AMC Entertainment Posts Lower Fourth-Quarter Earnings on Merger and Acquisitions Costs

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Adam Aron, CEO of the exhibition giant, told analysts he backs efforts by the major studios to shorten the theatrical window if they will boost AMC's overall business.

AMC Entertainment, which is owned by China's Dalian Wanda Group, on Tuesday posted lower fourth-quarter earnings, due to one-time merger and acquisition costs.

That's despite missing analyst per-share earnings expectations by a penny, even as overall revenue rose 18 percent to $926.1 million for the three months to Dec. 31, 2016.

AMC CEO and president Adam Aron, on a conference call with analysts, said he backs efforts by the major studios to shorten the theatrical distribution window and get movies into homes earlier.

The exec argued that any new home digital distribution by the studios, now the subject of ongoing industry talks, could boost AMC's overall business. "We're intrigued by all this. If this is done right, and our revenue is significant enough, we believe we have the opportunity to grow and increase AMC revenues as a result of these activities," he asserted.

Aron said his company has been talking to the major studios for around 14 months, with an eye to potentially seeing the exhibition giant get a slice of the studio's home entertainment revenues. In return, AMC would agree to movie titles arriving in homes for premium on-demand viewing sooner after their theatrical debuts than the traditional 75 to 90 days.

The AMC topper said consumer revenues could come from a theatrical play or home viewing. "It's our view that this can be quite additive and productive for AMC and for movie theaters as a whole, if the proposals that are taken to market resonate with consumers and we're compensated fairly in the process," Aron said.

Admissions revenues at AMC during the fourth quarter jumped to $588.9 million, against a year-earlier $498.7 million, helped by box office from Rogue One: A Star Wars in December. And food and beverage revenues rose 16.5 percent to $282.5 million, against a year-earlier $242.3 million. 

But net earnings fell 20 percent to $33.2 million, or 33 cents a share, as AMC recorded $22.8 million in one-time merger and acquisition expenses and a $19 million tax benefit related to tax positions associated with prior acquisitions.

The latest results included 32 days' ownership of the U.K.-based Odeon & UCI Cinemas chain, and 11 days' ownership of Carmike Cinemas. AMC acquired Carmike for around $1.1 billion to make it the largest U.S. movie theater chain, and completed a second deal to acquire European cinema giant Odeon & UCI Cinemas Group to become the world's largest exhibitor.

After those and other acquisitions, AMC for the full year saw admissions revenue for the first time exceed $2 billion, and concession sales top $1 billion. Total full-year 2016 revenue exceeded $3 billion for the first time, jumping 10 percent to $3.2 billion, against year-earlier revenue of $2.9 billion.

AMC's fourth-quarter results just missed on analyst estimate of 34 cents in per-share earnings, while revenue exceeded a consensus estimate of $911.4 million.

Aron during the analyst call predicted full-year 2017 revenue for the exhibition giant will exceed $5 billion. AMC in January reached agreement to purchase yet another exhibitor, Stockholm-based Nordic Cinema Group Holding, for $929 million.

The exec also touted the upcoming Hollywood movie pipeline underpinning continued growth at the box office. "Based on what we've seen and the buzz of our guests, 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," he said.

Aron also announced that, beyond its existing Dolby and Imax-branded large-format theaters that are expected to grow in screen count, AMC's own premium large-format brand will be named Prime at AMC, with the first theater to open within one month.

Also on the branding side, AMC said it will retire the Carmike Cinemas brand. And the combined domestic circuit will be divided into two brands, AMC Theaters and a second and subsidiary AMC Classic Theaters brand for smaller theaters and smaller markets.

Feb. 28, 6 p.m.: Updated with comments by Aron to analysts during a conference call.