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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) | ||
ý |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended September 30, 2015 |
||
OR |
||
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from to |
Commission file number 001-33892
AMC ENTERTAINMENT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
26-0303916 (I.R.S. Employer Identification No.) |
|
One AMC Way 11500 Ash Street, Leawood, KS (Address of principal executive offices) |
66211 (Zip Code) |
Registrant's telephone number, including area code: (913) 213-2000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer ý | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Title of each class of common stock | Number of shares outstanding as of October 16, 2015 |
|
---|---|---|
Class A common stock Class B common stock |
21,575,532 75,826,927 |
AMC ENTERTAINMENT HOLDINGS, INC.
Item 1. Financial Statements. (Unaudited)
AMC ENTERTAINMENT HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
|
(unaudited) |
(unaudited) |
|||||||||||
Revenues |
|||||||||||||
Admissions |
$ | 441,262 | $ | 417,448 | $ | 1,393,338 | $ | 1,305,135 | |||||
Food and beverage |
216,764 | 189,065 | 667,804 | 582,426 | |||||||||
Other theatre |
30,814 | 27,391 | 101,901 | 95,674 | |||||||||
| | | | | | | | | | | | | |
Total revenues |
688,840 | 633,904 | 2,163,043 | 1,983,235 | |||||||||
| | | | | | | | | | | | | |
Operating costs and expenses |
|||||||||||||
Film exhibition costs |
233,390 | 220,608 | 751,894 | 689,928 | |||||||||
Food and beverage costs |
31,080 | 27,209 | 95,395 | 82,673 | |||||||||
Operating expense |
195,505 | 177,949 | 588,177 | 546,925 | |||||||||
Rent |
115,861 | 112,258 | 348,804 | 341,063 | |||||||||
General and administrative: |
|||||||||||||
Merger, acquisition and transaction costs |
751 | 78 | 2,590 | 1,012 | |||||||||
Other |
18,706 | 12,961 | 41,384 | 46,330 | |||||||||
Depreciation and amortization |
58,008 | 54,327 | 173,034 | 160,854 | |||||||||
| | | | | | | | | | | | | |
Operating costs and expenses |
653,301 | 605,390 | 2,001,278 | 1,868,785 | |||||||||
| | | | | | | | | | | | | |
Operating income |
35,539 | 28,514 | 161,765 | 114,450 | |||||||||
Other expense (income) |
|||||||||||||
Other expense (income) |
| (11 | ) | 9,273 | (8,397 | ) | |||||||
Interest expense: |
|||||||||||||
Corporate borrowings |
22,682 | 26,897 | 73,478 | 84,544 | |||||||||
Capital and financing lease obligations |
2,286 | 2,448 | 6,990 | 7,459 | |||||||||
Equity in earnings of non-consolidated entities |
(10,850 | ) | (13,087 | ) | (21,536 | ) | (17,300 | ) | |||||
Investment expense (income) |
163 | 181 | (5,039 | ) | (7,504 | ) | |||||||
| | | | | | | | | | | | | |
Total other expense |
14,281 | 16,428 | 63,166 | 58,802 | |||||||||
| | | | | | | | | | | | | |
Earnings from continuing operations before income taxes |
21,258 | 12,086 | 98,599 | 55,648 | |||||||||
Income tax provision |
9,080 | 4,710 | 36,360 | 21,700 | |||||||||
| | | | | | | | | | | | | |
Earnings from continuing operations |
12,178 | 7,376 | 62,239 | 33,948 | |||||||||
Gain from discontinued operations, net of income taxes |
| | | 313 | |||||||||
| | | | | | | | | | | | | |
Net earnings |
$ | 12,178 | $ | 7,376 | $ | 62,239 | $ | 34,261 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Basic earnings per share: |
|||||||||||||
Earnings from continuing operations |
$ | 0.12 | $ | 0.08 | $ | 0.64 | $ | 0.35 | |||||
Earnings from discontinued operations |
| | | | |||||||||
| | | | | | | | | | | | | |
Basic earnings per share |
$ | 0.12 | $ | 0.08 | $ | 0.64 | $ | 0.35 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Average shares outstanding-Basic |
97,978 | 97,506 | 97,959 | 97,506 | |||||||||
Diluted earnings per share: |
|||||||||||||
Earnings from continuing operations |
$ | 0.12 | $ | 0.08 | $ | 0.63 | $ | 0.35 | |||||
Earnings from discontinued operations |
| | | | |||||||||
| | | | | | | | | | | | | |
Diluted earnings per share |
$ | 0.12 | $ | 0.08 | $ | 0.63 | $ | 0.35 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Average shares outstanding-Diluted |
98,073 | 97,628 | 98,024 | 97,628 | |||||||||
Dividends declared per basic and diluted common share |
$ | 0.20 | $ | 0.20 | $ | 0.60 | $ | 0.40 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
See Notes to Consolidated Financial Statements.
1
AMC ENTERTAINMENT HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
|
(unaudited) |
(unaudited) |
|||||||||||
Net earnings |
$ | 12,178 | $ | 7,376 | $ | 62,239 | $ | 34,261 | |||||
Unrealized foreign currency translation adjustment, net of tax |
700 | 1,090 | 981 | 657 | |||||||||
Pension and other benefit adjustments: |
|||||||||||||
Net loss arising during the period, net of tax |
| | (45 | ) | | ||||||||
Prior service credit arising during the period, net of tax |
| | 746 | | |||||||||
Amortization of net (gain) loss reclassified into general and administrative: other, net of tax |
7 | (211 | ) | (1,686 | ) | (632 | ) | ||||||
Amortization of prior service credit reclassified into general and administrative: other, net of tax |
| (254 | ) | (1,762 | ) | (762 | ) | ||||||
Curtailment gain reclassified into general and administrative: other, net of tax |
| | (7,239 | ) | | ||||||||
Settlement gain reclassified into general and administrative: other, net of tax |
| | (175 | ) | | ||||||||
Marketable securities: |
|||||||||||||
Unrealized net holding gain (loss) arising during the period, net of tax |
(2,311 | ) | (2,597 | ) | (1,868 | ) | 762 | ||||||
Realized net gain reclassified into investment expense (income), net of tax |
(5 | ) | (10 | ) | (154 | ) | (25 | ) | |||||
Equity method investees' cash flow hedge: |
|||||||||||||
Unrealized net holding gain (loss) arising during the period, net of tax |
(465 | ) | 408 | (847 | ) | 136 | |||||||
Realized net loss reclassified into equity in earnings of non-consolidated entities, net of tax |
112 | 134 | 351 | 397 | |||||||||
| | | | | | | | | | | | | |
Other comprehensive income (loss) |
(1,962 | ) | (1,440 | ) | (11,698 | ) | 533 | ||||||
| | | | | | | | | | | | | |
Total comprehensive income |
$ | 10,216 | $ | 5,936 | $ | 50,541 | $ | 34,794 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
See Notes to Consolidated Financial Statements.
2
AMC ENTERTAINMENT HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|
September 30, 2015 | December 31, 2014 | |||||
---|---|---|---|---|---|---|---|
|
(unaudited) |
|
|||||
ASSETS |
|||||||
Current assets: |
|||||||
Cash and equivalents |
$ | 97,939 | $ | 218,206 | |||
Receivables, net |
56,794 | 99,252 | |||||
Deferred tax asset |
108,858 | 107,938 | |||||
Other current assets |
84,400 | 84,343 | |||||
| | | | | | | |
Total current assets |
347,991 | 509,739 | |||||
Property, net |
1,313,526 | 1,247,230 | |||||
Intangible assets, net |
219,017 | 225,515 | |||||
Goodwill |
2,289,800 | 2,289,800 | |||||
Deferred tax asset |
62,953 | 73,844 | |||||
Other long-term assets |
433,873 | 417,604 | |||||
| | | | | | | |
Total assets |
$ | 4,667,160 | $ | 4,763,732 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ | 212,195 | $ | 262,635 | |||
Accrued expenses and other liabilities |
160,337 | 136,262 | |||||
Deferred revenues and income |
167,938 | 213,882 | |||||
Current maturities of corporate borrowings and capital and financing lease obligations |
17,803 | 23,598 | |||||
| | | | | | | |
Total current liabilities |
558,273 | 636,377 | |||||
Corporate borrowings |
1,746,996 | 1,775,132 | |||||
Capital and financing lease obligations |
95,489 | 101,533 | |||||
Exhibitor services agreement |
312,160 | 316,815 | |||||
Other long-term liabilities |
438,944 | 419,717 | |||||
| | | | | | | |
Total liabilities |
3,151,862 | 3,249,574 | |||||
| | | | | | | |
Commitments and contingencies |
|||||||
Class A common stock (temporary equity) ($.01 par value, 167,211 shares issued and 130,442 shares outstanding as of September 30, 2015; 173,150 shares issued and 136,381 shares outstanding as of December 31, 2014) |
1,364 | 1,426 | |||||
| | | | | | | |
Stockholders' equity: |
|||||||
Class A common stock ($.01 par value, 524,173,073 shares authorized; 21,445,090 shares issued and outstanding as of September 30, 2015; 21,423,839 shares issued and outstanding as of December 31, 2014) |
214 | 214 | |||||
Class B common stock ($.01 par value, 75,826,927 shares authorized; 75,826,927 shares issued and outstanding as of September 30, 2015 and December 31, 2014) |
758 | 758 | |||||
Additional paid-in capital |
1,182,070 | 1,172,515 | |||||
Treasury stock (36,769 shares as of September 30, 2015 and December 31, 2014, at cost) |
(680 | ) | (680 | ) | |||
Accumulated other comprehensive income |
1,146 | 12,844 | |||||
Accumulated earnings |
330,426 | 327,081 | |||||
| | | | | | | |
Total stockholders' equity |
1,513,934 | 1,512,732 | |||||
| | | | | | | |
Total liabilities and stockholders' equity |
$ | 4,667,160 | $ | 4,763,732 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
See Notes to Consolidated Financial Statements.
