

Less:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(68.5)

 

 

2.1

 

 

(72.1)

 

 

199.6

Equity in earnings (loss) of International theatre JV's

 

 

1.5

 

 

0.3

 

 

1.9

 

 

0.5

Income tax provision

 

 

0.1

 

 

 —

 

 

0.2

 

 

 —

Investment income

 

 

(0.1)

 

 

 —

 

 

(0.3)

 

 

 —

Depreciation and amortization

 

 

0.6

 

 

0.5

 

 

1.9

 

 

1.3

Attributable EBITDA

 

$

2.1

 

$

0.8

 

$

3.7

 

$

1.8

 

 

 

6)

Other expense (income) for the three and nine months ended September 30, 2018 includes financing losses and financing related foreign currency transaction losses. During the three months ended September 30, 2018, we recorded expense of $54.1 million as a result of an increase in fair value of our derivative liability for the Convertible Notes due 2024.

 

7)

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

 

8)

Stock-based compensation expense is 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 992 CFO Commentary_Q3_18

Exhibit 99.2

 

 

Picture 4

11500 Ash Street

Leawood, Kansas 66211

 

November 8, 2018

 

CFO Commentary on

Third Quarter 2018 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 third quarter 2018 earnings press release issued November 8, 2018 and available at http://investor.amctheatres.com. 

 

Additional information detailing select unaudited pro forma financial data for the three and nine months ended September 30, 2017 and September 30, 2018 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 August 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 nine-month period ended September 30, 2017 combines the historical financial data of AMC and Nordic, giving effect to the acquisition, financings and theatre divestitures related to our acquisition of Carmike Cinemas, Inc. (“Carmike”) as if they had been completed on January 1, 2017.  The pro forma data for the nine-month period ended September 30, 2017 also removes the non-recurring direct incremental costs of the Odeon acquisition, the Carmike acquisition and the Nordic acquisition. The unaudited proforma data for the three-month period ended September 30, 2017 removes the non-recurring direct incremental costs of the Odeon acquisition, the Carmike acquisition and the Nordic acquisition. The historical consolidated financial information for Nordic has been adjusted to comply with 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. 

 

1

 


 

Additional constant currency information adjusting unaudited historical financial data for the three and nine months ended September 30, 2018 using average monthly currency rates from the three and nine months ended September 30, 2017 is also presented for comparative purposes.

 

Conference Call

 

The Company will host a conference call on Thursday, November 8, 2018, at 4:00 p.m. CST/5:00 p.m. EST to review results for the third quarter ended September 30, 2018.

 

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.

 

Third quarter ended September 30, 2018

 

U.S. Industry Box Office: The third quarter of 2018 continued the trend in 2018 of exceeding expectations, generating $2.7 billion and growing 5.5% compared to the same quarter a year ago.  The quarter started out strong as two holdover films from the second quarter, INCREDIBLES 2 and JURASSIC WORLD: FALLEN KINGDOM, finished in the top five grossing movies for the third quarter. Leading the charge for the third quarter were MISSION IMPOSSIBLE – FALLOUT followed by ANT-MAN AND THE WASP and rounding out the top five was surprise hit CRAZY RICH ASIANS.

 

There was impressive box office depth this quarter, as all top ten films grossed over $100 million, compared to seven films in the prior year period, and films outside the top ten were up nearly 23%.  Offsetting this strength was a decline in premium formats, including IMAX grosses down nearly 23% and 3D grosses off nearly 27%.  The quarter did finish on a strong note as September was the second highest grossing September ever behind only September last year.

 

Consolidated Results

 

Compared to the third quarter of 2017, consolidated admissions revenues for the quarter declined 0.3% to $751.4 million while food and beverage revenues grew 6.5% to $384.8 million and other theatre revenues grew 33.5% to $85.2 million. Consolidated total revenues grew 3.6% in the third quarter to $1,221.4 million.

