Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
AMC > SEC Filings for AMC > Form 10-Q on 6-Aug-2014All Recent SEC Filings

Show all filings for AMC ENTERTAINMENT HOLDINGS, INC.

Form 10-Q for AMC ENTERTAINMENT HOLDINGS, INC.


6-Aug-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

In addition to historical information, this Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the "Securities Act," and Section 21E of the Securities Exchange Act of 1934, as amended, or the "Exchange Act." The words "forecast," "estimate," "project," "intend," "expect," "should," "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, including those discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations of AMC Entertainment Holdings, Inc.," which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the following:

º •
º decreased supply of motion pictures or delayed access to motion pictures;

º •
º quality of motion picture production, spending levels on motion picture marketing, and performance of motion pictures in our markets;

º •
º risks and uncertainties relating to our significant indebtedness;

º •
º limitations on the availability of capital may prevent us from deploying strategic initiatives;

º •
º risks of poor financial results may prevent us from meeting our payment obligations;

º •
º our ability to utilize net operating loss carryforwards to reduce our future tax liability;

º •
º increased competition in the geographic areas in which we operate;

º •
º increased use of alternative film delivery methods or other forms of entertainment;

º •
º shrinking theatrical exclusive release windows;

º •
º certain covenants in the agreements that govern our indebtedness may limit our ability to take advantage of certain business opportunities;

º •
º general political, social and economic conditions;

º •
º review by antitrust authorities in connection with acquisition opportunities;

º •
º dependence on key personnel for current and future performance;

º •
º optimizing our theatre circuit through construction and the transformation of our existing theatres may be subject to delay and unanticipated costs;

º •
º our ability to achieve expected benefits and performance from our strategic theatre acquisitions and other strategic initiatives;

º •
º our ability to finance our indebtedness on terms favorable to us;

º •
º failures or security breaches of our information systems;

º •
º our investment in and revenues from NCM may be negatively impacted by the competitive environment in which NCM operates;

º •
º risks relating to impairment losses and theatre and other closure charges;

º •
º risks relating to the incurrence of legal liability; and

º •
º increased costs in order to comply with governmental regulation.


Table of Contents

This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative but not exhaustive. In addition, new risks and uncertainties may arise from time to time. Accordingly, all forward-looking statements should be evaluated with an understanding of their inherent uncertainty.

Readers are urged to consider these factors carefully in evaluating the forward-looking statements. For further information about these and other risks and uncertainties, see Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013 and our other public filings.

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included herein are made only as of the date of this Quarterly Report on Form 10-Q, and we do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We are one of the world's leading theatrical exhibition companies and an industry leader in innovation and operational excellence. Our Theatrical Exhibition revenues are generated primarily from box office admissions and theatre food and beverage sales. The balance of our revenues are generated from ancillary sources, including on-screen advertising, fees earned from our AMC Stubs™ customer frequency membership program, rental of theatre auditoriums, income from gift card and packaged tickets sales, on-line ticketing fees and arcade games located in theatre lobbies. As of June 30, 2014, we owned, operated or had interests in 342 theatres and 4,968 screens.

During the six months ended June 30, 2014, we opened one newly built theatre with 12 screens, acquired 12 screens in the U.S., permanently closed two theatres with 13 screens in the U.S., permanently closed one theatre with 13 screens in Canada and temporarily closed 158 screens and reopened 152 screens in the U.S. to implement our strategy and install consumer experience upgrades.

Box office admissions are our largest source of revenue. We predominantly license "first-run" films from distributors owned by major film production companies and from independent distributors. We license films on a film-by-film and theatre-by-theatre basis. Film exhibition costs are accrued based on the applicable admissions revenues and estimates of the final settlement pursuant to our film licenses. Licenses that we enter into typically state that rental fees are based on aggregate terms established prior to the opening of the picture. In certain circumstances and less frequently, our rental fees are based on a mutually agreed settlement upon the conclusion of the picture. Under an aggregate terms formula, we pay the distributor a specified percentage of box office gross or pay based on a scale of percentages tied to different amounts of box office gross. The settlement process allows for negotiation based upon how a film actually performs.

