AMC Entertainment Fourth-Quarter Earnings Beat Estimates Helped by 'Star Wars'

AMC  - H 2015
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The exhibition giant posts record results, but management offered no comment on whether Chinese owner Dalian Wanda Group may become a minority investor in Viacom's Paramount Pictures.

AMC Entertainment on Monday reported fourth-quarter earnings of $41.6 million, or 42 cents per share, compared with $29.8 million, or 30 cents per share in the year-ago period, beating Wall Street estimates.

The quarter saw strong box office amid the launch of Star Wars: The Force Awakens.

During an analyst call, AMC president and CEO Adam Aron offered no comment on whether Chinese owner Dalian Wanda Group may become a minority investor in Viacom's Paramount Pictures.

Wall Street analysts often mention Wanda, which also owns Legendary Entertainment, as a possible buyer of or investor in a Hollywood studio. Viacom chairman and CEO Philippe Dauman last week said the company was considering a sale of a minority stake in Paramount to a strategic investor.

AMC, unveiling its latest results, said its fourth-quarter and full-year 2015 results set various records. Quarterly revenue rose 10.1 percent to $783.9 million, a company record for the period. Analysts had on average forecast earnings of $39.6 million, or 41 cents per share, on revenue of $801.8 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), another profitability metric, increased approximately 10.0 percent in the fourth quarter to a company record $154.0 million for the period.

Admissions revenue increased 8.4 percent to $498.7 million in the fourth quarter, also a company record for that quarter. Attendance grew 5.8 percent to more than 51 million. Concessions revenue rose 12.5 percent to a company fourth-quarter record $242.3 million.

“The fourth quarter of 2015 was another strong quarter for AMC and a great finish to the year, as an unyielding focus on improving the guest experience continued to set records, drive attendance" and generate strong earnings growth, Aron said in a statement accompanying his company's latest financial results.

“Additionally, in my view, there is opportunity aplenty for AMC that transcends resting on the successes of the past," he continued. "We believe that there are a wealth of additional initiatives available to AMC in marketing, operations and technology that can further drive earnings growth and the creation of long-term shareholder value.”

AMC said its 2015 revenue, admissions and concession revenue and adjusted EBITDA also set company records for a full year.

"From start to finish, 2015 was a record setting year for AMC, as our theaters continue to be among the most productive in the nation," said executive vp and CFO Craig Ramsey. "Importantly, the earnings we have reported today are being converted into strong free cash flow, available for investment in our initiatives and guest centric strategies, as well as potential acquisition opportunities."

During an analyst call Monday morning, Aron congratulated indie film distributor Open Road Films, in which AMC has a 50 percent stake, for its best picture Oscar win Sunday night with Spotlight.

He was also bullish about box-office prospects for Hollywood studio titles in 2016 after record-setting business for exhibitors in 2015. "We're more optimistic about the slate of movies coming out in 2016 than many other observers," Aron said before looking beyond the current year to the Hollywood studios' movie slate further down the road.

"Industry box-office projections for [2017 and 2018] are frothy and robust," he added. The newly installed AMC topper also offered details as the exhibition giant joins the trend towards a bigger cinema experience by going beyond existing Imax and Dolby screens to launch its own oversized screens.

Here AMC will follow rival Cinemark, which already has its own premium large format (PLF) brand. "We are ... now fully engaged in developing a third PLF, private label, in-house premium large format brand to further augment and complement our Imax and Dolby cinemas," Aron told analysts.

Oversized screens typically offer superior sound systems and more comfortable chairs than in 2D movie theaters. Aron did not specify how AMC's third PLF brand will be different from Imax and Dolby screens.

He pointed instead to economics as a driver as AMC's planned PLF brand will not incur third-party revenue splits with Imax and Dolby. So while AMC's own large-format theaters may not offer the quality moviegoing experience of an Imax or Dolby auditorium, it can offer cheaper ticket pricing for markets where consumers are reluctant to pay the steep upcharge for premium large format screens. 

Aron also signaled the exhibition giant will look to acquire more regional cinema chains following its acquisition of privately held Starplex Cinemas for around $172 million,