Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 4, 2020

Exhibits

10-Q: Quarterly report pursuant to Section 13 or 15(d)

Published on November 4, 2020

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​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

​

​

(Mark One)

​

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

​

Commission file number 001-33892

​

​

AMC ENTERTAINMENT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

​

Delaware
(State or other jurisdiction of
incorporation or organization)

26-0303916
(I.R.S. Employer
Identification No.)

One AMC Way
11500 Ash Street, Leawood, KS
(Address of principal executive offices)

​
66211
(Zip Code)

​

​

Registrant’s telephone number, including area code: (913) 213-2000

​

​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

​

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

​

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

​

​

​

​

​

Large Accelerated Filer ☐ 

Accelerated filer ☒ 

Non-accelerated filer ☐

Smaller reporting company ☐

​

Emerging growth company ☐

​

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ☐

​

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

​

Securities registered pursuant to Section 12(b) of the Act:

​

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A common stock

AMC

New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

​

​

​

Title of each class of common stock

   

Number of shares
outstanding as of October 30, 2020

Class A common stock
Class B common stock

​

85,624,174

51,769,784

​

​

​

​

AMC ENTERTAINMENT HOLDINGS, INC.

​

INDEX

​

​

​

Page
Number

​

PART I—FINANCIAL INFORMATION

​

Item 1.

Financial Statements (Unaudited)

3

​

Condensed Consolidated Statements of Operations

3

​

Condensed Consolidated Statements of Comprehensive Loss

4

​

Condensed Consolidated Balance Sheets

5

​

Condensed Consolidated Statements of Cash Flows

6

​

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

78

Item 4.

Controls and Procedures

79

​

PART II—OTHER INFORMATION

​

Item 1.

Legal Proceedings

79

Item 1A.

Risk Factors

80

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

83

Item 3.

Defaults Upon Senior Securities

84

Item 5.

Other Information

84

Item 6.

Exhibits

89

​

Signatures

92

​

​

​

2

PART I—FINANCIAL INFORMATION

​

Item 1. Financial Statements. (Unaudited)

​

AMC ENTERTAINMENT HOLDINGS, INC.

​

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

September 30,

​

September 30,

​

September 30,

​

September 30,

(In millions, except share and per share amounts)

    

2020

    

2019

    

2020

    

2019

​

​

(unaudited)

​

(unaudited)

Revenues

​

​

​

​

​

​

​

​

​

​

​

​

Admissions

​

$

62.9

​

$

797.3

​

$

631.8

​

$

2,424.3

Food and beverage

​

 

29.1

​

 

420.0

​

 

317.6

​

 

1,281.3

Other theatre

​

 

27.5

​

 

99.5

​

 

130.5

​

 

317.7

Total revenues

​

​

119.5

​

​

1,316.8

​

​

1,079.9

​

​

4,023.3

Operating costs and expenses

​

​

​

​

​

​

​

​

​

​

​

​

Film exhibition costs

​

​

26.6

​

​

416.8

​

 

298.5

​

 

1,264.6

Food and beverage costs

​

 

8.8

​

 

67.2

​

 

66.7

​

 

205.1

Operating expense, excluding depreciation and amortization below

​

 

192.1

​

 

419.0

​

 

663.8

​

 

1,259.2

Rent

​

 

214.3

​

 

238.7

​

 

676.2

​

 

726.6

General and administrative:

​

​

​

​

​

​

​

​

​

​

​

​

Merger, acquisition and other costs

​

 

1.0

​

 

4.7

​

 

3.0

​

 

11.2

Other, excluding depreciation and amortization below

​

 

32.7

​

 

37.5

​

 

91.3

​

 

126.9

Depreciation and amortization

​

​

123.5

​

​

112.1

​

​

365.7

​

​

337.1

Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill

​

 

195.9

​

 

—

​

 

2,047.8

​

 

—

Operating costs and expenses

​

 

794.9

​

​

1,296.0

​

 

4,213.0

​

​

3,930.7

Operating income (loss)

​

​

(675.4)

​

​

20.8

​

​

(3,133.1)

​

​

92.6

Other expense (income):

​

​

​

​

​

​

​

​

​

​

​

​

Other expense (income)

​

 

125.0

​

 

(1.3)

​

 

145.3

​

 

5.1

Interest expense:

​

​

​

​

​

​

​

​

​

​

​

​

Corporate borrowings

​

 

82.8

​

 

73.2

​

 

233.7

​

 

218.7

Finance lease obligations

​

 

1.4

​

 

1.8

​

 

4.5

​

 