 

Consolidated net loss for the third quarter increased $57.7 million to $100.4 million compared to a net loss of $42.7 million in the same quarter a year ago. Included in the loss for the third quarter ended September 30, 2018 was $54.1 million of expense as a result of an increase in fair value of our derivative liability related to the conversion feature for the SilverLake convertible notes due 2024, an increase in general and administrative costs of $22.4 million related to merger costs and bonus and stock-based compensation expense due to improved operating performance, a $28.9 million gain on the sale of AMC’s remaining investment in National CineMedia, LLC. (“NCM”), and a gain on the Screenvision merger of $30.1 million.  Included in the net loss for the third quarter of 2017 is a $17.0 million gain on the sale of Open Road.  Our provision for income taxes increased $28.7 million due primarily to the valuation allowance recorded in the fourth quarter of 2017. Consolidated net earnings margin for the third quarter was (8.2%) compared to (3.6%) in the third quarter of 2017. Consolidated diluted loss per share increased $0.49 to a loss of $0.82 per share compared to a loss of $0.33 per share for the same period a year ago.

 

2

 


 

Consolidated Adjusted EBITDA for the third quarter declined 3.4% to $142.4 million and Adjusted EBITDA margin decreased to 11.7% from 12.5% in the year ago period.  Included in Consolidated Adjusted EBITDA for the third quarter ended September 30, 2017 is approximately $7.3 million of benefit from general and administrative credits related to incentive compensation and non-recurring NCM cash distributions. Adjusted EBITDA was negatively impacted by approximately $6.9 million due to the launch of the AMC Stubs A-List loyalty tier and is in-line with expectations.

 

2018 Consolidated Historical Results vs. 2017 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 three months ended September 30, 2017 removes the non-recurring direct incremental costs of the Odeon acquisition, the Carmike acquisition and the Nordic acquisition. 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. 

 

Compared to the pro forma third quarter of 2017, third quarter 2018 consolidated total revenues increased 3.6% (increased 4.3% on a constant currency basis) and were comprised of a 0.3% decline (increased 0.4% on a constant currency basis) in admissions revenues, a 6.5% increase (increased 6.9% on a constant currency basis) in food and beverage revenues, and a 33.5% increase (increased 35.1% on a constant currency basis) in other theatre revenues.

 

Consolidated net loss for the third quarter increased $61.8 million to $100.4 million (increased $61.5 million to $100.1 million on a constant currency basis) compared to the pro forma results in the same quarter last year.

 

Consolidated Adjusted EBITDA for the third quarter declined 3.4% to $142.4 million (2.4% decline to $143.8 million on a constant currency basis) and Consolidated Adjusted EBITDA margin decreased 80 basis points to 11.7% compared to the same pro forma period a year ago.

 

2018 U.S. Segment Historical Results vs. 2017 U.S. Segment Pro Forma Results 

 

Compared to the pro forma U.S. segment third quarter of 2017, third quarter 2018 total U.S. revenues increased 5.9% to $895.6 million and were comprised of a 1.4% increase in admissions revenue to $539.0 million, an 8.3% increase in food and beverage revenues to $301.4 million, and a 54.6% increase in other theatre revenues to $55.2 million.  In the third quarter, AMC outperformed the industry by more than 400 basis points on an attendance per screen basis and underperformed the industry by approximately 200 basis points on an admissions revenue per screen basis.  Taking into account the impact of the AMC Stub’s A-List loyalty program, and the decline in IMAX and 3D related attendance, AMC performed in-line with the industry.

 

Total U.S. attendance increased 8.6% to 58.9 million while average ticket price for the quarter decreased 6.6% to $9.15 compared to the pro forma results in the same quarter a year ago. The decline in average ticket price was primarily due to discounted pricing for our AMC Stubs members, increased attendance from our A-list loyalty program, and declines in IMAX and 3D related attendance.

