10-K: Annual report pursuant to Section 13 and 15(d)
Published on March 12, 2021
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
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The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2020, computed by reference to the price at which the registrant’s Class A common stock was last sold on the New York Stock Exchange on such date was $
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DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s definitive proxy statement, in connection with its 2020 annual meeting of stockholders, to be filed within 120 days of December 31, 2020, are incorporated by reference into Part III of this Annual Report on Form 10-K.
AMC ENTERTAINMENT HOLDINGS, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2020
INDEX
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Forward-Looking Statements
In addition to historical information, this Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “may,” “will,” “forecast,” “estimate,” “project,” “intend,” “plan,” “expect,” “should,” “believe” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions and speak only as of the date on which it is made. Examples of forward-looking statements include statements we make regarding the impact of COVID-19, future attendance levels and our liquidity. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, including those discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the following:
| ● | If attendance levels increase consistent with our assumptions described below, we currently estimate that our existing cash and cash equivalents, net proceeds from the completed issuances of debt and common stock in January 2021 and borrowings under the Odeon Term Loan Facility will be sufficient to comply with minimum liquidity requirements under our debt covenants, fund operations, and satisfy obligations including cash outflows for increased rent and planned capital expenditures currently and through at least March 31, 2022. This requires that we achieve significant increases in attendance levels beginning in the third quarter of 2021 and ultimately reaching approximately 90% of pre COVID-19 attendance levels by the fourth quarter of 2021 and through first quarter of 2022 as the vaccine rollout continues and more Hollywood product is released in our theatres. If we are unable to achieve more normalized levels of attendance and operating revenues as described above, we may be required to obtain additional liquidity. If such additional liquidity were not realized or insufficient we likely would seek an in-court or out-of-court restructuring of our liabilities, and in the event of such future liquidation or bankruptcy proceeding, holders of our common stock and other securities would likely suffer a total loss of their investment; |
| ● | the impact of the COVID-19 virus on us, the motion picture exhibition industry, and the economy in general, including our response to the COVID-19 virus related to suspension of operations at our theatres, personnel reductions and other cost-cutting measures and measures to maintain necessary liquidity and increases in expenses relating to precautionary measures at our facilities to protect the health and well-being of our customers and employees; |
| ● | risks and uncertainties relating to our significant indebtedness, including our borrowings and our ability to meet our financial maintenance and other covenants; |
| ● | shrinking exclusive theatrical release windows; |
| ● | certain covenants in the agreements that govern our indebtedness may limit our ability to take advantage of certain business opportunities and limit or restrict our ability to pay dividends; |
| ● | risks relating to impairment losses, including with respect to goodwill and other intangibles, and theatre and other closure charges; |
| ● | risks relating to motion picture production and performance; |
| ● | our lack of control over distributors of films; |
| ● | intense competition in the geographic areas in which we operate; |
| ● | increased use of alternative film delivery methods including premium video on demand or other forms of entertainment, including the effects of the exit of the United Kingdom from the European Union; |
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| ● | general and international economic, political, regulatory, social and financial market conditions and other risks; |
| ● | limitations on the availability of capital or poor financial results may prevent us from deploying strategic initiatives; |
| ● | our ability to achieve expected synergies, benefits and performance from our strategic theatre acquisitions and strategic initiatives; |
| ● | our ability to refinance our indebtedness on terms favorable to us or at all; |
| ● | our ability to optimize our theatre circuit through new construction, the transformation of our existing theatres, and strategically closing underperforming theatres may be subject to delay and unanticipated costs; |
| ● | AMC Stubs® A-List may not meet anticipated revenue projections which could result in a negative impact upon operating results; |
| ● | failures, unavailability or security breaches of our information systems; |
| ● | our ability to utilize interest expense deductions may be limited annually due to Section 163(j) of the Tax Cuts and Jobs Act of 2017; |
| ● | our ability to recognize interest deduction carryforwards, net operating loss carryforwards, cancellation of debt income and other tax attributes to reduce our future tax liability; |
| ● | our ability to recognize certain international deferred tax assets which currently do not have a valuation allowance recorded; |
