AMC Entertainment Holdings ' (AMC) CEO Gerry Lopez on Q2 2014 Results - Earnings Call Transcript

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 |  About: AMC Entertainment Holdings, Inc (AMC)
by: SA Transcripts

Call Start: 17:00

Call End: 17:49

AMC Entertainment Holdings Inc (NYSE:AMC)

Q2 2014 Earnings Conference Call

July 30, 2014 05:00 pm ET

Executives

Mike Zwonitzer - Senior Vice President of Finance

Gerry Lopez - President, Chief Executive Officer, Director

Craig Ramsey - Chief Financial Officer, Executive Vice President

Kannan Venkateshwar - Barclays Capital

Analysts

Barton Crockett - FBR Capital Markets

Ben Mogil - Stifel

Eric Handler - MKM Partners

Jim Goss - Barrington Research

Operator

Greetings, and welcome to the AMC Entertainment Second Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference to your host, Mike Zwonitzer, Senior Vice President of Finance.

Mike Zwonitzer

Good afternoon. Welcome to AMC's second quarter 2014 conference call. After our prepared remarks, there will be a brief question-and-answer session. Joining me today on the call are Gerry Lopez, President and Chief Executive Officer; and Craig Ramsey, Executive Vice President and Chief Financial Officer.

Before we begin, I would like to remind you that some of the comments made by management during the conference call contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to vary which are discussed in our public releases, including our most recent 10-K.

We caution you not to put undue reliance on forward-looking statements. 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 and adjusted EBITDA which are not in accordance with GAAP.

Management believes these results more clearly reflect comparative operating performance. For a full reconciliation of EBITDA and adjusted EBITDA to GAAP results in accordance with Regulation G, please see our press release furnished as exhibit to our Form 8-K dated July 30, 2014, which may be located under the Investor Relations area on our website at www.amctheatres.com.

I'd like to introduce Gerry Lopez. Gerry?

Gerry Lopez

Thank you, Mike. Thanks everyone for joining us this afternoon. The second quarter of 2014 was a solid quarter. While the comparisons to prior year were tough, we again posted numbers that we believe demonstrate the earnings power of our overall business.

Revenues for the quarter totaled $726.6 million, down 4.7% as compared to 2013. While our overall adjusted EBITDA was down less than half as much 2.2% to $131.8 million. It is rare in this capital-intensive, high fixed cost business of ours to see flow through improve like that and we are happy with the progress that we have made in that key area.

We are also pleased with the progress we have made to-date across our five strategic action fronts on our market share performance versus peers in the trade areas, where we have deployed our initiatives. The message is clear. Box Office comps wear and are tough, but the underlying fundamentals at AMC are solid, the strategy works and we are on track.

Speaking of tough Box Office comps, our admissions revenue for the quarter were down 7.1%, slightly below the industry, which was down 6.5% to 60 basis points underperformance is primarily related two things.

First, in and last year's second quarter, we outpaced the industry on a per screen basis by 270 basis points. This year, we came down to earth a little, but we manage over the two years to outpace competition by 230 basis points. We will take that.

Secondly, the strength of last year's IMAX slate was phenomenal. Just as a reminder, the top-three films a year ago, which generated almost 30% of the industry's record $3 billion in Box Office were in IMAX. This year's lag was not as large in Box Office, nor as concentrated.

The food and beverage front grew brighter for us. Notably, we recorded 4.5% increase in food and beverage per patron, to $4.22, our highest quarter ever. Although the decreased attendance numbers hurt the total food and beverage revenues, which were down 3.6 versus prior year, truth is we are seeing continued success with our strategic initiatives as we gain traction with dining theaters now 15 up and running, our MacGuffins lounges now 74 across the fleet and even our revamped concession stands.

With double the gross margin of the Box Office, success in food and beverage goes a long way in helping us improve flow through and show that the cyclical studio release schedules.

As you have heard us say before, we are continuously pursuing ways to engage your customers and one of our most important ways we do that is through AMC Stubs, the industry's most innovative loyalty program.

AMC Stub continued to gain traction and this quarter the revenue growth of 38% versus last year. In the same timeframe, we have also grown our AMC Stub's membership base roughly 30% to 2.6 million members and they now represent 22% of our attendance in the first half of the year, up from 19% in the first half of 2013.

