AMC 電影院 (AMC) 2004 Q2 法說會逐字稿

Good morning.

My name is Renita, and I will be your conference facilitator today.

At this time I would like to welcome everyone to the AMC Entertainment Inc. fiscal year 2004 second quarter conference call hosted by Peter Brown, chairman and CEO of AMC Entertainment Inc.

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 licensing by the company; competition; construction delays; the ability to open or close theatres or screenings as currently planned; domestic and international political, social and economic conditions; demographic changes and 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 suitable acquisition candidates; and, to successfully integrate acquisitions into its operations and results of significant litigation.

During the call, reference will be made to certain non-GAAP financial measures as defined by Regulation G of the SEC.

A discussion of management’s use of these measures and reconciliations to the most directly comparable GAAP measures is contained in the press release and is posted on the company's web site. (Operator instructions)

Mr. Brown, you may begin your conference.

Thank you, Renita and good morning everyone and welcome again to the fiscal 2004 second quarter earnings conference call for AMC Entertainment Inc.

As Renita just said, I’m Peter Brown, chairman and CEO.

Joining me on the phone today are Craig Ramsey, our CFO;

Phil Singleton, our COO; and Dick Walsh, chairman of our film group.

Now as we typically do, I will lead off the presentation today with a few comments on the quarter’s highlights.

Craig Ramsey will the and take us through the financials and then finally Dick Walsh will wrap up the formal part of the presentation with some comments on the upcoming film product.

All of us along with Phil Singleton will then be available to participate in the Q&A portion of the call.

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 over the wire earlier this morning.

The story of this quarter, as I look at the quarter, was cost control.

As you go down to P&L and you look at the key line items of operating costs -- film exhibition costs, concession costs, theater operating expense, just to name a few -- you see that all of these expenses were down when compared to last year.

Now Craig will be elaborating on this in just a few minutes, so I won’t say any more other than I feel good about the company’s ability to keep a tight reign on its costs in the quarter, particularly when you consider we were up against a strong product year last year, a record year, for the box office.

Additionally, when you consider that we are comparing to essentially a same-strain base.

Now those of you who follow us regularly know that we’ve long advised that when it comes to tracking the results of a theatrical exhibition company you should always look at a period that is longer than a quarter.

The reason for this is that the quality differences in film product can have a major impact on results.

And this tends to be magnified the shorter the period you use to measure the business.

In addition, there are also anomalies that can occur in a quarter caused by the timing of key high volume periods such as the holidays.

Specifically whether those periods fell in this year’s quarters or last.

Now we had one of those anomalies in our fiscal second quarter this year and Craig will go into that in more detail when he walks through the numbers, but the important point here is that you should watch us over a longer period of time than just a quarter.

In fact, as we’ve often said, we watch the business internally on an LTM basis and our management information system reports actually track the business and we manage the business on a year-to-date basis.

Now as was noted in the earnings release, on a year-to-date basis we have generated a record, adjusted EBITDA of $127m and a record after-tax cash flow of $76m.

Now as a reminder, after-tax cash flow is the cash earnings that our business generates.

It’s essentially our net earnings with non-cash charges such as depreciation and amortization added back.

As those of you who have been following this business for a long time know, theatrical exhibition is a business of cash flow, and we watch very closely the cash earnings, the cash this business generates, our after-tax cash flow as well as our free cash flow, which we define as our after tax cash flow less our net capital expenditures.

On a free cash flow basis we continued the positive trends that we have now seen since our fiscal 2002 year, and we generated $16m of free cash flow in the quarter and $33m of free cash flow on a year-to-date basis.

Now that free cash flow that we are generating continues to bolster our liquidity position, we ended the quarter with $242m in cash and cash equivalents, and our credit profile, as measured by our net debt to LTM adjusted EBITDA stood at just a little over 2X at the end of the quarter, that’s our leverage ratio.

Last but certainly not least, and perhaps most importantly on our asset quality, it continues to get even better.

I want to run through some of the key metrics that we use to look at this.

Now we segment our theater circuits into three types of theaters.

Megaplexes, something we call continuing multiplexes and disposition multiplexes.

We define a megaplex as a theater of generally 14 or more screens with predominantly stadium-style seating.

A continuing multiplex is a sloped floor theater that has a characteristic such as a protected real estate profile that makes it a viable unit, at least through the remainder of its lease life.

And, a disposition multiplex is what it sounds and says it is.

It is a theater we’ve targeted for disposition over the next three years.