3
AMC ENTERTAINMENT HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
Nine Months Ended | ||||||
---|---|---|---|---|---|---|---|
|
September 30, 2015 |
September 30, 2014 |
|||||
|
(unaudited) |
||||||
Cash flows from operating activities: |
|||||||
Net earnings |
$ | 62,239 | $ | 34,261 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|||||||
Depreciation and amortization |
173,034 | 160,854 | |||||
Gain on extinguishment of debt |
| (8,544 | ) | ||||
Amortization of net discount (premium) on corporate borrowings |
674 | (790 | ) | ||||
Deferred income taxes |
17,671 | 19,665 | |||||
Theatre and other closure expense |
3,911 | 8,224 | |||||
Loss (gain) on dispositions |
281 | (400 | ) | ||||
Stock-based compensation |
9,377 | 6,072 | |||||
Equity in earnings and losses from non-consolidated entities, net of distributions |
(2,561 | ) | (1,587 | ) | |||
Landlord contributions |
43,224 | 45,188 | |||||
Deferred rent |
(18,272 | ) | (13,146 | ) | |||
Net periodic benefit credit |
(18,089 | ) | (2,564 | ) | |||
Change in assets and liabilities: |
|||||||
Receivables |
52,532 | 61,609 | |||||
Other assets |
205 | 54 | |||||
Accounts payable |
(69,844 | ) | (91,265 | ) | |||
Accrued expenses and other liabilities |
(42,277 | ) | (98,285 | ) | |||
Other, net |
(2,880 | ) | (756 | ) | |||
| | | | | | | |
Net cash provided by operating activities |
209,225 | 118,590 | |||||
| | | | | | | |
Cash flows from investing activities: |
|||||||
Capital expenditures |
(215,574 | ) | (182,968 | ) | |||
Investments in non-consolidated entities |
(958 | ) | (1,471 | ) | |||
Proceeds from the disposition of long-term assets |
604 | 9 | |||||
Other, net |
(1,158 | ) | 939 | ||||
| | | | | | | |
Net cash used in investing activities |
(217,086 | ) | (183,491 | ) | |||
| | | | | | | |
Cash flows from financing activities: |
|||||||
Proceeds from issuance of Senior Subordinated Notes due 2025 |
600,000 | | |||||
Proceeds from issuance of Senior Subordinated Notes due 2022 |
| 375,000 | |||||
Repurchase of Senior Subordinated Notes due 2020 |
(626,114 | ) | | ||||
Repurchase of Senior Notes due 2019 |
| (639,728 | ) | ||||
Payment of initial public offering costs |
| (281 | ) | ||||
Cash used to pay dividends |
(59,012 | ) | (39,003 | ) | |||
Purchase of treasury stock |
| (92 | ) | ||||
Deferred financing costs |
(11,978 | ) | (7,952 | ) | |||
Principal payments under capital and financing lease obligations |
(5,811 | ) | (5,144 | ) | |||
Principal payments under Term Loan |
(5,813 | ) | (5,813 | ) | |||
Principal amount of coupon payment under Senior Subordinated Notes due 2020 |
(3,357 | ) | (3,052 | ) | |||
| | | | | | | |
Net cash used in financing activities |
(112,085 | ) | (326,065 | ) | |||
Effect of exchange rate changes on cash and equivalents |
(321 | ) | 18 | ||||
| | | | | | | |
Net decrease in cash and equivalents |
(120,267 | ) | (390,948 | ) | |||
Cash and equivalents at beginning of period |
218,206 | 546,454 | |||||
| | | | | | | |
Cash and equivalents at end of period |
$ | 97,939 | $ | 155,506 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|||||||
Cash paid during the period for: |
|||||||
Interest (net of amounts capitalized of $122 and $231) |
$ | 76,301 | $ | 77,655 | |||
Income taxes paid (refunded), net |
(1,028 | ) | 1,890 | ||||
Schedule of non-cash investing and financing activities: |
|||||||
Investment in NCM (See Note 2Investments) |
$ | 6,812 | $ | 2,137 |
See Notes to Consolidated Financial Statements.
4
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(Unaudited)
NOTE 1BASIS OF PRESENTATION
AMC Entertainment Holdings, Inc. ("Holdings"), through its direct and indirect subsidiaries, including AMC Entertainment Inc. ("AMCE"), American Multi-Cinema, Inc. and its subsidiaries, (collectively with Holdings, unless the context otherwise requires, the "Company" or "AMC"), is principally involved in the theatrical exhibition business and owns, operates or has interests in theatres primarily located in the United States. Holdings is an indirect subsidiary of Dalian Wanda Group Co., Ltd. ("Wanda"), a Chinese private conglomerate.
As of September 30, 2015, Wanda owned approximately 77.85% of Holdings' outstanding common stock and 91.34% of the combined voting power of Holdings' outstanding common stock and has the power to control Holdings' affairs and policies, including with respect to the election of directors (and, through the election of directors, the appointment of management), entering into mergers, sales of substantially all of the Company's assets and other extraordinary transactions.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to: (1) Impairments, (2) Film exhibition costs, (3) Income and operating taxes, (4) Theatre and other closure expense, and (5) Gift card and packaged ticket income. Actual results could differ from those estimates.
Principles of Consolidation: The accompanying consolidated balance sheet as of December 31, 2014, which was derived from audited financial statements, and the unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the Company's financial position and results of operations. All significant intercompany balances and transactions have been eliminated in consolidation. There are no noncontrolling (minority) interests in the Company's consolidated subsidiaries; consequently, all of its stockholders' equity, net earnings and total comprehensive income for the periods presented are attributable to controlling interests. Due to the seasonal nature of the Company's business, results for the nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the twelve months ending December 31, 2015. The Company manages its business under one reportable segment called Theatrical Exhibition.
5
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 1BASIS OF PRESENTATION (Continued)
Other Expense (Income): The following table sets forth the components of other expense (income):
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Loss on redemption of 9.75% Senior Subordinated Notes due 2020 |
$ | | $ | | $ | 9,273 | $ | | |||||
Gain on redemption of 8.75% Senior Notes due 2019 |
| | | (8,386 | ) | ||||||||
Other income |
| (11 | ) | | (11 | ) | |||||||
| | | | | | | | | | | | | |
Other expense (income) |
$ | | $ | (11 | ) | $ | 9,273 | $ | (8,397 | ) | |||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Presentation: In the Consolidated Statements of Cash Flows, certain line items within operating activities have been presented separately from the "other, net" line item in the current year presentation, with conforming reclassifications made for the prior period presentation.
NOTE 2INVESTMENTS
Investments in non-consolidated affiliates and certain other investments accounted for under the equity method generally include all entities in which the Company or its subsidiaries have significant influence, but not more than 50% voting control, and are recorded in the Consolidated Balance Sheets in other long-term assets. Investments in non-consolidated affiliates as of September 30, 2015, include interests in National CineMedia, LLC ("NCM" or "NCM LLC") of 15.04%, Digital Cinema Implementation Partners, LLC ("DCIP") of 29%, Open Road Releasing, LLC, operator of Open Road Films, LLC ("Open Road Films") of 50%, and AC JV, LLC ("AC JV"), owner of Fathom Events of 32%. The Company also has partnership interests in two U.S. motion picture theatres and one IMAX screen of 50% ("Theatre Partnerships"). Indebtedness held by equity method investees is non-recourse to the Company.
Amounts payable to Theatre Partnerships were $2,628,000 and $6,194,000 as of September 30, 2015 and December 31, 2014, respectively.
RealD Inc. Common Stock. The Company holds an investment in RealD Inc. common stock, which is accounted for as an equity security, available for sale, and is recorded in the Consolidated Balance Sheets in other long-term assets at fair value (Level 1).
6
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 2INVESTMENTS (Continued)
Equity in Earnings (Losses) of Non-Consolidated Entities
Aggregated condensed financial information of the Company's significant non-consolidated equity method investments is shown below:
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Revenues |
$ | 154,838 | $ | 142,400 | $ | 433,831 | $ | 398,584 | |||||
Operating costs and expenses |
99,850 | 97,641 | 341,178 | 305,632 | |||||||||
| | | | | | | | | | | | | |
Net earnings |
$ | 54,988 | $ | 44,759 | $ | 92,653 | $ | 92,952 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The components of the Company's recorded equity in earnings (losses) of non-consolidated entities are as follows:
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
National CineMedia, LLC |
$ | 4,431 | $ | 3,249 | $ | 3,360 | $ | 5,258 | |||||
Digital Cinema Implementation Partners, LLC |
6,253 | 5,537 | 16,844 | 15,082 | |||||||||
Open Road Releasing, LLC |
| 3,630 | (430 | ) | (4,450 | ) | |||||||
AC JV, LLC |
(243 | ) | 321 | 983 | 959 | ||||||||
Other |
409 | 350 | 779 | 451 | |||||||||
| | | | | | | | | | | | | |
The Company's recorded equity in earnings |
$ | 10,850 | $ | 13,087 | $ | 21,536 | $ | 17,300 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
NCM Transactions. As of September 30, 2015, the Company owns 19,663,664 common membership units, or a 15.04% interest, in NCM. The estimated fair value of the units in NCM was approximately $263,886,000, based on the publically quoted price per share of NCM, Inc. on September 30, 2015 of $13.42 per share. See Note 10Commitments and Contingencies for information regarding the termination of the Screenvision, LLC merger agreement and the expenses associated with the termination.
