AMC Entertainment Holdings, Inc. (AMC) Q1 2015 Earnings Report, Transcript and Summary

Greetings and welcome to the AMC Entertainment First Quarter 2015 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [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 first quarter 2015 earnings conference call. Before we get started with our prepared remarks, I’d like to point out a new format for the dissemination of some of our financial information for the first quarter. In an effort to assist analysts, shareholders and potential shareholders, with even more timely financial information as referenced in our press release issued earlier today, we have posted CFO commentary on the Investor Relations page of our website at www.amctheatres.com. This new CFO commentary was posted to the website simultaneously with the issuance of the earnings press release and offers information normally provided during AMC’s CFO, Craig Ramsey’s portion of the prepared remarks. We thought of providing this data centric information ahead of time would allow listeners to focus on the qualitative portion of the call rather than trying to pick out data points and ultimately enjoy a better conference call experience. I’d also 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 April 29, 2015, which is located under the investor relations area on our website at www.amctheatres.com. After our prepared remarks, there’ll be a brief question-and-answer session. Joining me on the call today are Gerry Lopez, President, 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. 2015 is up and running, as is everyone at AMC, keeping pace with the fast and furious pun intended start to the year and setting company records with a strong first quarter. As you all know, first quarter a year ago so ours and the industries best growth numbers are 2014 and because of that I was a little nervous coming into the quarter this year. Overlaps can be so tough in this business. Well, I shouldn’t be in such a nervous Nellie. Both our total revenues and adjusted EBITDA grew in Q1 2015, when compared to prior year. With total revenues increasing 4.9% to $653.1 million and adjusted EBITDA growing 13.4% to $115.7 million. Both of those are company records for any first quarter in our history. The strength of our strategic initiatives again proved that our guest experience leadership strategy is the right one for AMC, I think but this tremendous value for both us, our guest and our shareholders. I don’t think many people anticipated the first quarter of 2015 would be as strong as it was especially in light of the tremendous quarter the industry and AMC both had a year ago. And just to refresh everyone’s memory in the first quarter of 2014, AMC grew admissions revenue 6.8% while industry box office grew 5.5%, a big number for the industry to be sure, but an even bigger number for us with that three and third point outperformance hence it might be in a nervous Nellie. Now keeping those terms in perspective, when compared to last year our 2015 first quarter admissions revenue grew 2.4% and our admissions revenue per screen grew 1.7%. The two year trend then is 9.4% growth in admissions revenue, a 9.0% growth in admissions revenue per screen. The two year trend is very strong, but it does mask some underperformance to the industry in 2015, as our year-on-year 2.4% box office growth fell short of the industry’s 3.2%, disappointing but the industry underperformance can be attributed to a couple of things. First, as I mentioned a moment ago, in 2014’s first quarter, we grew admissions revenue 6.8% and then even greater 7.3% on a per screen basis. The 6.8% was a 135 basis point outperformance and the 7.3%, a 285 basis point again outperformance, indeed those were top overlaps. The two year trend thus move out some of the spiky nature of the business, and it is very solid as you reflect a 51 basis point outperformance in total admissions and a 134 basis point outperformance in admissions per screen. Secondly, the film concentration and mix also played a role. The strength of the first quarter box office this year was centered on a few movies, with the biggest film by far being American Sniper, grossing nearly $100 million more than last year’s top performer The Lego Movie. And while American Sniper played well in our urban markets and played very well in our IMAX screens, it played disproportionately better in the Southern states and less urban markets in which we have a much smaller presence. So our real market share on Sniper would be low on North. Likewise, several other remaining big movies in the quarter were family-oriented, Cinderella, and Sponge Bob most notably. When compared to last year’s more action-oriented first quarter slate, which played very strong in that urban market sweet spot, this year’s family-oriented lineup did not generate the same market share for us. The good news is family fare does drive food and beverage and you’ll see this reflected in our F&B numbers, when I cover them in a few minutes. As we look forward, having just returned from CinemaCon, there are number of high energy, efficacy, action-packed movies made it for the balance of the year, many of which will be show case in IMAX and our new Dolby Cinema at AMC Prime. Those movies will play right into wheelhouse and the Furious 7 is any indication as I’d like to say, hold on to your seats. Speaking of seats, our confident, convenient, strategic action front continues to impress our guests and keeps them coming back for more. At the end of the first quarter, we had refitted or installed recliner reseats across 700 screens in 60 theatres, that’s up 70% compared to last year and that we can count far more than even our closest competitors. The productivity of these existing assets continues to improve. Those 60 reclining theatres asset group even though some of them are in their third year of operation, delivered an impressive 11.4% increase in admissions revenue per screen. While the industry saw an estimated 3.2% increase per screen. That’s more than an 8 point outperformance against the industry for the quarter. Our guests have clearly spoken with respect to the comfort and convenience they receive from AMC’s reclining theatres. Those same guests have also spoken on how easy and convenient it is to purchase a ticket to see a movie in an AMC theatre with more-and-more guests choosing to do so by buying online. Our first quarter Internet ticketing revenues were up an amazing 42.4% over last year. As we sold 8.2 million tickets online, representing approximately 18.3% of our total tickets sold. This compares to about 12.6% of our total tickets sold a year ago, nearly a 50 percentage point improvement. Importantly, our proprietary ticketing engine at amctheatres.com continues to perform well for our guest, accounting for about 37.6% of our online ticket sold in the first quarter, that’s a remarkable adoption rate by our guest for a service that is not even a year old. We’re glad to gain traction in this area, as it tells us that when we work to remain relevant to our guest, when we focus on their total retail experience, they respond with their support and their dollars. Now shifting gears, and moving over to food and beverage. Another very bright spot for us this quarter. AMC grew food and beverage revenue 10.3% to $200.5 million for the first quarter compared to the second quarter a year ago. It is easy to see that the accelerated that we deployed in food and beverage enhancements in the fourth quarter of last year, it’s already paying dividends. As impressive as that growth is, I’m even more excited by our 10.5% growth in food and beverage revenues per patron to another company record, an all-time high of $4.48. That’s five consecutive quarters now, every quarter since we’ve been public that we have reported a record quarter of food and beverage revenues per patron a testament to the sustainability and strength of our enhanced food and beverage strategic action front. But just generating the revenue wasn’t enough. We need to see the throughput, and we did it again this quarter as food and beverage gross profit per patron grew 10% to a first quarter record of $3.84. In order to sustain that growth, we want to make sure our guests have choice and convenience in that food and beverage offerings. And so, we have continued to optimize many options and invest in a broad spectrum of innovative delivering systems to make it quick and easy to