AMC 電影院 (AMC) 2014 Q2 法說會逐字稿

Greetings, and welcome to the AMC Entertainment second quarter 2014 earnings conference call.

(Operator Instructions)

As a reminder this conference is being recorded. I would now like to turn the conference to your host Mike Zwonitzer, Senior Vice President of Finance. Thank you. You may begin.

Good afternoon, and welcome to AMCs second quarter 2014 conference call. After our prepared remarks, there will be a brief question and answer session. Joining me on the call today are Gerry Lopez, President and Chief Executive Officer; and Craig Ramsey, Executive Vice President and Chief Financial Officer.

Before we begin, I'd like to remind you that some of the comments made by management during the conference call contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to vary, which are discussed in our public releases, including our most recent 10-K. We caution you not to put undue reliance on forward-looking statements. Forward-looking statements made during this call speak only as of the date of this call.

In addition, some of the comments made on this call may refer to certain measures such as EBITDA and adjusted EBITDA which are not in accordance with GAAP. Management believes these results more clearly represent comparative operating performance. For a full reconciliation of EBITDA and adjusted EBITDA to GAAP results in accordance with Regulation G, please see our press release furnished as exhibit to our Form 8K dated July 30, 2014 which may be located under the investor relations area on our website@AMCtheaters.com.

I would like to introduce Gerry Lopez. Gerry?

Thank you, Mike. And thanks, everyone, for joining us this afternoon. The second quarter of 2014 was a solid quarter, and while the comparisons to prior year were tough, we again posted numbers that we believe demonstrate their earnings power of our overall business. Revenues for the quarter totaled $726.6 million, down 4.7% as compared to 2013 while our overall adjusted EBITDA was down less than half as much, 2.2%, to $131.8 million.

It is rare in this capital intensive, high fixed cost business of ours to see flow through improve like that, and we're happy with the progress that we've made in that key area. We are also pleased with the progress we've made to date across our five strategic action fronts on our market share performance versus peers in the trade areas where we've deployed our initiatives.

The message is clear. Box office comps were and are tough, but the underlying fundamentals at AMC are solid, the strategy works, and we're on track.

Speaking of tough box office comps, our admissions revenue for the quarter were down 7.1%, slightly below the industry which was down 6.5%. The 60 basis point under performance is primarily related to two things.

First, in last year's second quarter we outpaced the industry on a per screen basis by 270 basis points. This year we came down to earth a little, but we managed over the two years to outpace competition by 230 basis points. We'll take that.

Secondly, the strength of last year's IMAX slate was phenomenal. Just as reminder, the top three films of the year ago which generated almost 30% of the industry's record $3 billion in box office were in IMAX. This year's slate was not as large in box office, nor as concentrated.

The food and beverage front proved brighter for us. Notably, we recorded a 4.5% increase in food and beverage per patron to $4.22, our highest quarter ever.

Although the decreased attendance numbers hurt the total food and beverage revenues, which were down 3.6% versus prior year, truth is we are seeing continued success with our strategic initiatives as we gained traction with dine-in theaters, now 15 up and running, our MacGuffins lounges, now 74 across the fleet, and even our revamped concession stands. We've doubled the gross margin of the box office success in food and beverage goes a long way in helping us improve flow through and shoulder the cyclical studio release schedules.

As you've heard us say before, we are continuously pursuing ways to engage our customers, and one of our most important ways we do that is through AMC Stubs, the industry's most innovative loyalty program AMC Stubs continues to gain traction and this quarters of revenue growth of 38% versus last year.

In the same timeframe, we've also grown our AMC Stubs membership base roughly 30% to 2.6 million members, and they now represent 22% of our attendance in the first half of the year, up from 19% in the first half of 2013. Fewer things in the retail business that we are in are more fundamental than customer engagement, and our progress on AMC Stubs not only speaks our current success, but it sustainable and will serve us well in the future.

