Greetings, and welcome to the AMC Entertainment Second Quarter 2017 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Merriwether, Vice President, Investor Relations for AMC Entertainment. Thank you, Mr. Merriwether. Please go ahead.

Thank you, Bob. Good morning, everyone. I'd like to welcome you to today's call and those of you listening on the webcast to AMC's Second Quarter 2017 Earnings Conference Call. With me here this morning is Adam Aron, our Chief Executive Officer and President; and Craig Ramsey, Executive Vice President and Chief Financial Officer. Before I turn the call over to Adam, let me remind everyone that some of the comments made by management during this conference call may contain forward-looking statements, which are based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of these risks and uncertainties are discussed in our public filings, including our most recently filed 10-K and 10-Q. Several of the factors that will determine the company's future results are beyond the ability of the company to control or predict. In light of these uncertainties inherent in any forward-looking statements, listeners are cautioned to not place undue reliance on these statements. The company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information or future events. On this morning's call, we may reference measures such as adjusted EBITDA, adjusted EBITDA margin and constant currency, which are non-GAAP financial measures. For a full reconciliation of our non-GAAP measures to GAAP results, please see our second quarter earnings release issued earlier this morning. In conjunction with our second quarter earnings release, we encourage you to review the CFO commentary for the second quarter of 2017 that we published on our website with the earnings release. After our prepared remarks, there will be a brief question-and-answer session. This morning's call is being recorded, and a webcast replay will be available on the Investor Relations section of our website at amctheatres.com. With that, I'll turn the call over to Adam.

Thank you, John. Good morning, everyone. We do intend to cover a lot of ground on this call today. And as part of that effort, after my prepared comments, Craig and I will try to answer as many questions as you have as long as that takes. In an attempt to add more clarity and be more transparent, we will be discussing information and sharing our perspective on a wide array of topics that should be helpful to you as you think about AMC and better allowing you to further shape your own opinions about us. As virtually all of you know, this week on Tuesday, after the market closed, AMC thought it appropriate to issue a preview of our disappointing results for the second quarter of 2017 in advance of the long-scheduled formal earnings announcement and quarterly earnings call planned for Monday of next week after the market close. We were every bit as much frustrated as you were that we were, therefore, precluded from talking with you directly over the past 2.5 days and, potentially, could not talk with you for another 3.5 days still to go to share more color on the quarter just completed and on the choices that we've made that we believe will enable us to deliver better numbers and to increase shareholder value in the years ahead. So we moved Monday afternoon call to today, Friday morning, and here we are. Also, on Tuesday, AMC filed an 8-K with the SEC that for the first time, gives you pro forma information on each of the 4 movie circuits: AMC, Carmike, Odeon and Nordic, in U.S. GAAP, with purchase accounting applied quarter-by-quarter as if we had owned all 4 circuits on January 1, 2016. This will make it possible for you to make year-over-year…

[Operator Instructions] Our first question comes from the line of Eric Handler with MKM Partners. Please proceed with your question.

I actually got two questions for you. First, let's look at your expenses in the second quarter. Your rent expense was about $200 million, and that's about a $17 million sequential increase from the first quarter. So was all of that attributable to Nordic? And is that a good go forward number to use in subsequent quarters? And then along with that, it looks like the other line in G&A of $46 million, that's up about $12 million sequentially. And what accounted for that? Was that all Nordic or were -- there were some investment spending? Or what can you do with regards to that line? And then for my second question, when you look at $400 million of nonstrategic assets, so you've got National CineMedia, press reports have Open Road getting sold. I'm just curious, beyond that, are you considering any of the Carmike assets possibly selling some of those underperforming or maybe small market theaters? Or how are you getting to that $400 million number?

So thank you. I'll take the second question, and we'll get Craig on the numbers associated with your expense questions. On the monetizing of what we're calling nonstrategic assets, about half of it is the NCM shares. They -- I can neither confirm nor deny what was printed on The Wall Street Journal. But if it were to happen, that would obviously bring cash to the door. Similarly, I think many of you, especially those of you who also cover hospitality, appreciate the fact that being asset-light is a smart thing to do and that it's better to lease the real estate than own the real estate as a public company. It turns out that we found out that we've got about -- out of 650 theaters, we've got about 40 that we own which is under 10%. Depending upon how many of those we might sell and then lease back, so we would keep the theaters and not lose the screens, but we would sell the underlying real estate, that could bring in as much as $100 million or more. And then there are lots of other items that we found. Some of them are on the confidential side, and we're better off not to talk about them until we can figure out a way to most intelligently monetize them. But that gives you a couple of the biggest items, Eric.

Okay. On the rent, the run rate, Eric, for the remaining two quarters is between 195 and 200 each quarter. So it is the impact of the final -- of bringing Nordic in to the -- to those results, and of course, we'll experience those fully in the last two quarters of the year. G&A is high, a little high in the second quarter due to some -- we had some onetime legal cost and some other consulting. But it's somewhere in the $37 million to $40 million is a good range for each quarter going forward, at least for the third and fourth quarter.

Okay. And then just as a quick follow-up then. As you look at the cost structure, are we pretty much -- to what extent are all those cost synergies reflected in the numbers? Or are there some cost synergies still left to go?

On the synergy side, there's more left to go. We had estimated about $35 million for Carmike and $10 million for the Odeon Nordic Circuit on a full run rate basis, so $45 million in total. As we're tracking it, it looks like our capture of the $35 million in 2017 will be somewhere in the range of $22 million to $26 million and most all of the 10 -- so we'll have more to -- that'll be in the full 2017 year. There'll be more of the Carmike remaining to pick up in the 2018 year, and then most of the Odeon falls into 2018.

Our next question comes from the line of David Miller with Loop Capital Markets. Please proceed with your question.