 

Food and beverage revenue per patron remained nearly unchanged, declining just $0.02 to $5.11 compared to the third quarter last year.  As expected, strong attendance growth from our AMC Stubs

3

 


 

members, including A-List, produced a lower food and beverage per patron rate, yet third quarter food and beverage gross profit increased nearly 9%.  Our guests continue to enjoy our diverse array of enhanced food and beverage offerings as we roll out menu innovations, including our Feature Fare menu that is now available at nearly 350 theatres.  Our U.S. food and beverage gross margin for the quarter increased 20 basis points to 85.4%, while U.S. food and beverage gross profit per patron remained unchanged.

 

At quarter-end we operated 28 dine-in-theatres and served alcohol at 330 locations.

 

U.S. other revenues saw a 54.6% increase to $55.2 million compared to the prior year’s pro forma quarter. Included in other revenues is approximately $10.3 million of revenue related to a change in revenue recognition as a result of adopting ASC 606.  

 

AMC’s U.S. film exhibition costs increased 7.4% to $289.0 million compared to last year’s pro forma results, representing 53.6% of admissions revenue as compared to 50.6% in the same quarter a year ago primarily due to a combination of strong box office and higher attendance from A-List. AMC continues to incur film exhibition expense on each ticket presented for admission, but the revenue associated with increased A-List attendance does not currently offset the increase in film exhibition expense.  The increase in film exhibition costs as a percentage of admissions revenue is within our expectations.

 

U.S. operating expenses for the quarter increased 3.9% to $283.5 million compared to last year’s pro forma results and represented 31.7% of revenues, a 60-basis point improvement compared to 32.3% in the same pro forma period a year ago. Included in U.S. operating expenses for the quarter is approximately $5.3 million of expense related to the adoption of ASC 606.  U.S. operating expenses for the 2018 third quarter and 2017 pro forma period also include $3.7 million and $3.9 million, respectively, of certain operating expenses that are excluded from our calculation of Adjusted EBITDA, and excluding these certain operating expenses from both periods, adjusted operating expenses for the third quarter increased 4.0% to $279.8 million, and represented 31.2% of revenues, a 60-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.

 

U.S. rent expense for the third quarter increased 2.6% to $152.1 million, on roughly 0.4% fewer average screens.

 

U.S. depreciation and amortization decreased 4.8% to $94.2 million in the third quarter compared to the same pro forma period last year.  The decrease is primarily due to the prior year impairment charges and adjustments to the estimated fair value of property related to the Carmike acquisition.  We will continue to evaluate the useful lives of our theatres and expect annual depreciation and amortization expense for 2018 to be between $530 and $540 million on a consolidated basis.

 

U.S. net loss for the third quarter was $84.5 million compared to a net loss of $34.7 million in the same pro forma period a year ago.  Included in the loss for the third quarter ended September 30, 2018 was $54.1 million of expense as a result of an increase in fair value of our derivative liability related to the conversion feature for the SilverLake convertible notes due 2024, an increase in general and administrative costs of $16.1million related to merger costs and bonus and stock-based compensation expense due to improved operating performance, a $28.9 million gain on the sale of AMC’s remaining investment in NCM, and a gain on the Screenvision merger of $30.1 million.  Included in the net loss for the third quarter of 2017 is a $17.0 million gain on the sale of Open Road.  Our provision for income taxes increased $29.6 million due primarily to the valuation allowance recorded in the fourth quarter of 2017. 

 

4

 


 

U.S. Adjusted EBITDA for the quarter decreased 2.4% to $105.0 million compared to the pro forma third quarter last year, as U.S. adjusted EBITDA margins decreased 100 basis points to 11.7%.  Included in Adjusted EBITDA for the third quarter ended September 30, 2018 is approximately $3.9 million of impact related to salaries and wages related to bonuses and a $3.4 million decline in cash distributions from non-consolidated entities. Adjusted EBITDA was negatively impacted by approximately $6.9 million due to the launch of the AMC Stubs A-List loyalty tier, which is in-line with our expectations.  Excluding the $14.2 million impact from the items mentioned above, Adjusted EBITDA grew 11.5% and Adjusted EBITDA margins increased 96 basis points to 12.8%. 

