Yesterday, after the closing bell, AMC Entertainment Holdings Inc. (AMC) reported disappointing financial results for the second quarter of 2014. AMC Entertainment is the second-largest cinema-chain in the U.S. However, the cinema industry is currently suffering from a decline in box-office sales which is affecting AMC Entertainment’s top line. Consequently, the stock price dropped $1.21 (5.38%) to $21.30 in the aftermarket trade on Nasdaq.
During the first half of 2014, Hollywood’s big-screen releases failed to maintain the momentum that the industry witnessed in the first half of 2013. Meanwhile, AMC Entertainment announced that box-office sales will continue to reduce at a mid-teens percentage rate in the ensuing third quarter. However, a meaningful turnaround in the scenario might only materialize in the fourth quarter.
Second Quarter Results in Details
Quarterly net income from continuing operation was $31.4 million or 32 cents per share compared with $61.9 million or 81 cents per share in the prior-year quarter. Second-quarter earnings per share of 32 cents considerably lagged the Zacks Consensus Estimate of 36 cents.
Quarterly total revenue stood at $726.6 million, down 4.7% year over year and also below the Zacks Consensus Estimate of $730 million. Segment wise, Admission revenues were $478.7 million, reflecting a drop of 7.1% year over year. Food and beverage revenues were $211.6 million, down 3.6% year over year. Other theater revenues were $36.3 million, up a whopping 30.2% year over year.
Quarterly operating expenses were $658.2 million, decreased 3.9% year over year. Operating income was $68.4 million, down 12.1% year over year. Operating margin was 9.4% compared with 10.2% in the year-ago quarter. In the second quarter of 2014, adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $131.8 million, down 2.2% year over year.
In the reported quarter, average ticket price was $9.55 and food and beverage revenues per patron increased 4.5% to a record-high $4.22. In the first half of 2014, AMC Entertainment sold approximately 13 million tickets online which translated into a 45% year-over-year rise in online sales.
During the second quarter of 2014, AMC Entertainment generated $107.8 million of cash from operations against $97.6 million in the year-ago quarter. Free cash flow, in the reported quarter was $48.2 million compared with $32.3 million in the prior-year quarter.
At the end of the second quarter of 2014, AMC Entertainment had $235.3 million of cash and cash equivalents and $1,799.4 million of outstanding debt compared with $546.5 million of cash and cash equivalents and $2,078.8 million of outstanding debt at the end of 2013. The debt-to-capitalization ratio, at second-quarter 2014 end was 0.54 against 0.58 at the end of 2013.
Other Stocks to Consider
AMC Entertainment currently carries a Zacks Rank #4 (Sell). Other better-ranked stocks in the broader Media/Entertainment industry which are worth mentioning include Pearson plc. (PSO), Gray Television Inc. (GTN) and Media General Inc. (MEG). Currently, Gray Television sports a Zacks Rank #1 (Strong Buy) while both Media general and Pearson carry a Zacks Rank #2 (Buy).
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