Two questions. So what was the blended admissions revenue per screen in the second quarter? Clearly, Carmike was an issue, yet again, with admissions revenue per screen down 11.3%. I don't know, maybe I was wrong. I had thought that you guys had kind of ameliorated that problem intra-quarter? I'm just wondering why it's bringing numbers down yet again. What exactly is going on there, Adam? Is it a slate issue? Do you think it was a slate issue in the second quarter? What's going on operationally at the ex-Carmike stuff that you think that you can ameliorate this issue in the near term? And then I have a follow-up.

Sure. Q2, it's such a -- I mean, I am sure as I was trying to say in my prepared remarks, Q2 was such a weird quarter. April was up 4% and a record April, and May is off 11% and horrible. So the theaters just performed so differently in April than they did in May. And then you have the vagaries of various titles, which, some, as you know, play much better in AMC markets and some play much better in Carmike markets. And it's actually one of the reasons we found Carmike attractive, because we thought that across the whole of the circuit, no matter what was playing, it would be attractive to some part of our more national clientele. So that's why I think that what you're calling the intra-quarter performance look like it went left turn, right turn in the same quarter. That is how the whole quarter acted. But having said that, we mentioned this a little bit on the first quarter call, as we went back and looked, in eight of the 12 months in '16, Carmike, as a circuit, had declining market share, including three of the four months between September and December, it had declining market share. When you look at what Carmike as a company did between April and December to modernize its circuit after it put itself under contract to be sold, it didn't do very much. And so the circuit essentially went on dead stop around April-ish of -- remember, we put them under contract in March, April-ish of '16, and we didn't get to change that until December of '16. What we found is that we've already gone through each of the several hundred Carmike theaters one by one with this -- across the top -- departmental team…

Yes, David. The point I would make on the AMC circuit, as Adam talked about earlier, was tracking better than the industry, Carmike clearly didn't. One of the things that affected the Carmike results is there was less family-oriented product in the market. Certainly, last year with Jungle Book and Finding Dory, really played strong for them in the second quarter of '16. And you just didn't see that type of big-playing, family-oriented tiles in 2017. So that had a pretty big impact on the Carmike circuit as well.

Okay. And then just a follow-up, on PVOD right now, it just feels like this thing is going to die a slow death. I mean, there's just no consensus amongst the major studios on when the window would start. There's no consensus on which films are going to be involved. There's no consensus on what the pricing structure is going to look like, what the splits are. Disney has already said that it doesn't want to participate. Adam, in your discussions with your studio partners, do you feel like anyone else wants to opt out or may opt out? Or what does it feel like to you? Thanks a lot.

Thank you. Thank you, David. So we had a series of investor meetings and lunches in mid-May, especially in New York and Boston because we were so troubled that our share price was falling despite having released Q1 earnings where we beat The Street by 20%. And we literally, days -and-days devoted to meeting with investors. Those conversations from our perspective, were less about marketing the AMC story and they were more about trying to listen to the people we were meeting with to understand what was on their mind. And there is no doubt that was on their mind was PVOD, PVOD, PVOD. And it was driving investors bonkers that there was uncertainty on this topic and they didn't know the outcome. We took that quite seriously and I requested emergency meetings with a lot of studio CEOs. And over the past 8 weeks, I personally have had one-on-one meetings with 5 different studio CEOs solely dedicated to the issue of PVOD. And I can tell you categorically, there is, no one is close to resolution on this matter. There are not 2 studios who agree on what should be done. Obviously, we can't talk to our competitive movie theater circuits, so we don't. But there is, as you just described, there is no industry consensus. This thing has been under discussion now since, I've been at it since December of '15, so I'm in 18 months already. Based on the conversations I've had, if I had to make a bet or if I had to give you my assessment, I would say that the odds of whatever happening being good for exhibitors has a higher probability of happening than whatever happens being bad for exhibitors. Now that's a professional judgment based on this. And people change in their mind and do different things and say different things tomorrow than they said yesterday. But there is one thing, I think, I can say categorically. I do not expect that this issue is going to be resolved in 2017. And I don't think you're going to see PVOD occur in the United States in 2017. I say that with a caveat that, of course, I could be wrong. But that is our view based on being in the room over and over and over and taking this matter very seriously. So how it ends up? We will never know until, it ain't over until it's over, right, Yogi Berra said. But it's clearly not moving to a speedy implementation, which has been the fear of several people that we talked to a few months back.

Our next question comes from the line of Eric Wold with B. Riley.

A couple of questions. One, I guess, Craig, I want try to connect the dots a little bit between kind of capital allocation with the CapEx plans, the buyback announcement. So I can understand you're cutting the CapEx guidance for this year basically by the amount of lost proceeds from NCMI and kind of making that similar comment into next year, especially given that the $200 million of incremental non-strategic assets beyond NCMI, the timing of sale of those is always going to be uncertain and probably less near term. But kind of the decision process in it, too, if you move into next year and you can get the $200 million of non-NCMI proceeds and kind of see that come in, what is the thought between upping CapEx for next year versus doing a buyback, given what you can see as the returns from that and just how much you're praising the benefits of these recliner reseats and the long-term benefits that drives the company?