 

International Industry Box Office: The third quarter international industry box office did not fare as well as the domestic box office, as we saw mixed results, with the countries served by Odeon’s theatres seeing a 3.5% decline, on a constant currency basis, while the countries served by Nordic witnessed a 17.3% increase, on a constant currency basis, compared to the same period in 2017. 

 

With a popular FIFA World Cup rolling into July that included play from England and Sweden and strong domestic holdover films from the second quarter not resonating as well in Europe, it was a challenging quarter for the industry.  Despite playing particularly well in the UK and Ireland, Sweden and Norway, MAMMA MIA! HERE WE GO AGAIN couldn’t match the strength of DUNKIRK and DESPICABLE ME 3 last year. We did see better family friendly product in most countries with INCREDIBLES 2 and HOTEL TRANSYLVANIA 3, and we believe MARY POPPINS RETURNS and RALPH BREAKS THE INTERNET will continue that trend in the fourth quarter.

 

 

2018 International Historical Segment Results vs. 2017 International Historical Segment Results

 

Compared to the third quarter of 2017, third quarter total international revenues decreased 2.2% to $325.8 million (increased 0.1% to $333.4 million on a constant currency basis), and were comprised of a 4.2% decline in admissions revenue to $212.4 million (decreased 2.0% to $217.3 million on a constant currency basis), a 0.4% increase in food and beverage revenues to $83.4 million (increased 2.4% to $85.1 million on a constant currency basis), and a 6.8% increase in other theatre revenues to $30.0 million (increased 10.3% to $31.0 million on a constant currency basis).

 

Total international attendance decreased 5.8% to 23.8 million and average ticket price for the quarter increased 1.6% to $8.95 (increased 4.0% to $9.16 on a constant currency basis). Odeon’s strategic pricing increases partially offset by deteriorations in foreign currency translation rates helped drive the increase in average ticket price.  Attendance was affected by a weaker movie slate this year including the impacts of the FIFA World Cup and weather, as well as the impact from screen closures from recliner renovations and increased competition.

 

International food and beverage revenue per patron increased 6.4% to $3.51 (increased 8.8% to $3.59 on a constant currency basis) while international food and beverage gross margin for the quarter declined 10 basis points to 76.4%.

 

AMC’s international film exhibition costs for the quarter declined 6.0% to $89.8 million (decreased 3.8% to $92.0 million on a constant currency basis), representing 42.3% of admissions revenue and a 80-basis point decrease compared to last year. These results are consistent with the film concentration of the top international titles and local content this year versus last year.

 

International operating expense for the quarter was up 6.1% to $117.0 million (increased 8.9% to $120.1 million on a constant currency basis) compared to last year and represented 35.9% of revenues as

5

 


 

compared to 33.1% in the same period a year ago. International operating expenses for the 2018 third quarter and 2017 period include $3.0 million ($3.0 million on a constant currency basis) and ($0.2) 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 third quarter increased 3.5% to $114.0 million (increased 6.4% to $117.1 million on a constant currency basis) and represented 35.0% of revenues, as compared to 33.1% from the prior year period. We are disclosing adjusted operating expenses because we believe they are more indicative of our ongoing performance.

 

International rent expense for the third quarter declined 1.7% to $51.6 million (increased 0.2% to $52.6 million on a constant currency basis).

 

International depreciation and amortization declined 0.8% to $36.0 million (increased 1.1% to $36.7 million on a constant currency basis) in the third quarter compared to the same period last year.

 

International net loss for the third quarter increased $12.0 million to $15.9 million (increased $11.7 million to $15.6 million on a constant currency basis), compared to the same period a year ago.