enjoy traditional movie-going staples like coke and popcorn as well as fresh made food service, street side dinners with beer, wine, and cocktail. It is no secret to anyone in the restaurant business that pace change over time, and so most of our menus. So, over the next few weeks and months, we will updating and refining our dining theatre offerings to better serve our guests and improve efficiency. We are always looking for ways to improve our operations and exceed expectations. Doing so means we need to know our guests and that brings us to our third strategic initiative, guests, loyalty and engagement. We’ve recognized the importance of connecting with our guests and building the AMC brand because our guests have choices on where they spend their money and increasingly more important where they spend their time. So we must provide information easily over a broad spectrum of channels and make it as convenient as possible to see a movie in an AMC theatre. We believe we do that better than anyone else through our AMC’s Stubs programs on our social media outreach. With over 2.4 million paid members at quarter end, AMC Stub members continued to value the rich reward to the program and outpace the U.S. – the average U.S. movie goer in both attendance and food and beverage spend. As I mentioned in our previous call, we are currently exploring new innovations to enhance AMC Stubs, expand its scope and drive additional utilization in the future. So stay tuned for announcements later this year. AMC Stub’s success is matched by our social network outreach through Facebook, Twitter and YouTube all of which combined to expand and drive guest loyalty. AMC is by far the most socially connected U.S. movie exhibitor with more Facebook likes, Twitter followers and YouTube subscribers than the other three major exhibitors combined. And just this month our AMC Movie news, the YouTube channel with more than a 130 million views and his host John [indiscernible] were nominated for three international academy or Web Television Awards and came away with a win for best live series. Congratulations to John and his team. That brings us to our fourth strategic action front, the very exciting side-on-side news I alluded to on our last call. Simply put be prepared to be blown away with the introduction of the new Dolby cinema at AMC Prime experience, there will be one like any other movie you experience in the market today. Those of you in New York and L.A. you’ll get it first, and Burbank, Century City and Time Square to name just a few. What we’re doing here? It’s seaming up with Dolby to further enhance our position as the premium sight and sound leader in the exhibition industry. In a nutshell, we are combining Dolby’s spectacular Atmos Sound System, with their new high dynamic range laser projection technology and then adding AMC’s auditorium design expertise, our panacea reclining seats and transducers in every chair so that movie goers can literally feel the action on the screen. It will be a truly immersive experience for our guests, and one that we think, will drive new business as well as greater repeat visits. Avengers, Terminators, Mission Impossible, you are not going to want to see them anywhere else but at an AMC. In the first phase of the rollout, we’re planning to convert our currently installed base of AMC easy access and prime locations to Dolby Cinemas at AMC Prime, with the roll out of the first four by the end of May and an additional four sites by the end of June. We are that quick, we have to. Dolby and Disney, as I’m sure you’ve all noticed, I have already announced Tomorrowland, and Inside Out, coming this May and June respectively as a first titles to be shown using this amazing technology. Ultimately, we intent to expand to 50 Dolby Cinemas at AMC Prime by 2018 with options to do even more in the future. We believe our guest will love what they see here and feel this partnership is just one of the many ways we’re getting guests excited of our coming back to movie theatres again and again. Many might wonder how this premium format fits into IMAX strategy. We are I’ll remind everyone, the nation’s largest IMAX exhibitor would approximately a 150 screens and a 45% market share and we plan to add even more screens in 2015. We love the IMAX brand and we believe Dolby Cinema at AMC Prime is complementary to our IMAX offerings. A new premium format gives our guests more options and gives us programming flexibility, it is a win-win and winning is good. Winning is – winning with our guest, it means great customer service, greater engagement and in general exceeding their expectations. From my crew members at the theatres to our leadership at the Theatre Support Center, guests are our first priority. We believe in that approach and we believe our guest notice, at least that’s what our top box satisfaction scores are telling us and doing so resoundingly. For the first quarter, our top box score was 60.5, an all time high for the company. The first time we finish a quarter above 60 and open 270 basis points higher than last year, simply an amazing number in the retail service industry. Very proud of it. As good as that is, we can always improve and that’s just what we intend to do. We must continue to increase productivity of our existing assets and differentiate ourselves from the competition through innovation to maintain our leadership position. With only 7% of the nation’s theatres, and even less in terms of screen count, AMC has earned 21% of the last 12 months box office share. Now that’s what we would call productivity. And we would look even deeper and measure ourselves against the competition within a 20 mile radius of our buildings. We’re seeing nearly 6 percentage points of box office per screen, our performance dating back of April of 2011. This metric shows in a detail per screen level that our customer centric approach is the right thing to do for our guest and our shareholders over the long-term. So as we look ahead to the rest of 2015, the prospects for record box office continued to look great. For those of you who keep score, yes, I call for an $11.25 billion year for the industry in 2015, and I have seen nothing through the first four months of the year to this [indiscernible] The table is set for wide variety of blockbuster franchise films and good calendar spacing, and appeal to every segment of the audience. But at AMC, we can’t just rely on the next big movie. We rely instead on ourselves and our capacity to innovate. Three-and-half years ago, we were talking recliners, and some of the same people who were calling us crazy back then are now unveiling their own recliner plans who said exclusive internet ticketing arrangements were silly and we’re even sued for it but guess what all the folks are just rushing to do now. Progress inevitably involves change, and with it, disruption and pain. But done correctly, it also involves winning, and you guys know how I feel about that. We’re already working on the next big thing or things. We aim to surprise and delight our guests, and give everyone else something new to talk about. In other words, when it comes to the innovations to improve the guest experience, we’re just getting started. We have plans to test launch several new and exciting concepts in 2015. You already know, we’re exploring alternative pricing models by subscriptions, unlimited tickets, and dynamic pricing expect increased experimentation in this area. We will also continue expanding our internet ticketing and e-commerce efforts, all in an attempt to drive convenience and with it customer conversion. With conversion, we also aim to increase loyalty. So, AMC stuffs will also see new features and in fact doubling down beginning before the year is out. On these and others, trust us to keep you posted, and our guests engaged and excited. This is just a sampling of the own relenting innovation taking place at AMC. So, to our guests and shareholders, thank you for your continued patronage and support. We will continue to focus on being the customer experience leader in movie exhibition and in doing so; we look to drive value for you. The 2015 box office rate looks good, real good. We are excited by it and even more so by how our strategy plays right into it. Thank you for listening and I’d like to turn the call back over to our operators, so we can take a few questions. Craig is here and we’re eager to hear from all of you. Operator?

