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AMC Entertainment Holdings Inc (NYSE:AMC)
Q4 2019 Earnings Call
Feb 27, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the AMC Entertainment Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

And this time, I'll turn the conference over to, John Merriwether, Vice President of Investor Relations. Mr. Merriwether, you may begin.

John Merriwether -- Vice President, Investor Relations

Thank you, Rob. Good afternoon. I'd like to welcome everyone to AMC's fourth quarter and year-end 2019 conference call. With me this afternoon is Adam Aron, our President and Chief Executive Officer; Craig Ramsey, Executive Vice President and Chief Financial Officer; and Sean Goodman, Executive Vice President.

Before I turn the call over to Adam, let me remind everyone that some of the comments made by management during this conference call may contain forward-looking statements, which are based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of these risks and uncertainties are discussed in our public filings, including our most recently filed 10-K and 10-Q. Several of the factors that will determine the Company's future results are beyond the ability of the Company to control or predict. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned to not place undue reliance on these statements. The Company undertakes no obligation to revise or update any forward-looking statements whether as a result of new information or future events.

On this call, we may reference measures such as adjusted EBITDA, adjusted EBITDA margin, free cash flow, adjusted free cash flow and constant currency among others, which are non-GAAP financial measures. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release issued earlier today. In conjunction with our earnings release, we encourage you to review the supplemental financials for the fourth quarter year ended 2019 that we published this afternoon on our website in tandem with the earnings release.

After our prepared remarks, there will be a question-and-answer session. To be respectful of your time, we intend to keep the call to approximately an hour. This afternoon's call is being recorded and a webcast replay will be available in the Investor Relations section of our website at amctheatres.com later today.

With that, I'll turn the call over to Adam.

Adam M. Aron -- Chief Executive Officer and President

Thank you, John. Good afternoon, everyone. I'm very pleased you could join Craig Ramsey and me today. I'm also delighted to formally introduce you to Sean Goodman. Sean has been with us since December and has been working to ensure a smooth and seamless transition of the CFO responsibilities. As you will soon learn, Sean is a very smart and worldly fellow. We're excited to have him on board and I greatly look forward to working together with Sean to create value for all AMC stakeholders in the years ahead.

I want to also take this opportunity to express sincere gratitude and appreciation to Craig for his 25 years of outstanding service to AMC. He will be retiring on the 29th of this month, just two days from now. And Sean will formally take on the CFO title at that time.

Looking back on 2019, the year turned out to be the largest global box office of all time, having generated $42.5 billion in worldwide admission revenues. AMC benefited from that strength globally. In Europe, we experienced another year of strong box office growth, driven by an industry attendance increase of more than 6%. And our new theaters in the Middle East are roaring hot. Contrary to the views held by doubters, the facts are actually quite different. It is simply undeniable that theatrical exhibition globally was alive and well in 2019 and setting new record highs.

In the United States though, 2019 was a year that saw both ups and downs. The year started off with a difficult first quarter and then fought its way back to become essentially tied with 2016 as being the second highest domestic box office of all time. 2018 of course, the year prior being the strongest domestic box office in history. Specifically, for the fourth quarter, the domestic box office came in at $2.9 billion, 1.6% less than last year but right on par for the average fourth quarter over the past five years.

In Europe, the industry box office performed much better than in the U.S. up 6.3% on a constant percent -- on a constant currency basis, weighted according to our geographic European footprint. Of particular note, not only did AMC see healthy growth internationally, but in the United States, the fourth quarter was the seventh consecutive quarter in which AMC gained market share and dramatically outperformed the rest of the theatrical exhibition industry on both attendance per screen and admission revenues per screen. Also of importance, we can clearly see that the previously announced profit improvement plan designed both to cut costs and to drive revenues is already kicking in.

We're going to start this call by asking Sean to review our fourth quarter and full-year financial results. I'll then come back and give you an update on several important topics that continue to enhance the business for the long-term benefit of all of our stakeholders. Sean, over to you.

Sean Goodman -- Executive Vice President, Finance

Thank you, Adam. I'm honored and excited to be on this truly exceptional team.

Turning to the financial results for the fourth quarter, AMC's seventh consecutive quarter of industry outperformance. Our consolidated results with variance to last year's fourth quarter calculated in constant currency are as follows. Total revenue was up 3.2% to a fourth quarter record of $1.45 billion. Adjusted EBITDA was $269.1 million, up 12.5% after accounting for the impact of ASC 842. The adjusted EBITDA margin was 18.6%, up over 150 basis points after accounting for the impact of ASC 842. And on an as-reported basis, adjusted free cash flow increased by $186 million to $303 million. And free cash flow, which represents net cash provided by operating activities less capex, increased by $190 million to $199 million. And both of these cash flow increases are after adjusting 2018 for the cash flow classification impact of ASC 842. All of these results were achieved in an environment where the domestic box office attendance declined by 5.3% and box office revenue decreased by 1.6%.

