AMC Entertainment Holdings, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. Although the request references 2019 Q4, this filing reports full-year results; quarterly figures are noted separately where provided. AMC operates movie theatres in the United States and international markets.
Business context and reporting period
AMC operated 1,004 theatres and 11,041 screens in 15 countries at year-end, with approximately 356.4 million attendees during 2019. Revenue primarily comes from admissions and food and beverage sales. Dalian Wanda owned about 49.85% of common shares and controlled approximately 74.89% of voting power.
Key financial metrics
| Metric | 2019 | 2018 |
|---|---|---|
| Total revenue | $5.471 billion | $5.461 billion |
| Admissions revenue | $3.301 billion | $3.385 billion |
| Food and beverage revenue | $1.720 billion | $1.672 billion |
| Operating income | $136.0 million | $265.0 million |
| Net earnings (loss) | $(149.1) million | $110.1 million |
| Adjusted EBITDA (non-GAAP) | $771.4 million | $929.2 million |
| Operating cash flow | $579.0 million | $523.2 million |
| Capital expenditures | $518.1 million | $576.3 million |
| Cash and cash equivalents at year-end | $265.0 million | $313.3 million |
Operating margin was approximately 2.5% in 2019 versus 4.9% in 2018; net margin was approximately negative 2.7% versus positive 2.0%. Operating cash flow less capital expenditures was approximately $60.9 million, before other investing items and landlord contributions.
At year-end, corporate borrowings had a carrying value of approximately $4.753 billion; stated principal maturities totaled $4.911 billion. Finance lease liabilities were $99.9 million. Adoption of the new lease standard resulted in $5.500 billion of operating lease liabilities on the balance sheet. Cash working capital deficit, excluding restricted cash, was $1.271 billion. Available borrowing capacity was reported as $215 million under the U.S. revolving facility and $117 million under Odeon’s facility, subject to debt-document limitations.
Material changes versus 2018
- Revenue was nearly flat, but admissions revenue fell 2.5%, reflecting a 1.8% decline in average ticket price and 0.7% lower attendance. Food and beverage revenue rose 2.9%, and other theatre revenue rose 11.3%.
- Operating income fell 48.7% and AMC moved from net earnings to a net loss. Adjusted EBITDA declined 17.0%.
- Rent expense increased $170.0 million, with much of the change associated with adoption of ASC 842 and reclassification of certain lease-related amounts; the filing cautions that prior-year figures were not restated. The accounting change also reclassified approximately $56 million of build-to-suit lease principal payments into operating cash flows.
- Long-lived asset impairment charges rose to $84.3 million from $13.8 million, covering 54 theatres and 660 screens, plus a U.S. property. Goodwill of $4.789 billion was not impaired, although valuation depended on significant estimates.
- AMC refinanced term loans and redeemed notes in 2019, extending the term loan maturity to 2026. It recorded $16.6 million of expense related to debt repayment and modification.
Outlook, commentary, risks and unusual items
- Management expected 2020 capital expenditures, net of landlord contributions, of approximately $275 million to $300 million and planned to convert a further 390 screens to recliner seating. No specific revenue or earnings guidance is provided.
- Management stated that operating cash flow, existing cash and available facilities should fund operations, planned capital spending and dividends for at least the next 12 months, while noting debt covenants and other limitations. AMC reported compliance with financial debt covenants at year-end.
- In February 2020, AMC declared a quarterly dividend of $0.03 per share, down from $0.20, reducing the quarterly payout by about $18 million. The filing notes dividends are discretionary and subject to liquidity and debt restrictions; the convertible notes also contain dividend-related provisions.
- Fourth-quarter 2019 revenue was $1.448 billion, operating income was $43.4 million and net loss was $13.5 million. The quarter included $84.3 million of non-cash impairment charges. Annual results were also affected by volatile fair-value changes in derivatives tied to convertible notes and a contingent stock cancellation option.
- Major risks include film availability and performance, distributor concentration, competition from streaming and other entertainment, shrinking theatrical release windows, substantial debt and lease commitments, refinancing and interest-rate exposure, foreign currency movements, impairment risk, and possible public-health emergencies. The filing specifically identified the novel coronavirus as a potential attendance risk.
- AMC disclosed securities and shareholder litigation, including actions relating to its 2017 offering and 2018 transactions involving Wanda and Silver Lake. Management said it did not expect the matters discussed to have a material adverse effect, but acknowledged litigation outcomes are uncertain.
- KPMG issued unqualified opinions on the consolidated financial statements and internal control over financial reporting; management also concluded disclosure controls and internal controls were effective.
Important facts for investors to verify
- Debt principal, near-term maturities, interest costs, covenant capacity and the availability of revolving credit, including restrictions on borrowing and dividends.
- Cash generation after capital spending and lease payments, and whether management’s stated 12-month liquidity assessment remains applicable.
- Attendance, ticket pricing and film slate performance, alongside the growth and profitability of food and beverage and ancillary revenue.
- The effects of ASC 842 on rent expense, cash-flow classification and leverage comparisons; operating lease liabilities are substantial.
- Assumptions underpinning goodwill and theatre impairment tests, and whether further impairment charges arise.
- The sustainability of the reduced dividend and potential dilution or adjustment provisions associated with the $600 million convertible notes.
- Developments in the disclosed litigation, film-distribution practices, and the attendance and operating effects of public-health or other external disruptions.