Greetings and welcome to the AMC Entertainment Third Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Mike Zwonitzer, Senior Vice President of Finance for AMC. Thank you. Mr. Zwonitzer, you may begin.

Good afternoon. Welcome to AMC’s third quarter 2014 conference call. After our prepared remarks, there will be a brief question-and-answer session. Joining me on the call today are Gerry Lopez, President and Chief Executive Officer; and Craig Ramsey, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made by management during the conference call contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to vary, which are discussed in our public releases, including our most recent 10-K. We caution you not to put undue reliance on forward-looking statements. Forward-looking statements made during this call speak only as of the date of this call. In addition, some of the comments made on this call may refer to certain measures, such as EBITDA and adjusted EBITDA which are not in accordance with GAAP. Management believes these results more clearly reflect operating performance. For a full reconciliation of EBITDA and adjusted EBITDA to GAAP results in accordance with Regulation G, please see our press release furnished as an exhibit to our Form 8-K dated October 28, 2014, which may be located under the Investor Relations area on our website at www.amctheatres.com. I would like to introduce Gerry Lopez. Gerry?

Thank you, Mike and thank you everyone for joining us this afternoon. Ladies and gentlemen, it is no secret that the third quarter of 2014 was a tough one due almost exclusively to an underwhelming film slate and industry Box Office as well as some very difficult year ago comparisons. Yet in spite of all the obstacles, we are pleased that we have once again outpaced the industry, this time by a very solid 160 basis points due on an admissions per screen basis. It is clear to us that our five strategic action fronts are driving results and are enabling us to outpace competition even in periods where the comparisons are tough. As you have heard me say before, the underlying fundamentals at AMC are solid, the strategy works and we are on track. Now, let’s get into a few details regarding our performance and an update on our strategic action fronts. Top of the batting order are admissions revenues, which for the quarter were down 10.6%. On a per screen basis, they were down 11% versus an industry that saw a decline of 12.6%. This was a significant outperformance and it is indeed the 160 basis points you heard me mentioned a moment ago. Importantly, extending the view from 3 to 12 months ending September 30, 2014, the outperformance is even stronger at 190 basis points. To us, this admissions per screen success is proof positive that driving productivity from the existing asset base is absolutely the right thing to do. It is capital and operations efficient and it works in up and down periods both. And as you all know, our industry has plenty of both. This admissions results we are convinced are directly tied to our comfort and convenience strategic action front. The recliner reseats are…

Thank you, Gerry. Similar to the second quarter of 2014, a 13% decline in third quarter industry Box Office provided a challenging backdrop to test the resilience of our strategic initiatives and their contribution to our overall financial performance. In the next few minutes, we will see how resilient they are and how significant their contribution was as we look at third quarter and year-to-date results and update you on our balance sheet and asset base. While revenue performance was challenged, all line items performed well ahead of the 13% decline in industry Box Office. Admissions revenues totaled $417.4 million and were down 10.6% versus last year. Food and beverage revenues aggregated $189.1 million and were down 6.2% year-over-year. And finally, other revenues were flat to last year. All combined to produce total revenues of $633.9 million, down 8.9% versus last year. Total attendance was 44 million compared to 51.9 million in the quarter last year. Average ticket price grew by 5.3% primarily due to increases in core ticket pricing, higher ticket prices at additional recliner reseat locations, and improved attendance for IMAX 3D and AMC Prime during the quarter. On a per screen basis, admissions revenues decreased 11%, again bettering industry performance that was down 12.6%. Our enhanced food and beverage initiatives proved to be a significant difference as well. Food and beverage revenues were down only 6.2% primarily due to a 10.3% increase in food and beverage revenues per patron that was driven by our enhanced food and beverage initiatives. Whether it be MacGuffins, dine-in theaters, expanded product offerings or our revamped concession stands, our strategic initiatives continue to drive industry leading results in this area. Food and beverage gross margin of 85.6% was flat sequentially and down slightly year-over-year due to the rollout of our newer F&B…