As you've also heard us say before, reinvestment in our business at the strategic action fronts we've detailed for you in the past are helping create a meaningful competitive advantage. We'd like to leave no doubt that we will remain committed to the asset productivity and customer experience leadership path that we've chosen.

Importantly, we are still in the early stages of various initiatives and the result we've achieved to date by those in food and beverage and AMC Stubs clearly indicate that we are on the right path. So, let me briefly give you an update on the significant progress we've made on a few of our strategic action fronts.

First, comfort and convenience remain a key focus as we continue with our recliner reseats. The 505 screens at 44 locations -- I said 505 screens at 44 locations -- that we've deployed to date delivered admissions revenue per screen growth of 33% on a more than doubling of the EBITDA and the second quarter of 2014. To be sure, this solid top line per screen growth and the more than doubling of EBITDA in a period where industry admissions revenue was down 6.5 points says we are dramatically significantly outperforming and our strategy is working.

The 33% per screen admissions growth was nicely balanced as well with 21 points coming from attendance and 10 points coming from average ticket price increase. We believe that this type of balanced growth clearly illustrates the tremendous power of our reseat program and that customers are not so only driven by the slate of movies, but also the experience of seeing those movies in the comfort and style of an AMC theater. For confirmation, we look to our top box guest satisfaction scores which at 69% are not only the highest in the circuit, but in a class by themselves when it comes to retail enterprises.

By the way, all that comfort also comes with convenience. One of the newest best examples is what we call open-source Internet ticketing. This is the idea that we mentioned during the IPO roadshow of AMC show times and movie tickets being widely and conveniently available.

To jumpstart this, we rolled out our own ticketing engine this last April, making tickets to an AMC now both easier to get and available in more places on the web than anyone else's. So far we've seen a 45% increase in online ticket revenues and have sold more than 13 million online tickets this year.

Our second area of focus, enhanced food and beverage, continues to drive productivity from our guest visits, and we are seeing strong growth in the sales per patron metric. As mentioned at the outset, this metric is now a $4.22, better than 2013 by an impressive 4.5 points and the highest quarter in the history of the Company.

Food and beverage gross profit per patron, we would argue, is the most important metric in this part of the business. And in the second quarter, it was also a record at $3.62, a 3.9% improvement over the prior year. Balance is again the key, growing not just the ticket size, but the profitability of each ticket.

In the second quarter, we deployed three new food and beverage kiosks, now we have 125 in the circuit, one more marketplace express, now we have 17 in the circuit, 9 more MacGuffins now we have 74 across the fleet, as I mentioned a moment ago, and 2 more of the dine-in theaters, which are now totaling 15.

Moving on to the premium sight and sound front, we continue to be the world's leading and largest IMAX exhibitor, and during the second quarter we deployed two additional IMAX screens bringing our total to 147, all of them, of course, 3-D enabled. IMAX sets the bar high, but our premiums sight and sound execution goes beyond delivering a single product. We continue to strive to improve the customer experience by incorporating the very best of premium large format and the unique AMC [touch and looks very] in our own concept which we call AMC Prime.

This quarter we made progress on our AMC Prime rollout which we now have up and running in six locations. AMC Prime is a concept that further enhances the sight, sound and anesthetic in-theater experience including power recliners and double aligned JBL speakers. AMC Prime is clearly the next generation PLF, and guest feedback has been tremendous where the rollouts have occurred.

The last of the strategic action fronts I will comment on this afternoon in targeting programming. Specifically, how a theater and film teams are working together crunching data to schedule more shows more aggressively in our buildings. Their combined efforts helped us register the number one market share for opening weekend on four of the top five grossing films during the quarter, as well as the number one share for the entire run of Amazing Spiderman 2, the fourth highest grossing film in the quarter.

When the movie needs to open big, it is AMC that opens them big. 6 of the top 10 theaters in the country this quarter were AMCs, including the top two, just to give you a sense. We believe these examples further illustrate how these action fronts continues to give us the ability to deliver top line results.

I would now like to turn the call over to Craig Ramsey, our chief financial officer, to briefly review some of the highlights in the quarter. Craig?