Fewer things in the retail business that we are in are more fundamental than customer engagement and our progress on AMC Stubs not only speaks to our current success, but is sustainable and will serve us well in the future.

As you have also heard us say before, reinvestment in our business and the strategic action front we have detailed for you in the past are helping create a meaningful competitive advantage.

Luckily, no doubt that we remained committed to the asset productivity and customer experience leadership path that we have chosen. Importantly, we are still in the early stages of various initiatives and the result we have achieved to-date like those in food and the beverage and AMC Stubs, clearly indicate that we are on the right path.

Let me briefly give you an update on the significant progress we have made on a few of our strategic action fronts. First, comfort and convenience remains a key focus as we continue with our recliner reseats. There are 505 screens at 44 locations; I said 505 screens at 44 locations that we have deployed to-date, delivered admissions revenue per screen growth of 33% more than doubling of the EBITDA in the second quarter of 2014.

To be sure, the solid top-line per screen growth and more than doubling of EBITDA in a period where industry admissions revenue was down 6.5 points, says we are dramatically significantly outperforming and our strategy is working. That 33% per screen admissions growth was nicely balanced as well, with 21 points coming from attendance and 10 points coming from average ticket price increase.

We believe that this type of balanced growth clearly illustrates the tremendous power of our re-seat program and their customers are not solely driven by this slate of movies, but also the experience of seeing those movies in the comfort and style of an AMC theater.

For confirmation, we look to our top-box get satisfaction scores, which at 69% are not only the highest in the circuit, but in a class by themselves when it comes to retail enterprises.

By the way, all that comfort also comes with convenience. One of the newest, best examples is what we call open source Internet ticketing. This is the idea that we mentioned during the IPO road show of AMC show times and movie tickets being widely and conveniently available.

To jump start this, we rolled out our own ticketing agent this last April, making tickets to an AMC now look easier to get and available in more places on the web than anyone else. So far, we are seeing the 45% increase in online ticket revenues and have sold more than 13 million online tickets this year.

Our second area of focus, enhanced food and beverage continues to drive productivity from our guest visits and we are seeing strong growth in the sales per patron metric. As mentioned at the outset, this metric is now $4.22, better than 2013 by impressive 4.5 points and the highest quarter in the history of the company.

Food and beverage gross profit per patron, we would argue is the most important metric in this part of the business. In the second quarter, it was also a record at 362, a 3.9% improvement over the prior year. Balance is again the key growing not just ticket size, but the profitability of each ticket.

In the second quarter, we deployed three new food and beverage kiosk. Now we have 125 in the circuit. One more marketplace express, now we have 17 in the circuit, nine more MacGuffins, now have 74 across the fleet as I mentioned a moment ago and two more of the dining theaters, which are now totaling 15.

Moving on to the premium sight and sound front, we continue to be the world's leading and largest IMAX exhibitor. During the second quarter, we deployed two additional IMAX screens; bring our total 147, all of them of course 3D-enabled.

IMAX sets the bar high, but our premium sight and sound execution goes beyond delivering a single product. We continue to strive to improve the customer experience by incorporating the very best of premium large-format and the unique AMC touch and luxury in our own concept, which we called AMC Prime.

This quarter we made progress on our AMC prime rollout, which we now have up and running in six locations. AMC Prime is a concept that further enhances the sight, sound and a static in-theater experience, including power recliners and top-of-the-line JBL speakers.

AMC Prime is clearly a next generation PLF, and guest feedback has been tremendous where the rollouts have occurred. The last of the strategic action fronts I will comment on this afternoon is targeted programming, specifically how our theater and film teams are working together crunching data to schedule more shows more aggressively in our buildings. Their combined efforts helped us register the number one market share for opening weekend on four of the top five grossing films during the quarter, as well as the number one share for the entire run of The Amazing Spider-Man 2, the fourth highest grossing film in the quarter.

When the movie needs to open big, it is AMC that opens them big. Six of the top-10 theaters in the country this quarter were AMC's, including the top-two just to give you a sense. We believe this example further illustrate how these action fronts continue to give us the ability to deliver top-line results.