By contrast, AMC's fourth quarter U.S. attendance declined by 4.4%, which is approximately 100 basis points better than the rest of the industry. AMC's domestic admissions revenue actually grew by 1.7%, 423 basis points better than the rest of the industry. Our admissions revenue growth was driven in part by an average ticket price increase of 6.4%, 329 basis points better than the rest of the industry. This overperformance reflects the many competitive advantages enjoyed by AMC. Notable in the fourth quarter is the continued success of our A-List subscription program, strategic pricing initiatives and premium format offerings. Overall, our fourth quarter attendance in the U.S. was 62.3 million visits, our second highest fourth quarter attendance ever.

International admissions revenue was aided by a positive industry backdrop and the success of our initial investments in recliner seating, premium formats, as well as improved food and beverage offerings to enhance the guest experience. For our international operations on a constant currency basis, admissions revenue grew by 4.1%, and this was driven by a 4.8% increase in attendance per screen, partially offset by a decline in average ticket price by 0.7%, as we matched in certain select cases, price cutting by some of our competitors. We are particularly satisfied that our Luxe theaters, renovated with recliner seating, experienced attendance growth of more than 3.5 times higher than the industry at large. Our international fourth quarter attendance was 30.2 million visits, giving us a consolidated fourth quarter attendance of 92.6 million, our second highest fourth quarter attendance ever.

From a food and beverage perspective, as you know, AMC goes far beyond classic concession offerings like popcorn and fountain drinks to give our guests an unrivaled out-of-the-home experience. In the U.S., food and beverage revenue per patron increased by 2.5% to $5.33, while the international business food and beverage revenue per patron grew 7.8% in constant currency to $3.59. Both the domestic and international results represent AMC records for the fourth quarter. This was achieved by continuing to innovate and refresh menu choices while implementing strategic pricing actions to optimize revenue for the company while maintaining the value proposition for our guests. We see a significant opportunity to continue to grow the overall spend in food and beverage in the years ahead.

Even though we believe that we are primarily valued on EBITDA rather than net income, I should highlight to you that this quarter's income statement reflects certain non-cash items that impacted net income. We recorded an $84.3 million charge related to impairments of long-lived assets. The vast majority of this is attributable to impairments of operating lease right-of-use assets that were established with the adoption of ASC 842. We also recorded a non-cash charge of approximately $9.6 million associated with the fair value remeasurement of a derivative liability, a derivative asset related to the company's convertible notes due in 2024. As a reminder, we recorded income of $165.5 million in the fourth quarter of last year associated with the same derivatives.

And finally, our income tax expense reflects an approximately $41.5 million credit from a non-recurring tax benefit related to our international operations. In order to aid in transparency, this quarter, we are disclosing an adjusted net income metric, which simply normalizes net income for the above-mentioned non-cash charges and therefore, provides a clearer picture of the underlying performance of the company. Adjusted net income for the fourth quarter was $38.9 million, up 105.8% compared to last year's fourth quarter.

To touch very briefly on the consolidated full year results with variances to prior year calculated in constant currency, total revenue was a record of $5.5 billion, up 1.6%. Admissions revenue was $3.3 billion, down 1%. Food and beverage revenue was $1.7 billion, up 4.1%. Consolidated adjusted EBITDA was $771.4 million, down 3.5% after adjusting for the impact of ASC 842 and the benefit from a $35 million one-time lease modification that happened in 2018. And on an as-reported basis, adjusted free cash flow increased by $118 million to $359 million. And free cash flow increased by $172 million to $61 million. Both of these cash flow increases are after adjusting 2018 for the cash flow classification impact of ASC 842.

Net capital expenditure for 2019 was approximately $412 million, and we are updating our 2020 net capital expenditure guidance to now be between $275 million and $300 million after landlord contributions. The capex reductions for 2019 and 2020 are a reflection of us having already completed the renovation of so many of our U.S. theaters and a lessening of the domestic renovation needs as a result. The high end of our forecasted 2020 capex guidance includes approximately $150 million of maintenance capex and $150 million of net growth capex after landlord contributions, and such landlord contributions continue to be quite sizable.

For 2020, we are disproportionately directing our capital investments into our European theaters, where recent financial returns have been particularly compelling, and to technology initiatives which continue to drive operational efficiencies and increase customer loyalty. From a balance sheet perspective, we ended the year with $265 million of unrestricted cash and $332 million of undrawn revolving credit availability, which totals $597 million of liquidity.

And finally, as the Company has stressed for almost a year now, when looking at our leverage and valuation ratios, you should pay particular attention to the fact that the data services, Capital IQ, Bloomberg and Factset overstate AMC's debt by including operating lease liabilities within net debt. This is inconsistent with U.S. GAAP. Accordingly, they significantly overstate AMC's leverage and valuation multiples.

