AMC 電影院 (AMC) 2014 Q4 法說會逐字稿

Greetings and welcome to the AMC Entertainment fourth-quarter 2014 conference call.

(Operator Instructions)

I would now like to turn the conference over to your host, John Merriwether, Vice President of Investor Relations. Please go ahead.

Thank you, operator.

Good afternoon, everyone. I'm John Merriwether, Vice President Investor Relations, and I'd like to welcome you to AMC's fourth-quarter and year-end 2014 earnings conference call.

Before we get started with our prepared remarks, I'd like to remind you that some of the comments made by management during this conference call may contain forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties, and assumptions and are discussed in our public filings, including our most recent 10-K.

Statements made throughout this presentation are based on current estimates of future events and the Company has no obligation to update or correct these estimates. Listeners are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially as a result of these various factors. We caution you not to put undue reliance on forward-looking statements and the 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, adjusted EBITDA, and adjusted EBITDA margin, which are not in accordance with GAAP. However, management believes these results more clearly reflect operating performance.

For a full reconciliation of EBITDA and adjusted EBITDA to GAAP results in accordance with Regulation G, please see our press release issued earlier today and furnished as an exhibit to our Form 8-K dated February 17, 2015, which may be found in the investor relations area on our website at www.AMCtheaters.com. 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.

I'll now turn the call over to Gerry.

Thanks, John. And thank you, everyone, for joining us this afternoon.

Wow, what a year. 2014 was a record year for AMC on a number of different fronts.

How about hitting all-time Company hires for adjusted EBITDA for the fourth quarter and the full year at $140.1 million and $463.9 million, respectively. And, oh, by the way, achieved both of those in spite of what we all know was a very soft box office year. And our improvements in the food and beverage side continue to set records, as well, with food and beverage revenues per patron for the quarter up 13.5% to $4.46, the highest in our Company's history.

Now, I know that sounds like a broken record, as I've said it in every one of our earnings calls since going public back in December of 2013. We believe these results, remarkable as we judge them to be, are nothing but a direct result of our focus on guests and their experience in our theaters. We continue to innovate and drive higher value for them and ultimately our shareholders by continuing to successfully implement our five distinctive strategic initiatives to remain, as we like to call it, the guest experience leader.

To us this is exciting stuff, and of course I will talk more about it in a few moments. But before I get too far ahead of myself, let we step back and share with you some of the details and highlights of 2014's fourth quarter and full year.

Let's start with the top line, of course, our admissions revenue and attendance for the fourth quarter of 2014, which were down 4.5% and 4.3%, respectively, given the weakened box office we all know about. On a per-screen basis, we were down 4.7%, which compares to an industry decline of 4.3%; an uncharacteristic 40 basis point underperformance that is entirely related to the strong comps that we enjoyed a year ago in our IMAX screens.

You have to remember, AMC is the largest IMAX exhibitor in North America, indeed the world, with a 45 share and 150 screens, having added three more screens in the fourth quarter alone. So, while we love IMAX, their performance does disproportionately impact us versus the broader market. Last year in the fourth quarter the strength of Gravity and the inclusion of the Hunger Games as an IMAX offering created a very tough hill to climb for this year's Interstellar and Mockingjay Part 1, which was not even in IMAX.

Now, we judge that to be a momentary blip because we're not alone in thinking that IMAX and the premium format schedule for 2015 looks incredibly promising. For one, this year's Mockingjay Part 2 will be in IMAX, not to mention titles from Furious 7 in early April to Avengers in May to Terminator Genesis in July, to, of course, Star Wars, The Force Awakens, in December, the bottom line. That's an impressive lineup of blockbuster titles and we believe that it offers significant upside opportunities for us.

Specific format aside, I would argue more comprehensive picture of our circuit strength emerges if we take a look at admissions revenue per screen for the full 2014 year, as we once again bettered the industry by approximately 90 basis points. So, while the industry's admissions revenue per screen were down 5.6% for the year, we outperformed, being down only 4.7%. Net, no matter how you cut it, 2014 was another year of industry outperformance for AMC.

And that outperformance isn't by happenstance. We believe it's clearly a result of the powerful response to our comfort and convenience strategic initiative. Our recliner reseats are the center of guest attention and we continue to invest and improve the productivity of our existing facilities.

At quarter end and year end we had refitted or installed recliner reseats across 598 screens in 53 theaters. That's up 51% compared to the prior year. In terms of increasing productivity at existing theaters, for the fourth quarter those reseated theaters delivered a 13.8% increase in admissions revenue per screen, while the industry came down 4.3%.

And for the year the reseats deliver an incredible 25.3% increase while the industry came back down 5.6%. That's an incredible 18 point and 31 point outperformance for the quarter and the year, respectively, all on approximately two-thirds fewer seats. Clearly our guests value this innovation and we will keep tweaking the model to further increase the productivity of our existing assets.

But as good as the recliner reseats are, we need to make sure it's as easy as possible to get a ticket to enjoy all that comfort. Now, you've heard me say before that if you can buy a lawn mower on Amazon with one click, you should be able to buy an AMC movie ticket with one click, as well. And while we are not quite there yet, we are on our way with our own ticketing engine and are making continued progress.