| ● | impact of the elimination of the calculation of USD LIBOR rates on our contracts indexed to USD LIBOR; |
| ● | review by antitrust authorities in connection with acquisition opportunities; |
| ● | risks relating to the incurrence of legal liability, including costs associated with the ongoing securities class action lawsuits; |
| ● | dependence on key personnel for current and future performance and our ability to attract and retain senior executives and other key personnel, including in connection with any future acquisitions; |
| ● | increased costs in order to comply or resulting from a failure to comply with governmental regulation, including the General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”) and pending future domestic privacy laws and regulations; |
| ● | the dilution caused by recent and future sales of our Class A common stock could adversely affect the market price of the Class A common stock; |
| ● | the market price and trading volume of our shares of Class A common stock has been and may continue to be volatile, and purchasers of our securities could incur substantial losses; |
| ● | future offerings of debt, which would be senior to our Class A common stock for purposes of distributions or upon liquidation, could adversely affect the market price of our Class A common stock; |
| ● | geopolitical events, including the threat of terrorism or cyber-attacks, or widespread health emergencies, such as the novel coronavirus or other pandemics or epidemics, causing people to avoid our theatres or other public places where large crowds are in attendance; |
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| ● | anti-takeover protections in our amended and restated certificate of incorporation and our amended and restated bylaws may discourage or prevent a takeover of our Company, even if an acquisition would be beneficial to our stockholders; |
| ● | an issuance of preferred stock could dilute the voting power of the common stockholders and adversely affect the market value of our Class A common stock; and |
| ● | other risks referenced from time to time in filings with the SEC. |
This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative but not exhaustive. In addition, new risks and uncertainties may arise from time to time. Accordingly, all forward-looking statements should be evaluated with an understanding of their inherent uncertainty and we caution accordingly against relying on forward-looking statements.
Except as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any reason. Actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Readers are urged to consider these factors carefully in evaluating the forward-looking statements. For further information about these and other risks and uncertainties as well as strategic initiatives, see Item 1A. “Risk Factors” and Item 1. “Business” in this Annual Report on Form 10-K.
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PART I
Item 1. Business
General Development of Business
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 primarily located in the United States and Europe.
As of December 31, 2020, Dalian Wanda Group Co., Ltd. (“Wanda”), a Chinese private conglomerate, owned approximately 23.08% of Holdings’ outstanding common stock and 47.37% of the combined voting power of Holdings’ outstanding common stock and had significant influence over Holdings’ affairs and policies, including with respect to the election of directors (and, through the election of directors, the appointment of management), entering into of mergers, sales of substantially all of our assets and other extraordinary transactions. On February 1, 2021, Wanda exercised their right to convert all outstanding Class B common stock to Class A common stock resulting in ownership in Holdings’ outstanding common stock and voting power of Holdings’ outstanding common stock of approximately 9.8% as of March 3, 2021.
Our business was founded in Kansas City, Missouri in 1920. Holdings was incorporated under the laws of the state of Delaware on June 6, 2007. We maintain our principal executive offices at One AMC Way, 11500 Ash Street, Leawood, Kansas 66211.
COVID-19 Impact, Company Response and Change in Business Strategy
In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) to be a pandemic. The COVID-19 pandemic has disrupted and is expected to continue to disrupt our business, which has and could continue to materially affect our operating results, cash flows and/or financial condition for an extended period of time.
On March 17, 2020, we temporarily suspended all theatre operations in our 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 our guests and theatre staff. We resumed limited operations in the International markets in early June 2020 and limited operations in the U.S. markets in late August 2020. A COVID-19 resurgence during the fourth quarter of 2020 resulted in additional local, state, and federal governmental restrictions and many previously reopened theatres in International markets temporarily suspended operations again.
The North American and International industry box offices have also been significantly impacted by the COVID-19 pandemic, and in response to the suspension of theatre operations by AMC and other theatre exhibitors and the COVID-19 related suspension of new movie production, studios have postponed new film releases beyond 2020 or moved them to the home video market, streaming, or premium video on demand (“PVOD”) platforms.
As a result of the suspended operations and limited new film content, our revenues and expenses for the year ended December 31, 2020 were significantly lower than the revenues and expenses for the year ended December 31, 2019.