With that, I will now hand the call back over to Adam.

Adam M. Aron -- Chief Executive Officer and President

Thank you, Sean. As you just heard, we had a successful fourth quarter, where AMC solidly outperformed the industry yet again. These results are directly tied to the continued commitment to innovation in the AMC platform through which we deliver a personalized and targeted end-to-end experience for our guests, leveraging technology and data-driven insights that all drive consumer loyalty. We believe that AMC is placing a unique trail in creating nothing less than the quintessential 21st century moviegoing experience.

Before turning to your questions, I'd like to comment on eight important specific topics. First, on the attractiveness of the industry box office looking ahead. As I said a few minutes ago, globally, the 2019 box office set an all-time record high. Much has been written that the domestic box office may face challenges this year in 2020. That may be true. But some have tried to draw conclusions out of potential short-term softness and argue that this is due to a secular decline in out-of-home moviegoing. We could not disagree more strongly. As we look ahead, especially to 2021, we see dramatic growth in the size of the domestic box office not so far away. When the 2021 box office eventually is reported, we believe it will be the pessimists and the naysayers who will turn out to have been wrong. You will recall that as recently as 2017, some were writing the obituary of theatrical exhibition, only to find that 2018 was the biggest domestic industry box office ever and 2019 was the biggest global industry box office ever.

People have been forecasting that theatergoing is an anachronism for more than 70 years now. Television was going to put movie theaters out of business. VCRs were going to put movie theaters out of business. DVDs were going to put movie theaters out of business. Premium video-on-demand was going to put movie theaters out of business. And now streaming is supposed to be putting movie theaters out of business. And yet, the resilience of theaters has overcome and overcome and overcome. 2021 is right around the corner. And 2021, in our opinion, should be quite a wonderful year for AMC. As we look to 2021 and beyond, we see proven billion-dollar franchises and incredible film slates, anchored by the likes of Avatar, Jurassic World, Indiana Jones, Mission Impossible and Star Wars, to name just a few. This makes us extremely optimistic about our industry's future.

Second, on AMC's revenue growth, cost cutting and margin improvements. We are ever so proud that for the seventh consecutive quarter, AMC outperformed the rest of the domestic industry with attendance per screen beating the rest of the industry by 284 basis points and admissions revenue per screen beating the rest of the industry by 607 basis points. That speaks volumes for the efficacies of all the competitive advantages that AMC enjoys in the United States. As industrywide box office revenues grow globally to record levels this past year in 2019, we are reminded how smart it was for AMC to recently become the largest exhibitor in Europe. What's more, our European theaters are responding to renovation and to the installation of recliner seating with growth rates 3.5 times that of the industry growth rate generally in Europe. Approximately 40 of our theaters have recliner seating installed now, and approximately 60 of our theaters in Europe should have recliner seating installed by year-end 2020.

We are similarly pleased by our latest geographic expansion in the Middle East. We opened our second theater there 10 weeks ago. Out of our 1,000 theaters in 15 countries, on a per seat basis, that new theater that opened 10 weeks ago in Riyadh already is our highest grossing theater in the entire world. By year-end 2020, we expect to have 15 open theaters in the Middle East and possibly more. We expect to have 25 or more theaters opened there by year-end 2021.

On costs. At the end of the second quarter, we announced a $50 million profit improvement plan to enhance aspects of our revenue and optimize our operations and cost structure to improve efficiency and margins. We've already taken actions to heighten the certainty that we will deliver on or exceed this $50 million goal. Results of our significantly increased focus on cost discipline are already showing up. Adjusted for ASC 842, our EBITDA margin improved by 150 basis points for the quarter just completed. During 2020, we'll continue to see the benefits of the profit improvement plan kicking in throughout the year.

Third, as to capex and free cash flow. As our capital expenditures come down, AMC has turned the corner on free cash flow generation. Our investments in strategic initiatives are yielding strong returns. And with the natural evolution of our U.S. theaters needing less investment money with so many of the theaters already having been renovated, AMC's capital expenditures in 2020 will be somewhere approximately $110 million to $135 million less than they were in 2019. But these amounts still are more than sufficient to continue to invest in our business to drive growth, especially with theater renovations in Europe and with technology innovations everywhere.

Fourth, we made an important announcement today about capital allocation, especially as that relates to returning cash to shareholders. AMC is committed to a balanced capital allocation approach to achieve the highest long-term risk-adjusted return for our shareholders. This includes investing in the business, reducing leverage and returning cash to shareholders through either dividends or share buybacks. We've been saying for some time now that we have raised the priority being accorded to reducing AMC's leverage, hence the significant reduction in our forecasted capital expenditures. Deleveraging remains our single highest priority at the moment.