6.0

Non-cash NCM exhibitor services agreement

​

​

10.1

​

​

10.1

​

​

30.1

​

​

30.4

Equity in (earnings) loss of non-consolidated entities

​

 

10.6

​

 

(7.5)

​

 

25.9

​

 

(24.2)

Investment expense (income)

​

 

(4.1)

​

 

(0.5)

​

 

4.0

​

 

(18.7)

Total other expense, net

​

 

225.8

​

​

75.8

​

 

443.5

​

​

217.3

Loss before income taxes

​

 

(901.2)

​

​

(55.0)

​

 

(3,576.6)

​

​

(124.7)

Income tax provision (benefit)

​

 

4.6

​

 

(0.2)

​

 

66.7

​

​

10.9

Net loss

​

​

(905.8)

​

​

(54.8)

​

​

(3,643.3)

​

​

(135.6)

Less: Net income (loss) attributable to noncontrolling interests

​

​

—

​

​

—

​

​

—

​

​

—

Net loss attributable to AMC Entertainment Holdings, Inc.

​

$

(905.8)

​

$

(54.8)

​

$

(3,643.3)

​

$

(135.6)

Loss per share attributable to AMC Entertainment Holdings, Inc.'s common stockholders:

​

​

​

​

​

​

​

​

​

​

​

​

Basic

​

$

(8.41)

​

$

(0.53)

​

$

(34.56)

​

$

(1.31)

Diluted

​

$

(8.41)

​

$

(0.53)

​

$

(34.56)

​

$

(1.31)

Average shares outstanding:

​

​

​

​

​

​

​

​

​

​

​

​

Basic (in thousands)

​

​

107,695

​

​

103,850

​

​

105,428

​

​

103,826

Diluted (in thousands)

​

​

107,695

​

​

103,850

​

​

105,428

​

​

103,826

​

See Notes to Condensed Consolidated Financial Statements.

​

3

AMC ENTERTAINMENT HOLDINGS, INC.

​

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

September 30,

​

September 30,

​

September 30,

​

September 30,

(In millions)

    

2020

    

2019

    

2020

    

2019

​

​

(unaudited)

​

(unaudited)

Net loss

​

$

(905.8)

​

$

(54.8)

​

$

(3,643.3)

​

$

(135.6)

Other comprehensive income (loss):

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized foreign currency translation adjustments

​

 

11.4

​

 

(68.2)

​

 

(26.8)

​

 

(102.9)

Realized loss on foreign currency transactions reclassified into other expense

​

​

—

​

​

—

​

​

—

​

​

0.6

Pension adjustments:

​

​

​

​

​

​

​

​

​

​

​

​

Realized net loss reclassified into other expense, net of tax

​

 

0.2

​

 

0.1

​

 

0.9

​

 

0.2

Equity method investee's cash flow hedge:

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized net holding loss arising during the period

​

 

—

​

 

—

​

 

—

​

 

(0.1)

Other comprehensive income (loss)

​

 

11.6

​

 

(68.1)

​

 

(25.9)

​

 

(102.2)

Total comprehensive loss

​

​

(894.2)

​

​

(122.9)

​

​

(3,669.2)

​

​

(237.8)

Comprehensive income (loss) attributable to noncontrolling interests

​

​

—

​

​

—

​

​

—

​

​

—

Comprehensive loss attributable to AMC Entertainment Holdings, Inc.

​

$

(894.2)

​

$

(122.9)

​

$

(3,669.2)

​

$

(237.8)

​

See Notes to Condensed Consolidated Financial Statements.

​

4

AMC ENTERTAINMENT HOLDINGS, INC.

​

CONDENSED CONSOLIDATED BALANCE SHEETS

​

(Unaudited)

​

​

​

​

​

​

​

​

​

(In millions, except share data)

    

September 30, 2020

    

December 31, 2019

 

ASSETS

​

​

​

​

​

​

​

Current assets:

​

​

​

​

​

​

​

Cash and cash equivalents

​

$

417.9

​

$

265.0

​

Restricted cash

​

​

10.9

​

​

10.5

​

Receivables, net

​

 

97.5

​

 

254.2

​

Other current assets

​

 

82.3

​

 

143.4

​

Total current assets

​

 

608.6

​

 

673.1

​

Property, net

​

 

2,332.5

​

 

2,649.2

​

Operating lease right-of-use assets, net

​

​

4,475.8

​

​

4,796.0

​

Intangible assets, net

​

 

164.5

​

 

195.3

​

Goodwill

​

 

2,874.4

​

 

4,789.1

​

Deferred tax asset, net

​

 

0.6

​

 

70.1

​

Other long-term assets

​

 

419.8

​

 