Effective vaccines against COVID-19, which are expected to become widely available during 2021, together with the currently scheduled release later this year of major movie titles that have so far been delayed, are expected to have a material positive impact on our industry and have generated optimism that movie theatre attendance levels ultimately will rebound from current levels. In the meantime, however, a continued high level of COVID-19 cases, together with continuing delays of major movie releases and the direct or simultaneous release of movie titles to the home video or streaming markets in lieu of theatre exhibition, have led to theatre closures, prevented the opening of theatres in major markets and have had, and are expected to continue to have in the future, a material adverse impact on theatre attendance levels and our business.
| ● | As of March 5, 2021, we were operating at 527 of our 589 U.S. theatres, with limited seating capacities and during limited opening hours. Some of our major markets in the U.S., such as New York City and California, |
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| remain partially closed for theatrical exhibition. During the fourth quarter of 2020, we experienced an overall attendance decline in the U.S. of approximately 92.3% compared to the same period a year ago. |
| ● | As of March 5, 2021, we were operating at 78 of our 356 leased and partnership International theatres, with limited seating capacities and during limited opening hours. During the fourth quarter of 2020, we experienced an overall attendance decline in our International theatres of approximately 89.2% compared to the same period a year ago. |
In response to the COVID-19 pandemic, we have adjusted certain elements of our business strategy and have taken and continue to take significant steps to preserve cash by eliminating non-essential costs, including reductions to our variable costs and elements of our fixed cost structure, including, but not limited to:
| ● | Suspended non-essential operating expenditures, including marketing & promotional and travel and entertainment expenses; and where possible, utilities and reduced essential operating expenditures to minimum levels necessary while theatres are operating for limited hours or are closed; |
| ● | Terminated or deferred all non-essential capital expenditures to minimum levels necessary while theatres are operating for limited hours or closed; |
| ● | Implemented measures to reduce corporate-level employment costs while closed, including full or partial furloughs of all corporate-level Company employees for a period of time, 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. With the resumption of operations, we eliminated the full and partial furloughs; |
| ● | 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 we operate. As we resumed limited operations, employment costs increased; |
| ● | Working with our landlords, vendors, and other business partners to manage, defer, and/or abate the related rent expenses and operating expenses; |
| ● | Introduced an active cash management process, which, among other things, requires senior management approval of all outgoing payments; |
| ● | Since April 24, 2020, we have been prohibited from making dividend payments in accordance with the covenant suspension conditions in our Senior Secured Credit Facility Agreement. We 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 $77.6 million during the year ended December 31, 2020 in comparison to the year ended December 31, 2019; and |
| ● | We are prohibited from making purchases under our stock repurchase program in accordance with the covenant suspension conditions in our Senior Secured Credit Facility agreement. |
We intend to seek any available potential benefits, including loans, investments or guarantees, under future government programs for which we qualify domestically and internationally. We have taken advantage of many forms of governmental assistance in the U.S. and internationally including but not limited to revenue and fixed cost reimbursements, payroll subsidies, rent support programs, direct grants, and property tax holidays. We cannot predict the manner in which such benefits will be allocated or administered, and we cannot assure that we will be able to access such benefits in a timely manner or at all.
In addition to preserving cash, we enhanced liquidity through debt issuances, debt exchanges and equity sales as follows. See Note 8—Corporate Borrowings and Finance Lease Obligations, Note 9—Stockholders’ Equity, and Note 17—Subsequent Events in the Notes to the Consolidated Financial Statements under Part II, Item 8 thereof, for further information.