Today, we also announced that given the current depressed level of our share price and given that the financial markets seem to be giving AMC very little credit for paying an oversized dividend, we realize there's an opportunity to enhance shareholder value by deleveraging and by increasing the proportion of capital returned to shareholders through buybacks rather than through dividend payments. Even so, the paying of a dividend remains an important component of our capital allocation and the current new dividend amount, we are doing so consistent with the average paid by other New York Stock Exchange listed companies. Some have speculated that we might not have the wherewithal financially to fund a higher dividend. That's just nonsense. And it's completely belied by our $265 million of cash and $332 million of undrawn revolving lines of credit at year-end 2019, totaling approximately $600 million of total year-end liquidity.

The explanation is this. Simply put, we cannot justify paying out a dividend with a yield exceeding 11% when our share price is currently 1 to 3 multiple points below historic EBITDA trading ranges adjusted for ASC 842. In our view, given current conditions, the smartest way to return cash to shareholders now is through share repurchase rather than a dividend within a typically large yield. So, we are adjusting our capital allocation accordingly at this time.

AMC's Board of Directors, as we issued in a press release a few minutes ago, has declared a dividend for the quarter ended December 31, 2019, of $0.03 per share on shares of Class A and Class B common stock, the 24th consecutive dividend since the Company's initial public offering but admittedly at a lower level starting this quarter. The dividend decrease of $0.17 per share compared to the fourth quarter of 2018 reduces the total dividend payout for the quarter by approximately $18 million, and should this dividend continue unchanged, by approximately $72 million annually, providing capital that we can optimally deploy toward both deleveraging and to equity buybacks that will create value for our shareholders. To that end, our Board has also authorized up to $200 million of Class A common stock repurchases over the next three years.

Topic 5. We also announced today a new executive compensation program for our most senior officers that trades immediate pay reductions, reductions for a share equivalent grant that is considerably out of the money. AMC's management team and I believe that our shares are fundamentally mispriced and that at current levels, our shares are a bargain. As a result, all of the relevant senior officers of AMC have voluntarily and enthusiastically signed onto a new reduced compensation program, where our corresponding benefit is dependent on a one-time way out of the money share equivalent grant.

Here are details at a high level. More information will be contained in an 8-K filing. The current total target compensation of AMC's participating senior officers will be immediately reduced by an amount equal to the sum of 15% of their cash salaries, plus 15% of their target cash bonus opportunity. This compensation decrease will be split into thirds and applied evenly as reductions in compensation across each of three categories, one-third lowering combined cash salary and cash bonus, one-third lowering at-market restricted share grant amounts that time vest and one-third lowering at-market performance share grants that vest based on performance.

Importantly, these sacrifices now in lowered cash salary and cash bonus as well as lowered at-market restricted shares and performance shares will continue at the new lower totals in each of the coming three years. In exchange, the officers reducing their pay now will receive a one-time grant of AMC share equivalents that, with certain exceptions, has a three-year time vesting provision and also requires that the AMC share price rise materially in order for any vesting to occur. This share grant is split into six equal tranches. Initial vesting will occur -- will not occur, initial investing will not occur until the AMC share price recovers on a 20-day VWAP basis to $12 per share, a 102% premium to yesterday's market close.

The second tranche will vest only when the AMC share price rises to $16, a 170% premium to yesterday's close. The third tranche vests at $20, a 237% premium to yesterday's close. The subsequent tranches vests at $24, $28 and $32, premiums of 305%, 372% and 440%, respectively. 14 senior officers of AMC are all participating in this effort, including me personally, of course. We are all trading immediate compensation reductions for three years in exchange for a security that will have no value at all until the AMC share price more than doubles or triples and more.

As you can see, all of us have deep conviction about AMC's future, and therefore, each of us is putting our money where our mouth is. Management is totally aligned with shareholders and through cash pay cuts and lowered at-market share grants now, we are all putting more skin in the game. We are heavily incentivized to build the AMC share price back up. We have every confidence that will occur and we will be doing all in our power to make that possible.

Sixth, as to A-List. As we've done each quarter, a quick update on our AMC Stubs A-List subscription program. The fourth quarter just completed was another quite successful quarter for A-List. A-List is one of our most vital and impactful marketing programs. We are constantly and proactively managing the program to improve our company's overall profitability. We continue to have between 900,000 and 1 million paid members. A-List members currently represent between 15% and 20% of our total US admissions.

The superb A-List news in the fourth quarter is that average A-List frequency for the fourth quarter was again 2.4 theater visits per member per month, right in the heart of the sweet spot of the mid to high 2 times range, which defines program success at current membership pricing levels. Just as A-List has been ahead of schedule on membership counts and program profitability from right out of the shoot, the fourth quarter frequency of moviegoing at 2.4 times also per month is also favorable to our initial planning models. We continue to have a rock-solid, reassuring and confidence building analytic handle on the A-List program. And innovation continues with A-List.

