AMC 電影院 (AMC) 2003 Q4 法說會逐字稿

Good morning, my name is Lisa, and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the AMC Entertainment , incorporated fourth quarter and fiscal year 2003 conference call, hosted by Peter brown, chairman and Chief Executive Officer of AMC Entertainment . 234EU Any forward looking statements contained in this call which reflects math's management's best just a moment involve risk and uncertainties .

Actual results could differ materially from those anticipated in the forward- forward-looking statement included herein as a result of a number of factors, including among other companies’ abilities to enter into various financing programs.

The performance of films loans ed by the company, competition , con construction delays, the ability to open or close theaters and screens as currently planned , domestic and international , political, social and economic conditions, demographic changes , increases in demand for real estate, changes in real estate, zoning and tax laws, unforeseen changes in operating requirements , the company's ability to identify suit able acquisition candidates and to successfully integrate acquisitions into operations and the results of significant litigation .

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

After the speak areas ' 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 one 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, Lisa, thank you very much.

Good morning , everyone.

Again, welcome to the fiscal 2000 - 2003 fourth quarter earnings call for AMC Entertainment.

As Lisa said, I'm Peter Brown, Chairman and Chief Executive Officer.

Joining me on a call are Craig Ramsey, our Chief Financial Officer , Bill Singleton, our Chief Operating Officer, and Dick Walsh, Chairman of our film group.

Now, as is our custom , I'll leadoff the presentation with a few brief comments on some of the highlights for both the quarter and the fiscal year.

Craig Ramsey will take us through a detailed message of the financial results for both the quarter and fiscal year and Dick Walsh will wrap up the form formal part of the presentation with comments on upcoming film product. [inaudible audio]

So on that note, let's begin.

I hope by now all of you have had a chance to review the press release that went out earlier this morning over the wire.

In terms of some of the key highlights, as was noted in the press release, both a quarter and fiscal year periods produced record heavy revenues and adjusted EBITDA.

Our asset quality continued to improve.

We successfully integrated two acquisitions, adding over 650 screens to our circuit screen count in the fiscal year.

Our free cash flow continued to grow, and a conservative balance sheet and increased liquidity fueled an improvement in our credit profile.

Now, Craig will be talking more about this last point in a few minutes when he takes us through the numbers.

But first, I want to take a moment to talk more about each of the highlights that I just noted.

Now, even though we typically talk about our results on a quarterly and year to day basis when we get together on these calls every quarter, as many of you know, our philosophy has always been to manage the company to create value over the long-term .

The fiscal year end seems like a natural opportunity to take a look back and see how we've done in this regard .

That's essentially what this slide does.

It takes the fiscal 2003 results and puts them in a historical context looking back over the last 11 years.

Now , we look at this period because that's the time frame essentially in which the present management team has been working together.

As this slide shows , since this fiscal 1992, our total revenues have grown at a compound annual rate of 14 %.

Our adjusted EBITDA in that period has grown in a compound annual rate of 16% , and our leverage as measured by the ratio of our net debt divided by adjusted EBITDA has decreased over two turns in that period of time , from 4. 7 times where it stood at the end of fiscal 1992, to 2. 1 times at the end of fiscal 2003.

Now, those that follow us closely over the last 11 years know there have been some ups and downs.

In the early part of the 90s, the industry was stable.

By the late 90s, things were tumultuous.

The industry returned to a stable state a couple of years ago and enjoyed one of its best years ever last year.

The point here is that we at AMC have found a way to prosper in our business, irrespective of the cycle we're in.

We think that this speaks volumes to the dedication and quality of our associates and also the high quality of our asset base which I want to turn our attention to.

Those of you who follow us regularly know that we segment our circuit screen portfolio into three types of theaters.

Megaplex(ph) , something we call continuing multi pleases and disposition multi- plexes.

We define a Megaplex as a theater 14 or more screens with predominantly stadium style seating.

A continuing multiplex is a theater that has a characteristic, such as a protected real estate profile that in our opinion makes it a long -term viable .

A disposition multiplex is one we've targeted for disposition.

Megaplex we've shown on this slide in green, and account for the greatest percentage of our circuit screen portfolio, 70% at the present time.

Continuing multiplexes account for 23% of our portfolio and disposition multiplex account for 7%, which is only 243 screens.

The disposition screens will come off line over the next three years and I'll illustrate this further in a moment when I talked talk about the continued portfolio optimization strategy that we employ to keep our asset base continuously improving as it did in fiscal 2003 .

Not only do we have theaters that are in almost every top market in the United States, our theaters are generally the top performers in their markets.

This is something we call " "quality market coverage ."

It's the combination of both the breadth of top market coverage and the productivity of our theaters as measured by their box office revenue performance over a last 12-month period.

As this slide shows, AMC dominates, really continues to dominate in this metric with over 50% of the top 50 theaters in North America.

As you can z the next closest competitor has only 14% .

Great theaters, that are the top performers 34 in all of the top markets, that's quality market coverage, and it's what distinguishes the AMC theater circuit.

How do we make sure that our as asset quality is continuously improving ?

Well, the answer lies in how we manage our portfolio on both a new build and disposition front.

This slide gives us some insight into what I'm talking about here.

As noted in the earnings release, in fiscal 2003, we opened 93 screens and closed 111 screens.

This represents a net screen count reduction of 18.

You look at this in the context of what we've done over the last several fiscal years , you can see that the screens we added in fiscal 2003 are a part of over 2200 screens that we've added since fiscal 1996, which is essentially the period that the megaplexing (ph) phenomenon started.

In that same period, we've taken off line over 1,000 screens , including 111 that we closed in fiscal 2003 that was referenced in the earnings re lease.

Now, through the simultaneous new building and disposition activity, we've been able to lead our peer competitors and the industry in a key measure of asset quality, which is screens per theater , which is also noted on the slide.

As you can see at present, A MC's screen per theater count stands at 14 .7 , and is projected to grow as we continue to process again of simultaneously opening and closing screens in the years ahead.

Now , in addition to our strategy of growing and improving our portfolio through new build and disposition activity, we've also been an active acquirer.

As we look back at the highlights of fiscal 2003, I'm pleased to report to you that we were able to successfully integrate two significant acquisition that is we've basically closed at the beginning of the fiscal year.

These acquisitions were a five-theater, 68 screen circuit based in New Orleans called gulf state, and a 66 theater , 621 screen circuit for predominantly in the northeastern part of the United States called General Cinema.

In terms of their financial contribution in 2003, these two acquisitions delivered approximately $48 million of EBITDA, which was right in line with our expectations we purchased these two circuits for a combined sum of $ 212 million, so based on first year actual EBITDA delivery, we were able to acquire them for an attractive combined multiple of around 4 .4 times.

Finally, in terms of the highlights of the fiscal year, we were able to examine the free cash flow trend that we start ed to see last fiscal year.

As this slide shows, we generated $78 million of free cash flow in fiscal 2003, which was up from $14 million in fiscal 2002 .

The free cash flow that we're generating is increasing our liquidity, strengthening our balance sheet and improving our credit profile .

So on that financial note, I'll now turn the program over to our CFO, Craig Ramsey.

Thank you, Peter.

Before discussing A MC's results for the fourth quarter and fiscal year periods, let's first review some industry statistics that will serve as the backdrop.

As we review these statistics for North America, keep in mind that our fourth quarter this year included 14 weeks.

Now, we have accumulated the industry information that's presented on the slide so that it is presented on the same basis.

That is, 14 weeks in the current period compared with a 13 week period last year.

Now on that basis, you can see that the box office was up 4% from $ 2.104 billion in the fourth quarter of last year to $2.198 billion this year.

This quarterly box office performance follows a record- record-setting calendar 2002 , as you'll recall where North America registered a year over year increase of 12 % to about $9.5 billion.

The industry 's performance for the quarter was largely driven by increases in average ticket price which is we estimate at about 3.5% with about a 1% decline in attendance.

I'm sorry, a 1% increase in attendance.

The quarter started very strong with January up about 7.6 %.

In addition to contribution from Christmas and new year's holiday re leases such as Lord of the Rings, Catch Me If You Can, and Two Weeks' notice, January's box office also benefited from strong performance of films released during the month , such as "Chicago."

February 's box office was flat compared to the prior year.

However anchored by strong pictures, March box office was able to give a 7.1 % improvement considering the additional week.

As shown on the chart, films expected to grows over $100 million accounted for the bulk of the fourth quarter increase in box office.

As you can see from the slide, four films released during the fourth quarter of this year expected to exceed $100 million in box office and contribute approximately $501 million versus two films during the same quarter last year that contributed $295 million.

That's about a 70% increase.

With that, let's look at AMC's fourth quarter results, and again, keep in mind that the fourth quarter this year does include 14 weeks.

Total revenues increased $31 million, or 8% compared to the same quarter last year from $415 million on a pro forma basis to $446 million.

Now, note that the pro forma comparison for total revenues and adjusted EBITDA that's presented on the slide, includes the general cinema and gulf states acquisitions in the 2002 results as if those acquisitions had occurred at the beginning of the fiscal year.

The total revenue increase was driven primarily by the additional week included in the fourth quarter F O4 results.

The adjusted EBITDA increased $4 million or 8% from the same quarter last year to $52 million dollars.

Mostly due to increases in revenues and effective cost controls.

As we'll see in a minute, our operating expenses as a percent of theater revenues were down 90 basis points compared to the same quarter last year and resulted in an increase in our adjust ed EBITDA margins.

The adjusted EBITDA performance exceeded our expectations for the quarter and also analyst revised expectations that averaged about $ 49.2 million.

Now, while the additional week did augment the quarters total revenue, and adjusted EBITDA performance, it was the -- it was not the sole factor contributing to our record results.

In fact, if you drop off the 14th week and do what I'll call a same week's basis comparison, our circuit produced year-over-year positive comparison in total revenues, they were up 1.2% which exceeded the industry's performance for the comparable period.

And on the same week's basis our adjust ed EBITDA was also a positive comparison with last year.

It increased 3.7%.

Now, consistent with our objective of producing free cash flow results, we also closely monitored after tax cash flow, which we define as net loss, plus depreciation, amortization and non-cash items.

As consistent with the presentation that you see in the press release, we compare our after-tax cash flow results with actual last year, and you can see the improvement in after- tax cash flow results increase buying over $9 million or a 48% increase.

Net CAPEX was $16 million for the quarter, compared to $30 million in the same quarter of last year.

Now this in combination with our after tax cash flow produced free cash flow of $12 million for the quarter , compared with the deficit in actual free cash flow last year during the quarter, or an increase of $ 23 million.

So in summary the quarter was very strong.

It exceeded our expectations and we're pleased with how the A MC circuit performed in comparison to the rest of the industry.

So now let’s take a look at the the -- so now let's take a look at the fiscal -year-old period which produced record setting total revenue and adjusted EBITDA results.

Total revenues increased $116 million or 7% over the same period last year, increasing from $1.676 billion on a pro forma basis to $1.792 billion.

Total revenue performance was driven by increases in attendance reflecting the strength of the box office during this period and by increases in total revenues per head, including increases in average ticket and concession spending per head.

Adjusted EBITDA increased $25 million or 12 % over the same period last year to $ 230 million.

The combination of strong revenue performance, while at the same time controlling our operating costs, contributed to the strong EBITDA performance.

For both the quarter and year to date periods , our margins at the operating level and at the adjust ed EBITDA line have improved over the prior year.

The strong operating performance of our circuit also led to a year-over -year increase in our comparison of after-tax cash flow results which increased from $91 million for the full fiscal year last year, to $131 million for the current year, 44% increase.

Net CAPEX for the year was $53 million, compared to actual CAPEX of $ 77 million last year.

This reduction in our net CAPEX in combination with the 44 % I object crease in after tax cash flow produced an increase in free cash flow from $14 million to $ 78 million or a $ 64 million increase.

Let's look at the key drivers for the quarter in fiscal year periods.

Now, no new screens were opened during the quarter , but for the full fiscal year, you'll note that screen additions included 641 screens that we acquired and the opening of five theaters with 93 screens.

Now, during the quarter, we closed six theaters with 40 screens, which resulted in nominal theater closure expense.

For the year that brings our total closures to 111 screens and in line with our plan as we've discussed through the year of closing over 100 screens during the year.

Our average screens operated were down slightly during the quarter, and up slightly during the fiscal year, both are in line with what we planned.

Attendance per screen is down for both the quarter and fiscal year periods, due mostly to films performance during the quarter.

You may recall during our third quarter conference call, we noted that on a year-to-date basis, attendance per screen was tracking ahead of last year.

You see that our total revenues per head increased during the quarter and also during the year to -date period or the fiscal year periods, reflecting increases in average ticket prices and concession per head of house.

Now, our film costs were up slightly for both the quarter and the fiscal year periods , but as we've discussed before, we don't focus totally on the percentages .

We also track the productivity of our screens in terms of the dollars produced per screen, and in the case of film, we focus on retention dollars or the amount of admissions dollars per screen that we retain after paying film bills.

When you can see on a retention basis, we show improvement for the fourth quarter and for the fiscal year basis.

As noted earlier, our initiatives related to reducing our operating expenses even during a time when we're experiencing increased revenues are demonstrated in the re reduction of operating expenses as a percent of total revenues by 90 basis points for the quarter and 1 00 basis points for the fiscal year period.

We continue to operate one of the most efficient major market theatrical exhibitors in terms of our overhead with G&A at 2.5 % of total revenues.

So let's talk a minute about our liquidity and capital resources.

We maintain a very conservative balance sheet with a lot of financial flexibility to act on opportunities that are a creative.

Our balance sheet shows a strong cash position at the end of the fiscal year.

And at quarter end, we also had about $70 million of con construction and process or dollars in construction process on theaters that have not yet opened.

In our view this really represents a cash equivalent and we will use it in a moment as we look at our leverage.

Total debt was $727 million at the end of the quarter, showing a $ 21 million decrease from the end of the last quarter, the December quarter of $748 million at that time.

Our quarter end debt was comprised of senior sub debt and there were no amounts borrowed under our revolving credit facility.

Net debt in the amount of $ 483 million also is down from the end of the prior quarter, which was $507 million, due to the reduction in capital lease and financing lease obligations and our positive free cash flow .

At the end of the quarter, our leverage ratio was a very comfortable 2.1 times, and if you adjusted and treat the CIP CAPEX as a cash equivalent, as it adjusted down to 1.8 times.

So with that, I'd like to turn the program over to Dick Walsh for a film product outlook.

Thank you, Craig .

As we look at the next several months, we believe that four key trends will play out through the summer.

We've already seen in our experiencing a solid and early start to summer.

The season started off with " "Anger Management" that went on to grows $140 million from an April 11th opening date, and was kicked into full gear on May 2 with the opening of "X-men 2."

We see this will be a summer of strong anchor films, the studios have made intensive capital commitments to field that are laced with high concept titles and proven franchises.

Sequels will again play a major role.

There are 8 sequels that will have a solid impact on the season's grossing potential.

We're very encouraged by the performance two date of the first two of the see quells in the marketplace . " X- men 2 grossed $85.9 million in the first two days of release.

This was a stunning 58% over its 54.5m opening weekend in July 2000.

Through Sunday night it has grossed $174 million, already exceeding by 11 % its total run three years ago with plenty of business left in the picture.

As remarkable as that performance was, this past weekend saw the matrix 2 gross $92 million and a record -break record-breaking $134 million for four days.

This compares to the $28 million opening in March of 1999 and its total run of $ 171 million.

You can easily see that the movie- going public is drawn to sequels of previous numbers that a built in audience has expanded since their initial release, with several more to go this summer, and indeed, the remainder of the year , we feel this is a very healthy trend for the industry.

We're also encouraged by the slate of other key films that will round out the summer schedules and could very easily become tent pole franchises for the future.

As we look at the slate of key summer films for early and eight summer, you can see a lineup that should make for a solid season of movie going .

Daddy day care has opened and done a nice job of capturing the family audience and looks to be a $100 million hit for Eddie Murphy and Sony.

Bruce Almighty with Jim Carrey who plays God for a week and Jennifer Aniston is poised for a great opening.

Finding Nemo is the latest Disney Pixar release and has a great pedestrian agree.

Too Fast, 2 Furious is the sequel to the surprise hit that grossed $144 million.

The Hulk, the latest action hero brought to the big screen with Eric Bana and Jennifer Connelly is directed by Ang Lee the director of Crouching Tiger Hidden Dragon.

Charlie's Angels, the sequel to the 2000 November hit is round rounding out the first half of the summer.

The July 4th weekend looks very solid with three major titles coming into the marketplace.

Terminator III with Arnold Schwarzenegger, Illegally Blonde 2, the remake of last year's summer surprise of $91 million and Dream Works animated entry for the summer Sin Bad.

They will be followed by Pirates of the Caribbean, the League of Extraordinary Gentlemen with Sean Connery, Bad Boy's 2 a remake of the surprise hit with Will Smith and Martin Lawrence.

Seabiscuit could prove to be timely as Funny Cide tries to be the first horse since horse since 1978 to win the triple crown this movies stars Toby McGuire and Jeff Bridges.

And finally, in August, American Wedding, the third installment of the American Pie series opens.

The first two did $102 and $145 million respectively.

As you can see it's a very strong lineup and one that should keep theaters busy throughout the summer.

Okay.

Thank you, Dick and Craig.

We are Lisa, we're ready for the Q and A.

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

Your first question comes from Jill Krutick of Smith Barney.

Thank you.

Good morning.

Could you give us, Peter, your sense of the consolidation out outlook or the landscape for the theater exhibition business in the wake of regale’s(ph) special dividend , is that something AM AMC would consider as the cash flow starts to accelerate.

And on the box office, it certainly sounds like things are rounding out better than expected.

Do you think that the box office expectations for this year may prove to actually be conservative ?

Okay .

There were three questions.

First being consolidation act activity.

The industry has been -- if you look at the macro trends over the last several years , the industry has been consolidating , the larger circuits have gotten larger as a percentage of overall screens.

The activity over the last couple of years, I mean , speaker speaking for ourselves, we did a couple of acquisitions that I referenced during the presentation.

Right .

You know, I think really all I can say, Jill, we continue to be very careful about how we go about our acquisitions.

They have to fit a dual criteria of either an asset quality criteria , using the two that we've done in this last year as an example, by illustration, I can illustrate the quality criteria of the gulf states transaction and the market criteria in our case of the General Cinema .

As we've commented on previous calls, speaking for ourselves , we've got a very short list of those circuits that we feel would fit those criteria, and we're constantly working them in terms of getting hopefully them to a point some day where if they are interested in realizing their liquidity that they would talk to us.

But you can't program an acquisition, as you well know.

What kind of pricing trends are you seeing as it relates to transactions ?

Well , we, again , we don't -- our only market experience has

been the deals that we've done, which I noted were, you know, it was under 4 -1/2 times on the combined basis for the two of them.

I think it's probably doubtful that acquisitions in the future can be done at those kinds of multiples.

A lot of that has to do with the backdrop of the industry, having the record year that we had in the calendar 2002 year.

I think gave people a lot of confidence in terms of some of these smaller or local or regional circuits that we might be interested in.

So, we're patient and we don't feel any burning desire to do anything that would not make sense from a valuation a creative standpoint.

I think I'll also address the question on the liquidity.

We have commented in past calls that we're comfortable with the leverage range in and around two times, but I think we've also said up to 3-1/2 times leverage range , and we are running at around 2 times range right now, which looks to me , given what has happened with some of our competitors, they are sort of bringing their leverage a little more closely aligned to our range.

So we feel comfortable with our liquidity situation right now, given our strategic plan and opportunity that we want to be available to move on in the future.

Craig, do you have anything to add to that?

Well , the specific question question of a dividend, we would continue to evaluate that, watch the legislation as it progression progresses and decide at the appropriate time, but as Peter said, I think our priority is certainly to re reinvest our dollars in the business and with our free cash flow, that's being reinvested a new bill and we stay flexible with the cash balances and our available lines of credit be opportunity stick for an acquisition .

The last question was about box office.

Dick, do you want to comment?

Yeah, certainly we're very encouraged with how April played out and may has shaped up.

I think our only reticence to be more bullish than we are is that we're going up against a strong record season last summer.

The table is set to be able to be able to match that season very, very closely.

I think we'll know more after the July 4th weekend.

I think by that time, more trends will have exhibited themselves and we should be able to have a greater sense with how the rest of the summer is going to play out, but certainly anybody would have to say so far so good.

Great.

Thanks very much.

Thank you, Jill .

Your next question comes from Stewart Halpern (ph) of RBC.

To follow-up on the acquisition thing, could you give us a sense in broad terms, Peter, if you X out regal because people aren't likely to be sellers, just on the quality benchmark that you used, is there any order of magnitude of number of screens that you could comment on, would actually fit within your quality criteria?

That are out there?

Craig has got --

I think you've hit on those that have information out there in the public domain.

There are some regional competitors that have done a very nice job with their circuits and have high quality that would certainly fit nicely with our quality criteria, again, it's a matter of timing for a deal like that, but, there there's an order of magnitude , there is a couple, three thousand screens.

There are a number out there that are not large in relation to the comps that you cited that but could aggregate to a pretty decent size.

I didn't understand the question.

I would agree, 2000- 3000 screens.

Average ticket price, you know, continues to show nice gains.

How much of that is just the mix in terms of the quarter product over the quarter was adult orient ed so you didn't get kids at lower prices or how much is related to proactive elimination of discounting ?

Well , the mix on the I'd Lance that with a comp , and that is for the quarter, the average ticket price was $ 6.40 versus $6.14 for average for the year.

So, not all of that is a mix of pictures , but you could probably account for some of it as mix of pictures, maybe 10 cents , maybe 15 .

Your point on discounting.

I guess my comment would be, we've -- as we've discussed before, been fairly targeted in our pricing strategies.

We've looked hard at our discounting over the last 12 months to 18 months and have taken some discounts off the table, so that will become less of a factor going forward for us as we compare with other exhibitors .

We're probably more in line in terms of our pricing structure, and our over all average ticket price to others in the market.

Great, thank you .

You are welcome .

Your next question comes from Alex Gould of CIBC World Markets.

Congratulations on the quarter, definitely a good one.

I just wanted to ask if you could speak a little bit about the competitive environment.

I know you've spoken about L. A. in the past and are there any theaters being built in some of your major markets?

Well, I think that we did during the year allude to some competitive activity in Los Angeles .

It was -- it was a bit of an anomaly in that there was a concentration of new build in the market.

As we look at the major markets that we operate in today, we're finding some good opportunities, some sites that meet our criteria, and there's competition for those sites .

We believe we're fortunate to be able to proceed on those that we want to move forward on , but there is -- there continues to be new build, certainly not at the level we saw in the 2000-2001.

We're seeing, I guess what we had call a more mature market approach to building, and that is that theaters are being built with adequate distance and adequate demographics between them to support, you know, the -- and appropriately sized in terms of screens and seats to really be able to support the business.

So much more rational building, I think, would be how we characterize what we see in the market today .

Additionally, have you had any recent discussions with the rating agencies , any potential up grade, anything you could shed a little light on?

We continue to talk with the agencies on an ongoing basis to keep them apprised of what we're doing, how we're doing.

We had the recent upgrade in early -- late January , early February, but at this point in time, no indication that there'll be another increase in our ratings.

We are very pleased with the way that our debt securities are trading in the market.

They seem to be trading at or above par actually, so, a good trading level in terms of those securities.

Great, thank you.

You're welcome.

Your next question comes from Jessica Brewer(ph) of CFSC.

Can you hear me?

Yes.

Can you guys talk a little bit about -- I've got a couple of questions.

The first one is about margins on the film product this year.

It looks like we have quite a few block busters..

Can you talk about how that may move the margin around on those over the summer months .

Okay.

Did you have two questions,

Jessica?

My other question was just about the -- you mentioned that your comfortable leverage level in 2 to 3-1/2 times, but if you look at that on a rent -adjusted basis, you guys are a turn to a turn and a half above some other folks in the market.

Would that be a possible use of excess cash to bring that down.

I'll take the latter one and Craig can talk about film product margins, but I think the way there would be to go back in an renegotiate deals with landlords, because that's what you really have to reduce in order to create a lower capitalized rent denominator , so to speak or numerator.

And that is an arrow in our quiver in terms of we're constantly maximizing our operating efficiencies.

I will say it is not the easiest thing to get done in good times, because if you think about it, a landlord has a contract that says that we're going pay him so much, and there's got to be some incentive there for them to agree to reduce that amount of payment.

But we are doing some things, particularly on the international side at this point point, where we're going in on some of the deals and reducing and actively negotiating.

It's a tough negotiation.

It's like a workout negotiation in a way, even though it doesn't have anything to do with the concept of a work out.

It's a tough negotiation.

I'd only add to that.

We have a couple of situations where we had ourselves negotiated some fixture leases that we have actually put some cash to work and bought those out.

We -- in the general cinema acquisition had a couple of situations where we also had fixture leases.

Those are the ones that we've targeted to work on.

So that may present some additional opportunity for us in the future also.

On the film product, I think was your second question and kind of our outlook, I'll start with that.

There is others that there that can help me with it, but we do think that we're hopeful that we see a reduction in film costs.

We try to negotiate the best deals that we can.

Related to mixture, film mix, or mix of product, there will not be a star wars picture this summer, and some of the other studios that traditionally have negotiated higher some higher terms don't appear to have as full a schedule of releases this year.

So, all in all, I think we may stand to see film costs come down a bit, but primarily, again again, related to mix.

So, you think there is some speculation that with some of the really large releases this year, particularly maybe the mate Matrix, that the studios would be demanding higher pricing on that, maybe not as high as star wars , but based on the success they've had in the past?

Yeah.

Okay.

I would just add one thing, and it's a comment that Craig made earlier in the presentation which has to do with the retention concept.

I don't think that that should ever be overlooked .

Which really is the concept of the gross price of dollars that we end up with.

There is a strange thing that can happen in our business, which is that you can actually do more business as a result of in essence paying higher film rent, because the pictures are more commercial and there is more demand for them.

You can actually end up with more gross profit dollars by paying more film rent, again, by virtue of the fact that there is stronger demand for that picture picture.

So it's a little counterintuitive, when you think about this business relative to some other, you know, retail businesses where you're selling blue jeans or something and you're buying units of blue jeans and the more you can buy, the deeper your discount.

So, it's just a point that I think as we continue to talk in these call s, we want to make sure that everybody under stands.

Both the margin, the percentage, but equally as important are the dolls that we end up retaining.

Okay.

Thanks a lot.

You're welcome .

Your next question comes from Matthew Harrigan of Janco Partners.

Congratulation.

Two questions.

One , your stored value card program, you are nicely position for that, given your premium branding.

Can you update us on how that's going?

And then secondly , since everything is pretty much going swimmingly domestic ally , can you give us an up date overseas.

Do you think you will make not as many he will elephants in the Savannah, any more, so is there an inclination to focus on fixing Canada and fixing Europe and other areas ?

I'll take the second one, and Dick, in addition to being chairman of the film group that over sea oversees the marketing he's got a real fun card.

He'll talk about the card.

On international, as I've said before, we're in a holding pattern, really, with respect to what we've got right now, and I would characterize our activity as really more along the lines of maximizing the operating efficiencies of what we've got, which, as I just allude ed to a moment ago, when I think it was Jessica's question.

You know, one of the arrows in the quiver there is to go in and work with some of the landlords to get rend reductions which will improve the cash flow picture of the units .

That's really the kind of activity that we're focused on right now.

We're not actively seeking out new opportunities.

That isn't to say that if we had someone come to us that would be interested in working with us to build the brand in a market, in a way that would minimize our capital risk, that we would look at doing something like that, so we keep an open mind, but we really don't want to put more capital into these international markets at the present time.

What we want to do is improve the cash flow picture of what we've got and in some cases, if that means a complete exit, then we'll look at that as well.

On the stored value card, Dick, why don't you give us some --

I'm glad you picked up on that.

It has been a very strong and solid success for us.

Our strategic alliances with Safeway and Walgreen stores, Walgreen's is now fully implemented across the country, and the thing continues to click along at a very good pace.

In fact, for the first five weeks of this fiscal year, the card is running about 30 % strong stronger than our previous gift certificate program was our per head is up almost 50 % in this area, and we do think it's because of our strong brand recognition out there in the marketplace.

When we opened all of these other channels of distribution for the card, the customer is clearly taking advantage of it, and we're not seeing that much of a hit at all at our unit level, at our theater level .

So theater levels sales continue to be strong, and our strategic partnerships have kicked in very nicely , and quick quite frankly, we can't wait until the next holiday season and enjoy this opportunity to really ring the bell in this department.

In fact, while many retailers were down over the Christmas season and their gift certificate or entertainment sales or card sales, we were actually up.

So, it's a very positive trend for the company and one we're very glad to have.

Good, thank you .

You are welcome, Matt.

Your next question comes from Bishop Sheen (ph) of Wachovia.

Good morning, Peter and Craig and Bill and Dick.

A couple of questions that I don't think we've covered.

Two, any progress do you think toward rationalization of the film zones between AMC and its competitors , and let me just follow it up with an observation and ask for some commentary.

It appears that because box office has been surprisingly stronger or gaining momentum and certainly off of 2002 's spectacular box office, that the closing up of unproductive screens slowed, naturally, as they managed to eke out the last bit of productivity .

Do you foresee any change in the pace of spring closings to get rid of the, you know, out with the old and in with the new ?

Yeah , Bishop, on the latter point, we've looked into our crystal ball and as good as the crystal is made out of, if you know what I mean, but we -- you're right.

We did have a trend it looked like, at the end of the year 2002 as we looked at what happened from 2001 to 2002 as the year ended up approximately flat versus the 2001 year where it had been declining since 1999.

We've actually -- our view is that we'll see some additional net decline in a 2003 year , but I'm not talking about big numbers, we're talking about maybe a net decline in the 500 screen range which would take the north American indoor screen count around 34-7 range, probably the more important thing, though, is when you look at that metric of screen count and you look at what we've project for over all attendance for the calendar year 2003, and you look at it on an attendance per screen basis, what you see is you end up with an attendance per screen level that's about where we were in 1995 , and that's an interesting statistic because those of you that follow this business and the industry cycle over the last 7 years know that that 1995 year, May of '95 was the year when the replacement cycle, if you will, really began, when we led the move to start building the new product that we call Megaplex theater facility.

So what we're saying is, you know , even with all of this adding , disposing , et cetera, we're basically -- or even with these additions, we're going to be looking at a very healthy attendance per screen level, again , if you view that the level of 1995 was a in 1995 was a healthy level in terms of attendance per screen and 1995, just as a reference, 1995 year- year-end screen count was 27,000.

So it -- screens are important to look at, but it's really that attendance per screen, the summary statement there.

I think that's an excellent point, but I think we need to as analysts probably adjust our perceptions , because we've been hearing this 30 or be low kind of mantra for so long, that it's easy to lose sight of why we got in the swamp to begin with.

Let me do one other question along that -- the share, I noticed, unless I missed it , you didn't mention anything about AMC's market share for the year or for the quarter .

We don't -- maybe we do sometimes and we don't.

We're not that --

We're about 13 -1/2% and clearly up over last year due to acquisitions, but that's pretty close to where we've been performing.

So no change there.

And in terms of -- is there rationalization work to be done, or is that also a misconception between maybe still too many screens crowded into a zone, a little swap ping or exchanging that could be done among competitors ?

Well, Bishop, I -- the one thing on that point, I think you had mentioned earlier in your question about film zone rationalization, we're to the point with the configuration of our circuit, this was a big theme in the early couple of years when the new Mega’s started coming out and there was still a lot of multis (ph) in the same film zone and Dick can add his two cents, the nature of the business as it relates to us these days, most ever of our theaters, pre-dominantly our circuit is in a noncompetitive situation in terms of its film profile.

You'll have a few instances where there's a multiplex theater that's in the zone and it's still getting some of the product , but our experience has been that that's a short-term phenomena.

Over time, you know, capitalism wins out in terms of the product naturally wanting to go and flow to those units that are going to produce more dollars of revenue for that product.

It always does .

Yeah.

Okay.

Great.

There are no further questions at this time.

Okay.

Great.

Thank you very much Lisa.

Thanks everyone for joining us this morning.

It's actually very exciting time of year to be in our business as most of you know, summer is our big season, and as you heard from Dick wall Dick Walsh, we think there are plenty of films that should get folks out to an AMC theater this summer.

We look forward to reporting again in mid-July, and until then, we hope to see you at the movies.

Thank you all very much.

Thank you for participation in today's AMC Entertainment incorporated conference call.

This call will be available for replay beginning at 1 p.m. eastern time today through midnight on Tuesday, June 3rd .

At the web site www.amctheatres.com .

You may now disconnect .