Thank you, Craig. Ladies and gentlemen, we are extremely excited about our future at AMC. We are seeing tangible benefits from our strategy and investments and have a great amount of upside potential as we continued to invest with great focus on our core business. We are confident these continued investments will drive outsized returns when compared to our peers in the industry, especially with what looks to be a truly exciting upcoming Box Office year in 2015. We are and we will continue to be the industry’s innovation leader in customer driven experiences and we have so far touched only a portion of our (enviable) asset base. We continued to punch above our weight. Overall, AMC’s last 12 months Box Office share is 22%. This was only 7% of the screens in the United States. While this is an impressive statistic, we measure ourselves more granularly using a metric we track very closely and have shared for the past few quarters, the 20-mile proximal per screen Box Office market share. That is to say, when we measure ourselves against competition in a 20-mile radius of our buildings, we are seeing six percentage points of Box Office per screen outperformance, dating back to April of 2011. This metric shows on a granular per screen level that focusing on the customer experience is the right thing to do for them and for our shareholders long-term. Thank you for listening. And I would like to turn the call back over to the operator for a Q&A session. Operator?

Thank you. Ladies and gentlemen, at this time we will begin the conducting a question-and-answer session. (Operator Instructions) Our first question comes from the line of Eric Wold from B. Riley. Please proceed with your question.

Hi, good afternoon. Call from San Francisco I was kind of hoping you would reschedule the call for tomorrow night since there won’t be a Game 7 to distract us anyway. But I will get into the questions. One on Regal, Regal commented yesterday they were seeing some pressures on the results from competitor actions to improve customer experiences maybe common on the update of where you see your incremental attendance coming from in terms of competitor theaters versus your own and thoughts on your ability to hold on to those customers if the competitors react with upgrades of their own?

(Technical Difficulty) One moment.

Hello?

Hello.

Yes, we can hear you.

Okay, great. So, where did you leave off?

Did you hear the question or just the negative comment about the Royals?

We heard both unfortunately. So, I will address the question first and leave the Royals thing until after the thing is settled hopefully tomorrow night, not tonight. What we have seen Eric on these reseats over the last couple of years since the first one stayed back that far now is it about 60% of the attendance increase is coming from the proximal competitors. That’s why we introduced that measure to our system of the 20-mile proximal. The other 40% however is coming from a sheer behavior change among the customers. That’s where the AMC Stubs programs kind of really helps us, because it improves the value for the customer and it encourages that return to that behavior into the reseated theater. People competitors are rushing to the market with these reseats. I wish it was that simple. It’s really not. The industry as you now has a long tail of people copying each other and so on and so forth. What’s different this time is that if they are focusing strictly on the physical plant change, they would reseat itself and they are missing out on all of the other elements. They put a beverage improvement, the loyalty program, the aggressive programming, the silent sound experience they are really presenting that customer with a half bargain. And we don’t think to address upon the sustainability that you brought up. We don’t think that is sustainable. We think that the reverse is true that when people enjoy the comfort, that’s great. That’s kind of like the price of entry, but then you have to deliver on all these other elements, the convenience of being able to buy your Internet, your ticket on the Internet in many more places and not be tied up to a single website. The value that AMC Stubs delivers, the better food and beverage program, 75 bars already installed out there etcetera, etcetera the list goes on is when you present that total package that it becomes sustainable. Changing their seats and cleaning the carpet, it may help for a couple of weeks, is not in our opinion sustainable. Does that answer your question before I make a snide remark about the Giants?

No, I suppose one quick follow-up what percentage of the reseated theaters have you put through price increases and any – to-date have you seen any material change in attendance trends once you have?

No. Well, let me answer your first question. So, kind of the – we have talked about this before and we let it run for about a year and then in the second year after guests have had an opportunity to experience and take part in the service and the convenience, then we will start moving price. And we have got about I’d say about 27 of our theaters that of the total 48 that we have are in that second year or actually in the third year. And so that’s where in the first year we see some lift on average ticket price just because the audience starts to skew a little older. Then in the second and third year, we can start seeing some price movement as an example in the theaters that have been out there over a year, average ticket price is up about 12% and then you get out over a couple of years, they are up over – up almost 30%. We continue to see Box Office increases into that third year. And so they are kind of at a declining rate naturally as they have been in the market a little longer, because you are starting to kind of cap out a little bit, but we are still seeing growth in attendance and revenues and so no noticeable impact or negative impact on pricing.