So I'm actually going to take that one because I've been associated with companies who bought back a lot of stock over the years. And both as a director and as a CEO, we did not announce this initiative to buy $100 million worth of stock lightly. And I grant you that I think I used the word artful. We have to have an artful balance between going after growth when we see projects in front of our eyes that can generate growth and increase our returns. But we are expecting to spend $450 million, $500 million. That’s a serious chunk of change even it is reduced from what it might otherwise have been. I suspect that we will be investing more in our theaters than anyone else. But the artful balance is that there are two other things that we think are important for AMC to do. It’s not just that we renovate theaters. We think it is extraordinarily important to delever. And so, we will make sure that we do that as we outlined on this call. And we think it is also extremely important that given how attractive the investment returns will be, in our opinion, if we can buy shares in AMC at the levels where they are trading now and where they traded at recently, we also think that we can get very compelling returns and very strong returns on investment by buying our stock. And so being smart in how you balance those three things, because they are conflicting objectives. But we do believe that we will succeed on all three, that we will continue to renovate more theaters than anybody else, getting the growth returns from that we laid out on this call. It’s just stunning what we see when we can get into the correct theater with the correct renovation and pull it off. But at the same time, we’re going to get the buybacks accomplished. And at the same time, we’re going to delever the business.

Okay.

Fortunately, we found some liquidity opportunities to fund it all because we found, as we said, $400 million of assets that we think we can sell. You’re turn, go.

Okay. On the CapEx, I guess, for this year and for next year, can we get a sense of what the, I guess, broad allocation is between legacy AMC, Carmike and Odeon? Is there a plan to shift more to Carmike to try to correct the ills that you’re seeing there? Or is it better to push more towards legacy AMC, where you know that it’s working?

So there will be some legacy AMC theaters that get renovated, we’re not stopping. But if you look at that chart that we gave you on the recliner seats, even though the returns are -- and these aren’t -- this is not ROI percentage, this is actually literally growth in attendance and growth in operating cash flow. The numbers are currently stunning. But if you look back in the first year, they were even higher. And that’s because when you do the first ones, if you have a brain in your head, you’d do the theater where you could think you're going to get the best return. And so we have two virgin circuits. I call them virgin circuits because they have no recliner seat auditoriums in any quantity. And so yes, we are moving monies from the AMC circuit to the Carmike circuit and the Odeon circuit because the biggest eye popping returns may come out of the first theaters that we do in each of those circuits if we pick the right theaters. And so it is a strategy to go after the lowest hanging fruit in the Carmike and Odeon circuits rather than chase the 173rd AMC theater, where there -- it may be a little harder. The other issue is that you've seen that some -- that recliner seat theaters outperform non recliner seat theaters. And in buying Odeon and in buying Carmike, we thought that we could improve the performance of those circuits. And one of the ways we thought we could improve those circuits was by going to theaters that had high potential but weren't actually realizing their potential, renovate the theater and turn it in -- we'd give you a technical industry term, turn it from a pig to a superstar literally on the strength of a renovation. So yes, to answer your question, strategically we're not stopping the renovation of AMC branded theaters. But we will move a lot of monies into the Carmike and Odeon circuits. With respect to the Carmike theaters, you should also remember that about 150 of them have already been rebranded as AMC theaters. So even though they came to us as Carmike theaters and we or you may describe them as legacy Carmike theaters or former Carmike theaters, to the consumer, they're actually AMC theaters now. And so the consumer is actually going to continue to see us renovating AMC theaters in quantity. And I can further say that the only theaters we're likely to renovate within the Carmike circuit would be those that are either in the AMC brand or the AMC DINE-IN brand, not the ones in the AMC Classic brand.

Our next question comes from the line of Stan Meyers with Piper Jaffray. Please proceed with your question.

So I wanted to dig a little deeper into reseats. Obviously, your core legacy AMC has done extremely well. But then your non reseated theaters weren't -- I guess, underperformed industry as well. Are you seeing that as a result of competition? I know many chains are -- your competitors are accelerating the reseats. Maybe you can talk to what is happening in those specific DMAs and maybe what's driving the underperformance of your core non-reseated AMC theaters.

It's very similar to what we saw when we introduced the new theater format in 1995. We were the first. Ultimately, the industry copied the format, stadium seating. And the attendance gets redistributed as more new theaters came onboard. The same thing is happening here and we're seeing it as well. We were a first mover. And so what's happening to the portion of the circuit that is not improved, that hasn't been touched yet, is that they are competitively impacted by theaters that have been reseated by competitors in the local market. That's the primary factor. The performance of films is what it was and what it has been. What's changed is that there has been a reseated theater come into the market, thus the emphasis on continuing to reseat and where we can to be a first mover.

Our next question comes from the line of Chad Beynon with Macquarie.

Just one on the filing the other night, which was super helpful for us to understand the seasonality, particularly for the international business. Was there a reason why you weren't able to disclose this? Or did you kind of just gather the information? Just trying to get a better sense of why this was just kind of released when it was released. And then I have a follow-up.

Okay. Well, let me take a bit of a historical perspective here on what we provided to the market and start by saying there are two things at work in these underlying pro formas. One is purchase accounting. Any time you do an acquisition, you revalue the assets. That's typical of all this type of transactions. Second, in this case and unique to this case, is taking, in the case of Odeon, U.K. GAAP financial statements and recasting them into U.S. GAAP for every quarter and for the full year. And that's a considerable effort. Likewise, for Nordic, the restatement of their formally issued IFRS financial statement GAAP into U.S. GAAP. So you've got two things going on that took a considerable amount of work. The first pro forma that we put out back in October of 2016, we did put out a U.K. GAAP to U.S. GAAP version of the Odeon financial statements for the two quarters ended June 30, 2016. We filed Article 11 pro formas on Odeon on November 30. And that was again both purchase accounting and the reflection of the conversion from U.K. to U.S. GAAP. The November pro formas included 3 quarters ended September 30, 2016. We updated those pro formas in February of 2017, when we completed the Carmike acquisition. There was no GAAP restatement there. But certainly, with the pro forma of their financial results into those GAAP financials, and that was for nine months ended 2016. And then we issued Odeon U.K. GAAP to U.S. GAAP and Carmike for the full 2016 year. We issued those pro formas on March 13, 2017. Now to your question, what happened with Nordic. Once again, we had to convert IFRS to U.S. GAAP and we had to do the purchase accounting. We received the reports from our -- the consultants we were using to make those GAAP conversions. And remember, the transaction closed on March 28 and we received the fair value accounting report from our consultants on June 30. So we then recast internally all of those pro forma statements. And it wasn't until Monday of this week that all of that work had gotten completed and gotten through the review by our accountants that looked at the quarterly financial statements that put us in a position to issue the full pro forma statements. So it was really a matter of getting the work done, recasting their GAAP to our GAAP, in the case of Nordic, having the experts that we use on the purchase accounting, getting their report, recasting it, having it reviewed. It was available to us on Monday and -- not available to us, it was available June 30. We worked it, it was available and scrubbed and reviewed and available for us to release on Monday. We did it as quickly as we possibly could.

