AMC 電影院 (AMC) 2016 Q4 法說會逐字稿

Greetings and welcome to the AMC Entertainment fourth-quarter and year-end 2016 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. John Merriwether. Thank you. You may begin.

Thank you, Matt. Good afternoon, everyone. I'm John Merriwether, Vice President of Investor Relations. I'd like to welcome you to AMC's fourth-quarter and year-end 2016 earnings conference call. Before we get started with our prepared remarks, I'd like to remind everyone that it as referenced in our press release issued earlier today, we have posted a CFO commentary about the fourth quarter and year ended on the Investor Relations page of our website at amctheaters.com.

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.

In addition, comments made on this call may refer to certain measures, such as 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 our non-GAAP measures 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 28, 2017, which is located in the Investor Relation area of our website.

After our prepared remarks, there will be a brief question-and-answer period. Joining me on the call today are Adam Aron, CEO and President; and Craig Ramsey, Chief Financial Officer. I will now turn the call over to Adam.

Thank you, John. Good afternoon, everyone. Thank you for joining us today. 2016 was a year unlike any other thing in AMC's 96-year history, punctuated by progress in growth in nearly every aspect of our business. It was a year of enhancing the guest experience in our theaters by delivering more recliner seats and more premium large format auditoriums to our guests than the number offered by any other US exhibitor.

It was a year of elevating the breadth and depth of our world-class marketing to moviegoers, especially through the significant expansion of our US customer database to more than six million member households, which means approximately 20 million people and these are known movie ticket buyers. The power of AMC having access to the movie purchase decisions of so many people is of tremendous value and the database we have already begun to aggressively mine.

And perhaps as important as anything else, as you know, 2016 was a year of expanding our growth platform through two transformative acquisitions, with a third acquisition in the works that vaulted us into the number one position as the largest movie exhibitor in the United States, the largest movie exhibitor in Europe and the largest movie exhibitor in the world.

And if that weren't good enough, AMC set new all-time high records for every revenue segment and adjusted EBITDA, exceeding $3 billion in total revenues for the first time ever, growing nearly 10% to a record $3.2 billion. That $3.2 billion record we set in 2016 is one that we will literally shatter in 2017, with revenues that are likely to well exceed $5 billion.

But staying within 2016, AMC grew adjusted EBITDA 13.5% to a record $609 million and diluted EPS, 10.3% to $1.17 per share. These outstanding results exceed all consensus estimates for full-year revenues, full-year adjusted EBITDA, and full-year diluted EPS.

Incidentally, lest you think those records were a product solely of the acquisitions, you should be alerted that we would have set revenue and adjusted EBITDA records for the year, even without the December contributions that came from Odeon and Carmike.

And speaking of the acquisitions, AMC's now has international results to report. As we promised you earlier in the year, starting today and going forward, in addition to our consolidated results, we will also be reporting certain metrics based on US and international segments.

Craig's CFO commentary, issued today with the press release, provides a thorough review of the segments, but some of the 2016 highlights include a 4.5% increase in US admissions revenues, driven by a 4.7% increase in US attendance, a 9.1% increase in US food and beverage revenues, which translated into a 4.1% increase of food and beverage revenue on a per patron basis. All this contributed to a 7.9% increase in US adjusted EBITDA.

Internationally, for the year, the year being defined as November 30 to December 31, the time in which we owned Odeon, total revenues were in Europe were $118.9 million, $118.9 million, and adjusted EBITDA was $28.4 million. Please keep in mind that this adjusted EBITDA in Europe is a result of December movies, one of the busiest months of the year and should not be extrapolated merely by multiplying by 12 for full-year 2017.

2016 wasn't only just a great year for AMC. The movie industry in North America also notched another record year, the fourth record year in the last five, with gross domestic box office growing 2% year over year to $11.4 billion. Again, proving that over the long-term, and over the course of the year's entire film slate, the underlying business of exhibiting films is large, stable, strong and growing. Based on what we have seen and the buzz in the industry, we are eagerly awaiting the full 2017 and 2018 film slates, which we believe will propel the industry box office to new record heights yet again.

It was only a year ago that I joined AMC and shared with you then a set of key priorities for our Company. We made tremendous progress on each of those properties during 2016 and we think it's important to quickly review with you our strategy and how we are faring at year-end 2016.

Improving the guest experience remains at AMC's core, and is now supported by the three components that we'd like to call the three E's: enhance, engage and expand. First, we continue to be the innovation leader in the movie theater industry by enhancing the guest experience at our theaters. AMC is investing in innovation and participating in new technologies.

During 2016, we invested more than $420 million in upgrading our theaters with our landlord partners, picking up roughly 30% of the tab, or $125 million of the $420 million. Recliner seat innovations and recliner seat renovations accounted for the majority of those investments because nothing delivers more comfort to the guest, all the while, generating unlevered cash-on-cash returns for us in excess of 25%.

At the end of the 2015, a year back, including our dine-in theaters locations, spot acquisitions, new builds, Dolby Cinema and recliner renovations, AMC operated 1,235 recliner screens in 115 theaters, accounting for roughly 23% of the circuit. By the end of 2016, one year later, including 20 Carmike recliner screens, we operated 1,918 screens compared to 1,235, with recliners in 183 theaters compared to 115.