Internet ticketing revenues were up 21.5% for 2014 as we sold 27.1 million tickets online, representing approximately 14.3% of our total tickets sold, compared to only about 10.3% a year ago. Importantly, our proprietary ticketing engine at AMCtheaters.com accounted for 26.2% of our online tickets sold. Pretty impressive when you think that a year ago this was nothing but an idea on a drawing board.

Also on that drawing board, not that long ago, was the idea that we would sell our tickets on the Internet on a nonexclusive basis across many platforms. And we are pleased that today our show times are for sale on more websites than that of any other exhibitor, including not only our on-site but Flixster, movietickets.com and Fandango. It is safe to expect continued progress in this area.

And while ordering each ticket from your phone or tablet from more websites makes life easier, wouldn't it be great to just subscribe to a month of movies for one price and go as often as you like? That's exactly what we announced in the fourth quarter.

In partnership with Moviepass, we started a subscription service model in two test markets, Boston and Denver, and for one price you can see a movie every day for a month. We'll give you an update later this year as to how well it's being received, but let me just say that we are very encouraged by what we've seen so far.

This is all about the convenience side of that comfort and convenience strategic plan. To us, continuous innovation across the board is a key to success. When you ask us if we worry about other exhibitors imitating us in recliners and we answer it's more than just a seat, you need a complete package, it is continuous innovation that we are talking about. Others don't have it. To us it's a way of life.

Not only are our guests enjoying the comfort and convenience of our reseats, open source Internet ticketing, and subscription trials, but our enhanced food and beverage initiative is resonating with them, as well. Food and beverage is an area where we deployed a meaningful portion of the $39 million of our accelerated CapEx that we announced late in the third quarter last year. And we didn't waste any time investing in productive assets like 14 new MacGuffins, 20 new freestyle machines, and 44 new digital menu boards, all of which are designed to broaden the scope of food and beverage offerings and increase the convenience to our guests.

At quarter end and year end, we had 16 dining theaters, 89 MacGuffins up and running, representing a 45% and 62% increase in unit count, respectively, compared to the prior year. These investments contributed to the fourth quarter's 13.5% increase and record $4.46 in food and beverage revenues per patron I mentioned earlier. Proof, we believe, that guests are undoubtedly enjoying the choice and convenience of a more varied food and beverage menu in our theaters.

We have now set Company records in food and beverage revenues per patron for every quarter since our IPO, a testament to the muscle of our enhanced food and beverage strategic initiatives. These quarterly improvements have also translated to the year-end results, with total gross food and beverage revenues having grown 1.4% to a Company record $797.7 million in food and beverage revenues per patron, having grown 7.8% to another new Company record of $4.26 for the full year 2014.

A small part of the improvement in food and beverage revenues relate to a refund filed with the state regarding a sales tax refund claim primarily related to sales taxes on food and beverage items. During the refund verification process, AMC personnel challenged various industry practices and taxability.

After several meetings and negotiations, as you can imagine, AMC was ultimately awarded a $5.1 million refund during the fourth quarter. AMC's innovation spirit evidently extends even to our tax department.

While improving food and beverage revenue per patron is good, the flow-through to earnings is even more important. For the fourth quarter we generated a Company record $3.86 for approximately 14.2% growth in food and beverage gross profit per patron. And likewise, for the full year, we grew food and beverage gross profit per patron approximately 7.4% to a Company record $3.66.

Those records wouldn't be possible without our guests and their loyalty and engagement with AMC, which is the focus of our third strategic initiative. Building the AMC brand has been a top priority over the last couple of years. And in today's social network and always-connected environment we must take advantage of the technology and seek new avenues to ensure AMC is always top of mind and convenient for our guests.

AMC Stubs is a proprietary watch program that is leading that charge with over 2.4 million paid members at year end. AMC Stub members outpace the average moviegoer in attendance by roughly 30% and food and beverage spend by approximately 20%. These are, make no mistake, the most valuable guests, and we are currently exploring new innovations to enhance this program and expand its scope to drive additional utilization in the future. So, stay tuned for announcements later this year.

Not far behind AMC Stubs and gaining fast is our social network outreach through Facebook, Twitter and YouTube. With more than 4.6 million Facebook likes and nearly 260,000 Twitter followers, AMC has more likes and followers, respectively, than any of the other three major exhibitors combined.

But we are not satisfied with that. AMCs December 2014 Facebook post advertising a free popcorn holiday offer included a holiday message from the Minions, which was, oh, by the way, the number one most shared Facebook post for all of 2014. And AMC Movie News, our daily YouTube movie news channel, eclipsed 113 million total view since we launched it.

All of these engagement and interactions strengthens the AMC brand and builds loyalty. So, when a moviegoer has a choice of where to see a movie, they'll want to choose our theaters. And based on box office, AMC theaters are proving to be, indeed, the theaters of choice.

In 2014 we operated 6 of the top 10 grossing theaters, including the top 3. The number 1, Empire 25, and the number 3, Lincoln Square, both in Manhattan, and the number 2, Burbank 16 in LA. We are also number 1 or number 2 in box office revenue in 80% of the top 25 US markets, including the number 1 in the top three markets: New York, LA and Chicago.

We do like being number one. And in order to stay number one we have to keep exceeding expectations and blazing new trails to deliver even more great sight and sound so our guests can experience all that a movie has to offer.