503.0

​

Total assets

​

$

10,876.2

​

$

13,675.8

​

LIABILITIES AND STOCKHOLDERS’ EQUITY

​

​

​

​

​

​

​

Current liabilities:

​

​

​

​

​

​

​

Accounts payable

​

$

376.9

​

$

543.3

​

Accrued expenses and other liabilities

​

 

268.9

​

 

324.6

​

Deferred revenues and income

​

 

400.9

​

 

449.2

​

Current maturities of corporate borrowings

​

 

20.0

​

 

20.0

​

Current maturities of finance lease liabilities

​

​

10.5

​

​

10.3

​

Current maturities of operating lease liabilities

​

​

511.0

​

​

585.8

​

Total current liabilities

​

 

1,588.2

​

 

1,933.2

​

Corporate borrowings

​

 

5,803.8

​

 

4,733.4

​

Finance lease liabilities

​

​

84.2

​

​

89.6

​

Operating lease liabilities

​

​

4,909.4

​

​

4,913.8

​

Exhibitor services agreement

​

 

542.0

​

 

549.7

​

Deferred tax liability, net

​

 

43.4

​

 

46.0

​

Other long-term liabilities

​

 

240.6

​

 

195.9

​

Total liabilities

​

 

13,211.6

​

 

12,461.6

​

Commitments and contingencies

​

​

​

​

​

​

​

Stockholders’ equity (deficit):

​

​

​

​

​

​

​

AMC Entertainment Holdings, Inc.'s stockholders' equity:

​

​

​

​

​

​

​

Class A common stock ($.01 par value, 524,173,073 shares authorized; 61,882,218 shares issued and 58,149,593 outstanding as of September 30, 2020; 55,812,702 shares issued and 52,080,077 outstanding as of December 31, 2019)

​

 

0.6

​

 

0.5

​

Class B common stock ($.01 par value, 51,769,784 shares authorized, issued and outstanding as of September 30, 2020 and December 31, 2019)

​

 

0.5

​

 

0.5

​

Additional paid-in capital

​

 

2,125.0

​

 

2,001.9

​

Treasury stock (3,732,625 shares as of September 30, 2020 and December 31, 2019, at cost)

​

 

(56.4)

​

 

(56.4)

​

Accumulated other comprehensive loss

​

 

(52.0)

​

 

(26.1)

​

Accumulated deficit

​

 

(4,387.8)

​

 

(706.2)

​

Total AMC Entertainment Holdings, Inc.'s stockholders’ equity (deficit)

​

 

(2,370.1)

​

 

1,214.2

​

Noncontrolling interests

​

​

34.7

​

​

—

​

Total equity (deficit)

​

​

(2,335.4)

​

​

1,214.2

​

Total liabilities and stockholders’ equity (deficit)

​

$

10,876.2

​

$

13,675.8

​

See Notes to Condensed Consolidated Financial Statements.

5

AMC ENTERTAINMENT HOLDINGS, INC.

​

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

​

​

​

​

​

​

​

​

​

​

Nine Months Ended

(In millions)

​

September 30, 2020

​

September 30, 2019

Cash flows from operating activities:

​

(unaudited)

Net loss

​

$

(3,643.3)

​

$

(135.6)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

​

​

​

​

​

​

Depreciation and amortization

​

​

365.7

​

​

337.1

Deferred income taxes

​

​

65.2

​

​

7.0

Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill

​

​

2,047.8

​

​

—

Amortization of net discount (premium) on corporate borrowings to interest expense

​

​

(4.2)

​

​

8.1

Amortization of deferred financing costs to interest expense

​

​

11.6

​

​

11.8

PIK interest expense

​

​

29.8

​

​

—

Non-cash portion of stock-based compensation

​

​

9.5

​

​

11.5

Gain on dispositions

​

​

(3.3)

​

​

(16.0)

(Gain) loss on derivative asset and derivative liability

​

​

109.0

​

​

(15.4)

Loss on repayment of indebtedness

​

​

—

​

​

16.6

Equity in (earnings) loss from non-consolidated entities, net of distributions

​

​

40.3

​

​

(10.2)

Landlord contributions

​

​

31.9

​

​

89.0

Other non-cash rent

​

​

(1.7)

​

​

19.5

Deferred rent

​

​

(8.1)

​

​

(45.3)

Net periodic benefit cost

​

​

0.8

​

​

1.3

Change in assets and liabilities:

​

​

​

​

​

​

Receivables

​

​

165.3

​

​

93.8

Other assets

​

​

67.3

​

​

(3.2)

Accounts payable

​

​

(121.2)

​

​

(101.2)

Accrued expenses and other liabilities

​

​

17.2

​

​

(55.4)