Now as this slide shows, megaplex screens, which are shown in green on the pie chart are by far and away the largest percentage of our circuit screen portfolio at the present time, 71 percent.

That is actually up a percentage point from this chart that we showed a quarter ago.

Continuing multiplexes shown in blue on this slide account for 23 percent of our portfolio, and importantly disposition multiplexes are just 6 percent of our total screen circuit count, or 204 screens.

Now the disposition screens, as I said a moment ago, are screens we’ve targeted to proactively take offline.

As we do this, our overall portfolio quality will continue to improve and I will talk a little bit more about that when we look at disposition forecasts.

Now the AMC theater circuit is characterized by modern, high performing theaters that are located in virtually all of the top markets in the United States of America.

Our screens do more business on a unit level than our major peer competitors, as well as the industry.

At the end of September, on an LTM basis, the AMC circuit generated North American box office revenues per screen of $355,000.

Now that is just box office.

Those of you that follow this business know that concession revenues account for another third, approximately, of the total revenues of the screen.

But importantly, on a box office per screen metric this is 34 percent higher than our major peer competitor group and 41 percent higher than the industry average.

Our theaters are typically the top-performing theaters in their respective markets, and a proxy for this is a list of top 50 theaters in North America.

We watch this list very closely, week in, week out.

Based on box office revenues generated for individual theaters over the last 12 months at the end of September, again based on this list that we watch closely, which is developed by a group called Entertainment Data Inc., EDI, AMC had just under 50 percent of the top 50 performing theaters in North America.

Those of you who are looking at the slide can see that we dominate in this metric, continue to dominate in this metric with just under 50 percent of the top 50 theaters in North America, significantly outdistancing our next closest competitor in this metric who has only 16 percent of the top 50 performing theaters in North America.

Now one of the key reasons why our theater portfolio quality continues to improve has to do with how we have simultaneously managed and continued to manage both our new build and disposition programs.

As was noted in the press release, we disposed of 45 screens in the quarter.

This brought our screen per theater ratio to 15, which is the highest among all of our major peer competitors.

As this slide shows over the next few fiscal years, we will continue our simultaneous new build and disposition activity, adding around on average approximately 100 screens per year, and taking offline, on average, about 80 screens per year.

This will have the effect of continuing to improve the portfolio quality, which if you are looking at the slide in front of you you will see is reflected in the screen per theater statistic shown at the top of the slide, which is expected to grow to 15.2 -- remember up from 15 that I just mentioned to you at the end of the September quarter -- that will be 15.2 at the end of the fiscal year and 15.6 by the end of fiscal 06.

Now, before I turn the presentation over to Craig, I thought I would briefly touch on a couple of strategic initiatives that we have either talked about before in these conference calls or that we’ve recently announced.

Those have you who have tracked us closely know that our strategic plan consists of three aspects; maximizing our operating efficiencies; optimizing our theater portfolio; and, growing our ancillary revenues through enhancement extensions of our business and brands.

One of the key areas that we’ve been focused on in the brand extension arena has been on the candy side of the business.

Last week we made an announcement that I thought was a good example of what we are doing in the brand extension area and I thought I would take a minute on this call to talk with you about it today.

We launched an AMC branded version of the ever-popular gummy candy product that we sell at the concession stand.

Now our version of this product, which is completely private label, is called Clips Gummy Stars and not only does it prominently showcase the AMC theaters brand, it brings our long-time icon, an animated figure that we call Clip, to the forefront.

This initiative was the first fully AMC branded private label initiative in the candy arena and it follows on the heels of a few co-branded initiatives that we’ve launched in the candy arena.

One co-branded initiative was Russell Stouffer’s Candies on their sugar-free pecan delights product, as well as co-branding moves that we’ve made with our Sun Maid chocolate-covered raisin products and sour jack products.

Now this is a small brand extension seed that we planted, but we look for big things to grow from it in terms of further differentiating the AMC brand in the marketplace, which we believe is one of the things that separates us from our competitors, our brand.

The second strategic initiative is one that we actually introduced just about a year ago, the AMC entertainment card.

Now as those of you may recall, this was the first major launch of the stored value card technology in the theater industry.

The AMC entertainment card has replaced our paper-based gift certificates and its been a great success.

The average transaction size is up almost 60 percent and the average gift certificate and gift card sales are up 14 percent.

Additionally, we’ve struck distribution deals with Safeway and Walgreen’s so that in addition to the AMC box office, the AMC entertainment card is distributed through over 4,000 retail outlets outside of the AMC system.

Not only does this card generate more sales than our old paper-based gift certificates product, it has tremendous promotional value.

