AMC Entertainment Holdings, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; the filing was signed March 12, 2021. AMC operates movie theatres in the U.S. and international markets. COVID-19 closures, capacity limits and a shortage of new theatrical releases severely disrupted operations. The filing reports audited financial statements with an unqualified audit opinion.
Financial performance and position
| Metric | FY2020 | FY2019 | Change/context |
|---|---|---|---|
| Total revenue | $1,242.4 million | $5,471.0 million | Down 77.3% |
| Admissions revenue | $712.1 million | $3,301.3 million | Down 78.4%; attendance down 78.9% |
| Food and beverage revenue | $362.4 million | $1,719.6 million | Down 78.9% |
| Operating income (loss) | $(4,102.7) million | $136.0 million | Includes $2,513.9 million of impairment charges |
| Net income (loss) | $(4,589.4) million | $(149.1) million | Basic and diluted loss per share: $(39.15), versus $(1.44) |
| Adjusted EBITDA | $(999.2) million | $771.4 million | Non-GAAP; down $1,770.6 million |
| Cash from operating activities | $(1,129.5) million | $579.0 million | Reflects sharply lower trading and working-capital movements |
| Capital expenditures | $173.8 million | $518.1 million | Reduced to maintenance and prior commitments |
| Cash and cash equivalents | $308.3 million | $265.0 million | Plus $13.1 million restricted cash |
| Corporate borrowings | $5,715.8 million | $4,753.4 million | Year-end principal amount was $5,411.6 million |
| Stockholders’ equity (deficit) | $(2,885.1) million | $1,214.2 million | Turned to a deficit |
Operating lease liabilities were approximately $5.5 billion; discounted operating-lease payments were also approximately $5.5 billion. Working capital was negative $1,104.6 million, excluding restricted cash. AMC had drawn the available amounts under its revolving facilities as of year-end. Film exhibition costs were 45.3% of admissions revenue (51.5% in 2019); food and beverage costs were 24.5% of related revenue (16.2% in 2019). These ratios reflect a markedly altered mix and low operating volume.
Fourth-quarter 2020 revenue was $162.5 million, operating loss was $969.6 million and net loss attributable to AMC was $945.8 million. U.S. fourth-quarter attendance fell approximately 92.3% year over year and international attendance fell approximately 89.2%.
Material changes versus the prior comparable period
- AMC suspended all theatre operations on or before March 17, 2020, then gradually reopened with restricted seating and hours. Resurgence-related closures followed in the fourth quarter. Average screens operated for the year fell 52.7%.
- Goodwill and other asset impairments totaled $2,513.9 million, including $2,306.4 million of goodwill impairment. Net loss widened substantially; impairment charges were non-cash but drove much of the reported loss.
- Operating cash flow swung from positive $579.0 million to negative $1,129.5 million. Financing activities provided $1,330.3 million, primarily from debt and equity issuance.
- AMC issued $500 million of 10.5% first-lien notes due 2025 and $300 million of 10.5% first-lien notes due 2026; exchanged about $2.02 billion of subordinated debt for about $1.46 billion of second-lien notes due 2026, reducing debt principal by about $555 million and extending some maturities.
- During 2020, at-the-market stock sales generated $272.8 million gross proceeds from approximately 91 million shares. AMC permanently closed 63 theatres with 593 screens and reduced growth capital spending.
Outlook, liquidity, risks and unusual items
- Conditional liquidity outlook: Management estimated that cash on hand, January 2021 financing proceeds and the February 2021 Odeon term loan would cover operations, covenant minimums and obligations through at least March 31, 2022, if attendance rose substantially beginning in Q3 2021 and reached about 90% of pre-COVID levels in Q4 2021 and Q1 2022. AMC said its current cash burn was unsustainable and that attendance, releases and liquidity forecasts were highly uncertain.
- Subsequent financing and dilution: In January 2021, AMC sold approximately 187 million shares for $596.9 million gross proceeds, issued $100 million of 15%/17% cash/PIK toggle first-lien notes, and converted $600 million of convertible notes into 44.4 million Class A shares. In February, Odeon entered a £140 million and €296 million term loan facility, bearing 10.75% interest in year one and 11.25% thereafter, with a cash-or-PIK option. These transactions affected liquidity, leverage, interest costs and share count.
- Covenants and rent: A March 2021 amendment extended suspension of the revolving-credit financial covenant through March 31, 2022, subject to conditions including a $100 million minimum liquidity test. AMC also faced about $450 million of deferred rent obligations as of year-end, with rent cash outflows scheduled to increase in 2021. It reported ceasing payments on some leases and receiving notices of default while negotiating concessions.
- Restructuring risk: AMC warned that if attendance did not recover or additional liquidity and rent relief were unavailable, it might need to restructure liabilities in or out of court; in a future liquidation or bankruptcy, common shareholders could lose their entire investment. Further creditor discussions or debt-to-equity transactions could be dilutive.
- Other significant items: The debt exchange generated an estimated $1.2 billion of cancellation-of-debt income for tax purposes, with a significant reduction in tax attributes anticipated. A-List subscription charges were paused during closures and restarted as theatres reopened. Dividends were prohibited under debt-covenant conditions from April 24, 2020; AMC paid $6.5 million in dividends during 2020 versus $84.1 million in 2019.
- Operating risks: Film release delays, simultaneous streaming releases and shorter theatrical windows may limit attendance and revenue. AMC cited Warner Bros.’ planned simultaneous 2021 HBO Max releases and a Universal agreement allowing PVOD availability after a minimum 17-day theatrical window, with an extension to 31 days for certain strong-opening films.
- Contingencies and controls: Securities class-action and derivative litigation remained pending; AMC stated outcomes were uncertain. Management and the auditor reported effective internal control over financial reporting at year-end.
Most important facts for investors to verify
- Whether attendance and theatre operating capacity recovered as assumed, and whether film supply and theatrical release windows supported that recovery.
- Cash burn, available unrestricted liquidity, covenant compliance and the terms or availability of any additional financing.
- Actual payment, abatement or deferral of the approximately $450 million of rent obligations, and resolution of lease defaults or landlord remedies.
- Current debt principal, cash versus PIK interest requirements, maturity schedule and ability to service debt and lease commitments.
- Shares outstanding after subsequent offerings and note conversions, potential further issuance, and the resulting dilution to existing holders.
- Any further impairments, tax-attribute reductions, litigation developments or changes to management’s liquidity assumptions.