| ● | The April 2020 issuance of $500 million of 10.5% first lien notes due 2025 (the “First Lien Notes due 2025”). |
| ● | The July 2020 completion of a debt exchange offer in which we issued approximately $1.46 billion aggregate principal amount of 10%/12% Cash/PIK Toggle Second Lien Subordinated Secured Notes due 2026 (the |
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| “Second Lien Notes due 2026”) in exchange for approximately $2.02 billion principal amount of our senior subordinated notes, reducing the principal amounts of our debt by approximately $555 million and extending maturities on approximately $1.7 billion of debt to 2026, most of which was maturing in 2024 and 2025 previously. Interest on the Second Lien Notes due 2026 for the first three six-month interest periods after the issue date is expected to be paid all or in part on an in-kind basis pursuant to the terms of the Second Lien Notes due 2026. |
| ● | The July 2020 issuance of the 10.5% first lien secured notes due 2026 (the “First Lien Notes due 2026”) in which we received proceeds of $270.0 million, net of discounts and deferred charges. |
| ● | The launch of several “at-the-market” equity offerings to raise capital through the sale of AMC Class A common stock. During the year ended December 31, 2020, we sold 91.0 million shares, generating $272.8 million in gross proceeds and paid fees to sales agents of $6.8 million. In January 2021, we sold approximately 187.0 million shares, generating $596.9 million in gross proceeds and paid fees to sales agents of $14.9 million. |
| ● | The December 2020 issuance of 21,978,022 shares of Class A common stock to Mudrick Capital Management, LP (“Mudrick”) in exchange for $104.5 million aggregate principal amount of the Second Lien Notes due 2026 and a commitment from Mudrick to purchase $100 million aggregate principal amount of 15%/17%/Cash/PIK Toggle First Lien Secured Notes due 2026 (“First Lien Toggle Notes due 2026”) which we issued to Mudrick in January 2021 for cash. |
| ● | The January 2021 conversion by holders of all $600 million of our 2.95% Convertible Senior Secured Notes due 2026 into shares of our Class A common stock at a conversion price of $13.51, which resulted in the issuance of 44,422,860 shares of our Class A common stock and reduced annual cash interest expense by $17.7 million. |
| ● | The February 2021 entry into a new £140.0 million and €296.0 million term loan facility agreement (the “Odeon Term Loan Facility”) by Odeon Cinemas Group Limited (“Odeon”). Approximately £89.7 million and €12.8 million of the net proceeds from the Odeon Term Loan Facility were used to repay in full Odeon’s obligations (including principal, interest, fees and cash collateralized letters of credit) under its existing revolving credit facility and the remaining net proceeds will be used for general corporate purposes. |
The temporary theatre closures and the reduced operating hours and reduced attendance at the reopened theatres have caused a substantial decline in our sales in the most recently completed fiscal year. In light of the challenges posed by the COVID-19 pandemic, we are focused on maximizing our attendance capacity as permitted by the jurisdictions where we operate, continuing to provide a safe environment for our guests and employees, maintaining our operational efficiencies as much as possible and preserving our liquidity. As a result of the COVID-19 pandemic, we have reduced capital expenditures significantly to maintenance levels and with the exception of prior commitments, have eliminated growth capital expenditures at this time. The future attendance and sales levels of our theatres and our ability to implement our growth strategy remain highly uncertain, as the full impact and duration of the COVID-19 pandemic continues to evolve as of the date of this Annual Report on Form 10-K. The ongoing impact of the COVID-19 pandemic on our long-term operational and financial performance will depend on future developments, many of which are outside of our control, and all of which are highly uncertain and cannot be predicted. Please see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations of Part II thereof for additional information.
If attendance levels increase consistent with our assumptions described below, we currently estimate that our existing cash and cash equivalents, net proceeds from the completed issuances of debt and common stock in January 2021 and borrowings under the Odeon Term Loan Facility in February 2021 will be sufficient to comply with minimum liquidity requirements under our debt covenants to fund operations, and satisfy obligations including cash outflows for increased rent and planned capital expenditures currently and through at least March 31, 2022. This requires that we achieve significant increases in attendance levels beginning in the third quarter of 2021 and ultimately reaching 90% of pre COVID-19 attendance levels by the fourth quarter of 2021 and through the first quarter of 2022 as the vaccine rollout continues and more Hollywood product is released in our theatres. We entered into the Ninth Amendment (as defined below) to the Credit Agreement (as defined below), pursuant to which the requisite revolving lenders party thereto agreed to extend the suspension period for the financial covenant applicable to the Revolving Credit Facility (as defined below) from March 31, 2021 to March 31, 2022, as described, and on the terms and conditions specified, therein. As a result, we will be subject to the financial covenant beginning with the quarter ending June 30, 2022. We are subject to minimum liquidity requirements of approximately $145 million, of which $100 million is required under the conditions for the Extended Covenant Suspension Period under the Senior Secured Revolving Credit Facility during the Extended Covenant Suspension Period, as amended, and £32.5 million (approximately $45 million) required under the
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Odeon Term Loan Facility. Our liquidity needs thereafter will depend, among other things, on the timing of a full resumption of operations, the timing of movie releases and our ability to generate cash from operations.
