8-K: Current report filing

INVESTOR RELATIONS:
John Merriwether, 866-248-3872
InvestorRelations@amctheatres.com

MEDIA CONTACTS:
Ryan Noonan, (913) 213-2183
rnoonan@amctheatres.com

"

Q3 Total Revenues of $1.317 billion, up 7.8% from last year (up 9.3% in constant currency)

"

Q3 Net loss of $54.8 million, 45.4% improvement from last year (45.5% improvement in constant currency)

"

Q3 Adjusted EBITDA of $156.5 million, up 9.9% from last year (up 11.4% in constant currency)

"

Q3 Adjusted EBITDA, adjusting 2018 for ASC 842 impact, increased 31.3% (up 33.1% in constant currency)

"

Q3 Total attendance of 87.1 million tickets sold set an all-time high quarterly record

"

Q3 U.S. average ticket price grew 3.3% to $9.45, a 220 basis point industry outperformance (265 basis point industry outperformance, excluding AMC)

"

Q3 U.S. food and beverage revenues per patron grew 4.7% to a third quarter record, $5.35 

Quarter Ended September 30,

Nine Months Ended September 30,

2019

2018

Change

2019

2018

Change

GAAP Results

Revenue

$

1,316.8

$

1,221.4

7.8

%

$

4,023.3

$

4,047.5

(0.6)

%

Net earnings (loss)*

$

(54.8)

$

(100.4)

(45.4)

%

$

(135.6)

$

(60.5)

124.1

%

Net cash provided by operating activities

$

56.6

$

1.7

N/M

$

210.2

$

298.8

(29.7)

%

Non-GAAP Results**

Total revenues (2019 constant currency adjusted)

$

1,335.0

$

1,221.4

9.3

%

$

4,092.2

$

4,047.5

1.1

%

Adjusted EBITDA

$

156.5

$

142.4

9.9

%

$

502.3

$

665.1

(24.5)

%

Adjusted EBITDA (2018 Adjusted for ASC 842)

$

156.5

$

119.2

31.3

%

$

502.3

$

594.8

(15.6)

%

Adjusted free cash flow

$

5.1

$

(31.5)

N/M

$

55.4

$

166.5

(66.7)

%

Adjusted free cash flow (2018 Adjusted for ASC 842)

$

5.1

$

(45.8)

N/M

$

55.4

$

123.2

(55.0)

%

Operating Metrics

Attendance (in thousands)

87,100

82,662

5.4

%

263,880

264,838

(0.4)

%

U.S. markets attendance (in thousands)

61,172

58,935

3.8

%

188,051

190,542

(1.3)

%

International markets attendance (in thousands)

25,928

23,727

9.3

%

75,829

74,296

2.1

%

Average screens

10,662

10,626

0.3

%

10,674

10,699

(0.2)

%

·

Revenue: Third-quarter total revenues were $1.317 billion, increasing 7.8% on a GAAP basis (increasing 9.3% in constant currency) from the year-ago quarter. Results were driven by (i) record setting U.S. and International attendance, up 3.8% and 9.3%, respectively, (ii) strong food and beverage per patron growth, up 3.4% (up 4.7% in constant currency) primarily due to strategic pricing initiatives and (iii) other revenues per patron, which grew 10.7% (grew 12.6% in constant currency) largely from increases in online ticketing fees.

·

Net Loss: Net loss was $54.8 million, improving $45.6 million, or 45.4% on a GAAP basis (improving 45.5% in constant currency) from the year-ago quarter. The decrease in net loss included the impact of the 7.8% increase in total revenues, which helped to drive our operating income higher by $42.7 million along with the reduction in general and administrative expenses and lower depreciation and amortization, partially offset by higher rent expense due primarily to ASC 842.

·

Adjusted EBITDA:  Total Adjusted EBITDA was $156.5 million, up 9.9% from the year-ago quarter (up 11.4% in constant currency). Total Adjusted EBITDA grew 31.3% year-over-year (up 33.1% in constant currency), after adjusting the year-ago quarter for $23.2 million in non-cash accounting impact of ASC 842 for comparability.