That is a 55% growth in recliner screens, a 59% growth in AMC Theatres offering recliners; those changes in just one year. Recliners now represent 35% of the legacy AMC footprint, by legacy AMC footprint, meaning before the 2016 acquisitions are included and that is far more recliners than any other US exhibitor.

And we are just warming up. As we told you announcing the second quarter earnings, we are convinced that the prospect of recliners is great for our guests and for our shareholders. We now plan to renovate an additional 122 theaters and an additional 1,560 screens just in 2017 and 2018. And as long as the financial returns stay as solid as they are now, we expect to continue a blistering pace of theater upgrades in 2019 and beyond.

Enhanced food and beverage offerings represent another AMC proven guest innovation, whether it is imaginable layout of the concessionary with pick-and-pay convenience, unique hot food choices, or even the opportunity to enjoy a greater variety of soft drink flavors; for the more hearty palate, an alcoholic beverage, we're matching the comfort of our recliners, with the convenience, variety, and taste of food offerings and beverage offerings that are sure to delight.

With respect to food, we have already made significant progress in our dine-in theaters so now we are turning our attention as well to a general makeover that should literally redefine concession stand offerings at about 90% of our AMC branded theaters. Rolling out nationally, between May and August of this year, AMC Theatres universally will offer more food choices that span the spectrum from indulgent to healthy.

AMC will be going from one popcorn flavor to four; from one hotdog choice to five; from two doughy pizzas to four choices of stone-fired flat bread pizzas. We are adding gourmet meat and cheese antipastos, and seven choices of gluten-free snacks, up from none today. And these are just some of the improvements that are coming to concession stands at AMC.

Not only are we expanding choice and menu design, we're increasing the convenience with new pick-and-pay access online and in some of our theater locations, expanding food and beverage delivery to seat. Our profit contribution margins on food and beverage exceed 85%. It is no doubt that we are working hard and creatively to increase their consumer appeal so as to further increase our F&B sales above their now record levels.

Another AMC innovation, Coca-Cola Freestyle, is now ubiquitous in place now at essentially all legacy AMC Theatres, with more than 100 different soft drink choices and free refills and their self-port configurations, Coke Freestyle increases our guest satisfaction. It increases our sales and it decreases our labor expense.

That is a good combo. So we're introducing Coke Freestyle machines to every former Carmike Theater as well. We should be fully deployed and installed throughout the prior Carmike circuit with Coca-Cola Freestyle by mid-year 2017.

The appeal for enjoying an adult beverage also appears universal and there are now more AMC Theatres than ever before serving alcohol. As of December 31, 2016, including former Carmike Theaters, AMC had 244 locations serving alcohol; that is an 86% increase in locations compared to a year ago.

Our MacGuffins Bars continues to be one of our most popular guest amenities and we expect to add at least 44 more locations worldwide in 2017. We are on trend to open a new MacGuffins Bar just about almost every single week.

Looking past seats and nourishment, pleasing moviegoers at AMC is ultimately about delivering to the best in visual and audio quality and nowhere is that experience better than in our premium large-format offerings, the so-called PLFs.

Our guests simply love IMAX and Dolby Cinema at AMC and they are rewarding us on average a highly attractive 70%, that is 7-0, that is 70% ticket price premiums in return. AMC currently operates 194 IMAX screens and is the largest IMAX provider in the United States, with 176 IMAX screens in the US which is just under half of IMAX's total US deployments.

Likewise, AMC is the largest Dolby Cinema operator in the US, having recently announced the opening of our 50th Dolby Cinema location in Roseville, Minnesota. During 2016, we announced expansion agreements with both IMAX and with Dolby.

We'll be expanding the number of IMAX auditoriums and AMC's US theaters to 185 locations by the end of 2019, including renovations in the coming months at some of the highest grossing theaters in the country in New York City and Los Angeles. We also expect to grow Dolby Cinema presence to more than 100 US auditoriums at AMC by the end of 2017 and in more than 160 by the end of 2018.

Millions of new guests will be wowed by the new laser technology, immersive sound system, and seating enhancements that we are deploying both at IMAX and Dolby locations. I have to tell you that both IMAX and Dolby Cinema are such fabulous companies to work with. They are such fabulous partners for AMC. We expect to significantly expand each of its presence not only in the United States but also in Europe as well.

We also can announce some of the details of our own new proprietary PLF offering that has been in development since mid-year 2016, which will be branded and marketed as Prime at AMC. Prime is a mid-tier PLF auditorium and our first will open in March; that is March 2017, next month.

For our guests, it will offer better seats, better sound, better projection and larger screens than our traditional screen formats and should offer AMC at ticket price premium that we won't have to share with a third-party partner. It is likely to command a lesser price premium than IMAX or Dolby but it also is a lower upfront investment cost as well.

Prime is designed to play in theater side by side with IMAX and Dolby where demand is sufficient for multiple auditoriums and to be the lead dog PLF in smaller theaters and in smaller market locations, offering our guests a PLF experience but without requiring of us the same high-end PLF investment. To ensure that our guests know about these amazing movie going enhancements, we turn to the second facet of our strategy. AMC is engaging moviegoers with world-class and industry-leading marketing activity to drive both growth and loyalty.

During the latter half of 2016, we revolutionized our already successful loyalty program, redesigning and relaunching AMC Stubs. AMC Stubs had been locked in with about 2.5 million member households but without meaningful growth in some three years. By contrast, membership in the redesigned AMC Stubs has simply exploded.