We continue to explore potential sources of additional liquidity, which is essential to our long-term viability, including:
| ● | Additional equity financing. We may continue to pursue equity issuances that include our remaining authorized shares. The amount of liquidity we might generate will primarily depend on the market price of our Class A common stock, trading volumes, which impact the number of shares we are able to sell, and the available periods during which sales may be made. Because our market price and trading volumes are volatile, there is no guarantee as to the amounts of liquidity we might generate or that our prior experience accurately predicts the results we will achieve. |
| ● | Landlord Negotiations. Commencing in 2021, our cash expenditures for rent are scheduled to increase significantly as a result of rent obligations that had been deferred to 2021 and future years that total approximately $450.0 million as of December 31, 2020. In light of our liquidity challenges, and in order to establish our long-term viability, we believe we must continue to reach accommodations with our landlords to abate or defer a substantial portion of our rent obligations, in addition to generating sufficient amounts of liquidity through equity issuances and the other potential financing arrangements discussed below. Accordingly, we have entered into additional landlord negotiations to seek material reductions, abatements and deferrals in our rent obligations. In connection with these negotiations, we have ceased to make rent payments under a portion of our leases and have received notices of default, the result of which may permit landlords to threaten or seek a variety of remedies. We continue to renegotiate leases with landlords to attain additional concessions and address any instances of default. To the extent we achieve substantial deferrals but not abatements, our cash requirements will increase substantially in the future. |
| ● | Other Creditor Discussions. While the liquidity we have raised has substantially extended our liquidity runway, the new debt we have issued, together with the higher interest rate payments that will be required in the future but have largely been deferred, will substantially increase our leverage and future cash requirements. These future cash requirements, like our deferred rent obligations, will present a challenge to our long-term viability if our operating income does not return to pre-COVID-19 pandemic levels. Even then, we believe we will need to engage in discussions with our creditors to substantially reduce our leverage. We expect to continue to explore alternatives that include new-money financing, potentially in connection with converting debt to equity, which would help manage our leverage but would be dilutive to holders of our common stock. We expect we will continue to receive from and discuss proposals with all classes of creditors. These discussions may not result in any agreement on commercially acceptable terms. |
| ● | Covenant Suspension. We entered into the Ninth Amendment to the Credit Agreement, pursuant to which the requisite revolving lenders party thereto agreed to extend the suspension period for the financial covenant applicable to the Revolving Credit Facility from March 31, 2021 to March 31, 2022, as described, and on the terms and conditions specified, therein. See Note 17—Subsequent Events of the Notes to the Consolidated Financial Statements under Part II, Item 8 thereof for further information. |
| ● | Joint-venture or other arrangements with existing business partners and minority investments in our capital stock. We continue to explore other potential arrangements, including equity investments, to generate additional liquidity. |
It is very difficult to estimate our liquidity requirements, future cash burn rates and future attendance levels. Depending on the Company’s assumptions regarding the timing and ability to achieve more normalized levels of operating revenue, the estimates of amounts of required liquidity vary significantly. Similarly, it is very difficult to predict when theatre attendance levels will normalize, which we expect will depend on the widespread availability and use of effective vaccines for the coronavirus. However, our current cash burn rates are not sustainable. Further, we cannot predict what future changes may occur to the supply or release date of movie titles available for theatrical exhibition once moviegoers are prepared to return in large numbers. Nor can we know with certainty the impact of Warner Bros.’s announcement that it is releasing its entire 2021 slate of movies on HBO Max at the same time as the movies debut in theatres or any similar announcements regarding the release of movie titles concurrently to the home video or streaming markets, as those arrangements will be subject to negotiations that have not yet taken place. We estimate future attendance levels and other assumptions to predict our liquidity requirements and future cash burn but our ability to accurately predict our liquidity and cash burn is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic. Further, there can be no assurances that the Company will be successful in generating the
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additional liquidity necessary to meet its obligations beyond twelve months from the issuance of these financial statements on terms acceptable to the Company or at all. If the Company is unable to maintain or renegotiate its minimum liquidity covenant requirements, it could have a significant adverse effect on the Company’s business, financial condition and operating results.