Recliner re-seats are the key feature of full theatre renovations. These exhaustive theatre renovations involve stripping theatres to their basic structure in order to replace finishes throughout, upgrade the sight and sound experience, install modernized points of sale and, most importantly, replace traditional theatre seats with plush, electric recliners that allow customers to deploy a leg rest and fully recline at the push of a button. The renovation process typically involves losing up to two-thirds of a given auditoriums seating capacity. For an industry historically focused on quantity, this reduction in seating capacity could be viewed as counter-intuitive and harmful to revenues. However, the quality improvement in the customer experience is driving, on average, a 74% increase in attendance at these locations. Our customers have responded favorably to the significant personal space gains from ample row depths, ability to recline or stretch their legs, extra-wide pillowed chaise and oversized armrests. The reseated theatres attract more midweek audiences than normal theatres and tend to draw more adults who pay higher ticket prices than teens or young children. We typically do


Table of Contents

not change ticket prices in the first year after construction, however, in subsequent years we typically increase our ticket prices at our reseated theatres.

Technical innovation has allowed us to enhance the consumer experience through premium formats such as IMAX, 3D and other large screen formats. When combined with our major markets' customer base, the operating flexibility of digital technology enhances our capacity utilization and dynamic pricing capabilities. This enables us to achieve higher ticket prices for premium formats and provide incremental revenue from the exhibition of alternative content such as live concerts, sporting events, Broadway shows, opera and other non-traditional programming. Within each of our major markets, we are able to charge a premium for these services relative to our smaller markets. We will continue to broaden our content offerings and enhance the customer experience through the installation of additional IMAX and AMC Prime (our proprietary large screen format) screens and the presentation of attractive alternative content.

Food and beverage sales are our second largest source of revenue after box office admissions. Food and beverage items traditionally include popcorn, soft drinks, candy and hot dogs. Different varieties of food and beverage items are offered at our theatres based on preferences in the particular geographic region. Our traditional food and beverage strategy emphasizes prominent and appealing food and beverage counters designed for rapid service and efficiency, including a customer friendly self-serve experience. We design our theatres to have more food and beverage capacity to make it easier to serve larger numbers of customers. Strategic placement of large food and beverage stands within theatres increases their visibility, aids in reducing the length of lines, allows flexibility to introduce new concepts and improves traffic flow around the food and beverage stands.

To address recent consumer trends, we are expanding our menu of enhanced food and beverage products to include made-to-order drinks and meals, customized coffee, healthy snacks, premium beers, wine and mixed drinks and other gourmet products. We plan to invest across a spectrum of enhanced food and beverage formats, ranging from simple, less capital-intensive food and beverage design improvements to the development of new dine-in theatre options to rejuvenate theatres approaching the end of their useful lives as traditional movie theatres and, in some of our larger theatres, to more efficiently monetize attendance. The costs of these conversions in some cases are partially covered by investments from the theatre landlord. Building on the success of our full-service Dine-In Theatres, we have completed construction of a new concept, AMC Red Kitchen, which emphasizes freshness, speed and convenience. Customers place their orders at a central station and the order is delivered to our customers at their reserved seat. As of June 30, 2014, we have successfully implemented our dine-in theatre concepts at 15 locations, which feature full kitchen facilities, seat-side servers and a separate bar and lounge area.

Our revenues are dependent upon the timing and popularity of film releases by distributors. The most marketable films are usually released during the summer and the calendar year-end holiday seasons. Therefore, our business is highly seasonal, with higher attendance and revenues generally occurring during the summer months and holiday seasons. Our results of operations may vary significantly from quarter to quarter and from year to year.

During the 2013 calendar year, films licensed from our seven largest distributors based on revenues accounted for approximately 85% of our U.S. admissions revenues. Our revenues attributable to individual distributors may vary significantly from year to year depending upon the commercial success of each distributor's films in any given year.

During the period from 1990 to 2013, the annual number of first-run films released by distributors in the United States ranged from a low of 370 in 1995 to a high of 677 in 2012, according to Motion Picture Association of America 2013 Theatrical Market Statistics and prior reports. The number of digital 3D films released annually increased to a high of 45 in 2013 from a low of 0 during this same time period.