Other, net

​

​

48.8

​

​

(3.2)

Net cash provided by (used in) operating activities

​

​

(771.6)

​

​

210.2

Cash flows from investing activities:

​

​

​

​

​

​

Capital expenditures

​

​

(156.0)

​

​

(348.2)

Acquisition of theatre assets

​

​

—

​

​

(11.8)

Proceeds from disposition of long-term assets

​

​

8.6

​

​

21.4

Investments in non-consolidated entities, net

​

​

(9.3)

​

​

(9.5)

Other, net

​

​

1.9

​

​

(0.3)

Net cash used in investing activities

​

​

(154.8)

​

​

(348.4)

Cash flows from financing activities:

​

​

​

​

​

​

Proceeds from issuance of Term Loan due 2026

​

​

—

​

​

1,990.0

Payment of principal Senior Secured Notes due 2023

​

​

—

​

​

(230.0)

Payment of principal Senior Subordinated Notes due 2022

​

​

—

​

​

(375.0)

Call premiums paid for Senior Secured Notes due 2023 and Senior Subordinated Notes due 2022

​

​

—

​

​

(15.9)

Principal payment of Term Loans due 2022 and 2023

​

​

—

​

​

(1,338.5)

Proceeds from issuance of First Lien Notes due 2025

​

​

490.0

​

​

—

Proceeds from issuance of First Lien Notes due 2026

​

​

270.0

​

​

—

Borrowings (repayments) under revolving credit facilities

​

​

322.2

​

​

(1.7)

Scheduled principal payments under Term Loans

​

​

(15.0)

​

​

(16.9)

Proceeds from Class A common stock issuance

​

​

2.8

​

​

—

Proceeds from sale of noncontrolling interest

​

​

37.5

​

​

—

Principal payments under finance lease obligations

​

​

(4.5)

​

​

(8.5)

Cash used to pay for deferred financing costs

​

​

(15.2)

​

​

(11.7)

Cash used to pay dividends

​

​

(4.3)

​

​

(63.4)

Taxes paid for restricted unit withholdings

​

​

(1.0)

​

​

(1.3)

6

Net cash provided by (used in) financing activities

​

​

1,082.5

​

​

(72.9)

Effect of exchange rate changes on cash and cash equivalents and restricted cash

​

​

(2.8)

​

​

(2.3)

Net increase (decrease) in cash and cash equivalents and restricted cash

​

​

153.3

​

​

(213.4)

Cash and cash equivalents and restricted cash at beginning of period

​

​

275.5

​

​

324.0

Cash and cash equivalents and restricted cash at end of period

​

$

428.8

​

$

110.6

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

​

​

​

​

​

​

Cash paid during the period for:

​

​

​

​

​

​

Interest (including amounts capitalized of $0.8 million and $0.6 million)

​

$

182.1

​

$

184.1

Income taxes received, net

​

$

(9.6)

​

$

0.1

Schedule of non-cash activities:

​

​

​

​

​

​

Investment in NCM

​

$

3.8

​

$

1.6

Construction payables at period end

​

$

32.5

​

$

89.1

​

See Notes to Condensed Consolidated Financial Statements.

7

AMC ENTERTAINMENT HOLDINGS, INC.

​

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

​

September 30, 2020

​

(Unaudited)

​

NOTE 1—BASIS OF PRESENTATION

​

AMC Entertainment Holdings, Inc. (“Holdings”), through its direct and indirect subsidiaries, including American Multi-Cinema, Inc. and its subsidiaries, (collectively with Holdings, unless the context otherwise requires, the “Company” or “AMC”), is principally involved in the theatrical exhibition business and owns, operates or has interests in theatres located in the United States and Europe. Holdings is an indirect subsidiary of Dalian Wanda Group Co., Ltd. (“Wanda”), a Chinese private conglomerate.

As of September 30, 2020 and October 30, 2020, Wanda owned approximately 47.10% and 37.68% of Holdings’ outstanding common stock, respectively, and 72.76% and 64.46%, respectively, of the combined voting power of Holdings’ outstanding common stock and has the power to control Holdings’ affairs and policies, including with respect to the election of directors (and, through the election of directors, the appointment of management), entering into mergers, sales of substantially all of the Company’s assets and other transactions.

Temporarily Suspended Operations. As of March 17, 2020, the Company temporarily suspended all theatre operations in its U.S. markets and International markets in compliance with local, state, and federal governmental restrictions and recommendations on social gatherings to prevent the spread of COVID-19 and as a precaution to help ensure the health and safety of the Company’s guests and theatre staff. As a result of these temporarily suspended operations, the Company’s revenues and expenses for the three and nine months ended September 30, 2020 are significantly lower than the revenues and expenses for the three and nine months ended September 30, 2019.

