AMC 電影院 (AMC) 2004 Q4 法說會逐字稿

Good morning, ladies and gentlemen.

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

At this time I would like to welcome everyone to the AMC Entertainment Inc. fourth quarter and fiscal year 2004 conference call hosted by Peter Brown, Chairman and Chief Executive Officer of AMC Entertainment Inc.

Ladies and gentlemen, 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 theatres 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 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 Securities and Exchange Commission.

A discussion of management's use of these measures and reconciliations to the most directly comparable GAAP measures is contained in the Company's fourth quarter earnings release and is posted on the Company's website, at www.amctheatres.com.

At this time all lines have been place 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 (OPERATOR INSTRUCTIONS) I would now like to turn the conference over to Mr. Brown.

Sir, you may begin your conference.

Thank you, Paul, and good morning, everyone and welcome to as Paul said the fiscal 2004 fourth quarter and year-end earnings call for AMC Entertainment Inc.

I am Peter Brown, Chairman and Chief Executive Officer and joining me on the call today are Craig Ramsey, our Chief Financial Officer;

Phil Singleton, our Chief Operating Officer; and Dick Walsh, Chairman of our Film Group.

As we typically do, I will lead off the presentation today with some overview remarks on the highlights for the fiscal year and I'll also update you on our asset quality.

Craig Ramsey will then take us through the numbers and Dick Walsh will wrap up the formal part of the presentation with a discussion on film's products.

All of us will then be available for questions from our analysts.

On that note, let's begin.

I hope by now you have all had a chance to review the press release that went out on the wire last evening.

As was noted in the release, we are pleased to report a record fiscal year adjusted EBITDA of $248 million.

This represents a 7 percent increase over our prior fiscal year's adjusted EBITDA of $231 million, and I might add that our prior fiscal year was a 53-week period versus a 52-week period this year, and Craig will be speaking more to that in our financial remarks.

Our fiscal '04 adjusted EBITDA growth is really the continuation of a nice growth trend that we've seen over the last several fiscal years.

In fact if you look back at where we were at the end of our fiscal 1999 year and where we are today, you'd see that our adjusted EBITDA has grown at an 18 percent compound annual growth rate.

Now those of you who follow us regularly know that there are three aspect to our strategic plan; maximizing our operating efficiencies, improving the quality of our portfolio of theatres, and growing our ancillary revenues.

Successful execution on the first component of this plan shows up in margin improvement, and we saw that in our fiscal year adjusted EBITDA margin which grew almost 100 basis points over where it was in the prior fiscal year.

We continue to improve the quality of our theatre portfolio.

The second key component of our strategic plan, through the successful opening of 114 new megaplex screens and equally as important the disposition of 142 screens.

Additionally in fiscal 2004 we were able to complete a nice tuck-in acquisition of a small theatre circuit called Megastar that added 48 high-quality screens to our circuit portfolio.

Fiscal 2004 also saw a continuation of the growth in free cash flow that we have been so focused on over the last several fiscal years and that we have now seen every year since fiscal 1999.

In fiscal '04 we generated $103 million of free cash flow, which represents a 48 percent increase over the prior fiscal year's free cash flow.

Finally our free cash flow combined with the overall execution on all aspects of our strategic plan continues to strengthen our balance sheet, improve our credit profile, and add to our liquidity position, which gives us substantial flexibility to continue executing our plan and creating value for our shareholders.

Now before I turn the program over to Craig, I though I would take just a moment to update you on the quality of our circuit screen portfolio.

What distinguishes the AMC theatre circuit, we believe, is its high-quality, modern high-performing theatres located in all the key major markets with a strong national brand.

Those of you who follow was regularly know we track the quality of our portfolio through the segmentation of our circuit into three types of theatres, megaplexes, something we call continuing multiplexes, and disposition multiplexes.

Megaplex is a theatre that we define as generally having 14 or more screens with predominantly stadium style stating.

A multiplex theatre is a show forward (ph) theatre 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 multi is a theatre that we targeted for disposition, generally over the next three years.

The end of the fiscal year our 2597 megaplex screens accounted for 73 percent of our total circuit screen portfolio.