In fact, last week we announced the creation of a special limited edition Dr. Seuss Cat in the Hat card to tie in with the movie, Dr. Seuss’ Cat in the Hat which opens on November 21.

Together with Universal we created a special trailer to advertise the card, and these cards will be available at AMC’s box offices through November the 27th or until supplies last.

So on that note, I will turn the presentation over to Craig Ramsey, our CFO, who will take us through the numbers.

Thank you, Peter.

Before discussing AMC’s financial results for the second quarter that ended on October 2nd, 2003, let’s first review some industry statistics for the quarter that will serve as a backdrop.

Note that these industry stats coincide with our quarterly reporting periods in both 2002 and 2003.

I also want you to remember that our second quarter in 2002 began on June 28th, and as a result it benefited from the full Fourth of July holiday week, whereas the second quarter began on July 4th in the current fiscal year and did not receive the full benefit of that very strong box office week.

Now with that said, let’s look at the industry’s performance.

You note the box office numbers indicate that admissions revenues were flat year over year, showing a slight increase from $2.226b during the second quarter last year to $2.235b this year.

Industry-wide price increases essentially offset a reduction in attendance.

We also show the performance of films grossing over $100m, which was up in comparison to the same quarter last year, as you can see on the slide, eight films released during the second quarter of this year are expected to exceed $100m in box office and in total contribute $1.162b compared to six films during the same quarter last year that contributed just over $1b in box office.

So with that, let’s now look at AMC’s second quarter.

Total revenues decreased $13m or about 3 percent from the same quarter last year, decreasing from $451m to $438m.

Now this change was primarily the result of the calendar reporting change that we just discussed.

Other contributing factors included a reduction in the number of screens operated, and a change in the genre mix of films released during the current year compared to last year.

As you will see in a moment, average screens operated declined by 1 percent because we closed 45 screens during the quarter.

Now as for genre, films that are classified drama, suspense, science fiction, action and urban generally play well in our major market focus circuit, whereas other genres such as family have much broader appeal.

Films in the drama, science fiction and urban genres comprised 40 percent of the total industry box office in the second quarter last year.

Collectively, this group comprised only 12 percent of the industry box office in the second quarter of this year, which contributed to the reduction in attendance and total revenues between the two quarters.

Now as we noted earlier, quarter to quarter changes in genre mix are not unusual for this business, but are usually mitigated over longer periods of time which is one of the reasons we encourage people to focus on longer period of times when analyzing the industry.

Our adjusted EBITDA decreased $3m from the same quarter last year to $58m.

Now the reduction is primarily due to the change in total revenues that we just discussed.

It’s also due to an increase in administrative expenses that was offset by a reduction in our theater operating expenses.

Now general and administrative expenses increased due to three factors.

We experienced higher health and general insurance costs, and some increases in our pension costs related to changes in actuarial assumptions.

And finally, we had a change in some timing of some expenses that also contributed.

As we’ll see in a moment, our operating expenses were down in the aggregate and as a percent of total revenues, the result of our strategic initiatives to reduce costs.

The next three data points on the slide related to our stated objective of free cash flow positive results, and you can see that we delivered on this important initiative.

We defined our after-tax cash flow as net earnings plus depreciation, amortization and any non-cash items and believe, as we stated earlier, that it presents the best picture of our operating performance from a cash generation perspective.

Our after-tax cash flow increased over last year by 19 percent, driven by an improvement in net earnings.

Net capex, while up over the prior year is in line with our expectations and indicative of our reduced level of new build activity.

Our free cash flow is positive and reflects a substantial improvement in this metric over the last several years.

Now because our fiscal year included 53 weeks last year, our reporting periods in the current year, in the current fiscal quarter, may not line up with those of some of our peers, so as a result we looked at our operating results, what they would have been on a 13-week period ended September 27th of 2003.

On that basis, our admissions revenues in the US were essentially flat with the same period last year.

Average ticket prices were up 7 percent and our concession revenue per head was up 3.6 percent.

Film exhibition costs were down 120 basis points, and again, our theater operating expenses as a percent of total theater revenues were down about 70 basis points.

Our adjusted EBITDA would have been up 3 percent and our adjusted EBITDA margin up 60 basis points.

Now as we noted, we advised people to watch the business over longer periods of time, which is especially important this year given the change in reporting period for the second period of this year versus last year.

So with that in mind, let’s look at the results for the 26-week period.

Total revenues were essentially flat when compared to the same quarter last year, and pretty much in line with industry’s performance.