Industry Box Office. The North American industry box office has been significantly impacted by COVID-19 in the third quarter ending September 30, 2020. Although certain states authorized the reopening of theatres as early as June 2020, with limited seating capacities and social distancing guidelines, some states, including California, New York, and Maryland, remain partially closed for theatrical exhibition as of the end of October 2020. As a result, studios have postponed new film releases or moved them to the home video market, and movie release dates may continue to move in the future. Major movie releases that were previously scheduled to be released in the fourth quarter have either been rescheduled for 2021 or slated for direct to streaming in lieu of a theatrical release, leaving a reduced slate of movie releases for the remainder of the year, and release dates may continue to move. Certain competitors have decided to temporarily reclose their theatres in light of the ongoing pandemic and the reduced slate of movie releases, which may further exacerbate the trend described above. On October 23, 2020, the Company resumed operations at several AMC locations throughout the state of New York as a result of the state government allowing movie theatres to reopen throughout much of the state. The combination of theatre reopening restrictions and limited new film distribution has resulted in a significantly lower industry box office for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. In response to the current low attendance levels, the Company has made adjustments to theatre operating hours to align screen availability and associated theatre operating costs with attendance levels for each theatre. The Company has also introduced AMC Private Screening, which allows movie goers to reserve a separate AMC Safe & CleanTM auditorium for a private screening for up to 20 people, starting at $99 plus tax.

Update on Theatre Reopenings-U.S. markets. The Company’s theatre operations in the U.S. markets remained suspended for the entire second quarter ended June 30, 2020. The Company resumed limited operations in its U.S. markets in late August 2020 with the initial 115 theatre reopenings occurring on August 20, 2020. The Company reopened 170 additional theatres on August 26, 2020, and 142 additional theatres on September 4, 2020. As of September 30, the Company had resumed operations at 467 U.S. theatres, with limited seating capacities of between 25% and 40%, representing approximately 78% of the U.S. theatres and 73% of 2019 U.S. same-theatre revenue. Since the resumption of operations in its U.S. markets, the Company has served more than 1,973,000 guests as of September 30, 2020, representing a same-theatre attendance decline of approximately 83% compared to the same period a year ago. As of the end of October 2020, the Company operated approximately 539 of its 600 U.S. theatres, with limited seating capacities. The remaining 10% of the U.S. theatres left to reopen are primarily located in

8

California, Maryland, and New York, and include some of the Company’s most productive theatres, representing approximately 15% of 2019 U.S. same theatre revenue. In regions where theatres are not yet able to open, the Company continues to have productive discussions with local and state government authorities about the appropriate timing for a resumption of operations.

Update on Theatre Reopenings-International markets. The Company resumed limited operations in the International markets in early June. As of June 30, 2020, the Company had resumed operations at 37 theatres, with limited seating capacities, in nine countries and recorded attendance of 100,000 guests in June. As of July 31, 2020, the Company had resumed operations at 182 leased and partnership theatres. As of September 30, 2020, the Company had resumed operations at 321 leased and partnership theatres. This represents approximately 91% of the Company’s international theatres and approximately 93% of 2019 international same-theatre revenue. Seating capacity at the reopened international theatres remains limited to between 25% and 50% of capacity to ensure social distancing for guests. Since the resumption of operations in its International markets on June 3, 2020, the Company’s theatres have served more than 4,637,000 guests as of September 30, 2020, representing a same-theatre attendance decline of approximately 74% compared to the same period a year ago. As of the end of October 2020, the Company operated 261 of its 358 international theatres. The reduction in open international theatres between September 30, 2020 and October 30, 2020 is a result of a recent resurgence of COVID-19 cases in its International markets. Italy, Germany, Spain, Ireland and the UK have announced or enacted plans to reinstitute national or regional lockdowns to protect their citizenry. As a result, the Company plans to close or has closed some or all of its previously reopened theatres in these countries, depending on the respective mandate. The Company expects to reopen these theatres when the respective mandate has been lifted and it is safe to do so and permissible under local, provincial as well as national guidelines.