AMC Stubs membership has just recently crossed over the six million member household mark. Some 5.5 million of these households have purchased an AMC ticket in the past 12 months and all have had some interaction with us in the past 24 months. With sign-up rates of a stunning 400,000 to 500,000 new member households continuing rights now each month, we hope that we can reach 10 million member households in the AMC Stubs program and the AMC customer database sometime in 2017.

With an average of roughly three to four family members per household, our consumer database has already grown to approximately 20 million known moviegoers and should rise to 30 million to 40 million known moviegoers by later this year. To whom, we are marketing one to two times each week to sway them to see a movie, the kind of movie that they individually prefer based on past purchases and to do so at an AMC theater.

I just cannot emphasize enough the value to our Company, of this consumer data and information. We intend to creatively mine this rapidly growing consumer database to increase sales and otherwise boost loyalty to AMC.

Further evidence of our marketing prowess can be found in the relaunch of the AMC website and mobile apps on November 30. This was not a small undertaking. It took terrific staff time and we invested $11 million in the process. The new website and new apps are more visibly rich and more robust in content and importantly, improved the ease-of-use in making seat reservations, and the convenience of purchasing tickets, and food and beverage items online in advance, essentially converting intent into action.

For the fourth quarter, online ticketing represented more than 31% of our total ticket sales. AMC's online presence has experienced phenomenal growth, seeing a 1,000 basis point increase compared to last year and the percentage of online tickets being sold through the website and apps.

More recent data indicates that AMC's mobile app ticket sales and AMC's website ticket sales are up even more. Just last week, movie tickets sold on the AMC website were up 93%, 9-3, 93% and movie tickets sales from our smartphone apps were up some 77%, 7-7, 77% year over year. This results in boldness to do even more.

Activities are already underway to heighten our social media presence. We're also starting to test creative a pricing concepts, and we have a raft of good ideas for new marketing programs and new marketing activity that will be launched in 2017 that we are highly confident will take sway with consumers in AMC's direction.

This brings us to the third E of our strategy, expand. One of my key priorities, clearly articulated right at the outset on day one of 2016, was to grow our Company, both by accelerating the deployment of our proven strategic growth initiatives as well as for acquisition.

It's been widely noted that AMC has truly been transformed as a Company in this past year and we're serving to transform our place in the entire industry, too, through the acquisition of both Odeon and Carmike Cinemas, both completed in the latter part of 2016. And by our setting in motion, again, a third growth opportunity with Nordic Cinema Group.

There has been a purpose and a discipline to our acquisition strategy with an obvious investment thesis behind each transaction. In short, we are creating a much larger platform, upon which to leverage our scale for growth to benefit our guests, associates and especially, our shareholders.

The Odeon transaction was a once-in-a-generation opportunity to make AMC the largest exhibitor in Europe and the world and it was done post-Brexit with the Pound at an enviable thirty-year low versus the US dollar. We were able to acquire a circuit with a storied history, operating in some of the best locations and cities in the UK and Europe, but with many of those theaters themselves admittedly quite tired and in real need of AMC's theater renovation expertise, which we have done more than 100 times.

Planning to enhance the Odeon circuit began immediately in December and we intend to deploy our proven AMC-style theater renovations, including recliner seats and PLFs, and better food and drink to many areas across the UK and Europe that are not accustomed to the comfort and quality that are enjoyed here as the bedrock of what AMC stands for at our US theaters.

As a result, we expect attendance to increase at Odeon theaters such that adjusted EBITDA could grow as much as 50% over the next four to five years. I want to be clear though, as we mentioned in the past, 2017 will be a transition year for Odeon and Carmike Theaters.

There are start-up and transition costs; additionally, since the recliner renovations deployments take on average six to 12 months to complete and although we have already begun, the lift in these investments won't be visible until very late in 2017 and well into 2018. Having said all that, these are absolutely the right investments to make and we are very confident in their earnings power.

The Carmike acquisition combined, as you know, the number two and number four, number four circuits in the US to create the largest exhibition circuit in the US. Carmike offers AMC -- excuse me, one second. Carmike offers AMC complementary markets in suburban and rural regions of the country, with little market overlap and gives AMC a truly national footprint. We will deploy some of our strategic growth initiatives at every Carmike Theater and many will be renovated full-blown with recliner seating.

We have also identified $35 million of cost synergies, which we believe will be substantially realized by the end of 2017. We've already begun the integration in earnest, converting point-of-sale systems and vendor contracts and commencing initiative deployments.

We've also reached conclusion and are very excited about our new branding strategies for AMC and Carmike, which I'm happy to comment upon more during our question-and-answer session on this call, if it is of interest to you today. As anticipated, we're making solid progress on the required theater divestitures. We expect to announce something publicly in the coming months. It is still looking like 15 to 20 theaters to be divested with immaterial single-digit annual EBITDA loss to AMC.

We're also currently working well and constructively with both AMC and Screenvision to complete the logistics and timing to satisfy the requirements under the Department of Justice consent decree to sell down our NCM ownership stake and to transfer certain theaters to the Screenvision contract.

2016 was a busy year for AMC with respect to acquisition and to that end, I would specifically like to go out of my way to call to your attention something noted in the CFO commentary. 2016 M&A costs include $10 million of transaction-related compensation, consisting of special bonuses approved by AMC's Board of Directors paid, in part, to some two dozen members of the AMC management team in recognition of their successful efforts to put into place and to complete the acquisitions of Odeon and Carmike in 2016.