Our new Entourage feature has been a much welcome enhancement to A-List. It was launched in November of 2019, and it allows A-List members to link their accounts so that they can make, in a single, quick and easy booking transaction, a movie reservation, including specific reserved seats for multiple moviegoers, the people in their Entourage. In just three months, we have about 115,000 members of A-List who linked their accounts through Entourage.

Overall, A-List contributed more than $20 million of incremental operating income to AMC in 2019, way ahead of our earlier announced expectations and a full year ahead of our expectations described during the launch of the A-List program back in June of 2018. We expect even more from A-List in 2020. It continues to exceed our expectations. It's increased loyal to AMC. It has benefited our theaters, our studios and our premium format partners. A-List is a big reason why AMC's U.S. attendance has been robust and why AMC has outperformed the industry quarter after quarter after quarter after quarter after quarter after quarter after quarter.

Seventh, on the issue of streaming. Some seem to accept on faith that an increase in streaming content will serve as some mortal threat to movie theaters. They choose to ignore the facts that 2019 was the biggest global box office year for movie theaters ever. Or that when television exploded with content from four major channels to hundreds of channels, theaters did just fine. Or that companies like AMC have invested billions of dollars to increase the creature comforts at our theaters, enticing more and more moviegoers to get out of the house, or that our marketing and engagement programs are increasing loyalty on a customized basis like never before. Or that our technology interfaces have made it far, far easier to book a prime seat in a movie theater and for us to stay continuously engaged with our guests. Studies have indicated a clear and strong positive correlation between those who stream movies and those who also like to go to theaters to enjoy movie-watching in person on a big screen with powerful sound and the smell of buttered popcorn. In short, movie-watching begets moviegoing.

Further, rather than looking at theaters as competitors, we believe there is a significant opportunity for streaming providers to further utilize theatrical exhibition to create tremendous value for their content and for their shareholders. The theatrical format has always had strong branding power, particularly in today's world of endless scroll of content icons on streaming platforms. Theatrical exhibition helps to differentiate high-quality content from low-quality content. Theatrical exhibition aids users in discovery. Multiple studios have utilized theatrical exhibition as the anchor in building incredibly valuable franchises, which are then extendable into TV content, streaming content, theme parks, video games and merchandise, all with a build in demand base that was created initially and in encouraged -- and encouraged from that initial theatrical release. These studios are starting to do that now with their streaming offerings, too, and they do this while earning billions in profits via the theatrical box office, which, as the content arms race continues to play out, we think will be increasingly important to help defray the massive investment in content that is required to succeed.

Importantly, the lure of theatrical exhibition keeps talented directors, cinematographers, writers and actors excited and motivated, knowing that their work will be shown and enjoyed in the best possible way on a big screen. As a result, we have every confidence that we will maintain our century-long partnerships with existing major studios and forge new alliances with emerging streaming powerhouses for them to use our movie theaters as vehicles to propel their own business success. With this in mind, AMC just hired a new Senior Vice President of Strategy, who joins us Monday. He is media world-savvy, highly regarded and has previously worked as a long time Executive Vice President of Business Development and Strategy of 20th Century Fox Television and before that at Universal Pictures. Based in Los Angeles, his first major objective will be to create partnerships with streaming services, both from established studios and from emerging streaming players to create value for the benefit of all parties but especially to create value for us here at AMC.

And finally, topic eight. Just before we head to your questions, it seems appropriate to take a moment to briefly address the topic on everyone's mind, the coronavirus. AMC Entertainment does not have movie theaters in China nor in South Korea nor anywhere in Asia. AMC does not have movie theaters in Iran. We do have theaters in Italy, some of which in northern and northeastern Italy. We have decided to close for a week starting three days ago as a precaution. As best we can tell, the economic impact of corona on AMC so far has been minimal.

While it's conceivable that could change, as of today, our theaters, which are predominantly in the United States and Northern Europe, appear to have felt little or no pain. It goes without saying that we are vigilantly monitoring reports and advice from governmental authorities in the United States and throughout Europe, as well as from medical experts. Of course, as you would expect, we will be a responsible player here, taking into account the safety of our guests and of our staff, but importantly, to report looking broadly at our circuit of 1,000 theaters across 15 countries visited a million times per day by moviegoers around the world. So far, so good.

And probably, this is as good a place as any in this call today to remind one and all, that AMC does not have a single debt maturity before the year 2024. Also, our securities are covenant light, a flexible capital structure with no debt maturities for four full years should be calming.

In conclusion, the quarter just completed was another period in which AMC truly performed well. While we realize in looking at our share price that there are many who seem to doubt us, we have every confidence that as we continue to deliver results, we'll be proven correct that AMC's future is extraordinarily bright.