The Company recorded the following related party transactions with NCM:
(In thousands)
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
Due from NCM for on-screen advertising revenue |
$ | 1,513 | $ | 2,072 | |||
Due to NCM for Exhibitor Services Agreement |
856 | 1,784 | |||||
Promissory note payable to NCM |
6,944 | 6,944 |
7
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 2INVESTMENTS (Continued)
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
NCM screen advertising revenues, net of screen integration fee |
$ | 8,756 | $ | 8,482 | $ | 26,727 | $ | 25,854 | |||||
NCM beverage advertising expense |
1,321 | 2,887 | 6,836 | 9,077 |
The Company recorded the following changes in the carrying amount of its investment in NCM and equity in earnings of NCM during the nine months ended September 30, 2015:
(In thousands)
|
Investment in NCM(1) |
Exhibitor Services Agreement(2) |
Other Comprehensive (Income) |
Cash Received |
Equity in (Earnings) |
Advertising (Revenue) |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Ending balance December 31, 2014 |
$ | 265,839 | $ | (316,815 | ) | $ | (3,780 | ) | |||||||||||
Receipt of common units(3) |
6,812 | (6,812 | ) | | |||||||||||||||
Receipt of excess cash distributions |
(15,953 | ) | | | $ | 15,953 | $ | | $ | | |||||||||
Amortization of deferred revenue |
| 11,467 | | | | (11,467 | ) | ||||||||||||
Unrealized gain from cash flow hedge |
234 | | (234 | ) | | | | ||||||||||||
Equity in earnings and loss from amortization of basis difference(4)(5) |
3,360 | | | | (3,360 | ) | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
For the period ended or balance as of September 30, 2015 |
$ | 260,292 | $ | (312,160 | ) | $ | (4,014 | ) | $ | 15,953 | $ | (3,360 | ) | $ | (11,467 | ) | |||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
8
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 2INVESTMENTS (Continued)
During the nine months ended September 30, 2015 and the nine months ended September 30, 2014, the Company received payments of $5,352,000 and $8,045,000, respectively, related to the NCM tax receivable agreement. The receipts are recorded in investment expense (income), net of related amortization, for the NCM tax receivable agreement intangible asset.
DCIP Transactions. The Company will make capital contributions to DCIP for projector and installation costs in excess of an agreed upon cap ($68,000 per system for digital conversions and as of September 30, 2015, $39,000 for new build locations). The Company pays equipment rent monthly and records the equipment rental expense on a straight-line basis over 12 years.
The Company recorded the following related party transactions with DCIP:
(In thousands)
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
Due from DCIP for equipment and warranty purchases |
$ | 1,357 | $ | 1,048 | |||
Deferred rent liability for digital projectors |
8,801 | 9,031 |
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Digital equipment rental expense |
$ | 1,350 | $ | 1,268 | $ | 4,026 | $ | 5,270 | |||||
Warranty reimbursements from DCIP |
1,335 | 934 | 3,716 | 2,590 |
Open Road Films Transactions. For the three months and nine months ended September 30, 2015, the Company suspended equity method accounting for its investment in Open Road Films when the negative investment in Open Road Films reached the Company's capital commitment of $10,000,000. The Company's share of cumulative losses from Open Road Films in excess of the Company's capital commitment was $2,060,000 as of September 30, 2015. For the three months and nine months ended September 30, 2014, the Company resumed the equity method accounting where the Company had previously suspended the equity method when the negative investment in Open Road Films reached the Company's capital commitment.
The Company recorded the following related party transactions with Open Road Films:
(In thousands)
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
Due from Open Road Films |
$ | 1,945 | $ | 2,560 | |||
Film rent payable to Open Road Films |
84 | 709 |
9
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 2INVESTMENTS (Continued)
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Gross film exhibition cost on Open Road Films |
$ | 660 | $ | 900 | $ | 4,100 | $ | 10,000 |
AC JV Transactions. The Company recorded the following related party transactions with AC JV:
(In thousands)
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
Due to AC JV for Fathom Events programming |
$ | 520 | $ | 333 |
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Gross exhibition cost on Fathom Events programming |
$ | 2,228 | $ | 1,961 | $ | 6,297 | $ | 4,476 |
NOTE 3STOCKHOLDERS' EQUITY
Common Stock Rights and Privileges
The rights of the holders of Holdings' Class A common stock and Holdings' Class B common stock are identical, except with respect to voting and conversion applicable to the Class B common stock. Holders of Holdings' Class A common stock are entitled to one vote per share and holders of Holdings' Class B common stock are entitled to three votes per share. Holders of Class A common stock and Class B common stock will share ratably (based on the number of shares of common stock held) in any dividend declared by its board of directors, subject to any preferential rights of any outstanding preferred stock. The Class A common stock is not convertible into any other shares of Holdings' capital stock. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock shall convert automatically into one share of Class A common stock upon any transfer, whether or not for value, except for certain transfers described in Holdings' certificate of incorporation.
Dividends
The following is a summary of dividends and dividend equivalents declared to stockholders during the nine months ended September 30, 2015:
Declaration Date | Record Date | Date Paid | Amount per Share of Common Stock |
Total Amount Declared (In thousands) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
February 3, 2015 | March 9, 2015 | March 23, 2015 | $ | 0.20 | $ | 19,637 | ||||||
April 27, 2015 | June 8, 2015 | June 22, 2015 | 0.20 | 19,635 | ||||||||
July 28, 2015 | September 8, 2015 | September 21, 2015 | 0.20 | 19,622 |
10
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 3STOCKHOLDERS' EQUITY (Continued)
During the nine months ended September 30, 2015, the Company paid dividends and dividend equivalents of $59,012,000, increased additional paid-in capital for recognition of deferred tax assets of $223,000 related to the dividend equivalents paid, and accrued $107,000 for the remaining unpaid dividends at September 30, 2015. The aggregate dividends paid for Class A common stock, Class B common stock, and dividend equivalents were approximately $12,945,000, $45,496,000, and $571,000, respectively, during the nine months ended September 30, 2015.
Related Party Transaction
As of September 30, 2015 and December 31, 2014, the Company recorded a receivable due from Wanda of $637,000 and $156,000, respectively, for reimbursement of general administrative and other expense incurred on behalf of Wanda.
Temporary Equity
Certain members of management have the right to require Holdings to repurchase the Class A common stock held by them under certain limited circumstances pursuant to the terms of a stockholders agreement. Beginning on January 1, 2016 (or upon the termination of a management stockholder's employment by the Company without cause, by the management stockholder for good reason, or due to the management stockholder's death or disability) management stockholders will have the right, in limited circumstances, to require Holdings to purchase shares that are not fully and freely tradeable at a price equal to the price per share paid by such management stockholder with appropriate adjustments for any subsequent events such as dividends, splits, or combinations. The shares of Class A common stock subject to the stockholder agreement are classified as temporary equity, apart from permanent equity, as a result of the contingent redemption feature contained in the stockholder agreement. The Company determined the amount reflected in temporary equity for the Class A common stock based on the price paid per share by the management stockholders and Wanda on August 30, 2012, the date Wanda acquired Holdings. During the nine months ended September 30, 2015, a former employee who held 5,939 shares, relinquished his put right, therefore the related share amount of $62,000 was reclassified to additional paid-in capital, a component of stockholders' equity.
Stock-Based Compensation
Holdings adopted a stock-based compensation plan in December of 2013.
The Company recognized stock-based compensation expense of $2,199,000 during the three months ended September 30, 2015 within general and administrative: other and a credit of $1,596,000 during the three months ended September 30, 2014. The credit during the three months ended September 30, 2014 was due to the reversal of stock-based compensation expense previously recognized prior to the modification of the performance target of the PSU awards in the prior year. The Company recognized stock-based compensation expense of $9,377,000 and $6,072,000 during the nine months ended September 30, 2015 and September 30, 2014, respectively. The Company's financial statements reflect an increase to additional paid-in capital related to stock-based compensation of $9,377,000 during the nine months ended September 30, 2015. As of September 30, 2015, there was approximately
11
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 3STOCKHOLDERS' EQUITY (Continued)
$2,144,000 of total estimated unrecognized compensation cost, assuming attainment of the performance target at 120% resulting in a 150% payout, related to stock-based compensation arrangements expected to be recognized during the remainder of calendar 2015.
2013 Equity Incentive Plan
The 2013 Equity Incentive Plan provides for grants of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock units, stock awards, and cash performance awards. The maximum number of shares of Holdings' common stock available for delivery pursuant to awards granted under the 2013 Equity Incentive Plan is 9,474,000 shares. At September 30, 2015, the aggregate number of shares of Holdings' common stock remaining available for grant was 8,266,166 shares.
Awards Granted in 2015
Holdings' Board of Directors approved awards of stock, restricted stock units ("RSUs"), and performance stock units ("PSUs") to certain of the Company's employees and directors under the 2013 Equity Incentive Plan. The fair value of the stock at the grant dates of January 5, 2015, March 6, 2015, and August 7, 2015 was $24.97, $33.96, and $29.59 per share, respectively, and was based on the closing price of Holdings' stock.
The award agreements generally had the following features:
On March 6, 2015, RSU awards of 58,749 units were granted to certain executive officers. The RSUs will be forfeited if Holdings does not achieve a specified cash flow from operating activities target for the twelve months ended December 31, 2015. These awards do not contain a service condition. The vested RSUs will not be settled, and will be non-transferable, until the third anniversary of the date of grant. Under certain termination scenarios defined in the award
12
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 3STOCKHOLDERS' EQUITY (Continued)
agreement, the vested RSUs may be settled within 60 days following termination of service. A dividend equivalent equal to the amount paid in respect of one share of Class A common stock underlying the RSUs began to accrue with respect to the RSUs on the date of grant. Such accrued dividend equivalents are paid to the holder upon vesting of the RSUs. Thereafter, dividend equivalents are paid to the holder whenever dividends are paid on the Class A common stock. The grant date fair value was $1,995,000. The Company recognized expense for these awards of $1,995,000, in general and administrative: other expense, during the nine months ended September 30, 2015, based on current estimates that the performance condition is expected to be achieved.