I would like to turn the call over to Craig Ramsey, our Chief Financial Officer, to briefly review some of the highlights from the quarter. Craig?

Craig Ramsey

Thank you, Gerry. For the next few moments, I will provide a brief commentary on our second quarter and year-to-date results and an update on our balance sheet and asset base.

For our fiscal second quarter, with an industry backdrop of 6.5% lower Box Office, we generated total revenues of $726.6 million that were down only 4.7% versus last year. This included $478.7 million of admissions revenue, $211.6 million of food and beverage revenues and $36.3 million of other theater revenue.

Strong operating contribution by our reseat and other strategic initiatives, in particular those that produced a 30% increase in other revenues was not enough to offset the tough Box Office comparisons, lower IMAX Box Office and general lower level of film performance versus the quarter last year.

Adjusted EBITDA for the quarter was $131.8 million, down only 2.2% versus last year, aided by our cost-containment efforts that led to film exhibition cost being 165 basis points lower than the quarter last year.

G&A expense, excluding stock-based compensation that were 18.8% or $3.2 million lower and a very slight increase in rent, all of which combined to improve flow through and our adjusted EBITDA margins by over 50 basis points.

Total attendance decreased by 7.7% to 50.1 million guests and average ticket price increased by 0.6%, primarily due to small increases in core ticket pricing and increases at the recliner re-seat locations offset by the impact of lower IMAX attendance during the quarter. On a per screen basis, admissions revenues decreased 7.9%.

Food and beverage revenues decreased 3.6%, driven by the decrease in attendance offset by a 4.5% increase in food and beverage revenues per patrons. Our enhanced food and beverage initiatives continued to drive our industry-leading results in this area. As Gerry noted, these initiatives are about higher spent per patron and improving profitability.

Our 85.6% food and beverage margin was down slightly as a result of the rollout of our newer food and beverage concepts, which in some cases carry higher percentage cost of goods sold, but produce higher gross profit per patron and that's a trade-off we will always make.

Our gross profit per patron grew 3.9% during the period. Other theater revenues increased by $8.4 million or 30.2% as compared to the same period last year, due primarily to a 31% increase in Internet ticketing fees, a 38% increase in AMC Stubs' membership revenues and higher gift card revenues.

Our film exhibition cost of $257.2 million represented 53.7% of admissions revenue, a decrease of 165 basis points as compared to the same period last year. This decrease was driven by a shift in mix due to lower grossing films during the quarter, which delivered lower attendance levels, but at lower film terms.

Operating expenses before opening and closing and other expenses of $181.3 million decreased by one for 1.5% on lower volume. Rent expense of $113.9 million was virtually flat in the aggregate and down slightly on a per screen basis.

As we have noted, many of our landlords are willing to contribute capital to our remodel initiatives. In many cases, rental terms are not substantially increased. Overall, we are pleased with our quarterly results as our overall margins continue to trend in the right direction due to our various strategic initiatives and the solid cash-on-cash returns they are delivering and our cost-containment efforts.

Capital expenditures for the quarter totaled $64.5 million offset by $9.2 million in landlord contributions as we continue to selectively manage our asset base.

During the quarter, the company opened one new theater with 12 screens in the U.S. We acquired one theater with 11 screens, temporarily closed 57 screens and reopened 70 screens in the U.S. to implement our strategy and deploy guest experience upgrades. We also permanently closed one theater with 13 screens in Canada.

We continue to expect capital expenditures for 2014 to total approximately $240 million to $260 million, with landlords contributing approximately $40 million to $60 million, so a net cash outlay of $200 million.

For the six-month year-to-date period, we outperformed the industry with our Box Office down 1.2% versus an aggregate industry Box Office decline of 1.4%. On a per screen basis, our outperformance was even larger.

In this case, the strength of our strategic initiatives, most notably our re-seats where total revenue grew 68% over the same period last year more than compensated for a decline in IMAX contribution and lower overall film performance. As a result, total revenues were essentially flat to last year.

Adjusted EBITDA set a new company record for the first half of the year, growing to $233.8 million, up 7.8% on the total revenue contribution and our cost containment efforts that produced a 21 basis point reduction in film exhibition costs, operating expenses that were in line with the volume of business, a G&A expense excluding stock-based compensation reduction of $7.6 million and a rent increase of only 0.6% compared to the same period last year. As a result, adjusted EBITDA margins improved by 115 basis points compared to the prior six-month period.