With that, operator, we're ready for questions.

Questions and Answers:

Operator

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from the line of Eric Wold with B. Riley FBR. Please proceed with your question.

Eric Wold -- B. Riley FBR -- Analyst

Thank you. Good afternoon. Just a quick question on the capital allocation plan. Obviously, Adam, you talked about the reduction of the dividend can be deployed toward share repurchases and a decrease in debt. Maybe some thoughts on how that decision is made between those two uses and kind of how do you prioritize those two?

Adam M. Aron -- Chief Executive Officer and President

Sure, Eric. Actually, I think it was your report that first suggested that we switch from dividends to buybacks, I might add. Look, we've been returning $80 million a year in dividends. We are going to continue to pay out dividends, admittedly at a lower rate. It generates right around $70 million annually, $72 million should the current new dividend rate continue unchanged. Essentially, that by itself would fund the share buyback authorization that we announced.

But in terms of deciding between returning cash to shareholders, well, let me just keep going in a second. We also -- to build up cash on the balance sheet, therefore increase or decrease net debt, therefore improving our leverage ratio. We are bringing our capex expenditures way down, as you know, somewhere between $110 million to $135 million comparing 2020 to 2019. That allows us to deleverage significantly. In the prior years, there were some assets that we are able to sell and monetize in cash. I do believe there is some opportunity for us to continue to do that in 2020. When we look at the share price and see that our assets are being valued at less than 7 times EBITDA, it seemed pretty low to us. Some of the items under our control are worth far more than that. So, all of these things are in our sights.

In terms of priorities, it's very clear. Priority one is to deleverage. And we're all doing that through reduced capital expenditures and the possibility of a small amount, a modest amount of asset sales. I don't want anybody to think we're doing anything big. Then also I would say, next priority is to continue to return cash to shareholders. But we'll choose to do that more through share repurchase than through dividends. Especially with the uncertainty in the world today, with the uncertainty in the markets for the last three days, now is a good time to be adding cash to the balance sheet and that's what we intend to do above all else.

Eric Wold -- B. Riley FBR -- Analyst

Perfect. If I might, real quick, on Stubs A-List, one follow-up there, I guess. You've had that in place for almost two years. Can you talk about what you see with kind of the less than active users? Do they tend to stay on for the most part? Are you seeing churn away from people who don't use as much? And then with that, what is your thoughts on the ability or need to take additional price increases?

Adam M. Aron -- Chief Executive Officer and President

Sure. So, our A-List has been in force for 20 months. As I said in the call, like -- it was more successful than we ever hoped it could be right out of the shoot. Membership counts were higher, profitability was faster. You may recall a long time ago, we said we thought by year-end, we would get to $3 per member per month, right about what's happening these days.

The average -- if you look at churn, which we look at very carefully, the average A-List member looks like they're going to stay with us for at least three years. Our churn is pretty low. Logically, the people who would fall off most are the people who are inactive. That's kind of a logical thing. But we have been replacing those departing A-List members with more new members, so our membership counts keep growing rather than shrinking.

There's no compelling need to take a pricing action. Remember, we've already set three different pricing regions across the United States. We intend to be judicious in how we price the program. I do think there's an opportunity, in some markets or in some states, to take the price up. There are a couple of other really interesting levers that we can pull that will affect the program profitability a lot that don't require a price increase. For competitive reasons, I don't actually want to articulate what they are on this phone call. But there's one decision by itself that could improve A-List profitability by at least $10 million, possibly more on an annualized basis. And we started testing in several markets quite quietly, various approaches surrounding that decision to see how they play with consumers.

So, I'm going to leave you with a bit of mystery only because I don't want to tip our hand. But as I said, we are constantly living this program, proactively managing it, looking at all sorts of ways in which we can generate increased value from it. We've separated AMC A-List members into deciles based on their activity, their frequency, their food and beverage spend. We're putting different promotions out to different people based on their activity, trying to stimulate the activity that they could spend more with us, not trying to dilute activity where they're already spending a lot with us. If there's one thing this company ever did well ever in its 100-year history and this is our 100th year, by the way, 2020 is our 100th anniversary, A-List might be the hit of all hits.

Eric Wold -- B. Riley FBR -- Analyst

Thank you.

Operator

Our next question comes from the line of David Miller with Imperial Capital. Please proceed with your question.

David Miller -- Imperial Capital -- Analyst

Yes. Hey, guys. Great results. Congratulations there. Sean, a couple of questions for you. And Craig, maybe you want to chime in just because I know you have this background, obviously. When we look at your capital structure, the net debt-to-EBITDA is what it is and it's recorded efficiently. And I get it that there are some inefficiencies with the way it's being reported by the wire services. But the net debt-to-EBITDA ratio looks invariably much higher when you count in the convert, when you count in the $600 million convert. And the problem with that convert is that it's busted and it's way below money. So what, if anything, can be done about renegotiating the terms of the convert?

