First Quarter Highlights
• Total Revenues of $941.5 million
• Net Loss of $2,176.3 million, including $1,851.9 million of non-cash impairment charges
• Adjusted Net Loss of $231.6 million
• Adjusted EBITDA of $3.1 million
• Cash balance as of March 31, 2020 of $299.8 million
AMC Entertainment Holdings, Inc. (NYSE: AMC) (“AMC” or “the Company”), today reported results for the first quarter ended March 31, 2020.
AMC’s 2020 fiscal year started strongly with total revenues up nearly 10% compared to the prior year through February. However, as theatres in Italy and across Europe began closing in late February and social distancing practices were initiated in the U.S. in response to the ensuing COVID-19 global pandemic, attendance and revenues began to deteriorate in early March.
On March 17, 2020, in response to COVID-19 safety concerns for our associates and guests, and in compliance with local, state and federal directives, AMC suspended operations at all domestic and international theatres, resulting in virtually no revenue for the Company for the remaining two weeks of the first quarter.
“These are truly unprecedented times. I join with all our employees around the world to offer our sympathies to those affected by the coronavirus, as well as our sincerest gratitude to those on the front lines,” said Adam Aron, CEO and President of AMC. “After starting the year with two solid months of revenue growth compared to last year, in midMarch we were forced to pivot the entire company to respond to the effects of the pandemic.”
Aron continued, “Our top priorities remain the safety and well-being of our guests and associates, combined with our taking sweeping actions to preserve the long term viability of AMC Entertainment. In response to the suspension of theatre operations, AMC took swift action to achieve three priorities – 1) dramatically reduce our cash burn, including furloughing all of our U.S. executives and employees and the vast majority of our global workforce, as well as eliminating non-essential operating and capital expenditures, 2) strengthen our liquidity by working with our landlord and studio partners to defer or abate theatre and film rents, respectively, as well as raising an additional $500 million of public market debt, and 3) preserving our capabilities and commencing comprehensive planning efforts to effectively reopen our theatres when it is safe and smart to do so.”
Aron concluded, “We are confident we are taking the necessary steps on a broad array of fronts to ensure AMC’s future success as we navigate these turbulent and uncertain times.”
Balance Sheet, Cash and Liquidity
AMC’s top financial priority remains liquidity management. Accordingly, the Company has taken the following actions:
• During the three months ended March 31, 2020, drew down approximately $325 million (full availability) under existing revolving credit facilities:
– $215 million (the full availability net of letters of credit) under our $225.0 million senior secured revolving credit facility due April 22, 2024.
– £89.2 million (approximately $110 million in USD, the full availability net of letters of credit) under our £100 million revolving credit facility due February 14, 2022.
• In April 2020, issued $500 million of 10.5% first lien notes due 2025.
• Working with our landlords, vendors, studio, and other business partners to manage, defer, and/or abate certain cash costs during suspended operations at our theatres.
• Introduced an active cash management process, which, among other things, requires senior management approval of all outgoing payments.
• Suspended shareholder cash returns, including the Company’s stock repurchase program and, in compliance with certain financial covenants related to our indebtedness, future dividend payments. The suspension of any future dividends when considered in tandem with the dividend decrease of $0.17 per share in the first quarter of 2020 when compared to the first quarter of 2019, results in aggregate quarterly savings of $17.5 million.
The Company has taken and continues to take significant steps to preserve cash by eliminating non-essential costs, including the following:
• Implemented measures to reduce corporate-level employment costs, including;
– full or partial furloughs of all corporate-level company employees, including senior executives, with individual workload and salary reductions ranging from 20% to 100%.
– cancellation of pending annual merit pay increases.
– elimination or reduction of non-healthcare benefits, including 401(K) match. Similar corporate level cost reductions have occurred internationally.
• All domestic theatre-level crew members have been fully furloughed and theatre-level management has been reduced to the minimum level necessary to begin resumption of operations when permitted. Similar efforts to reduce employment costs are being undertaken internationally consistent with applicable laws across the jurisdictions in which the Company operates.
• Nearly all contractor roles have been suspended.
• Suspended non-essential operating expenditures, including marketing, promotion, and travel and entertainment expenses.
• Terminated or deferred all non-essential capital expenditures to minimum levels necessary during the suspension of operations at our theatres.
• Natural reduction of variable expenses including cost of goods sold (e.g., film rent and food & beverage costs).
CARES Act Relief
The Company expects to receive relief from the Coronavirus Aid, Relief and Economic Security (CARES) Act in the following forms:
• Approximately $18.5 million cash tax refunds and refundable alternative minimum tax credits with the filing of our 2019 federal and state tax returns, which have been filed.
• Deferral of social security payroll tax matches that would otherwise be required in 2020.
• Receipt of a payroll tax credit in 2020 for expenses related to paying wages and health benefits to employees who are not working as a result of closures and reduced receipts associated with COVID-19.
Theatre Reopening Plans
The Company is looking forward to welcoming guests to its theatres as soon as it is safe and wise to do so, as well as being permissible under local, state /provincial and federal guidelines.
To that end, we have already reopened 10 theatres in Norway, Germany, Spain and Portugal, and currently expect to be fully open globally in July. In our two largest territories, we are currently planning to reopen almost all of our U.S. and U.K. theatres in July, to be positioned to showcase Warner Bros’ release of Christopher Nolan’s “Tenet” now slated for release on July 17th followed by Disney’s “Mulan” now slated for release on July 24th.