Wow, great, okay. Craig, that's super helpful. And just sticking on that topic, I know when you guys originally had the Nordic conference call, you talked about some minority interest or JV theaters that would also maybe be confusing. Could you kind of flush that out if those are included in your annual guidance for 2017 or if the profits will come below the EBITDA line? And that's all for me.

Sure. The statements that you're talking about, the entities that you're talking about are around -- it's about 50 theaters at Nordic. And these are theaters that we own 49%. They don't qualify for consolidation into our financial statements, so they're not included in our revenues and the expenses. But there is an equity in earnings, non-consolidation equity in earnings accounting. But those assets, it's very close to consolidation. We have representation on the board. We approve operating budgets. There are a number of other things that, in essence, give us control to where we feel that's appropriate to include them in our financials. And they add pretty significantly to our market share in those countries. In the case of Sweden, they take us from 70% to 90% market share; Finland, 65% to 70% -- 75%; and over 25% in Norway. So we think it's justified to include our share of adjusted EBITDA. You'll see that -- in the pro forma statements, you'll see that each quarter coming in as attributable EBITDA. And as we thought about the guidance that we gave, it's also included in the guidance that we gave.

Our next question comes from the line of Jason Bazinet with Citi. Please proceed with your question.

One, I'd like to go back to the buyback question. I think if I am doing the math right, the CapEx guidance that you gave was about $1 billion over two years and the maintenance portion over two years was about $400 million, so $600 million being allocated towards growth initiatives.

Maintenance will be $320 million, no we said maintenance was $160 million so that's $320 million.

Okay, $320 million. So let's call it $700-ish million, $600 million, $700 million of capital married up against the $100 million two year buyback target. So let's call it $6, $7 of growth CapEx for $1 of buybacks. The reason that confuses me is that maybe five years ago, when you guys first talked about these recliner reseats, you talked about 100% cash-on-cash return. I'm assuming that assumes that no competitor comes in and follows your efforts to do a recliner reseat, which I think would diminish those returns. And then your stock was 100%, it's what, $16 now. It wasn't that long ago when it was $32. So 100% cash-on-cash return. And the reason that's happened is because the market, the capital markets, have essentially taken the EBITDA miss and capitalized it at 7 times EBITDA as if it's a permanent impairment as opposed a one-time undulation. So if I was on the board, I would be allocating $6 or $7 to my buyback for every $1 of growth CapEx. I'd almost do the mirror image of what you just articulated today. So if you could answer that, that would be helpful. My second question is -- yes, go ahead.

Well, I'll let Craig give you the professional answer and I'm going to give you the flip CEO answer. It seems what happened is that the investment banker I use of choice is Citibank. And I got in a rip-roaring argument sometime over the past month saying, why don't we have a higher buyback program, even if we have to cut back CapEx to do it, and your own institution just given me hundreds of pages of paper and hours of reasons why we're doing it the right way. And the biggest argument against what you just said, because I was making the same arguments to your institution that you were just making to our institution, is that it's not enough just to buyback your stock, you also have to deliver growth. And when you have opportunities that are as attractive as we have to upgrade our theaters, we should take those opportunities. That's in a nutshell. Now listen, what's the more dignified CFO answer?

I don't know if it's more dignified. Jason, the early returns were a one year payback. And as we've said, on an ongoing basis, we didn't expect them to stay because at those levels because we knew that others would...

Come in, right?

Would come in. And so what's happened is returns had a declined. But they're still well above our threshold of 25% and particularly when we look at, as Adam called them, the virgin territory or the highest opportunity that's available in our Carmike circuit and certainly in the Odeon, we don't expect 100% returns in those situations because in certain of the Carmike markets, they've already had some reseats. And I think there will be fairly fast copy in Odeon as well going forward, but we'll have a first-mover advantage. So we're not thinking of a 100% return, but we are thinking of certainly over the 25% return that's our basic investment threshold. We think that's also the case today and going forward for a stock buyback, the math that we do around it. Now as the price changes, our thinking will change. But as we see, yes, go ahead.

No, that's my point. I mean, I have no idea when you had conversations with any banking team. But I would think that it wasn't at $15 or $16 a share. I mean, it was 2 days ago, you were trading in the low 20s. 2 months ago, you were trading in the mid-20s. So I'm just saying this is a dynamic situation. It strikes me as a very rare opportunity to buy back your stock at a low price. But it's up to you, I appreciate the color. Let me ask...

Jason, I promise you, we were on the phone with the banking teams after the stock fell down to $15 a share. And by the way, it might have been at 11:00 o'clock at night because I, it did catch our attention where our stock was trading.

This is our first buyback.

Not my first buyback.

I know. But it's the company's first buyback, Jason. And there's always an opportunity to alter the program. But this is the first one. And so we said we thought it'd be appropriate, first step was $100 million.

And Craig said there's an opportunity. Obviously, he's right. He means there's an opportunity to upsize the program if that makes sense to do as we go down the road.