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Eric Wold from B. Riley.

Thank you and good afternoon. Two questions if I may. One, how should we think about the film expense line as you kind of head into the summer blockbuster period, you seem to be at least a little higher than what I was expecting in the first quarter, there are already reports out there of some German theatres boycotting Avengers because of what Disney was looking for in terms of film rent, as you get into the meat of the summer and kind of the movie that you’re well expected to be blockbusters, how should we think about trends towards film rent – similar year-over-year increases as we see in Q1?

You want to ask the second question or you just want us to handle that first one first.

Sure, second one Gerry on – on G&A, obviously with the pull out of the gain is not set the G&A, what would kind of normalized G&A in Q1 have been and how should we think about that going forward as well?

Okay. Let’s tackle I mean...

Yeah.

Go ahead.

I’ll go back on the FEC and give you some thoughts on that – some of which may repeat points Gerry made. Certainly, film exhibition costs were up 53.3 in this score compared to 51.9 last year and a lot of due to concentration. And by that time I mean the top films, top five films in the quarter, this year were 38% of the box office and about 31% last year. So clearly, American Sniper was great because of the volume created, but certainly it does put its pressure on film cast, because as we’ve talked about four, we are on scales and generally speaking, each studio is different, but generally speaking the more box office a film produces, the higher percentage the film pay.

In general though, Eric what I would say is, the trend that you saw in the first quarter for the next three will continued about the same phase. Their movies are going to continue to be big, we know it’s not clear that the concentration to Craig was just saying will be as severe or as acute or strong as it was in the first quarter and the quarters to come. There is just more product period and it shouldn’t be as concentrated. But we have a lot of big movies coming and those big movies do come in at a higher end of scale. So what you saw in the first quarter is not unreasonable to suspect the next three – you may not – obviously may not be at the exact same level and it’ll go up and down and have a point either way, but it is a big movie year and with it the high-end of the scale will come.

Yeah, the other thing I’d add to that Eric is the unknown about the future film playoff is there’s a lot of publicity about the large pictures and that, that segment of the film’s slate is pretty well nailed down and written on, we don’t know about is the strength of the other pictures. The other 100 or so pictures that we paid that are from film 20 to film 100 and how much and clearly those produce lower film cost and just what kind of a contribution that we would get from them at lower film rates to kind of mitigate. That’s an unknown that – we hope will mitigate some of the upward pressure as well. The second question on G&A looks like the run rate is about $15 million if you – if you adjust for the $18 million, and then it’s down a little bit from last year’s G&A in the quarter about $2.3 million down.

Perfect. Thank you both.

Thank you, Eric.

Thank you. Our next question comes from Ben Mogil from Stifel.

Great, good. Good afternoon. Thanks for taking my question. So, I just want to make sure I heard the last comment right, if you sort of strip out the $18 million, that you got benefit from and you in the $4 million that sort of you got hit on the settlement, like we should be thinking about G&A and the $15 million a quarter run rate, is that correct?

Yeah, $15 million probably to probably to $18 million, it’s going to depend on a lot, as an example incentive compensation, which can fluctuate depending upon results, but that’s probably a good way to look at it.

And any way you look at it, it’s still down from last year’s quarterly run rate is that, is that correct?

Yes.

Yeah, somewhat, yeah.

So, two questions. When you look at market share and I get that you given – given any given quarter your market share move around a little bit, when you look at market share quarter to date I get that it’s only been one month, but also you have some obviously visibility on advance ticket sales coming out of Avengers, do you think your market shares come back to where it should be based on historical trends during count, et cetera?