Just to build on that a little bit, Eric, our thinking when it comes to pricing on these reseats, it kind of runs in three fronts, right, depth, perception and sustainability. The depth is when we do raise the prices, 9, 12 months in by how much. And this industry normal, normal behavior on a traditional theater will be to take perhaps a quarter maybe if you want to be real aggressive $0.50. What we are doing though in these reseats is we have taken a $1, perhaps a $1.25. So, yes, we wait those 9 or 12 months, but then when we go, we go hard. We will go a little deeper. We go a $1, $1.25. Second, it’s the idea of sustainability. Can we keep up with that? Well, that’s so far proven to be the case. And it’s because of that third element, which is the perception. When people are showing up at the theater and the experience is that much better, they are okay with it. They are okay with it, because the theater is full. They are okay with it and they know that gee, you know what I am willing to pay that extra $1, $1.25 in order to get a seat that I wanted and a show time that I wanted, because in many of the Friday and Saturday nights, we are running into sold out shows in many of the movies that are first released. So, it’s really that combination that allows us to do what we are doing with the reseat pricing.

Perfect. Thank you, guys.

Good luck tonight.

Thank you.

Our next question comes from the line of Kannan Venkateshwar from Barclays. Please proceed with your question.

Thank you. Just a couple of questions. The first is on you still have some high cost debt on your balance sheet and just given the kind of uplift free cash flow you can see from that, just wanted to understand how you are thinking about that going forward? And just from an M&A perspective, if you can update us on your thoughts, just given what Regal announced yesterday and what kind of overlap you have, obviously the overlap has to be material, but just wanted to get your updated thoughts on that as well?

Give us a second here, Kannan, while I payoff my debts. I had put the over and underline on how long it will take to hear – Regal’s announcement at the first caller. So, I owe some people some money. I want to let Craig address the balance sheet question and then we will come back to the M&A.

Well, we are most focused as you might suspect or would hope I guess. We are most focused on the 9.75% senior subs and first call date is December of 2015. And we don’t have to wait until December 2015 depending upon the rate environment, we do the calculations every week almost and as we get closer to that first call date, I think of course, assuming what happens in the market with interest rates, but assuming that we have got some continued stability in rates, we will be out there taking care of that, very similar to what we did about a year ago with the – with that 8.75% senior note, which we did a tender for and then cleaned it up. And so that’s our plan and of course it all depends on the interest rate environment going forward. But we would certainly hope to be able to do that here in the next 6 months.

On the M&A portion of the question, Kannan, let me start kind of at a more global level and just reiterate something that we have said during the IPO roadshow and in the months since. We think that there is no reason anyone would expect. Certainly, we don’t expect that the consolidation trend in the industry will come to a halt or stop or decrease in any way. There are number of filters at a global level that we will apply. Certainly, when I say global, I mean, at a macro level in the U.S., let me be more accurate and more correct. They filter specifically our first financial, because it makes sense is the acquisition accretive? Do the numbers work, okay? And that filter has been the number one filter for many of this. The only filter for us is nothing but the first filter. The second one is the DOJ filter and that is given our size and our scope these days any transaction of any size that we engage in, the government is going to review. And the government has a very detailed plan and they have a very methodical way, they go through these things. They don’t look at it market by market, they look at it theater by theater, literally trade area by trade area. And as financially accretive an acquisition maybe in total, when you are not careful about what a DOJ may do, you can leak value and the transaction really quit, if you are not thoughtful and careful about that second filter. The third filter, which I think applies perhaps uniquely to us it’s all about what kind of assets are being acquired, what comes with this transaction. Is it a bunch of traditional theater, in which are not going to be…

Thank you. That’s very helpful.

You bet.

Our next question comes from the line of James Marsh from Piper Jaffray. Please proceed with your question.

Great, thank you. Two quick questions here, the first relates to your broader large format strategy and obviously ETX and IMAX, but just wondering if you could give us some sense for kind of the relative performance between the two and just how are you feeling about both. And then just, I also just wondered if controversy like a Crouching Tiger, day and date thing, does that impacts your relationship with IMAX at all, you guys just kind of chalk that up to kind of ordinary business, it seems just, I guess a little tone deaf to me, but it’s just hard to tell form where I sit. And then the second question – go ahead, why do you answer that one and I will ask the next one?