Our 785 continuing multiplex screens accounted for 22 percent.

And our 162 disposition multiplex screens were just five percent of our overall screen count.

As I said, we will take these screens off-line over the next -- generally the next three fiscal years forward and with continued careful new building, this will continue to improve the quality of our overall portfolio, which is now what we're going to look at.

As I said in my highlight remarks, in fiscal 2004 we added a total of 162 new screens to our portfolio.

This includes 48 screens we acquired through the Megastar acquisition and the rest of the additions were new builds.

Additionally we took off-line 142 screens, which includes one 8 screen managed theatre.

This slide that is up before you shows the distribution of our own screen additions and dispositions throughout fiscal 2004 on a quarterly basis.

It also shows the cumulative additions and dispositions from fiscal 1996 through the end of fiscal 2003.

A good proxy for the quality of the theatre circuit is its screens per theatre count.

We watch this metric closely and as you can see through the simultaneous addition and disposition activity, we have increased our screens per theatre count from 14.7 where it stood at the end of fiscal 2003 to 15.3 at the end of fiscal 2004.

You can also see that every quarter that metric was improving.

We continue to have the highest screen per theatre count of any of our major peer competitors and that is one of reasons we believe our theatres produce industry leading revenues per screen as well as dominate the list of top performing theatres in North America week in and week out.

On that note, I will turn the presentation over the Craig Ramsey, our CFO, who will review with us in detail the numbers for both the quarter and the fiscal year.

Craig will also be discussing the deferred tax accounting and preferred stock matters that were noted in our press release.

Thank you, Peter.

Let me first start with our quarterly results, which were impacted by a number of factors including a comparison of a 13-week quarter this year versus a 14-week quarter last year.

And in addition to having one less week in the fourth quarter this year, the quarter was also affected by less Christmas and a New Year's holiday business.

Our fourth quarter last year began -- excuse me, fourth quarter this year began on January 2 and it began on December 27 last year.

And you can see that we benefited from less Christmas and New Year's business in the fourth quarter this year.

So if we use our fiscal reporting periods for both years, we estimate that the box office in North America decreased from about 2.2 billion during the fourth quarter last year to just under 2 billion this year, 1.99 billion.

It is not a 9 percent decrease.

That was fueled by a five percent increase in average ticket price for the industry and about a 13.5 percent decrease in attendance.

So as we will see in a minute, our results really fall pretty much in line with those results of the industry during the comparable period.

As we look at the fourth quarter, our total revenues decreased $41 million or 9 percent in comparison with the same quarter last year, decreasing from $444 million to $403 million.

As we just noted, this reduction resulted from a 13 percent decline in attendance for AMC, which was of course due to one less week during the quarter and that week including large holiday business volume.

Our operating results benefited from a 4.4 percent increase in total patron spending per head, which was comprised of a 3.7 percent increase in average ticket and its a 2.5 percent increase in our concession spending per head.

Adjusted EBITDA decreased about $6 million from the same quarter last year to $46 million.

The decrease is the result of the revenue performance we just discussed, but our cash flow or EBITDA results did benefit from reductions in our film expedition costs, concession costs, and operating expenses.

The next three points on the slide relate to our stated objectives, free cash flow positive results.

And as you can see we once again delivered on this important initiative.

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

Our after-tax cash flow was very comparable with last year, but our free cash flow benefited from a sale leaseback transaction during the quarter.

I would also note that our fourth-quarter results do include a $7 million charge related to our long-term incentive plan.

This stock based compensation plan was approved by our shareholders at our last annual meeting and provides stock based benefits to over 900 of our associates.

The plan benefits are dependent upon the achievement of predetermined targets and they vest over three years and it was recorded in the fourth quarter because that is when we were able to ascertain that those predetermined targets would be achieved.

The fourth quarter results also include $13 million of cost associated with the redemption of approximately 283 million of our 9.5 percent senior subordinated notes through the issuance of $300 million of 8 percent senior subordinated notes.

Contributing to the results for the fiscal year, total revenues were essentially flat in comparison with the prior year at almost $1.8 billion.

