AMC 電影院 (AMC) 2002 Q4 法說會逐字稿

Good morning.

My name is Crystal and I will be your

conference facilitator today.

At this time, I would like to

welcome everyone to the AMC Entertainment, Inc. FY

2002 fourth quarter earnings

conference call hosted by

Peter Brown,

Chairman and Chief Executive

Officer of AMC Entertainment, Inc.

Any forward-looking statements

contained in this call, which

reflects management's best

judgment are based on factors

currently known and involve risks

and uncertainties.

Actual results could differ

materially from those

anticipated in the

forward-looking statements

included herein as the result

of a number of factors.

Including among others the

Company's ability to enter

into various financing programs, the

performance of film licensed by the Company,

competition, construction

delays, the ability to open or

close theaters and screens as

currently planned.

Political, social and

economical changes,

demographic changes, increases

in demand for real estate,

changes in real estate, zoning

and tax laws and unforeseen

changes in the operating

department.

All lines have been placed on

mute to prevent any background

noise.

After the speakers' remarks,

there will be a question-and-answer

Analysts who would like to

ask a question during this

time should press star then the number 1 on your telephone keypad and questions will be taken in the order they are received.

To withdraw your question, press the pound key.

Thank you, Mr. Brown, you may begin your

conference.

Okay, thank you, Crystal,

very much.

And thank all of you for

joining us today.

As Crystal said, this is the fourth quarter

fiscal 2002, the quarter ended

March 28, 2002, earnings

conference call for AMC

Entertainment.

I'm Peter Brown, Chairman and

Chief Executive Officer.

On the phone with me today is

Philip Singleton, our

President and Chief Operating

Officer for our largest subsidiary company,

American Multi-Cinema; Craig

Ramsey, our Chief Financial

Officer. Also joining us on the phone

today in his debuting role on

these calls is Dick Walsh,

who is Chairman of our Film Group,

he's relocating to Kansas City from our film department.

Dick is also an Executive Vice

President with AMC Entertainment, and Dick

will be handling the film

portion of the presentation.

Now, as is typically our

custom, I will do a few

minutes of highlights on the

quarter.

Then Phil will update us on

our asset quality.

Phil will also update us on

the status with respect to

integrating a couple of

acquisitions we basically

consummated this last fiscal

year and beginning of this

fiscal year.

And Craig Ramsey will walk us

through some highlights on the numbers, and

as I said just a moment ago, Dick

Walsh will finish up with a

presentation on the film

product, then we'll have a Q&A.

So, as we look at the fiscal

year, I have to say it was just a

super year for the company, both in

terms of our financial performance

and importantly the strategic

accomplishments on the corporate development

front.

I hope all of you have a copy of the

press release.

But as you saw in the press

release, we did report record

revenues and adjusted EBITDA

for our full fiscal year.

As we've said in prior conference calls, we like to watch the business

on a 12-month rolling 12-month basis, and it's

convenient to do that at the

end of a fiscal year.

But as you saw, revenues at

$1.3 billion were up 10% over

the prior fiscal year.

Adjusted EBITDA 161 million up 20% over the prior fiscal year.

Now some other things I want to

highlight: Adjusted EBITDA

margin improved.

We've had an intense focus on

improving our adjusted EBITDA

margin.

And as you saw in the, on an LTM

basis, adjusted EBITDA margin was up

110 basis points over the

prior fiscal year '02 -- '01,

period.

Now that margin has improved,

shown improvement for six

consecutive quarters.

In addition, at the end of the

fiscal year, on an as-reported

basis, our net debt to

adjusted EBITDA ratio was 2.7

times, down from 3.3 times

where we were on an LTM basis

at the end of our December

quarter.

Now, Craig will speak more to

this in just a moment.

And we'll talk a little bit about

some of the pro forma numbers that

we spoke with you on the road

about when we did our equity

offering and how that ratio

would compare when you look at

the pro forma numbers.

In addition, we ended the

quarter with a very

substantial liquidity position

over $600 million of

availability.

And to refresh your memory,

that was $383 million at the

end of our December quarter.

This was fueled by three

successful financings that we

completed in fiscal '02.

Starting in April of '01, we

privately placed $250 million

of convertible preferred with

Apollo Management out of New

York.

In January, we led our

industry back into the public

debt market, with a $175

million bond offering. And in

March, we led our industry back

into the public equity markets

and indeed saw a lot of you

I'm sure that are on this conference

call this morning with

approximately $100 million

common stock offering.

All total, in our fiscal '02 year,

we raised over $500 million of

capital.

Now we also had, those of

you that followed the company, an objective with respect to our free

cash flow. And I'm pleased to

report that we have indeed

achieved the objective of

becoming free cash flow

positive.

We measure our free cash flow

by taking what we call an

"after-tax cash flow," which is really

our net income plus

depreciation and amortization

cash earnings, if you will,

and subtracting from that our

net capital expenditures.

And on that basis, you would

see that our free cash flow

was $14 million to the

positive column.

So, we're very pleased about

having achieved that objective

that we've had in intense

focus on.

Last but not least on the

strategic front, we

substantially completed two

acquisitions, representing

almost 700 screens.

Now I say "substantially completed"

because, technically, one of

those acquisitions, General

Cinemas, closed in the

first day of our fiscal year

'03.

But we view that that

acquisition was 99.9% done, if

will you, in our fiscal '02

year.

So we look at that as fiscal

'02 year's work.

To refresh your memory, those

two acquisitions were General

Cinemas, as I just talked about,

General Cinemas was the ninth

largest theater circuit in the

United States, 66 theaters, 621 screens.

We bought bought company out of

bankruptcy, at a very attractive

multiple less than four times.

That acquisition will add

around $300 million of

revenues, $46 million of

adjusted EBITDA on a one-way

basis, and as I just said a moment ago, it closed

technically on the first day

of our fiscal '03 year, but we

substantially completed in our

fiscal '02 year.

The other acquisition that we

completed was a circuit in New

Orleans called Gulf States,

five theaters, 68 screens.

This was a circuit that was

the New Orleans market share

leader.

That acquisition we expect to

add $40 million of revenues,

$8 million adjusted EBITDA,

and that closed in our

fiscal '02 year on March 15,

2002.

So with that, I'm now going to turn the program over

to Phil Singleton, who will

update us on asset quality, as well as the

integration acquisition

integration status report.

Thanks, Peter.

When you look at AMC the

first thing that you'll see is

we have a leading high-quality

asset base that is second to

no one else in the market.

LTM for the period ending 3/28

of this year, calendar '02, we

counted fiscal year-end we

counted 3520 screens and 247

locations.

The slide you're looking at shows the AMC

screen portfolio segmented

into three types of theaters:

mega-plexes, something we

call "continuing

multi-plexes," and disposition

multi-plexes.

The definition of a mega-plex

is generally a stadium-seated

theater -- stadium seating in a theatre that's built since

1995.

It's usually 14 or more

screens, and but stadium

seating is really the

discriminator or defining

factor.

A continuing multi-plex in our

definition is a slope floor theatre

that has a protected real estate

situation that makes it a

viable economic unit for

several years to come.

At least three to five, if not

more.

A disposition multi-plexed are

theaters that we've targeted for

disposition or the next three

years.

An example of a continuing multi-plex would be our Century City

in Los Angeles, in the heart of Century City our

Phipps Plaza in the Phipps Plaza Shopping Center in the heart of Buckhead in

Atlanta, our Kabuki in Japan

Town in San Francisco, or Marco in

Philadelphia.

As you can see on the slide,

the mega-plexes in green and the

continuing multi-plexes in

blue account for 92% of our

overall screen count.

And in that group is what I

call "keepers," they're going to

be high-performance theaters

that will continue to be very

viable and high-quality for

years to come.

Disposition multi-plexes

represent only 8% of our remaining

surface screen count, and it's important to

note that even as a group 5.2 million,

they are all cash-flow

positive.

AMC's high-quality asset base

shows up in the market place

as well,

as you can see on this slide.

Based on the individual

theater box office results for the LTM period

through March of '02 this year,

calendar '02, as tracked by

Entertainment Data, Inc., the AMC

circuit had 52% of the top 50

theaters in North America, and

as you can see, no other

competitor, either regionally or

nationally, comes anyway near

having the high number of the

industry's top performing

theaters.

Lowe's Cineplex even with their New

York locations only had 6 on this chart.

In fact, Edwards is now part of

the Regal Group and Century National Amusement

and Movie Call are regional

players that have done a

little better job in situating

their locations within the

regions they're located.

I think this is probably my

favorite slide.

And I know my partner Dick Walsh who has

joined us this time loves this slide

also.

It's a very high number of

battleships in the AMC armada

and he wants a lot more.

I think the bottom line summary of

this slide and the previous

slide is that more high-quality

assets in your portfolio means

more high-volume, high-performance theaters in

the marketplace as well, and

right now AMC's asset quality

is the best in the business.

Now I'd like to report on

integration status of the Gulf

States and General Cinema

acquisitions.

We took possession of Gulf

States on 3/15 of this

calendar year, '02, and General

Cinema on 3/29/02.

The integration timeline for Gulf States

was planned to be about two weeks, and for General

Cinema for about four.

Our strategy target of having

all acquisition theaters totally

assimilated and fully contributing

to our '03 business plan by the release of

the first summer anchor film "Spiderman"

on May 3rd. And it was a fairly

ambitious time line, it was practical

in our estimation.

As it pro logged, to cut over, I should tell you that

we were fortunate to have very

cooperative home office teams

in the acquisitions circuits both in

Boston and New Orleans who nicely

facilitated the acquisitions.

And at this point, all but

roughly about 15 to 20 people

in General Cinemas Boston have

been released with attractive

yet fair holdover bonus and

severance payment.

By the end of June, that count should

be down to about half dozen personnel, and by

the end of September, we

anticipate everyone will be

gone and also should be out of the

office leased to them by then.

The home office staff

disposition at Gulf States was

handled by the owner, was not an

issue for us.

Good planning preparation and

hundreds of hours of our

transition teams invested in

the effort resulted really in

a seamless cutover of both

circuits on schedule and on

budget.

Internally, that included areas such as

our point of sales system, which

we were fortunate in General

Cinema's case they had the same Radiant

System, the same point-of-sale system computers that we had.

Accounting our marketing group including

our frequency program, Movie

Watcher, our Internet ticketing piece , payroll, MIS,

virtually all the other

corporate systems, it was a

pretty smooth cutover due to

the planning and time involved

in figuring it out.

Externally, the guests noticed virtually

nothing by the end of the

second weekend.

Our film suppliers also

complimented us on how smooth

and coordinated the cutover

was, and in fact our

co-op agreements, which were to our

advantage, actually began on

the first week of the cutover,

which was a good deal for us.

And there were virtually no vendors and -- glitches and

switching to the vendors and

suppliers in both, in all the

markets that the acquisition

theaters are located.

Likewise, our re-branding is

on schedule.

The newspaper advertising along with the

cutover of General Cinema's

Credits, which is their frequency program, to our frequency

program, which is the AMC Movie Watcher

program, was accomplished actually by the

end of the first week.

Conversion of General Cinema

theaters to the AMC admission and concession price

model, which included changing

all internal and box office concession

signs, was completed by 5 -- by May 3.

And I might add with the

neutral or positive impact on

both average ticket price and

concession per head in every

location.

Staff and management

changed over our uniform

suppliers actually to keep up with us was

essentially completed by the end of April.

Exterior resigning for Gulf

States will be completed actually by

tomorrow, on May 17.

And General Cinema

should be done by the middle

of June, 6/15.

And changeable internal collateral

signing has basically been

resigned in both circuits and

fixed internal signings should

be done by the end of July.

Lastly, and probably most importantly, the AMC cultural

integration is proceeding

nicely.

We launched transition teams

into virtually every

acquisition market.

In fact, we inserted one key AMC management

person in every Gulf States

and every General Cinema theatre for

the first three weeks of

possession. An assembly of all

the managing directors of all

AMC locations and acquisition theaters followed the

fourth week in April in Kansas

City, and it was a high-level

meeting that combined the role with the new

AMC mission statement and

operating fundamentals with a focused

orientation program for our newly acquired

theater teams.

That meeting in the North America [INAUDIBLE] as we

called it was very well received

by all of our former Gulf

States and General Cinema

managers, and it moved the meter

dramatically in my estimation in terms of

rapidly integrating these folks

into the AMC family.

The second transition team is actually

hitting the ground this week for a two week tour in all the

acquisition markets to backstop any build-up of

operating pressure due to the

opening of "Star Wars, Episode Two"

which actually opens

officially today.

Actually, last night, midnight

shows were launched.

Finally, we have an AMC Basic

Training Road Show underway, and it began

last week and will run through

the end of June that

reinforces to our new management team again, our new

mission statement, operating

fundamentals and guest service

policy.

So to report to you in summary,

our acquisition integration

status, I'm pleased to report, is on schedule.

It's under budget in terms of

projected transitional costs,

and with essentially -- within

five weeks of taking

possession, we have all former Gulf

States and General Cinema

acquisition theaters fully

assimilated and contributing

to our opening business plan as

we launch into one of the most

attractive film product Summer seasons in

recent years.

With that summary, I'll turn it over to Craig for review of the

industry background.

Thanks, Phil.

Before we discuss AMC's

financial results for the

fourth quarter and full fiscal

year, I'd like to provide some

industry statistics for the

fourth quarter that I think

will serve as a good backdrop

to our next discussion.

As you see on the slide, as we

track the box office in North

America, admissions revenues

were up 16% over the fourth

quarter of last year.

Of that 16%, we estimate that

the attendance increase accounted

for 11%.

Increasing from about 337

million last year to

approximately 374 million this

year.

The balance of the box office

increase would then have been

accounted for by increases in

average ticket prices, which

we estimate were up from about

$5.56 last year to $5.79 this

year, or 5%.

As we look at the performance

of the large pictures or those

that are grossing or expected

to gross over $100 million,

you see again it was up in

comparison to the same quarter

last year.

Three films released during

the current quarter of this

year expected to exceed $100

million in box office and

contributed a total of $457

million, compared to three

last year that contributed

about $415 million, and just by

reference, the current fiscal

year films would be "Ice Age",

"A Beautiful Mind", and "Blackhawk

Down".

It's interesting to note that while

the over $100 million

films did produce more box

office compared to the same

quarter last year, really the

strength of the quarter's box

office performance came from a

very full release slate of

pictures.

37 films were wide released

during the fourth quarter of

this year, versus 31 films

last year.

So let's now look at AMC's

results for the fourth quarter

and as we do, I'd like to

reference back to those

highlights that Peter gave

you.

First of all, record revenues

and adjusted EBITDA up 41% in

the quarter.

Also an improvement in

adjusted EBITDA margin.

Keep in mind that as we look at

these numbers, our acquisition

of General Cinema was

finalized on March 29th, and

that would be the first day of

our new fiscal year.

So the numbers on the slide

are not pro forma for the

acquisition, but they are the

numbers that we will report in

our annual report on our SEC

filing.

Total revenues, as you can see,

are up $49 million, or up 17%

over the same quarter last

year.

Total revenue performance was

driven primarily by increases

in attendance, which was up

12% from 36.3 million last

year to about 40.5 million for

the current quarter.

Our 17% comp on revenues and

12% comp on attendance both

out performed the industry

comps of 16% on revenues and

11% on attendance,

respectively.

Adjusted ebitda increased $11

million, or 41% over the same

quarter last year.

The momentum of the box office

certainly played a role in

these results.

While not shown on the slide,

as we noted earlier, our margin

percentage increased pretty

substantially over the prior

year, 9.3% in the fourth

quarter of last year to 11.2%

in the fourth quarter of the

current year.

Theater closure activity has

slowed, with only 24 screens

coming offline during the

quarter.

And most of these screens came

offline at their lease

expirations, so there was no theater closure

cost incurred during the quarter.

You see net cap of $30 million,

that reflects the slightly

higher increase in our number

of screens that were added

during the quarter, compared

to last year.

Average screens operated were

also up slightly, reflecting

these new openings.

As we turn to the fourth

quarter results, again, taking

you back -- or excuse me, to the full

fiscal year results, again,

taking you back to those key

highlights, record revenue

and adjusted EBITDA for the

full fiscal year, and again on

a full fiscal-year basis and

improvement in our adjusted

EBITDA margin.

Total revenues increased $126

million or 10% over the same

quarter -- or over the full

year last year, excuse me.

Total revenue performance

again was driven by increases

in attendance,

reflecting the strong box

office, and by increases in

total revenue per head, which

really reflects the pricing

initiatives.

Attendance increased from 151

million in fiscal '01 to 159

million in fiscal '02,

an increase of 5%.

Adjusted EBITDA up 20% for the

full fiscal year.

Adjusted EBITDA margin, again,

of about 100 bases points to 12%

for the current fiscal year.

Our aggressive closure program

over the prior years has

really left us with a very

manageable theater disposition

program.

Consequently, screens are

coming off at lease

expiration. And you can see

here that we disposed of 86

screens during the current

fiscal year versus about 250 last

year.

Net cap-x was $77 million for

the full fiscal year, very

much in line with our

expectations for the year and

down pretty substantially from last

year, which was $101 million

for the full year last year.

In line with our plan for the

year, we added about 214 -- we added 214

screens, versus 115 in the

prior year.

Average screens operated were

down for the full fiscal year,

indicating that our total

revenue and adjusted EBITDA

results were not driven by

additional screens operated

during the year.

As we noted earlier, but it's

not shown on this slide, we

did produce free cash-flow

positive results.

And if you've listened to our

conference calls over the last

several quarters, you'll

remember this has one of our

stated objectives. Fiscal '02

results will show free cash

flow of $14 million, which is a

substantial improvement over

the prior year.

Turn now to look at our

capitalization and liquidity.

And again, think back to those

highlights that we gave you at

the beginning of the program.

Lower leverage and increased

liquidity are really the key

points here.

Our acquisition of General

Cinema was closed in the first

ever fiscal year.

However, we are showing both

the actual capitalization and

pro forma capitalization on

this slide, so it's the

pro forma numbers include the

impacts of the GC acquisition.

As a result of the financing

transactions that we conducted

in fiscal '02, where we

raised a total of $533 million

of capital, both debt and

equity, our balance sheet has

substantially strengthened.

Those financings, combined with our

improved operating results,

have also improved our overall credit

profile.

At fiscal year-end, our

balance sheet reflects

strong liquidity with $219

million of cash, and this combined with

the full availability of our

$425 million revolving credit

facility, gives us ample

flexibility to continue to

execute our business plan,

including additional

acquisition and consolidation.

At quarter end, we had CIP cap-x

of $37 million.

Now, those are dollars that are

invested in theaters that have

not yet opened, really

represent the cash equivalent

and we'll use that number here in

a minute as we look at

leverage.

Total debt was $653 million, comprised of our

senior sub-debt since there were no

borrowings on our revolving credit

facility.

Net debt of $434 million, is

down from about $496 million

at the end of the last

quarter.

And that reflects the strong

cash flows for the quarter.

At quarter end, our leverage

was 2.7 times, compared to the

requirement under our credit

agreement of 5.5 times.

The ratio is further reduced if we

adjust for the CIP cap-x. As I noted earlier,

the leverage ratio drops to 2.5

times.

On a pro forma basis, our total

debt increases to $726 million,

from the cash and additional

subdebt that we used in the GC

acquisition.

However, because of the low

multiple that we paid on this

transaction and our use of

equity to fund part of the

acquisition price, our

leverage is further reduced on

a pro forma basis to 2.4 times.

At this point, I'd like to

provide some guidance on our

fiscal '03 year, which will

include the full year impact

of the General Cinema and Gulf

States acquisitions.

First of all, the first three

statistics on this slide

relate to the industry that is

the North American Box Office.

And as you can see, we believe

that the Box Office has

potential to achieve between

6 and 8% growth over our

next fiscal year.

I do want you to keep in mind

that we are looking at the

period from April 2002 to

March of 2003, much has been

written and talked about the

"calendar '02" Box Office, which

of course our fiscal year would

include nine months of

"calendar '02."

But very little is known about

the pictures that will be

released in our fourth fiscal

quarter, that is, the period

of January '03 through March

of '03.

Having said that, however, we still do

believe that the box office will be

in that 6 to 8% range.

Of the 6 to 8%, we can break

that down into both pricing

and attendance, and we believe

average ticket prices for the

industry as a whole will

average about a 5% increase

over last year.

And there could be attendance

growth, real growth, between 1

and 3%.

After considering these

estimates for the overall Box

Office, we believe that AMC

adjusted EBITDA will range

between 210 to 225 million

over the next fiscal year.

And we also show we're

currently planning net cap-x

of $44 million, which is net

of a $44 million plan sale

lease-back transaction.

So, with that I'd like to turn the

program over to Dick Walsh,

who will preview the upcoming

film product.

Thank you, Craig.

There are three

characteristics that describe

this year's slate of Summer

product.

Because of what is already in

the marketplace, the industry

is experienced a solid and

early start to Summer.

There are strong anchor films,

or sequels, if you will, that

have a built-in audience and

as important there is an

attractive slate of other key

films that will have huge want-to-see

due to the popularity

of the actors in those films.

This year, Summer started

early on April 19th with the

release of Universal's

"Scorpion King".

This is an example of a

growing trend by the studios

to release high-profile

product throughout the year,

and not just in Summer or the

November-December period.

"Scorpion King"'s $36 million

dollar opening was the biggest

ever in April.

That was followed up two weeks

later, on May 3rd, with

"Spiderman"'s opening,

weekend gross of $114 million.

By far the biggest ever.

It's also the fastest to get

to $200 million cumulative gross,

taking only nine days.

Having dropped only 37% from

its record-breaking opening

weekend, there's no telling

where this picture could end

up.

About nine or 10 hours ago,

depending on what time zone

you're in, "Star Wars Two"

opened to sellout crowds at 12.

We have 116 units reporting in

with a gross of $1.2 million

for those midnight shows.

An average of just over

$10,000 per location.

Obviously, that picture is off

to a terrific start.

The rest of the Summer looks

very solid.

With a slate of sequels and

other high-profile product

entering the marketplace.

On 5/31, "Sum of All Fears",

starring Ben Affleck as Jack

Ryan based on the Tom Clancy

novel.

On 6/7, "Bad Company" with

Anthony Hopkins and Chris

Rock, produced by Jerry Bruckheimer.

On 6/7 "Divine Secrets of

the Yaya Sisterhood", starring Sandra Bullock and Ashley Judd,

based on the best selling book

by Rebecca Wells.

On 6/14, "Scooby Doo", live action based on

the animated TV show.

On 6/21, "Leo and Stitch",

which is Disney's Summer

animated movie.

Also on 6/21, "Minority Report",

starring Tom Cruise and directed

by Steven Spielberg.

Then as we head into the July

4th weekend, the traditional

start of the back half of the

summer, on 6/28, "Mr. D",

starring Adam Sandler and

Winona Ryder.

On 7/3, "Men in Black 2" opens.

In 1999, the original grossed

$250 million.

On 7/12, "Road to Perdition",

Tom Hanks and Paul Newman directed by Academy Award winning Sam Mende.

7/14, "Stuart Little Two", two

years ago the first one

grossed $140 million.

On 7/19, "K-19: The Widowmaker,"

starring Harrison Ford, a true

story of a Russian nuclear sub

during the height of the cold

war.

On 7/26, "Austin Powers 3".

The last one grossed $205

million in 1999.

"Signs" opens on August 2nd,

starring Mel Gibson, written

and directed by M. Night Shamalan.

On 8/7, "Spy Kids 2".

Last Spring, this was a

surprise picture for everybody

in the industry, and it went

on to gross $112 million -- the original.

And then in on 8/9, "Triple X,"

last year's big breakout action star, Vin Diesel,

stars in this picture. This

time he's an extreme sports

athlete turned secret agent.

With these highly commercial

titles flooding the lucrative Summer

marketplace, combined with the

fast start the industry is

already off to, there is a high

likelihood that this could be the

highest grossing Summer of all

time for the industry.

With that, I'll turn it back

to Peter.

Okay.

I think, Crystal, we're ready

for the Q&A portion of the

program.

At this time, I

would like to remind everyone

in order to ask a question,

please press star and then the

number one on your telephone keypad.

We'll pause for just a moment to

compile the Q&A roster.

Your first question comes from

Tim Wallace from Bank of

America.

Mr. Wallace, your line is

open.

You can hear me?

Yes, we can hear you, Tim.

I'm sorry guys, hey it's John [Jenetis] calling in for Tim.

A couple of quick questions for

you.

On the closing expense side,

I know you mentioned that you're

seeing slow in closing for you

guys.

How about the industry?

Is that moving in line or is

that a slowdown as well in

terms of theater closings?

Has -- is it more or less in line

with your expectations, I should

say?

Probably a little less.

Probably a little less.

I think one of the things you see when

the box office is as strong as

it is, that some of the

underperforming assets in the

industry will hang on a little

bit longer.

So it's -- you know, there has been net

reduction in screens to date

this year.

Probably not as many as we

would like to see.

Okay.

Great.

Are

you guys going to have

proformas for GC on a

quarterly basis in your

filings?

Yeah.

We will provide that,

certainly as we go through our

quarters in fiscal '03, to

make the discussions more

relevant and the comparisons

more relevant,

we'll provide pro forma FO 2

numbers by quarter, going

forward.

Great.

Thank you.

You're welcome.

Your next

question comes from Jill

Cursick from Salomon Smith

Barney.

Thank you very much.

Good morning.

Could you give us a

sense of what your free cash

target is for fiscal '03, and

secondly, if you could perhaps

walk through some of the terms

on the "Star Wars 2" movie.

Are concession revenues

involved in payments to Lucas?

And then finally, I know you

mentioned briefly that some of

the smaller theaters are not

coming off line as quickly as

you thought.

Have you revised expectations

of theater disposals over the

course of the year given the

breakout success of the box office?

I wonder if that might not

happen as quickly as you

anticipate.

Thank you very much.

I'll try the first one on

the FO 3 free cash flow

estimate.

If you take the range of --

guidance we gave on adjusted

EBITDA and then the net cap-x

of $44 million, the missing

component would be interest,

and we believe that we'll

probably see net interest in

the 70 to 73 million range

next year.

Which would give you about $85

million of free cash flow in

fiscal '03.

Great.

Jill, in the screen --

industry screen question, I

guess the -- one of things

that we've done is, if you

look at the calendar year through

the end of March, you have

about 175 screens coming off

line.

If you annualize that number,

which represents a year-end

screen count of about 34,200,

that's a little higher than at one point in time

we were looking

at that year-end screen count

being around mid-33,000 range,

something like that.

So, I think the relevant thing

there is that if you go ahead

and if you track on our

attendance assumption that we're

making for the calendar year

and divide that into that

screen count, you find that

the attendance per screen on

even that, if you will provide

higher year-end estimated

screen count, which show another

year of attendance per screen

increases on a macro basis for

the industry. To refresh

everyone's memory, we saw this

reversal in attendance per

screen in the 2001 calendar

year.

Where we saw that that attendance

per screen grew about 7% over

the prior calendar year.

And that was as I said a

reversal of basically seven

straight years of declines in

attendance for screens.

So, that's a metric we watch in terms of the health of the

industry, and we think that it's going to be

another healthy year for that

metric.

What are your projections, Peter,

going forward over the next

couple years?

For industry screen count.

You're pushing me, Jill!

Sorry.

It's hard enough to go out

one year.

I'd say -- we don't have at

this point a fiscal or

calendar '04.

We just have to get back to

you on that.

But calendar '02, we are

thinking around 34,000ish at the

end of year, seems to be

reasonable at this point in time.

Okay.

Great.

And on the terms for "Star

Wars"?

In terms for "Star Wars,"without getting

specific, they're high.

The idea that George Lucas is

getting some of the concession

revenues is misleading.

That is not happening with that.

And we believe the picture

will be a strong performer in

the marketplace, and you know we're

always watching our film

costs.

But we're ultimately focused

on retention, and in general

these high performance, high

cost films generate far greater

retention dollars than the

lesser films in the

marketplace.

So, we certainly will enjoy a

fruitful run on "Star Wars,"

and everyone will be happy

with how this all worked out.

Great.

Thank you very much.

You're welcome.

Thank you for the call.

Your next

question comes from Mark Renar

from Morgan Stanley.

Yes.

Good morning, gentleman.

Congratulations on a strong

quarter and fiscal year.

I just have a couple of questions.

One is, do you have a target

for your theatre lease expense

for the next fiscal year?

Theatre closure expense?

No, the rental --

Lease expense.

Yes.

Yeah, it looks like around --

again, this would be with, on a

pro forma basis, about $300

million.

Okay.

That would include General

Cinema and the Gulf States

acquisition.

Okay.

And then a follow-up question:

Given the availability and

your stated intent to acquire

more theaters, could you give

more guidance on what theaters

you might be targeting and

at what point do you

start diluting your asset

base?

Given you have the highest

screen count per theaters.

What type of acquisitions are

you going after?

Well, we -- our target list

is very short at this point,

but very focused.

And I would say that it

probably wouldn't be a good

idea to be naming specific

circuits, but one of the

things that we talked about

when we were on our equity

road show was really the

characteristics of the

acquisitions, and this kind of

goes back to who we are.

We're a major DMA player, top

50 DMA player, so it would stand to reason that we'll look

at acquisitions that really

enhance our footprint and top

DMAs major markets.

And in addition to that, the

other criteria that we look at is

really the underlying quality,

the asset, and that's really on a micro basis.

The types of theaters that the

circuit would have.

And when you look at those two

criteria, you will find that

there are a couple of real big

major circuits out there that

would fit that criteria.

But -- and then in addition to

that, there would be some

smaller, local/regional

circuits that fit that

criteria.

So, you know, we've got our eye on

several of them, and the thing

about acquisitions is you can

never quite plan on when

they're going to happen.

You just have to work 'em, work 'em

work 'em, work 'em.

But we're certainly working

them.

Okay.

Great.

Thank you.

Your next

question comes from John

Maxwell from E and T [INAUDIBLE].

Good morning, gentlemen.

Peter, kind of follow-up to

the last question, I guess you

already talked about terms

of -- you know, it seems you got a pretty

good war chest of liquidity.

Absent -- you know, closing on

an acquisition, do you just

keep the free cash flow

building, or would you then

kind of -- you know, if the acquisition targets

aren't there, then start refocusing

on maybe a more aggressive

development program?

Oh, I wouldn't say aggressive

development program.

One of the things that we have talked

about it terms of our

strategic plan to refresh

everyone really three

components: Focus on the

fundamentals, which is really

driving operating efficiencies,

optimizing our theatre

portfolio, and then really

enhancing our business and

brand through growing

ancillary revenues, and it's

really the second component that we're

talking about.

What we've said is that there

will be, as you look at

optimizing our theater

portfolio, really three

components of that, selective

strategic new building,

continued disposition and

acquisitions.

So, on the new bill front, you

would expect for us to be in

the vicinity of a hundredish

screens a year, the next few

years, in which we consider to

be a sustaining growth rate in

terms of new-build activity.

And our focus on new builds is

very as it has historically been very

high-quality, real estate

projects, really the triple-A

real estate projects, with the

high-quality theater unit at

the high-quality real estate

project.

So, I wouldn't see us stepping

on the accelerator just

because we have a little more

money in our pockets.

We would be more -- we are going to be very disciplined

in terms of how we grow and not go out and do bad

deals, if you will, for the sake of putting that

money to work.

Okay.

And also, just kind of a

follow-up on the acquisition

front.

Is it your sense that there -- it would

be more expensive now just

based on the state of the

industry, or really isn't a

factor, it's more of a

question just finding the

right fit?

I think it's the latter.

I think it's really finding the right

fit at this point.

Because, you know, the thing -- the kind

of circuits that we're

interested in we generally

have a higher quality

characteristic about them

anyway, and really for us what

we're paying attention to is

to make sure that

we bring cash flows into

the equation in a way that

create value. And that's how

we're approaching it.

Okay.

Thank you very much.

Your next

question comes from

[INAUDIBLE]

Hello?

Mr. [INAUDIBLE], your line is

open.

I'm sorry.

Kind of got muddled.

I'm sorry about that.

Hi, gentlemen. My question

pertains to film rental

expense.

In addition to "Star Wars",

this is number of sequels and

prequels, can you talk a

little about in the June quarter

and also in the September

quarter, thoughts about film

rental expense as a percentage

of admission revenues?

It's our belief that we're

probably going to track 100,

maybe possibly 200 basis points higher

than last year.

During this period.

We have -- we've already

experienced some of this.

While I applaud "Scorpion King"

coming into the marketplace, that was a

rather expensive picture, and

of course you can imagine that

"Spiderman" is expensive and

I'm looking at first six weeks

of our fiscal year here, and

while our film rent expense is

up about 1.8%, percentage

points, which is 2%, and this

is on a same-store basis, our

retention dollars are up $4.7

million dollars.

Or 15% higher than a year ago.

So this concept that yes, we

are indeed paying more for the

product, we are also grossing

much more with that product,

and at the end of the day the

company is healthy because of

that.

Now, that is not to say that

we're going to take our eye

off the ball and just

willy-nilly pay film rent for

whatever needs to be to get

the job done.

We do focus on that.

We do watch it very closely.

But again, at the end of the

day, it appears to us that the

retention dollars that we're

able to take to the bank are

the most key component of that

whole dynamic.

I'd like to echo what Dick

has said and just make certain

that everybody understands

this retention concept.

It really is a gross margin

concept, and while we do look

at percentages that a film -- or

we're paying on a film, we

also keep our eye very closely

on retention, and that would

be the admissions revenue

less the film cost or for net

gross margin dollars, because

at the end of the day, you know, it's

dollars that you take to the

bank.

Great.

Thank you very much.

And I absolutely agree with

that strategy.

Thank you, Stewart.

At this time,

there are no further

questions.

Okay, great.

Well, then with that, we'll

close the call.

I want to thank everybody for

joining us today.

As you can tell, we're very

excited about the Summer

product.

Looks very strong.

We've kicked off with

"Spiderman" and then last

night, "Star Wars."

but I would say that as

excited and as great as the

strong product is, what

excites us more is really the

strength of your company.

And with our quality asset base,

the statistics still walks

through and will continue to

walk through, that is, our

circuit of high-volume,

high-performance theaters that is

really unsurpassed in our

industry.

Our proven management team and

our unsurpassed financial

resources, we look very

forward to continuing to

successfully execute our

strategic plan,

and continue to build AMC as

we do that at the single -- a

single

theatre brand in the

marketplace.

So with that, we'll see you

next quarter.

But hopefully, before that

we'll see you at the movies.

Thank you for

participating in today's AMC

Entertainment, Inc. conference call.

This call will be be available

for replay beginning at 1 P.M.

Eastern time today through

11P.M. Eastern Time on

Thursday, May 30th. The

website is www.amctheatres.com.

You may now disconnect.