AMC Entertainment Holdings, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Amounts are in U.S. dollars; financial statement amounts are in millions unless noted. AMC operates theatres in the U.S. and internationally. Results remained severely affected by COVID-19 restrictions, limited seating, reduced attendance and delayed or alternative film releases.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $148.3 | $941.5 |
| Operating loss | $(427.8) | $(1,986.1) |
| Net loss attributable to AMC | $(566.9) | $(2,176.3) |
| Loss per share, basic and diluted | $(1.42) | $(20.88) |
| Adjusted EBITDA, non-GAAP | $(294.7) | $3.1 |
| Cash used in operating activities | $(312.9) | $(184.0) |
| Cash used in investing activities | $(16.0) | $(87.4) |
| Cash provided by financing activities | $854.7 | $312.4 |
- Cash and cash equivalents were $813.1 at March 31, 2021, up from $308.3 at year-end; cash plus restricted cash was $842.1. The quarterly increase in cash and restricted cash was $520.7.
- At March 31, corporate borrowings were $5,439.4 long term plus $20.0 current. The debt note reports $5,112.5 of principal borrowings; figures differ because of carrying-value adjustments. Finance lease liabilities were $90.3 and operating lease liabilities totaled $5,500.0.
- Working capital deficit, excluding restricted cash, was $597.5. AMC reported $211.9 available under its $225 million revolving credit facility, net of letters of credit.
- Attendance fell 88.8% year over year; average screens operated fell 24.2%. Revenue declined 84.2%, including admissions down 87.8%, food and beverage down 82.6%, and other theatre revenue down 66.4%.
Material changes versus Q1 2020
- Net loss narrowed from $2,176.3 to $567.2, largely because Q1 2020 included $1,851.9 of impairment charges; Q1 2021 had none. The improvement does not indicate a return to profitability: operating loss was $427.8 and Adjusted EBITDA was negative $294.7.
- Interest expense increased to $162.8 from $82.8, including a $70.0 non-cash write-off of unamortized discount and financing charges when $600 million of convertible notes converted to equity.
- Operating cash outflow increased to $312.9 from $184.0 despite lower capital spending. Capital expenditures were $11.9 versus $91.7.
- AMC raised $596.9 gross through Q1 at-the-market stock sales, issuing approximately 187.1 million shares. It also issued $100 million of 15%/17% cash/PIK toggle notes and obtained an Odeon term loan facility. Conversion of the $600 million convertible notes issued 44.4 million Class A shares.
- Domestic theatres operating with limited capacity increased from 394 at January 1 to 585 at March 31 (about 99% of domestic theatres). International theatres operating fell from 109 to 97 (about 27% of international theatres) over the same period.
Outlook, commentary and risks
- Management estimated existing cash would cover operations, minimum liquidity requirements, obligations and planned capital expenditures through early May 2022 only if attendance rose significantly from Q3 2021 and reached about 85% of pre-COVID levels by Q4 2021, remaining there through the first half of 2022. This is an assumption, not a guarantee.
- Management stated current cash burn is unsustainable and said it could not assure it would obtain sufficient additional liquidity beyond twelve months. Failure to meet minimum liquidity requirements could materially harm the business; the filing warns a restructuring or bankruptcy could result in a total loss for common stockholders.
- Minimum liquidity requirements were approximately $145 million, including $100 million under the extended revolving-credit covenant suspension and approximately $45 million under the Odeon facility. The revolving-credit financial covenant suspension was extended to March 31, 2022; the covenant is scheduled to apply beginning with the quarter ending June 30, 2022, subject to the agreement terms.
- Deferred rent obligations were approximately $473 million at March 31, 2021. Management was negotiating abatements and deferrals with landlords; deferrals without abatements would increase future cash needs. AMC also expects rent expenditures to rise as deferred payments come due.
- Debt carries substantial interest costs, including 15% cash or 17% PIK on the new toggle notes and 10.75%/11.25% on the Odeon term loan. Management said creditor discussions may be needed to reduce leverage; potential debt-to-equity transactions could dilute shareholders.
- Film availability and attendance remain uncertain. Risks include continued pandemic effects, delayed releases, shrinking theatrical windows, Warner Bros.’ simultaneous 2021 theatrical/HBO Max releases, and other studios’ accelerated home availability.
- Subsequent to quarter-end, AMC reported raising about $153 million gross through May 5 from sales of approximately 15.5 million additional shares under a new ATM program. The company had also withdrawn a proposal to seek authorization for 500 million additional Class A shares, while stating it planned to pursue issuance of remaining authorized shares.
- Other notable items: the Baltics theatre sale was completed May 6 for remaining consideration of approximately $31.9 million; a securities class action was certified on March 30; and the filing describes other pending shareholder litigation and contingent lease guarantees.
Important facts for investors to verify
- Whether attendance and film releases meet the assumptions underlying management’s liquidity estimate, and whether cash remains above covenant minimums.
- Actual cash burn, future operating cash flow, capital spending and the timing and amount of deferred rent payments or abatements.
- Debt balances, cash versus PIK interest elections, maturities, covenant terms and progress in any creditor negotiations.
- Further equity issuance, dilution, ATM proceeds and the company’s remaining authorized share capacity.
- Whether theatre operating levels and Adjusted EBITDA improve; the non-GAAP measure should be considered alongside GAAP losses and cash flows.
- Developments in the shareholder litigation, contingent lease guarantees, and potential tax-attribute reductions related to cancellation-of-debt income.