Total revenues reflect a 5.3 percent decline in attendance, offset by an increase in total revenues per head that included increases in average ticket of about 6.2 percent and increases in concession spending per head of about 3 percent.

The average screens operated between the periods was essentially flat.

As Peter noted in his remarks, our adjusted EBITDA increased $17 million or 7 percent over the same period last year to $248 million.

And given the flat total revenue performance, this increase in adjusted EBITDA for fiscal '04 was driven largely by reductions in our operating expenses both in absolute dollars and as a percent of total revenues.

And we will talk a little bit more about that in a moment.

Our after-tax cash flow for the fiscal year benefited from the improvement in operating results and it was increased to $134 million, a 10 percent increase.

Net CAPEX was $31 million for the fiscal year, compared to $53 million for the same period last year.

CAPEX was reduced by sale leasebacks of $63 million in the current fiscal year, compared to $44 million of sale leasebacks in the prior year.

We delivered $103 million of the free cash flow during the current fiscal year, compared $69 million last year.

We now look at some noteworthy points concerning the key drivers and analytics for the quarter and year-to-date periods.

You can see that during the fourth quarter we opened one theatre with 18 screens and it brought our total year-to-date openings to 114, which was in line with our plan for the year.

Screen additions, as shown on the slide of 162 include 48 screens that we acquired during the third fiscal quarter.

During the quarter, we also closed 4 theatres with 37 screens, bringing our total closures in the fiscal year to 142 screens.

Screen openings and closings resulted in a slight year-over increase in average screens operated during the quarter and actually a slight reduction in average screens during the full fiscal year.

As we talked earlier, our year-over-year calendar changes negatively affected attendance during the quarter, leading to a decrease in attendance per screen.

Our average ticket price has increased 2.7 percent for the quarter and 6.2 percent for the fiscal year, which contributed to the theatre revenue per head increase of 4 percent for the quarter and 6 percent for the fiscal year.

In addition, we experienced a 2.5 percent increase in concessions sales per head for the quarter and 3 percent for the fiscal year.

Our film exhibition cost decreased from 52.2 percent in the fourth quarter of last year to 50.1 percent this year and for the full fiscal year our film exhibition cost declined by 120 basis points.

We focus, as we have discussed before, on both percentages and absolute dollars of contribution.

In this case we look at film retention per screen, which you can see was essentially flat in the quarter but increased 5 percent for the fiscal year.

A significant contributor to our fiscal year operating results was the successful management of our operating costs.

As you can see on the slide, operating expenses as a percent of theatre revenue were reduced by 110 basis points for the fiscal years reflecting many targeted savings initiatives.

Our recurring G&A expense was up as a percent of revenue.

You see slightly up for the fiscal year.

It reflects some increases in insurance and pension costs.

Look now -- turn to our liquidity and capital resources.

We continue to improve the credit profile of our balance sheet.

We show a strong cash position of 333 million at the end of the quarter.

Total debt was 747 million.

It was up 16 million from the end of the last quarter.

It was comprised of our senior subordinated notes and our capital lease obligations.

There were no amounts borrowed on our revolving credit facility, although we did successfully complete renegotiation of that facility during the quarter.

We also, as I noted earlier, refinanced about $283 million of our 9.5 percent senior subordinated notes through the issuance of about $300 million of 8 percent subordinated notes, and that refinancing will generate some nice interest savings as we go forward.

Now as set forth in the press release, the Company will restate prior year provisions for income taxes and will record non-cash valuation allowances against deferred tax assets that relate to our operating losses incurred in our foreign operations.

These restatements are non-cash and they really results for re-evaluation by the Company and our independent auditors of applicable accounting guidance related to income taxes.

The press release sets forth the amount of the restatements in each year and for the previously issued quarters in 2004 and 2003.

And the restatement will also affect the discontinued operations as noted in the press release because the discontinued operations relate to the historical or the international resorts.

Now a bit of maybe some additional clarification.

The Company has historically accounted for deferred tax assets in our foreign operations using the same methodology as we have used in the U.S., and that methodology recognized deferred tax assets when operating losses were incurred in these foreign operations and the tax laws of the relevant country allowed for carryforward of those NOLs.