As I mentioned a couple of quarters ago, based on the tremendous feedback from our guests, we continued the rollout of AMC's exclusive PLF format AMC Prime, with two additional locations opened during the fourth quarter, bringing the total to nine at year end. Now, we think of AMC Prime as the next-generation PLF, as it addresses not only superior sight and sound but also comfort and convenience. We believe AMC Prime is complementary to our IMAX offerings, as it gives our guests more options and it gives us programming flexibility.

With only nine of these screens deployed so far, we clearly have upside opportunity here. It should not surprise you that we are working to take AMC Prime to the next level, not only in technology but in deployment. So be prepared to be blown away when we announce and launch the next amazing innovation in AMC Prime in a few weeks.

To wrap up my initial comments, the results we announced today further solidify the belief that our strategy is working. And it appears our guests are believers, too, as evidenced by our top box guest satisfaction score of 58.7 for 2014, which is in a league of its own when it comes to retailers.

But we cannot and will not rest on our laurels. We believe being the guest experience leader demands a continued focus on productivity through innovation and investments in our existing assets. Sustainable, long-term success in this industry hinges not only on continued expansionary new builds, but on the productivity of the existing fleet and the existing guest visits.

Before I hand the call over to Craig, this being our year-end call, I'd like to take a moment to recognize two very important groups who drive our success, our AMC Associates and our guests. This result simply would not be possible without the hard work and commitment to excellence our associates demonstrate 365 days a year, because our theaters are open 365 days a year.

From the work taking place here at the theater support center in Kansas, to the general managers, their leadership teams and their crews at our theaters across the nation, thank you for everything you do to make smiles happen at AMC. You make us proud.

And to our guests, thank you for your continued patronage. It is our goal to continue exceeding your expectations. We know you have a choice and we thank you for choosing AMC.

Now I'd like to turn the call over to Craig Ramsey, our Chief Financial Officer, to review the financial highlights from the quarter and the year. Mr. Ramsey.

Thank you, Gerry.

I don't think there's any question that from an industry box office perspective 2014 left a lot to be desired. The fourth quarter of 2014's industry box office declined 4.5% and contributed to the full-year 2014 industry box office decline of 5.2%.

With that sandbox to play in, AMC performed remarkably well as our innovative guest service initiatives drove revenues and earnings for both the fourth quarter and the year ended December 31, 2014. For the next few minutes I will be talking about the fourth-quarter results for 2014 as compared to the same quarter one year ago.

Following the same 4.5% decline as the industry, AMCs admissions revenues for the fourth quarter were down 4.5% to $460.3 million compared to a year ago. While food and beverage revenues and other revenues bucked the trend, growing 8.8% to $215.3 million and 11.1% to $36.6 million, respectively. Combining all three revenue segments produces total revenues of $712.2 million which were basically flat to last year.

Total attendance for the quarter was $48.2 million compared to $50.4 million in the quarter last year. And average ticket price declined by $0.03 to $9.54, primarily due to declines in attendance for IMAX and 3-D during the quarter. On a per-screen basis, admissions revenues decreased 4.7%, underperforming the industry by 40 basis points, again primarily due to declines in IMAX.

Our enhanced food and beverage initiatives truly shined this quarter as we generated a 13.5% increase in food and beverage revenues per patron that was driven by our enhanced food and beverage initiatives. Our accelerated CapEx investment allowed us to deploy more of our food and beverage product concepts during the fourth quarter. And whether it be MacGuffins, dine-in theaters, expanded product offerings, or our revamped concession stands, our strategic initiatives continue to drive industry-leading results in this area.

Food and beverage gross margin at 86.4% is up 20 basis points year over year. Our gross profit per patron grew 14.2% during the period as we saw improvement across our entire spectrum of food and beverage initiatives.

Now, with regard to other revenue, as we have discussed in the past, because of purchase accounting rules related to being acquired by Wanda, we were previously unable to recognize breakage on our packaged tickets until this year. During the fourth quarter we recognized approximately $4.6 million of other revenue related to packaged tickets.

The impact of lower attendance was nearly offset by food and beverage revenue per patron, increases in packaged tickets, Internet ticketing fees, and gift card revenue. Strong operating contributions from our reseated theaters enhanced food and beverage initiatives and other initiatives were not enough to entirely offset industry box office headwinds, especially in the IMAX format, but they clearly had a significant positive impact on our overall revenue performance.

Our film exhibition cost of $244.3 million represented 53.1% of admissions revenue, a decrease of 40 basis points as compared to the same period last year, consistent with film performance and scale affect. Operating expenses of $182.5 million, excluding certain operating expenses, decreased by 3.1% in the aggregate, due primarily to the effects of lower volume and the negative operating leverage of fixed costs. Our theater teams effectively managed variable operating costs to lower levels, consistent with the reduction in overall attendance.

Rent expense of $114.2 million was up 1.4%, and on an average per screen basis was up 1.2%. Many of our landlords understand the power of our strategic initiatives and are willing to contribute capital to our remodel initiatives. In many cases rental terms are not substantially increased, which, in combination with the substantial revenue improvements, mitigates the impact of annual rent increases in these terms.