 

International Adjusted EBITDA for the third quarter decreased 6.0% to $37.4 million (decreased 2.5% to $38.8 million on a constant currency basis) compared to the third quarter last year. International Adjusted EBITDA margins decreased 50 basis points to 11.5%. As we continue to integrate 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 third quarter of 2018, we opened one new theatre with a total of 6 screens and acquired one theatre with 8 screens. We permanently closed 43 screens, temporarily closed 192 screens and reopened 204 screens to implement our strategy and install consumer experience upgrades. As of September 30, 2018, we owned or operated 1,002 theatres with 10,971 screens across 16 countries.

 

Capital Expenditures

Total gross capital expenditures for the quarter ended September 30, 2018 were $133.8 million and after $27.8 million of landlord contributions yielded net capital expenditures of $106.0 million. Recliner renovations accounted for the majority of the capital expenditures in the third 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 third quarter with $333.3 million in cash and cash equivalents and a total debt balance of approximately $5.4 billion, including capital and financing lease obligations. 

 

As of September 30, 2018, we were in compliance with all debt covenants.

 

Convertible Notes

 

On September 14, 2018, AMC issued $600 million of 2.95% Senior Unsecured Convertible Notes (“Convertible Notes”) due September 15, 2024.  The Company used the net proceeds from the sale of the Convertible Notes to repurchase and retire 24,057,143 shares of Class B common stock held by Wanda for $17.50 per share or

6

 


 

approximately $421.0 million, associated legal fees of $1.9 million and to pay a special dividend of $1.55 per share of Class A common stock and Class B common stock, or approximately $160.5 million on September 28, 2018 to shareholders of record on September 25, 2018.

 

In accounting for the Convertible Notes, the Company bifurcated the conversion feature from the principal balance of the Convertible Notes as a derivative liability.  The derivative liability on September 14, 2018 of $90.4 million is offset by a discount to the principal balance and is amortized to interest expense at an effective rate of 5.98% over the term of the Convertible Notes. The derivative liability is remeasured at fair value each reporting period with changes in fair value recorded in the consolidated statement of operations as other expense or income. For the three months ended September 30, 2018, this resulted in a charge of $54.1 million. The if-converted value of the Convertible Notes due 2024 exceeded the principal balance by approximately $49.1 million as of September 30, 2018 based on the closing price per share of the Company’s common stock of $20.50 per share.

 

Dividends

Consistent with our plans to augment shareholder returns through the return of capital, AMC’s Board of Directors, at its regular board meeting on November 1, 2018, authorized the nineteenth consecutive quarterly dividend of $0.20 per share, payable on December 26, 2018, to holders of record on December 10, 2018.

 

On September 28, 2018, AMC paid a special dividend of $1.55 per share of Class A Common stock and Class B Common stock to shareholders of record as of September 25, 2018. 

 

Since our IPO on December 18, 2013, AMC has returned more than $558 million to shareholders in the form of dividends or dividend equivalents and has repurchased shares of Class A and Class B common stock totaling $478.7 million

 

Share Repurchases

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.

 

During the nine months ended September 30, 2018, we have repurchased 500,000 shares of Class A common stock at a cost of $8.2 million. From the inception of this share repurchase program, through the quarter ended September 30, 2018, we repurchased 3,695,856 shares of Class A common stock at a cost of $55.8 million.

 

On September 14, 2018, using a portion of the proceeds from the $600 million 2.95% Senior Unsecured Convertible Notes due 2024, AMC repurchased and canceled 24,057,143 Class B Common stock held by Wanda, at a cost of $421.0 million.

 

In the past 12 months, AMC has repurchased a total of 26.7 million shares of Class A Common and Class B Common stock.

 

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Odeon Public Offering Consideration

 

For several quarters AMC has been evaluating the prospects of a European public offering for Odeon.  Due to market conditions, management has decided that a European public offering for Odeon would not be in the best interest of shareholders at this time.

 

As a result, the consolidated results for the third quarter ended September 30, 2018 include a charge for the write-off of approximately $8.0 million of deferred charges related to the proposed public offering of Odeon.  This charge is accounted for in the “Merger, acquisition and transaction costs” line item of the income statement.