And we were able to conclude that it was more likely than not that the deferred tax assets would be realized in future years through carryforwards.

We would establish historically established valuation allowances when this more likely than not assessment could not be concluded.

The restatements relates to applying a methodology that records valuation allowances day one or from startup in foreign jurisdictions until a track record of profitability is established.

It is a more conservative approach, and one that we and our independent auditors concluded was appropriate in these circumstances.

Now as noted in the press release, the estimated effects of the restatements are preliminary and subject to some final audit work by the Company's auditors.

A significant amount of work has been done on these numbers and is already completed and we expect to finish the remaining work very shortly.

The press release also notes that we are currently responding to an FEC comment letter pursuant to a pending registration statement related to our senior subordinated notes of 2014.

This matter concerns a possible reclassification of the Series A Convertible Stock out of stockholders equity.

We are currently in the process of resolving this matter with the FEC and we note that is another non-cash in this case it would be a reclassification, and if it were made it would not impact our previously reported results current -- or affect our current earnings.

I would also like to note that this would not affect the Company's compliance with any debt covenants.

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

Thank you, Craig.

In our film product outlook we see four key trends that should play out over the summer business period.

We have a strong April through June slate.

We've had a strong run of pictures from Man on Fire and 13 Going on 30 in April, right up through last weekend's huge opening of Harry Potter, the Third Installment, which outperformed the opening of both of its predecessors.

And we have several key titles left to go in June.

The product has been evenly spread out and we have a chance to have seven consecutive weeks where a picture in release that week will ultimately exceed $100 million during their domestic theatrical release.

Starting with Van Helsing on May 4th and continuing in subsequent weeks with Troy, Shrek 2, Day After Tomorrow, Harry Potter, Stepford Wives, and The Terminal; this pattern has given us a steady flow of high-quality pictures entering the marketplace.

Even though sequels are mentioned on this previous list, we are doing very well with Shrek 2 to and the third installment of Harry Potter, as we've said.

We are actually less dependent on sequels than had been the history in the recent past.

Last year's summer season contained 12 sequels.

This year only six appear on a schedule that looks very promising.

One of the biggest pictures of the year of course it the eagerly anticipated release a Spiderman 2 on June 30th.

As we head into the July 4th weekend, the industry will see 12 pictures moving into the marketplace in the immediate weeks prior to and during that key period.

This activity around the July 4th period should give us momentum as we head into the late summer period.

The titles of key interest during the late summer period our Anchorman, a comedy starring Will Farrell;

King Arthur, an historic action movie from Director Jerry Bruckheimer;

I, Robot, a science-fiction thriller starring Will Smith.

The Bourne Supremacy, the second of Bourne trilogy by author Robert Ludlum starring Matt Damon;

Catwoman, based on the DC Comics character, starring Hallie Barrie;

The Village, a supernatural thriller written and directed by M. Night Shyamalan; and finally Collateral, an action drama directed by Michael Mann starring Tom Cruise.

As you can see, it is a very strong lineup and one that should keep our theatres busy throughout the summer.

And with that, I will turn it back to Peter.

Okay, I think, Paul, we are ready for Q&A.

(OPERATOR INSTRUCTIONS) Bishop Cheen of Wachovia Securities.

Good morning, Peter, Craig, Phil and Dick.

A couple of questions.

Going to -- let me just billboard them for you.

Would you remind us what your structure of your new bank facility is that I guess the ink just dried off of that?

And also did you actually quantify the impact of Christmas and the one-week differentiation on the EBITDA and revenue for the Q and for the fiscal year?

Okay, Craig, I think you are up on that --

Well, the facility was reduced to -- really was reduced to $175 million and as I noted we have not borrowed any against it.

It is very similar in all other respects to the expiring facility, basically the same covenant package.

Okay, that was a 400 and some odd facility, the old facility?

Well it has amortized down to about 275 at the point in time where we did the --

Right and this is a 175 seven-year facility?

It is five-year.

Okay, and then to the period differentiation, the one-week and the Q-4 starting point post Christmas?

Yes, if we look at two comparable 13 week periods between the years, we would still see total revenues down about six percent.