With respect to the balance sheet, we ended the quarter with just over $235 million in cash and a total debt balance of approximately $1.86 million. We used approximately $143 million of cash when we called the remaining senior notes in June, which completed the refinancing that we initiated in December.

Our June quarter operating results benefited from the refinancing with a reduction in net interest expense of $4.3 million that we yield annualized interest savings of $31 million.

At the end of the quarter, our leverage ratio was 3.5 times, net debt to adjusted EBITDA, which is within our comfort range.

Our leverage, cash flow generation and liquidity are in line with expectations and in accordance with our plans to augment shareholder returns to return of capital, AMC's Board of Directors authorized our second quarterly dividend of $0.20 per share payable September 15th to holders of record, September 5th.

With that, let me turn it back over to Gerry.

Gerry Lopez

Thank you, Craig. As we hope you can tell, we are extremely excited about the future at AMC. We are seeing tangible benefits from our strategy and investments and we had a great amount of upside potential as we continue to invest with great focus our core business.

We are confident this continued investments will drive outsized returns when compared to her peers in the industry. We are and we will continue to be the industry leaders in customer-driven experiences and we have so far put only a small portion of our enviable asset base.

Overall, AMC's last 12-month Box Office share is 21%. This would only 7% of the U.S. total peer account and even less of its screen count. While this is an impressive statistic, we measure ourselves even deeper using the metric we track very closely internally and we share with you in the past few quarters. We call it a 20-mile proximal market share.

When we measure ourselves against competition in 20 mile radius of our buildings, we are seeing almost six percentage points of Box Office per screen outperformance versus the competition dating back to April of 2011. This metric shows in a granular first-screen level that focusing on the customer experience is the right thing to do for them and for our shareholders long-term.

Thank you for listening. Now, I would like to turn the call over back to the operator for any questions. Thank you.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question and answer session. (Operator Instructions) Thank you. Our first question comes from the line of Barton Crockett with FBR Capital Markets. Please proceed with your question.

Barton Crockett - FBR Capital Markets

Okay. Great. Thanks for taking the questions. Thanks again for providing the data on the re-seat outperformance. I think you said it was up 33% in the quarter, which on its face is a good number, but it is less growth than you seen over the past few quarters that you have been reporting that metric. It seems like the delta versus the industry is less than we have seen.

I was just wondering if this suggests any diminishing of the benefit of the re-seat initiative or if it's just kind of outside kind of reaction to the overexposure to IMAX and perhaps film mix and maybe you would expect things to move back towards what we have seen in recent quarters as we go ahead.

Craig Ramsey

Yes. One of the things that I think we are seeing is that we are now comping against re-seat, so there is a same-store, same-reseated store piece of the business, so if you look at these levels those that are opened less than a year, the attendance per screen is up 75%. If you go the second year, they are up 27%. If you go to the third year, they are kind of flat to up slightly a couple of percent. I mean, if that store base increases and you get the effect of more same stores year-over-year it is just going to be tough to keep the 70% growth.

Gerry Lopez

Does that make sense, Barton, because what we are seeing is that as the number of total re-seats continues to grow, the number of those reseats that have been open longer of course grows along, so the first year effect continues to be very consistent with what we have seen, which is in that 60%, 70% 80%, in some case it's a 100% et cetera, varies by building, obviously, but there is fewer of those buildings that are now opened in the last year and they and the number of unit count and those that are opened two and three years is beginning to grow, so it's a question of mix more than it is that unit-by-unit impact or importantly for the behavior change by guest. That's what is driving that 33% versus some of the numbers that were put in the past that were in the 60s or 70s. It's all driven by the age mix as we continue to grow that base.

Barton Crockett - FBR Capital Markets

Okay. I mean, that makes perfect sense. Now, you had said in the last call that there was in the second year when the attendance was growth as you were pushing more on rate, are still seen that?

Gerry Lopez

When you say rate, you mean price?