These bonuses were wholly unsolicited by the management. They were funded in 2017 by our largest shareholder, Dalian Wanda, and were recorded as a capital contribution in 2016. Naturally, we are grateful. And in 2017, the acquisition momentum continues.

Our most recent announcement on January 23 to buy the Nordic Cinema Group doubles our country tally in Europe from 7 to 14. Nordic is an extremely well-run circuit and unlike Odeon, is a theater network that is truly modern and up to date. Nordic's market share is exceptional, exceeding 50% across the system and in three of its countries, has a market share exceeding 75%.

Nordic is a high-quality operator with attractive growth metrics and operating margins well above Odeon's and for that matter, even above our own, at the legacy AMC Theatres. With a seasoned management team and an attractive 10 theater new build pipeline, the existing Nordic footprint will be expanding, adding confidence to our view of Nordic's near-term earnings growth prospects.

As you know, as part of the financing of both the Carmike and Nordic acquisitions, we recently completed a successful equity offering. We raised $640 million of equity prior to underwriters' fees by issuing approximately 20.3 million shares of Class A common stock at $31.50 per share.

I believe in putting my money where my mouth is. I have so much personal confidence in where AMC is headed; I personally purchased $1 million worth of AMC stock as part of the recent AMC offering. This is the third time in a year that I have bought AMC shares using personal funds. My belief in the future prospects for AMC extends all the way to my right back pant's pocket, where I keep my wallet.

Last January, AMC's public float was 21.6 million shares; the average daily trading volume of AMC stock is about 300,000 shares and our market cap was less than $2 billion. Fast forward a little over a year. Our public float is up some 160%, far more than doubling to 55.7 million shares that liquidly we can trade. Our average daily volume since the offering, excluding that huge first day of trading, right after the offering, is 1.5 million shares, and our market cap now exceeds $4 billion. At AMC, we are highly cognizant that our charge is to smartly increase long-term shareholder value. We clearly focused on that in 2016 and our focus on doing so continues in 2017 and beyond.

In 2016, AMC took on the number one position in the US, the number one position in Europe, and the number one position in our industry in the world. Our future looks bright in 2017 for AMC, and I, for one, think we are in for yet another record year. Indeed, we have looked the various securities analysts' reports that have been issued about AMC.

And while we don't give traditional guidance per se, we can say that putting aside outliers, all the reports out there seem to be in the right ballpark with respect to the revenue and earnings potential for AMC this year.

As always, we thank you for listening this afternoon. Craig Ramsey and I look forward to taking your questions. Operator, to you.

(Operator Instructions)

David Miller, Loop Capital.

Congratulations on the stellar results and on the year and on all the deals. Adam, if I recall, on your December 20 call, which was the call announcing the closure of the Carmike and Odeon deals, you had talked about a 60-day window with regard to getting those divestitures done as per DOJ decree. It was the 15 to 20 theaters as per DOJ decree. So we're well beyond the 60-day window; any commentary on that? And then I have a follow-up. Thanks.

Sure. The Justice -- if you read the consent decree, the Department of Justice gave itself the right to extend the 60-day deadline by another 60 days. And we are in active dialogue with DOJ. We're in very good shape with respect to these divestitures. They will happen, in our view, they will happen within the timeframe originally conceived in the consent decree.

Okay. Great. And then Craig, I saw the CapEx guidance vis-a-vis the 8-K, the $700 million to $750 million. Just sticking that into my models here, it looks like that would spit out a net cash use number in Q1, followed by free cash flow generation thereafter. Would that be correct or are you willing to give that kind of granularity? Appreciate it. Thanks.

David, before he answers. I'm sure glad you didn't ask that question to me. That's all I want to say.

You could chime in.

I'll rely on his help as needed. But that is probably right. I don't have that necessarily by quarter in front of me. The thing I would ask you to think about, and it's how I think about our CapEx in both 2017 and 2018 is that we will be monetizing some of our National CineMedia stock ownership.

And we're thinking of some of this CapEx spend, the guidance that we've given for 2017 is actually reinvesting some of those proceeds. So, I think of it that way as I think about the free cash flow look and the characteristics of 2017.

Okay. Wonderful. Thank you very much.

Barton Crockett, FBR Capital Markets.

First, with all of the merger stuff,. I know we'll stop asking about this relatively soon but can you give us a sense of on a per-screen basis, for the legacy AMC, what was your box office per-screen trend? Was it comparable to the industry or something meaningfully different? That's first and then second, there's been this reviving of talk about premium VOD windows and suggestions at AMC is perhaps interested in working with some studios on stuff. Could you talk about the probability in your mind that something happens, that's, in any way, impactful for the industry?

I'll be the first one. Mark, it's Craig. For the quarter, as I look at the industry, on admissions per-screen basis, I think it's down about 5.5%. If you peel back all of the acquisition activity, including the Starplex, that affected the last month of 2015 and all of 2016, if you pull all that back and look at the core circuit that performed those two years, the same-store look, we were actually -- we outperformed slightly in 20 for the quarter; we were about 50 basis points better than the industry and we were right on top of the industry for the calendar year.

