AMC 電影院 (AMC) 2003 Q1 法說會逐字稿

Good morning. My name is Judy and I will be your conference facilitator today. At this time, I would like to welcome everyone to the AMC Entertainment, Incorporated fiscal year 2003 first-quarter conference call hosted by Peter Brown, chairman and chief executive officer of AMC Entertainment, Incorporated.

Any forward-looking statements contained in this call which reflect management's best judgment based on factors currently known involve risks and uncertainties. Actual results could differ materially from those anticipated in the forward-looking statements included herein as a result of a number of factors including, among others, the company's ability to enter into various financing programs, the performance of films licensed by the company, competition, construction delays, the ability to open or close theaters and screens as currently planned, political, social, and economic conditions, demographic changes, increases in demand for real estate, changes in real estate, zoning and tax laws, and unforeseen changes in operating requirements.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer period. 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 very much, Judy.

Good morning, everyone, and welcome to the fiscal 2003 first-quarter earnings conference call for AMC Entertainment, Inc.

As Judy said, I'm Peter Brown, chairman and chief executive officer of AMC. Joining me on the phone today are Craig Ramsey, our CFO, Phil Singleton, our COO and Dick Walsh, chairman of our film group.

Now, Craig and I will be doing the formal part of the presentation today, and Phil and Dick will be joining us for Q and A, so on that note, let's begin.

As was noted in the press release that went out this morning, our revenues and adjusted EBITDA were both fiscal first-quarter records. Now, the strength of the box office, our industry-leading portfolio of theaters and the continued successful execution of our strategic plan all combined to produce this quarter's outstanding record results.

Now, as we look at those results and we compare them to last year, because we completed two acquisitions essentially at the end of our fiscal 2002, the acquisition of Gulf States and General Cinema, we think that the most accurate way to look at the company's performance on a year-over-year basis is to treat last year as if the two acquisitions had been completed at the beginning of that fiscal year.

In other words, we compare fiscal 2003 to fiscal 2002 on a pro forma basis.

At $462 million, our revenues were 19% higher than pro forma revenues of 389 million in the same period last year. Our adjusted EBITDA in the quarter of $62 million represented a 58% increase over pro forma adjusted EBITDA of $41 million in last year's first fiscal quarter.

This marks the seventh consecutive quarter of year-over-year increases in both revenues and adjusted EBITDA. Our adjusted EBITDA margin continued to improve on both a year-over-year and sequential basis as well, and in addition to our adjusted EBITDA, we pay close attention to a measure that we call after-tax cash flow or ATCF, for short.

Now, ATCF is the bottom-line cash that our business earns. It's derived by taking our net earnings and adding back non-cash charges such as depreciation and amortization. We then deduct from ATCF our net capital expenditures to get our measure of free cash flow.

Our ATCF for the quarter was $40 million, which represented a 127% increase over last year. Our net capex in the quarter was $20 million. So we generated, in essence, $20 million of free cash flow in the quarter.

Now, the free cash flow that we're generating is enabling us to continue to reduce our leverage, and at the end of the quarter, our leverage ratio, as measured by net debt to last 12 months adjusted EBITDA was 2.3 times, down from 2.7 times what it was at the end of the March quarter.

Our liquidity position improved since the March quarter as well. At the end of June, our total availability, which is defined as our cash on hand together with the funds that we can borrow on our revolving credit facility, stood at over 600 million, up over $30 million from where we were at the end of the March quarter.

Lastly, in terms of the quarter's highlights, the acquisitions I - the acquisitions I mentioned a few moments ago, Gulf States and General Cinema, have now been fully integrated and are contributing nicely to our cash flow picture, as we'll now take a look at.

The General Cinema acquisition was closed on the first day of our current fiscal year, and the Gulf States transaction was completed at the end of our last fiscal year.

Now, to refresh everyone's memory, General Cinema added 621 screens at 66 locations, and Gulf States added 68 screens at 5 locations to our circuit portfolio.

Now, we pro forma'd the GC acquisition to contribute who million dollars of adjusted EBITDA in fiscal '03 and the Gulf States acquisition to contribute 8 million. As you can see on this slide, in the first fiscal quarter, GC contributed $12 million of EBITDA which represents 30% of what we had pro forma'd for the entire year, and Gulf States contributed 3 million, which is 47% of what we pro forma'd for the full year.

Now, as a frame of reference, looking back over the last 18 years, AMC's June quarter EBITDA contribution as a percentage of the full fiscal year has averaged 20%. So you can see that these acquisitions are contributing nicely, and our ability to get them integrated quickly has been key in being able to maximize their EBITDA contribution.

AMC continues to differentiate itself in the theatrical exhibition industry by the quality of its assets. Now, though our size is large, in fact with 3,505 screens at 250 theaters, we are the second largest theater company in the world, our focus has always been on quality, not quantity.

Now, when you look at quality, one of the best indicators is very simply whose theaters are doing the most business in the marketplace at the unit level. Week in, week out, box office revenues for all North American theaters are tracked by a data service called EDI, which is a division of A.C. Nielson. We and everyone in our industry are able to see, through EDI, the level of business at just about every theater in the market is doing. Again, as measured by the box office revenues that those theaters produce.

Now, as we do with the AMC circuit, we watch the EDI data on an LTM basis and we generate a list of top 50 theaters in the market. As you can see from this slide, AMC dominates this list, with fully 50% of the top 50 theaters in North America at the end of June. We have more top 10 theaters than the next five circuits combined.

Now, another key measure of asset quality is screens per theater. At 14.2 screens per theater, AMC leads all of its industry peers. Now, this is an important statistic because as we enter the digital age of movie-going and theaters becomingly become more diversified in their delivery of content - for example, the broadcasting of concerts - the ability to have shelf space - that is to say, screens at the unit level - to be able to do this while accommodating the demand for the core feature film product will be an absolute competitive advantage.

One of the keys to AMC's success over the past several years has been our ability to continually upgrade the quality of our theater circuit by disposing of older, obsolete theaters, while at the same time bringing on newer, higher-performing theaters.

Since the end of fiscal 1995, and through the June quarter, we've disposed of almost a thousand screens while adding to our portfolio a little over 2100 screens.

We expect this simultaneous addition and disposition activity to continue in our current fiscal year, as we add a little over a hundred screens while disposing of almost a similar amount, 91 screens, as shown in the red part of the bar chart on this slide.

Now, the net effect that this will have on our overall portfolio will be to increase the screen per theater count to 14.7, thus continuing the improvement of the quality of our circuit.

Now, we have some very exciting new theaters that we'll be bringing on-line later this year, and I look forward to updating everyone in future calls about how these theaters are doing as we get them open.

With the overall quality of theaters in our portfolio, we're in the fortunate position of not having to spend large amounts of capex dollars to keep our circuit moderate and industry-leading. As a result of this, our free cash flow position is solidly positive and growing, as this slide shows.

We're free cash flow positive in fiscal '02, and on a pro forma LTM basis at the end of the June quarter, our free cash flow was over $50 million as you can see on this slide.

Free cash flow will allow us to lower our leverage without sacrificing EBITDA growth, due to the fact that our asset base is of such high quality. Now, this isn't to say that we won't continue to add new units or consider attractive acquisition opportunities. The key on both of these fronts will be, as it always has been for us, quality. We will not get into an undisciplined size focus scan. We will be continued to guide by the principle that has served us so well over the past few years and that principle simply being that bigger isn't better, better is better.

So on that note, I'll turn the program over to Craig Ramsey, our CFO, who will finish up the formal part of the presentation today with a more detailed look at the industry backdrop during the quarter, and of course our numbers.

Thank you, Peter. Before discussing AMC's financial results for the first quarter ended June 27th, let's first take a look at some industry statistics for that quarter that will serve as a good backdrop.

As we track the box office, admissions revenues during the quarter were up 25% from 1.9 billion in the first quarter of last year to 2.4 billion this year.

Attendance accounted for 20% of this 25% increase, as it increased from 339 million last year to 407 million in the quarter for the current year.

Industry-wide average ticket prices increased from $5.60 last year to about $5.86 this year, which accounted for the balance of the box office increase, or about 5%.

We always look at the top grossing film, performance of film grossing over $100 million. It was up in comparison to the same quarter last year and as you can see on the slide, we had seven films released during the quarter that are expected to exceed the $100 million mark at the box office, and in total, contributed about 1,341,000,000 during the quarter. That compares to 7 films during the same quarter last year that contributed 1,166,000,000. Now, while the - while the over 100 million films did produce more box office compared to last year, the real strength of the quarter in the box office during the quarter came from the performance of films under the $100 million mark. There were 37 wide-release pictures during the first quarter of this year, compared to 32 last year, so the box office enjoyed a very full release schedule.

Okay. Let's look at AMC's first quarter, and I'd like you to note that in the press release and in our slide presentation, we are comparing current quarter results with prior-year actual and also with pro forma, which, as Peter said, treats the recent acquisitions of General Cinema and Gulf States as if they had occurred at the beginning of the year.

Now, the majority of my comments will relate to the comparison with pro forma results last year, since I believe that's the most relevant basis for comparison.

On a pro forma basis, total revenues increased 73 million over the same quarter last year, increasing from 389 million to 462 million. This record-breaking performance was driven primarily by increases in attendance, which were up 16% from 45.7 million last year to 52.8 million during the current quarter.

Increases in average ticket prices of approximately 4% contributed to the balance of the total revenue increase.

Adjusted EBITDA increased 21 million, or 50% over pro forma results for the same quarter last year, to a record-setting 62 million. The momentum of the box office and our ability to leverage the strong revenue performance, combined to produce these results that exceeded analysts' expectations.

Now, while not on the slide, it is important to note that we continue to produce increasing adjusted EBITDA margins which were up 280 - or 268 basis points or 10.6 last year to 13.3% during the current period. And the last three data points on the slide relate to our free cash flow results, and as you can see, the improvements that have been made at this point.

We define our free cash flow as net loss plus depreciation, amortization, and any other non-cash items, and believe that it presents the best picture of our operating performance from a cash generation perspective. APC was - ATCF was up 127% compared to pro forma last year. Net capex, while up over prior-year pro forma and actual amounts, is in line with our expectations, and it is indicative of our reduced level of new build activity.

Our free cash flow results, as we said earlier, show substantial increases over last year.

Now, since the pro forma impacts of General Cinema and Gulf States make it a little difficult to gauge the full-year performance potential of our circuit, we have presented a pro forma LTM information. I think Peter's introductory comments concerning the quarter apply equally as well to this LTM period. That is, record revenues and adjusted EBITDA, continued margin improvement, and after-tax cash flow up, and also free cash flow positive results.

I'd want you to note that the adjusted EBITDA performance of 226 million is above the upper end of the guidance range we provided on our last conference call, and we'll discuss revised guidance here in just a few minutes.

As we drill down to the key drivers and analytics related to the first quarter, we see that all are positive and confirm the strength of the first-quarter results. Screen additions include those that were added in the General Cinema acquisition, as we discussed a minute ago. We had one new built theater with 18 screens that came on-line during the quarter.

The increase in attendance per screen reflects the real growth in attendance that took place during the quarter. While we don't show it, you would - you'll be able to calculate on the press release that our film exhibition costs did increase from 53.8% on a pro forma basis last year in the first quarter to 56.5%, and this reflects the terms really on the two largest pictures during the quarter, "Spiderman" and "star wars." This percentage for the quarter is, however, lower than the 58.3% that we experienced in the first quarter of our fiscal 2000 year, which is when we had the last "Star Wars" picture on screen.

Now, we have discussed before that we focus both on percentages and on absolute dollars of contribution, and in this case, we look at the annualized amount of admission revenues that we retain after paying our film costs. We refer to it as film retention per screen.

And even with the higher percentages paid for film - for films during the quarter, our retention per screen increased by 12% on a pro forma basis.

As noted on the slide, G and A expense includes two one time items. First is a special compensation item related to the forgiveness of loans to the company's CEO and COO. Now, these loans were put in place in AMC's second quarter of fiscal 1999, and their purpose was to enable the executives to purchase shares as part of a secondary offering that the company was undertaking at that point in time.

The forgiveness action was taken in this quarter to recognize the extraordinary performance of the company and its senior executives over the past two years.

As most of you know, AMC was the only public theater company to successfully preserve value for its shareholders and all of its constituents in a - in the capital structure during a period of unprecedented industry distress which saw all of AMC's public company peers file for bankruptcy.

As well as most of our major peer competitors who were not public.

The company has performed and is continuing to perform well, as evidenced by this quarter's record results.

This exemplary performance has been recognized by this onetime special award.

Now, this charge is in G and A expense but because of its onetime special nature, it is excluded in our definition of adjusted EBITDA.

Additionally, our after-tax cash flow excludes the non-cash portion of this charge, which was approximately $11.4 million, and this is all detailed in Footnote 2 on the second page of the financial summary to our press release.

Now, the second noteworthy item in G and A expense is approximately $2 million of G and A incurred during the quarter related to the closure of the General Cinema corporate offices.

As Peter noted earlier, our acquisitions are fully integrated and contributing to cash flow, and in this case, the corporate offices have been closed at this point in time.

Okay. Let's turn now and discuss liquidity and capital resources. The financing transactions that we completed last year raised about $533 million of both debt and equity, and substantially strengthened our balance sheet as reflected in the column that's labeled the March 28th, 2002 pro forma.

The strength of our first-quarter performance enabled us to increase our liquidity and total availability. Note the increase in our cash balance and in our total availability, which includes amounts that are available to borrow under our unused revolving credit facility.

We also reduced our net debt from 557 million on a pro forma basis at the end of our fiscal year to 526 million at the end of the quarter.

Our improved adjusted EBITDA performance also enabled us to lower our leverage from 2.7 times to 2.3 times. Leverage is further reduced to about 2.1 times if we adjust for C IT capex and treat it as a cash equivalent.

This last slide, I think, ties together really everything that we've been here talking about today, and it shows you the three metrics that we managed the business on to create value for our shareholders. Those three being adjusted EBITDA, net debt, and our total share count.

Now, if we grow our adjusted EBITDA, and at the same time lower our net debt and manage our share count so that we're not diluting our equity base at a rate faster than we are reducing our leverage, then real fundamental long-term equity value will be created for our shareholders. It's really that simple.

As you can see from the slide, and based on the company's outstanding performance in the first quarter that we have talked about today, we believe the fundamental value growth dials are really lining up in the proper order.

At this point, we are estimating that our adjusted EBITDA for the current fiscal year should come in around - in a range of 220 to 230 million. This is an increase in the range that we gave you during our last quarterly earnings conference call in mid-May, and it would represent 7 to 12% increase - year-over-year increase over the pro forma adjusted EBITDA that we calculated for fiscal 2002.

Now, we did file a form 8-K that set forth those pro forma calculations on a quarter-by-quarter basis. We filed it on May 30th, for your reference purposes.

We believe that this new range is a conservative estimate, particularly since as you saw earlier our pro forma LTM adjusted EBITDA at the end of the June quarter stood at $226 million.

Now, equally important as the EBITDA growth in the equity value creation equation is what is happening to net debt. Things look to be lining up pretty well here also. At the end of our last fiscal year, again on a pro forma basis, our net debt was 557 million. As we just discussed, due to the strength of our operating results in the first quarter, we were able to further de-lever the company and reduce net debt to 526 million. With free cash flow that the company is now generating, we project our net debt balance at the end of our fiscal 2003 year will be in a range of 460 to 470 million, or down 15 to 17% on a year-over-year basis.

It is important to note that our reduction of net debt is not coming at the expense of equity issuance that would dilute the equity value base. Here, we watch our total share count to make certain that is not happening. Now, we are estimating that our total shares, which consists of all classes of our common stock, our convertible preferred on an as-converted basis, and options assuming the treasury stock method, and total restricted awards, will be about 76.8 million at the end of our fiscal year. Which is just up slightly over the fiscal year 2002 number, and that's primarily due to payment in kind dividends on the convertible preferred stock that was issued in April of 2001.

So to summarize what this shows - slide is showing, our adjusted EBITDA is going up. Net debt is going down. And total share count is staying relative or basically flat.

That equates to the right direction for each of these metrics, as we continue to manage to create value for our shareholders.

So with that, I'd like to turn the program back over to Judy, who will open the floor for our Q and A session.

At this time, I would like to remind the analysts that in order to ask a question, please press star, then the number 1, on your telephone keypad.

Your first question comes from Tim Wallace with Banc of America Securities.

Thank you very much. Can you hear me okay?

Yeah. Tim, you're breaking up just a little bit but -

Okay. Yeah, I'm hearing a little interference there. Can you hear me?

Yeah, we can hear you.

Okay. Good. Just a couple of questions. It may have been on one of your slides and I don't have access to the slides right now, but your average spend per customer, could you update us on what that is?

Second, could you talk about your plans for upgrading your - digitally upgrading your plants, what your expectations are for the year.

And then if you could talk a little bit about - advertising came in a bit stronger than I had anticipated. If you could comment on what's driving that and what we should expect for the - for the next couple of years. Thanks.

Okay. Yeah. The average spend per customer, the concession per head, $2.39 for the current year, and $2.30 for last year, so it's up just about 4%.

Ticket -

Did you want the ticket also, Tim, or -

Yeah.

Okay. The total - let's just go to the total revenue per head, which was $8.49 for the current quarter versus $8.18 last year. Again, that's up about 4%.

Okay. Great.

The second question, on digital, we are in the - in kind of a test roll-out phase of a digital initiative with our on-screen advertising company, National Cinema Network, which would enable us to capture what we think are some real up side opportunities in the ancillary revenue area. We've - we've - we have some test markets where we are fully digitally equipped in our theaters. It's enabling us to expand the base of customers, and so we're quite encouraged with the results to date and expect to continue to roll out over the next 12 months and look for good up side potential. So that's where we are currently.

You did say NCN - you noted the NCN line was improved. We have seen some strengthening in the advertising market, and actually, NCN's revenues are up pretty substantially over the same quarter last year, up about 50%, and with a fairly substantial improvement in their adjusted EBITDA performance also.

Okay. Thank you.

You're welcome.

Your next question comes from Jill crew Dick with Salomon Smith Barney.

Hi. Thanks. Good morning.

What kind of box office expectations are you building into your current EBITDA forecast for this year, and any thoughts on the first-half box office for 2000 - for calendar 2003?

Secondly, I was hoping you could give us a sense of your - talk a little bit more about the acquisition outlook. We are seeing some smaller players picking up properties off the block, given the strong box office. How do you see acquisition prices changing in the current market, and what's your outlook for the balance of the year of how aggressively you guys are looking at acquisitions?

Thank you.

Thanks, Jill. We'll - I'll take the second half, and Craig can talk about the first half the first part of the question. Really, on the acquisition front, Jill, as you noted, I think most theatrical - one thing about when theater properties are normally sold or not sold is during the peak periods of the seasonality of the business, which is typically, as you know, the summertime and/or the holiday season between Thanksgiving and the new year. So, again, as you noted, there really is not a lot of activity as is natural at this - for this - at this time of the year for folks that are out there with theater properties.

Our approach - and I alluded to it in my formal part of the presentation - is, we have a typed short list of those properties that we would find attractive, both in terms of our asset quality metric as well as our market quality metric, and we are, as I said on prior calls, just constantly, constantly working those. They are transactions that you can't necessarily plan on happening because they involve complex dynamics between buyers and sellers, but we're constantly working on them.

But I think that the key point that I'd like to make in this call, and really in my formal comments wanted to make loudly and clearly, is that one thing that we won't do is we won't just acquire to create size. Our focus is on quality, quality, quality. Bigger isn't better, better is better, is the principle that guides us, and with that in mind, we're going to be very disciplined about how we approach these. And I think you're correct in your assessment that with the strong box office, people would have a sense - a better sense - or a more higher sense of the values of these underlying properties, but as we also know, box office is cyclical and at some future point in time may not be as strong as it is right now. In fact, will not be as strong as it is right now. And that may be a better environment for us.

But we'll do fine in the meantime with what we've got in our new build portfolio, and again, being disciplined about our approach.

The first half of the question, Craig will take.

Yeah. Jill, I think that the first question was what do we - what do we model in for the box office the rest of the year, and we've - we really are kind of sticking with the range that we gave in the first quarter, in the 6 to 8% range, which would - which would imply that we have a fairly conservative view on the balance of the year. And the January, February, March - that fourth quarter for us - is still quite a bit unknown at this point.

So 6 to 8%, we think, is a conservative position.

What does that imply for the balance of the year, in terms of box office for the balance of the calendar year, in terms of box office?

We believe that we're going to be very close, if not exceed, the second half of last year, and that's a very encouraging note because as you remember, the last two quarters of our fiscal year last year were very strong and we feel very confident we're going to be very comparable to those.

Great. Thank you.

You're welcome, Jill.

Your next question comes from Lawrence Bernard with Morgan Stanley.

Yes. Good morning. Just a couple of questions. One, on the expense, special compensation expense which you mentioned which I think you've detailed fairly, I'm just trying to get a sense. You mentioned that was a onetime charge. Can you comment on what the - what the original loan - the amounts of those loans? Could you give any predictions of what kind of any future expense might be, if any?

And the second question relates to concession costs. They're up slightly, 13.5%, as a percentage of concessions. Just want to see if you see that going forward - going down on a future basis, now that you're a bit bigger with Gulf States and General Cinema.

Okay. On the special compensation, the loans, again, I'd reiterate my - the point I made, were made in the second quarter of 1999. The loan balance was 10-point - the original loans were about 8.5 million in total. That - the charge that was taken in this quarter cleans up all of those loans, so in terms of going forward, there's no additional cost associated with any type of loan like that.

There will be no more, is the point.

With regard to your question on concession, if you were to - if you look at the press release where we go and present the pro forma, you'd find that our concession cost is actually down as it relates to last year same quarter pro forma. The general - now, this is primarily driven by a little higher concession cost of the General Cinema circuit.

Now, we've - we've brought it down a few basis points, and we expect to continue to do so in the future as we - as we integrate - continue to integrate their purchasing programs for concession items into the AMC contracts.

So the primary impact was related to General Cinema, and we do expect to be able to manage those down going forward.

Great. Thank you very much.

Your next question comes from Christopher Dickson with UBS Warburg.

Thank you very much. As you - talk a moment, if you would, about the disposals of some of the screens, and how many of your screens right now are either running at break-even cash flow or negative cash flow, and then I'd like to follow up a little bit on the adjusted EBITDA.

As I see it, if we backed out the onetime charge, your overall EBITDA is essentially flat year over year against an extraordinary revenue base. Are there any other contingent liabilities that may be floating out there that may affect EBITDA as we go forward, excluding, of course, the loan, which is effectively written off.

Okay. I'll try the first question on dispositions. We have gone through now and, I guess, updated our internal analysis of our forward look on screen dispositions, and as you know, Chris, I think as we've discussed with you before, we do look out five years, and with each of our theaters and try to anticipate changes in the market, and really where those theaters are going. So when I give you numbers here, we're talking about a forward look of a number of years, and we have about 350 screens that we would put in this category of disposition. And we'd probably see those rolling off in - you know, 90 to a hundred screens over the next three years.

And actually, as a group, that - those screens are performing at or very near break-even.

So, again, I - even with the general - integration of General Cinema, we do have a very - a very manageable inventory of screens, again, because we've been aggressive in the past.

The question on adjusted EBITDA, after the other charges, there are really no other charges contemplated at this time. As I made - noted in the earlier question about the loan cleanup, that is all of - all of the loan cleanup activity, and so there really aren't any others out there, if I understood your question.

Thank you very much.

Your next question comes from Bishop Sheen with Wachovia Securities.

Good morning, Peter and Craig and Phil and Dick.

Nice quarter. It's nice to see you guys take advantage of what clearly has been an up trend, and I would concur with you, it's hard to imagine the slope of this curve continuing.

A couple of questions because you've covered so much.

You've got nearly 200 million of cash, or had it, at the end of June. Has that cash position changed dramatically in the last couple of weeks?

Oh, not dramatically. We've probably had some - some net inflow, but not a substantial change.

Okay. What are you doing with so much cash? What do you plan carrying so much cash around on your balance sheet?

Well, I think it - it provides us an opportunity to be opportunistic. We continue to look at some acquisition opportunities. I think Peter was very pointed with his remark that we're going to continue to exercise discipline in terms of what we pay for any acquisitions.

It provides us to be - an opportunity to be opportunistic to pay down debt under the right circumstances or continue to de-lever the company.

All right. But so this is your dry powder if any expansion opportunities come up, but the way you were generating free cash flow - correct me if I'm wrong - that should more than cover your scheduled debt maturities over the next - well, over this fiscal year, over the next four quarters or so, is that correct?

Well, yeah, we would - we would have not really any debt maturities over the next year.

Right.

So we would be going into the market to either buy back or retire sub-debt.

Right. Okay. So that brings me to the buyback. Do you have - in your new bank agreement, and I'm - I can't remember in your bonds if you have any restrictive covenants, given your current financial status, that would prevent you from buying in your stock?

Yeah, Bishop, we do. We have covenant calculations on baskets, et cetera.

Right.

I think what I - I know where you're going with this question, and I think that really the simple answer is, we - particularly in this economic environment, and with a backdrop of some of the other industries that are out there, it's a great position in my view to be in, to have the kind of liquidity we have. And what we will do, as we have really been doing for the last 10 years, if you go back to '91 when Phil and I got involved, is we will look at what the most effective use of those cash resources will be to create shareholder value, and I expect that that will run your standard gamut of, you know, building projects in the sense of investing the money in the growth of the business, but also looking at what we need to do with respect to our capital structure, in terms of our debt securities, as well as our equity securities.

We just don't have anything today that we're ready to announce on any of those fronts, but I guess the summary point I want to make and reiterate is what we will not do is go out and be undisciplined with the use of cash [inaudible] either on a new build front or acquisition front. There is nothing that can - that can, you know, destroy value for all of our constituents in our capital structure. As we have seen in our industry, with those players that at times were larger than us, than putting that money to work in the wrong way.

Yeah. Well said. Clearly you seem balance sheet sensitive which seems to be the prudent thing to be in this sector and certainly in these times, and I've known you a long time, Peter, and I certainly believe you.

The other thing is, is there any capital challenge coming up that we should be thinking about in terms of dispositions in terms of chunks of cash needed to buy out leases, to close up screens? I know you have an orderly plan for dispositions over the next few years and you're always looking at that, but I'm just trying to anticipate any unanticipated capital challenges that go along with the - with the rescreening of your asset base.

No. The simple answer is no.

Okay. All right. One last question. I notice that you gave us in two different pieces - if I didn't get the ticket price wrong, ticket prices went from $5.60 year-ago quarter to 5.86 average price?

Yeah.

And that included the General Cinema? In other words, is that apples to apples on a pro forma or is that only the AMC chain?

No, that's pro forma.

Pro forma.

That's pro forma.

Yeah.

Okay. Very good. So it looks like total - and total spend went from 7.90 to 8.25 also pro forma?

That's correct.

All right. Thank you, gentlemen.

Your next question comes from Andy VanHouten with Deutsche Banc.

Good morning. Craig, I appreciate your patience and level of detail on the compensation charge and I just had a few follow-up questions on that.

In terms of the loans that were originally given to the officers, those loans were used a hundred percent to buy back stock or to buy stock in your secondary offering, is that correct?

That's right.

Okay. And of course you already answered whether there were any other loans outstanding or whether the company would continue to make loans on a go-forward basis, and you replied no on that.

My other question is regarding the timing of the issue. In terms of the thoughts behind the compensation committee and the board of why did they choose, for example, this particular quarter to go ahead with the charge and make the forgiveness of the loans.

Well, I - I can't necessarily speak for them, but I can give you my perspective.

You know, this is really recognition of what's taken place over an extended period of time, really back to 1999 and forward, and so the timing, I think, is more related to when the - you know, the company has emerged from that cycle, that very difficult time. That - I think that's the important timing consideration with regard to - with regard to this forgiveness issue.

Okay. And just so - I'm sorry. One follow-up question. I'm sorry, Craig. I think in the Q and A earlier, you had said that the original loan was 8.5 million, and I wasn't sure sort of how that corresponded with the - with the $20 million charge. Is that including accrued interest or what was sort of the difference between that?

Yeah, there's additional accrued interest, and then there's about 8.7 million of tax - payroll taxes associated with the forgiveness.

And the other thing I'd want to make - point to is, you know, there is a - the industry has gotten more competitive. There's industry - executive talent, particularly talent that can demonstrate the ability to manage in difficult times, comes at a premium, and I think there was recognition of that also.

So I'd want that to - you know, to be on your mind also as you think about it.

No, no. Absolutely. I appreciate your level of detail. Thank you very much.

Okay.

Your next question comes from Stewart Lindy with Lehman Brothers.

My questions are answered. Thank you very much.

You're welcome.

Your next question comes from Matthew Harrigan with Jennco Partners.

Good morning. Two questions. Most of them were answered but two additional questions.

One, you said you had 37, you know, wide releases versus 32, you know, apart from the hundred million plus pictures during the quarter.

How much of that is a function of the bulge in production before anticipating a strike and is there going to be a bit of a pricking of the bubble as that situation normalizes, you know, maybe sometimes in 2003, you'd have negative costs in terms of the number of wide releases?

And then lastly, my usual question on the state of the international business.

I'll take the film question. I think you're seeing the final stages of the ramp-up prior to the strike. I think those pictures have now come into the marketplace, and your thought is a good one, what does that mean going forward, and we're encouraged right now. Right now, we're tracking approximately 48 titles to open in our October-through-December period. That is 7 more than opened last year, 41. And then as we look forward - and it gets a little murky, but already we see 39 titles slotted for the January-to-March period, and that equals what was out there one year ago.

So we see no dropoff in production, and in fact, there's a frenzy of activity for next year to lock up dates of some of the Big 10 pull pictures, and for example May 2nd is already gone, "X-Men" will be sitting there. May 16th, "Matrix Revisited." June 20th, "The Hulk." July 2nd, "Terminator." The other matrix will be back at Thanksgiving and two pictures have already staked out Christmas again, "Lord Of The Rings" and "Harry Potter." So if anything, this activity continues to improve on a very progressive basis.

And then on the international side?

Yeah. Matt, this is Peter. I - you asked that question and I typically give you the same answer.

Sorry.

No. That's fine. Which is, you know, we continue to monitor our opportunities with our international assets. Craig can fill us in on - actually what we have on a year-over-year basis on an LTM basis, we have the numbers. For our international units, all total, they have improved, but I guess I'll make a continued strategic comment before I turn it over to him on the numbers. And that is that, you know, we - it's an interesting marketplace right now for international assets, and I think as I've said on prior calls, it's probably more of a, you know, buyer's market than it is a seller's market right now, because I think that those companies that are in the business of international theatrical exhibition, if they all had their druthers, would probably not be in the business, and some of the big assets that are out there are - are parts of large media and entertainment conglomerates which, of course, in some cases are not doing so well, in terms of their performance.

So it's really more of a - I think everybody continuing to try to look to figure out what the best opportunity for everybody internationally is.

Craig, on the numbers?

Yeah. On the numbers, Pete noted that there's improvement. About a - a little over a $2 million improvement in the EBITDA contribution from our international circuit during the quarter.

Were you actually cash flow EBITDA positive?

No, it's still negative.

Okay. Congratulations on the quarter.

Thanks, Matt.

Again, I would like to remind the analysts if you would like to ask a question at this time, please press star and then the number 1 on your telephone keypad.

Your next question comes from John Maxwell with BNP Paribus.

The only remaining question I have is net capital spending for the year, is that still in the 75, 80 million range for this current fiscal year?

That would be gross. Actually, the - the total gross number is about 88 million. We are still planning to do a sale/leaseback transaction that would generate proceeds of about 44, which would give us net of 44.

Okay. Great. Thank you very much.

Your next question comes from Steven Rogerio with UBS Warburg.

Two questions. One as it relates to box office. You gave us a feel of that before, when a question was asked. Could you just repeat what you expect for box office growth in the remainder of this year?

And also, what you are planning on doing for ticket price increases?

Well, I think the box office the second half of the year is going to be very comparable to last year, so it will either be equal to or slightly up. For the industry.

And for ticket prices?

For ticket prices - this is Phil Singleton. We'll seasonally take a look at all of our markets, as we always do, at the beginning of the holiday quarter and probably selectively push up the needle a little bit. Probably more so in the box office than the concession area. And then we'll have a few key locations that should come on-line the last half of the year, too, that will be much higher ticket prices. One in Chicago and one in the San Francisco area.

Okay. And last question as it relates to the compensation charge, how deep did that go within the organization? How many people participated?

Well, as I said, there were two.

Thank you.

Your next question is a follow-up from Bishop Sheen with Wachovia Securities.

Peter, on the sale/leaseback, anticipated for sometime Q3, sometime Q4 -

Actually probably in the next quarter.

In the next quarter. And would it be - would the usual REIT - the REIT that you have a close association with, or to a different party?

No, it would be with entertainment properties. We did - we did look outside for rates, and the rate's very competitive, and so it will be with entertainment properties.

With entertainment properties?

Yes.

Okay. All right. Thank you.

You're welcome, Bishop.

There are no further questions at this time.

Okay. Great. I'd like to thank everyone for joining us this morning. I know it's an interesting morning in the capital markets. I'll just close by simply saying we hope y'all have a great rest of the summer. Keep cool. Take in a movie or two. And we look forward to visiting with you again after the September quarter.

Thank you for participating in today's AMC Entertainment, Incorporated conference call. This call will be available for replay beginning at 1:00 p.m. eastern time today through 11:59 p.m. eastern time on Monday, August 5th, through the website www.AMCtheaters.com. You may disconnect at this time.