UPDATE, 3:14 PM: AMC Entertainment was “surprised” by Regal’s announcement about its effort to find a buyer, CEO Gerry Lopez told analysts in a conference call to discuss Q3 earnings. And he strongly suggested that AMC won’t be a bidder. “Our perspective is, hey, I have my hands full. Things are working. Our perspective is that we need a steady hand on the till.” If he was interested and struck a deal, he added, Justice Department officials likely would cast a jaundiced eye on the antitrust implications. “They look at it theater by theater. When you’re not careful about what the DOJ may do, you can leak value in a transaction really quick.” But he didn’t slam the door shut. He noted that “size does matter in a mature industry and we are clearly, clearly that.” But benefits wouldn’t necessarily come from cost-cutting. “The greater benefit comes from deploying a strategy that’s working for us in a bigger sandbox.… It’s not a cost play. It’s a top line play.”
Regal Entertainment Explores Possible Sale
The AMC chief also amplified on his frustration with IMAX and Netflix’s plans to introduce Crouching Tiger 2 next year simultaneously at theaters and the streaming service. “What we know about the project is what we read in the press,” he says. But he adds that it was “naive” to think that the exhibition chain would only have a conversation about the window theaters have to show new movies before they appear in the home “and not on any of the other touch points” that influence negotiations with studios and distributors. Lopez says that AMC controls what releases appear on its IMAX screens. At this point, “we’re not particularly motivated to exhibit a movie that has limited upside for our circuit.”
PREVIOUS, 1:09 PM: It’s not a huge miss, but analysts had hoped for little more from AMC Entertainment. The No. 2 theater chain reported net earnings of $7.38 million in Q3, down from $33.87 million in the period last year, on revenues of $633.9 million, down 8.9%. The top line was shy of the consensus forecast for $639.9 million. Diluted earnings at 8 cents per share were right on target.
“As we head into the last quarter of the year and look out to 2015, we believe that our industry leading innovations will continue to contribute to our results, along with an expected stronger slate of movies in the months ahead,” CEO Gerry Lopez says.
Some investors may forgive the revenue shortfall based on promising returns from AMC’s ambitious initiative to reduce the number of seats in some venues, replacing them with luxury recliners. The 48 theaters that have changed “experienced an impressive 14.3% year-on-year improvement in admissions revenues per screen during the September quarter of 2014, compared to an industry decline of 12.6%,” Lopez says.
Total attendance fell 15.1% versus last year to 44 million. Admissions revenues declined 10.6% to $417.4 million. The average outlay for tickets increased 5.3% to $9.48. Concessions sales fell 6.2% to $189.1 million — better than analysts expected. Average spending per patron was up 10.3% to $4.29, which AMC says is the highest in its history.
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