And then EBITDA, we still have some leverage on EBITDA that wouldn't be down the full six percent.

So something less than?

And that again, you are saying for the full year or for Q4?

Q4.

Okay, your feeling about the existing Q1 in terms of revenue and EBITDA Dodd and your feeling for fiscal year '05?

Well, we don't -- we are really not in a position to give guidance at this point.

I think our feelings were reflected by Dick that we've got a very nice lineup of product that really has some very strong momentum at this point in the quarter.

So we're optimistic about the overall first-quarter results.

Right.

Ticket price, last question, ticket prices certainly have been an important impact for you.

Over six percent ticket prices last year, do you anticipate ticket prices at the same magnitude and also the frequency of ticket prices for fiscal '05?

I would say we're probably not looking for six percent increase.

We look at each theatre, each market, each ticket bracket in our spring and preholiday season and have made some what we think are appropriate ticket price changes.

I would say we are not expecting anything close to the six percent.

It could be 3 to 4 percent for the fiscal year.

Okay, good.

I will pass the baton and perhaps loop back and ask you about all that fabulous cash you're still toting around.

Thank you.

Michael Savner with Banc of America Securities.

Good morning.

Thanks.

Can you tell us, Craig, what you're terms for Passion of the Christ were and I guess as extension of that what your film split during the quarter would have been ex Passion?

And then a second one related to the restatements, if you could possibly give us some comfort or clarity -- as you've mentioned this is a preliminary finding.

I guess a couple questions stem off that.

What is it that brought about this change now?

Obviously it is the same auditor you have been using for awhile, so I guess I am curious at what made them go back and look at this accounting issue now.

And then go back a couple years and how much certainty should we have that there is not going to be some other finding coming out before the books get closed?

And I guess we will assume that they can still get closed by June 15.

Thanks.

Okay, we really are in a position and don't like to comment about our specific film terms on any film with any particular studio.

I would suggest there wouldn't be a significant change in our fourth quarter if we did not have that picture in the quarter.

The second question, certainty.

Well, in terms of why we made the restatement, I tried to provide some color on that Michael, that it was -- you're always reevaluating and looking at what you are doing, and as you go through an audit and this did come out of our audit process.

And as we really focused on the international operations, we just came to the conclusion that what we had been doing, first I would say what we had been doing at the time we are doing that, we thought that was the appropriate thing to do.

But as we look back, it seemed more appropriate and it appeared as we researched this matter, it became apparent that this methodology we've now adopted is the more predominant treatment.

And I want to emphasize that this is all again a non-cash matter, but it is just an application of principal.

I can't and really don't want to speak for our audit firm.

We have had the same auditing firm for a number of years and believe they have done good work.

We are in agreement with them on this matter.

We don't have any disagreements with our accountants on this matter.

And with regard to certainty, is there something else coming?

It is our belief that we have once again done a very thorough job of work and have been through a good audit and that we have a little bit of work, as I said.

There's no significant amount of work done on this restatement and we believe that it is our intent and desire to make our filing by -- on a timely basis, which as you know is the June 15 date.

I appreciate that and I guess Craig a just housekeeping question.

What I inferred from your comments on CAPEX, I just want to make sure I have my math right.

Your CAPEX breakdown for the fourth quarter you had a $63 million leaseback.

That was all in the fourth quarter, so your net CAPEX spending was $21 million?

Is my thinking about that right?

That is correct.

Thank you very much.

Anthony DiClemente with Lehman Brothers.

Hi Craig.

Hi Peter.

Just a couple of quick questions.

I just wanted to ask you, do you have expectation for interest expense for the upcoming fiscal year first of all?

And then secondly, just going along with Bishop's question on the amount of cash, you have over $4.00 per diluted share of cash in the balance sheet.

If you can just prioritize what your potential uses for cash could be, and then what your threshold, remind us what your threshold for acquisitions might be on EV (ph) to EBITDA basis.

Craig will get that interest expense.

This is Peter.

I think on the cash question you put it well, which is prioritize.

Our best use of our cash is in the business.