Okay, helpful. Let me ask a sort of a strange question. Have you ever been approached by a financial institution? Or have you ever asked a financial institution to essentially price some sort of derivative based on the box-office volatility such that if the box fell, the institution would pay you money? And if the box was ripping, you'd pay them money and there would be some fee associated with that, but it would sort of smooth out the volatility, similar to the merits of the Carmike acquisition that you cited earlier but doing it across whole circuit?

I will give the flippant CFO answer. I actually have a letter in my files from a company that years ago wanted to do exactly that. It's on their letterhead, I'll send it to you. It was Enron. I mean, I'm serious. I haven't been approached on that recently, but there, I do you have that letter, and we didn't act on it. But I haven't had anyone inquire of recent.

By the way, I love Citibank. And I wasn't trying give you or your bankers a hard time. Whether it's coming from you or them, we have gotten great advice from Citibank.

Ladies and gentlemen, our next question comes from line of Lawrence Dann-Fenwick with Credit Suisse.

Actually, it's Omar from Credit Suisse. Just I've got 3 questions, a couple for Craig and one for Adam if possible. Craig, just want to clarify the comments you made about CapEx for next year. Were you saying that the reduction in CapEx that you've guided to, is that, are you, can you just kind of clarify whether or not that is in non-recliner investment? I just want to make sure that you aren't reducing recliner investment in 2017 and 2018. That's the first question. And second is on the $30 million of incremental EBITDA you're guiding to the rest of 2017. Could you just kind of say how much of that is revenue and how much of that is cost, and then how much of that will roll forward into 2018? That would be helpful. And then the last questions are for Adam. And that's on 2018 box office. I mean, Adam, you, obviously, the slate this year is very strong, includes Star Wars at the end of this year. I’m just wondering what gives you confidence that 2018 will be up versus 2017, given that obviously you won’t have a main Star Wars film, which could be, I don’t know, 2% or 3% of the entire year in 2017 and why you won't have a step-down in U.S. domestic box office next year?

Your first question was about how the -- what kind of a composition of the guidance. And we didn’t give specific by category guidance. We think the maintenance for next year will still be around the $160 million of the $450 million to $500 million. We’re pushing out kind of some CapEx from all initiatives, whether it’s our large format, some recliner and some food and beverage. So it’s kind of pushing out. I’d say we are reducing some of the maintenance from a technology perspective and signage. We actually had some rebranding. It’s probably a good portion of it, some rebranding in the Carmike circuit that we’re pushing out. The other point I would say is that we are moving some U.S. recliner deployment and reallocating to Odeon and again the Carmike circuit because again we think that the return opportunity is better in those two situations versus what we originally thought. So, it is kind of across the board. There is some recliner, but the biggest chunk, I guess, would be the branding piece.

With respect to the box office in 2018, since people couldn’t predict accurately in April what’s going to happen in May of 2017, I don’t know that we can say with certainty that we know how 2017 or 2018 is going to do. But when you look at the titles that are coming out in the fourth quarter of 2017, and it’s far beyond Star Wars, even though Star Wars is Star Wars, it’s the gift from heaven. But there are so many great movies coming out in the fourth quarter. We have to feel bullish about the fourth quarter. And hopefully, it will be big enough to match the weakness in the third quarter. For the people who do this for a living, whether it’s the executives of studios with whom our people talk every day or our own people, we have a staff department of about 60 people who do all of our film buying, when we talk to them, they are very excited, both the people at studios and the experts here, on the whole array of titles that are coming out in 2018. I haven’t heard anybody tell me with absolute certainly whether 2018 will be even with 2017, ahead of 2017 or slightly behind 2017. And as I remind you, people in April couldn’t accurately predict May. So I think some of this is going to turn out to be, as movies are released, are critics and consumers, excited and thrilled and delighted? Having said that, from what we see, 2018 is going to be a very strong year.

There was a -- you also had a question about the $30 million. And I think we clarified it in the press release quote that...

That it's $30 million for the year.

It's $30 million this year in the last 6 months. And so there'd be another, we think, $30 million in the first half of next year, so...

Yes, I think his question was what percent of -- revenue versus cost.

Yes, we didn't provide a lot of detail on that. But the largest percentage of it is on the cost side.

Our next question comes from the line of Leo Kulp with RBC Capital Markets. Please proceed with your question.

First one, as we look out, given your lower CapEx spending and continued Carmike issues, how should we think about your ability to close the performance gap relative to the U.S.? I mean, do you think the underperformance will continue for the foreseeable future? At what point does that change?

Is this about on the former Carmike's move?

Well, just I mean, in general, the relative domestic box-office performance, when do you think, as a whole, that will subside?

Well, it's among the highest priorities for our marketing organization to get revenue in the Carmike theaters. And as I said, there have been many identified issues. And they got to be knocked down one at a time. And as we looked at the issues that were floating around the Carmike circuit, about 40% of the attendance issues in the Carmike circuit was because somebody came into town and put a recliner theater near a Carmike theater and Carmike never responded. And in an earlier answer to a question, we said that we're going to move some capital dollars into the Carmike circuit for those theaters that have been rebranded AMC and have the highest potential to benefit. Those projects kind of take 4 to 6 months so -- and they haven't really started yet. So that sounds like a first half '18 issue for the things that have to get solved that way. Another issue for Carmike is it had two of its biggest, most successful theaters that were closed for renovation. And the theaters were closed for over a year. And they're just coming back on stream this summer. So we're going to get a material bump theoretically by two of their biggest, strongest and best performing theaters finally reopening and coming back online. And it's literally issue by issue. Do we have a loyalty club, an identified clientele for a theater? So if I had to forecast, we bought the company on December 21. It was probably about the end of May that all of their theaters have been rebranded into AMC and put in the AMC system. Can we turn this circuit around in 9 months? So is it January to March of '18? Or is it taking us 12 months and it's January to June of '18? Or does it taking us slightly longer than that? I don't know. But I'm hopeful that we can get it sorted out and turned in the first half of '18. And the first half of '18 starts six months from now. So it's clearly not going to happen in the third quarter because -- of this year because if the whole of the movie industry is challenged, that's not a time when you're going to -- with a lackluster demand, you're going to see a big turn in the performance of theaters that have been troubled. So I guess -- but I'll bet you all those Carmike theaters are going to be full when Star Wars is playing. So let's just say end of fourth quarter to second quarter of '18. And that's kind of the range when I would love to know that we're actually delivering better numbers.