With respect to Windows, so, this is one of the topics that the press has reported both accurately and inaccurately at the same time. They reported accurately that there are several studios and some third-party players who have floated, are floating proposals to all of the historic window where theaters have had 75 to 90 days of exclusivity.

What has not been reported, or at least not widely, is that in all cases, the entities that have been considering those windows changes, have been talking about sharing home rental revenue with theaters. And I've already been on this topic for 14 months, with multiple players. And, it was widely reported back last spring, when Screening Room was first kicking around publicly that AMC was intrigued by all this.

And the reason we are intrigued by all this, is if this is done right and this is done intelligently and our revenue share is significant enough, we believe that we have the opportunity to grow and increase AMC's revenues as a result of this activity. And others have portrayed this as a big risk, or grave risk, and we think just the opposite.

If we do this right, this is a chance to expand the reach of the domestic box office in that first 90-day period beyond its current $11.4 billion and we can get paid handsomely in the process. Such that we would enjoy a revenues stream if somebody watches a movie in our theater, or if they watch at home.

Now is it imminent? There is no real way of knowing because there are so many proposals floating around, people having different views, a consensus is going to need to emerge for this not to be a one company, one studio deal but more of an industrywide effort, which I believe was the thrust of your question. And I could see something happening months from now. I could see us going 14 more months and making no more progress than we made in the last 14 months.

So, we will see how the discussions unfold, but the thing that I want to point out to all of you is it's our view that this can be quite additive and productive for AMC and for movie theaters as a whole across our industry, if the proposals that are taking the market resonate with consumers and if we are compensated fairly in the process.

That's all very helpful. If I could just ask one other question. You talked about using some of the proceeds from selling NCM shares to fund the CapEx. It's important then that you actually get a good price for the NCM shares that you have to sell and there's a lot of concern that, that might not be very doable with the amount of shares that you have to bleed out and the float there. Can you talk about your confidence, your ability to exit those stakes without killing the share price in the process?

I will do my best. First of all, we don't have the definitive number of shares, as Adam alluded to in his remarks. We're in the process of constructing negotiations with National CineMedia. So I'm talking about a bit of a moving target right now but putting that aside for a moment, we were more thoughtful as we talked to the Department of Justice and had our back-and-forth, and settled on 30 months.

And we did that because we had done some research and we've talked with some of our bankers and other consultants about what might be a reasonable amount of time to move a large block of equity in that company. And so, we do believe it's possible; in fact, we do believe that the early sales by building the float of the company and expanding the ownership actually could lead to better marketing in the later half of the 30-month period.

So, we will be thoughtful; we will have an orchestrated plan. We fully expect to cooperate with the National CineMedia. It does give them an opportunity to expand the flow of their company and improve the trading dynamic in a way similar to the way that Adam just discussed we experienced and so, we do think it can be done and we will be thoughtful and prudent in how we go about it.

Great. Thanks for the color.

Omar Sheikh, Credit Suisse.

Just a couple questions. Adam, maybe I can start with the comments you made about Odeon and UCI. Since you completed the acquisition, I wondered if you could just update us on your thoughts on how you think about those opportunities? And I think that you highlighted when you first acquired it, and you mentioned in your prepared remarks that you feel that the EBITDA growth that you could over the next few years could be 50%.

I wondered whether you could just tell us what the full-year annualized 2016 base for that 50% number should be, just to give us some help in thinking about the growth over the next few years.

And second question is just perhaps to Craig. There was just, again, in line with some your peers, there was some income you recognized versus cash distribution from joint ventures in your adjusted EBITDA. I wondered if you could just give us some color on what that was for and whether you expect anything more in 2017? Thanks.

Well, let me take the first two and I will let Craig do the third. In our July press release, I think we were pretty comprehensive about the base level of EBITDA that was inherent in the Odeon network, using UK GAAP before we translated to US GAAP. And that is what we think we can grow by 50%. We said we could grow at 50% over four years; we still think we can do that.

The reason that we think we can do that is that those Odeon theaters are in great locations in London and elsewhere, but, boy, some of those theaters are tired. Not all; they have got a lot of nice theaters but they have more than half need enhancement and upgrade.

If there is one thing that AMC knows how to do, it is renovate theaters. In the first 100 theaters that we renovated, we saw, on average, a 53% increase in attendance within a year. And that 53% increase in attendance translated to a 70% increase in theater revenue and you can imagine that EBITDA went through the roof at those theaters as a result.

And that's what we're going to bring to Europe. We're going to renovate some of these tired Odeon theaters and put in recliner seats and put in better food, and put better lobbies. We're going to take IMAX to Europe. They are already there, of course, but in larger size than they are now.

We're going to take Dolby Cinema to Europe. They are already there but we're going to take them in larger size than they are now. And as we do this and make the product significantly better for European consumers, we have every confidence that market share will move to Odeon in a big way. Attendance will rise, revenues and profits will rise. So that's the plan. As to your third question, Craig?

The -- as we were thinking about the 50% growth, we were actually think about it in Pound Sterling, and not adjusted for currency. So that's how I will give it to you. We think the base level is about $85 million to $90 million in the 2016 year for Odeon on a Pound Sterling basis.

Your next question related to cash distributions, that would be reflected in our total EBITDA in 2016. The aggregated $40 million that included NCM, some joint venture entities and actually, a larger-than-prior-year distribution from digital cinema implementation partners that was most of the increase from $34 million in total last year, $40 million this year.