Yes, to be clear on the market share, Ben, our market share in our proximal areas, in those 20 miles that we measure from each one of our buildings, it’s very, very stable and have been increasing, but since all the way back to 2011 when we began to deploy all of this customer centric initiatives. So, in the markets in which we compete, the market share is very, is very stable – very predictable, et cetera, what various is how big would the films be elsewhere. So, a film like Sniper, which surprised everybody, I don’t think anybody pegged it to run to $350 million in box office that it’s going to wind up running or it has already run. That – in our proximal markets, in our 20 mile radius, we’re going to get our 32%, 33%, 34% market share day-in, day-out, not a problem, it’s just that the film does so much other business elsewhere that our national share then gets depressed, because those markets where we don’t play wind up getting – performing beyond the norm, so the market share gain is not – is not one that it’s driven by the performance of our buildings, is driven by the performance of the movie in those areas of the countries like the South East for example, where we simply don’t have enough theatres. We’re good in Atlanta, but – find there, but you only have one in Charlotte for example, one in Alabama, one in the Florida Panhandle, that’s barely a footprint to compete when you have a movie like Sniper that plays, that plays so well in those markets. So, that’s – that’s what’s driving that share performance, it’s nothing fundamental to the buildings, it’s more the way that the movies play out based on the audience they appeal to.

Great. Thank you and thank you for that.

Yes.

And then on the online ticketing front, beyond the cost savings of not having to share revenue with Fandango or MovieTickets.com. Maybe you can talk conceptually what traffic through your side as opposed to third party side gives you beyond just simple cost savings?

Greater engagement with the guest and ultimately that’s what we are really seeking. When they buy on our site, the transaction, the experience with AMC begins right then and there, and as retailers that we are, we just assume that the number of intermediaries between us and our customer be as few as possible. We – Fandango still does the lion share of our business, MovieTickets does a bit. We want them, we just assume that they’ll be on our side, that way we owned different section, we owned the relationship, anything goes wrong it’s on us, everything that goes right, also on us. It just we try to envelope the experience as much as possible. So, we just assume that they’ll be on our side. At the end of the day though, and as much as we like that then, to be honest. So as long as you buy a ticket for an AMC, whatever is their preference. The most important job is for them to buy a ticket. We assume an attitude or we projected an attitude to all of these ticketing vendors out there that hey, although we have a preference, our number one job is to sell the tickets and if customer has a relationship with Fandango we’ll be happy to do it that way. They have a relationship with movietickets.com, Flipster where we’re also selling tickets, we’ll do that. It’s exciting because there are other folks now emerging, other people bring in ticketing apps and ideas that are not quite out in the marketplace yet that we think are going to continue to expand that convenience element, that availability element. We have nearly a million seats in the circuit. We start almost five shows a day on average across those million seats, 5 million sales opportunities a day as many people would want to have a shot at selling tickets for those 5 million sales opportunities. We’re going to support it. We’re going to encourage it and we’ll do business with everyone. Do have the preference though and we would like to [indiscernible] because we would like to have that relationship beginning to end with AMC but in the end we’ll support them all. Does that make sense?

That’s great. I really appreciate the color. Thanks guys.

You bet.

Thank you. Our next question comes from Eric Handler from MKM Partners.

Yes, thanks for taking my question. So just following up on Ben’s question a little bit on the industry stats. So this – and I like what you’re doing with the theatre renovation and its clear how those theatres are performing and I understand that certain quarters, there are some exogenous events that can cause you to gain or lose market share. But when you look at the numbers now, in three out of the last four quarters, you’ve actually underperformed the box office, which suggest that your non-renovated theatres are losing a pretty good amount of market share. So with that being said do you think maybe some of those theatres need to be shuttered or is there a way to accelerate the renovation process so that you could stop the bleeding from some of these theatres and is this the right way to think about it?

Parts of it, yes. Parts of it, no. Let’s start with the part that I don’t think we would agree with them that is the notion of shutting theatres down. We don’t have that situation. We don’t have any theatres that we would consider underperforming or at the point where a shutdown would be a call for. We do have some sites where the leases are coming up where we don’t see an improvement in the trends perhaps or where the landlord is not willing to contribute to a capital improvement and so on. So we are always in those kind of negotiations at a given point in time in the renegotiations of a lease extension, things are not going where we want them to, yeah, we may give up a site here or there. We haven’t really done a heck of lot of that over the last couple of years because these remodels have turned some of these underperforming assets into something a heck of lot more attractive. Now, the part that you are correct about is that the traditionally seated theatres, the core seated theatres. Those will full up to it a lot more with the industry and those we are cannibalizing ourselves. When we go into a market like Chicago and start renovating some of own theatres, we do wind up shifting some share around from our traditionally seated theatres from our core theatres into this new remodels which were older assets that were more at the end of their lease life. So, we are still in – we’re kind of doing it to ourselves a bit when we go and remodel one and because of the concentration that we have traditionally had into the major markets, we’re cannibalizing ourselves. We’ve – we’re on record and that continue to see that in this remodel theatres about 60 or so percent of the increased attendance comes from share shift and in some cases ourselves, and about 40% is increased behavior on the part of the customer. So some of that 60%, some of that 55%, 60% that a share shift is indeed coming from our own height, would rather it be us doing it to us than somebody else doing it or worse the customer not enjoying the experience and not – not engaging in that repeat behavior.

Yeah. The only I’d add too is that, we try to get some statistics on it, but if you do – one thing that affects the core circuit for us probably brings the volatility is IMAX. And for example, last year for the full year, and I don’t have it by quarter, but last year IMAX was down 8% and our core circuit is really where those screens are sighted versus the reseats or reseats generally wouldn’t have IMAX screens in them. So, as you looked at I guess June and maybe December last year and we’re thinking about under performance, that’s driving a good chunk of it, given our dominant position. Now, in the current quarter, you’d say, well, but Craig it turned around in terms of IMAX and Sniper drove performance above and beyond the IMAX performance of last quarter. Yes indeed it did – it was offset however by the point we’ve made on American Sniper, that we just earned an overall lower share there because of kind of where that film played and the strength of what the play off for that picture is. You have a lot going on. I think we look at our concentrate and focus on our core circuit. We think it performs in line with other core circuits around the country. And rest assured that we are – what we are trying to do in the near-term is deploy as much food and beverage bars, expanded food and beverage and menu items to our core circuit, and to the extent possible, and as rapidly as possible convert those that make sense to recline or recede.

Okay. That’s helpful. And just a quick follow-up. So, you’re not seeing any evidence of competing circuit coming in, building a newer, fresher theatre versus your core theatre and taking market share from you there?

No. I didn’t say that.

Yeah, okay.

I said if you – I said our core compares favorably with other core circuits, and there’s a little bit of trick about that because in our core circuit, we strip out what would otherwise be new build. Our development, our new build is kind of recedes, and we segment those, we have kind of a pure core circuit. If you compare that against other circuits that aren’t may be as aggressive in recedes, and that are new build, those get blended into their core. So, that it may appear that they are performing better because I don’t know if that’s helpful but I didn’t say that our core circuit does experience competitive build against it absolutely.

Yeah.

But I think everyone’s core circuit experiences competitive new build or reseats, when you strip out reseat and new builds from the basic – from the total circuit and look at really let’s going on with the core circuit and affected by those two initiatives, I think we’re in line with those.

Yeah. Here’s a way to think about it, Eric. For the total revenues – because I don’t want – we don’t breakout the segments and so on and we don’t want to start that, but the way to think about it a little bit is total revenue line for that core circuit, what we would call core circuit for the quarter was flat versus our DIPs which we have 17 of those and those were up in the mid-teens versus our reseats where we now have 60 of those and those were up in the mid-20s. So that gives you a sense of where the three segments of the business of the core DIP and the reseats, we think and we track them separately, we think of them separately, obviously the vast majority of the buildings are core about 250 somehow, 252 of them I think 253 and those were revenue wise flat versus a mid-teens versus the mid-20s for the other two segments. The trick is to deploy the initiatives in the right time, in the right place in the right buildings and while maintaining the stability in that core.

Okay. Great. Thank you very much.

Yeah. You bet.

It’s very helpful.

You bet.

Thank you, guys.

Thank you. Our next question comes from Barton Crockett from FBR Capital.

Okay. Great. Thanks for taking the question. I wanted to ask at risk of trying to getting various [indiscernible] numbers about this, but you guys have been reporting the performance trend in your reseated theatres, since you came public, you’ve been talking about a performance trend that it seems like its decelerated a lot, I mean it was initially close to triple digit, double-digit now it’s – I think you’re reporting 11%.So what’s driving that kind of deceleration, I mean is it seasoning – I was wondering if you could break that down for us a little bit?

Yeah, I think if I – if we went back to the fourth quarter we talked about 13.8% for that segment of theatres and so it is down, 11.4% down from 13.8%. And I think what we’re seeing and what we’ve talked about fairly consistently is as you get over two years into that the kind of the maturation cycle of those assets their year over year growth goes to kind of mid single-digits and so the larger that population of theatres gets I guess the larger the impact of single – mid single digit growth has. I think you referred to that as seasoning.

Seasoning.

Yeah, so it’s a same thing. That is certainly a contributing factor, but we’re still seeing – kind of what we’ve said mid single, once you get out over couple of years mid-teens in the over year and kind of the, the first year is a bit of a mixed bag, because you’ve got some that are nine months and you got some that are just a couple three months and so those are kind of a mixed bag in terms of the year-over-year growth, but I think certainly this movement from 13.8% to 11.4% is more seasoning than anything.

Yeah, what we’re seeing Barton just to give you some more color on it is that first 12-months after the remodel the impact, it’s about the same as we’ve always seen, very site specific of course, a lot of that has to do with a prior performance of that building how low was it or exactly how many people will be attracted on a per screen basis and if you’re converting something that was a – a theatre was in the mid 20,000 average screen attendance over the course of a year, you remodel it. Yeah, those guys saw tremendous increases, but you went from a 20 to a 40, great. We’re now converting buildings that instead of starting out in the mid 20s, you’re starting out in the mid 30s and the mid 40s and even a couple in the 50s. Well it’s a lot tougher to go from 50 to a 100, than it was to go from 20,000 people per screen to 40,000 people per screen. When you do that, you still have only 40,000 people per screen. So what we are seeing is that in the first year, the impact continues to be overwhelmingly positive, it ramps up, in some cases, it’s more immediate than others, but pretty much the pattern has remained through, which is tremendous high double-digit. In some cases, 70s and 80s as we saw early, early on, early on and some of the newer ones not in every one, but then in the year two, yeah it comes back and then in year three, then it’s now down to the single-digit. Of course, off a much higher level, much higher performance bar. Now when we only had a dozen of these and they were all in that first 12 month, 14 month, 16 month, 18 month ramp, yeah that’s where those numbers came from those 60s and 70s. Now we got 60 and 40 of them are already above two years, I’m using a round number, so don’t read them into a model, but the – vast majority of this buildings are now, we have portion of them they are in the third year, that first dozen or so that did and we got a big chunk of them that are into their second year that’s going to continue as we carve out more and more of the circuit for their remodels. Those seasoned theatres as you call them quite correctly, are just not going grow as fast. It doesn’t slow us down, because every time that we remodel one of these things the impact is so positive that it’s just tough to pass by.

Okay. And thanks for that. Now to switch gears a little bit on a question I guess the capital deployment. One of things that I think that jumps out as you kind of highlight the underperformance at America’s banker because of a lack of southern and rural mix. Is that if you own Carmike, I mean, you might have outperformed at Sniper. So I don’t expect you to comment specifically on that theatres due in process if any of it comes up for sale, but just generally, when you IPO’s your preference for capital looks right, when I think you’re going through existing plan versus acquisition seems to be a lower priority?

Yeah.

Is there anything in this environment that changes you thinking or is that still kind of the way we should look to you guys?

To be honest with you, no. Nothing changes our thinking. We’ve advertised during the IPO road show on the year and a half or so since, year and a quarter since that we have a very we think a stepwise process on how we think about these things. The first, as we’ve always said is a financial analysis, right. What are you buying and what comes with it. And what is the cash flow and all of those other kind of things that you would expect us to look at. Will it be accretive, how are you going to pay for it, you’re going to drive up your leverage, are you going to use how much equity will you use – all of those kind of things, but the fact is what you would expect. The second filter is government, it’s DOJ. As you know, historically, they have reviewed every transaction that matters down to the individual building level. And then for us more specifically the third filter that we look at is, okay, and I know what you are buying that once you get past the government process, you keep in what does it mean to you. And in our case, it means, how will we deploy these strategic initiatives, have reseats, the enhanced food and beverage, the IMAX and/or the Dolby Cinema now that we’ve announced it into those buildings that you get to keep. And for us that’s what the real price is, how can you take some of these assets that you are now bringing into the fleet and turn them around, and experience some of the same upside that we’ve seen in our existing fleet. If anything hasn’t changed at all, Barton, in all candor is that needle filter. As you know, the screen vision National Cinemedia merger was blocked, that’s indicative to us of a Department of Justice Antitrust Division that is very active and very much scrutinizing things. So we would take an extra pause in that when we go to that filter to think very carefully about what will the government behavior would be, why will they let us keep. And transaction may look great after the first filter creative, et cetera, et cetera but ultimately is what you get to keep that really adds value to our shareholders. And if we think that getting through that second filter, it’s too onerous or too – it will be too detrimental to the transaction. Chances are we would not – we would not go with it. We are traditionally have been acquirers. We hope to continue to be so. Opportunities will come and go. At CinemaCon people ask me about [indiscernible] can put itself up for sale. I was not aware of the formal process on that front. I was aware of the rumors but not of a formal process those are different things, and we’re always going to be taking a look around and active in that front, but we will be very thoughtful and very careful about any transaction, certainly one of that size and magnitude and that process that we’ve advertised it’s true. We will be true to it and not got any corner, so skip any, any essential steps. Craig, you may want to add some.

The only thing I’d add, it’s and it’s not acquiring, it’s – I don’t mean to equate this to acquiring a big circuit like Carmike, but I do want it to be clear that that we talked a lot about the reseats and it is kind of the primary point of emphasis for us in our capital deployment. But since we had our call in the first quarter of last year. We’ve built and opened three new theatres. So, we continue to build theatres and I think we continue to look for – new theatre sites across the country and including in the South – in the South East. We’ve also, what we call spot acquisitions. We’ve stepped into leases in five theatres where they do kind of become a reseat or a remodel, but you could also think as those acquisitions. We’ve done five of those and a couple of those in Florida and a couple in the South and frankly I think as we go into the coming year, we look at 2015. We think that number could double. And so it’s incremental. We are adding buildings. We’re building them and we are out-stepping into them and there may well be some other acquisitions that are available as we go into the through 2015 but, but we are interested in new sites to complement the remodels that we’re doing as well.

Three years ago, Barton we were sharing 2% screens every year 1.8% to 2.1% in that range. We’re now adding about 1 point to 1.5 screen count to the circuit every year. We think that’s about right, and of course the bulk of the work is really – is really in the remodels. We started these remodel journey on the reseats alone three years ago a little over that, and we’ve done 60 buildings. We started a dining theatres, really began focusing on them three years ago, a little over that we done 17 of those. So 77 building out of 342 building fleet, we’ve done significant capital work in and that’s really – whereas when we look at acquisitions and these parts are great finds and nice jewels that we add to the fleet. The truth is 77 of those 342 building have been remodeled or reseated or dining theatres or something along those lines. That’s where the bulk of the attention on the capital is going.

Okay. That’s great. Thank you very much.

Thank you.

Thank you. Our next question comes from Chad Beynon from Macquarie.

Hi. Thanks for taking my questions. Hey, Gerry within your prepared remarks you talked about some strong enthusiasm and momentum from CinemaCon mainly with respect to the spacing and product in 2015 and we all know that these were small issues in 2014 could you elaborate a little bit on your view if this is kind of a one year phenomenon or if the studios have kind of changed their view on spacing where we’re all just trying to figure out how this industry looks beyond 2015 which appears to be kind if a perfect positive storm if 2016 will be a difficult year of the industry time goes back to their old ways? Thanks.

I don’t think the industry goes back to its old ways. 2016 is – heck, I couldn’t – we have, let’s just say that we have an active office betting pool on what Avengers is going to do this weekend. So, worrying about 2016 is beyond the scope sometimes, okay. So, I’m not even going to worry about that. We’re worried about what Avengers will run for three days coming up, and by the way the over and underline is 200 for all of those of you out there who are starting your own pools in your own offices. What I think you’ve seen, Chad, is an industry that has learned a few key lessons. When you see a move like Furious 7 opening up to summer like numbers, and running summer like numbers in April, I think people stand up and take notice. When you see a movie like Sniper opening up in a handful of theatres in December, but really having the run – the bulk of its run in Jan and Feb, and running up to $350 million, people stand up and take notice. And whatever criticisms want to – people want to throw at this industry, the one thing I will tell, you haven’t been in many others and including other aspects of the entertainment business is, people in this business stand up and take notice and learn lessons that whether they happen because of their own movies or because they’re happening to somebody else’s movie. People have learned that spacing matters. People have learned that appealing to different segments of the audience matters. People always knew that trick accounted programming, that’s not a new trick. But the new lessons learned are that big movies don’t just open Labor Day and Fourth of July, that there is life in this other months that we are indeed in a 52-week-a-year business. As exhibitors, I think have been saying for a long, long time. Those are not lessons that I would suspect are going to get lost. When these studios lay out the kind of capital they lay out for the production and subsequently the marketing of a movie. They are of course going to want to play it safe and try to assure themselves of a return, I think that by itself will lead to this better spacing, this greater spacing than we’ve seen in years past. When the movies will come, when the movies will be ready, that’s a different ball game and that’s why you see some movies getting delayed. We speculate endlessly about when will the next Avatar come and things like that. So, you’ll see days moving around because of that, but I think by and large you’ll see studio behavior modify the way that it continues it, continue its learning and modify itself the way that it has, based on the lessons that are getting learned right now. I don’t anticipate a return to the – to the old days or people doing things that they know don’t work – don’t work as well. So, we’re encouraged by that. We’re encouraged by the slate, not just the movies – we got to see a bunch of extended clips that in Vegas last week. We’re extended – we’re encouraged by how nicely spaced they are. That’s we think a big deal and we think is going to work for them. Once if it plays out that way and if it works, I don’t – the studious are smart. They’re not going to go backwards. They will move forward. That would be my guess. Does that answer your question, Jeff?

Yes, that’s perfect. Thank you very much guys.

You bet.

Thank you. Our next question comes from Stan Meyers from Piper Jaffray.

Thanks guys. Gerry, just on dine-ins, you guys have 17 dine-ins now, 96 [indiscernible] under your belt, how is this strategy evolving I believe you mentioned maybe some menu changes. And then I guess should we expect some improvement in margin in those dining’s as you kind of increase the volume?

The answer is yes. I think we’ll be reasonable to expect an improvement on margins there, our strategy on dining’s – the overall strategy continues unchanged and that is to deploy the dining theatres in those locations where we believe the demographics and real estate support it. It needs to be in the right location, we need to have the right physical plant to do it in, laying in a commercial kitchen is not the easiest thing to do, sometimes we have the space, sometimes you don’t if your theatre is surrounded by a bunch restaurants where maybe that’s not – maybe that’s not the best place to go in and put in our own restaurant, but if there is not that many – there’s all sorts of factors like that what kind of audience are you serving? Will they be supportive? Will the township allow you to have a liquor license? And how difficult or onerous is the process to secure one of those, all of those figure into the calculation, into the site collection as to selection as to where we deploy the DIPs. So the strategy will remain steady and unchanged, we will select – we will select sites where we believe it makes sense, so far the criteria that we used has worked for us, I think you’ll see changes coming and is in how we manage the menu and how we manage the workforce. We are learning that sharing a plate matters a heck of a lot more than we thought. You would think it’s perfectly obvious, and we thought so ourselves but it turns out that eating in the dark matters a lot more to our guests than we had anticipated. So we need to – as we evolve the menu, the difference between us and the restaurant companies that a restaurant may have evolved the menu for taste, for new ingredients for what’s trending out there, things of that nature. You see us focus on menu but mostly focus on quality and then focus on ease of eating in the dark, ease of sharing, more than on developing the next trendy foodie. I don’t think you’ll see us at the cutting edge of the next to Russia wrap or something like that. You’ll see us work burgers and you’ll see us work fundamental food very well with high quality, but with a focus on what our guests are telling us, which is I have to be able to share it and I have to be able to eat it in the dark. Those are not the kind of the things that you – normal restaurant people are worrying about, not a lot anyhow, but we do and that’s our tactical execution that is really evolving and trending as we learn more but strategically we’re going to remain on path.

Great. Thank you.

You bet.

Thank you. We have time for one last call coming from Jim Goss from Barrington Research.

Hi. Actually my questions also have to do somewhat with the concessions issue. You had a pretty good past in food and beverage per patron and somewhat of an offset in the concession gross margin. And I know you have multiple strategies including the dine-in theatres. I was wondering what the mix issues were that led to this and is that the sort of trend in both metrics we had to expect as the year unfolds?

