Hollywood’s weak movie lineup over the second half of the summer hurt the top and bottom lines of AMC Entertainment Holdings Inc.
The Leawood-based parent company of AMC Theatres on Tuesday reported a sharp drop in third-quarter profits and an 8.9 percent decline in revenues.
The company said it earned $7.4 million in July, August and September, or 8 cents a share, compared with $33.5 million, or 44 cents a share, a year ago. It marked a 78 percent decline.
Revenues fell to $633.9 million from $696.0 million a year ago.
Chief executive Gerry Lopez said AMC struggled in a slow cinema market but benefited from its strategy of improving food and beverage operations, converting theaters to plush recliners and making other improvements.
He cited a 10.3 percent increase in food and beverage revenues per customer during the quarter and a smaller decline in admissions revenues than the industry suffered as a whole.
Attendance climbed, however, in theaters that AMC already has upgraded, Lopez said. It was proof, he said, that the company’s strategy of making moviegoing more convenient and more comfortable works regardless of whether attendance is strong or weak.
“All of our underlying fundamentals are solid,” Lopez said during a conference call with analysts after the earnings announcement.
The industry’s weak run of releases, however, meant attendance fell 15 percent to 44 million in the quarter from 51.9 million a year ago. AMC said, however, that its operations fared better in the weak market than the industry broadly.
The report comes a day after rival chain and industry leader Regal Entertainment Group reported weaker financial results and announced an “exploration of strategic alternatives,” which was widely seen as opening the door to a sale.
“We, candidly, were surprised,” Lopez said of Regal’s announcement of an extensive review of its own options. “We are familiar with the process, having endured it not too long ago.”
AMC’s reseating and other theater upgrades followed from its own review when it was a privately owned company planning to make a public stock offering.
Lopez called Regal a well managed company and said it is “way too early” for anyone to speculate about a deal.
AMC, he said, would consider the federal government’s antitrust interests in any deal the company might pursue, Lopez added.
The U.S. Department of Justice reviews theater mergers with great scrutiny and can quickly eliminate the value of a possible merger. For example, regulators could require the buyer to sell off acquired theaters that compete closely with the theaters it already owns.
“They look at it theater by theater,” he said.
Shares of the three largest theater chains jumped on the news that Regal could be in play.
AMC shares rose 3.4 percent Tuesday, an 81-cent climb to $24.40, before the company’s earnings report. Regal’s stock gained 3.75 percent and Cinemark Holdings Inc. shares rose 2 percent.
Regal’s report showed its revenues, $693.8 million during July, August and September, were down 14.6 percent from a year ago. Its earnings fell 64 percent to $26.7 million.
Billionaire investor Philip Anschutz controls 78 percent of Regal’s voting stock.
AMC is owned largely by the China-based conglomerate Dalian Wanda Group, which also is the largest cinema operator in that country.
Bloomberg News contributed to this report.
AMC Entertainment CEO Gerry Lopez went to bat Tuesday for the Kansas City Royals during a conference call with analysts — after the company announced earnings and before game six of the World Series. The first question came from Eric Wold, an analyst at B. Riley Co. — in San Francisco, home of the Giants.
“I was kind of hoping you’d reschedule the call for (Wednesday) night because there won’t be a game seven to distract us,” Wold said — as if he had no doubt the Giants would finish the Royals off Tuesday. Then he asked about AMC’s ability to gain moviegoers from rival chains.
A technical problem kept Lopez off the line for a short time. When he came back online, Wold spoke first.
“Did you hear the question or just the negative comment about the Royals?” he said.
“We heard both, unfortunately,” Lopez answered. “I’ll answer the question first and leave the Royals thing until after the thing (World Series) is settled, hopefully tomorrow night, not tonight.”
Lopez then outlined how efforts by theater rivals to copy AMC’s comfort and convenience strategy are falling short.
“Does that answer your question before I make a snide remark about the Giants?” Lopez said, earning some chuckles on the call.
Lopez, who was heading to Kauffman Stadium for the game, ended the encounter with a show of sportsmanship.
“Good luck tonight,” he said.
“Thank you,” Wold replied.