Well, let me take them in reverse order. I will do the Netflix piece first and then we will give you some perspective on ETX or as we call it now AMC Prime and on IMAX. On the Netflix announcement, Crouching Tiger, Hidden Dragon, etcetera, to be totally honest, we don’t know much about the project. What we know about the project is what we read in the press that you have read. We have not been approached by a formal – by distributor with any kind of proposal or any kind of deal, because frankly from what we appeared – from what we know, that we are going to have a distributor. So that’s kind of weird. So, what we know about the project is what’s being published in the press. It strikes me as a made for medium movie, I have said that in the press, there is no Ang Lee behind this sequel. None of the original cast appears to be performing or participating in it. So, I am a little unclear as to the movie. I – at the moment have to classify it as a kind of made for home, made for video movie. A point of clarification to a lot of what’s been written in the press, IMAX does not knock control what plays on our screens, on our IMAX screens. Contractually, we control what plays on those IMAX screens. They know that, I suspect Netflix knows that, everybody in the business knows that. The studios know that. Just because IMAX agreed to this thing, that does not force us to play the movie on the IMAX screen if we don’t have a deal, with the distributor which again, there is no distributor. So, there is no deal at the moment. The business relationship…

Yes. We give an idea so just in terms of the economics look it’s not the highest ticket price we have, it’s actually the second highest ticket price IMAX would be the highest as you think about our $9.48 average ticket price for the quarter we have a $3 surcharge and so – and depending upon the film it’s actually for the quarter. So it’s about $13.83 was the kind of average price on our proprietary large format screens. It turns out to be the very profitable, the most profitable ticket we sell in terms of kind of our after rents or after film rent margin. Early in the deployment we have about 7 or we are continuing to deploy and as Gerry said we think they are complementary to the large format of IMAX.

The database that we have on Prime because we have made the bet on moving forward IMAX so quickly Jim is not really robust to give you a real sense, but I will – what I will share with you though is that like most of the things in our business content drives a lot, so when a movie opens in IMAX, Interstellar for example coming up, even during this last weekend right. Those IMAX numbers will blow everything else out of the water during opening weekend. Our ability to flex their prime screen in which 3, 4 and 5 into whatever movie just has opened we will then have those outperforming with Prime in that second week maybe but certainly about the third and fourth week versus the IMAX screen. So it’s a content driven dynamic more than it is anything else. Does that make – does that help you.

Yes, extremely helpful. Thank you. It’s a lot of good color. And then the second quarter was just a quick one here just related to the enhanced food and beverage and I just wondered if it’s inherently less volatile than the typical ordinary concessions, it seem to vary a lot based on what films you are playing, can you give a sense over time it’s going to be less volatile than the ordinary concession business?

Yes. The volatility is driven more by the sheer attendance volume than by anything else. Once we get the people in the door their behavior is fairly predictable. And in fact the enhanced food and beverage has taken some of the beta out from the old days when the number of SKUs and what you were trying to sell the customer was so limited to essentially popcorn, coke and candy the volatility of people get bored of it, there is really no variety in there and it’s going to like well, maybe they will get the popcorn but not the Coke or the Coke but not the popcorn and it was easy to bypass. Now with so many more options, whether it’s ice cream, whether it is popcorn in more sizes not just the fountain Coke but all of the other bottle beverages that we make available from Coke. And all by the way a beer or a glass of wine or a drink their behavior is just much more predictable because if people are not doing the one that do in the other, that variety provides a more complex business, it also provides for a steadier behavior on the part of the consumer. And we like it, that it’s helped us kind of take some of the swing out in the total numbers versus what happens in the crazy Box Office world that we live in.

Okay, alright. Thanks very much guys. Great quarter.

Thank you, Jim.

Our next question comes from the line of Ben Mogil from Stifel. Please proceed with your question.

Hi, good afternoon and thanks for taking my questions. On the concessions number of a plus 10, can you break it out to what it was at the 48 touched venues and the rest of the untouched venues?

Well, at the reseats, I don’t have a percentage right and actually the reseats are not the full 48, that’s we don’t count and for purposes this number is 37 and it doesn’t include those that haven’t been open for over three months. Both those opened over three months is up 8.5%, I am sorry, it’s up 11% versus kind of the core up 8.5.

So the core was actually like the core what you’ve done some improvements should be not the same level, you’re still growing at a pretty strong level?

Absolutely. But that’s got, but you’re exactly right. I mean it’s got some of the bars that Gerry referenced earlier, 75 bars, some of those are in what we call core theaters, there is fires, there is other enhancements that, but as you, but certainly more concentrated, the reseats have a more concentrated impact from additional food and beverage items.