Barton Crockett - FBR Capital Markets

Yes. Effective per…

Craig Ramsey

Yes. Absolutely, for example, in the first year those kind of the breakdown that I gave you a minute ago, the less than one year pricing is up 6%, 8%, 9% almost. As we have said before that is kind of maybe an older audience. We are getting the change in mix.

As we start pushing pricing in that second year, our year group is up 12%. Then the third year or over two year group is up another 10%. Yes, as we have said before, we want the guest to experience the concept, to taste it before we raise price and we are able to do that here through those steps. I have just given you more ATP increase in the year two and three.

Barton Crockett - FBR Capital Markets

Okay. Then one final question, Regal end markets are opening reseated screens now. Do you see those in your territories? If one of these opens in your territories what happens? Does the reseat growth stop or do you guys both, growth the market? What do you see as the competitive dynamics there?

Gerry Lopez

We don't have yet a lot of experience, where the ones that they are doing are going head-to-head against the ones that we have already done, so we don't have a good database to bank on to give you any kind of readable data yet. We are humble that - everybody seems to have jumped in the [battle] wagon.

We have now over 500 screens that we have done this with. It continues to work. We like to think that we are kind of first movers on it and are deeper into our fleet with the idea than anyone else. The head-to-head comparisons didn't really any yet that we have noticed anything. I am sure they will come. I am liking the notion that we are the first mover in the space.

I am also liking the notion that as we said all along it's not just about the seats, but it's about the total package. Total package in the building and then a total package when it comes to offering the convenience of the reserve seating, which not everybody is doing, the convenience of the tickets availability in more websites, in more ways and in more forms than anybody else is offering, so hey so bring on the seats, because what we learned is that that matters a lot, but it's not the only thing that matters.

Barton Crockett - FBR Capital Markets

Okay. Great. Thank you.

Gerry Lopez

Thank you, Barton.

Operator

Thank you. Our next question comes from the line of Jason (Inaudible) with Citi. Please proceed with your question.

Unidentified Analyst

Yes. Thanks so much. The question in terms of you your internal outlook for the Box Office for the balance of the year and sort of how you are think about 2015. I mean, do you still expect this year to be a tough year as we move into 3Q Q4 and a sharp rebound and '15 is that a reasonable expectation? Thanks.

Craig Ramsey

Yes. I think the way that you have described is the way we are reading it. Q3 is off to a rough start. I think, we all know that, anybody tracking the Box Office knows what the numbers look like. August is going to be a little better than July, that's not to say much.

September, we will see how it works out. We got a couple of good movies that are going to hit our theater over the next couple of weeks with Guardians. I have seen it. Looks great, I think Guardian will have the ability to surprise us, frankly like Lucy [Jose] did a little bit.

I saw Turtles earlier today, Teenage Mutant Ninja Turtles, look good, very entertaining love that 93 minute run time, because we will be able to straggle a lot of shows at convenient time, so all of those are bright spot, but the fact is we expect the third quarter, the September quarter to be down in the mid-double digits without painting any specifics to it, it's going to certainly going to be down double digits and we would expect it to be in the middle teens so to speak.

The December quarter looks to be better, up modestly, single digits, but make no mistake it's going to be tough back half of the year. We are expecting the year at the moment to be down in the low to mid single digits for the full-year, the Box Office.

To put a bit in the offside of $10.5 billion in that neighborhood I should say for the full year against the $10.9 billion over a year ago. That's kind of the way that we are reading it. Subject to getting smarter every single Friday that goes by. It's clearly, it's a cyclical business, and this is the down part of the cycle.

Unidentified Analyst

Okay.

Craig Ramsey

'15 on the other hand, Jason, looks very, very, very good. More we learn about the movies as we meet with our friends, studio community in LA, they are better than the movies are looking, we are encouraged by the consumer reaction to some of our initiatives. We are encouraged by the way that 3D is holding up.

Frankly, IMAX, even though it's overlapping a very tough year a year ago, the way that some of the directors are using the technology, '15 promises to be a great, great year. If we have moved, what we have done since 2010 or 2011 more from an industry, where we get a record year out of every three into a situation where we get two record years out of every three.

I am going to go ahead and take that, because that speaks well to what the consumers are doing out there.

Unidentified Analyst

Understood, thank you very much.