Total revenue reflects a reduction in attendance offset by an increase in our total revenues per head, including increases in both our average ticket and concession spending per head.

Adjusted EBITDA increased $4m or 3 percent over the same period last year to $127m.

Given the flat total revenue performance, this increase in adjusted EBITDA for the 26-week period is due to a reduction in our operating expenses, both in absolute dollars and as a percent of total revenues, and we will discuss that in more detail here in a moment.

Our after-tax cash flow for the 26-week period benefited from the improvement in operating results and set a record for the LTM period or the last 12-month period of $138m.

Net capex was $43m for the year-to-date period compared to $30m for the same period last year, and for the 26-week period we delivered $33m of free cash flow.

On an LTM basis free cash flow was $72m.

Let’s now look at some noteworthy points concerning key drivers in analytics for the quarter and year-to-date periods, again focusing on the year-to-date numbers covering the longer period of time.

As we noted earlier, there were no screens added during the quarter.

Screen additions in the year-to-date period included two theaters in North America with 34 screens.

Additions in 2002 include the screens that we acquired in the general cinema acquisitions, plus 18 new-build screens.

During the quarter we closed seven theaters with 45 screens, which was in line with our full year plan to close just over 100 screens.

Screen openings and closings resulted in a year-over-year reduction in average screens operated during the quarter and in the year-to-date period.

Similar to the industry’s experience, attendance was down during the quarter, leading to the reduction in attendance per screen.

You will note that our average ticket for the quarter and year-to-date periods experienced a year-over-year increase, which was the primary contributing factor to the theater revenue per head increase of 8 percent.

Now in addition, we experienced a 3 percent increase in concession sales per head for the quarter, and a 3.8 percent increase for the year-to-date period.

Both resulted from an increase in units sold, which is a reflection of some strategic initiatives we have implemented to improve concession operating efficiencies.

These increases were not the result of raising or increasing concession prices.

We should also note that our theater revenues do not include vendor rebates, as these have been consistently reported as a reduction of our associated concession costs.

Our film commission cost decreased from 55.1 percent in the second quarter of last year to 54 percent this year, 110 basis point reduction, which is the same basis point reduction for the year-to-date period, and as we have discussed before, our focus is both on percentages and absolute dollars of contribution which in this case we look at annualized amounts of admissions revenues retained after we pay our film costs, or what we call film retention per screen.

As you can see, this increased by 1 percent for the quarter and 4 percent for the year-to-date period.

A significant contributing factor to our overall operating results was the successful management of operating cost during a time of declining industry attendance.

As you can see, operating expenses as a percent of theater revenues was reduced by 100 basis points in both the quarter and year-to-date periods, reflecting our targeted costs savings initiatives.

Our expenses were down as a percent of revenues and in absolute dollars.

Our general and administrative expenses increased as a percentage of revenues due to the three factors that I discussed previously.

So let’s turn now to talk about our capitalization and liquidity.

We continue to improve the credit profile of our balance sheet and maintain financial flexibility to act on opportunities that are accretive.

Our balance sheet shows a strong cash position with $242m of cash at the end of the quarter.

We also had CIP capex of $35m or construction process on theaters not yet open.

This really represents a cash equivalent which we will use in a moment as we look at our leverage.

Total debt was $731m which is unchanged from the end of the last quarter.

The quarter end debt, total debt, included our senior sub debt, capitalized leases and financing lease obligations.

There were no amounts borrowed on our revolving credit facility.

Net debt, the amount of $489m is up from the prior quarter, but due primarily to seasonal working capital changes.

At the end of the quarter our leverage stood at 2.1X, which is further reduced if we adjust for the CIP capex to 1.9X.

So with that, I would now like to turn the program over to Dick Walsh who will provide some commentary on the film product outlook.

Thank you, Craig.

As we look at our third quarter, we see four trends developing.

We are going to have our traditional strong line up of blockbuster films.

We see an increase in the number of $50m grossing films; very strong Thanksgiving and holiday periods which should lead to the calendar year of 2003 concluding with an at or near record performance.

We’ve already had some very solid October openings from School of Rock, Texas Chainsaw, Kill Bill Volume 1, and this past weekend we had the highest opening ever for the month of October with the Scary Movie 3 numbers up just under $50m.

As we look ahead to the final two months of the quarter, we have our seasonally slated blockbusters such as Matrix Revolution, Cat in the Hat and Lord of the Rings, the Return of the King.

We also have an unusual number of titles that are expected to do $50m or more.

This quarter, we are projecting 26 titles to gross $50m or more, comparing to 16 for the same period last year.