Thank you, Gerry. The next few moments, I will provide a brief commentary on our second quarter and year-to-date results and an update on our balance sheet and asset base. For our fiscal second quarter, with an industry backdrop of 6.5% lower box office, we generated total revenues of $726.6 million that were down only 4.7% versus last year. This included $478.7 million of admissions revenue, $211.6 million of food and beverage revenues, and $36.3 million of other theater revenue.

Strong operating contribution by our receipts and other strategic initiatives, in particular, those that produced a 30% increase in other revenues, was not enough to offset the tough box office comparisons, lower IMAX box office and general lower level of film performance versus the quarter last year. Adjusted EBITDA for the quarter was $131.8 million, down only 2.2% versus last year, aided by our cost containment efforts that led to film exhibition costs being 165 basis points lower than the quarter last year. G&A expense, excluding stock-based compensation, that were 18.8%, or $3.2 million lower and a very slight increase in rent, all of which combined to improve flow-through and our adjusted EBITDA margins by over 50 basis points.

Total attendance decreased by 7.7% to 50.1 million guests, and average ticket price increased by 0.6% primarily due to small increases in core ticket pricing and increases at the recliner receipt locations, offset by the impact of lower IMAX attendance during the quarter. On a per screen basis, admissions revenues decreased 7.9%.

Food and beverage revenues decreased 3.6%, driven by the decrease in attendance, offset by a 4.5% increase in food and beverage revenues per patrons. Our enhanced food and beverage initiatives continue to drive our industry-leading results in this area. And as Gerry noted, these initiatives are about higher spend per patron and improving profitability.

Our 85.6% food and beverage margin was down slightly as a result of the rollout of our newer food and beverage concepts which in some cases carry higher percentage cost of goods sold, but produce higher gross profit per patron, and that's a trade-off we'll always make. Our gross profit per patron grew 3.9% during the period.

Other theater revenues increased by $8.4 million, or 30.2% as compared to the same period last year, due primarily to a 31% increase in Internet ticketing fees, a 38% increase in AMC Stubs membership revenues and higher gift card revenues. Our film exhibition costs of $257.2 million represented 53.7% of admissions revenue, a decrease of 165 basis points as compared to the same period last year. This decrease was driven by a shift in mix to lower grossing films during the quarter which delivered lower attendance levels but at lower film terms.

Operating expenses before opening and closing and other expenses of $181.3 million decreased by 1.5% on lower volume. Rent expense of $113.9 million was virtually flat in the aggregate and down slightly on a per screen basis.

As we've noted, many of our landlords are willing to contribute capital to our remodel initiatives and in many cases, rental terms are not substantially increased. Overall, we are pleased with our quarterly results as our overall margins continue to trend in the right direction due to our various strategic initiatives and the solid cash on cash returns they are delivering and our cost containment efforts.

Capital expenditures for the quarter totaled $64.5 million, offset by $9.2 million in landlord contributions as we continue to selectively manage our asset base. During the quarter, the Company opened one new theater with 12 screens in the US.

We acquired one theater with 11 screens, temporarily closed 57 screens and reopened 70 screens in the US to implement our strategy and deploy guest experience upgrades. We also permanently closed one theater with 13 screens in Canada.

We continue to expect capital expenditures for 2014 to total approximately $240 million to $260 million with landlords contributing approximately $40 million to $60 million, so a net cash outlay of $200 million. For the six month year to date period, we outperformed the industry with our box office down 1.2% versus an aggregate industry box office decline of 1.4%. On a per screen basis, our out performance was even larger.

In this case, the strength of our strategic initiatives, most notably our receipts where total revenue grew 68% over the same period last year, more than compensated for a decline in IMAX contribution and lower overall film performance. As a result, total revenues were essentially flat to last year.