Yes. I think Ben we might have shared these numbers in the past. For the quarter what we’re seeing is that in our traditional core circuit, the food and beverage per patron is running just under $4, $3.83, in the reseats it’s running a little harder $4.36. And that’s driven obviously by the better ambience, the better atmosphere in the theater also because the reseats have a greater percent penetration of the bar for the MacGuffins lounge. Then lastly in the dine-in theaters, that food and beverage per patron is running above $10, $10.25. Pretty strong growth, pretty consistent growth across all three of the formats as Craig indicated. We like giving people the option and they respond accordingly and even when the core is running at 3.93, 8.5% improvement over prior, for the quarter, we’re fairly pleased with that number only to see the other two run even harder 11% up, 22% up or numbers that are even bigger. We enhance food and beverage the whole concession fees is working across all of the different formats that are in the circuit nowadays.

Okay. That’s great. And then on internet ticketing, are you seeing it, I am not sure how much you can get a sense of this, but are you seeing it sort of on a cost basis help you or is it more driving incidence of attendance. And then as a follow-up to that if you were to, that you were to sort of see Fandango do a deal with MovieTickets.com, would that presumably help the system as well?

Well that’s a great question, not thought of it. For us what really moves the needle is the availability of tickets in more websites. The notion that existed in our circuit a couple of years ago that any one building you can buy the tickets for that building in only one website that’s what was broken. We’ve now burst it through that. And frankly in my humble opinion the more places you make the goods available the more likely you are to increase your sales. Beyond that, so combination of those guys will see, it’s really about making the tickets available in Fandango, MovieTickets, our own website, another that we are negotiating with. Beyond that what I will tell you is that the behavior is rather interesting. Just this weekend, just Friday, Saturday, Sunday, that we just had, the biggest movie, the John Wick, right, 28% of our sales were online. For Gone Girl which had now been out three weekends, 43% of our sales were online. So that kind of tells you that customer, the audience matters a lot. Gone Girl of course it’s more, it’s a different kind of audience than John Wick even they are both rated R et cetera, et cetera, but one clearly appeals to an older audience than the other does. And you see that older audience skewing towards the web. Why? Because they don’t want to get to the box office and not have a ticket and they rather get to the box office with a ticket not only that but it will be a reserve seat. So, those kinds of customers are going to go into web. So, we’ll see those kinds of variations, 28% all the way to 43%, 44% based on the content as well. So for us really matters that it’s available and the people that it’s easy and the people can get to it, so that when they feel they’re making the plans for the weekend and they feel like going to the movies, the conversion to back sell them a ticket is immediate and right away.

That’s great. Thank you very much. What do you think about a larger unified platform or do you think you can do that even without those two third parties merging?

A larger unified platform for internet ticket sales you mean.

Yes. Like if you saw I mean we got Fandango and MovieTickets together with that, would you see that as accelerating those trends?

Yes. That would be great. We love it. I mean we are frankly somewhat agnostic to the many different players out there. I want to cut a deal with (indiscernible), I want to cut a deal with these new super-integrated platform that you’re describing. I have deals with Fandango for all of my theaters, I have deals with MovieTickets for all of my theaters. Of course in my own website, I have my own ticketing engine as well. We, to us frankly they are all sales channels and they are more of the sales channels that we can sell through I think the better off the industry is certainly we think the better of AMC is going to be. You got to make some parameters, the thing is got to be up and running, it’s (100%) or product directly you got to make sure that it’s not a wrong, kind of a flood by night, obviously that is going to wind up providing the customer bad experience but that’s not the case within the players that we mentioned here. So for us people want to put up more websites or want to consolidate websites and making experience better for the guest, we’re going to be right there, we’re going to be rightly horned.

That’s great. Thank you very much, Gerry.

You bet.

Our next question comes from the line of Jim Goss from Barrington Research. Please proceed with your question.

Thanks. Actually I’d like to follow-up first with something Ben just raised in terms of concession barriers. You indicated that the revenues per customer were higher at the reseated auditoriums versus the core. I was wondering how the percent and dollar gross margins vary from one category to another?

Let’s see if I can give you that quickly.

Well I’ve got it, Gerry.

Okay.

So, on the core it’s 13.7% reseated is 12.2 that’s the cost.

Okay.

As you get dine-ins, dine-ins we’ve talked about around 25%, it’s actually less.

Around 25%. So, those are the food and beverage cost offer the numbers that we had discussed with Ben. The reseats still a little lower because there will be a greater percentage which I don’t have the exact amount but I’ll give you because the re-seat, the 48 re-seats have a greater penetration of lounges than the traditional circuit does. In other words we have as a percent of the fleet more penetration on the re-seats with bars than we do in this in the core circuit.