Eighteen are scheduled to be released November 1 or later, which compares to 10 last year.

Family fare such as Brother Bear, Owl, Cat in the Hat and Haunted Mansion combined with the action of Matrix, Master and Commander, Last Samurai and Lord of the Rings 3, throwing in something for the more discerning customers such as Something’s Gotta Give, Mona Lisa’s Smile and Cheaper by the Dozen should lead to a very strong Thanksgiving and holiday season.

With this strong A lineup, we see that despite some sluggishness earlier in the year, it points along the way.

The industry could set another all-time record for gross during calendar 2003.

With that, I will turn it back to Peter.

Renita, I think we are ready for the Q&A portion of the program.

(Operator instructions) Your first question comes from Joe Krutick of Smith Barney Citigroup.

Hi, this is Jill Krutick for Joe Krutick.

I have two questions.

One is in terms of the supply picture, you guys closed a lot more screens than we had anticipated this quarter.

Do you think, going back to look at it over a longer period, are you going to make that up in the fourth quarter?

What is sort of your screen opening and closing plans for the fourth quarter?

The second question has to do with your AMC entertainment card and what you think your penetration is in terms of how many of your attendees actually do carry and use those kind of cards, and what the potential is there.

Thank you.

I will handle the first question on screen closures.

You know last year in 2003 we closed about 100 screens, and really had targeted about that.

I think I said in my comments we would expect for the whole fiscal year to close about 100 screens, 100 to 110 so having the 45 in this period is really pretty much in line with that target.

You reflect back to Peter’s discussion of our segmentation of the portfolio, we’ve got about 200 screens that we would expect to roll off over the next three years, so that should give you a fairly good indication of what you should expect this year and on a go forward basis.

The second question on the entertainment card, your question was what sort of penetration on the card.

I guess I can speak to it in terms of sales, which I alluded to.

A difference metric I guess that is probably more relevant, we look at three metrics when we look at tracking the entertainment card at this point.

Total sales year over year, which are up 14 percent.

We also look at the contribution on a per head basis, which is probably the most relevant of the statistics which is running right now, when we look at the sales from this product versus the paper-based gift certificate product, we are generating about 0.138, that is 13 cents approximately, per head, versus the per head that was generated last year on the gift certificate product which was 0.111.

So it’s about a 24 percent increase on a per head basis.

The other metric that I alluded to that we watch is really the average size, or average transaction size.

What we’ve been able to do there with the gift card is move that up almost 60 percent.

The average gift certificate purchase size was in and around the $13 range.

We are running right now with the gift certificate because we price these things at price points that just generally seem to move people to want to purchase more in terms of the amount per transaction, we’ve moved it to a $20 average purchase size.

So it’s really been, as I said in my formal remarks, it’s really been a great success and a lot of retailers as we’ve all noted have moved aggressively into this area of the stored value card technology.

We were the first, really following in our tradition and history of innovation in our industry to launch this on a wide scale basis in our industry.

Thank you.

You’re welcome.

Our next question comes from Bishop Cheen of Wachovia Securities.

Good morning, Peter and Craig, Phil and Dick.

A couple of questions.

You continue to haul around a lot of cash, so I always ask about the cash.

Let me just billboard what I was going to ask you, two things.

If you can give us any guidance on the magnitude of attendance expectations on your part that you see this quarter versus the September 30th quarter that you just completed.

The third question is, on the capex, is that net of anything more?

I think you showed a couple of million on dispositions in the quarter and I was just wondering, on the net capex, what it is net of.

Let me go in reverse order.

The capex, there are not really any sale lease facts or any netting, so gross equals net for the quarter.

The question on attendance, I think what we would suggest for the quarter’s potential, it’s probably better to state it in terms of the industry.

Industry box office we think would be 10 plus percent over the quarter over last year.

Okay.

And then, Bishop, on the cash question, I knew you were going to ask that, I’ve penciled out some words here.

The four words are, word number one, flexibility; word number 2, patience; word number 3, accretive and word number 4, track record.

I think when you combine those four words and kind of go back to what Craig alluded to when he talked about capitalization and liquidity, it does give us a lot of flexibility and if we are patient and we make sure that in being patient we do whatever we do with that cash that is going to be accretive, you know, we will continue to add to our historical track record of really showing that we’ve been able to grow value over many, many years through sort of the good times and the bad times as the business goes.

So that’s really the answer, I think, on the cash.

That’s a good answer.

I was thinking about hitting you up for a loan.

Your next question comes from Anthony DiClemente of Lehman Brothers.

Hi, how are you?

I just had a question again about the film expense.

Like you said last quarter and then this quarter, down 110 basis points year over year as a percentage of revenues.

Can you give us a bit more color as to what is driving that, and is that a trend that we should extrapolate into future quarters and into the next two or three quarters?

And then I have a quick follow up.

Thank you.

I think what we’ve experienced this year is less a dependency on the biggest blockbuster pictures for the predominance of our growth.

Last year you had Star Wars and Spiderman being so dominant in the marketplace, they were high cost films.

This year they were replaced by lower grossing films which therefore carried a lower film rent expense.

We do see this as a constant struggle, if you will, to hold box office FEC costs down.

I will say this -- I do think that for the foreseeable future in this business, maybe that’s 12 months, I think you will see a continued increase in retention, and again that’s the number we focus on.

I think the gross will be there and I think it will be there at a cost we can afford to pay, and the retention number will continue to grow.

Excellent.

I had a second question.

Reflecting on your point earlier about film mix and sort of how it impacted AMC results in the quarter as compared to the industry results.

You mentioned your expectation for the industry in the current quarter.

My question is, as you look at the film mix for the second quarter, how does the film mix play into AMC’s quarterly results?

As I looked on it I can see that you don’t have a Harry Potter, you may have fewer family films that you typically do.

How does that play into AMC’s results in terms of percentage growth versus the industry?

I hope that’s clear.

As we stated earlier, the genre that particularly works for us is drama, suspense, some urban and heavily into science fiction.

We certainly feel that Matrix and Lord of the Rings being positioned where they are in this quarter, we will benefit greatly from the grosses on those pictures.

Again, I wouldn’t count family product out.

I think the Cat in the Hat is going to be a very, very strong picture.

I think you’ll see almost every movie-going demographic well-represented during this final week of our quarter.

But, clearly the strength is going to come out of the action and science fiction genre that our circuit performs particularly well in.

Great.

Thank you very much.

Our next question comes from Gordon Hodge of Thomas Weisel & Partners.

Just a couple of questions.

One, as far as theater openings and I am curious if you have any sale leasebacks planned for the rest of this year, and then also if you could talk about what you see out there in terms of acquisition opportunities to the extent there are any.

I’ll take the question on the sale leasebacks.

We do believe as we have established our history and kind of our operating profile, as we like to lease our theaters and we do have a couple programmed for this year, theaters that we put our money into to build with the full expectation of going to the sale leaseback market, so we will have a couple of theaters before the end of our fiscal year.

Theater openings, we have total for the year I think we are programmed at 114 total openings for the fiscal year, so we still have a few coming online over the next several months.

And on the acquisition question, Gordon, I think that as we’ve said in these prior calls, and in fact it kind of goes back to our strategic plan and those three components of it, the second component specifically I am talking about now, optimizing the theater portfolio.

That really has to do with the simultaneous new building and disposition program, and in addition the acquisitions that meet our dual-pronged criteria of asset quality and market fit.

I would say that we are very encouraged -- well before I say that I would say that one of the things that we can’t ever do is know exactly when acquisitions are going to happen.

To use the fishing analogy, it’s like having a lot of lines in the water and watching all the bobbers and you are constantly checking the lines which you never know exactly when you are going to pull something in.

I will say that I am encouraged, probably more so than I’ve been in a while on the level of activity that we are involved in in terms of moving some of these opportunities down the road.

Again, I put the caveat on that those acquisitions or deals -- and deals can be tenuous.

Our tact is that slow and steady wins the race, we keep our head down and we just keep working it, and working it and working it but it is a key element of our strategic plan.

Great, thanks.

You’re welcome.

Our next question comes from Matthew Harrigan of Genco Partners.

Good morning.

Two questions.

Your competitors over at Regal have had rather more success maybe than some people would have anticipated on the cine-media side, on the advertising front I think they’ve done $50m extra cash flow on an LTM basis for their fiscal year.

Given the quality of your real state profile, and the costs and the ROI that you would see somewhat cloning their strategy, is that something that you have to do at some point, having witnessed their success?

Secondly, on the international side, I guess a couple of years ago you happily would have sold certain assets.

Are you more committed to those assets now?

I would say to the second question, Matt, the answer is on the international that time has improved those assets and in fact in the quarter the mix of them were positive in terms of the EBITDA contribution.

So it is a small part of our business, but it has gotten better.

So being small, if we had the right opportunity that was an accretive opportunity to look at potentially exiting those businesses, I am sure we would, however I will say with equal conviction that they are contributing, improved over time and are not really distracting us at this point in time.

So it is really a steady as she goes.

If there are opportunities out there, we’ll look at them.

I’d say on the other part of the question, just a couple of comments.

We certainly track what all of our competitors are doing, we’ve been in the business ourselves for a long time and have lead a lot of innovation.

We’ve been in the screen advertising business really since 1985, we really were one of the first circuits to step out in that space through a wholly owned subsidiary called NCN.

So we are very familiar with the ability to generate media revenues on our screens.

And I would say to you that we watched the area carefully and part of the watching that we do is making sure that we are looking at the deals that we are doing with respect to some of our vendors and accounting for those correctly in terms of how we are scorekeeping the revenues and all of that.

But I would say to you that we think it is a very viable area.

We’ve been involved in that area for a long time and we are certainly well-positioned to move more aggressively into that area if we really truly believe that it is an area that can and will generate a clear return on investment capital based on sales that are being made to third party advertisers.

I’d add too that we are experiencing improvement in operating results.

If you looked at the revenue line, you’d have to drill down into both our NCN revenue line and the other theater revenue line.

But if you really analyzed what contribution it was to our operating results year over year, if you want to call it the pre-feature or the advertising or the media segment, they are up 37 percent for the quarter and 42 percent for the fiscal year in terms of their contribution to EBITDA.

So we are taking some action ourselves and we are pleased with the profitability that we are experiencing in that line of business.

Thank you, Peter.

Thank you, Craig.

Our next question comes from Stewart Halpern of RBC Capital Markets.

Thanks.

Actually I have four questions and then just one clarification.

Just the clarification first, Craig, you said that the December quarter box office expectation up 10 percent, you are talking about national box office?

Yes.

Okay, great.

And then just four questions.

First, do you have market share for your percentage, national box office this quarter versus last and then year-to-date this versus last?

Secondly, could you help me to understand the net cash used in financing activities, the $14.3m that you are showing in your other financial data, I just want to make sure I understand what that is.

Thirdly, if you could comment on the impact on the international circuit on results?

Lastly, if you have any preliminary comments on calendar 04 box office to outlook, whether you see it potentially stronger or weaker than calendar 03?

Thanks.

I’ll take the market share, it was at 13 percent for the quarter and 13.2 percent for the fiscal period year-to-date.

Do you know how that would compare versus last year?

Versus last year, 13.3 percent.

For the quarter?

That’s year-to-date.

Did you want to comment on other 04 trends?

Yes.

It is beginning to fall together next year such that when we reviewed it and we looked particularly at the April to December period that is going to match up with our fiscal year for next year, we think it is loaded with pre-sold temple pictures such as Spiderman 2, Harry Potter 3, Shrek 2, The Ring 2, Oceans 12, Meet the Faukers.

There are high concept pictures such as Van Housing, Troy, I Robot, Alexander, Cinderella Man.

Family films such as Garfield, Shark Tale, the Incredibles, Sponge Bob, Polar Express.

Sitting here right now, we know this line up will even build out and be broader.

This may be one of the best on paper slates we’ve seen in quite some time, so we are very confident going into next year.

Okay, great.

On the international question, I think I covered that just a moment ago, Stewart, but in the quarter the international assets contributed about $1m that is between Asia, Europe and Canada of positive EBITDA.

But in terms of the other sort of statistics, would you say that they probably tend to bring down or actually help in some cases?

No, I’d say in terms of the margin picture they would bring down.

Okay.

Your other question was on the change in cash flows from financing activities to $14m.

Yes.

You know, you are required to put your change in bank overdrafts, your checks outstanding in excess of cash balances is really what that is.

We didn’t have any other financing activities, this is just a cash balance change on overdrafts.

Got you.

Okay, thanks.

Thanks.

Our next question comes from Ray Schleinkofer, of [Slotavant] & Company.

Good morning, guys.

I am kind of intrigued with this idea of potentially box office being up 10 percent in this quarter here.

I just wanted to play around with two things that are going on, one is that inclusion of an extra week in this quarter and I just want to make sure, when you say 10 percent that you are kind of thinking of, is that a straight apples-to-apples comparison?

And then secondly, you are kind of lapping where you had your ticket price increases last year.

Is there any impact that that may have which might make the increase in overall box office potentially different for you than for some of the other players out there?

Thanks.

Well you are right, we did lap ourselves in terms of our ticket prices, and I think the number we gave you for the box office in the quarter was for the industry, it’s probably got an assumption of a 5 percent ticket price increase embedded in that, but I would say that we will look at our ticket prices as we approach the holiday season, we will probably not hit 5 percent, we will be a little more conservative.