Adjusted EBITDA set a new Company record for the first half of the year, growing to $233.8 million, up 7.8% on the total revenue contribution and our cost containment efforts that produced a 21 basis point reduction in film exhibition costs, operating expenses that were in line with the volume of business, a G&A expense excluding stock-based compensation reduction of $7.6 million and a rent increase of only 0.6% compared to the same period last year. As a result, adjusted EBITDA margins improved by 115 basis points compared to the prior six month period.

With respect to the balance sheet, we ended the quarter with just over $235 million in cash and a total debt balance of approximately $1.86 million. We used approximately $143 million of cash when we called the remaining senior notes in June, which completed the refinancing that we initiated in December. Our June quarter operating results benefited from the refinancing with a reduction in net interest expense of $4.3 million that will yield annualized interest savings of $31 million.

At the end of the quarter, our leverage ratio was 3.5 times net debt to adjusted EBITDA, which is within our comfort range. Our leverage cash flow generation and liquidity are in line with expectations and in accordance with our plans to augment shareholder returns through return of capital, AMCs board of directors authorized our second quarterly dividend of $0.20 per share payable September 15 to holders of record September 5.

With that, let me turn it back over to Gerry.

Thank you, Craig. As we hope you can tell, we are extremely excited about the future at AMC. We are seeing tangible benefits from our strategy and investments, and we have a great amount of upside potential as we continue to invest with great focus in our core business.

We are confident these continued investments will drive outsized returns when compared to our peers in the industry. We are and will continue to be the industry leaders in customer-driven experiences, and we have so far touched only a small portion of enviable asset base.

Overall, AMCs last 12 months box office share is 21%. This with only 7% of the US total theater count and even less of its screen count.

While this is an impressive statistic, we measure ourselves even deeper using a metric we track very closely internally and we shared with you in the past few quarters. We call it a 20 mile proximal market share.

When we measure ourselves against competition in a 20 mile radius of our buildings, we are seeing almost 6 percentage points of box office per screen out performance versus the competition dating back to April of 2011. This metric shows on a granular per screen level that focusing on the customer experience is the right thing to do for them and for our shareholders long term. T

hank you for listening, and I will now like to turn the call over back to the operator for any questions. Thank you.

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

Our first question comes from Barton Crockett with FBR Capital Markets.

Okay, great. Thanks for taking the question. Thanks again for providing the data on the reseat performance. I think you said it was up 33% in the quarter, which on its face is a good number, but it is less growth than you've seen over the past few quarters that you've been reporting that metric. And it seems like the delta versus the industry is less than we've seen. I was just wondering if this suggests any diminishing of the benefit of the reseat initiative or if this is kind of an outsized kind of reaction to the over exposure to IMAX and perhaps FilmX and maybe you'd expecting to move back towards what we've seen in recent quarters as we go ahead.

Yes, Barton, the thing that I think we are seeing is that we are now comping against reseat. And so there is a same store -- same reseated store piece of the business. If you look at the (technical difficulty) [reseat] levels of those that are open less than a year, the attendance per screen is up 75%. If we go to the second year, they are up 27%. And if you could to the third year, they're flat to up slightly a couple percent. As that store base increases and you get the effect of more same stores year-over-year, it's just going to be tough to keep the 70% growth.

Does that make sense, Barton? Because what we're seeing is as the number of total reseats continues to grow, the number of those reseats that have been open longer of course grows along. The first year effect continues to be very consistent what we've seen, which is in that 60%, 70%, 80%, in some cases 100%, et cetera. Varies by building, obviously. But there is fewer of those buildings that are now open of the last year, and the number of unit count in those that have opened two and three years is now beginning to grow. So, it's a question of mix more than it is the unit by unit impact or importantly for us, the behavior changed by the guest. That is what is driving that 33% versus some of the numbers that we've recorded in the past that were in the 60%s and 70%s. It's all driven by the age mix as we will continue to grow that base.

Okay, that makes perfect sense. Now, you sid on the last call that there was in the second year when the attendance growth slows, you're pushing more on rate. Are you still seeing that?

When you say rate, you mean price?

Yes. Effective per [capita] (multiple speakers).