We also realized significant cancellation of debt income (“CODI”) in connection with our debt restructuring. As a result of such CODI, we estimate a significant portion of our net operating losses will be eliminated as a result of tax attribute reductions. Any loss of tax attributes as a result of such CODI may adversely affect our cash flows and therefore our ability to service our indebtedness.
Narrative Description of Business
We are the world’s largest theatrical exhibition company and an industry leader in innovation and operational excellence. Over the course of our nearly 100-year history, we have pioneered many of the theatrical exhibition industry’s most important innovations. We introduced Multiplex theatres in the 1960s and the North American stadium-seated Megaplex theatre format in the 1990s. Most recently, we continued to innovate and evolve the movie-going experience with the deployment of our theatre renovations featuring plush, powered recliner seating and the launch of our U.S. subscription loyalty tier, AMC Stubs® A-List. Our growth has been driven by a combination of organic growth through reinvestment in our existing assets and through the acquisition of some of the most respected companies in the theatrical exhibition industry.
Our business is operated in two Theatrical Exhibition reportable segments, U.S. markets and International markets. Prior to 2016, we primarily operated in the United States. Our international operations are largely a result of our acquisition of Odeon and UCI Cinemas Holdings Limited (“Odeon”) in November of 2016 and Nordic Cinemas Group Holding AB (“Nordic”) in March of 2017.
Today, AMC is the largest theatre operator in the world. As of December 31, 2020, we owned, leased or operated 950 theatres and 10,543 screens in 14 countries, including 590 theatres with a total of 7,668 screens in the United States and 360 theatres and 2,875 screens in European markets and Saudi Arabia. During the year ended December 31, 2020, we sold our theatre operations in Latvia and divested of 49% of our interest in Lithuania operations. As of December 31, 2019, prior to the effects of the COVID-19 pandemic on our business, we were the market leader in the United States and Europe including in Italy, Spain, Sweden, Norway, Finland, Latvia and Lithuania; and a leading theatre operator in the United Kingdom, Ireland, Portugal and Germany. We have operations in four of the world’s ten largest economies, including four of the five largest European economies (the United Kingdom, Spain, Italy and Germany) as of December 31, 2019. Analysis of market share data in 2020 is not meaningful given the effects of the COVID-19 pandemic on the theatrical exhibition industry.
As of December 31, 2020, in the U.S. markets, we owned, leased or operated theatres in 44 states and the District of Columbia, with approximately 49% of the U.S. population living within 10 miles of one of our theatres. We have a diversified footprint with complementary global geographic and guest demographic profiles, which we believe gives our circuit a unique profile and offers us strategic and operational advantages while providing our studio partners with a large and diverse distribution channel. As of December 31, 2019, prior to the COVID-19 pandemic, we operated some of the most productive theaters in the top markets in the United States and were the market leader in the top two markets: New York and Los Angeles. As of December 31, 2019, our top five markets, in each of which we held the #1 share position, are New York, Los Angeles, Chicago, Atlanta and Washington, D.C., according to data provided by Comscore. Analysis of market share data in 2020 is not meaningful given the effects of the COVID-19 pandemic on the theatrical exhibition industry.
As of December 31, 2020, in the International markets, we owned, leased or operated theatres in 12 European countries and in Saudi Arabia through our Kingdom of Saudi Arabia partnership. In all of these 13 countries, we operate productive assets in each of the country’s capitals. As of December 31, 2019, prior to the effects of the COVID-19 pandemic, about a third of our international recliner renovations occurred in London, Berlin and Madrid; three of the largest Western European Capitals. Due to the population density in Europe as of December 31, 2019, prior to the effects of COVID-19 pandemic, each screen served on average twice the population of a U.S. screen in a less populated market. With the exception of the Baltics and Portugal, as of December 31, 2019, we had a combined 15 IMAX® screens in all of our territories’ capitals.