It really goes to the question of where can you get the best returns and we underwrite our new builds in and around the 20 percent ROI criteria, cash on cash, and really that is the same on the acquisitions, and that is what we have been achieving.

So the comment that I made and I made it deliberately in my highlight remarks is that we believe that the cash gives us the flexibility to continue to execute on the opportunities that may be out there for us both from a new building standpoint but also from a consolidation standpoint as well.

Which we have been successful executing over the last few years.

Having said that, I will also tell you that this is a Company that is focused on always maximizing shareholder value, creating value.

We have been doing it since 1992 fiscal year when I came out here and joined with Phil Singleton, my partner, and in the last five fiscal years as well.

So we will continue to remain focused on that and study all of our alternatives at any point in time and if appropriate, execute on an alternative that we think is the right one for shareholder value.

Craig, on the just expense?

The press release shows about $77 million of gross interest expense for fiscal '04, and as we look ahead and both the benefits from the refinancing we do, we did in this fourth quarter, I think the number for next year is going to be low 70s.

That is helpful.

Thank you very much.

Ray Slinkhoffer (ph) with Stertivant (ph) and Company (ph) .

I just wanted to see if you could give us maybe a little bi of a sense of the new build program; how many screens you might have coming on this year, anticipated timing?

And then maybe also what you are seeing in general in the market in terms of the pace of building that is going on out there?

I will address the latter and Craig will get you some stats on the former first question, Ray.

I think that we track every -- we really do this every week in and week out.

Industry screen openings and industry screen closings, and I think it is safe to say that while we are projecting from a macro standpoint a flat industry screen count, when we look at -- at least the major peer group of competitors and then some of the regionals that we tend to compete more heavily with, we see that it's really more a situation of net closures rather than openings.

So I think really the statement there is it doesn't feel to us that there is any quote/unquote crazy new building on a macro basis anyway going on in the industry.

My own view, I think our view is that there are some smaller exhibitors that are finding some locations and building some new screens.

A lot of those are in markets that are secondary markets as we would view them and markets are not competitive with us.

But it really is a story I think of more of a conservative approach from a macro industry perspective and I think you see that.

If you infer that as we do or as it goes with us it might go with the others as well, which has been some sort of traditional way the industry has worked.

When we talk about our simultaneous addition disposition, you can see that we are basically taking offline about the same number that we're bringing online.

In fact, as Craig talked about, our average screen count on a fiscal year basis is down just a little tiny bit year-over-year.

Now on the question of forward new builds, Craig?

We are projected to have 44 new build screens coming online during '05.

Actually one of those was opened in May; one is targeted for an October opening, and then the third one is targeted for December, just prior to the holiday season.

That's great.

Thanks guys.

Gordon Hodge of Thomas Weisel Partners.

I just have a question that has already sort of been asked but I was just wondering if you could -- bigger picture here.

Your lower film rents in this quarter as a percentage I gather related to Passion and that might also explain or may have been offset by lower per caps; at least we have heard that from others in the industry.

Is that a fair assessment of how it went?

And then I'm curious, Craig, where would we find -- did the deferred tax number -- did that show up on the income statement?

Or is that something that was not income statement related, the $17 million?

And Dick I was wondering if you could talk about what your dissipation of the Olympics effect might be based on your past history and any comments on the Loews option would be appreciated.

It's easier to remember the last one. (multiple speakers) I'll take -- since we remember the last first, the comment on the Loews acquisition is very simply I think we know what you know.

We have read in the press what is going on they're and we basically -- it remains to be seen.

Backing up from there, I will turn it to Dick on the films.

On the Olympics, the Olympics is something that I would have to honestly tell you is an unknown.

I will tell you that the product schedule in August looks strong in terms of number of titles.

The studios are not backing away from the Olympics in the late August into September period.

And we have really seen over a period of time a decline, I would have to say in the effect of the Olympics on our box office.

And certainly in a case where we are 8 to 9 Time Zones differential, I think you will see the product continue to play well through August.

Okay, good.

Deferred taxes?

The $17 million that is referred to as the cumulative reduction in deferred tax assets would be a balance sheet change.