Yes, absolutely. For example, in the first year, those -- the breakdown that a gave you a minute ago, the less than one year's pricing is up 6% -- 8%, 9% almost. And that's -- as we've said before, that's maybe an older audience. We're getting a change in mix. As we start pushing pricing in their second year, our second year group is up 12%. And then the third year -- or over two year group is up another 10%. So, yes, the first -- as we've said before, we want to guest the experience the concept, to taste it before we raise price, and we are able to do that here through those steps I'd just given you, more ATP increase in the year two and three.

Okay. And then one final question. Regal and Marcus are opening reseated screens now. Do you see those in your territories? And if one of these opens in your territories, what happens? Does the reseat growth stop, or do you guys both grow the market? What you do see as the competitive dynamics there?

We don't have yet a lot of experience where the ones that they are doing are going head-to-head against the ones that we've already done. So, we don't have a good database to bank on to give you any kind of rateable data yet. We are humble that everybody seems to have jumped on the bandwagon. We have now over 500 screens that we've done this with. It continues to work. We like to think that we first movers on it and are deeper into our fleet with the idea than anyone else. The head-to-head comparisons, we don't really have any yet that we've noticed anything. I'm sure they will come. I'm liking the notion that we are first mover in the space.

I'm also liking the notion that as we've said all along, it's not just about the seats, but it's about the total package. The total package in the building and then the total package when it comes to offering the convenience of the reserved seating, which not everybody's doing, the convenience of the tickets available in more websites in more ways and more forms than anybody else is offering. So, hey, bring on the seats. Because what we've learned is that matters a lot, but it's not the only thing that matters.

Okay great. Thank you.

Thank you, Barton.

Our next question comes from Jason Bazinet with Citi.

Thanks so much. I just had a question in terms of your internal outlook for the box office for the balance of the year and how you are thinking about 2015. Do you still expect this year to be a tough year as we move into 3Q and Q4 and a sharp rebound in 2015? Is that a reasonable expectation?

Yes. I think that is -- the way you've described it is the way we are reading it. Q3 is off to a rough start, I think we all know that. Anybody tracking the box office knows what the numbers look like. We don't see -- we think August is going to be a little better than in July. That is not saying much. September, we will see how it all sorts out

We've got a couple of good movies that are going to hit us here over the next couple of weeks with Guardians, I've seen it, looks great. I think Guardian will have the ability to surprise us, frankly, like Lucy just did a little bit. I saw Turtles earlier today, Teenage Mutant Ninja Turtles look good. Very entertaining. Love that 93 minute runtime because we will be able to schedule a lot of shows at convenient times. So, all of those are bright spots. But the fact is, we expect the third quarter, the September quarter to be down in the mid double-digits.

Without pinning any specifics to it, it's certainly going to still be down double-digits, and we would expect it to be in the middle teens so to speak. December, the December quarter looks to be better. Up modestly, single-digits. But make no mistake, it is going to be a tough back half of the year. We are expecting the year at the moment to be down in the low to mid single- digits for the full year of the box office. Should put us -- obviously not -- should put us in the upside of $10.5 billion -- or in that neighborhood, I should say, for the full-year against the $10.9 billion of a year ago. That's kind of the way that we are reading it, subject to getting smarter every single Friday that goes by. (Laughter) It's clearly -- it's a cyclical business, and this is the down part of the cycle.

2016, on the other hand, Jason, looks very, very, very good. The more we learn about the movies, as we meet with our friends in the studio community in LA, the better that the movies are looking. We are encouraged by the consumer reaction to some of our initiatives. We are encouraged by the way that 3D is holding up. Frankly, IMAX, even though it's overlapping a very tough year a year ago, the way that some of the directors are using the technology, 2015 promises to be a great, great year. And if we've moved -- what we've done in 2010 or 2011 is moved from an industry where we used to get a record year out of every three into a situation where we get two record years out of every three, I'm going to go ahead take that. Because that speaks well to what the consumers are doing out there.

Understood. Thank you very much.

Thank you.