And then specifically, a separate question, I think, Craig, maybe it was about a year ago, you mentioned that you would consider a European IPO on either Euronext or London if there was consistency with the European results, which there has been. I think that's three quarters in a row of European outperformance. So a European IPO, at least by my account, would just eviscerate any criticism that you guys would -- or guys are overleveraged. And I'm wondering what flavor you have in tackling that at this point? Thanks very much.

Adam M. Aron -- Chief Executive Officer and President

David, it's Adam. I'm going to fill the both. On the issue of the Silver Lake convert, I would remind everybody that while it stays debt, there's an interest rate of 2.95%. And if it converts to equity, as far as the public shareholders of AMC are concerned, while it was issued at $18.95, I believe, it could drop into the $14s if we stay low, if the share price stays low. I defy anybody in this call to be unhappy if management was able to raise significant equity at north of $14 a share when our share price is trading at $6. We're aware that there may be an opportunity to renegotiate the terms that convert. We would only do so if we could do so on terms that were attractive to AMC and beneficial to AMC's public shareholders.

On the issue of a European IPO, we did raise that issue about two years ago. I think we put that -- yes, you are correct that if we sold off a lot of our European assets. We said a European IPO might be selling off essentially 0.25% of Europe, that, that would prove to the world that it's ludicrous, that our European theater assets are being valued at under 7 times EBITDA. But there are other ways to make the same point.

And I also said, I think, six to 12 months ago on one of these calls that the results of our recliner renovations in Europe are so high, realizing that we now have 40 theaters done and we're going to have 60 theaters done by year-end 2020. Right now, we think it's smartest for our current shareholder base to reap all of the increased shareholder value that accrues from those recliner renovations going into place. And that it would be unwise to give away 0.25% of that upside to the European public. So for the moment, it's off the table. We do think there are other ways to prove to one and all that some of our European theaters are worth a lot more than less than 7 times EBITDA. But we don't think we should be selling the whole European estate to do so.

David Miller -- Imperial Capital -- Analyst

Okay. Thank you.

Operator

Our next question is from the line of Chad Beynon with Macquarie. Please proceed with your question.

Chad Beynon -- Macquarie -- Analyst

Hi. Good afternoon. Thanks for taking my question. For 2020, I think most prognosticators are looking for domestic admission revenues to be down mid-singles or maybe even slightly worse. So if you guys can continue to gain market share and obviously benefit from the cost-cutting plan that you put in place and that we saw a nice margin improvement in the fourth quarter domestically, can you help us think about margin potential as you've laid out before for 2020, if that is the scenario that ends up playing out? Thank you.

Adam M. Aron -- Chief Executive Officer and President

Thank you, Chad. Look, here -- in a nutshell, right, we've got three vectors at work and -- four vectors at work in 2020. We got a solid growth in Europe and the Middle East. We've got market share gains in the U.S., which we hope to continue, and we have all the help from the profit improvement plan, which I increasingly have confident -- I'm increasingly confident that not only will we deliver on our goal, that we will exceed our goal. The fourth vector is the domestic box office could be soft. In an ideal world, the sum of the three first vectors would fully offset the fourth vector. But it's only February 15 and it's too early to tell.

Chad Beynon -- Macquarie -- Analyst

Got you. Thank you. And then separately, just back on the share repurchase announcement. Are there restrictions in terms of how much you can purchase per day or per week, just given the volume, I guess, as a percentage of the daily float? And how did you think about...

Adam M. Aron -- Chief Executive Officer and President

I think it's 25% of the last two weeks' trading volume that what we can buy in a single day. That's our limit.

Chad Beynon -- Macquarie -- Analyst

Okay. Perfect. Thanks very much, guys.

Adam M. Aron -- Chief Executive Officer and President

I know, you were going to say -- I cut you off, I didn't mean to. And you were saying, how do we think about something rather?

Chad Beynon -- Macquarie -- Analyst

Well, I was just going to say, how did you think about repurchasing opportunistically versus doing kind of a standard Dutch tender out in the market?

Adam M. Aron -- Chief Executive Officer and President

I think our preference is to do a purchase opportunistically based on share price at the time. Doing this gradually might be better than shooting our wide-all in single Dutch auction. Also at -- by doing so opportunistically, we get to decide the timing of our buys. We are going to -- we certainly clearly are buying back stock or I'm sorry, we clearly will, not today. We're in a quiet period. We clearly will be buying back stock. But as for the timing of that stock repurchase, debt reduction, lowering -- increasing our net debt -- increasing our cash to reduce our net debt, decreasing our leverage ratios, deleveraging is still our single top priority.