Adjusted EBITDA grew 24% to a record $140.1 million for the fourth quarter from $112.9 million for the quarter last year. This translates to a 390 basis point improvement in margin to 19.7% for the fourth quarter. The contributions from our strategic initiatives, particularly food and beverage and reseats, combined with increases in other revenues and reductions in G&A other expenses, gave adjusted EBITDA a significant lift, enough to overcome box office headwinds.

Overall, we are pleased with our quarterly results. It really is a testament to the strength of our strategic initiatives and our cost control discipline to see the flow-through to record adjusted EBITDA.

We had some favorable comparisons to last year and a couple of expenses and revenue line items, so I don't expect the magnitude of the flow-through to adjusted EBITDA to continue at this pace. But certainly the returns we are seeing on the accelerated CapEx investment have margins headed in the right direction.

Capital expenditures for the quarter totaled $104.4 million, including $29.5 million of accelerated CapEx, and were offset by $14.3 million of landlord contributions. During the quarter, the Company opened two new theaters with 17 screens, we closed one theater with 7 screens, and we acquired one theater with 6 screens. We temporarily closed 127 screens and reopened 12 screens to implement our strategy and to deploy guest experience upgrades.

During the fourth quarter, we were able to accelerate the deployment of our comfort and convenience and enhanced food and beverage strategic initiatives as a result of our Board's authorizations of approximately $39 million of additional 2014 CapEx. We invested approximately 81% of the total accelerated CapEx for the year to develop 7 new reseated theaters totaling 94 screens, open 2 additional IMAX screens, add 10 new MacGuffins, 20 new freestyle machines, and 44 new digital menu boards. And we believe these food and beverage deployments had a positive impact on our fourth-quarter results.

Looking ahead to 2015, we expect to invest approximately $320 million to $340 million, with landlords expected to contribute approximately $65 million to $85 million, resulting in a net cash outlay of approximately $250 million to $260 million.

Now, for the full 2014 year, we saw similar trends as the fourth-quarter results. However, for the year, AMCs strategic initiative led to industry outperformance. For the year, our box office was down 4.4% versus an aggregate industry box office decline of 5.2%.

On a per screen basis our outperformance was even a bit larger. The strength of our strategic initiatives continued as admissions revenue per screen for our reseats grew 25.3% over the same period last year. And enhanced food and beverage initiatives drove per patron spend to a Company record $4.26, a 7.8% increase over last year, ultimately spurring growth in food and beverage revenue by 1.4%.

Other revenues increased an impressive 14.8%. And combined, our total revenues only declined 2% versus the same period last year. Adjusted EBITDA for the year was a record $463.9 million, up 3.5% on total revenue decline of 2%, evidencing that our strategic initiatives made significant contributions, and that theater management teams held operating expenses in line with the volume of business. In addition, G&A expense, excluding stock compensation expense, was down $31.7 million, and rent increased only 0.8% compared to last year.

With respect to the balance sheet, we ended the quarter with just over $218.2 million in cash and a total debt balance of approximately $1.9 billion. Our fourth-quarter and annual operating results benefited from our refinancing, with the fourth-quarter reduction in net interest expense of $5.7 million. That will yield annualized interest savings of $31 million.

Looking ahead in 2015, our 9.75% senior subordinated notes are callable in December of this year, so we will be watching the debt markets closely over the coming months for an opportunity to refinance those at a lower rate. At the end of the quarter our leverage ratio was roughly 3.6 times net debt to adjusted EBITDA, which is well within our comfort range. Our leverage, cash flow generation, and liquidity are in line with our expectations.

In accordance with our plans to augment shareholder returns through return of capital, AMC's Board of Directors authorized our fourth quarterly dividend of $0.20 per share payable on March 23 to holders of record on March 9.

And with that I'd like to turn the call back over to Gerry.

Thank you, Craig.

Man, what a year. AMC outperformed the industry for 2014, having set multiple Company records, including, among others, adjusted EBITDA, adjusted EBITDA margins, average ticket price, food and beverage per patron, and gross profit per patron for both food and beverage and admissions, all of this during a down box office year. In fact, for the first time in our history, we grew profits and margins in a down box office year.

We must be doing something right. We believe the results we've just shared clearly demonstrate that our target capital investments and the guest focus strategy that we put in place are working well. So well, that we continue to punch above our weight. With only 8% of the theaters in the United States, AMC garnered 21% of the last 12 months box office share.

And while you've heard me say it before, it's worth repeating. When we measure ourselves against the competition in a 20-mile radius of our buildings, we are seeing approximately 6 percentage points of box office per screen outperformance dating back to April of 2011. This metric shows on a granular per-screen basis, per-screen level, that focusing on customer experience is the right thing to do for them and for our shareholders long term.

Relentless innovating is always the right thing to do. And being the innovation leader means always thinking ahead. In 2015, we will either be launching or testing new guest experience initiatives in pricing, mobile platforms, e-commerce, loyalty programs, crowdsourcing and sight and sound, all geared to further improve the guest experience and maintain relevance with our guests.

Wherever guests are consuming movie information is where we want to be and where they should be able to purchase an AMC ticket. These are initiatives that differentiate AMC from other public and private companies in our sector, initiatives that present a complete package to our guests, and build on the success of what guests have enjoyed over the last few years at AMC.

These are designed to keep our guests coming out again and again to the movies and they are not easy for our competitors to replicate. This is what allows us to deliver record results, even when the box office does not cooperate.