It's discretionary but would expect it to continue. That business has operated in a very much in accordance with their financing model so we would expect there to be continuing cash for distribution but that will depend upon the Management Team and the Board of that particular company to finalize that and authorize it for next year, but at this point in time, we would expect it.

Okay. That's clear. So I just wondered if I could squeeze in one follow-up on Odeon. Adam, I think you mentioned some Starplex reorganization costs in 2017, I wondered whether you could maybe quantify those?

Did we -- I don't know that we did. I thought we took those -- made those changes in 2016. What was your question again, please?

Sorry, there was a -- I think Adam, in your prepared remarks, you mentioned some reorganization or, not reorganization, I beg your pardon, renovation costs in Odeon in 2017. I don't know whether I misheard that or whether there was a number associated with that.

No. We didn't -- no, I'm okay. I thought you said reorganization costs which would imply changes to personnel. What we said was we're going to start renovating theaters. And you can assume that, on average, a theater renovations is $3 million to $5 million before landlord contribution. There will be some theaters that are less; there will be some theaters that are more, and sometimes, a lot more.

Over time, I think we're going to be renovating between 50 and 100 of the Odeon theaters in the UK. But I think just a handful of theaters are going to get done soup to nuts in 2017 that where you're going to see most of these renovations start taking place is 2018 and 2019. So we did not put a number associated with it, but you can use the $3 million to $5 million in theater, in a handful of theaters.

And we did a -- it is included in the CapEx guidance that we put out there for 2017 and we're not -- we never have really disaggregated that into the parts and pieces so it's in that total.

Okay. Brilliant. That's very clear. Thank you very much.

Eric Wold, B. Riley & Company.

Couple of questions. Two questions. One, on the remodels, you talk about the benefits you're seeing from the remodels vis-a-vis attendance lift and box office lift? Can you give us a sense of relative performance of theaters that have not been reseated or given enhanced food and beverage? Trying to get a sense of the potential level of drag those theaters are having on the overall average.

And then secondly, including the equity offering for this month, assuming Nordic transaction is completed, the planned CapEx, and the landlord contributions required and you [might see stock] fall back, can you give a sense of where you think leverage ratio could end up at the end of 2017 versus where it was at the end of 2016?

I'll let Craig do the leverage. On the first question, what is the difference between the renovated theaters and non-renovated theaters? It's interesting. Many of you have asked this on prior calls. Well, when you renovate theaters, okay, you get a big pop. Does it sort of then, like, disappear?

And the answer is no. Once we get our big pop and that tends to institutionalize the renovated theaters doing really well and they stay up there at the renovated -- at the elevated level of performance.

Where we are exposed, and where I believe our competitor is exposed, is that our renovated theaters, whether they were renovated three months ago or 24 months ago, our renovated theaters, as a class, are doing extremely well, with significant double-digit revenue growth that would blow your mind if we shared that number with you.

But, the non-renovated theaters are growing at single-digit growth, which blows our minds because we are the same Company, which shows us the power of recliner seats. So, our conclusion is the faster we can renovate theaters, the better off we are. Moving theaters from that low-growth metric year over year to the high-growth metric year over year, and that is why we've said we're going to renovate another 122 of our theaters, this year and next, which is a huge percentage increase of, call it, the 390 theater legacy AMC circuit.

And then I only gave you the 2017 and 2018 numbers. The renovations are going to continue in 2019 and when -- you'll start to see Carmike Cinemas getting renovated in 2018 but, that's probably an 2018, 2019 and -- or 2018 and 2019, or 2018, 2019, and 2020 renovation plan. There is no doubt that renovated theaters are just killing in the marketplace.

Consumers are voting with their feet. And our way to handle that is to have more theaters that are renovated than anybody else and it will be by a country mile. We already have a big lead over any other large circuit in terms of renovation. And our plans for 2017 and 2018 are more aggressive than anybody else as well.

So, on the leverage question, Eric, I think if you went back and did the math, after the Odeon, Carmike transactions and on a pro forma basis, you would have leverage at about 4.6 times, maybe 4.7 times, somewhere in that range. With the proceeds from the equity offering, and the paydown of that bridge and we put some cash on the balance sheet that we will utilize in Nordic, the leverage drops to right around four times.

So then, roll forward and complete the Nordic financing and the Nordic transaction, sometime here in early 2017 and your leverage goes back up. You've already got the equity, taking the leverage down to four times. It's going to go back up to probably the 4.5 times, 4.6 times range. So that gets you into the first half of 2017.

Your question is what do you look like at the end of 2017? You start seeing that coming down by the end of 2017 as you earn more of the synergies and start to realize some of the benefits. It's going to come down to 4.5 times, maybe 4.4 times, so it's not going to drop dramatically but we -- what we do see is visibility to further deleveraging at the end of 2017 and then at the end of 2018 down into the lower four times and as you get further out, you can see it dropping below four times again.

Thanks Craig. Thank you, guys. That's all.

Chris Mittleman, Mittleman Brothers.

Chris, before you do I'm delighted to hear your voice on this call.

Thanks Adam.

I mean that sincerely. What's your question?

Thank you very much. We did a hold on to our AMC shares and we're very happy with the results. So, thank you. I just wanted to ask about maintenance CapEx. I know you guys don't break it out specifically but I see you said that more than half of the $297 million of CapEx spent in 2016 was recliner and renovations. I'm just wondering if you would give us the maintenance CapEx number just so I can get a sense of what it is on a percentage of sales basis.