And especially right now, when there's real uncertainty in the world, we're going to be conservative in keeping cash in our pockets to make sure that the -- what I think might be somewhat irrational fears the market has had over the past few days don't turn out to be rational fears, having cash in our pocket would be a good thing. But deleveraging first, share repurchase second, both will happen.

Go back to the Investor Day from April of 2019, nothing has changed with respect to our aspirational targets. We laid out a three five year road for AMC to go down in which deleveraging was a major strategy for the Company. Margin improvement was a major strategy for the Company. Revenue growth was a major strategy for the Company. That is still our view of where AMC will go in the years ahead.

Chad Beynon -- Macquarie -- Analyst

Thank you, Adam. Appreciate it.

Operator

Thank you. We're nearing the end of our question-and-answer session. We have time for one additional question, which is coming from the line of Meghan Durkin with Credit Suisse.

Meghan Durkin -- Credit Suisse -- Analyst

Hi, guys. I wanted to get a little more color on the Italy impact, revenue and EBITDA contribution from those theaters. How many screens are closed? Why did you decide to close for one week? And what types of evaluations will you be doing before you open the theaters again? And then just one last is, what protections do you have if there is a more prolonged closure? Is there insurance or something like that?

Adam M. Aron -- Chief Executive Officer and President

Well, that's about 19 -- I mean, we adore you, Meghan, but there is about 19 questions in there. We have 47 theaters in Italy. We've closed 22 of them for all in northern Italy, generally around Milan. There are another seven in northeastern Italy, where the local government has gone back and forth three times in the past 48 hours where they want us to open or close. The -- back in Milan, there are already a lot of entities in Milan that have reopened to the public. There is an increasing view of Milan -- in Milan that there may be an overreaction in and around Milan. We decided to close for a week because that's what all the local governmental authorities and local medical authorities thought was the right thing to do. Milan and its environments are not on a quarantine or a lockdown. We did this cooperatively with the local governments just as a precaution.

In terms of the economic impact, it's de minimis. The only issue is that those theaters in Italy are closed for a week. It's between $0.5 million and $1 million for a week's closure. That's not even going to be noticed but when we wrap up AMC for the year. The issue might be if it scares moviegoers elsewhere in Italy or elsewhere in Europe, if it causes people to return to theaters slowly after the theaters reopen. But it's way too early to start prognosticating what's going to happen.

Right now, we have a few handfuls of theaters that are closed. They're smaller theaters in general. Economic impact is really low. And no, we don't -- we're not being Pollyanna. I raised the issue in my script on the call. If the coronavirus were in [Phonetic] the United States in a huge way, like that would be a problem for us. But what's happened in Milan is not.

And as I said, as we assess where we are today, as you look at our circuits broadly across 1,000 theaters, there's little or no impact. I should say that we do not have business interruption insurance for the coronavirus. So, that is not a protection that is currently available to the company. I tried in my prepared remarks to be calm about coronavirus. Right now, AMC is in a very good place. Let's hope it stays that way.

Meghan Durkin -- Credit Suisse -- Analyst

Okay. Thanks. And my best to Craig.

Craig R. Ramsey -- Executive Vice President and Chief Financial Officer

Thank you.

Adam M. Aron -- Chief Executive Officer and President

Meghan, and everybody, that's a nice way to end the call after 25 years. Everybody's best to Craig.

Craig R. Ramsey -- Executive Vice President and Chief Financial Officer

Thanks.

Operator

Thank you. At this time, I'll turn the floor back to you, Adam, for any closing remarks.

Adam M. Aron -- Chief Executive Officer and President

So I said all, I had to say before folks. I just put my money where my mouth is. I just signed on to a $1.6 million pay cut over the next three years to take AMC securities that will have no value until our share price crosses $12 or $16 or $20, $24, $28 and $32. I personally own 459,833 shares of AMC stock today. We believe the future -- I haven't sold a single share in the four years I've been here and I'm maybe acquiring a lot more. I think our future is enormously bright.

I think the pessimists who have been doubting us over the past year but especially in the last six months and three months, I think they're just flat-out wrong. And all in our management team is out to prove themselves. We will do everything humanly possible to deliver results at AMC as we did in the fourth quarter. And we know that all the talk in the world isn't going to matter. The only thing that's going to matter is do we deliver results. We are very much committed to doing so. We have done so and we will all see together the fruits of that labor.

With that, we thank you for joining us, for staying with us late on a Thursday night, especially in the East Coast. And we'll adjourn the call.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

John Merriwether -- Vice President, Investor Relations

Adam M. Aron -- Chief Executive Officer and President

Sean Goodman -- Executive Vice President, Finance

Craig R. Ramsey -- Executive Vice President and Chief Financial Officer

Eric Wold -- B. Riley FBR -- Analyst

David Miller -- Imperial Capital -- Analyst

Chad Beynon -- Macquarie -- Analyst

Meghan Durkin -- Credit Suisse -- Analyst

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