AMC Entertainment Holdings, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. AMC operates theatres in the U.S. and internationally. Substantially all theatres were operating during the quarter, compared with pandemic-related closures and capacity limits in Q1 2021; therefore, the sharp year-over-year recovery is against a substantially disrupted comparison period.
Financial performance and liquidity
- Revenue: $785.7 million, up from $148.3 million. Admissions revenue was $443.8 million, food and beverage $252.5 million, and other theatre revenue $89.4 million. Attendance increased to 39.1 million from 6.8 million.
- Losses: Operating loss was $166.9 million versus $427.8 million; net loss was $337.4 million versus $567.2 million. Diluted loss per share was $0.65 versus $1.42. Segment Adjusted EBITDA, a non-GAAP measure, was negative $61.7 million versus negative $294.7 million.
- Costs and margins: Operating costs and expenses totaled $952.6 million. Film exhibition costs were 42.8% of admissions revenue, versus 31.7% a year earlier. Rent expense rose 16.2% to $223.2 million.
- Cash flow: Operating activities used $295.0 million, investing activities used $54.9 million, and financing activities used $76.3 million. Cash and cash equivalents declined to $1.165 billion from $1.593 billion at year-end; including restricted cash, quarter-end cash was $1.189 billion.
- Debt and obligations: Corporate borrowings had a $5.23 billion principal balance and $5.502 billion carrying value; finance lease liabilities were $68.8 million. Operating lease liabilities were $5.185 billion. Working capital was negative $285.0 million.
- Other metrics: Total assets were $10.345 billion and stockholders’ deficit was $2.178 billion. Average diluted shares increased to 515.9 million from 400.1 million.
Material changes and unusual items
- Revenue and attendance rose substantially as theatres reopened, capacity restrictions eased, and film releases increased. Management attributed most of the year-over-year revenue improvement to the pandemic-affected prior-year period.
- AMC issued $950 million of 7.5% first-lien notes due 2029 and used proceeds plus cash on hand to redeem $873.5 million principal of higher-rate first-lien notes. The refinancing generated a $135.0 million debt-extinguishment loss; corporate borrowing interest expense fell to $82.0 million from $151.5 million.
- AMC invested $27.9 million in Hycroft Mining units. It recorded $63.9 million of unrealized investment gains in Q1, including gains on shares and warrants. These fair-value gains are not evidence of theatre operating profitability, and the warrant valuation includes significant unobservable assumptions.
- COVID-related deferred lease amounts remained $271.7 million at quarter-end. Management said rent repayments increased cash outflows.
Outlook, risks, and contingencies
- Management said existing cash, together with operating cash generation, should fund operations, obligations, planned capital expenditures, and covenant requirements for at least the next 12 months. It also said positive operating cash flow and long-term profitability require attendance to rise significantly and approach pre-pandemic levels. The filing gives no specific revenue or earnings guidance.
- Management estimated 2022 capital expenditures, net of landlord contributions, at approximately $150 million to $200 million. It described the business as seasonal, with stronger attendance generally in summer and holiday periods.
- Key risks include renewed pandemic restrictions or reluctance to attend, film-release delays and shorter theatrical exclusivity, competition from streaming, significant debt and refinancing needs, deferred rent, inflation, supply-chain disruption, labor shortages and wage increases, and geopolitical and foreign-currency risks.
- Minimum liquidity requirements were approximately $143 million. The revolving credit facility’s secured leverage covenant suspension was extended through March 31, 2023; a covenant may apply beginning with the quarter ending June 30, 2023 under specified borrowing conditions. Management expected compliance but cautioned that liquidity needs and attendance are difficult to forecast.
- A securities class-action settlement for $18 million received final court approval in February 2022; related stockholder derivative litigation remained ongoing. Management stated that ordinary-course claims and proceedings were not expected to materially affect financial position or overall operating trends, while noting litigation outcomes remain uncertain.
Important facts for investors to verify
- Whether attendance and operating cash flow improve enough to reduce cash burn and support the company’s 12-month liquidity assessment.
- The timing and cash burden of the $271.7 million in deferred lease amounts, alongside recurring lease payments and planned capital spending.
- Debt maturities, interest costs, covenant terms, and AMC’s ability to refinance or meet obligations beyond the stated 12-month outlook.
- The extent to which reported results depend on noncash Hycroft fair-value gains and the assumptions used to value its warrants.
- Whether film availability, consumer demand, inflation, labor costs, and supply constraints affect attendance, margins, and liquidity.