Liquidity. In response to the COVID-19 pandemic, the Company has taken and is continuing to take significant steps to preserve cash by eliminating non-essential costs, including reductions to executive cash compensation and elements of its fixed cost structure:

● Suspended non-essential operating expenditures, including marketing & promotional and travel and entertainment expenses; and where possible, for example: utilities, reduced essential operating expenditures to minimum levels necessary while theatres are closed.
● Terminated or deferred all non-essential capital expenditures to minimum levels necessary while theatres are closed.
● Implemented measures to reduce corporate-level employment costs, including full or partial furloughs of all corporate-level Company employees, including senior executives, with individual work load and salary reductions ranging from 20% to 100%; cancellation of pending annual merit pay increases; and elimination or reduction of non-healthcare benefits.
● All domestic theatre-level crew members were fully furloughed and theatre-level managements’ hours were reduced to the minimum levels necessary to begin resumption of operations when permitted. Similar efforts to reduce theatre-level and corporate employment costs were undertaken internationally consistent with applicable laws across the jurisdictions in which the Company operates. As the Company resumed limited operations, employment costs increased.
● Working with the Company’s landlords, vendors, and other business partners to manage, defer, and/or abate the related rent expenses and operating expenses during the disruptions caused by the COVID-19 pandemic.
● Introduced an active cash management process, which, among other things, requires senior management approval of all outgoing payments.
● Since April 24, 2020, the Company has been prohibited from making dividend payments in accordance with the covenant suspension conditions in its Senior Secured Credit Facility Agreement. The Company had also previously elected to decrease the dividend paid in the first quarter of 2020 by $0.17 per share when compared to the first quarter of 2019. The cash savings as a result of the prior decrease and current prohibition on making dividend payments was $59.1 million during the nine months ended September 30, 2020 in comparison to the nine months ended September 30, 2019.
● The Company is prohibited from making purchases under its recently authorized stock repurchase program in accordance with the covenant suspension conditions in its Senior Secured Credit Facility Agreement.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees. Based on the Company’s analysis of the CARES Act, the Company expects to recognize the following benefits:

9

● Approximately $17.4 million of cash tax refunds from overpayments and refundable alternative minimum tax credits with the filing of the Company’s 2019 federal tax return, amending 2018 state tax returns and filing 2019 state tax returns in which the Company expects a refund. Thus far in 2020, the Company has received approximately $7.1 million of cash tax refunds.
● Deferral of social security payroll tax matches that would otherwise be required in 2020.
● Receipt of a payroll tax credit in 2020 for expenses related to paying wages and health benefits to employees who are not working as a result of temporarily suspended operations and reduced receipts associated with COVID-19.

​

The Company intends to seek any available potential benefits, including loans, investments or guarantees, under future government programs for which the Company qualifies domestically and internationally, including those described above. The Company has taken advantage of many forms of governmental assistance internationally including but not limited to revenue and fixed cost reimbursements, payroll subsidies, rent support programs, direct grants, and property tax holidays. The Company cannot predict the manner in which such benefits will be allocated or administered, and the Company cannot assure the reader that it will be able to access such benefits in a timely manner or at all.

During the three months ended September 30, 2020, the Company exchanged more than 87% of its senior subordinated notes for newly issued 10%/12% Cash/PIK Toggle Second Lien Subordinated Secured Notes due 2026 (the “Second Lien Notes due 2026”), thereby generating a near-term cash savings for the Company of between approximately $120 million to $180 million as a result of the ability to pay interest in kind on the Second Lien Notes due 2026 for the first three interest payment periods that would be payable semi-annually in arrears on June 15 and December 15, beginning on December 15, 2020 through December 15, 2021, subject to certain limitations described herein, and received proceeds from the issuance of the new 10.5% first lien secured notes due 2026 (the “First Lien Notes due 2026”) of $270.0 million, net of discounts of $30.0 million and deferred financing costs paid to lenders of $6.0 million. Further, as discussed in Note 6—Corporate Borrowings, the Company’s lenders have granted relief from the maintenance covenants in the revolving credit agreements through March 31, 2021. The first required compliance in the next 12 months is June 30, 2021. The Company’s ability to maintain compliance with the covenants will depend on the recovery of its theatre operations and the generation of sufficient cash flow (or EBITDA). If the Company is not in compliance with financial covenants, the Company’s lenders could exercise remedies including declaring the principal and interest on all outstanding indebtedness due or payable immediately. The Company’s cash and cash equivalents as of September 30, 2020 were $417.9 million. The Company’s total cash burn for the three months ended September 30, 2020 was approximately $388 million and included approximately $39 million of third party costs and $23.3 million of accrued interest payments related to the Exchange Offers. The Company’s total cash burn is impacted by, among other things, the timing of resumption of theatre operations, costs associated with the AMC Safe and Clean initiative, landlord negotiations and minimum lease payments, the timing of movie releases, theatre attendance levels, and food and beverage receipts.

