After its purchase by a Chinese conglomerate in September 2012, AMC Entertainment Holdings has announced that it is going public. Dalian Wanda Group Co. bought AMC for $2.6 billion and assumed $2 billion of the company's debt; the IPO is not expected to affect its majority control. Dalian expects to hold an undisclosed number of Class B shares, which carry three times the voting power of the Class A shares offered to the public. The second largest movie theater operator said it plans to list on the New York Stock Exchange under the symbol "AMC." The number of shares that will be made available for purchase was not disclosed .
AMC operates in the top 50 movie markets in the U.S. It has the number one or two spot in terms of market share in the top 15 markets, which include New York, Los Angeles, Chicago, Philadelphia, San Francisco, Atlanta, and Dallas. The company is known for its innovation in the entertainment industry and it operates 22 of the 50 highest grossing theaters in the U.S .
What will the IPO proceeds be used for?
AMC tried to go public in 2007 and 2010, but withdrew its offer both times. If AMC follows through this time around, the IPO proceeds will be used to pay off debt and support capital spending. By the end of 2012, 344 theaters, or 4,988 screens, fell under the AMC umbrella.
For 2012, AMC's net earnings increased to $58 million from a net loss of ($242.5) million in 2011. The improvements were attributed in part to improvements in admissions and concession revenues; gains from the disposition of theaters in Canada and the U.K.; lower interest expense and investment losses; and lower charges for financing costs .
Regal's recent acquisitions have improved revenues
Regal Entertainment Group (NYSE:RGC) is larger than its rival AMC and operates 7,340 screens in 576 theaters. Similar to AMC, Regal has theaters in 46 of the top 50 U.S. designated market areas. The company attributes its success to competitive strengths such as management's focus on cost controls and a distribution supply chain that drives concession margins. Regal has enhanced revenues through acquisitions and by operating a strong theater portfolio. The majority of its theaters feature stadium seating and house 10 or more screens .
The company's net income for the second quarter ended June 27, 2013 was $36.1 million, compared to $37.2 million in the second quarter of 2012. Second quarter net income was affected by a $19.4 million after-tax loss on extinguishment of debt. Adjusted (for one-time events) diluted EPS was $0.36 for the second quarter of 2013 compared to $0.25 for the second quarter of 2012. According to CEO Amy Miles, Regal's second quarter results reflected the successful integration of recent acquisitions which helped raise admissions revenue .
Cinemark achieves box-office revenue record
Cinemark Holdings (NYSE:CNK) is the third largest theater operator in the U.S. with 332 theaters and 4,434 screens. Unlike AMC and Regal, the company operates theaters in Latin America -- a total of 172 theaters and 1,360 screens in 13 countries. Cinemark has a strong presence in Latin America and occupies 14 of the top 15 metropolitan areas as of December 2012 .
Cinemark's second quarter results ended June 30 showed net income of $20.3 million and included a pre-tax loss on early retirement of debt worth $72.3 million. These results compare to net income for 2012's second quarter of $51.6 million. Diluted EPS for the current second quarter was $0.18 compared to $0.45 for the same period last year. CEO Tim Warner commented that second quarter revenues were an all-time box office record of $3 billion, up almost 8% from 2012. Cinemark also achieved record worldwide admissions revenues of $464.5 million, up 11.1% .
My foolish conclusion
As AMC begins selling shares to investors, it should not lose sight of how the revenues of movie theater operators are being challenged. The wide variety of movie content delivery options that are available to movie watchers, often below the price of a movie ticket, also affects rivals Regal and Cinemark. Fool contributor Rich Duprey discusses in another post the additional services and tactics movie operators use to give moviegoers a better experience while charging higher prices . . But prices can't rise forever before a drop in demand occurs.
At a recent event at the University of Southern California, directors Steven Spielberg and George Lucas talked about a future when movie ticket prices will have greater variation. Lower-budget movies, like Lincoln, will carry a lower ticket price than bigger budget movies, like Ironman 3 . It will be interesting to see the effect this will have on the movie industry, movie theater operators and patrons.
Eileen Rojas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.