Gerry Lopez

Thank you.

Operator

Thank you. Our next question comes from the line of Ben Mogil with Stifel. Please proceed with your questions.

Ben Mogil - Stifel

Hi, guys. Good afternoon. On the IMAX, the new IMAXs in your system, are those sort of tied to retrofits or these kind of new builds and connectivity you are seeing the IMAX market kind of deeper than you previously had thought.

Gerry Lopez

New builds, well, let me be clear. New IMAX builds. They are not sighting to the retrofits as much. In fact, when we retrofit a building, when we remodel a building that have an IMAX, the IMAX screens remain. We may do some pick up and why not, but the IMAX screen remained on touch. We got a couple of those.

The IMAX that we add are being added to buildings, where there was no IMAX before there. In one case, we have added to dragging on to a new build period, but it's really more about the splits on the IMAX owned growing to the point where new screen make sense then we will go ahead and add that screen. It's not really gotten into the remodel. There are kind of two different things.

Craig Ramsey

Yes. The other thing I would say a bit about what we saw with IMAX, we have talked about being down 9%, but the take rate was essentially the same, so there is certainly - we don't sense that there has been a change in the guest behavior preference for that format. It's still getting its fair share. It's just that the pictures didn't gross as much as last year.

Ben Mogil - Stifel

Okay. Then secondly you were talking about visiting your studio in LA and it looks like two of your buddies may become one buddy. Curious what your thoughts are not specifically on Fox Time Warner, but in general when you look at studio consolidation is your concern more rental splits or is your concern more simply reduced product?

Gerry Lopez

We will see. That transaction was announced and rejected, you know, so I will see what happens. We really have no comment on that front. Consolidation is a fact of life in our business, it certainly a fact of life in our end of the business. the content drives it. My interest is more in making sure that there is content that is available and that more of it is available from more sources all the time.

The creative minds in our business, the story tellers in our business, my concern is more in making sure that they have a pipeline into our screens Open Roads, ergo all of the work that we do it independent, they are partnering with [Creative] for them where they have independent ergo the work that we do on Bollywood, where there are a couple of guys choose to merge or buy each other out, so along the storytellers have a story that they want to put in screen are interested more in making sure that they have an avenue, they have a road into that screen. I think that that piece of that is going to remain healthy. Their roadmap may change, but the idea that people would bring us stories that they want to see on the large screen, I think, will remain with us for a long time.

Ben Mogil - Stifel

That's great. Thanks Gerry. Thanks, Craig.

Gerry Lopez

Thanks, Ben.

Operator

Thank you. Our next question comes from the line of Eric Handler with MKM Partners. Please proceed with your question.

Eric Handler - MKM Partners

Yes. Thanks for taking my question. Two things actually, first, last week when Regal reported and had their investor call, they talked about that New York and the Washington D.C. areas under performed the industry and also the strength of faith based films, those films didn't always play well in their urban theaters, is that concurrent with what you guys saw as well?

Then secondly, when you look at your concession spending, I wondered if you can maybe dice up and spice up some of the things you are seeing in terms of the impact that MacGuffins or alcohol sales may have had or the impact of dining theaters and just give us some more of those metrics around some of the growth that you saw with per caps.

Gerry Lopez

Yes. Let me start with the market's question. No, our markets frankly, we haven't seen a significant deviation from one marketplace to the other, one geography to the other. It's been fairly consistent. What we have seen that perhaps is consistent is, the impact of the family-based, faith-based film. What we have seen there to be honest is not that our absolute numbers on a per theater basis look any different than they would look for a similar genre for family versus faith-based for example.

What we do see though is that those genres do tend to play deeper, so whereas our absolute numbers look about the same, about where would expect them to be, when you then measure relative to the industry, because they are playing deeper and they are paying bigger than all the genres would and some of them are rural market. Again, our share does look smaller or our growth rate may not look as big and it's because those films have failed, they have longer tails or have broader tails than some of the other films. The geography we haven't really noticed, the genre faith-based, we did and it wasn't in absolute terms. It was more in relative terms. Now, moving to the beverage piece.

