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.
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.