If you look at -- and this would -- I would include the technology spend in the number Chris, and it runs below $100 million. I think it's probably in the $60 million to $70 million range. The other point I want to make about it is that quite a bit of the maintenance gets done as part of these remodels.

I see. So there's an overlap there.

Yes and so there is some maintenance spend. You might think, well, that's a fairly low maintenance spend and it is because there is maintenance that is been taken care of in the remodels.

Okay. All right.

Chris, since you know more about Carmike than just about anybody on this call, why don't I pretend that you also asked me the question. What are we going to do with Carmike branding because I'm dying to share it with you all. Is that okay?

Yes. I forgot you guys were going to come up with the new name. So that will be interesting.

We did. So here's where we go. This is not yet announced by press release, although we have told people inside our Company and I don't know how well, when you tell 1,000 people, I don't know how well it will be kept as a state secret. So we're comfortable in sharing with you all on this call.

We're going to essentially move AMC from a one-brand Company to a two-brand Company with two major brands and then we're going to have a sub-brand underneath that essentially will turn us into three brands, depending upon how you look at the size of the brand. We are going to retire the Carmike name, because we think that the AMC name is more powerful in the marketplace than the Carmike name.

And ironically, many of the Carmike theaters were not even branded as Carmike. They either were generically branded, there were some theaters called Cinema 6 and there were other theaters that were still carrying the brand names of companies that they had acquired and they had not chosen to even put their own brand on the house, so to speak.

So, the two major brands we're going to have are AMC, which is the brand that we have today, AMC Theatres and AMC Classic, AMC Classic Theaters. The Classic Theaters will go to the smaller theaters, the smaller markets, the less visited theaters. We're still going to offer what we believe will be a very competitive movie-going experience in those markets.

Because those markets are not necessarily used to seeing the full-blown recliner renovations that we see in some of our more larger theaters and larger urban markets. There's going to be a lot of interplay between theaters that were Carmike and theaters that were AMC in terms of which brand they go to.

So, we are going to move some of the smaller AMC Theatres to be AMC Classic. We are going to move some of the theaters at lower price points to AMC Classic. We are going to take some of the larger Carmike theaters that have this capability of having a full-blown AMC style renovation with recliner seats and IMAX and Dolby screens and the whole bit, and we're going to rebrand them as AMC Theatres.

We believe that each of the two brands will stand for quality, and that we believe that each of the two brands will have innovations in it so that people going to AMC Classic will be glad that AMC bought their theater. The Coke freestyle machines is a classic example of what we will be putting into the AMC Classic theaters that were not necessarily in the Carmike Theaters before.

Then I said that there is a sub-brand or a third brand and that is AMC Dine-In Theaters. Between the AMC and Carmike circuits, we have over 50 theaters that are full-blown restaurant theaters with kitchens and so we're going to rename all of those theaters AMC Dine-In Theaters and that essentially would be a third brand.

We are very excited about this for two reasons. Other than the AMC brand is a stronger brand than the Carmike brand and we believe that we will benefit. We also believe that since we're going to offer AMC Stubs membership to customers of both brands, the AMC brand and the AMC Classic brand, that having the AMC name and the AMC brand will help us in growing our customer database and help us in growing our consumer information.

But, the two things that are particularly interesting about this strategy. Number one, we can better marry guest expectations with the experience that we can afford to deliver. And, just like Marriott has Marriott Hotels and Courtyard by Marriott Hotels, we are going to have AMC Theaters and AMC Classic Theaters and we think given that we will have a substantial quantity in each brand, that, over time, consumers will know what to expect at an AMC Theater and what to expect at an AMC Classic Theater.

The second reason we think this is so important is at some of the AMC -- at some of the Carmike theaters, because the visitation was small, the margins were thin. And therefore, it is really important to maintain the cost structure and the operating discipline to continue to run those theaters with a keen eye on cost management.

And, if left to our own devices, if we just renamed all these theaters AMC, not only could we have consumer confusion as to what level of guest amenities they could find at the theater, but also, I can already hear the Middle Management of our Company saying well, if it's an AMC Theater. We've got to do with AMC way and that drives extra cost.

Now, if you've got 2 million visits at a theater, that extra cost is actually wise to expend because there are returns on the investment whether that's CapEx type investment or labor investment that's well and handsomely rewarded. But you can't run a higher-cost structure at a low-margin theater that demands a very tight and strict cost controls as part of the management strategy.

So having the second brand puts an automatic brake internally within AMC that just because it says AMC on the outside of the building, which it will say on all of the building. We're putting AMC signs up on all 650 of our theaters.

The -- we'll manage the AMC Classic Theaters differently. We're going to keep really tight eye on costs and maintaining the integrity of the cost structure of the AMC Classic Theaters and having a second brand just gives everybody around here a pause that essentially we can have two brand standards. I used Marriott as an example before. Marriott runs Ritz-Carlton Hotels and Marriott runs Courtyard by Marriott Hotels.

The guests at both of those chains are very satisfied. They run with very different cost structures and revenue structures and having these multiple brand strategies will put us in a position to operate similarly.

Great.

Chad Beynon, Macquarie.