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The following table provides detail with respect to the geographic location of our theatrical exhibition circuit as of December 31, 2020:
U.S. Markets |
|
Theatres(1) |
|
Screens(1) |
|
Alabama |
|
16 |
|
212 |
|
Arizona |
|
12 |
|
197 |
|
Arkansas |
|
4 |
|
45 |
|
California |
|
54 |
|
726 |
|
Colorado |
|
13 |
|
183 |
|
Connecticut |
|
5 |
|
68 |
|
Delaware |
|
1 |
14 |
||
Florida |
|
38 |
|
600 |
|
Georgia |
|
32 |
|
400 |
|
Idaho |
1 |
11 |
|||
Illinois |
|
47 |
|
551 |
|
Indiana |
|
24 |
|
321 |
|
Iowa |
|
7 |
|
92 |
|
Kansas |
|
9 |
|
132 |
|
Kentucky |
|
3 |
|
48 |
|
Louisiana |
|
7 |
|
99 |
|
Maryland |
|
13 |
|
144 |
|
Massachusetts |
|
10 |
|
142 |
|
Michigan |
|
12 |
|
193 |
|
Minnesota |
|
8 |
|
117 |
|
Missouri |
|
11 |
|
132 |
|
Montana |
5 |
55 |
|||
Nebraska |
|
2 |
|
21 |
|
Nevada |
|
2 |
|
28 |
|
New Hampshire |
1 |
10 |
|||
New Jersey |
|
26 |
|
329 |
|
New Mexico |
1 |
12 |
|||
New York |
|
29 |
|
306 |
|
North Carolina |
|
23 |
|
300 |
|
North Dakota |
2 |
19 |
|||
Ohio |
|
14 |
|
176 |
|
Oklahoma |
|
14 |
161 |
||
Oregon |
2 |
25 |
|||
Pennsylvania |
|
28 |
|
314 |
|
South Carolina |
|
5 |
|
52 |
|
South Dakota |
1 |
10 |
|||
Tennessee |
21 |
253 |
|||
Texas |
|
45 |
|
664 |
|
Utah |
|
3 |
|
29 |
|
Virginia |
|
13 |
|
173 |
|
Washington |
|
15 |
|
181 |
|
West Virginia |
2 |
20 |
|||
Wisconsin |
|
6 |
|
73 |
|
Wyoming |
1 |
9 |
|||
District of Columbia |
2 |
|
21 |
||
Total U.S. Markets |
590 |
7,668 |
|||
International Markets |
|||||
Denmark |
2 |
10 |
|||
Estonia |
3 |
15 |
|||
Finland |
26 |
150 |
|||
Germany |
22 |
197 |
|||
Ireland |
11 |
77 |
|||
Italy |
42 |
432 |
|||
Lithuania |
5 |
35 |
|||
Norway |
13 |
94 |
|||
Portugal |
3 |
45 |
|||
Saudi Arabia |
7 |
44 |
|||
Spain |
41 |
481 |
|||
Sweden |
73 |
401 |
|||
United Kingdom |
112 |
894 |
|||
Total International Markets |
360 |
2,875 |
|||
Total |
|
950 |
|
10,543 |
| (1) | Included in the above table are 70 theatres and 361 screens that we manage or in which we have a partial ownership interest. In the U.S. markets segment, we manage or have a partial interest in seven theatres and |
10
| 85 screens. In the International markets segment, we manage or have a partial interest in 63 theatres and 276 screens. |
Our theatrical exhibition revenues are generated primarily from box office admissions and theatre food and beverage sales. We offer consumers a broad range of entertainment alternatives including traditional film programming, private theatre rentals, independent and foreign films, performing arts, music and sports. We also offer food and beverage alternatives beyond traditional concession items, including made-to-order meals, customized coffee, healthy snacks, beer, wine, premium cocktails, and dine-in theatre options. The balance of our revenues are generated from ancillary sources, including on-screen advertising, fees earned from our customer loyalty program, rental of theatre auditoriums, income from gift card and exchange ticket sales, and online ticketing fees.