Okay. And also you earlier you started to paint an interesting picture where there is the reseats along with the price increases sort of complemented one another. And I wanted if you could talk a little bit more about how long from start the maturity of this process and is the curve in terms of attendance running something like 30% in the first year, 8% second year, and then tail off little and then that sort of supplemented with the price increases as you said at three quarters of a year to a year and then like how many years you pursue price increases to get to a mature state?

Yes.

I don’t know what the mature state is, I’ll give you the numbers because..

Yes.

Okay.

I don’t know that we are there yet, but we see some leveling I guess the rate of growth kind of starts to slow a little bit after you get out beyond a couple of years. But look and even in the first year we see and this is looking at the year-to-date period when the industry was down 6%.

6% or so right.

Yes. So, the reseats they are under a year old up 33% in revenues. Because they are over 50% in the second year as you are getting into a year older and they kind of got a full year behind them. And you’re still up about low single digits in the third year. In an industry it’s down 6 you are still up a couple of 3% in the third year. So, is it slowing down, yes, but you’ve had some pretty strong growth over that kind of two to three year period.

What we’re seeing Jim is the first year out the attendance increases are 50 plus. In the year one to two range, that slows down to the 30s, and then by year three we have now a few of those, then it comes down to single digits that’s what we’ve seen in year-to-date September, in an industry to Craig’s point that was down 6. So, we’re seeing now in the all that one of these, all that one of the or the reseat of theaters we’re seeing 10 points of difference between when the industry is performing and what these theaters are performing, of course a much attendance base, in some cases double the attendance that we used to have in the buildings prior to their remodel. So we are encouraged by two things (a) the sustainability, the fact that it’s not just a new car smell, it’s not a shinning new object affect that we are seeing in these things. But that we are actually holding on to those gains in the years two and three, quite strongly, so we are pleased and encouraged by the behavior.

And you have not seen that, you railed it all or compromised by reseats by competitors you might respect as being other premium cinema chains?

Well, we haven’t had a lot of that yet. We are now as we mentioned 48 buildings in 550, first mover advantage in a lot of these markets. So we haven’t had a lot of people, we have had perhaps a couple or a four, that we’ve had people than reseat against us in a theater that we have done to remodel. There is some share still going on, but frankly not as dramatic as we’ve seen what’s into a traditional theater. We tend to hold on. That’s my point that I made earlier to one of the questions regarding having to percent a total package. Once you’re AMC staff member, once I got you in that remodel period, once you’re enjoying the bar, somebody else on the street may remodel, but they are going to take the entire building, all they do is change a share. If they don’t have a strong loyalty program, if they don’t have the wine, the beer they drink for you, if they don’t have a better food program for you, yes sure, they will remodel, but you’re not going to get the same thing over there that you’re getting over here. So we think it holds on to those customers and so far even though those coupled that we have seen built out here in the Midwest frankly, w e are not experiencing any kind of losses. The trends continue to be positive versus what the Peter was doing prior to the remodel and again that’s – they are encouraging to us.

Again, one last thing, what signs are you looking forward to assure yourselves that the 2015 film slate optimism has been warranted?

What sign….

Everything always looks better next year, I’m wondering…

Yes, the – okay everything always – and particularly in this business it does.

Right.

But the truth is that when you look at the slate that has been announced and it has been dated. Forget all of the stuff that will come later, the stuff that we are reading all about movies that some of which were slated up for this year, they have got moved out for whatever reason. We are pretty encouraged. We can argue all day long about what the next Avengers will do, but when the first one did upwards of $670 million some odd to expect that that movie is only going to do $150 million is probably not that we are probably underestimating it right there. What we think will happen in 2015 is that for the first time, the industry will break through that elusive $11 billion mark. To be clear, our expectation is that, yes we will burst through that $11 billion mark that we fell short last year that we are not going to come anywhere near this year. But if you look at 2012 and you plot of $11 billion into 2015, it’s only a 0.5 CAGR. So yes, sure it looks better next year, it always does in this business. But when you then trend that out over more than 6 months or 12 months or you start looking at 18 months and 24 months, it’s a 0.5 CAGR. 0.5 CAGR is pretty historically found, it’s not in our rages expectation for next year. So that’s why we are encouraged. Yes, wherever you have 2014 ending, we are looking forward at 2015 and saying that feels a lot like 2012 did and if we plot it against that and put an $11 billion tag on it, it’s a 0.5 CAGR, it’s not banking on homeruns here. We will go ahead and take royal baseball, a couple of hits, and a couple of stolen bases and couple of guys across the plate.