Just wanted to focus on Prime, you mentioned earlier that there is a nice opportunity for your proprietary product to kind of fit in below IMAX or Dolby and you mentioned that IMAX screens command a 70% price premium. Could you kind of outlined your view on Prime? Is that an opportunity to drive attendance, drive pricing or really just have your own product that doesn't pay someone else a piece of the profits there? And maybe just outline the white space for that opportunity could be. Thanks.

Sure, Chad, the answer to your question is yes, yes and yes. We believe that a Prime auditorium can be outfitted at between 25% and 50% of the costs of an IMAX or Dolby Cinema auditorium. So we start with that.

And when I say 25% or 50%, it's because Prime as AMC Classic Theaters will be different than Prime at AMC Theaters, and we will, instead of putting in full recliner seats, for example. We're going to put in what we call plush rocker seats, which are much more comfortable and spacious than existing traditional movie theater seating and will be the most comfortable chair in that AMC Classic Theater but that doesn't necessarily represent full-blown power chair recliner characteristics.

The -- so we're going to put it in at much less cost than what we would spend collectively with our IMAX and Dolby partners to put in the higher-end PLF. That's point one.

Point two, if you look at the design of a lot of multiplex cinemas, you're going to find out that the two cinema screens are quite large. The next two screens that flank the two center screens are medium-sized and then all the others screens in the theater are regular sized.

And what we've been doing heretofore is we have just been programming movies to go into the medium-sized theaters, or I should say medium-sized auditoriums, willy-nilly based on the number of seats and which movie might fit best here. The consumer had no way of knowing whether they were getting a regular size screen or a mid-size screen, even though the screen is probably double in size.

And the asset is already sitting right there as a larger screen. And by investing in better seats, investing in better sight and sound technology, we will probably make the screen larger even still than it is now and instead of framing the current screen with skirting, we can go wall-to-wall and floor-to-ceiling.

We are clearly going to give the consumer a better experience than the average of our auditoriums today. But, it is not going to be to the full-blown degree of IMAX or Dolby. So whereas we get a 70% price premium from IMAX and Dolby, who knows? We'll find out when we launch but maybe we will get a 20% price premium or 30% price premium at Prime. But realize, we keep it all.

Because when we give a significant double-digit percentage of our gross revenues to IMAX or Dolby, remember the studios are taking slightly more than half and if we give in the teens to somebody else, that's eating out a big percentage of what we have after film-rent splits. So, by being able to -- even though the price premium will be less than Dolby and IMAX, getting to keep it all is quite valuable to us.

The other factor in all of that -- before I do, we do think that Prime is going to drive greater attendance and greater price, then just a regular 2-D auditorium. But another factor of all this is these Prime locations are going to go into theaters either as the third and fourth -- the third and/or fourth PLF in a theater that already has one or two PLFs, or it's going to be the only PLF in a much smaller AMC Classic Theater, where this will be the best product in the marketplace.

We do think it is compelling to consumers but, if we didn't have it, I think that IMAX or Dolby would be hard-pressed to put its product on this medium-sized screen and they may not want to put an additional -- they and we combine, may not want to put an additional multi-million dollar investment as an added screen in that location. Nor, as we start to go to some of the AMC Classic Theaters, where they think the returns aren't high enough, to put in the high-end PLF at all.

So this is something that allows us to extend the notion of the big screen which is drawing consumers, both in attendance and in price tag to more and more places throughout the AMC system. And if you look at AMC in January of 2016, we had about 160 PLF auditoriums.

If you look at us at 2019, if Prime is a success, we will have 500 of these things which is an enormous -- there was a conversation, there was a discussion earlier about Windows and people going to theaters and watching at home, and you have -- it would be nice if they are watching at home and then we get paid for it, but the best thing we can do, to make sure that they want to come to theaters, is make our theaters spectacular.

And we're doing that with seating and we're doing that with PLFs, and we're doing that with our food and beverage, but this whole notion of having a mid-tier PLF, we think is a very big idea for AMC. And, I'm not going to commit that we're going to have 100 or 200 until we know whether the first five or 10 are profitable. But If it works, we will blow it out because this is an idea that's, on paper, sure sounds good.

Great. Thanks. And then my follow-up, just a quick one, the $35 million of cost synergies, in the Carmike acquisition, is that $35 million in 2017 implemented or recognized by the end of the year?

It's run rate. So --

Run rate.

We'll have the full $35 million in hand by the end of the year. We have a huge percentage of it in hand already. But I think you can rely on all $35 million of it showing up in 2018 at a significant percentage of it showing up in 2017.

Okay. Thank you very much.

Thank you. We have no further questions at this time. I'd like to turn the floor back over to Management for any closing comments.

Thank you all. Lots of good movies coming out in 2017. We would be delighted to see you at the movies and I will end with one last comment. We intend to do a much better job in 2017 in talking to you all and potential institutional investors in AMC now that our stock float has moved from 20 million shares to 55 million shares.

There's a lot of ability for people to get into the AMC story, if they want to. So we are going to be scheduling at least four Investor Days between now and year end. One in New York, one in Boston, one in Chicago, one in the West Coast where we will be able to tell the AMC story to, in person, probably at an AMC theater, maybe recliner seat equipped, maybe with an IMAX and Dolby screen, with better concession food, with a bar. And we hope to see you and many of your clients at those sessions throughout the year. Thank you for joining us today.

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