·

Cash Flow: Net cash provided by operating activities was $56.6 million, growing $54.9 million compared to the year-ago quarter, and growing $69.2 million after adjusting for the $14.3 million cash flow classification impact of ASC 842 from financing activities to operating activities. Adjusted Free Cash Flow was $5.1 million, growing $36.6 million compared to the year-ago quarter and growing $50.9 million in the year-ago quarter after adjusting for the non-cash accounting impact of ASC 842. The increase in Adjusted Free Cash Flow is primarily related to increases in net cash provided by operating activities and the timing of maintenance capital expenditures.  Our Adjusted Free Cash Flow in the third quarter and cash balance at the end of the third quarter was negatively impacted by the normal seasonal timing of certain working capital items and is expected to correct itself in the fourth quarter. 

·

Industry Performance: In the third quarter of 2019, the U.S. industry box office generated $2.8 billion in admissions sales (up 3.6% year-over-year on a 2.4% increase in attendance). AMC outperformed the U.S. industry on both an attendance per screen and admissions revenue per screen basis by approximately 220 and 450 basis points, respectively, and after excluding AMC from the U.S. industry statistics, that outperformance grew to 270 and 560 basis points, respectively. The third quarter of 2019 marks the sixth consecutive quarter of attendance per screen industry outperformance and the third consecutive quarter of industry box office outperformance. Internationally, the industry box office in countries served by Odeon grew 13.7%, in constant currency. The industry box office across Europe benefited from a more family friendly film slate compared to a year ago.

·

AMC Stubs A-List Program: Since its launch in June 2018, the A-List tier of our successful AMC Stubs loyalty program has attracted more than 900,000 subscribers, far in excess of initial internal expectations of 500,000 subscribers in the first year. During the first quarter of 2019, AMC implemented a 10% membership price increase in ten states and a 20% price increase in five states. Based on an average monthly frequency of 2.40x for our A-List members in the third quarter, their associated full-price bring-along guest attendance, their food and beverage spend and the price increases in the first quarter, we believe the A-List program was profitable in the third quarter and nine-months ended September 30, 2019 compared to our estimated results if the program had not existed. A-List membership levels continue to exceed our expectations despite our price increase and competitive offerings.

·

AMC Theatres On Demand:  On October 15, 2019, the Company became the first U.S. theatrical exhibitor to unveil a digital home streaming service with the launch of AMC Theatres On Demand, with approximately 2,000 movies, including movies from every major studio, available for purchase or rent to AMC Stubs members. In addition, later this fall, AMC Theatres On Demand will also include movies from AMC Networks (NASDAQ: AMCX) in a first-ever cross platform marketing partnership. Movies can be purchased or rented through AMCTheatres.com, the AMC Theatres mobile app, Roku and SmartTVs with more services and devices to be added in the near future. AMC Theatres On Demand is yet another benefit for AMC Stubs members, designed as a low-cost, ancillary service to add convenience and value for the guest, increase loyalty, augment our rich consumer database and generate additional earnings.

·

Circuit Update: As of September 30, 2019, AMC owned, operated, or had interests in 634 theatres in the U.S. and 366 theatres internationally. In the third quarter, the Company added premium recliner seating to nine theatres, including eight in the U.S. and one internationally, bringing the U.S. penetration of theatres offering recliner seating to approximately 78% of addressable theatres, and approximately 9% of addressable European theatres.  Premium large format offerings continue to attract guests by delivering the best sight and sound experience, and the Company added 3 new Dolby screens, 1 new IMAX screen and 1 new Prime at AMC screen

during the quarter. 

·

New Lease Accounting Standard (ASC 842): The Company adopted ASC 842 on January 1, 2019. As previously disclosed, ASC 842 is an accounting change with no impact on AMC’s business or total cash flows. While this new rule introduces certain presentation changes to all three of AMC’s core financial statements, it does not affect day-to-day operations or cash generation. As a result of adopting ASC 842, the key changes are as follows: (i) the Company’s consolidated balance sheet now includes operating lease right-of-use assets and operating lease liabilities of $4.8 billion and $5.4 billion, respectively, at September 30, 2019; (ii) the Company’s income statement for the three months ended September 30, 2019 includes additional rent expense of $28.8 million, a decline in depreciation and amortization of $24.0 million and a decline in interest expense of $6.9 million; and (iii) the Company’s cash flows provided by operating activities for the nine months ended September 30, 2019 is lowered by $42.0 million, offset by an equivalent increase in the Company’s cash flows provided by financing activities.

·

Cash Dividend: The Company paid approximately $20.8 million of dividends in the third quarter of 2019. Since its IPO, AMC has paid $642.8 million in total dividends. Following the dividend declared on October 24, 2019, the Company will have issued a dividend in 23 consecutive quarters beginning in the second quarter of 2014.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Revenues

 Admissions

$

797.3

$

751.4

$

2,424.3

$

2,522.7

 Food and beverage

420.0

384.8

1,281.3

1,236.4

 Other theatre

99.5

85.2

317.7

288.4

   Total revenues

1,316.8

1,221.4

4,023.3

4,047.5

Operating costs and expenses

 Film exhibition costs

416.8

378.8

1,264.6

1,276.7

 Food and beverage costs

67.2

63.6

205.1

202.0

 Operating expense, excluding depreciation and amortization below

419.0

400.5

1,259.2

1,236.9

 Rent

238.7

203.7

726.6

593.1

 General and administrative:

   Merger, acquisition and other costs

4.7

18.1

11.2

27.1

   Other, excluding depreciation and amortization below

37.5

48.4

126.9

135.6

 Depreciation and amortization

112.1

130.2

337.1

398.4

   Operating costs and expenses

1,296.0

1,243.3

3,930.7

3,869.8

Operating income (loss)

20.8

(21.9)

92.6

177.7

Other expense (income):

Other expense (income)

(1.3)

54.1

5.1

57.5

Interest expense:

Corporate borrowings

73.2

64.3

218.7

188.2

Capital and financing lease obligations

1.8

9.4

6.0

29.5

Non-cash NCM exhibitor services agreement

10.1

10.3

30.4

31.2

Equity in earnings of non-consolidated entities

(7.5)

(70.0)

(24.2)

(74.0)

Investment income

(0.5)

(0.7)

(18.7)

(7.4)

       Total other expense

75.8

67.4

217.3

225.0

Loss before income taxes

(55.0)

(89.3)

(124.7)

(47.3)

Income tax provision (benefit)

(0.2)

11.1

10.9

13.2

Net loss

$

(54.8)

$

(100.4)

$

(135.6)

$

(60.5)

 Diluted loss per share

$

(0.53)

$

(0.82)

$

(1.31)

$

(0.48)

Average shares outstanding diluted (in thousands)

103,850

123,126

103,826

126,386

As of

As of

September 30, 2019

December 31, 2018

Cash and cash equivalents

$

100.4

$

313.3

Corporate borrowings

4,731.5

4,723.0

Other long-term liabilities

190.0

963.1

Finance lease liabilities

99.5

560.2

Stockholders' equity

1,183.3

1,397.6

Total assets

13,281.3

9,495.8

Three Months Ended

Nine Months Ended

September 30, 2019

September 30,

Consolidated

2019

2018

2019

2018

Net cash provided by operating activities

$

56.6

$

1.7

$

210.2

$

298.8

Net cash provided by (used in) investing activities

$

(127.1)

$

67.2

$

(348.4)

$

(114.3)

Net cash used in financing activities

$

(18.4)

$

(37.4)

$

(72.9)

$

(155.3)

Adjusted free cash flow

$

5.1

$

(31.5)

$

55.4

$

166.5

Capital expenditures

$

(118.3)

$

(133.8)

$

(348.2)

$

(374.9)

Screen additions

 1

 6

38

46

Screen acquisitions

 —

 8

64

39

Screen dispositions

77

43

181

177

Construction openings (closures), net

(15)

12

(67)

(106)

Average screens

10,662

10,626

10,674

10,699

Number of screens operated

10,945

10,971

10,945

10,971

Number of theatres operated

1,000

1,002

1,000

1,002

Screens per theatre

10.9

10.9

10.9

10.9

Attendance (in thousands)

87,100

82,662

263,880

264,838

Three Months Ended

Nine Months Ended

September 30, 2019

September 30,

2019

2018

2019

2018

Other operating data:

Attendance (patrons, in thousands):

U.S. markets

61,172

58,935

188,051

190,542

International markets

25,928

23,727

75,829

74,296

Consolidated

87,100

82,662

263,880

264,838

Average ticket price (in dollars):

U.S. markets

$

9.45

$

9.15

$

9.43

$

9.65

International markets

$

8.45

$

8.95

$

8.57

$

9.22

Consolidated

$

9.15

$

9.09

$

9.19

$

9.53

Food and beverage revenues per patron (in dollars):

U.S. markets

$

5.35

$

5.11

$

5.40

$

5.15

International markets

$

3.59

$

3.51

$

3.50

$

3.42

Consolidated

$

4.82

$

4.66

$

4.86

$

4.67

Average Screen Count (month end average):

U.S. markets

7,996

7,992

8,001

8,032

International markets

2,666

2,634

2,673

2,667

Consolidated

10,662

10,626

10,674

10,699

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2019

2019

2018

2019

2018

Revenues

U.S. markets

$

970.7

$

895.6

$

2,999.1

$

3,007.1

International markets

346.1

325.8

1,024.2

1,040.4

Consolidated

$

1,316.8

$

1,221.4

$

4,023.3

$

4,047.5

Adjusted EBITDA

U.S. markets

$

116.3

$

105.0

$

395.8

$

535.6

International markets

40.2

37.4

106.5

129.5

Consolidated

$

156.5

$

142.4

$

502.3

$

665.1

Capital Expenditures

U.S. markets

$

84.3

$

92.9

$

243.9

$

264.9

International markets

34.0

40.9

104.3

110.0

Consolidated

$

118.3

$

133.8

$

348.2

$

374.9

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2019

2019

2018

2019

2018

Net loss

$

(54.8)

$

(100.4)

$

(135.6)

$

(60.5)

Plus:

Income tax provision (benefit)

(0.2)

11.1

10.9

13.2

Interest expense

85.1

84.0

255.1

248.9

Depreciation and amortization

112.1

130.2

337.1

398.4

Certain operating expenses (2)

5.3

6.6

10.1

16.2

Equity in earnings of non-consolidated entities (3)

(7.5)

(70.0)

(24.2)

(74.0)

Cash distributions from non-consolidated entities (4)

4.7

3.1

17.0

30.9

Attributable EBITDA (5)

0.9

2.1

3.8

3.7

Investment income

(0.5)

(0.7)

(18.7)

(7.4)

Other expense (income) (6)

(1.5)

54.1

4.6

57.7

Non-cash rent - purchase accounting (7)

6.1

 —

19.5

 —

General and administrative expense—unallocated:

Merger, acquisition and other costs (8)

4.7

18.1

11.2

27.1

Stock-based compensation expense (9)

2.1

4.2

11.5

10.9

Adjusted EBITDA (1)

$

156.5

$

142.4

$

502.3

$

665.1

Rent

$

238.7

$

203.7

$

726.6

$

593.1

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.

·

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)

For the three and nine months ended September 30, 2019, the Company recorded $6.5 million and $21.1 million, respectively, in earnings from DCIP. For the three months ended September 30, 2018, the Company recorded equity in earnings related to its sale of all remaining NCM units of $28.9 million and a gain of $30.1 million related to the Screenvision merger. Equity in earnings of non-consolidated entities also includes loss on the surrender (disposition) of a portion of the Company’s investment in NCM of $1.1 million during the nine months ended September 30, 2018. Equity in earnings of non-consolidated entities for the nine months ended September 30, 2018 includes a lower of carrying value impairment loss on the held-for-sale portion of NCM of $16.0 million.

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.