We have a very robust slate for the remainder of the year including: “Unhinged”, “Saint Maud”, “Antebellum”,
“Spongebob Square Pants”, “Wonder Woman 1984”, “A Quiet Place II”, “The King’s Man”, “Black Widow”, “Soul”,
“Dune”, “West Side Story” and “Top Gun: Maverick” among others. While we are in active dialogue with Universal, no movies made by Universal Studios are currently on our docket.
Many things can change between now and July, but with the safety and well-being of our associates and guests as our first priority, combined with our rebuilding a successful and thriving business, we are taking the following steps aimed at optimizing the timeliness, safety and profitability of our reopenings:
• Maintaining close contact with local, national and international officials to understand and coordinate the timing and requirements under which we can reopen.
• Consulting with current and former faculty from the prestigious Harvard University School of Public Health to seek guidance from the best scientists and experts on how best to create a safe environment for our guests and associates. Personal protection equipment, cleaning protocols, limited theatre capacity, blocked seating, and other strategies are all being planned. We are especially looking at high tech solutions as well, to aid in our sanitization techniques including the use of electrostatic sprayers, HEPA vacuums and wherever possible upgraded MERV 13 air ventilation filters.
• Establishing a protocol partnership with the global leader in all things clean, The Clorox Company (NYSE:CLX), as they advise us as to how we can make our theatre environments as safe and clean as possible.
• Educating our guests so that they understand the actions we are taking with their safety in mind.
• Implementing aggressive marketing communications and promotional activity aimed at jumpstarting consumer demand.
• Reducing our cost structure, intensely examining every category of our expenditures to lower our spending wherever possible.
Other Key Highlights
Non-cash Impairment Charges: During the quarter ended March 31, 2020, the Company recorded $1,851.9 million of non-cash impairment charges related to long lived assets, indefinite-lived intangible assets and goodwill.
The impairment test for goodwill involves estimating the fair value of the reporting unit and comparing that value to its carrying value. A decline in the common stock price and prices of the Company’s corporate borrowings and the resulting impact on market capitalization are two of several factors considered when making this evaluation.
This press release includes “forward-looking statements” within the meaning of the federal securities laws. In many cases, these forward-looking statements may be identified by the use of words such as “will,” “may,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “projects,” “goals,” “objectives,” “targets,” “predicts,” “plans,” “seeks,” and variations of these words and similar expressions. Examples of forward-looking statements include statements we make regarding the impact of COVID-19 and our liquidity. Any forward-looking statement speaks only as of the date on which it is made. These forward-looking statements may include, among other things, statements related to AMC’s current expectations regarding the performance of its business, financial results, liquidity and capital resources, and the impact to its business and financial condition of, and measures being taken in response to, the COVID-19 virus, and are based on information available at the time the statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks, trends, uncertainties and other facts that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks, trends, uncertainties and facts include, but are not limited to, risks related to: the impact of the COVID-19 virus on AMC, the motion picture exhibition industry, and the economy in general, including AMC’s response to the COVID-19 virus related to suspension of operations at theatres, personnel reductions and other cost-cutting measures and measures to maintain necessary liquidity and increases in expenses relating to precautionary measures at AMC’s facilities to protect the health and well-being of AMC’s customers and employees; the general volatility of the capital markets and the market price of AMC’s Class A common stock; motion picture production and performance; AMC’s lack of control over distributors of films; increased use of alternative film delivery methods or other forms of entertainment; general and international economic, political, regulatory and other risks, including risks related to the United Kingdom’s exit from the European Union or widespread health emergencies, or other pandemics or epidemics; risks and uncertainties relating to AMC’s significant indebtedness, including AMC’s borrowing capacity under its revolving credit agreement; AMC’s ability to execute cost cutting and revenue enhancement initiatives as previously disclosed and in connection with response to COVID-19; limitations on the availability of capital; AMC’s ability to refinance its indebtedness on favorable terms; availability of financing upon favorable terms or at all; risks relating to impairment losses, including with respect to goodwill and other intangibles, and theatre and other closure charges; and other factors discussed in the reports AMC has filed with the SEC. Should one or more of these risks, trends, uncertainties or facts materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by the forward-looking statements contained herein. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. For a detailed discussion of risks, trends and uncertainties facing AMC, see the section entitled “Risk Factors” in the Company’s Form 10-Q for the quarter ended March 31, 2010 filed with the SEC, the section entitled “Risk Factors” in AMC’s Form 10-K for the year ended December 31, 2019 filed with the SEC, and the risks, trends and uncertainties identified in its other public filings. AMC does not intend, and undertakes no duty, to update any information contained herein to reflect future events or circumstances, except as required by applicable law.
About AMC Entertainment Holdings, Inc.
AMC is the largest movie exhibition company in the United States, the largest in Europe and the largest throughout the world with approximately 1,000 theatres and 11,000 screens across the globe. AMC has propelled innovation in the exhibition industry by: deploying its Signature power-recliner seats; delivering enhanced food and beverage choices; generating greater guest engagement through its loyalty and subscription programs, web site and mobile apps; offering premium large format experiences and playing a wide variety of content including the latest Hollywood releases and independent programming. AMC operates among the most productive theatres in the United States’ top markets, having the #1 or #2 market share positions in 21 of the 25 largest metropolitan areas of the United States. AMC is also #1 or #2 in market share in 9 of the 15 countries it serves in North America, Europe and the Middle East. For more information, visit www.amctheatres.com.