So, as we look ahead with a proven strategy and an experienced management team to implement it, a runway of opportunities measured in years, and a firm financial base, we are right where we want to be and are uniquely positioned to leverage a promising box office in 2015 and beyond.

Thank you for listening. And I now would like to turn the call back over to the operator so we can take a few questions. Operator?

(Operator Instructions)

Our first question comes from Eric Handler from MKM Partners.

Thanks for taking my question. I'm wondering if you could focus a little bit on the concessions line. How much of your percentage increase was attributable to the dine-in theaters as well as the MacGuffins? I'm wondering if you could break that down a little bit?

And, also, did you say -- I want to make sure I'm interpreting correctly -- that the $5.8 million sales tax refund claim, that was included in your revenue line for concessions? And then lastly with that, is that something that is a permanent change going forward that will improve your concession numbers?

It's Craig, Eric. I will try to be responsive here. The California sales tax credit did impact our concession revenue line. It was booked sales tax, as well, so the refund of sales tax was booked to the concession revenue line.

Now, your question about the per head amount, was that for the quarter or for the year? Whichever one. If you said it, I didn't catch it.

For the quarter. How much of the increase in the quarter was driven by the dine-in as well as the MacGuffins?

The dine-in theaters contributed about $0.04 on the $0.53 increase. And the MacGuffins about $0.06 on the $0.53 increase.

Okay. And then the last thing was, that sales tax credit, is that something permanent going forward that will allow you to get a few pennies here and there?

That's a one-time credit that we wouldn't expect. On a go-forward basis we would be treating sales tax in accordance with that ruling, so to that extent it's ongoing. But we wouldn't expect another one-time $5 million credit to come through that line item.

It sticks with the future but you get the one-time bump like we did this one time, Eric. I would think of it as a one-time.

I might go back and provide a little more perspective. The $0.53 from $3.93 to $3.46 quarter over quarter, you asked about a couple initiatives. The full initiatives were about $0.25. That includes our freestyle MacGuffins, dine-in theaters, kiosks, Marketplace, all of them together.

You only asked about two of them but just to give you a sense, $0.25 in total. So, the MacGuffins at $0.06 are one of the biggest contributors there. And the dine-in theaters at $0.04 are pretty good-sized contributors, again towards that $0.25 from those initiatives.

Half of the lift, Eric, is coming from the initiatives and the work behind them and the capital being deployed. And then the other half is coming from pricing and the one-time. So, that's the two big buckets that are helping that 50-some-odd -- $0.52, $0.53 improvement. Half of it is initiative work fueled by the capital and the menu expansion and et cetera, and the other half is the traditional pricing -- we always have some of that -- and then the one-time. Does that answer your question?

Thank you very much.

Our next question comes Ben Mogil from Stifel.

Thank you very much for taking my call. Just following up on Eric's questions, it looks like your margins were also significantly better in the quarter. And I get that the $5 million sales tax comes effectively with no cost against that was certainly part of it. But maybe you can talk about just on the core core, no bells and whistles, are you seeing some pricing benefits? And are you seeing the core core, if you will, growth faster than you would have thought given all the other things you've added?

I will take the first shot, Ben, to answer the question. No, we are not seeing the core core growing any faster than we would expect. The benefit is coming pretty uniformly and is really on a building-by-building basis dependent on when we deploy the specific strategy or the specific initiative.

For example, adding a MacGuffins immediately improved the per patron metrics, the food and beverage per patron matrix in that building by about $0.30, $0.35 in a matter of, like, a couple of weekends. And with that $0.35 per patron revenue comes about a quarter, maybe even a little better, of gross profit per patron. So it's really are related to the initiative going into the building and the timing of it more than anything else.

We've also had, in some of the jurisdictions and across the circuit, a move towards joining the rest of the retail world with tax on top. So, we are now pricing the item like you would in a regular retail environment, and then putting the tax on top. As we round it off, some of the pricing, that gave us a little wind in our sales for the quarter as we rolled that initiative across the entire system.

So, it's been, really, the combination of factors and the timing. Now, Craig has got some more color.

Yes. Just to follow-up on Gerry's point, historically our concession products and, frankly, our box office has been sold at a fixed price that includes sales tax. And we always had to back them out and calculate the sales tax. We've gone to -- and in fact what happens every time that a jurisdiction raises their sales tax, the old way we would get caught bearing the brunt of any sales tax increase.

So, to Gerry's point, we implemented in the fourth quarter a tax-on-top strategy that gave us some lift in the quarter and will continue to provide benefit going forward because we, in essence, like all other retailers, now pass on sales tax increases to the guests or to the consumer. We talked about the $0.25 of the $0.53 in the quarter being from the initiatives. We've got about $0.16 from pricing and a good chunk of that was moving to this tax-on-top strategy that enabled us to take some pricing while we were implementing the new tax strategy.

So, so to Gerry's point I think he made in his comments, that our tax department has even got the idea on innovation. That's another indication of those guys thinking, as well. Is that helpful?

Yes, that's great on all the fronts, particularly on the tax on top and the lift because of that. More broadly, more strategic -- everyone else now is talking about reseating and spending more on CapEx. What are you seeing early on from a competitive positioning?

