Startups cost AMC

Megaplex openings diminish exhib's earnings

NEW YORK — Startup costs on megaplex openings wiped out AMC Entertainment Inc.’s earnings in the three months to Dec. 26, cutting its net profit to $419,000 from $5.3 million a year earlier.

AMC’s earnings before interest, taxes, depreciation and amortization (cash flow) fell 25.6% to $18.8 million, de-spite 5.3% higher revenues of $163.2 million. But the revenue growth masked an 11% drop in attendance, AMC said, which the exhibitor blamed on “weaker film product from the company’s key suppliers,” which include Disney and Sony.

The result was a little worse than expected, analysts said, and AMC’s stock fell 25¢ to $16.50. “It’s slightly less than I expected but, to the company’s credit, they managed expenses pretty well,” said Montgomery Securities analyst Gordon Hodge.

Five new megaplexes

Still, higher startup costs related to the opening of new megaplexes put a big dent in AMC’s profits. After opening no new megaplexes in the second quarter, AMC opened five and a total of 136 screens in the third quarter, incurring hefty pre-opening marketing and training expenses but operating without a full quarter’s revenue from the new theaters.

In addition, expansion into Portugal and Japan added to costs. Analysts said that one complex in Japan lost more than $3 million in the quarter.

While the international expansion is pausing for the next year, AMC’s domestic growth is accelerating. Phil Sin-gleton, president of AMC’s operational subsidiary American Multi Cinema Inc., said that the exhibitor expects to open at least 500 new screens in the next 12 months, double what it opened in the past year.

Third-party promotions

And while he conceded the blitz of theater openings would keep the “fiscal pressure” on, he said AMC was work-ing on third-party promotions to keep marketing costs down. He added that the product coming out of Hollywood also indicates a much better year in 1997.

The quarterly result brought AMC’s profit for the nine months to Dec. 26 to $10.8 million, about half of what it was a year earlier on 7% higher revenue of $527.6 million.

Want to read more articles like this one? SUBSCRIBE TO VARIETY TODAY.
Post A Comment 0

Leave a Reply

No Comments

Comments are moderated. They may be edited for clarity and reprinting in whole or in part in Variety publications.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

More Film News from Variety