And then what is also disclosed in the press release is the actual each year's impact on the provision, but the $17 million is balance sheet.

And then to your first question regarding the effect of any one picture or whatever on our FEC, I think as Craig's comments pointed out earlier, we consistently focus on our FEC film exhibition cost percentage and as we reported, we had a 210 basis points drop during the fourth quarter, but we also had a 120 basis points drop through the entire year.

And I would say that trend is something that we would hope to continue, expect to continue.

And to lay that trend on such a global basis off to one picture I think would miss really the true story here in that we are actively focusing on FEC as a percentage of our total box office admissions.

It sounds like maybe the trend line rather than 220 basis points for this coming your might be more in the 100 level?

We would probably be more flat, although we're going to obviously work our hardest to continue to trend.

I think to be conservative, it would be a flat estimate.

Thank you.

Lee Olive (ph) with Citigroup.

Most of my questions have been answered.

I just have one relating to the sale leaseback and then a follow-up on another issue.

What is the cost of that sale leaseback?

What are you paying in terms of incremental rent there?

About a 9.5 percent cap rate.

And then just to remind me again, if we look at your rental expense number ex the incremental rent expense coming from the $63 million sale leaseback that you just completed, is it a mid-single digit type increase that you would expect for fiscal '05?

Yes.

So four to six kind of percent.

I guess my second question was just relating to the 44 screens you plan to open this year, what is your CAPEX budget there on a gross basis?

The total CAPEX -- about $110 million.

Which includes maintenance and other costs.

Okay, so it's probably maybe a $1 million of screen plus the remainder for maintenance and other?

No, the CAPEX related to new builds is about $30 million in '05.

And then the rest is maintenance and other items.

We also have a sale leaseback plan for fiscal '05 of about $40 million.

So our net CAPEX next year would be about 70.

Great.

Thanks guys.

Bishop Cheen of Wachovia Securities.

Just a couple housekeeping things.

The gross CAPEX spend for fiscal '04 versus fiscal '03 and the gross for Q4 or '04 and '03, just so we all get it exactly right.

Okay, well the gross for fiscal '04 is 95 million and then as we said we had a sale leaseback that netted it down to 30, 31.

Did you ask about '03?

Yes, versus '03.

'03 grossed CAPEX of 101 with a $48 million sale leaseback net of $53 million.

And then for Q4?

All of the sale leaseback was a Q4 event.

So give me just a second.

I've got to get --

It's pretty simple math.

It's in the schedule in the press release.

I see the net.

And I was just wondering what was the gross CAPEX?

He's got to add back the sale leasebacks.

So it would be $23 million.

Right and the gross CAPEX for Q4, '03?

Do you have that handy?

It was 16 and no sale leaseback (multiple speakers) .

Okay.

You said you had four new builds.

You talked about that previously.

How many screens in total are you looking for in '05?

44 screens.

44 screens.

Okay.

And on of those theatres already opened up?

That's correct.

And did you make any comment on how your international operations were doing?

Well, we have continued to see progress to where we are really operating at a breakeven -- breakeven to positive.

Okay.

In general in terms of volume international?

Yes, that's it, Bishop.

One last thing.

Just if you have it handy -- cash interest for Q4 and cash taxes for Q4?

Bishop, I will have to call you on that (multiple speakers) or give me a call.

I will.

Thank you.

Gentlemen, there are no further questions.

Do you have any further comments at this time?

No we don't.

I just want to simply say we thank everyone for joining us this morning.

We are pleased to report what we view as a great fiscal year in terms of our adjusted EBITDA, our net debt, our free cash flow.

Those are the fundamental metrics that we focus on that we believe are the metrics that are about creating fundamental value.

And as always, we appreciate your interest and hope that everyone has a great summer and hope that that summer includes at least a movie a week in an AMC Theatre.

With that, we look forward to reporting back to you in the fall and see how the summer has gone.

Thank you very much.

Ladies and gentlemen, this call will be available for replay beginning at 1:00 PM Eastern Standard Time today through 11:59 PM Eastern Standard Time on Thursday, June 24, 2004 through the website www.amctheatres.com.

We thank you for your participation.

You may now disconnect.