We're seeing the same things that you are seeing, which is everybody is announcing them and everybody is doing them. It's been interesting for us. Three years ago, I don't think I can use over an open line some of the adjectives and some of the names that we were called for this notion of taking two-thirds of the seats out of an auditorium. And yet today, there you have it.

I'll be honest with you, I've said this in several meetings -- when we see others copy, while we're seeing them copy, frankly it's only one element, which is the seat. Well, copying one element, in our opinion, does not a strategy make. They're copying it by installing the seat.

From the numbers that we've seen, and some of the buildings that we visited, it does not appear to us that some of these reseats are nearly as transformational as ours are. So, we don't believe that when you half bake it that you're going to get the kind of results that we are getting in our buildings. You may get a bump perhaps, and you can claim it, for sure, but you are not -- it is not a transformational change for the guest. There's no wow factor when they come back into that building.

Third, what I would say is, if you are copying and it's not transformational, what's your focus. And your focus, I would argue then, is copying. That's not innovating. And if that is what you are going to do that's fine, but then you are not focusing on the guest, you're not focusing on the next idea, you're not focusing on the convenience side.

To us it's really that complete package that I keep talking about. So, it's the fact that it's a better seat, it's the fact that it's reserved, it's the fact that it's on the Internet on more sites. It's the fact that if you are part of the loyalty program I'm going to send you $10 for every $100 you spend. It's the fact that it's got better food and beverage.

So it's all these things. And, God forbid, that it's got better sight and sound. Add them all up. Now, you have a transformational change for the guests, driving the 30 point outperformance to the industry, 40 point outperformance to the industry, that we've seen.

So, we're seeing what you're seeing, we're seeing the headlines, we're seeing the announcements. We're seeing some of the construction. Great. By the time they catch up we will be onto version 2 and version 3.

And to that point, Ben, I'd just emphasize again that we ended the year -- well, we started in 2014 with a $244 million gross CapEx budget before landlord contributions. And as we saw these initiatives really gain traction, we went back to the Board, got some more money authorized and approved. We call that our accelerated -- another $37 million-some.

So, we're going to spend in 2014 about $275 million, is the number you will see on the statement of changes, $275 million. Our gross CapEx for next year, again before landlord contributions, is $341 million.

So, it's more -- we are accelerating. And being first to market we think is very important, establish the habit, establish the presence, establish your app on the phone. We think that's important, as well to all that Gerry has added. But our reaction is just more of it, is certainly one reaction.

Ultimately, Ben, if everybody improves the movie-going experience, the industry is better off and I feel great. I like our chances when we are putting in front of people what we consider to be, and what they are telling us by their behavior, is a more complete transformational experience than what others may be thinking about out there. Hopefully that answers your question.

That's great. Thank you very much, guys. I appreciate the color.

Our next question comes from Barton Crocket from FBR Capital Markets.

This is Howard Ma in for Barton. Thanks for taking the question. This relates to Ben's question, and not to beat a dead horse, but Regal said that it's not really seeing much competition or overlap in the theaters that have so far been converted into the reseat format, and that it doesn't anticipate much competition in DMAs where new conversions are planned.

So, could you give AMCs perspective on the broader industry trend? And that can include anecdotal evidence of the impact of rising competition, whether or not the overall audience pie is growing, and whether or not it will be a battle for market share, and AMCs ability to maintain the trend of outperformance.

It is always going to be a battle for market share. There's no doubt about it. Although, to be clear, in these reseats, now that we are three years into this journey, what we have seen is that a little bit better than half of the growth comes from market share shift. The other half, or the 40-some-odd, 45 points, are pure organic growth.

I haven't seen too many things in my time in this industry, six years now, that can drive that kind of change. 40-some-odd points of growth organically, just increased behavior from same pool of guests, or an expanded pool of guests. So that's all, to us, good news not only for the Company but, frankly, for the studios and the industry and all the participants in the ecosystem.

The geography of these deployments, what we have seen so far, and certainly from our perspective, is driven by the schedule of lease renewals with the landlords, and the landlords' willingness to invest with us and I'm sure with some of the other exhibitors. So, the targeting and the scheduling and the cadence of the construction and the sites is not being driven by -- oh, gee, competitor X did a seats in market Y. Rather, it's driven entirely by internal factors, capital deployment schedules that are mostly having to do with us and our landlords, and not by any kind of competitive activity.

We keep hearing that -- oh, gee, is this going to another arms race like it was back in the early 2000s or the late 1990s or whatever. I wasn't here then so I cannot lend perspective to that. But I will tell you that for us there is a clear and sharp focus on productivity -- productivity of the existing building and productivity of each and every customer visit.

So, rather than putting up a whole bunch of new buildings out there in a mature industry like ours, what we are much more focused on is productivity and the metrics that are associated with it rather than some arms race or doing something because a competitor did it and some sort of land grab. That's just not part of our decision-making. I don't know, Craig, if you want to add?

The only thing I'd add, I was here back in the 1995 through early 2000s with the megaplex rollout. And that was the CapEx land grab war, I guess, maybe some are referring to. Those were new builds. Those were $20 million, $25 million capital commitments, three-year projects. And I'm talking about landlord money and exhibitor money.

Totally different, I think, in scope and really direction here. These are $4 million to $5 million remodels and, as well, involving landlord money. But much more flexible.