Craig Ramsey

Yes. On the food and beverage, a couple of ways to look at it, one is if you just look at the dine and theater circuit as a whole, quarter-over-quarter the food and beverage spend was up 11.7%, which is a pretty stout increase, so we did notice that probably again to the product, the attendance was kind of more in line with the industry in the dine and theaters versus the big increases in the reseats, dine and theater attendance tracked with the industry, but the spend was there up 11.7%, so fewer people may have come, but they came with their wallets open.

The other stat is, if you look at the $0.18 increase per head for the quarter, four of it came from dine and theaters, four of it came from MacGuffins and four of it came from the [machine], those coke machines that give you the flavor choices, so they are really still comprising a big piece of the year-over-year improvement in our food and beverage line item and the per amount, so really no weakness frankly that we can detect.

Eric Handler - MKM Partners

Great. Thank you very much.

Gerry Lopez

Thank you, Eric.

Operator

Thank you. (Operator Instructions) Thank you. Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question.

Jim Goss - Barrington Research

Thanks. A couple of them, first, looking at attendance per screen in the reseated theaters, the auditoriums, I think that you are applying this initiative to tend to be somewhat smaller than some of the average ones. If I am not mistaken, I am just wondering where the attendance per screen seems to be coming in relative to your averages in general.

Gerry Lopez

In rough terms, Jim, the theaters that we first attack with the reseat initiative are really driven more by two factors. There's many number of factors that we take into consideration, but I think that there is two drivers. The first one is lease expiration. That's the time when the landlords are more willing to talk terms and talk investment et cetera, et cetera, et cetera.

Our cadence as to how we approach the entire fleet is going to be primarily driven the queue, the lift, align is driven by one of the leases, one of the leases coming up. Okay? Of course those tend to be the older theaters et cetera, et cetera.

The second big component is something that we look at is a pretty granular metrics that we call seat terms. It's kind of a way of measuring capacity utilization, but with a couple of extra decimal places and what we are in these theaters that we are attacking first, our seat turns that tend to be lows three digits. Meaning, 100, 120, 90, call it, maybe 90 to 110 or 120 - terms per year. There is a number of people that sit in the seat and in every one of those seats in the theater over the course of a year. Not huge capacity utilization.

When we then go ahead and implement the initiative, while we see that seat term metrics improves dramatically, by dramatically, I am talking multiples in the 3s and 4s and beyond. Part of it simple math is that of course you take two-thirds of the seat out, so when you take two-thirds of the seats out, there are new seats that I have put in place of course are going to get more used. No kidding.

The interesting or more excited part of us though is not just that, but it's the fact the total attendance of the building on a first screen basis, because we are not adding screen, taking away screens. We may play with the seats, but not with the screens. It's significantly higher. That's really where the proven pudding is.

Now, Craig, - thrown a couple of numbers.

Craig Ramsey

A couple of data points Jim that might be helpful. If you look at the industry as a whole, I am not just talking AMC. I am talking about the industry as a whole. The way we calculate attendance per screen and you are kind of estimating number of screen in the middle of the year, but I think it's pretty - it's about 32,000 on an annualized basis attendance per screen. Okay? That's the industry, so the reseats, yes. They start as a group before remodel at about 30,000.

On one hand other little bit lower, but you could say they kind of represented above the industry as a whole. As it relates to our circuit though, we average about 41,0000 attendance to 42,000 attendance per screen, so the reseat years are like of like the rest of the industry, where we pre-remodeled. They are lower in terms of how they stack up towards our total average for the circuit the interesting point is you get all said and done with them, the attendance per screen goes over 50,000 attendance per screen.

To Gerry's point, he talks seats but the screen is a screen. You still got one and you got one you are starting. One you got to be in. It's gone from to 50,000. That's kind of the productivity that we are seeing out of it and I think there is a lot of number, there is a hope it's responsive to your question.

Jim Goss - Barrington Research

That's very responsive, because it basically takes from below average to above even your average.

Gerry Lopez

Yes.

Jim Goss - Barrington Research

Then stabilize it at a higher level, so it's not really stabilizing it at a lower level, which I suspect it could have been the case. The other question I had was, is there any shift to the strategic initiatives you embarked on either before the IPO or around the time of the IPO that you are attempting to modify a little bit as you start to get some initial results and look at how you think it will take going forward?