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2019

2019

2018

2019

2018

Equity in earnings of non-consolidated entities

$

(7.5)

$

(70.0)

$

(24.2)

$

(74.0)

Less:

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

(7.4)

(68.5)

(23.2)

(72.1)

Equity in loss of International theatre JV's

0.1

1.5

1.0

1.9

Income tax provision

0.1

0.1

0.2

0.2

Investment income

(0.1)

(0.1)

(0.6)

(0.3)

Interest expense

 —

 —

0.1

 —

Depreciation and amortization

0.5

0.6

2.8

1.9

Other expense

0.3

 —

0.3

 —

Attributable EBITDA

$

0.9

$

2.1

$

3.8

$

3.7

6)

Other expense (income) for the three months ended September 30, 2019 includes income of $8.5 million due to the increase in fair value of the derivative asset related to the Company’s Convertible Notes due 2024, expense of $5.7 million as a result of the decrease in fair value of its derivative liability, and loss on Pound sterling forward contract of $0.7 million. Other expense for the nine months ended September 30, 2019 includes $16.6 million of fees related to modifications of term loans income and $1.7 million loss on GBP forward contract, partially offset by income of $14.9 million due to the decrease in fair value of the derivative liability related to the Company’s Convertible Notes due 2024. During the three months ended September 30, 2018, the Company recorded expense of $54.1 million as a result of an

increase in fair value of the derivative liability for the Convertible Notes due 2024. Other expense (income) for the three and nine months ended September 30, 2018 includes financing losses and financing related foreign currency transaction losses.

7)

Reflects amortization of certain intangible assets reclassified from depreciation and amortization to rent expense, due to the adoption of ASC 842.  

8)

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

9)

Stock-based compensation expense is non-cash or non-recurring expense included in General and Administrative: Other.

Three Months Ended

Nine Months Ended

September 30, 2019

September 30,

2019

2018

2019

2018

Net cash provided by operating activities

$

56.6

$

1.7

$

210.2

$

298.8

Plus:

Merger, acquisition and other costs(2)

4.7

18.1

11.2

27.1

Less:

Maintenance capital expenditures(3)

32.0

23.5

77.0

59.3

Landlord contributions(5)

24.2

27.8

89.0

100.1

Adjusted free cash flow (1)

$

5.1

$

(31.5)

$

55.4

$

166.5

Reconciliation of Capital Expenditures

Capital expenditures

Growth capital expenditures(4)

$

88.1

$

118.0

$

246.8

$

311.9

Maintenance capital expenditures(3)

32.0

23.5

77.0

59.3

Change in construction payables(6)

(1.8)

(7.7)

24.4

3.7

Total capital expenditures

$

118.3

$

133.8

$

348.2

$

374.9

1)

We present “Adjusted Free Cash Flow” as a supplemental measure of our liquidity.  Management uses this measure and we believe it is helpful to investors as an indication of our ability to generate cash in-excess-of maintenance capital expenditures and certain other non-operating and costs and for other uses including repayment of our corporate borrowings and generating cash for growth opportunities.  Adjusted Free Cash Flow is a non-U.S. GAAP financial measure and is defined as net cash provided by operating activities, plus merger, acquisition and other costs, less maintenance capital expenditures and landlord contributions. Adjusted free cash flow does not represent the residual cash flow available for discretionary expenditures.  It should be considered in addition to, not a substitute for or superior to net cash provided by operating activities. The term adjusted free cash flow may differ from similar measures reported by other companies. Also provided is a reconciliation of Capital Expenditures disclosed in the Consolidated Statement of Cash Flows made up of growth capital expenditures, maintenance capital expenditures and change in construction payables as further explanation of the components of adjusted free cash flow.

2)

Merger, acquisition and other costs are excluded as they are non-operating. 

3)

Maintenance capital expenditures are amounts required to keep our existing theatres in compliance with regulatory requirements and in a sustainable good operating condition, including expenditures for repair of HVAC, sight and sound systems, compliance with ADA requirements and technology upgrades of existing systems.

4)

Growth capital expenditures are investments that enhance the guest experience and grow revenues and profits and include initiatives such as theatre remodels, acquisitions, newly built theatres, premium large formats, enhanced food and beverage offerings and service models and technology that enable efficiencies and additional revenue opportunities. We did not deduct these from adjusted free cash flow because they are discretionary, and the related benefits may not be fully reflected in our net cash provided by operating activities.

5)

Landlord contributions represent reimbursements in our strategic growth initiatives by our landlords. 

6)

Change in construction payables are changes in amounts accrued for capital expenditures and are not deducted or added back to Adjusted Free Cash Flow as they fluctuate significantly from period to period based on the timing of actual payments.