And I just don't see any parallel to what this industry went through back before. This one focused on improving the guest experience. The megaplex, yes, guest experience but also new store format and reaching out and building new buildings. This is a lot different.

The last comment I would add, Howard, if I may, is this is more than a one-dimensional move, at least for us. Whereas in the late 1990s and 2000s, people keep referring to that, it might have been one-dimensional, it was new builds, and it was about the stadium seats, and the cup holders, whatever.

If you listen to the prepared remarks, here is the upcoming innovation that we're hinting at or outright declaring for the next 12 to 18 months. Seat assign -- we are already -- the recliners everybody talks about, okay, those were versions one. We already have version two in deployment, working on version 3 just so that we can continue to shave the number of seats we need to lose whenever we install these new things.

Pricing -- we unveiled unlimited ticket in the fourth quarter. We talked about subscription already being in test.

Online ticketing -- going to more and more sites. Mobile e-commerce for the seats, for the reserved seats, for food and beverage. We'll see what comes.

Sight and sound -- we think that there are technologies that are literally around the corner that will take the sight and sound experience way beyond what we've seen so far to more fully exploit digital. Crowdsourcing -- we didn't even talk about that, engaging with our guests to figure out which theaters should get, for example, the best picture showcase, which movies should be shown in which auditoriums inside a specific theater. And then the loyalty program -- a new version of that not too far into the horizon.

So, it's not just the seat, it's not just the one thing. It's actually action on so many of these fronts that we think that's a completely different tone now than it did in the years past. So, if there's an arms race you, if you are not bringing all these bullets to the battle, good luck, because it's going to take more than a one trick or two trick. It's going to take a whole bag of tricks.

Great. Thanks for the color, guys.

Our next question comes from Jason Bazinet from Citi.

Thanks so much. Just going back to this lift in the food and beverage, if I understood all the things you said on the call, the $0.053 year-over-year lift, you said $0.25 was initiatives, $0.16 from pricing including adding tax on top, and then $0.11 roughly from this one-time rebate. Is the net take away from that that, even if we saw oil prices retrace back to $100 a barrel or whatever, that you think there would be no impact? In other words, none of this tailwind has to do with lower energy costs?

Great question. Have honestly not thought about it in the context of what's been happening at the gas pump. We know by tracking our business through the ups and the downs of the economy for the last 24 months, the initiatives began to pick up speed, our deployment of the initiatives began to pick up speed, that we seem to have been, as traditionally we have been, relatively unaffected by the macro factors in the economy.

Ill be very honest with you Jason, I don't think the quarter that we are enjoying at the moment will be as strong as it is without American Sniper, without SpongeBob and without 50 Shades. A gallon of gas could have dropped another $0.30, in Texas would have been below $1. I was out in Texas last week and it was like $1.37 for a gallon of gas. I couldn't believe it.

I don't know that the quarter that we are in the midst of would be any stronger if the gallon of gas was an extra $0.25, $0.30, $0.35 cheaper. Sniper is what's doing it. SpongeBob is what's doing it. And 50 Shades is what's doing it.

And, oh, by the way, I picked those three movies quite deliberately. Not only are they the three largest grossing movies so far this quarter, think of the genres and the audience that I'm appealing to with those three movies. Completely different segments of the audience. That's part of the trick, as well. I think that's what's helping us here more than, candidly, any one macroeconomic factor or another.

Thank you very much.

Our next question comes from Jim Goss from Barrington Research.

Thanks. I'd like to get into facilities management a little bit. I would imagine, now you have had the two stages of the one-third and one-half reseats, I'm wondering what the differences and experiences you found there.

Also, I'm thinking you are probably getting more frequent sellouts. I know early on you said it's good if somebody buys the seats ahead of time, and even if they don't show up, you at least get the admission price but then you don't get the concession. So, can you resell those seats that aren't claimed by the show time if the thing is sold out? And with the one price pass, do you restrict usage in the reseated theaters? How does this all work together?

So, several questions embedded in there. I'll try to take them one at a time. First, the facilities management, we don't have a lot of these hybrid houses. When we convert we convert. So the entire theater, all of the auditoriums, will go to reseat, and we will go to a reserve reseating system. We will hold pricing steady for any number of months to see the behavior, to get the trial going, and then see price increases 9 months, 12 months down the line.

So, for us, the management of the facility itself remains relatively consistent with the way that we manage it in the past. The one trick, and you alluded to it, is, now you get a lot more sellouts. We like that. We like it because it creates a sense of scarcity -- a sense of scarcity in this fashionable entertainment timing-sensitive business that we are in. A sense of scarcity creates urgency, and urgency is good.

It's good because it pushes people to buy the ticket ahead, Again as you alluded to it. And it pushes people to perhaps come on a different night of the week because they don't want to risk the ticket or the seat that they want not being available for them on Saturday evening or Saturday afternoon when they sign on to buy it for Saturday evening. So, they'll come on a Friday, they'll come on a Thursday.

What it also does for us, Jim, is that it gives us some pricing power. I think we've alluded to it in the prior calls. It gives us some flexibility in depth, for example. The traditional $0.25 lift in pricing now becomes $1 because people are getting the value. So, although they see that dollar, their reaction to it is much more positive.