Gerry Lopez

Not really. When I say I want to draw distinction between strategies and tactics, so there is no shift to the strategic direction. It was in play, frankly, even before Wanda, our principal shareholder acquired the company from private company. It would solidified in a year-and-a-half or so, before we went IPO and one that's ownership, because of the access to capital that we gain with them.

Then of course as a result of the IPO, we are staying on the strategic path that we have chosen, but those change and we have adapt adjust to the tactics. We adapt and adjust to what's happening in the marketplace, the new technology that may come along. Things of that nature.

For example, we mentioned in the prepared remarks this afternoon this whole notion of open source internet ticketing. That's an idea that we will be working on for the better part of three, four years. It never made any sense to me that our ticket for any one theater will be available only via website, so we are adapting and adjusting that tactic, which is all part of a comfort and convenience strategy as we go along, so we intend to continue to make the show times and tickets available and even more websites. It's all part of convenience, which are exceeding. It's all part of convenience.

The tactic and how we deploy them may add and shift and may move around, but the strategy of providing a guest with greater comfort and greater convenience, that's not changing any time soon. As we look at our fleet, we think that we are perhaps with the recliner for example a third of the way done to where we think the potential is.

We have alluded in the last quarter's call to the fact that we have now developed a second version of this recliner that would allow us to go a little deeper into the fleet, so that kind of gives you a sense. With some of the other initiatives, we are now two-thirds of the way done with IMAX. IMAX, we are at 147 screens. The count will move around. We will grow a little, but we are very far along that path.

Different tactics at different levels of deployment, but the strategy, the foundation remains fairly constant and fairly solid.

Jim Goss - Barrington Research

All right. Thanks very much.

Gerry Lopez

You bet.

Operator

Thank you. Our last question will come from the line of Kannan Venkateshwar with Barclays Capital. Please proceed with your question.

Kannan Venkateshwar - Barclays Capital

Thank you. The question I have is on the mix shift and the impact it has on the splits as you move through the rest of the year as well as 2015. As you are going through this process of having more IMAX screens and the mix of movie shift in terms of how many 3D movies versus non-3D movies and so on, what should we expect in terms of the movie splits and how they trend over the next couple of quarters and in 2015?

Gerry Lopez

Help me with the definition of splits. What are you calling splits? Are you talking about the take rate from the guests in terms of how many of them choose to go IMAX or 3D when a movie is available in those format…

Kannan Venkateshwar - Barclays Capital

This is mainly in terms of your share of Box Office revenues between you…

Gerry Lopez

The field cost?

Kannan Venkateshwar - Barclays Capital

Yes.

Gerry Lopez

The field cost, frankly, it's driven by the types of the movies. We have contractual agreements with the studios. We have a agreed on splits with them to use your terminology and those shift around [basis] based type of the movie. We have not seen significant movement over the last couple of years as the movies grow bigger, the split favor to studio more. There is smaller, medium movements - more, but it's been relatively constant number on this split. What has changed is the type of the movies and that will always change, but the split that are again driven by the specific movie Box Office revenue. It's really not moving around barely at all.

Craig Ramsey

Yes. It's really, I guess, I am not sure if this is part of your question or not, but I will answer it any way. Really there is no distinction between traditional IMAX and 3D on a film. They all carry the same negotiated film cost, so the fact that you may have more IMAX and a particular film doesn't necessarily grow the percentage that you are going to pay other than if it increases the volume that you do with that movie, so it's more volume related than it is type of content or 3D versus IMAX.

Gerry Lopez

Yes. I think, if you look historically at our numbers, and certainly some of our larger peers, the numbers are fairly consistent in the low to mid-50 and the shifts are driven I would venture to guests more by the size of movies in given quarter than it is by frankly anything else.

Kannan Venkateshwar - Barclays Capital

Okay. All right. Thank you.

Gerry Lopez

You bet.

Operator

Thank you. At this time, I would like to turn the floor back over to Mr. Lopez for closing remarks.

Gerry Lopez

Well, thank you. Thank you, everyone, for listening in this afternoon. I hope we answered all your questions. I am happy any others that we might have not addressed and you know where to find us. Have a good afternoon, everyone.

Operator

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

Craig Ramsey

Thank you.

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