But we will take a look at pricing and make appropriate adjustments.

Your other question was that last week, and I think that the number that we gave you would include that last week.

That’s great.

Thanks, guys.

You’re welcome, Ray.

Our next question comes from Alexis Gould of CIBC World Markets.

Good morning.

Just a couple of questions.

In terms of the planned extension, you talked about the private label and the co-branding.

I am sure it’s a small percentage overall now, but do you see it increasing margins in the sort of medium to long term?

Yes, Alexis.

I think the underpinning of a brand strategy is that you generate an additional degree of loyalty, a covenant if you will, between your guest or customer or patron, whatever you want to call them, and the company.

So it is something that as I said in my formal remarks, we feel that is somewhat differentiating about AMC.

We have a single and uniform brand in the marketplace, really worldwide at this point and we are finding as another example that being able to do things with that brand like with our movie watcher program, which is the industry’s largest frequent moviegoer loyalty program, there are 3.3m members in it, that there is an increase in frequency when we are able to create a covenant, a special covenant, between ourselves and a customer.

So that is really the underpinning of our brand strategy.

And then additionally, I know your bank facility matures in 2004 and just sort of looking out a couple of months, have you started thinking about what your plans are there?

Well we continue to discuss that facility with our banks and have every intention of replacing it before its expiration.

And then I guess somewhat related, you’ve been in touch with the rating agencies.

Any sort of updates there, recent conversations that we can hear about?

Nothing recent, no.

We continue to have dialog with them, we are pleased with how our debt securities are trading in the market, so we believe the value is being recognized, but no specific discussions to report at this point.

Then just finally, I know a bunch of people have asked about acquisitions and I am just going to ask one more time.

Some of your competitors have talked about compression, sort of compression, discrepancies between buyers and sellers.

Have you started to see any evidence of this?

Your prior remarks would lead me to believe that you probably have, but any color there?

Well the prior remarks stand.

I think that our activity level is up, and I would say on your specific question yes, we’ve seen some compression.

Such that these deals, I think we don’t want to do and won’t do dilutive deals.

We’ve always been disciplined in terms of how we’ve approached the business and it has served all of our constituents well, we believe, for all the years we’ve been doing this and we are going to continue to behave this way.

Great.

Thanks again.

You’re welcome.

Your final question comes from Jessica Brewer of CSFB.

Hi guys.

First of all, nice job on maintaining the margins in what was kind of a challenging quarter.

I wanted to just drill down a little bit more on the attendance per screen metrics and recognizing that you are looking at slightly different periods year over year and you had the difficult genre mix.

There are a couple of other things working in your favor including that last year that metric was down about 8 percent and so it looks like a relatively easy comp, and you also closed a number of underperforming screens.

So to frame it, I am just wondering if there are other factors going on, like increased competition or any kind of backlash against the higher ticket prices or international factors that were affecting that attendance trend.

And also, you know, how did those play out in the fourth quarter?

I don’t think we really tried to enumerate the primary factors, being genre, the types of films that played in the market, actually as Peter reported our business is up internationally, so we’ve seen some positive impacts there.

I don’t think there are any other pieces to the puzzle.

You gave some comparable metrics for, as if you had measured the same period last year, do you have that number for attendance?

Yes.

It will take me a second.

He’s looking that up, Jessica.

Well you can follow up with me later if you want.

If you don’t mind giving me a call, I’d be happy to talk to you on the phone.

Okay.

Thanks a lot.

You are welcome.

Are there any closing remarks?

Yes, I just want to thank everybody for joining us today on the call.

As you heard, we feel fairly bullish about the upcoming holiday season.

It is an important season of the year for us.

We are in good shape in terms of our asset quality and as I said in my remarks, both in the Q&A and the formal presentation, we will continue to be disciplined in our approach to the business and if all goes well, we think that will continue to pay off for all of our constituents like it has in the past.

So on that note, I will just close the program and simply say I wish all of you a warm and joyous holiday season.

I know it sounds kind of funny to say that here in October, but we won’t be talking to you again until after the holidays, so blessings to all of you and thank you all very much for your interest and your support.

We appreciate it and as Jessica will do, if you have any follow up questions or calls or anything we are always available to take those.

Thank you all very much.

Thank you for participating in today’s AMC Entertainment Inc. conference call.

This call will be available for replay beginning at 1 pm EST today, through 11 59 pm EST on Wednesday, November 12th, 2003 through the website.

Thank you and have a nice day.