Table of Contents

We continually upgrade the quality of our theatre circuit by adding new screens through new builds (including expansions) and acquisitions, substantial upgrades to seating concepts, expansion of food and beverage offerings, including dine-in theatres, and by disposing of older screens through closures and sales. We are an industry leader in the development and operation of theatres. Typically, our theatres have 12 or more screens and offer amenities to enhance the movie-going experience, such as stadium seating providing unobstructed viewing, digital sound and premium seat design.

As of June 30, 2014, we had 2,248 3D enabled screens, including AMC Prime and ETX 3D enabled screens, and 148 IMAX 3D enabled screens; approximately 48.2% of our screens were 3D enabled screens, including IMAX 3D enabled screens, and approximately 3.0% of our screens were IMAX 3D enabled screens. We are the largest IMAX exhibitor in the world with a 45% market share in the United States and each of our IMAX local installations is protected by geographic exclusivity.

On April 1, 2011, we fully launched AMC Stubs, a customer frequency program, which allows members to earn rewards, including $10 for each $100 spent, redeemable on future purchases at AMC locations. The portion of the admissions and food and beverage revenues attributed to the rewards is deferred as a reduction of admissions and food and beverage revenues and is allocated between admissions and food and beverage revenues based on expected member redemptions. Rewards must be redeemed no later than 90 days from the date of issuance. Upon redemption, deferred rewards are recognized as revenues along with associated cost of goods. Rewards not redeemed within 90 days are forfeited and recognized as admissions or food and beverage revenues. Progress rewards (member expenditures toward earned rewards) for expired memberships are forfeited upon expiration of the membership and recognized as admissions or food and beverage revenues. The program's annual membership fee is deferred, net of estimated refunds, and is recognized ratably over the one-year membership period.

The following tables reflect AMC Stubs activity during the three month period and six month period ended June 30, 2014:

                                                     AMC Stubs Revenue for Three Months
                                                             Ended June 30, 2014
                                                 Other Theatre
                       Deferred                    Revenues                         Food and
                      Membership    Deferred      (Membership       Admissions      Beverage
(In thousands)           Fees        Rewards         Fees)           Revenues       Revenues
Balance, March 31,
2014                 $     12,160   $  16,977
Membership fees
received                    7,457           -   $             -    $           -    $       -
Rewards
accumulated, net
of expirations:
Admissions                      -       5,121                 -           (5,121 )          -
Food and beverage               -       8,435                 -                -       (8,435 )
Rewards redeemed:
Admissions                      -      (4,937 )               -            4,937            -
Food and beverage               -      (7,999 )               -                -        7,999
Amortization of
deferred revenue           (7,010 )         -             7,010                -            -


For the period
ended or balance
as of June 30,
2014                 $     12,607   $  17,597   $         7,010    $        (184 )  $    (436 )


Table of Contents

                                                       AMC Stubs Revenue for Six Months
                                                             Ended June 30, 2014
                                                  Other Theatre
                        Deferred                    Revenues                        Food and
                       Membership    Deferred      (Membership       Admissions     Beverage
(In thousands)            Fees        Rewards         Fees)           Revenues      Revenues
Balance,
December 31, 2013     $     14,258   $  17,117
Membership fees
received                    12,352           -   $             -    $          -    $       -
Rewards
accumulated, net of
expirations:
Admissions                       -       9,137                 -          (9,137 )          -
Food and beverage                -      15,294                 -               -      (15,294 )
Rewards redeemed:
Admissions                       -      (9,460 )               -           9,460            -
Food and beverage                -     (14,491 )               -               -       14,491
Amortization of
deferred revenue           (14,003 )         -            14,003               -            -


For the period
ended or balance as
of June 30, 2014      $     12,607   $  17,597   $        14,003    $        323    $    (803 )

The following table reflects AMC Stubs activity during the three month period and six month period ended June 30, 2013:

                                            AMC Stubs Revenue for Three Months Ended June 30,
                                                                   2013
                                              Other Theatre
                   Deferred                     Revenues                             Food and
                  Membership    Deferred       (Membership         Admissions        Beverage
(In thousands)       Fees        Rewards          Fees)             Revenues         Revenues
Balance,
March 31, 2013   $      9,827   $  13,521
Membership
fees received           6,996           -   $               -     $           -     $        -
Rewards
accumulated,
net of
expirations:
Admissions                  -       3,869                   -            (3,869 )            -
Food and
beverage                    -       9,362                   -                 -         (9,362 )
Rewards
redeemed:
Admissions                  -      (3,469 )                 -             3,469              -
Food and
beverage                    -      (8,384 )                 -                 -          8,384
Amortization
of deferred
revenue                (5,077 )         -               5,077                 -              -


For the period
ended or
balance as of
June 30, 2013    $     11,746   $  14,899   $           5,077     $        (400 )   $     (978 )


Table of Contents

                                             AMC Stubs Revenue for Six Months Ended June 30, 2013
                                              Other Theatre
                   Deferred                     Revenues                                 Food and
                  Membership    Deferred       (Membership           Admissions          Beverage
(In thousands)       Fees        Rewards          Fees)               Revenues           Revenues
Balance,
December 31,
2012             $     10,596   $  15,819
Membership
fees received          12,002           -   $               -     $               -     $         -
Rewards
accumulated,
net of
expirations:
Admissions                  -       4,171                   -                (4,171 )             -
Food and
beverage                    -      15,286                   -                     -         (15,286 )
Rewards
redeemed:
Admissions                  -      (6,259 )                 -                 6,259               -
Food and
beverage                    -     (14,118 )                 -                     -          14,118
Amortization
of deferred
revenue               (10,852 )         -              10,852                     -               -


For the period
ended or
balance as of
June 30, 2013    $     11,746   $  14,899   $          10,852     $           2,088     $    (1,168 )

Significant and Subsequent Events

On January 15, 2014, AMC Entertainment Inc. ("AMCE") launched a cash tender offer and consent solicitation for any and all of its outstanding 8.75% Senior Fixed Rate Notes due 2019 ("Notes due 2019") at a purchase price of $1,038.75 plus a $30.00 consent fee for each $1,000 principal amount of Notes due 2019 validly tendered and accepted by AMCE on or before the consent payment deadline on January 29, 2014 at 5:00 p.m. New York City time (the "Consent Date"). Holders of $463,950,000, or approximately 77.33%, of the Notes due 2019 validly tendered (or defective tender waived by AMCE) and did not withdraw their Notes due 2019 prior to the expiration of the Consent Date. An additional $14,000 of Notes due 2019 was tendered from the Consent Date to the expiration date of the tender offer. The consents received exceeded the amount needed to approve the proposed amendments to the indenture under which the Notes due 2019 were issued. On February 7, 2014, AMCE amended the indenture governing the Notes due 2019 to eliminate substantially all of the restrictive covenants and certain events of default and other related provisions. On February 7, 2014, AMCE accepted for purchase $463,950,000 aggregate principal amount, plus accrued and unpaid interest of the Notes due 2019, at a purchase price of $1,038.75 plus a $30.00 consent fee for each $1,000 principal amount of Notes due 2019 validly tendered (or defective tender waived by AMCE), and, on February 14, 2014, AMCE accepted for purchase the additional $14,000 of Notes due 2019 tendered after the Consent Date, plus accrued and unpaid interest, at a purchase price of $1,038.75 for each $1,000 principal amount of Notes due 2019 validly tendered. On April 22, 2014, AMCE gave notice for redemption of all outstanding Notes due 2019 on a redemption date of June 1, 2014 (the "Redemption Date") at a redemption price of 104.375% of the principal amount together with accrued and unpaid interest to the Redemption Date. The aggregate principal amount of the Notes due 2019 outstanding on April 22, 2014 was $136,036,000. AMCE completed the redemption of all of its outstanding Notes due 2019 on June 2, 2014. We recorded a gain on extinguishment related to the cash tender offer and redemption of the Notes due 2019 of approximately $8,544,000 in other income, partially offset by other expenses of $158,000 during the six months ended June 30, 2014.