Going forward, the Company’s ability to reduce cash burn rates and ultimately generate positive cash flow, and therefore the extent to which the Company will require additional sources of liquidity, will depend almost entirely on its future attendance levels that drive admission and food and beverage revenue. Attendance in the fourth quarter of 2020 will be influenced by, among other things, the timing of new film releases, the ability to open remaining theatres in its major markets, the expansion or contraction of mandated seating capacity limitations, and consumer confidence in moviegoing. If the Company experiences negative developments with any of these factors, among others, its cash burn rates and liquidity will also be negatively affected, and the Company may require additional sources of liquidity in amounts that could be material. Furthermore, commencing in 2021, absent further negotiations with landlords, the Company’s cash expenditures for rent will increase significantly following periods of agreed deferrals. Given the reduced movie slate for the fourth quarter, in the absence of significant increases in attendance from current levels or incremental sources of liquidity, at the existing cash burn rate, the Company anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021. Thereafter, to meet its obligations as they become due, the Company will require additional sources of liquidity or increases in attendance levels. The required amounts of additional liquidity are expected to be material. The Company continues to explore potential sources of additional liquidity, including:

● Additional debt and equity financing; to date, the Company raised gross proceeds of approximately $2.9 million and $53.2 million during September 2020 and October 2020, respectively, through its at-the-market offering of approximately 15.0 million shares of its Class A common stock, see Note 7—Stockholders’ Equity for further information. In addition, the Company announced on October 20, 2020, it authorized the sale of 15.0 million additional shares of its Class A common stock through at-the-market offerings, under which, as of the October

10

30, 2020 settlement date, the Company has raised additional gross proceeds of approximately $33.8 million through the sale of approximately 11.8 million shares of its Class A common stock;
● Further renegotiations with landlords regarding its lease payments;
● Potential asset sales;
● Joint-venture or other arrangements with existing business partners; and
● Minority investments in the Company’s capital stock.

There is a significant risk that these potential sources of liquidity will not be realized or that they will be insufficient to generate the material amounts of additional liquidity that would be required until the Company is able to achieve more normalized levels of operating revenues. In the event the Company determines that these sources of liquidity will not be available to it or will not allow it to meet its obligations or does not comply with financial covenants as they become due, it would likely seek an in-court or out-of-court restructuring of its liabilities, and in the event of a future liquidation or bankruptcy proceeding, holders of the Company’s common stock would likely suffer a total loss of their investment. The Company’s cash burn is impacted by, among other things, the timing of resumption of theatre operations, including with respect to some of the Company’s most productive theatres which remain closed, the timing of movie releases and the slate of future releases, theatre attendance levels, landlord negotiations and minimum lease payments, costs associated with the AMC Safe and Clean initiative, and food and beverage receipts.

While the Company has used its best estimates based on currently available information, it is very difficult to estimate its liquidity requirements and future cash burn rates, and depending on the assumptions used regarding the timing and ability to achieve more normalized levels of operating revenue, the estimates of amounts of required liquidity vary significantly. There can be no assurance that the accuracy of the assumptions used to estimate its liquidity requirements and future cash burn will be correct, or that the Company will be able to achieve more normalized levels of attendance described above, which are materially higher than its current attendance levels, and its ability to be predictive is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic, which has resulted in stay-at-home orders, governmental closure orders, film production and scheduling disruption, reopening uncertainties and the cessation of its entire U.S. and International theatre operations for the first time in its history.

The Company realized significant cancellation of debt income (“CODI”) in connection with its debt restructuring. As a result of such CODI, the Company estimates a significant portion of its net operating losses and tax credits will be eliminated as a result of tax attribute reductions. Any loss of tax attributes as a result of such CODI may adversely affect the Company’s cash flows and therefore its ability to service its indebtedness.

Due to these factors, substantial doubt exists about the Company’s ability to continue as a going concern for a reasonable period of time.

Use of Estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of AMC, as discussed above, and should be read in conjunction with the Company’s Annual Report on Form 10–K for the year ended December 31, 2019. The accompanying condensed consolidated balance sheet as of December 31, 2019, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10–Q. Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the Company’s financial position and results of operations. All significant intercompany balances and transactions have been eliminated in consolidation. Majority-owned subsidiaries that the Company has control of are consolidated in the Company’s consolidated subsidiaries; consequently, a portion of its stockholders’ equity, net earnings (loss) and total comprehensive income (loss) for the periods presented are attributable to noncontrolling interests. Due to the seasonal nature of the Company’s business and the suspension of operations at all the Company’s theatres due to the COVID-19 pandemic, results for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020. The Company manages its business under two reportable segments for its theatrical exhibition operations, U.S. markets and International markets.