Our next question comes from Ben Mogil with Stifel.

Hi, guys, good afternoon. On the IMAX, the new IMAXes in your system, are those tied to the retrofits, or are these new builds and [curious, do you] see the IMAX market deeper than you previously have thought?

New build, well let me be clear. New IMAX builds. They're not tied into the retrofits as much. In fact, when we retrofit a building, when we remodel a building that has an IMAX, the IMAX screens remain -- we may do some fix up and whatnot, but the IMAX screens remain largely untouched. We got a couple of those. The IMAX that we add are being added to buildings where there was no IMAX before. They're -- in one case, we've added to a new build period, but it's really more about the splits on the IMAX phones growing to the point where a new screen make sense, and then we will go ahead and add that screen. It's not really tied into the remodel, they are two different things.

The other thing I'd say a bit about what we saw with IMAX, we talked about it being down 9%, but the take rate was essentially the same. So, there is certainly -- we don't sense that there has been a change in the guest behavior or preference for that format. It is still getting its fair share, it's just of the pictures didn't gross as much as last year.

Okay. And then secondly, you were talking about visiting your studio buddies in LA, and it looks like two of your buddies may become one buddy. Curious what your thoughts are, not specifically on Fox Time Warner, but in general, when you look at studio consolidation, is your concern more rental splits or is your concern more simply reduced product?

We frankly -- we will see, that transaction was announced and rejected. It's a dance. We'll see what happens. We really have no comment on that front. Consolidation is a fact of life in our business. It's certainly a fact of life in our end of the business. The content drives it. My interest is more in making sure that there is content that is available and that more of it is available from more sources all the time.

The creative minds in our business, the storytellers in our business, my interest is more -- my concern is more in making sure that they have a pipeline into our screens. Ergo open road, ergo all of the work we do with independents. The product we've created for them with AMC independent, ergo all the work that we do on Bollywood. Whether a couple of guys choose to merge or buy each other out, so long as storytellers have a story that they want to put on the screen, our interest is more in making sure that they have an avenue, they have a road into that screen. And I think that piece of it is going to remain healthy. The roadmap may change, but the idea that people will bring us stories that they want to see on the large screen I think will remain with us for a long time.

That's great. Thanks, Gerry, thanks, Rick.

Thank you. Our next question comes from Eric Handler with MKM Partners.

Yes, thanks for taking my question. Two things, actually. First, last week when Regal reported and had their investor call, they talked about that New York and the Washington DC areas under performed the industry and also the strength of faith-based films. Those films didn't always play well in their urban theaters. Did you see -- is that concurrent with what you guys saw as well?

And then secondly, when you look at your concession spending, wondered if you could maybe dice up and splice up some of the things you are seeing in terms of the impact that MacGuffins or alcohol sales may have had or the impact of Diamond theaters, and give us some more of those metrics around some of the growth that you saw were per caps.

Let me start first with the markets question. No, our markets, frankly, we haven't seen any significant deviation from one marketplace to the other, one geography to the other. It has been fairly consistent. What we have seen that perhaps is consistent is the impact of the family based -- the faith based films. What we've seen there, to be honest, is not that our absolute numbers on a per theater basis look any different than they will look for a similar genre for family versus faith-based for example. What we do see though is that those genres do tend to play deeper.

So, where our absolute numbers look about the same, about what we would expect them to be, when you measure relative to the industry because they are playing deeper and they're playing bigger than other genres would in some of the more rural markets, then our share does look smaller, or our growth rate may now look as big. And it's because those films have tail -- have longer tails -- or have broader tails that some of the other films would. The geography we haven't really noticed. The genre faith-based we did, and it wasn't in absolute terms, it was more in relative terms. Now, moving on to the food and beverage piece.

