AMC Entertainment Holdings, Inc. — Q2 2020 Form 10-Q
Business context and reporting period. This unaudited filing covers the three and six months ended June 30, 2020, compared with the same periods in 2019. AMC operates movie theatres in the U.S. and internationally. The COVID-19 pandemic led to suspension of all U.S. and international theatre operations by March 17, 2020. U.S. theatres remained closed throughout Q2; AMC resumed limited international operations in June.
Key financial results
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $18.9 million | $1,506.1 million | $960.4 million | $2,706.5 million |
| Operating income (loss) | $(471.6) million | $105.5 million | $(2,457.7) million | $71.8 million |
| Net income (loss) | $(561.2) million | $49.4 million | $(2,737.5) million | $(80.8) million |
| Adjusted EBITDA | $(340.3) million | $237.6 million | $(337.2) million | $345.8 million |
| Operating cash flow | Not presented separately for Q2 | $(415.9) million | $153.6 million |
- Q2 revenue fell 98.7% year over year; admissions revenue was $0.9 million versus $895.5 million. Six-month revenue declined 64.5%, principally because of reduced attendance and closures.
- Q2 Adjusted EBITDA was $(241.6) million in U.S. markets and $(98.7) million internationally. AMC reported attendance of 100,000 in Q2, at the 37 international theatres reopened by June 30.
- For the six months, investing cash outflow was $131.5 million, including $126.7 million of capital expenditures; financing cash inflow was $785.9 million. Cash and restricted cash ended the period at $508.4 million, including $498.0 million of cash and cash equivalents.
- At June 30, total assets were $11.27 billion, total liabilities $12.85 billion, and stockholders’ equity was a deficit of $1.58 billion. Corporate borrowings were $5.50 billion, excluding finance and operating lease liabilities. Current liabilities were $1.71 billion versus current assets of $679.7 million.
- Interest expense was $91.2 million in Q2 and $174.0 million for the six months. Six-month capital expenditures were $126.7 million, down from $229.9 million a year earlier.
Material changes and unusual items
- Six-month results included $1.85 billion of impairment charges, including $1.74 billion of goodwill impairment recorded in Q1 and impairments of theatre and intangible assets. The goodwill charge was non-cash.
- Debt rose from $4.73 billion of corporate borrowings at December 31, 2019 to $5.50 billion at June 30, reflecting new borrowing and revolving-credit drawdowns. On April 24, AMC issued $500 million of 10.5% first-lien notes due 2025; it had also drawn substantially all available amounts under its revolving facilities.
- AMC reported $194.8 million of contractual rent amounts due and unpaid in accounts payable and was negotiating or finalizing rent concessions or deferrals. Additional lease liabilities were deferred under COVID-related concessions.
- Food and beverage costs included $4.5 million of Q2 obsolete-inventory charges; six-month obsolete-inventory charges were $7.2 million.
Liquidity, outlook and risks
- Management cut costs through furloughs and compensation reductions, suspended or deferred nonessential spending and capital expenditures, and worked with landlords and vendors on rent and expense relief. Domestic theatre crews were fully furloughed. Dividends and share repurchases were restricted under debt covenant conditions.
- AMC planned to reopen U.S. theatres in mid-to-late August 2020; by the end of July it had reopened more than 130 international theatres. Management said cash on hand and subsequent financing might fund operations and essential capital spending for 12 months, but emphasized that estimates of attendance, revenue, rent relief, savings and capital needs were uncertain.
- The filing explicitly states that substantial doubt exists about AMC’s ability to continue as a going concern for a reasonable period. A delayed reopening, weaker-than-expected revenue, or renewed closures could require additional financing, which may not be available on favorable terms or at all.
- On July 31, 2020, after quarter-end, AMC completed a debt exchange that reduced exchanged subordinated-note principal by approximately $555 million and extended maturities on approximately $1.7 billion of debt to 2026. It raised $300 million gross from new 10.5% first-lien notes due 2026, before estimated discounts and cash premiums of $36 million. Certain backstop purchasers received 5 million Class A shares. Interest on second-lien notes may be paid partly or wholly in kind for 12–18 months, with estimated near-term cash savings of $120–$180 million. The exchange is expected to be treated as a troubled debt restructuring; AMC estimated $29.7 million of third-party fees would be expensed and was still evaluating the accounting impact.
- Also on July 31, the $600 million convertible notes were restructured, extending maturity to May 2026 and adding a first-priority lien. These and other subsequent-event financing terms were not reflected in the June 30 balance sheet.
- AMC expected 2020 capital expenditures, net of landlord contributions, of $130–$160 million. Key risks include COVID-19 and reopening demand, film-release timing, high indebtedness and interest costs, lease commitments, access to financing, possible further impairments, competition from alternative entertainment, and pending securities and shareholder litigation.
Most important facts for investors to verify
- Whether theatre reopening occurred on schedule and attendance, film releases and cash generation supported management’s liquidity assumptions.
- Current unrestricted cash, cash burn, rent arrears and the status and amount of landlord concessions.
- Final accounting, fees, interest obligations, collateral priority and maturity effects of the July 31 debt exchange and new financing.
- Debt-covenant compliance and access to additional financing, given the filing’s going-concern warning and use of substantially all revolving availability.
- Whether the large Q1 impairments or further deterioration in operating assumptions lead to additional charges or materially change asset values.