On August 7, 2015, a RSU award of 19,226 units was granted to the Interim Chief Executive Officer and President, with a grant date fair value of approximately $569,000. Each RSU will convert into one share of Class A common stock immediately upon vesting which will occur upon the earliest of; (1) the first day of employment of a replacement Chief Executive Officer, (2) March 15, 2016, or (3) the Company's termination of the participant without cause. All unvested RSUs will be forfeited upon the participant's termination as Interim Chief Executive Officer and President prior to vesting as a result of the participant's voluntary resignation or removal from such position by the Board of Directors for cause. A dividend equivalent equal to the amount paid in respect of one share of Class A common stock underlying the RSUs began to accrue with respect to the RSUs on the date of grant. Such accrued dividend equivalents are paid to the holder upon vesting of the RSUs. The Company recognized approximately $135,000 in general and administrative: other expense during the nine months ended September 30, 2015, in connection with this award.
13
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 3STOCKHOLDERS' EQUITY (Continued)
September 30, 2015, respectively, based on current estimates that the target performance condition is expected to be achieved at 120%.
The following table represents the RSU and PSU activity for the nine months ended September 30, 2015:
|
Shares of RSU and PSU |
Weighted Average Grant Date Fair Value |
|||||
---|---|---|---|---|---|---|---|
Beginning balance at January 1, 2015 |
| $ | | ||||
Granted(1) |
377,730 | 33.74 | |||||
Vested(2) |
(84,649 | ) | 33.96 | ||||
Forfeited |
(47,255 | ) | 33.96 | ||||
| | | | | | | |
Nonvested at September 30, 2015 |
245,826 | $ | 33.62 | ||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
NOTE 4CORPORATE BORROWINGS
A summary of the carrying value of corporate borrowings and capital and financing lease obligations is as follows:
(In thousands)
|
September 30, 2015 |
December 31, 2014 |
|||||
---|---|---|---|---|---|---|---|
Senior Secured Credit Facility-Term Loan due 2020 (3.50% as of September 30, 2015) |
$ | 754,404 | $ | 760,018 | |||
5% Promissory Note payable to NCM due 2019 |
6,944 | 6,944 | |||||
9.75% Senior Subordinated Notes due 2020 |
20,047 | 649,043 | |||||
5.875% Senior Subordinated Notes due 2022 |
375,000 | 375,000 | |||||
5.75% Senior Subordinated Notes due 2025 |
600,000 | | |||||
Capital and financing lease obligations, 6.0% - 11.5% |
103,893 | 109,258 | |||||
| | | | | | | |
|
1,860,288 | 1,900,263 | |||||
Less: current maturities |
(17,803 | ) | (23,598 | ) | |||
| | | | | | | |
|
$ | 1,842,485 | $ | 1,876,665 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
14
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 4CORPORATE BORROWINGS (Continued)
AMCE's Notes due 2020
On May 26, 2015, AMCE launched a cash tender offer for any and all of its outstanding 9.75% Senior Subordinated Notes due 2020 ("Notes due 2020") at a purchase price of $1,093 for each $1,000 principal amount of Notes due 2020 validly tendered and accepted by AMCE on or before June 2, 2015 at 8:00 a.m. New York City time (the "Expiration Date"). Holders of $581,324,000, or approximately 96.9%, of the Notes due 2020 validly tendered and did not withdraw their Notes due 2020 on or prior to the Expiration Date. The Company recorded a loss on extinguishment related to the redemption of the Notes due 2020 of approximately $9,273,000 in other expense (income) during the nine months ended September 30, 2015.
On October 30, 2015, AMCE gave notice of its intention to redeem any and all of the remaining $18,676,000 principal amount of the Notes due 2020 on December 1, 2015 at 104.875% of the principal amount, plus accrued and unpaid interest to the redemption date.
AMCE's Notes due 2025
On June 5, 2015, AMCE issued $600,000,000 aggregate principal amount of its 5.75% Senior Subordinated Notes due 2025 (the "Notes due 2025") in a private offering. AMCE capitalized deferred financing costs of approximately $11,803,000, related to the issuance of the Notes due 2025, during the nine months ended September 30, 2015. The Notes due 2025 mature on June 15, 2025. AMCE will pay interest on the Notes due 2025 at 5.75% per annum, semi-annually in arrears on June 15th and December 15th, commencing on December 15, 2015. AMCE may redeem some or all of the Notes due 2025 at any time on or after June 15, 2020 at 102.875% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after June 15, 2023, plus accrued and unpaid interest to the redemption date. Prior to June 15, 2020, AMCE may redeem the Notes due 2025 at par plus a make-whole premium. AMCE used the net proceeds from the Notes due 2025 private offering and cash on hand, to pay the consideration for the tender offer for the Notes due 2020, plus any accrued and unpaid interest and related transaction fees and expenses.
The Notes due 2025 are general unsecured senior subordinated obligations of AMCE and are fully and unconditionally guaranteed on a joint and several senior subordinated unsecured basis by all of its existing and future domestic restricted subsidiaries that guarantee its other indebtedness. The Notes due 2025 are not guaranteed by Holdings.
The indenture governing the Notes due 2025 contains covenants limiting other indebtedness, dividends, purchases or redemptions of stock, transactions with affiliates, and mergers and sales of assets.
On June 5, 2015, in connection with the issuance of the Notes due 2025, AMCE entered into a registration rights agreement. Subject to the terms of the registration rights agreement, AMCE filed a registration statement on June 19, 2015 pursuant to the Securities Act of 1933, as amended, relating to an offer to exchange the original Notes due 2025 for exchange Notes due 2025 registered pursuant to an effective registration statement; the registration statement was declared effective on June 29, 2015, and AMCE commenced the exchange offer. The exchange notes have terms substantially identical to
15
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 4CORPORATE BORROWINGS (Continued)
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. After the exchange offer expired on July 27, 2015, all of the original Notes due 2025 were exchanged.
As of September 30, 2015, AMCE was in compliance with all financial covenants relating to the Senior Secured Credit Facility, the Notes due 2020, the 5.875% Senior Subordinated Notes due 2022 (the "Notes due 2022"), and the Notes due 2025.
NOTE 5INCOME TAXES
The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate, adjusted for discrete items, if any. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions. The Company recognizes income tax-related interest expense and penalties as income tax expense and general and administrative expense, respectively.
The effective tax rate based on the projected annual taxable income for the year ended December 31, 2015 is 39%. During the three months ended June 30, 2015, the Company received a favorable state ruling that resulted in a reduction of uncertain tax positions and, as a result, the Company recorded a net discrete tax benefit of approximately $2,900,000. During the three months ended September 30, 2015, the Company received a notice of proposed adjustment from the Internal Revenue Service based upon its ongoing review of the Company's tax return for the fiscal period ended March 29, 2012. As a result of this notification, the Company recorded a net discrete tax provision of $1,900,000 for interest on the proposed adjustment ($1,200,000 net of tax), reinstated approximately $17,700,000 of deferred tax assets and recorded current interest and taxes payable of $19,600,000. The Company has also calculated additional estimated New Jersey tax liability of approximately $694,000 resulting from the proposed adjustment. The net impact of these discrete items reduces the Company's projected annual effective rate for the year to 37.9% and the actual rate for the nine months ended September 30, 2015 to 36.9%.
The Company's tax rate for the nine months ended September 30, 2014 differs from the statutory tax rate primarily due to state income taxes.
16
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 6FAIR VALUE MEASUREMENTS
Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts business. The inputs used to develop these fair value measurements are established in a hierarchy, which ranks the quality and reliability of the information used to determine the fair values. The fair value classification is based on levels of inputs. Assets and liabilities that are carried at fair value are classified and disclosed in one of the following categories:
Level 1: | Quoted market prices in active markets for identical assets or liabilities. | |
Level 2: |
Observable market based inputs or unobservable inputs that are corroborated by market data. |
|
Level 3: |
Unobservable inputs that are not corroborated by market data. |
Recurring Fair Value Measurements. The following table summarizes the fair value hierarchy of the Company's financial assets carried at fair value on a recurring basis as of September 30, 2015:
|
|
Fair Value Measurements at September 30, 2015 Using | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
Total Carrying Value at September 30, 2015(1) |
Quoted prices in active market (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
|||||||||
Other long-term assets: |
|||||||||||||
Money market mutual funds |
$ | 124 | $ | 124 | $ | | $ | | |||||
Equity securities, available-for-sale: |
|||||||||||||
RealD Inc. common stock |
11,751 | 11,751 | | | |||||||||
Mutual fund large U.S. equity |
1,881 | 1,881 | | | |||||||||
Mutual fund small/mid U.S. equity |
2,132 | 2,132 | | | |||||||||
Mutual fund international |
798 | 798 | | | |||||||||
Mutual fund balanced |
709 | 709 | | | |||||||||
Mutual fund fixed income |
746 | 746 | | | |||||||||
| | | | | | | | | | | | | |
Total assets at fair value |
$ | 18,141 | $ | 18,141 | $ | | $ | | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Valuation Techniques. The Company's money market mutual funds are invested in funds that seek to preserve principal, are highly liquid, and therefore are recorded on the balance sheet at the principal amounts deposited, which equals fair value. The equity securities, available-for-sale, primarily consist of common stock and mutual funds invested in equity, fixed income, and international funds and are
17
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 6FAIR VALUE MEASUREMENTS (Continued)
measured at fair value using quoted market prices. See Note 8Accumulated Other Comprehensive Income for the unrealized gain on the equity securities recorded in accumulated other comprehensive income.