Got it. And then thank you also for the recliner data, that year 1 attendance uplift is really impressive. But can you talk about the performance in subsequent years for the earlier tranches? Have you seen those performance declines as others have reseated against you?

Yes, because I want to put it in the release and somebody argued with me and said, "We're giving you too much data and it will confuse you because we're drowning you in data." The answer is that in the second and third year, it gets even better, not by much because you get the first big pop, then you get word of mouth. And then over time, you're able to raise price because more and more people know that it's there and it's wonderful and they've shifted their loyalty over. So by far, the biggest pop is in year one. But in years two and three, it doesn't weaken, it strengthens.

Got it, okay. And then last question on my end. Can you talk about in your guidance of how you're thinking about the 4Q box office from a growth perspective? I think if you assume a 13% [15%] decline, it implies like a 9% increase in 4Q. Is that correct? And how should we think about downside to the guidance if the box office doesn't meet expectations?

Did you say that your third quarter estimate is down 13%?

15%.

15%? You're on the low side of the prognosticators. That doesn't mean you're wrong and they're right. I'm just telling you that your number puts you among the optimists for the third quarter.

So that would imply an even better 4Q number, I guess?

Yes. And I was going to say that I think your fourth quarter number is also light. So I think you're more pessimistic. But I want to say I think you're light. I'm not saying based on what I know you're light. I'm saying amongst all the people who are predicting, I think your prediction for the fourth quarter is on the lighter end of that spectrum. So I think you're more bullish than others on the third quarter and you're more bearish on us than others on the fourth quarter. And if I had your job, I'd be a bear in the third quarter and a bull in the fourth quarter because just look at the movies that are coming out. And the fourth quarter has a lot of great titles.

Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question.

A couple of quicker ones, I think. I was wondering with Odeon, are you treating that as a self-funding entity? Or are you grouping it with the domestic product as well in terms of financing of reseating and that sort of thing?

Yes, we are looking to them to generate the cash flow to fund their CapEx program.

Jim, because obviously until the tax code changes, you don't want to repatriate cash. So if we have sourced the cash from abroad, we get to keep the cash abroad.

Okay, excellent. And so none of this should affect what's going on there, given that the box office is doing pretty well in Europe right now?

Yes.

The second thing, do the financial issues create any detour from any other strategies, whether they're the multiple PLFs or the food and beverage programs, or anything else?

Food and beverage programs are rolling out full-bore, full-speed ahead, June to October across the whole of the system with the AMC brand getting the full enchilada and the AMC Classic getting modified because they don't actually have enough space in the AMC Classic theaters to put some of the equipment you need for the full-blown menus. With respect to PLFs, we've been going at a breakneck speed. We were actually beating our contractual commitments to IMAX and Dolby. We may just be meeting our contractual commitments to IMAX and Dolby. But if you were asking, and I'm not talking about you personally, but if one was asking the question from Dolby, it may be a huge deal to Dolby whether they're at 100 or 110; from AMC's perspective, it's not a huge deal whether we have 100 or 110 PLF screens. So if the margin could -- I said food is not going to get pulled back at all. Is it possible that PLFs could slow? A tad, just a little bit. But talking about a good investment, we're getting 70% price premiums in our IMAX and Dolby Cinema auditoriums. So we have every incentive to continue to roll these things out. And as I said, we intend to live up to our contractual commitments to IMAX and Dolby to get there.

Okay. And the last thing, just on the rebranding, is that sort of a positive, a neutral or even a negative initially as you do this...

Which rebranding? Are you talking about the Carmike?

The Carmike to AMCs, yes.

It's a positive because what we've seen, and again, it talks to the operator that we bought. They had very low participation in their loyalty club. They had no self-capability for online ticketing to be sold. They didn't have automated box offices, kiosks in their theaters, they didn't even have the Carmike name up on the exterior wall of the building. It might say something, a non-branded descriptive like Cinema 6. So I think as what we've seen is as we bring the AMC brand and the AMC marketing programs into the Carmike network, we are helping ourselves considerably.

Okay, great. Thank you very much.

Nice to talk to you Jim, I appreciate it.

Thank you. Our next question comes from the line of Mike Hickey with The Benchmark Company.

Hey Craig, Adam good afternoon guys. I think we’ve bridged morning to afternoon, appreciate our time and openness on the call. Curious on the recliners, obviously you shared a lot of data. I haven't got a chance to go through it but do you have any specific conclusions I guess that say the attendance gains is more than just a share shift? And I guess, with the backdrop this year that we had what should be component product, obviously, we have as an industry, I think domestically a material contribution from recliners and enhanced food and beverage, and of course, we've seen weak attendance. So that sort of dislocation is somewhat troubling, so any thoughts would be great. And I have a follow-up.