11

Baltics’ theatre sale agreement. On August 28, 2020, the Company entered into an agreement to sell its equity interest in Forum Cinemas OU, which consists of nine theatres located in the Baltics’ region (Latvia, Lithuania and Estonia) and is included in the Company’s International markets reportable segment, for total consideration of approximately €77.25 million, including cash of approximately €64.35 million or $76.6 million prior to any transaction costs. This transaction was undertaken by the Company to further increase its liquidity and strengthen its balance sheet at a transaction multiple that demonstrates that market participants ascribe positive value to the business. The completion of the sale will take place in several steps and is contingent upon clearance from each regulatory competition council in each country. The Company received $37.5 million (€31.53 million) cash consideration upon entering into the sale agreement on August 28, 2020, transferred an equity interest of 49% in Forum Cinemas OU to the purchaser and recognized a noncontrolling interest of $34.9 million in total equity (deficit). Transaction costs of $1.0 million and net gain of $2.8 million related to the sale of 49% equity interest were recorded in additional paid-in capital during the three and nine months ended September 30, 2020. The carrying amounts of the major classes of assets and liabilities included as part of the disposal group that were previously included in the International markets reportable segment were; goodwill of $48.6 million, property, net, of $15.9 million, operating lease right-of-use assets, net of $16.0 million, and current and long-term operating lease liabilities of $2.3 million and $14.1 million, respectively. The remaining cash consideration is payable upon completion of the sale of the remaining 51% equity interest, which is expected to occur in three separate transactions by country following competition council clearance in each country. At September 30, 2020, the Company’s noncontrolling interest of 49% in Forum Cinemas was $34.7 million. The Company estimates the sale of Forum Cinemas will be completed in 2021.

Accumulated other comprehensive loss. The following table presents the change in accumulated other comprehensive loss by component:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pension and

​

​

​

 

​

​

Foreign

​

Other

​

​

​

 

(In millions)

    

Currency

    

Benefits

    

Total

 

Balance December 31, 2019

​

$

(8.8)

​

$

(17.3)

​

$

(26.1)

​

Other comprehensive loss before reclassifications

​

 

(26.8)

​

 

—

​

 

(26.8)

​

Amounts reclassified from accumulated other comprehensive loss

​

 

—

​

 

0.9

​

 

0.9

​

Balance September 30, 2020

​

$

(35.6)

​

$

(16.4)

​

$

(52.0)

​

​

Accumulated depreciation and amortization. Accumulated depreciation was $2,143.9 million and $1,820.1 million at September 30, 2020 and December 31, 2019, respectively, related to property. Accumulated amortization of intangible assets was $34.8 million and $22.8 million at September 30, 2020 and December 31, 2019, respectively.

12

Other expense (income). The following table sets forth the components of other expense (income):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

September 30,

​

September 30,

​

September 30,

​

September 30,

(In millions)

​

2020

​

2019

​

2020

​

2019

Derivative liability fair value adjustment for embedded conversion feature in the Convertible Notes

​

$

89.9

​

$

5.7

​

$

89.4

​

$

(14.9)

Derivative asset fair value adjustment for contingent call option related to the Class B common stock purchase and cancellation agreement

​

​

5.9

​

​

(8.5)

​

​

19.6

​

​

(0.5)

Credit losses related to contingent lease guarantees

​

​

6.1

​

​

—

​

​

15.3

​

​

—

International governmental assistance due to COVID-19

​

​

(13.5)

​

​

—

​

​

(17.9)

​

​

—

Loss on Pound sterling forward contract

​

​

—

​

​

0.7

​

​

—

​

​

1.7

Foreign currency transactions losses

​

​

0.1

​

​

0.1

​

​

—

​

​

0.7

Non-operating components of net periodic benefit cost

​

​

0.2

​

​

0.3

​

​

0.3

​

​

0.8

Loss on repayment of indebtedness

​

​

—

​

​

—

​

​

—

​

​

16.6

Financing fees related to modification of debt agreements

​

​

36.3

​

​

—

​

​

39.1

​

​

—

Other

​

​

—

​

​

0.4

​

​

(0.5)

​

​

0.7

Total other expense (income)

​

$

125.0

​

$

(1.3)

​

$

145.3

​

$

5.1

​

Impairments. The following table summarizes the Company’s assets that were impaired:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

September 30,

​

September 30,

​

September 30,

​

September 30,

(In millions)

    

2020

    

2019

    

2020

 

2019

Impairment of long-lived assets

​

$

28.1

​

$

—

​

$

119.4

​

$

—

Impairment of indefinite-lived intangible assets

​

​

4.6

​

​

—

​

​

12.9

​

​

—

Impairment of definite-lived intangible assets

​

​

6.4

​

​

—

​

​

14.4