Other Fair Value Measurement Disclosures. The Company is required to disclose the fair value of financial instruments that are not recognized at fair value in the statement of financial position for which it is practicable to estimate that value:
|
|
Fair Value Measurements at September 30, 2015 Using | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
Total Carrying Value at September 30, 2015 |
Quoted prices in active market (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
|||||||||
Current maturities of corporate borrowings |
$ | 9,399 | $ | | $ | 7,989 | $ | 1,389 | |||||
Corporate borrowings |
1,746,996 | | 1,728,247 | 5,555 |
Valuation Technique. Quoted market prices and observable market based inputs were used to estimate fair value for Level 2 inputs. The Level 3 fair value measurement represents the transaction price of the corporate borrowings under market conditions.
NOTE 7THEATRE AND OTHER CLOSURE AND DISPOSITION OF ASSETS
A rollforward of reserves for theatre and other closure and disposition of assets is as follows:
|
Nine Months Ended | ||||||
---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
|||||
Beginning balance |
$ | 52,835 | $ | 55,163 | |||
Theatre and other closure expense |
3,911 | 8,224 | |||||
Transfer of assets and liabilities |
| 2,439 | |||||
Foreign currency translation adjustment |
(1,918 | ) | (885 | ) | |||
Cash payments |
(9,274 | ) | (9,063 | ) | |||
| | | | | | | |
Ending balance |
$ | 45,554 | $ | 55,878 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
In the accompanying Consolidated Balance Sheets, the current portion of the ending balance totaling $7,483,000 is included with accrued expenses and other liabilities and the long-term portion of the ending balance totaling $38,071,000 is included with other long-term liabilities. Theatre and other closure reserves for leases that have not been terminated were recorded at the present value of the future contractual commitments for the base rents, taxes and maintenance.
During the three months ended September 30, 2015 and the three months ended September 30, 2014, the Company recognized theatre and other closure expense of $1,600,000 and $1,361,000, respectively, and during the nine months ended September 30, 2015 and the nine months ended September 30, 2014, the Company recognized theatre and other closure expense of $3,911,000 and
18
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 7THEATRE AND OTHER CLOSURE AND DISPOSITION OF ASSETS (Continued)
$8,224,000, respectively. Theatre and other closure expense included the accretion on previously closed properties with remaining lease obligations. In May 2014, one theatre with 13 screens in Canada was permanently closed.
NOTE 8ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table presents the change in accumulated other comprehensive income (loss) by component:
(In thousands)
|
Foreign Currency |
Pension and Other Benefits(1) |
Unrealized Net Gain on Marketable Securities |
Unrealized Net Gain from Equity Method Investees' Cash Flow Hedge |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, December 31, 2014 |
$ | 627 | $ | 5,564 | $ | 3,812 | $ | 2,841 | $ | 12,844 | ||||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) before reclassifications |
981 | 701 | (1,868 | ) | (847 | ) | (1,033 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive income |
| (10,862 | ) | (154 | ) | 351 | (10,665 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) |
981 | (10,161 | ) | (2,022 | ) | (496 | ) | (11,698 | ) | |||||||
| | | | | | | | | | | | | | | | |
Balance, September 30, 2015 |
$ | 1,608 | $ | (4,597 | ) | $ | 1,790 | $ | 2,345 | $ | 1,146 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The following table presents the change in accumulated other comprehensive income (loss) by component:
(In thousands)
|
Foreign Currency |
Pension and Other Benefits |
Unrealized Net Gain on Marketable Securities |
Unrealized Net Gain from Equity Method Investees' Cash Flow Hedge |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, December 31, 2013 |
$ | (351 | ) | $ | 20,967 | $ | 1,216 | $ | 2,372 | $ | 24,204 | |||||
| | | | | | | | | | | | | | | | |
Other comprehensive income before reclassifications |
657 | | 762 | 136 | 1,555 | |||||||||||
Amounts reclassified from accumulated other comprehensive income |
| (1,394 | ) | (25 | ) | 397 | (1,022 | ) | ||||||||
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) |
657 | (1,394 | ) | 737 | 533 | 533 | ||||||||||
| | | | | | | | | | | | | | | | |
Balance, September 30, 2014 |
$ | 306 | $ | 19,573 | $ | 1,953 | $ | 2,905 | $ | 24,737 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
19
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 8ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)
The tax effects allocated to each component of other comprehensive loss during the three months ended September 30, 2015 and the three months ended September 30, 2014 is as follows:
|
Three Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 30, 2015 | September 30, 2014 | |||||||||||||||||
(In thousands)
|
Pre-Tax Amount |
Tax (Expense) Benefit |
Net-of-Tax Amount |
Pre-Tax Amount |
Tax (Expense) Benefit |
Net-of-Tax Amount |
|||||||||||||
Unrealized foreign currency translation adjustment |
$ | 1,147 | $ | (447 | ) | $ | 700 | $ | 1,787 | $ | (697 | ) | $ | 1,090 | |||||
Pension and other benefit adjustments: |
|||||||||||||||||||
Amortization of net (gain) loss reclassified into general and administrative: other |
12 | (5 | ) | 7 | (346 | ) | 135 | (211 | ) | ||||||||||
Amortization of prior service credit reclassified into general and administrative: other |
| | | (417 | ) | 163 | (254 | ) | |||||||||||
Marketable securities: |
|||||||||||||||||||
Unrealized net holding loss arising during the period |
(3,788 | ) | 1,477 | (2,311 | ) | (4,257 | ) | 1,660 | (2,597 | ) | |||||||||
Realized net gain reclassified into investment expense (income) |
(7 | ) | 2 | (5 | ) | (15 | ) | 5 | (10 | ) | |||||||||
Equity method investees' cash flow hedge: |
|||||||||||||||||||
Unrealized net holding gain (loss) arising during the period |
(763 | ) | 298 | (465 | ) | 669 | (261 | ) | 408 | ||||||||||
Realized net loss reclassified into equity in earnings of non-consolidated entities |
184 | (72 | ) | 112 | 219 | (85 | ) | 134 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) |
$ | (3,215 | ) | $ | 1,253 | $ | (1,962 | ) | $ | (2,360 | ) | $ | 920 | $ | (1,440 | ) | |||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
20
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 8ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)
The tax effects allocated to each component of other comprehensive income (loss) during the nine months ended September 30, 2015 and the nine months ended September 30, 2014 is as follows:
|
Nine Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 30, 2015 | September 30, 2014 | |||||||||||||||||
(In thousands)
|
Pre-Tax Amount |
Tax (Expense) Benefit |
Net-of-Tax Amount |
Pre-Tax Amount |
Tax (Expense) Benefit |
Net-of-Tax Amount |
|||||||||||||
Unrealized foreign currency translation adjustment |
$ | 1,608 | $ | (627 | ) | $ | 981 | $ | 1,077 | $ | (420 | ) | $ | 657 | |||||
Pension and other benefit adjustments: |
|||||||||||||||||||
Net loss arising during the period |
(73 | ) | 28 | (45 | ) | | | | |||||||||||
Prior service credit arising during the period |
1,223 | (477 | ) | 746 | | | | ||||||||||||
Amortization of net (gain) reclassified into general and administrative: other |
(2,763 | ) | 1,077 | (1,686 | ) | (1,037 | ) | 405 | (632 | ) | |||||||||
Amortization of prior service credit reclassified into general and administrative: other |
(2,888 | ) | 1,126 | (1,762 | ) | (1,249 | ) | 487 | (762 | ) | |||||||||
Curtailment gain reclassified into general and administrative: other |
(11,867 | ) | 4,628 | (7,239 | ) | | | | |||||||||||
Settlement gain reclassified into general and administrative: other |
(288 | ) | 113 | (175 | ) | | | | |||||||||||
Marketable securities: |
|||||||||||||||||||
Unrealized net holding gain (loss) arising during the period |
(3,062 | ) | 1,194 | (1,868 | ) | 1,250 | (488 | ) | 762 | ||||||||||
Realized net gain reclassified into investment expense (income) |
(252 | ) | 98 | (154 | ) | (40 | ) | 15 | (25 | ) | |||||||||
Equity method investees' cash flow hedge: |
|||||||||||||||||||
Unrealized net holding gain (loss) arising during the period |
(1,389 | ) | 542 | (847 | ) | 223 | (87 | ) | 136 | ||||||||||
Realized net loss reclassified into equity in earnings of non-consolidated entities |
576 | (225 | ) | 351 | 650 | (253 | ) | 397 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) |
$ | (19,175 | ) | $ | 7,477 | $ | (11,698 | ) | $ | 874 | $ | (341 | ) | $ | 533 | ||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
21
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 9EMPLOYEE BENEFIT PLANS
The Company sponsors frozen non-contributory qualified and non-qualified defined benefit pension plans generally covering all employees who, prior to the freeze, were age 21 or older and had completed at least 1,000 hours of service in their first twelve months of employment, or in a calendar year ending thereafter, and who were not covered by a collective bargaining agreement. The Company also offered eligible retirees the opportunity to participate in a health plan. Certain employees were eligible for subsidized postretirement medical benefits. The eligibility for these benefits was based upon a participant's age and service as of January 1, 2009. The Company also sponsors a postretirement deferred compensation plan.
On January 12, 2015, the Compensation Committee and the Board of Directors of Holdings, adopted resolutions to terminate the AMC Postretirement Medical Plan with an effective date of March 31, 2015. During the three months ended March 31, 2015, the Company notified eligible associates that their retiree medical coverage under the plan will terminate after March 31, 2015. Payments to eligible associates were approximately $4,300,000 during the nine months ended September 30, 2015. The Company recorded net periodic benefit credits of $18,118,000, including curtailment gains, settlement gains, amortization of unrecognized prior service credits and amortization of actuarial gains recorded in accumulated other comprehensive income related to the termination and settlement of the plan during the nine months ended September 30, 2015.