On the food and beverage, the -- a couple ways to look at it. One is, if you just look at the dine-in theater circuit as a whole, quarter-over-quarter, the food and beverage spend was up 11.7%, which is a pretty stout increase. We did notice that the, probably due again, to the product, the attendance was more in line with the industry in the dine-in theaters versus the big increases in the reseats. Dine-in theater attendance tracked with the industry, but the spend it was there, up 11.7%. Fewer people may have come, but they came with their wallets open. The other stat is, if you look at the $0.18 of increase in per head for the quarter, [$0.04] of it came from dine-in theaters. [$0.04] of it came from MacGuffins, and [$0.04] of it came from the freestyle -- those Coke machines with -- that give you the different flavor choices. And so they're really still comprising a big piece of the year-over-year improvement in our food and beverage line item and the per head amount. Really no weakness, frankly, that we could detect.

Great. Thank you very much.

Thank you, Eric.

Thank you.

(Operator Instructions)

Our next question comes from Jim Goss with Barrington Research.

Thanks, couple of them. First, looking at attendance per screen in the reseated theaters, the auditoriums, I think that you are applying this initiative to, tend to be somewhat smaller than some of the average ones, if I'm not mistaken. And I'm just wondering where the attendance per screen seems to be coming in relative to your averages in general.

In rough terms, Jim, the theaters that we first attacked with the reseat initiative are really driven more by two factors. There's any number of factors that we take into consideration, but again, it's really two of the drivers. The first one is lease expiration. That is the time when the landlords are more willing to talk terms and talk investment, et cetera, et cetera. So, our cadence as to how we approach the entire fleet is going to be primarily driven, the queue, the list, the line, if you would, is driven by when are the leases coming up, okay? And of course, those tend to be the other theaters, et cetera, et cetera.

The second big component is something that would look at as a pretty granular metric that we call seat turns. It's kind of a way of measuring capacity utilization, but with a couple of extra decimal places. And what we're doing in these theaters that we're attacking first, our seat turns that tend to be in the low three digits, meaning in the 100, 120, 90, call it maybe 90 to 110, 120 seat turns per year. That's the number of people that sit in a seat in every one of those seats in the theater over the course of a year. Not huge capacity utilization. When we then go ahead and implement the initiatives, what we see is that, that seat turn metric improved dramatically. And by dramatically, I'm talking multiples in the threes and fours and beyond.

Part of it, simple math is that, of course, you take two-thirds of the seats out. So, when you take two-thirds of the seats out, the seats that are left -- the new seats that are put in place, of course they're going to get more use. No kidding. The interesting or more exciting part for us though is not just that, but it's the fact that the total attendance of the building on a per screen basis -- because we're not adding screens, taking away screens, we may play with seats, but not with the screens, it is significantly higher. That is really where the proof of the pudding is. Now, Craig (multiple speakers) couple of numbers.

A couple of data points Jim, that might be helpful. If you look at the industry as a whole, and I'm not just talking AMC, I'm talking about the industry as a whole, the way we calculate attendance per screen, and you are estimating numbers of screens and stuff through the -- in the middle of the year. But I think it's pretty accurate, it's about 32,000 on an annualized basis attendance per screen. Okay? That's the industry.

So, the reseats, yes. They start as a group before remodel at about 30,000. On the one hand, they are a little bit lower, but you can say they're kind of representative of the industry as a whole. As it relates to our circuit though, we average about 41,000 to 42,000 attendance per screen. The reseat theaters are kind of like the rest of the industry. When we pre-model, they're lower in terms of how they stack up towards our total average for the circuit. The interesting point is, when you get all said and done with them, the attendance per screen goes to over 50,000 attendance per screen. To Gerry's point, he talked seats, but the screen to screen, you've still got one, and you've got one you started with and one you got at the end. It's gone from 29,000 to 50,000. That's kind of the productivity that we are seeing out of it, and I think there is a lot of numbers there. I hope it's responsive to your question.

That's very responsive because it basically takes it from below average to above even your average --

Yes, yes.

And then stabilizes it at a higher level. So, it's not really stabilizing it at a lower level, which I suspect it could have been the case. The other question I have is, is there any shift to the strategic initiatives you embarked on either before the IPO or around the time of the IPO that you are intending to modify a little bit as you start to get some initial results and look at how you think it will take going forward?