 

ASC 842 Lease Accounting Change

 

The Company plans to adopt the FASB issued guidance related to lease accounting (ASC 842) on January 1, 2019. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

 

While this standard will have no cash impact, the Company expects that this standard will have a material effect on its GAAP consolidated financial statements. The company is continuing to assess the effect of adoption and will provide additional guidance in the coming months.

 

Please see the Quarterly Report on Form 10-Q filed with the SEC on November 8, 2018 for additional details.

 

 

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 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

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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; 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 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 Quarterly Report on Form 10-Q filed with the SEC on November 8, 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2018

 

2017

 

2018

 

2017

Net loss

 

$

(100.4)

 

$

(42.7)

 

$

(60.5)

 

$

(210.8)

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

11.1

 

 

(17.6)

 

 

13.2

 

 

(136.4)

Interest expense

 

 

84.0

 

 

71.4

 

 

248.9

 

 

203.4

Depreciation and amortization

 

 

130.2

 

 

135.2

 

 

398.4

 

 

393.9

Certain operating expenses (2)

 

 

6.6

 

 

3.7

 

 

16.2

 

 

12.5

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

 

 

(70.0)

 

 

1.8

 

 

(74.0)

 

 

199.1

Cash distributions from non-consolidated entities(4)

 

 

3.1

 

 

6.5

 

 

30.9

 

 

33.1

Attributable EBITDA (5)

 

 

2.1

 

 

0.8

 

 

3.7

 

 

1.8

Investment income

 

 

(0.7)

 

 

(16.6)

 

 

(7.4)

 

 

(21.6)

Other expense (income) (6)

 

 

54.1

 

 

(0.6)

 

 

57.7

 

 

(1.8)

General and administrative expense—unallocated:

 

 

 

 

 

 

 

 

 

 

 

 

Merger, acquisition and transaction costs (7)

 

 

18.1

 

 

5.6

 

 

27.1

 

 

57.2

Stock-based compensation expense (income) (8)

 

 

4.2

 

 

(0.1)

 

 

10.9

 

 

3.9

Adjusted EBITDA(1)

 

$

142.4

 

$

147.4

 

$

665.1

 

$

534.3

Adjusted EBITDA Margin(1)

 

 

11.7%

 

 

12.5%

 

 

16.4%

 

 

14.6%

Total revenues

 

$

1,221.4

 

$

1,178.7

 

$

4,047.5

 

$

3,662.4

Net loss margin (9)

 

 

-8.2%

 

 

-3.6%

 

 

-1.5%

 

 

-5.8%

 

10

 


 

Select historical and pro forma financial data:

 Three Months Ended September 30, 2018 and Three Months Ended September 30, 2017:

(dollars in millions),  (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

September 30, 2018

 

September 30, 2017

 

 

Actual

 

Pro Forma (10)

 

 

US

 

International

 

Total

 

US

 

International

 

Total

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Admissions

 

$

539.0

 

$

212.4

 

$

751.4

 

$

531.7

 

$

221.8

 

$

753.5

 Food and beverage

 

 

301.4

 

 

83.4

 

 

384.8

 

 

278.3

 

 

83.1

 

 

361.4

 Other theatre

 

 

55.2

 

 

30.0

 

 

85.2

 

 

35.7

 

 

28.1

 

 

63.8

   Total revenues

 

 

895.6

 

 

325.8

 

 

1,221.4

 

 

845.7

 

 

333.0

 

 

1,178.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Film exhibition costs

 

 

289.0

 

 

89.8

 

 

378.8

 

 

269.2

 

 

95.6

 

 

364.8

 Food and beverage costs

 

 

43.9

 

 

19.7

 

 

63.6

 

 

41.2

 

 

19.5

 

 

60.7

 Operating expense

 

 

283.5

 

 

117.0

 

 

400.5

 

 

272.9

 

 

110.3

 

 

383.2

 Rent

 

 

152.1

 

 

51.6

 

 

203.7

 

 

148.2

 

 

52.5

 

 

200.7

 General and administrative: