OREANDA-NEWS. AMC Entertainment Holdings, Inc. (“AMC” or “the Company”), one of the world’s leading theatrical exhibition companies and an industry leader in innovation and operational excellence, today reported results for the second quarter ended June 30, 2016.

Highlights for the second quarter 2016 include the following:

  • Total revenues were $764.0 million compared to total revenues of $821.1 million for the three months ended June 30, 2015.
  • Admissions revenues were $481.2 million compared to $533.4 million for the same period a year ago. Average ticket price was $9.63 compared to $9.91 for the same period a year ago.
  • Food and beverage revenues were $243.5 million, compared to $250.5 million for the quarter ended June 30, 2015. Food and beverage revenues per patron increased 4.7% to an all-time high record of $4.87. This quarter marks nine of the last ten quarters AMC has set an all-time high record in food and beverage per patron.
  • Net earnings were $24.0 million and diluted earnings per share (“diluted EPS”) were $0.24 compared to $43.9 million and $0.45, respectively, for the three months ended June 30, 2015.
  • Adjusted diluted earnings per share (1) were$0.24 compared to $0.48 for the three months ended June 30, 2015. Included in adjusted diluted earnings per share for the three months ended June 30, 2016 was approximately $5.5 million of merger and acquisition costs.
  • Adjusted EBITDA(1) was $129.6 million compared to $157.8 million for the three months ended June 30, 2015. Adjusted EBITDA Margin (1) for the second quarter was 17.0% compared to 19.2%, for the same period a year ago.
  • Adjusted Free Cash Flow(1) for the quarter ended June 30, 2016 was $40.8 million compared to $68.8 million for the quarter ended June 30, 2015.

“It would ordinarily be difficult to be pleased with a quarter in which a lackluster film slate caused us to share in the industrywide box office revenue decline that was down domestically some 10.7% per screen year-over-year. However, we are encouraged that this trend has already reversed itself with industry box office revenues up more than 7% as of July 29th, and a potentially record setting film slate being close at hand for calendar year 2017,” said Adam Aron, AMC Chief Executive Officer and President.

Aron added, “However, of far greater importance in our view, things that were within our control tell a much different story for AMC. We made progress at AMC in the second quarter in four significant ways. First, our theatre renovations featuring recliner seats, premium large format auditoriums and a refreshed overall decor continued to lead the industry, enhancing our appeal to consumers. Second, thanks to continuing our innovation of the AMC theatre experience, food and beverage revenues per patron were an all-time record for us. Third, we wholly revamped our already popular AMC Stubs® loyalty program, and tested it in 40 theatres in 6 markets. The test was so successful that we have already rolled out the new program nationally across our entire network. Moviegoers are signing up to enroll in the new AMC Stubs® loyalty program at a rate 2 to 3 times than that for the previous program, and the number of our total active members is already up approximately 20% in just a few short months. We believe membership should continue to increase at a brisk pace, and this augers brightly for AMC's future. And fourth, our executives and staff worked tirelessly to put us in a position to announce in July our acquisition of Odeon & UCI Cinemas in Europe as well as a new merger agreement with Carmike Cinemas here in the United States. When either of these acquisitions close, AMC then becomes overnight the largest movie exhibitor in the world. Taken together, this level of activity and progress is almost breathtaking, enabling AMC to be uniquely positioned to deliver additional value to our guests, associates and shareholders.”

Dividend

On April 27, 2016, the Company declared a regular quarterly dividend of $0.20 per share for the quarter ended March 31, 2016, which was paid on June 20, 2016, to shareholders of record as of June 6, 2016. The total dividends paid in the second quarter of 2016 were approximately $19.7 million.

On July 25, 2016, the Company declared a regular quarterly dividend of $0.20 per share for the quarter ended June 30, 2016, which is payable on September 19, 2016, to shareholders of record on September 6, 2016.

Acquisitions

Odeon & UCI Cinemas Group: As previously announced on July 12, 2016, AMC entered into a definitive agreement to acquire the equity of the largest theatre exhibitor in Europe, London-based Odeon & UCI Cinemas Group from private equity firm, Terra Firma in a transaction valued at approximately ?921 million (including approximately ?14 million of employee incentive costs), comprised of ?500 million for the equity, 75% in cash and 25% in stock consideration, subject to lock-ups, and the assumption of ?407 million of net debt as of March 31, 2016 to be simultaneously refinanced at closing. Assuming the transaction closes December 31, 2016 and a GBP/USD exchange rate of 1.30 the transaction is valued at approximately $1,199 million under UK GAAP. The transaction is expected to produce annual cost synergies of approximately $10 million. The transaction is expected to be completed in the fourth quarter of 2016, subject to antitrust clearance by the European Commission and consultation with the European Works Council.

Carmike Cinemas, Inc. (NASDAQ: CKEC): As previously announced on July 25, 2016, AMC has entered into an amended and restated merger agreement to acquire all of the outstanding shares of Carmike Cinemas, Inc. (NASDAQ: CKEC) (“Carmike”) for $33.06 per share, representing an approximate 32% premium to Carmike’s March 3, 2016, closing stock price. The revised offer provides an additional $3.06 per share or 10.2% more than the previous offer. Carmike stockholders can elect to receive $33.06 in cash or 1.0819 AMC shares per Carmike share, subject to a customary proration mechanism to achieve an aggregate consideration mix of 70% cash and 30% in shares of AMC stock. The transaction is valued at approximately $1.2 billion, including the assumption of Carmike’s net indebtedness, based on the closing trading price of AMC’s common stock on the New York Stock Exchange on July 22, 2016.

About AMC Entertainment Holdings, Inc.

AMC (NYSE:AMC) is the guest experience leader with 386 locations and 5,334 screens located primarily in the United States. AMC has propelled innovation in the theatrical exhibition industry and continues today by delivering more comfort and convenience, enhanced food & beverage, greater engagement and loyalty, premium sight & sound, and targeted programming. AMC operates the most productive theatres in the country’s top markets, including No. 1 market share in the top three markets (NY, LA, Chicago).

                           
AMC Entertainment Holdings, Inc.
Consolidated Statements of Operations
For the Fiscal Periods Ended 6/30/16 and 6/30/15

(dollars in thousands, except per share data)
(unaudited)
                           
        3 Months Ended     6 Months Ended
        June 30,     June 30,
                           
        2016     2015     2016     2015
Revenues                          
Admissions       $ 481,234       $ 533,382       $ 963,808       $ 952,076  
Food and beverage         243,546         250,516         487,698         451,040  
Other theatre         39,182         37,181         78,473         71,087  
                           
Total revenues         763,962         821,079         1,529,979         1,474,203  
                           
Operating costs and expenses                          
Film exhibition costs         262,940         295,416         525,294         518,504  
Food and beverage costs         34,100         35,807         68,065         64,315  
Operating expense         200,026         205,414         402,339         392,672  
Rent         122,819         115,022         247,403         232,943  
General and administrative:                          
Merger, acquisition and transaction costs         5,548         261         10,152         1,839  
Other         20,634         17,737         39,150         22,678  
Depreciation and amortization         62,291         57,249         122,721         115,026  
                           
Operating costs and expenses         708,358         726,906         1,415,124         1,347,977  
                           
Operating income         55,604         94,173         114,855         126,226  
Other expense (income):                          
Other expense         (110 )       9,273         (84 )       9,273  
Interest expense:                          
Corporate borrowings         24,888         24,717         49,755         50,796  
Capital and financing lease obligations         2,147         2,331         4,342         4,704  
Equity in earnings of non-consolidated entities         (11,849 )       (9,362 )       (16,113 )       (10,686 )
Investment (income) loss         176         (59 )       (9,778 )       (5,202 )
                           
Total other expense         15,252         26,900         28,122         48,885  
                           
Earnings before income taxes         40,352         67,273         86,733         77,341  
Income tax provision         16,385         23,350         34,475         27,280  
                           
Net Earnings       $ 23,967       $ 43,923       $ 52,258       $ 50,061  
                           
Diluted earnings per share       $ 0.24       $ 0.45       $ 0.53       $ 0.51  
                           
Adjusted diluted earnings per share (1)       $ 0.24       $ 0.48       $ 0.51       $ 0.43  
                           
Average shares outstanding diluted         98,304         98,037         98,237         97,987  
                           
               
Balance Sheet Data (at period end):
(dollars in thousands)

(unaudited)
       

As of

    

As of
        June 30,     December 31,
        2016     2015
Cash and equivalents       $ 93,316     $ 211,250
Corporate borrowings         1,834,970       1,912,793
Other long-term liabilities         492,393       462,626
Capital and financing lease obligations         97,665       101,864
Stockholders' equity         1,552,846       1,538,703
Total assets         4,948,541       5,088,317
               
                           
Other Data:
(in thousands, except operating data)
(unaudited)
        3 Months Ended     6 Months Ended
        June 30,     June 30,
                           
        2016     2015     2016     2015
Net cash provided by operating activities       111,077       171,352       133,948       192,915  
Capital expenditures       (82,668 )     (74,167 )     (140,325 )     (143,757 )
Screen additions       -       12       12       12  
Screen acquisitions       11       32       11       40  
Screen dispositions       -       -       38       -  
Construction openings (closures), net       (57 )     28       (77 )     32  
Average screens-continuing operations       5,282       4,943       5,298       4,914  
Number of screens operated       5,334       5,031       5,334       5,031  
Number of theatres operated       386       350       386       350  
Screens per theatre       13.8       14.4       13.8       14.4  
Attendance (in thousands)       49,996       53,818       101,241       98,576  
                                   
 
Reconciliation of Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share:
(dollars in thousands, except per share data)
(unaudited)
        3 Months Ended     6 Months Ended
        June 30,     June 30,
        2016     2015     2016     2015
                           
Net Earnings:       $ 23,967     $ 43,923       $ 52,258       $ 50,061  

Net periodic benefit credit related to the termination of post-retirement plan

         -       -         -         (18,118 )
Loss on redemption of 9.75% Senior         -       9,273         -         9,273  
Subordinated Notes due 2020                          
Gain on sale Real D         -       -         (3,008 )       -  
Discrete tax benefit recorded in income tax provision         -       (2,900 )             (2,900 )

Income tax effects of pre-tax adjustments above

         -       (3,616 )       1,173         3,450  

Net Earnings, excluding benefit related to termination of post-retirement plan, loss on redemption of Notes due 2020, gain on sale of RealD, discrete tax benefit, and related tax effects of adjustments

       $ 23,967     $ 46,680       $ 50,423       $ 41,766  
                           
Average shares outstanding, diluted         98,304       98,037         98,237         97,987  
                           
Adjusted diluted earnings per share (1)       $ 0.24     $ 0.48       $ 0.51       $ 0.43  
Diluted Earnings per share       $ 0.24     $ 0.45       $ 0.53       $ 0.51  
                           
                           
Reconciliation of Adjusted EBITDA:
(dollars in thousands)
(unaudited)
        3 Months Ended     6 Months Ended
        June 30,     June 30,
                           
        2016     2015     2016     2015
Net Earnings       $ 23,967       $ 43,923       $ 52,258       $ 50,061  
Plus:                          
Income tax provision         16,385         23,350         34,475         27,280  
Interest expense         27,035         27,048         54,097         55,500  
Depreciation and amortization         62,291         57,249         122,721         115,026  
Certain operating expenses (3)         3,838         3,350         7,240         7,414  
Equity in earnings of non-consolidated entities         (11,849 )       (9,362 )       (16,113 )       (10,686 )
Cash distributions from non-consolidated entities         590         1,285         18,271         15,771  
Investment (income) loss         176         (59 )       (9,778 )       (5,202 )
Other expense (4)         (110 )       9,273         (84 )       9,273  
General and administrative expense-unallocated:                          
Merger, acquisition and transaction costs         5,548         261         10,152         1,839  
Stock-based compensation expense (5)         1,717         1,439         2,804         7,178  
Adjusted EBITDA (2)       $ 129,588       $ 157,757       $ 276,043       $ 273,454  
Adjusted EBITDA Margin (6)         17.0 %       19.2 %       18.0 %       18.5 %
                           
                 
Reconciliation of Adjusted Free Cash Flow:
(dollars in thousands)
(unaudited)
        3 Months Ended     6 Months Ended
        June 30,     June 30,
                           
        2016     2015     2016     2015
Net Earnings       $ 23,967       $ 43,923       $ 52,258       $ 50,061  
Plus:                                          
Income tax provision         16,385         23,350         34,475         27,280  
Interest expense         27,035         27,048         54,097         55,500  
Depreciation and amortization         62,291         57,249         122,721         115,026  
Certain operating expenses (3)         3,838         3,350         7,240         7,414  
Equity in earnings of non-consolidated entities         (11,849 )       (9,362 )       (16,113 )       (10,686 )
Cash distributions from non-consolidated entities         590         1,285         18,271         15,771  
Investment (income) loss         176         (59 )       (9,778 )       (5,202 )
Other expense (4)         (110 )       9,273         (84 )       9,273  
General and administrative expense-unallocated:         -         -         -         -  
Merger, acquisition and transaction costs         5,548         261         10,152         1,839  
Stock-based compensation expense (5)         1,717         1,439         2,804         7,178  
Minus:                                          

Cash distributions from non-consolidated entities

         590         1,285         18,271         15,771  
Income taxes paid, net of refunds         3,284         (1,635 )       4,090         (1,130 )
Cash interest expense         25,569         27,394         51,383         56,718  

Capital expenditures (excluding change in construction payables)

         82,569         70,823         128,680         130,207  
Landlord contributions         (27,537 )       (12,726 )       (47,846 )       (23,717 )
Principal payments under Term Loan         2,201         1,937         4,403         3,875  

Principal payments under capital and financing lease obligations

         2,123         1,940         4,199         3,826  
Adjusted Free Cash Flow (7)       $ 40,789       $ 68,739       $ 112,863       $ 87,904  
                                           
(1)     Adjusted diluted earnings per share is diluted earnings per share excluding a non-recurring postretirement net periodic benefit credit in the prior year, a loss on redemption of our 9.75% Senior Subordinated Notes due 2020 in the prior year quarter and year, a gain on sale of our investments in Real D during the current year, a discrete tax benefit recorded in income tax provision during the prior year quarter and year and the related tax effects of those adjustments. We have included adjusted diluted earnings per share because we believe it provides investors with additional useful information on our performance and is used by management to assess our performance. We have calculated the tax effects of the pre-tax adjustments described above using our effective Federal and State income tax rate for current and deferred income taxes which is reflective of our estimated annual GAAP income tax rate forecast adjusted to account for items excluded from GAAP income. Adjusted diluted earnings per share is a non-GAAP financial measure and should not be used as an alternative to diluted earnings per share, and may not be comparable to similarly titled measures reported by other companies.
 
(2)    

We present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as net earnings plus (i) income tax provision, (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 any cash distributions of earnings from our 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-GAAP financial measure and should not be construed as an alternative to net earnings as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (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, estimate our value and evaluate our ability to service debt.
 
      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; and
       

•

   does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future.
 
(3)     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. We have 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.
 
(4)    

Other expense for the prior year quarter and prior year related to the cash tender offer and redemption of the 9.75% Senior Subordinated Notes due 2020. We exclude other expense and income related to financing activities as the amounts are similar to interest expense or income and are non-operating in nature.
 
(5)     Non-cash expense included in General and Administrative: Other
 
(6)    

We define Adjusted EBITDA Margin as Adjusted EBITDA divided by Total Revenues.
 
(7)    

We use Adjusted Free Cash Flow as a performance measure in our internal evaluation of operating effectiveness and in making decisions regarding the allocation of resources. Adjusted Free Cash Flow is a non-GAAP financial measure and should not be construed as an alternative to net earnings as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with U.S. GAAP). We define Adjusted Free Cash Flow as Adjusted EBITDA minus the sum of cash distributions from non-consolidated entities, cash taxes, cash interest, capital expenditures (excluding change in construction payables) net of landlord contributions, mandatory payments of principal under any credit facility and payments under capital lease obligations and financing lease obligations as further described in the table below. We make adjustments to Adjusted EBITDA for certain cash requirements to determine amounts available for general capital purposes from our operations. Adjusted Free Cash Flow may not be comparable to similarly titled measures reported by other companies or other similar measures of cash flow. We have included Adjusted Free Cash Flow as we believe it provides a useful measure of funds available for general capital purposes from our operations, and because it is used by management to evaluate the performance of our Company.
               
        3 Months Ended     6 Months Ended
        June 30,     June 30,
        2016     2015     2016     2015
Adjusted EBITDA       $ 129,588       $ 157,757       $ 276,043       $ 273,454  
Minus:                                          

Cash distributions from non-consolidated entities

         590         1,285         18,271         15,771  
Income taxes paid, net of refunds         3,284         (1,635 )       4,090         (1,130 )
Cash interest expense         25,569         27,394         51,383         56,718  

Capital expenditures (excluding change in construction payables)

         82,569         70,823         128,680         130,207  
Landlord contributions         (27,537 )       (12,726 )       (47,846 )       (23,717 )
Principal payments under Term Loan         2,201         1,937         4,403         3,875  

Principal payments under capital and financing lease obligations

         2,123         1,940         4,199         3,826  
Adjusted Free Cash Flow       $ 40,789       $ 68,739       $ 112,863       $ 87,904