Alright. Well, thanks Gerry. Thanks Craig.

You bet guys.

Our next question comes from the line of Barton Crockett from FBR Capital Markets. Please proceed with your question.

Okay, thanks for taking the question here. Back to the merger consideration is there any strategic benefit you think or a combination of a larger theater companies? We just went to a stage when Fox emerged with one of others that could come back. During this important quarter, the theater changes to get bigger and maybe come back bigger studios over time or to maybe better capacity that goes around the (indiscernible)?

Yes, that’s a great question, Barton. Much of that I heard at all but if I just to restate, is there any strategic benefit or any significant benefit to a combination of the largest circuits blending and merging with one another? Size does matter in a mature industry and we are clearly that. There are some economies of scale that can be gained by through sheer size. There are some efficiencies that can be had, but in all candor, those efficiencies are hard to imagine will come on the studio front. We all seem to have a pretty similar film cost when you look at the public. So, not sure that there will be much synergy in getting bigger on what is really the single largest cost in our P&L. There maybe some perhaps with some of the landlords maybe perhaps, but we have got pretty strong relationships there. Some of the suppliers cope maybe the ConAgra guys with the corn, maybe the oils it’s hard to imagine that there is really a lot of synergy that can be gained by the sheer size. I think they – I am sorry, well G&A clearly there will be some you would expect some of that, but I think the greater benefit, Barton really from a combination comes across in deploying a strategy that is clearly working for us into a bigger sandbox. So to me, although there sure they should be some G&A synergies and perhaps a couple of pennies that can be squeezed out of the cost of a bulb or a gallon of coke or something, the real gain will come from taking a view – taking some of the synergies that we have deployed and that are working into a bigger sandbox, into a greater number of theaters and so on. That’s where the real win we think would come. It’s not a cost play. It’s a top line play. And attempting to bend frankly, the attendance behavior from guests by deploying the reseats and the food and beverage etcetera into just more buildings into more markets, I think that’s a real strategic value. Other than that, I don’t know people smarter than I may argue that there are some. I am all yours, but I don’t know that.

Okay. If I could ask one other question, on your balance sheet, how much capacity would you have on your balance sheet to pursue acquisitions? How much more leverage do you think you would be comfortable taking on what’s the kind of your max ratio? And do you have the ability maybe to work with Dalian Wanda to use their balance sheet to pursue deals?

I will try the second one first. I mean, I think if you start what you start taking borrowing capacity or capital from a source – from a large shareholder. You kind of get into this relative value question of okay, what has – how do you kind of split that up, because you got a public segment that’s not contributing and you’ve got large shareholders. I mean, how do you make that whole? It’s a relative value fairness thing that you can do. People have done it. It’s just got a little bit of hair on it. So, is that a possibility? Yes. It’s got its own set of complications involved in it and that’s kind of how I think we think of it. We talked about in this business kind of on an ongoing basis, you – we like the 3.5 to 4 times and look currently if you could get a big deal done and take the leverage up to 4, I think you would want to be within 1 turn or 0.5, three quarters to a turn of your competitors, your comps in the industry. The person that didn’t do a deal and stays lower levered, I think he still want to have visibility within three quarters to a turn and that you could get your way back, working way back down in line with that competitor. I don’t know if that helps. I guess it does. Maybe you add a turn, but you wouldn’t want to find yourself a 1.5 turn worse off from a leverage perspective than one of your competitors.

Yes. Just to wrap that answer up, Barton, I don’t know that we will comfortable levering up without a clear plan to lever back down. So, one thing is to look at the hill and say okay, we can go up there, but unless that path to that hill comes with a path back down, I don’t know that makes me nervous. We like where we are right now. It’s a good place to be. God knows we have run the company much more levered than this in the private days. I think Craig captured it. We want to be within a turn of norms, not be an outlier.

Okay, that’s great. Thank you.

Ladies and gentlemen, we have reached the time limit for today’s call. I’d like to turn it back to Gerry Lopez for closing comments.

Just want to thank everybody for listening this afternoon and your continued attention to our company and our results. Have a great afternoon or evening and go Royals.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.