Well, recliners started being installed in 2011. For of past five years have been record domestic box office in the United States and Canada. January to March, then April, was record industry box office in domestic industry box office. So the industry has in fact, until May, been getting people to pay more dollars to go see movies in the United States. And I've got to think that some of that is because I hate to give them credit, but our competitors are making movie theaters nicer and the experience is something that's causing people to buy more of it. So I don't think it’s all share steal, and remember we don't just compete against ourselves, right? There are other forms of entertainment that are competing against the movie industry and movie theaters every day. And so to the extent that people are still buying tickets, and I have heard so many of the people who have jobs like the people on this phone call and I don't just mean the people asking the questions but also the buy-side who have been more listeners on the call than questioners. Yes, there is something called Netflix, and there are things called televisions. And there are other things one can do with one's discretionary dollar like go out to dinner at a restaurant instead of going to a movie. I think moviemaking and movie-going has held up nicely, and I'm going to give you once stat that kind of blows me away. This year, 2017, AMC is going to sell more tickets for people to go to an AMC theater in the United States than all the tickets that are sold for all the NFL games, for all Major League Baseball games, for all National Hockey League games, for all National Basketball Association games across the entire country, all season long, all 4 major sports, by a factor of 2.5 times. That makes me think we're doing a very good job competing for the discretionary dollar and getting people to go to the movies. And hopefully, as we look to fourth quarter, when we've got some great titles coming out of '17, of '18, of '19, of '20, as we continue to make movie theaters nicer, as we continue to upgrade the size of the consumer databases that we have so we can market movie-going to a lot of people a lot of times. On average, we're marketing about 80 times a year to the typical AMC Stubs member. A year ago, we had 2.5 million member households, now we have 9 million, 9.3 million member households a year later. I think these things all bode well for continuing to drive record industry box office. And so, but it's also true that there's going to be a lot of share steal going on within the industry, depending upon how the local market situations play out in terms of what theaters are renovated, near or far to others.

Last question for me. Obviously, IMAX has been a great partner for you, a great partner for Wanda. And clearly, you have contractual obligations in terms of continuing to roll out. Just curious, I mean, obviously, before recliners, you would create primarily a premium movie-going experience by adding an IMAX screen, and after doing that, you would see a big lift in attendance, which, of course, makes sense because you're sharing in that ticket, an IMAX ticket with your partner, IMAX. Now it seems like, obviously, you've had great success in creating a premium moviegoer experience by adding recliners, food and beverage, alcohol, all the things that you have done so great. So I'm curious, is that move to recliners has sort of dislocated to the IMAX premium experience that moviegoers used to have? And as you think about longer-term, is POS be sort of more recliner and more centric with what people are choosing in terms of that recliner experience?

Well, those are very good questions, and you're talking to the world's biggest fan of both IMAX and of Dolby Cinema. We've added a lot of POS within AMC over the past, whatever it is, 19 months that I've been here, and we'll continue to add a lot of POS. The, when titles are right, seeing it in a wonderful IMAX experience or seeing it in a wonderful Dolby Cinema experience is very powerful for consumers. We're not only benefiting with attendance gains, we're benefiting in price gains. And as I said, we are, on average, getting about a 70%, 7-0, 70% price premium for people to see movies in either the IMAX or Dolby Cinema experience. All of our Dolby cinemas do already now have reclining seats, and we are testing at a couple of IMAX locations. We have 180, I think, IMAX locations now in the AMC system in the United States. We’re testing some recliner seats to see how they will do in the IMAX format. And we’re doing that test jointly with IMAX, and we’re both watching closely to see how consumers respond. So I can’t answer your question yet until we get the results of the recliner seat test, where we’re doing it. It sure is popular in the Dolby auditoriums, we know that. But whether IMAX stays non-recliner or moves to recliner, and I’m sure that the -- our friends at IMAX, Rich Gelfond and Greg Foster, are going to have some strong opinions on the subject. I’d just remind you, it was only two weeks ago that Dunkirk opened up, and it opened up big in IMAX auditoriums. And IMAX just killed in terms of the market share of guests seeing Dunkirk doing so in an IMAX auditorium. Similarly, AMC outperformed on Dunkirk. So, it may just be, as is often is the case, part of it’s the theater -- the secret here is part of it’s the theater and part of it’s the movie. And that’s why we are not only rooting for AMC to make great theaters and to have great partners like IMAX and Dolby Cinema, but we’re also rooting for all the studio partners to give us great product because we succeed the best when they put fabulous product out in the marketplace that consumers want to see.

Thank you. Our next question comes from the line of Kannan Venkat with Barclays. Please proceed with your question.

Thanks. Adam, just a follow-up on Jason’s question a little bit but from a different perspective, which is you mentioned during the call that there isn’t a lot of visibility even a month ahead in the box office. But when you look at your leverage right now and you give us a leverage guidance out to 2020, why not focus more on reduction of leverage rather than the discretionary CapEx, simply said, at this point of the cycle when you don’t have too much visibility? And secondly, I have a question on one, and this may not be a fair question because it’s more related to the liquidity situation there, but it does impact you. How much visibility do you have into the liquidity position at Wanda and how that might affect you, guys? Thanks.

Okay. So let’s do the Wanda question first. I talk to Wanda as all the time. We just had a quarterly board meeting for a few days in Los Angeles, where Wanda was importantly represented. And I don’t need to know what Wanda’s liquidity is because in the five years that they’ve owned our company, they have not been a source of capital for AMC. We source all our own capital, equity and debt, on the strength of AMC’s balance sheet and have been very successful in raising equity at good prices when we wanted to do so and been very successful in securing debt at favorable interest rates when we’ve wanted to do so. Turning to your other question, there was a really important phrase that you used in your question, and it was at this point in the cycle, which sort of implies that maybe we're coming to an end of a good time. If you look at the jobs report that came out this -- was it yesterday morning or this morning, the days have been blurring given what's been going on with us since earlier this week. The economy's roaring hot. If you look at movie going in Europe right now, movie going in Europe is roaring hot. When you look at the industry box office for 4 of the past 5 years through April of this year, records were being set. When we look ahead, we don't see a lot -- there are some good movies coming out in August and September. You should go see Kingfisher 2. It's going to be fabulous -- oh, excuse me. Kingsman 2. It's going to be fabulous. But the big -- the fourth quarter is going to look really good. So -- and meanwhile, the dollar is at an all time high. And so I don't think we should accept the premise that this is a bad time in the cycle where movie going is going to suddenly slow down. I think as we look ahead, we could be looking at many, many good years of movie going, and that is certainly our hope. So we've tried to marry what we call the conflicting objectives of -- the conflicting objectives of still investing in our circuit to generate growth and increasing financial returns for our shareholders, the goal of buying back stock and the goal of delivering. And just on this very call, there has been a very smart person who has said we should deliver more. There's been a very smart person who said we should buy back more shares. And there's been a very smart person who said we should be investing and going after that growth with higher CapEx investment. So it just goes to show you, it's not quite a science, it's a little bit of an art, about trying to optimize all three of those objectives in ways that work well symbiotically.