We’re going to climb and dig up the numbers for you, I don’t know I recall 10% up on our per patron concessions an issue, probably do some other work. Our gross profit grew double digits as well, the one thing that we are doing and we’ve always advertise Jim, is that as we introduce more items certainly hot foods into the concession – into the traditional concession stand, as these dining theatres become a greater part of our food and beverage mix. Yes, the margin will compress but the dollars will expand, okay. The average concession – the average food and beverage per patron in a dining theatre is running near $10, in a regular concession stand it’s running closer to $4 – above $4 but still closer to $4, so that’s our range. Those – the $4 and a $10 come at different gross margin level.

Yeah. To Gerry’s point, last year and it’s incremental but its DITs were about 10.7% of the food and beverage total this year they’re up to 11.7%. So we are growing a piece of the business that’s delivering a lower percentage margin but to Gerry’s point as well the total gross profit per patron from food throughout is up 10%. So, even though the percentage margin may be down the final – the overall take on the food is improving.

Yeah.

Now, that is…

Go ahead.

I’m just wondering are you – like in the IPO stage you were – you had a number of different initiatives you were trying. Are you starting to clarify which one seem to be making the most sense and those are the ones you are going to be running with and that’s how we ought to be thinking about it. Because it was pretty complex at that time and it seems like it’s – like there’s a little more focus now on just what – how things will roll out?

We’re pretty confident that the strategies that we’ve – we’re pretty confident that, the executions that we have in our portfolio, whether it is the one end, the refreshing of a traditional concession stand primarily by introducing hot foods. At the other end at dining theatres, in the middle stage, we may marry those two with some location by location, flexibility kind of thing. We’re fairly, fairly confident that, what we’re doing on the food and beverage front, is working pretty well for us and for our guests. They carry different executional complexity, that’s always been the case, they carry different gross margins, because burger that we sell you for $13, $12 and change, is going to come at about a 70 gross margin versus a popcorn that I may only sell you for $5, or $6 or $7 well that comes at a 90%. So, yeah, we will trade off. We’ve always advertised. So, we will trade off gross margin points, for incremental gross margin dollars. So I’d gladly sell you a $13 -- $12.5 burger at 70 or somewhat points of margin versus an $8 bag of popcorn and 90 points of margin. That’s what we’re doing; we’re going to continue to do that. It’s tactically complex here at Theatre Support Center, it is not in the building itself. I don’t mind complexity here. I don’t want complexity at the point of execution with the guest which is the theatre itself.

Yeah. This may help us kind of supplement what Gerry saying, we’ve had about a $0.43 bump in our concession per head and we kind of look at it in a couple of pieces, one is just kind of pricing and by the way the tax on top strategy that we talked about in the fourth quarter, rolls forward and has a year-over-year impact in this first quarter of 2015, and well second and third as well. But, that’s just under half of the $0.43 within that element, that piece of it, that tax on top pricing and some other concession pricing. The other half basically is from the initiatives, and let’s say it’s $0.20, $0.21, $0.22 just kind of round numbers, relates to the initiatives that we talked about, and that’s dining theatres and that free style, the coke machines that gives you multiple choices, and that’s megaphones, and that’s the kiosk. So we’re getting a good chunk of the lift, and its’ all kind of spread evenly among the four that I just mentioned, the initiatives on kind of a per head basis. So, they all are kind of working, the clarity is some are working better than others, the alcohol is probably contributing a little more than kiosk, but kiosk is contributing and back to the point someone made earlier, what are you doing with those core theatres that aren’t maybe new. And so, well that’s where the kiosk is deployed. That’s as well as the megaphone. And so, I don’t know that we’re – the clarity we’re getting is that they all seem to be contributing some a little more than others on the initiative front, but we’re actually pretty pleased with all of it.

The trick, Jim is to figure out what to deploy in each location, based on the circumstances that are specific to that location. Left to our own devices we would have 342 bars already in the circuit. Well, guess what, securing those liquor licenses it’s easier in some jurisdictions other than others. So, that’s – we’re going to be thoughtful about that, but we’re not – the price the size of the price in food and beverage is such that we’re going to continue to deploy and handle the complexity that may come and keep it simple at the execution point regardless of what we need to deal with back here at the office. And I’m sorry I thought you were up, well, you were going to ask? Okay.

No, I was just wondering too then if reserve seating, because of the high propensity to sell out the more limited number of reseats is sort of reinforcing all of these mechanisms too.

To a degree, well we’ve seen with reserve seating is that it changes our guests behavior. The prime shows, which are the 7 o’clock in the evening kind of shows, have never been an issue for – for our capacity utilization, it’s all of the shows prior to it and all of the shows after it. With reserve seating what we see is smoothing out of the peaks, so that people now come to those later shows or people plan their day and come to the earlier shows. So, we’ve seen situations for example in New York, in Queens, we have a little seven screen theatre, that has as high a capacity utilization on certain weekend evenings in the shows that start at 10 PM as they do in shows that start at 7 PM, that’s unheard of, that’s never happened in our business before. That’s what happens with reserve seating, you remove that level of uncertainty from the experienced and people respond accordingly and we like that because they come more often.

So, all right. Appreciate your thoughts.

You bet. Thank you for the question.

Thank you. And I’ll now turn the call back over to our speakers for closing comments.

I want to just thank everybody for their time attention this afternoon. Hopefully you’ve liked the new format where we made some of the comments, certainly some of the data rich comments from Craig available a little earlier in that way we eliminate some of the quick scribbling and trying to figure out some of the numbers and everything else. If that works, we’ll continue doing it in the future. I look forward to commentary in the months ahead. And make sure you go to movie, we have a summer full of them for you and enjoy them at an AMC. See you guys soon.

Thank you, Gerry.

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