The net periodic benefit credit recognized for the plans in general and administrative: other during the three months ended September 30, 2015 and the three months ended September 30, 2014 consisted of the following:
|
Pension Benefits | Other Benefits | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Components of net periodic benefit cost: |
|||||||||||||
Service cost |
$ | | $ | | $ | | $ | 9 | |||||
Interest cost |
1,069 | 1,153 | | 54 | |||||||||
Expected return on plan assets |
(1,167 | ) | (1,308 | ) | | | |||||||
Amortization of net (gain) loss |
12 | (259 | ) | | (87 | ) | |||||||
Amortization of prior service credit |
| | | (417 | ) | ||||||||
| | | | | | | | | | | | | |
Net periodic benefit credit |
$ | (86 | ) | $ | (414 | ) | $ | | $ | (441 | ) | ||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
22
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 9EMPLOYEE BENEFIT PLANS (Continued)
The net periodic benefit cost (credit) recognized for the plans in general and administrative: other during the nine months ended September 30, 2015 and the nine months ended September 30, 2014 consisted of the following:
|
Pension Benefits | Other Benefits | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Components of net periodic benefit cost: |
|||||||||||||
Service cost |
$ | | $ | | $ | 2 | $ | 27 | |||||
Interest cost |
3,208 | 3,457 | 7 | 160 | |||||||||
Expected return on plan assets |
(3,500 | ) | (3,922 | ) | | | |||||||
Amortization of net (gain) loss |
34 | (776 | ) | (2,797 | ) | (261 | ) | ||||||
Amortization of prior service credit |
| | (2,888 | ) | (1,249 | ) | |||||||
Curtailment gain |
| | (11,867 | ) | | ||||||||
Settlement (gain) loss |
287 | | (575 | ) | | ||||||||
| | | | | | | | | | | | | |
Net periodic benefit cost (credit) |
$ | 29 | $ | (1,241 | ) | $ | (18,118 | ) | $ | (1,323 | ) | ||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
NOTE 10COMMITMENTS AND CONTINGENCIES
The Company, in the normal course of business, is a party to various ordinary course claims from vendors (including food and beverage suppliers and film distributors), landlords, competitors, and other legal proceedings. If management believes that a loss arising from these actions is probable and can reasonably be estimated, the Company records the amount of the loss, or the minimum estimated liability when the loss is estimated using a range and no point is more probable than another. As additional information becomes available, any potential liability related to these actions is assessed and the estimates are revised, if necessary. Management believes that the ultimate outcome of such matters, individually and in the aggregate, will not have a material adverse effect on the Company's financial position or overall trends in results of operations. However, litigation and claims are subject to inherent uncertainties and unfavorable outcomes can occur. An unfavorable outcome might include monetary damages. If an unfavorable outcome were to occur, there exists the possibility of a material adverse impact on the results of operations in the period in which the outcome occurs or in future periods.
On May 5, 2014, NCM, Inc., the sole manager of NCM LLC, announced that it had entered into a merger agreement to acquire Screenvision, LLC for $375,000,000, consisting of cash and NCM, Inc. common stock. Consummation of the transaction was subject to regulatory approvals and other customary closing conditions. On November 3, 2014, the U.S. Department of Justice filed an antitrust lawsuit seeking to enjoin the transaction. On March 16, 2015, NCM, Inc. and Screenvision, LLC decided to terminate the merger agreement. The termination of the merger agreement was effective upon NCM, Inc.'s payment of a $26,840,000 termination payment. The estimated legal and other transaction expenses were approximately $14,990,000. NCM LLC of which AMC was an approximate 15.05% owner at March 31, 2015, had agreed to indemnify NCM, Inc. and bear a pro rata portion of the termination fee and other transaction expenses. Accordingly, the Company recorded expense of
23
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 10COMMITMENTS AND CONTINGENCIES (Continued)
approximately $6,300,000 in equity in earnings of non-consolidated entities associated with these transaction expenses recorded by NCM LLC during the nine months ended September 30, 2015.
On May 28, 2015, the Company received a Civil Investigative Demand ("CID") from the Antitrust Division of the United States Department of Justice in connection with an investigation under Sections 1 and 2 of the Sherman Antitrust Act. Beginning in May of 2015, the Company also received CIDs from the Attorneys General for the States of Ohio, Texas, Washington, Florida, New York, and Kansas and from the District of Columbia, regarding similar inquiries under those states' antitrust laws. The CIDs request the production of documents and answers to interrogatories concerning potentially anticompetitive conduct, including film clearances and participation in certain joint ventures. The Company may receive additional CIDs from antitrust authorities in other jurisdictions in which it operates. The Company does not believe it has violated federal or state antitrust laws and is cooperating with the relevant governmental authorities. However, the Company cannot predict the ultimate scope, duration or outcome of these investigations.
Starplex Cinemas. On July 13, 2015, the Company entered into a stock purchase agreement (the "Agreement") with SMH Theatres, Inc. ("Starplex Cinemas"), the shareholders of Starplex Cinemas and the shareholder representative named in the Agreement. Under the terms of the Agreement, the Company will acquire all of the outstanding common stock of Starplex Cinemas (the "Transaction") for $171,800,000 in cash, subject to working capital and other adjustments. Starplex Cinemas operates 33 theatres with 346 screens in small and mid-size markets in 12 states, which further complements the Company's large market portfolio. The Company expects to acquire Starplex Cinemas on a cash-free, debt-free basis. The Company expects to consummate the Transaction by the end of 2015, subject to customary closing conditions, including the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
NOTE 11NEW ACCOUNTING PRONOUNCEMENTS
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30)Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"), which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this standard. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The Company will adopt ASU 2015-03 as of the beginning of 2016 and will change the presentation of the debt issuance costs, for its term loan and senior subordinated notes, by reclassifying the amount from other long-term assets to corporate borrowings in the Consolidated Balance Sheets.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. On July 9, 2015, FASB decided to delay the effective date of ASU 2014-09 by one year. The new standard is effective for the Company on January 1, 2018. Companies may elect to adopt this application as of the
24
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 11NEW ACCOUNTING PRONOUNCEMENTS (Continued)
original effective date for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures and has not yet selected a transition method.
NOTE 12EARNINGS PER SHARE
Basic earnings per share is computed by dividing net earnings from continuing operations by the weighted-average number of common shares outstanding. Diluted earnings per share includes the effects of contingently issuable RSUs and PSUs, if dilutive.
The following table sets forth the computation of basic and diluted earnings from continuing operations per common share:
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Numerator: |
|||||||||||||
Earnings from continuing operations |
$ | 12,178 | $ | 7,376 | $ | 62,239 | $ | 33,948 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Denominator (shares in thousands): |
|||||||||||||
Weighted average shares for basic earnings per common share |
97,978 | 97,506 | 97,959 | 97,506 | |||||||||
Common equivalent shares for RSUs and PSUs |
95 | 122 | 65 | 122 | |||||||||
| | | | | | | | | | | | | |
Shares for diluted earnings per common share |
98,073 | 97,628 | 98,024 | 97,628 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Basic earnings from continuing operations per common share |
$ | 0.12 | $ | 0.08 | $ | 0.64 | $ | 0.35 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Diluted earnings from continuing operations per common share |
$ | 0.12 | $ | 0.08 | $ | 0.63 | $ | 0.35 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Vested RSUs have dividend rights identical to the Company's Class A and Class B common stock and are treated as outstanding shares for purposes of computing basic and diluted earnings per share. Unvested RSUs and unvested PSUs are subject to performance conditions and are included in diluted earnings per share, if dilutive, using the treasury stock method based on the number of shares, if any, that would be issuable under the terms of the Company's 2013 Equity Incentive Plan if the end of the reporting period were the end of the contingency period. During both the three months ended September 30, 2015 and the nine months ended September 30, 2015, unvested RSUs of 19,226 units, were not included in the computation of diluted earnings per share as vesting conditions were not met at the end of the reporting period.
25
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 2015
(Unaudited)
NOTE 13SUBSEQUENT EVENTS
On October 29, 2015, 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 December 21, 2015 to stockholders of record on December 7, 2015.
On October 30, 2015, AMCE gave notice of its intention to redeem any and all outstanding aggregate principal amount of its Notes due 2020 on December 1, 2015 (the "Redemption Date"). The Notes due 2020 will be redeemed at a redemption price of 104.875% of the principal amount together with accrued and unpaid interest, if any, to the Redemption Date. The aggregate principal amount of the Notes due 2020 outstanding on October 30, 2015 was $18,676,000.
26
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 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 "may," "will," "forecast," "estimate," "project," "intend," "plan," "expect," "should," "believe" and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Similarly, statements made herein and elsewhere regarding pending acquisitions are also forward-looking statements, including statements regarding the anticipated closing date of the acquisition, the ability to obtain required regulatory approvals, or to satisfy closing conditions, the costs of the acquisition and the source of the financing, the expected benefits of the acquisition on our future business, operations and financial performance and our ability to successfully integrate the recently acquired business. These forward-looking statements are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. 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," 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:
27
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 as well as strategic initiatives, see Item 1A. "Risk Factors" and Item 1. "Business" in our Annual Report on Form 10-K for the year ended December 31, 2014 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, gift card and packaged ticket income, on-line ticketing fees and arcade games located in theatre lobbies. As of September 30, 2015, we owned, operated or had interests in 348 theatres and 4,937 screens.
During the nine months ended September 30, 2015, we opened 12 newly built screens and acquired 40 screens in the U.S., and temporarily closed 356 screens and reopened 294 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.
28
Recliner seating is 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 auditorium's 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, an 80% 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 theatres with recliner seating 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 not change ticket prices in the first year after construction, however, in subsequent years we typically increase our ticket prices at our theatres with recliner seating.
Rebalancing of the new supply-demand relationship created by recliner seating presents us two further opportunities to improve customer convenience and maximize operating results: open-source internet ticketing and reserved seating.
Open-source internet ticketing makes all our seats (over 828,000) in all our theatres and auditoriums for all our showtimes as available as possible, on as many websites as possible. This is a significant departure from the prior ten-year practice, when tickets to any one of our buildings were only available on one website. We believe increased online access is important because it captures customers' purchase intent more immediately and directly than if we had to wait until they showed up at the theatre box office to make a purchase. Once our customers buy a ticket, they are less likely to change their mind. Carefully monitoring internet pre-sales also lets us adjust capacity in real time, moving movies that are poised to over perform to larger capacity or more auditoriums, thereby maximizing yield.
Reserved seating, at our busiest theatres, allows our customers to choose a specific seat in advance of the movie. We believe that knowing there is a specifically chosen seat waiting for a show that promises to be a sellout is comforting to our customers, and removes anxiety around the experience. We believe reserved seating will become increasingly prevalent to the point of being a pre-requisite in the medium-term future.
We believe the comfort and personal space gains from recliner seating, coupled with the immediacy of demand captured from open-source internet ticketing and the anxiety removal of reserved seating make a powerful economic combination for us that none of our peer set is exploiting as aggressively as we are.
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 intend to continue to broaden our content offerings and enhance the customer experience through the installation of additional IMAX and Dolby Cinema at 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
29
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 September 30, 2015, we have successfully implemented our dine-in theatre concepts at 18 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 2014 calendar year, films licensed from our seven largest distributors based on revenues accounted for approximately 89% 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 2014, 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 707 in 2014, according to Motion Picture Association of America 2014 Theatrical Market Statistics and prior reports. The number of digital 3D films released annually increased to a high of 47 in 2014 from a low of 0 during this same time period.
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 September 30, 2015, we had 2,260 3D enabled screens, including 20 AMC Prime and ETX 3D enabled screens, and 150 IMAX 3D enabled screens; approximately 48.8% of our screens were 3D enabled screens, including IMAX 3D enabled screens, and approximately 3% of our screens were IMAX 3D enabled screens. We are the largest IMAX exhibitor in the world with a 45% market
30
share in the United States and each of our IMAX local installations is protected by geographic exclusivity. The following table summarizes our 3D enabled number of screens:
Format
|
Number of Screens As of September 30, 2015 |
|||
---|---|---|---|---|
3D enabled |
2,260 | |||
IMAX (3D enabled) |
150 | |||
AMC Prime/ETX (3D enabled) |
20 |
On April 1, 2011, we 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 nine month period ended September 30, 2015:
|
|
|
AMC Stubs Revenue for Three Months Ended September 30, 2015 |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
Deferred Membership Fees |
Deferred Rewards |
Other Theatre Revenues (Membership Fees) |
Admissions Revenues |
Food and Beverage Revenues |
|||||||||||
Balance, June 30, 2015 |
$ | 12,916 | $ | 17,972 | ||||||||||||
Membership fees received |
4,853 | | $ | | $ | | $ | | ||||||||
Rewards accumulated, net of expirations: |
||||||||||||||||
Admissions |
| 3,733 | | (3,733 | ) | | ||||||||||
Food and beverage |
| 5,380 | | | (5,380 | ) | ||||||||||
Rewards redeemed: |
||||||||||||||||
Admissions |
| (4,584 | ) | | 4,584 | | ||||||||||
Food and beverage |
| (6,481 | ) | | | 6,481 | ||||||||||
Amortization of deferred revenue |
(6,042 | ) | | 6,042 | | | ||||||||||
| | | | | | | | | | | | | | | | |
For the period ended or balance as of September 30, 2015 |
$ | 11,727 | $ | 16,020 | $ | 6,042 | $ | 851 | $ | 1,101 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
31
|
|
|
AMC Stubs Revenue for Nine Months Ended September 30, 2015 |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
Deferred Membership Fees |
Deferred Rewards |
Other Theatre Revenues (Membership Fees) |
Admissions Revenues |
Food and Beverage Revenues |
|||||||||||
Balance, December 31, 2014 |
$ | 11,408 | $ | 16,129 | ||||||||||||
Membership fees received |
18,610 | | $ | | $ | | $ | | ||||||||
Rewards accumulated, net of expirations: |
||||||||||||||||
Admissions |
| 13,859 | | (13,859 | ) | | ||||||||||
Food and beverage |
| 19,846 | | | (19,846 | ) | ||||||||||
Rewards redeemed: |
||||||||||||||||
Admissions |
| (13,870 | ) | | 13,870 | | ||||||||||
Food and beverage |
| (19,944 | ) | | | 19,944 | ||||||||||
Amortization of deferred revenue |
(18,291 | ) | | 18,291 | | | ||||||||||
| | | | | | | | | | | | | | | | |
For the period ended or balance as of September 30, 2015 |
$ | 11,727 | $ | 16,020 | $ | 18,291 | $ | 11 | $ | 98 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The following tables reflect AMC Stubs activity during the three month period and nine month period ended September 30, 2014:
|
|
|
AMC Stubs Revenue for Three Months Ended September 30, 2014 |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
Deferred Membership Fees |
Deferred Rewards |
Other Theatre Revenues (Membership Fees) |
Admissions Revenues |
Food and Beverage Revenues |
|||||||||||
Balance, June 30, 2014 |
$ | 12,607 | $ | 17,597 | ||||||||||||
Membership fees received |
5,298 | | $ | | $ | | $ | | ||||||||
Rewards accumulated, net of expirations: |
||||||||||||||||
Admissions |
| 3,638 | | (3,638 | ) | | ||||||||||
Food and beverage |
| 5,737 | | | (5,737 | ) | ||||||||||
Rewards redeemed: |
||||||||||||||||
Admissions |
| (4,077 | ) | | 4,077 | | ||||||||||
Food and beverage |
| (7,072 | ) | | | 7,072 | ||||||||||
Amortization of deferred revenue |
(6,128 | ) | | 6,128 | | | ||||||||||
| | | | | | | | | | | | | | | | |
For the period ended or balance as of September 30, 2014 |
$ | 11,777 | $ | 15,823 | $ | 6,128 | $ | 439 | $ | 1,335 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
32
|
|
|
AMC Stubs Revenue for Nine Months Ended September 30, 2014 |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
Deferred Membership Fees |
Deferred Rewards |
Other Theatre Revenues (Membership Fees) |
Admissions Revenues |
Food and Beverage Revenues |
|||||||||||
Balance, December 31, 2013 |
$ | 14,258 | $ | 17,117 | ||||||||||||
Membership fees received |
17,650 | | $ | | $ | | $ | | ||||||||
Rewards accumulated, net of expirations: |
||||||||||||||||
Admissions |
| 12,775 | | (12,775 | ) | | ||||||||||
Food and beverage |
| 21,031 | | | (21,031 | ) | ||||||||||
Rewards redeemed: |
||||||||||||||||
Admissions |
| (13,537 | ) | | 13,537 | | ||||||||||
Food and beverage |
| (21,563 | ) | | | 21,563 | ||||||||||
Amortization of deferred revenue |
(20,131 | ) | | 20,131 | | | ||||||||||
| | | | | | | | | | | | | | | | |
For the period ended or balance as of September 30, 2014 |
$ | 11,777 | $ | 15,823 | $ | 20,131 | $ | 762 | $ | 532 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Significant and Subsequent Events
Starplex Cinemas. On July 13, 2015, we entered into a stock purchase agreement (the "Agreement") with SMH Theatres, Inc. ("Starplex Cinemas"), the shareholders of Starplex Cinemas and the shareholder representative named in the Agreement. Under the terms of the Agreement, we will acquire all of the outstanding common stock of Starplex Cinemas (the "Transaction") for $171,800,000 in cash, subject to working capital and other adjustments. Starplex Cinemas operates 33 theatres with 346 screens in small and mid-size markets in 12 states, which further complements our large market portfolio. We expect to acquire Starplex Cinemas on a cash-free, debt-free basis. We plan to fund the acquisition using cash on our balance sheet and availability under our existing revolving credit facility, if necessary. We expect to consummate the Transaction by the end of 2015, subject to customary closing conditions, including the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Corporate Borrowings. On May 26, 2015, AMCE launched a cash tender offer for any and all of its outstanding Notes due 2020 at a purchase price of $1,093 for each $1,000 principal amount of Notes due 2020 validly tendered and accepted by AMCE on or before June 2, 2015 at 8:00 a.m. New York City time (the "Expiration Date"). Holders of $581,324,000, or approximately 96.9%, of the Notes due 2020 validly tendered and did not withdraw their Notes due 2020 on or prior to the Expiration Date. We recorded a loss on extinguishment related to the redemption of the Notes due 2020 of approximately $9,273,000 in other expense (income) during the nine months ended September 30, 2015.
On June 5, 2015, AMCE issued $600,000,000 aggregate principal amount of its Notes due 2025 in a private offering. AMCE capitalized deferred financing costs of approximately $11,803,000, related to the issuance of the Notes due 2025, during the nine months ended September 30, 2015. The Notes due 2025 mature on June 15, 2025. AMCE will pay interest on the Notes due 2025 at 5.75% per annum, semi-annually in arrears on June 15th and December 15th, commencing on December 15, 2015. AMCE may redeem some or all of the Notes due 2025 at any time on or after June 15, 2020 at 102.875% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after June 15, 2023, plus accrued and unpaid interest to the redemption date. Prior to June 15, 2020, AMCE may redeem the Notes due 2025 at par plus a make-whole premium. AMCE used the net proceeds from the Notes due 2025 private offering and cash on hand, to pay the consideration for the tender offer for the Notes due 2020, plus any accrued and unpaid interest and related transaction fees and expenses.
33
On June 5, 2015, in connection with the issuance of the Notes due 2025, AMCE entered into a registration rights agreement. Subject to the terms of the registration rights agreement, AMCE filed a registration statement on June 19, 2015 pursuant to the Securities Act of 1933, as amended, relating to an offer to exchange the original Notes due 2025 for exchange Notes due 2025 registered pursuant to an effective registration statement; the registration statement was declared effective on June 29, 2015, and AMCE commenced the exchange offer. The exchange notes 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. After the exchange offer expired on July 27, 2015, all of the original Notes due 2025 were exchanged.
On October 30, 2015, AMCE gave notice of its intention to redeem any and all outstanding aggregate principal amount of its Notes due 2020 on December 1, 2015 (the "Redemption Date"). The Notes due 2020 will be redeemed at a redemption price of 104.875% of the principal amount together with accrued and unpaid interest, if any, to the Redemption Date. The aggregate principal amount of the Notes due 2020 outstanding on October 30, 2015 was $18,676,000.
Postretirement Medical Plan Termination. On January 12, 2015, the Compensation Committee and the Board of Directors of Holdings, adopted resolutions to terminate the AMC Postretirement Medical Plan with an effective date of March 31, 2015. During the three months ended March 31, 2015, we notified eligible associates that their retiree medical coverage under the plan will terminate after March 31, 2015. Payments to eligible associates were approximately $4,300,000 during the nine months ended September 30, 2015. We recorded net periodic benefit credits of $18,118,000, including curtailment gains, settlement gains, amortization of unrecognized prior service credits and amortization of actuarial gains recorded in accumulated other comprehensive income related to the termination and settlement of the plan during the nine months ended September 30, 2015.
NCM. On May 5, 2014, NCM, Inc., the sole manager of NCM LLC, announced that it had entered into a merger agreement to acquire Screenvision, LLC for $375,000,000, consisting of cash and NCM, Inc. common stock. Consummation of the transaction was subject to regulatory approvals and other customary closing conditions. On November 3, 2014, the U.S. Department of Justice filed an antitrust lawsuit seeking to enjoin the transaction. On March 16, 2015, NCM, Inc. and Screenvision, LLC decided to terminate the merger agreement. The termination of the merger agreement was effective upon NCM, Inc.'s payment of a $26,840,000 termination payment. The estimated legal and other transaction expenses are approximately $14,990,000. NCM LLC of which AMC is an approximate 15.05% owner at March 31, 2015, had agreed to indemnify NCM, Inc. and bear a pro rata portion of the termination fee and other transaction expenses. Accordingly, we recorded expense of approximately $6,300,000 in equity in earnings of non-consolidated entities associated with these transaction expenses recorded by NCM LLC during the nine months ended September 30, 2015.
Dividends. The following is a summary of dividends and dividend equivalents paid to stockholders during the nine months ended September 30, 2015:
Declaration Date
|
Record Date | Date Paid | Amount per Share of Common Stock |
Total Amount Declared (In thousands) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|
February 3, 2015 | March 9, 2015 | March 23, 2015 | $ | 0.20 | $ | 19,637 | |||||
April 27, 2015 | June 8, 2015 | June 22, 2015 | 0.20 | 19,635 | |||||||
July 28, 2015 | September 8, 2015 | September 21, 2015 | 0.20 | 19,622 |
During the nine months ended September 30, 2015, we paid dividends and dividend equivalents of $59,012,000. At September 30, 2015, we accrued $107,000 for the remaining unpaid dividends.
34
On October 29, 2015, 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 December 21, 2015 to stockholders of record on December 7, 2015.
Dolby Cinema at AMC Prime®. On April 9, 2015, we, along with Dolby Laboratories, Inc., announced Dolby Cinema at AMC Prime, a premium cinema offering for moviegoers that combines spectacular image and sound technologies with design and comfort. Dolby Cinema at AMC Prime will include Dolby Vision laser projection and Dolby Atmos® sound, as well as AMC Prime power reclining seats with seat transducers that vibrate with the action on screen. As of September 30, 2015, we have 8 fully operational Dolby Cinema at AMC Prime screens and we expect to have 8 additional screens in operation by the end of 2015. We intend to expand to operating 50 Dolby Cinema at AMC Prime locations by December 2018 and up to 100 Dolby Cinema at AMC Prime locations by December 2024.
Executive Officers. On July 17, 2015, Gerardo I. Lopez provided us with notice of his resignation from his positions as Chief Executive officer, President and Director, effective August 6, 2015. On July 19, 2015, Holdings' Board of Directors appointed Craig R. Ramsey, Holdings' current Executive Vice President and Chief Financial Officer, to serve in the additional capacities of Interim Chief Executive Officer and Interim President of Holdings, effective August 7, 2015.
35
Operating Results
The following table sets forth our revenues, operating costs and expenses attributable to our theatrical exhibition operations.
|
Three Months Ended | |
Nine Months Ended | |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
% Change | September 30, 2015 |
September 30, 2014 |
% Change | |||||||||||||
Revenues |
|||||||||||||||||||
Theatrical exhibition |
|||||||||||||||||||
Admissions |
$ | 441,262 | $ | 417,448 | 5.7 | % | $ | 1,393,338 | $ | 1,305,135 | 6.8 | % | |||||||
Food and beverage |
216,764 | 189,065 | 14.7 | % | 667,804 | 582,426 | 14.7 | % | |||||||||||
Other theatre |
30,814 | 27,391 | 12.5 | % | 101,901 | 95,674 | 6.5 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Total revenues |
$ | 688,840 | $ | 633,904 | 8.7 | % | $ | 2,163,043 | $ | 1,983,235 | 9.1 | % | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Operating Costs and Expenses |
|||||||||||||||||||
Theatrical exhibition |
|||||||||||||||||||
Film exhibition costs |
$ | 233,390 | $ | 220,608 | 5.8 | % | $ | 751,894 | $ | 689,928 | 9.0 | % | |||||||
Food and beverage costs |
31,080 | 27,209 | 14.2 | % | 95,395 | 82,673 | 15.4 | % | |||||||||||
Operating expense |
195,505 | 177,949 | 9.9 | % | 588,177 | 546,925 | 7.5 | % | |||||||||||
Rent |
115,861 | 112,258 | 3.2 | % | 348,804 | 341,063 | 2.3 | % | |||||||||||
General and administrative expense: |
|||||||||||||||||||
Merger, acquisition and transaction costs |
751 | 78 | * | % | 2,590 | 1,012 | * | % | |||||||||||
Other |
18,706 | 12,961 | 44.3 | % | 41,384 | 46,330 | 10.7 | % | |||||||||||
Depreciation and amortization |
58,008 | 54,327 | 6.8 | % | 173,034 | 160,854 | 7.6 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Operating costs and expenses |
653,301 | 605,390 | 7.9 | % | 2,001,278 | 1,868,785 | 7.1 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Operating income |
35,539 | 28,514 | 24.6 | % | 161,765 | 114,450 | 41.3 | % | |||||||||||
Other expense (income) |
|||||||||||||||||||
Other expense (income) |
| (11 | ) | * | % | 9,273 | (8,397 | ) | * | % | |||||||||
Interest expense: |
|||||||||||||||||||
Corporate borrowings |
22,682 | 26,897 | 15.7 | % | 73,478 | 84,544 | 13.1 | % | |||||||||||
Capital and financing lease obligations |
2,286 | 2,448 | 6.6 | % | 6,990 | 7,459 | 6.3 | % | |||||||||||
Equity in earnings of non-consolidated entities |
(10,850 | ) | (13,087 | ) | 17.1 | % | (21,536 | ) | (17,300 | ) | 24.5 | % | |||||||
Investment expense (income) |
163 | 181 | 9.9 | % | (5,039 | ) | (7,504 | ) | 32.8 | % | |||||||||
| | | | | | | | | | | | | | | | | | | |
Total other expense |
14,281 | 16,428 | 13.1 | % | 63,166 | 58,802 | 7.4 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Earnings from continuing operations before income taxes |
21,258 | 12,086 | 75.9 | % | 98,599 | 55,648 | 77.2 | % | |||||||||||
Income tax provision |
9,080 | 4,710 | 92.8 | % | 36,360 | 21,700 | 67.6 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Earnings from continuing operations |
12,178 | 7,376 | 65.1 | % | 62,239 | 33,948 | 83.3 | % | |||||||||||
Gain from discontinued operations, net of income taxes |
| | | % | | 313 | 100.0 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Net earnings |
$ | 12,178 | $ | 7,376 | 65.1 | % | $ | 62,239 | $ | 34,261 | 81.7 | % | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
36
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Operating Data: |
|||||||||||||
Screen additions |
| | 12 | 12 | |||||||||
Screens acquisitions |
| 18 | 40 | 30 | |||||||||
Screen dispositions |
| | | 26 | |||||||||
Construction openings (closures), net |
(94 | ) | (27 | ) | (62 | ) | (33 | ) | |||||
Average screens(1) |
4,916 | 4,878 | 4,914 | 4,870 | |||||||||
Number of screens operated |
4,937 | 4,946 | 4,937 | 4,946 | |||||||||
Number of theatres operated |
348 | 342 | 348 | 342 | |||||||||
Screens per theatre |
14.2 | 14.5 | 14.2 | 14.5 | |||||||||
Attendance (in thousands)(1) |
47,298 | 44,048 | 145,874 | 139,012 |
We present Adjusted EBITDA as a supplemental measure of our performance that is commonly used in our industry. We define Adjusted EBITDA as earnings (loss) from continuing operations 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 any cash distributions of earnings from our equity method investees. These further adjustments are itemized below. 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.
The following table sets forth our reconciliation of Adjusted EBITDA:
Reconciliation of Adjusted EBITDA
(unaudited)
|
Three Months Ended | Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands)
|
September 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||
Earnings from continuing operations |
$ | 12,178 | $ | 7,376 | $ | 62,239 | $ | 33,948 | |||||
Plus: |
|||||||||||||
Income tax provision |
9,080 | 4,710 | 36,360 | 21,700 | |||||||||
Interest expense |
24,968 | 29,345 | 80,468 | 92,003 | |||||||||
Depreciation and amortization |
58,008 | 54,327 | 173,034 | 160,854 | |||||||||
Certain operating expenses(1) |
3,899 | 3,587 |