Fair point. Just one more follow up. Could you just also help us with your tax situation, and when do you expect to be a cash tax player -- payer, sorry?

Yes. There's about $500 million to $600 million of NOLs, cash taxes. Let me get to the right tab. I think probably get pushed out a year. Really, they're nominal, nominal really even end of 2020, right, at this point in time.

And that assumes current tax rates. So if the current tax rate were to lower, because that's clearly a priority of the White House and the Congress, that means that the NOLs could go out even further.

Yes. We do have some tax obligations related to state and local, but they stay fairly small and level and through 2020.

Our next question comes from the line of Peter Padula with BlackRock. Please proceed with your question.

I have just one very quick follow-up on the Q3, and apologies if it was covered before. Vis-à-vis, the $30 million reduction in costs and revenue enhancement initiative by the end of the year, I just was wondering whether you anticipate to achieve any of those and which proportion you expect to shift in the next quarter to mitigate like the softer box office, expectation.

We acted fairly quickly in the work to get positioned. It will affect, be early, beginning in August. It wasn't from the first day of the quarter. So there will be kind of pro rata over the next 5 months, the $30 million. We think it's fairly even though, so there will be some impact here in the third quarter and a little more in the fourth.

And would there be any costs associated with the implementation of these initiatives?

No.

No. We're not laying -- we have no plans of laying anybody off that would cause severance payments or anything like that. This is literally where we can stop spending money. I'm just going to give you two examples. We have 50 open positions in our corporate headquarters that were budgeted and approved. And they are not currently filled, including because we have normal attrition and people leave, and generally, two months after somebody's left, there's somebody new sitting in their workstation. We're not going to fill any of those open positions unless we absolutely have to. So that's an example of saving some money, and that doesn't cost us any money. There are theaters that have a lot of showtimes. And if industry box office is down, pick whatever number you are estimating, you may not need to have as many showtimes. So if you don't need as many showtimes, instead of opening a movie theater at 11 in the morning, maybe you'll open it at 1 in the afternoon and you'll save two hours of electricity and two hours of air-conditioning. And some of the part-time workers who are staffing that movie theater, instead of reporting to work and punching in at 11, they will punch in at 1. So -- and the list of things that we're doing, it's pages and pages long, but -- so we can't give you all examples on the phone, but to answer your question exactly, no, we don't think we're driving any cost to save these costs.

Our next question comes from the line of Ryan Sundby with William Blair. Please proceed with your question.

Is there a risk that maybe Q4 is too overcrowded or too many titles and so that could maybe get people to shift some of their viewing into Q1 and that could maybe impact your guidance?

There's always a risk, I guess. But we pick those guidance ranges very carefully because we do not want to go through in the fourth quarter what we just went through this week. So hopefully, we pick the guidance range well, and we're all going to find out together.

Okay. And then any thoughts or color you can provide on why we're just seeing so much better performance in Canada and Europe, especially, Europe, I guess, without having recliners in place there? Just kind of surprising to see such a divergence between those markets and the U.S., so any color would be great.

Well, let me talk about Canada first because there's a real easy answer for Canada. The huge movie last year was Captain America, which did not play well at all in Canada for obvious reasons. And so when they were comping Wonder Woman against Captain America, it looked really good. We had a better performance with Captain America in the United States. So when we comp those movies, they didn't look as good year-over-year. That explains Canada. What seems to be explaining Europe is Europe was not all that strong last year. And especially -- no, I'm not saying -- Germany is not the only country, but Germany, last year, I believe, had a World Cup and nobody was going to movies in Germany and they're all watching the World Cup. Like, really, like I mean, in the double-digit, we're not going to movie theaters, we're watching our, what they would call, football and we would call soccer matches. There's no World Cup in Germany this year, so the German theaters are booming on a year-over-year basis. But literally, if you look at our performance in Europe, we're in 14 countries in Europe. And if I'm not mistaken, we are down in one and booming in 13. So across-the-board, it's Europeans are going to the movies this summer.

Our next question comes from the line of Alejandro Luciano with MFS. Please proceed with your question.

I just had a couple of quick questions. First is with the $400 million that you announced of asset sales up, how much EBITDA do you lose because NCMI does pay dividends to you guys, and then you have integration payments that you make back. And then does that include kind of the DOJ theater divestments and again, EBITDA loss that once you sell those as well?

Well, the guidance includes our projection on -- certainly includes the effect of the divestitures as well as the effect of the NCM sales that we would have to take in here in the last part of this year. So it's in the guidance.

Okay. And then just, I know someone asked about cash taxes. So then what would be cash taxes for this year?

Less than $50 million.

We're at the end of our time for today and have no further questions. I'd like to turn it back to management for closing comments.

If there's anybody still on this phone call because we've gone two full hours, thank you very much for the time and attention that you devote to AMC Entertainment. We'll see you at the movies.

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