On February 7, 2014, AMCE completed an offering of $375,000,000 aggregate principal amount of its Senior Subordinated Notes due 2022 (the "Notes due 2022") in a private offering. The Notes due 2022 mature on February 15, 2022. AMCE will pay interest on the Notes due 2022 at 5.875% per annum, semi-annually in arrears on February 15th and August 15th, commencing on August 15, 2014. AMCE may redeem some or all of the Notes due 2022 at any time on or after February 15, 2017 at 104.406% of the principal amount thereof, declining ratably to 100% of the principal amount thereof


Table of Contents

on or after February 15, 2020, plus accrued and unpaid interest to the redemption date. Prior to February 15, 2017, AMCE may redeem the Notes due 2022 at par plus a make-whole premium. AMCE used the net proceeds from the Notes due 2022 private offering, together with a portion of the net proceeds from the Holdings' IPO, to pay the consideration and consent payments for the tender offer for the Notes due 2019, plus any accrued and unpaid interest and related transaction fees and expenses.

On February 7, 2014, in connection with the issuance of its Senior Subordinated Notes due 2022 (the "Notes due 2022"), AMCE entered into a registration rights agreement. Subject to the terms of the registration rights agreement, AMCE filed a registration statement on April 1, 2014 pursuant to the Securities Act of 1933, as amended, relating to an offer to exchange the original Notes due 2022 for exchange Notes due 2022 registered pursuant to an effective registration statement; the registration statement was declared effective on April 9, 2014, and AMCE commenced the exchange offer. The exchange notes will have terms substantially identical to the original notes except that the exchange notes do not contain terms with respect to transfer restrictions and registration rights and additional interest payable for the failure to consummate the exchange offer within 210 days after the issue date. The exchange offer expired at 5:00 p.m., New York City time, on May 9, 2014, with all original Notes due 2022 exchanged.

On April 25, 2014, Holdings' Board of Directors declared a cash dividend in the amount of $0.20 per share of Class A and Class B common stock, payable on June 16, 2014 to stockholders of record on June 6, 2014. Holdings paid dividends and dividend equivalents of $19,489,000 during the six months ended June 30, 2014 and accrued $87,000 for the remaining unpaid dividends at June 30, 2014.

On July 29, 2014, Holdings' Board of Directors declared a cash dividend in the amount of $0.20 per share of Class A and Class B common stock, payable on September 15, 2014 to stockholders of record on September 5, 2014.


Table of Contents

Operating Results

    The following table sets forth our revenues, operating costs and expenses
attributable to our theatrical exhibition operations.

                      Three Months Ended                      Six Months Ended
                     June 30,    June 30,                  June 30,      June 30,
(In thousands)         2014        2013       % Change       2014          2013        % Change
Revenues
Theatrical
exhibition
Admissions          $  478,667   $ 515,306         -7.1 % $   887,687   $   898,190         -1.2 %
Food and beverage      211,597     219,477         -3.6 %     393,361       387,414          1.5 %
Other theatre           36,309      27,882         30.2 %      68,283        54,863         24.5 %


Total revenues      $  726,573   $ 762,665         -4.7 % $ 1,349,331   $ 1,340,467          0.7 %




Operating Costs
and Expenses
Theatrical
exhibition
Film exhibition
costs               $  257,220   $ 285,395         -9.9 % $   469,320   $   476,719         -1.6 %
Food and beverage
costs                   30,341      30,550         -0.7 %      55,464        53,748          3.2 %
Operating expense      189,283     187,219          1.1 %     368,976       351,429          5.0 %
Rent                   113,861     113,542          0.3 %     228,805       227,348          0.6 %
General and
administrative
expense:
Merger,
acquisition and
transaction costs          572         706        -19.0 %         934         1,653        -43.5 %
Other                   15,149      17,034        -11.1 %      33,369        33,347          0.1 %
Depreciation and
amortization            51,750      50,370          2.7 %     106,527        98,832          7.8 %


Operating costs
and expenses           658,176     684,816         -3.9 %   1,263,395     1,243,076          1.6 %


Operating income        68,397      77,849        -12.1 %      85,936        97,391        -11.8 %
Other expense
(income)
Other income            (4,157 )      (294 )          * %      (8,386 )        (294 )          * %
Interest expense:
. . .
  Add AMC to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for AMC - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.