That's why we see our overall satisfaction scores that we track so carefully remain not only constant but remain actually higher than they've ever been, and improving, particularly when we remodel a theater. People see the value that they are getting for that extra dollar that we are charging them. So, for us, the facility management, frankly, remains relatively consistent.

The sellouts are a new experience, not one that was unknown, but one that we didn't have to process as often. We have sellouts now in 30-some-odd weekends out of the year in some of these buildings, where we might have had it before in a couple or four weekends out of the year. So, it's just a different way of thinking about the business for us.

It's a different way of thinking about the experience, frankly, for our guests. That's why we see the increase in Internet ticket sales. That's why we want to make it available in more sides.

It ties back together to the notion of it's a total package, a total experience for the guest. You cannot have the number of sellouts without making the tickets more available for them to get at. You cannot have a sellout without having it reserve seated, so that they know where they're sitting before they show up. Do one without the other and the guest is not going to feel the love. That is why we keep talking about this complete offering, this complete package for the guest.

Building management is, frankly, much trickier in the dining theaters because of the complexity that the kitchen brings than it is in any of the other buildings. That is why we took our time, if you recall, developing this and deploying these dine-in theaters. Today we have 16 but between number 2 and number 3 we took three years -- four years actually.

Then once we got rolling with it, we've gone a couple of years since then. But it was three years, four years between number 2 and number 3. It think it was because there was a lot to learn about how to manage the load in the building.

Does that answer your question Jim?

Yes, it does. It is going to be very complex but it should be to your advantage. So, thanks.

There is no doubt, there is absolutely no doubt that managing a circuit with this many formats is much more complex for our programmers, for our operations people. The trick is that in each individual building you've got to maintain the uniformity and the interior of that building relatively easier for the crew in that building to manage. Even here at headquarters, it's more complex at the operating level. You do try to keep a straight line of sight to the guest and servicing him or her.

All right. Thanks much.

Our last question is from David Miller from Topeka Capital Markets.

Yes, hi, guys. Tell me if I'm accurate here in terms of couching the whole reseating initiative in the couple years that you've been added. It seems like so far, from a per cap spend perspective, that it is working very well. But from an overall margin profile standpoint it is not working as well as you would have hoped, or maybe as well as a lot of people may have modeled due to the rent situation. You guys are just paying much higher rents than, say, Regal, maybe your core competitor, in the black of the bull's-eye, if you will. Would you say that's accurate?

And when can the rents situation get absolved? In other words, when is that apex in time where you can start renegotiating some of these rents and we can see some more margin follow-through? Thanks very much.

It's Craig. David, let me try to do justice here. The margin rent issue that you are raising is not a reseat theater issue.

I understand.

I'll come back to that. What we've had is a longstanding guiding principle that we lease and rent a greater percentage of our buildings. And that's because we believe the operating returns -- 20%, 30%, 40% depending upon the initiative -- are greater than the returns on the real estate. We want to invest our money in the operating side of the business and let the landlords own the building and earn their 12% cap rate or whatever.

The fact that AMC EBITDA margins are a little lower than maybe some of the others on your spreadsheet is because we pay rent on more buildings and, to some extent, we may pay higher per square foot rents because of the location -- high retail, good retail site locations we want to locate in. It's primarily due to the fact that we pay rent on more buildings.

Now, to the second part of your question, the margins -- well, let me finish the first part. If you looked at margins before rent, EBITDAR margins, you would find them to be comparable.

Now, take that EBITDAR margin on the full circuit 32%-ish, the EBITDAR margins on reseats are 46%. So, what's happening in the reseat is not that you have a rent problem. In fact, what we are experiencing is, at the right time, on a 20-year base term lease, you are 18 years into it, you go to your landlord and say -- this fits well in a remodel strategy or reseat strategy plus these other enhancements that Gerry spent time talking about today, this is a great location. Why don't you co-invest with us? Why don't you give us 35% of the $6 million, $5 million of capital we're going to put in, why don't you do that, and why don't you not raise our rent?

Every one of these deals, 53 of them so far, is a negotiation. Some of them we don't get any rent bumps. We get capital, no rent bumps. Some of them we get a small rent bump. Some of them we don't get any capital. It's all depending upon site-specific conditions and relations with the landlord, and so on and so forth.

But I think what you will find is that the EBITDAR margins and the EBITDA margins -- EBITDAR margins of 42%, EBITDA margins of 32% -- are higher in the reseats, in fact, because of the volume we're generating, the increases in attendance, the higher average ticket prices, the higher concession spend. We're managing the labor costs. The rent costs don't go up as much. In fact, that improves the margin profile on those assets.

I think for the last four quarters since we've gone public, our year-on-year rent line increases have been in the 1% range. They used to average twice that.

To Gerry's point, yes, our base lease has a 2% every year, 10% over five-year bump increases. So, you would expect our rent line to grow at 2%. It's not. Why is that? And it's because we're driving reseats, we're not getting levied full rent bumps on the capital, and we're driving higher. So, to your question, I think we're at an inflection point, frankly, where we start seeing better EBITDAR and EBITDA margins because of the reseats.

I understand. That clears it up. Thank you very much.

Shea, I think that we've gone over time and it uses our allotment time. So let me just thank everybody for listening. Thank you for your continued support of AMC. We look forward to being back with you in about three months time with a report on the first quarter. Have a good evening, everyone.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.