Not really. And when I say that, I want to draw the distinction between strategies and tactics. There is no shift to this to the strategic direction. It was in play, frankly, even before Wanda, our principal shareholder, acquired the Company from private equity. It was solidified in the 1.5 years or so before we went IPO and under Wanda's ownership, because of the access to capital that we gained with them. And then, of course, then as a result of the IPO, we are staying pretty much on the strategic path that we have chosen.

Now, what does change -- and we adapt and adjust, are the tactics. We adapt and adjust to what's happening in the marketplace, to new technologies that may come along, things of that nature. For example, we mentioned in the prepared remarks this afternoon, this whole notion of open-source Internet ticketing. That's an idea we've been working on for the better part of three or four years. It never made any sense to me that our tickets for any one theater would be available on only one website.

So, we are now adopting and adjusting that tactic, which is all part of a comfort and convenience strategy, as we go along. We intend to continue to make the short times and the tickets available on even more websites. It's all part of convenience. Reserved seating. It's all part of convenience. The tactic and how we deploy them may add and shift and may move around, but the strategy of providing a guest with greater comfort and greater convenience, that's not changing anytime soon.

As we look at our fleet we think that we are perhaps, with the recliners, for example, one-third of the way done to where we think the potential is. We've alluded in the last quarter's call to the fact that we have now developed a second version of these recliners that will allow us to go a little deeper into the fleet. That kind of gives you an sense. With some of the other initiatives we are not two-thirds of the way done with IMAX. IMAX, we're at 147 screens. That -- the count will move around, will grow a little, but we are very far along on that path. So, different tactics at different levels of deployment, but the strategy -- the foundation remains fairly constant and fairly solid.

Great, thanks very much.

You bet.

Our last question will come from Kannan Venkateshwar with Barclays.

Thank you. The question I have is on the mix shift and the impact it has on the split as you move through the rest of the year as well as 2015. As you're going through this process of having more IMAX screens and the mix of movie shift in terms of how many 3D movies versus non-3D movies and so on, what should we expect in terms of the movie splits and how they trend over the next couple of quarters and in 2015?

Help me with what the definition of splits. What are you calling splits? Are you talking about the take rate from the guest in terms of how many of them choose to go IMAX or 3D when a movie is available in those formats? Or are you talking about -- I'm sorry?

This is mainly in terms of your share of box office revenues between you --

The film cost?

Yes.

The film cost, we -- frankly, it is driven by the size of the movies. We have contractual agreements with the studios. We have agreed on splits with them, to use your terminology, and those shift around based on a -- [on a primary] basis, based on the size of the movie. We've not seen significant movement over the last couple of years. As the movies grow bigger, the split favors the studio more. The smaller, medium size movies stay with the exhibitor more. But it's been a relatively constant number on the splits. What has changed is the size of the movies, and that will always change. But the splits that are, again, driven by the specific movie box office revenue, is really not moving around barely at all.

And it's really -- I'm not sure if this is part of your question or not, but I'll answer it anyway. Really, there is no distinction between traditional IMAX and 3D on a film. They all carry the same negotiated film cost. If you're -- the fact that you may have more IMAX on a particular film doesn't necessarily grow the percentage that you ar going to pay other than if it increases the volume that you do with that movie. It's more volume related than it is type of content or 3D versus IMAX.

I think if you look historically at our numbers and certainly, some of our larger peers the numbers are fairly consistent in the low to mid [50%s], and the shifts are driven, I would venture to guess, more by the size of movies in any given quarter that it is by, frankly, anything else.

Okay. All right. Thank you.

You bet.

Thank you. At this time, I'll turn the floor back over to Mr. Lopez the closing remarks.

Well thank you, Arroya, and thank you, everyone, for listening in this afternoon. I hope we answered all your questions. Happy to answer any others that we might have not addressed. And you know where to find us. Have a good afternoon, everyone.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Thank you.