Our Strategy
We are committed to maintaining a leadership position in the exhibition industry by focusing on forward-thinking initiatives for the benefit of our guests. We do this through a combination of unique marketing outreach, seamless digital technology and innovative theatre amenities designed to 1) transform AMC into a world class leader in customer engagement, 2) deliver the best in-person experience while at AMC theatres and 3) selectively adjust our footprint through expansion in certain markets and strategic closure of underperforming theatres. Consistent with our history and culture of innovation, we believe our vision and relentless focus on these key elements, which apply strategic and marketing components to traditional theatrical exhibition, will drive our future success.
As discussed above, the COVID-19 pandemic has had a significant impact on our business. We have taken and continue to take steps to adapt our business strategy in the short-term in response to the COVID-19 pandemic, including adjusting our theatre operating hours in those markets where we are open to align screen availability and associated theatre operating costs with attendance levels for each theatre and implementing a comprehensive set of cleaning and operational protocols across our theatres, which are further discussed below. We have also taken and continue to take significant steps to preserve cash by eliminating non-essential costs. As a result of these steps, and as further discussed below, certain aspects of our longer-term strategy, such as growth capital expenditures with the exception of prior commitments have been suspended at this time. Going forward our capital allocation strategy will be driven by the cash generation of our business and will be contingent on a continued required return threshold. We cannot currently determine when we will be able to resume these aspects of our longer-term strategy.
In the U.S. markets in response to the COVID-19 pandemic and under advisement of current & former faculty of Harvard University’s School of Public Health as well as the Clorox Company, we developed a comprehensive set of cleaning and operational protocols branded “AMC Safe and Clean” which have been implemented at every one of our U.S. theatres. AMC Safe & Clean protocols include significant reductions in the maximum tickets available for each showtime and seat blocking in reserved seating auditoriums to allow for appropriate social distancing between parties, enhanced cleaning procedures that include extra time between showtimes to allow for a full, thorough cleaning and nightly disinfecting, use of high-tech high-efficiency particulate air vacuums, upgraded air filtration efforts including the use of minimum efficiency reporting value-13 filters wherever possible, new guest and employee safety protocols that include mandatory mask wearing by all guests and employees, employee health checks, hand sanitizing stations throughout the theatre and the availability to guests of disinfectant wipes. 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.
In the International markets in response to the COVID-19 pandemic, we developed a comprehensive set of cleaning and operational protocols branded “We Are Safer Cinema” which have been implemented across our European theatres. Protocols include significant reductions in the maximum tickets available for each showtime and seat blocking in reserved seating auditoriums to allow for appropriate social distancing between parties and enhanced cleaning procedures that include extra time between showtimes to allow for thorough cleaning. New guest and employee safety protocols include mandatory mask wearing by all guests and employees where directed by government guidelines, one-way guest flow systems in theatres where practical and hand sanitizing stations throughout the theatre.
| 1) | Transform AMC into a World Class Leader in Customer Engagement |
AMC engages movie-goers through advances in technology and marketing activities to strengthen the bonds with our current guests and create new connections with potential customers that drive both growth and loyalty. AMC serves our guests, end-to-end, from before they enter our theatres, through their enjoyment of a comprehensive spectrum
11
of film content while at our theatres and then again after the movie when they’ve left the theatre and are deciding what film to see the next time they visit.
In our U.S. markets, we begin the process of engagement with AMC Stubs® our customer loyalty program which allows members to earn rewards, receive discounts and participate in exclusive members-only offerings and services. It features a traditional paid tier called AMC Stubs Premiere™ for a $15 annual membership fee and a non-paid tier called AMC Stubs Insider™. Both programs reward loyal guests for their patronage of AMC theatres. Rewards earned are redeemable on future purchases at AMC locations.
AMC Stubs® A-List is our monthly subscription-based tier of our AMC Stubs® loyalty program. This program offers guests admission to movies at AMC up to three times per week including multiple movies per day and repeat visits to already seen movies for $19.95 and $23.95 per month depending upon geographic market. AMC Stubs® A-List also includes premium offerings including IMAX®, Dolby Cinema™ at AMC, RealD, Prime and other proprietary PLF brands. AMC Stubs® A-List members can book tickets online in advance and select specific seats at AMC Theatres with reserved seating. Upon the temporary suspension of theatre operations due to the COVID-19 pandemic, all monthly A-List subscription charges were put on hold. As we reopened theatres, A-List members had the option to reactivate their subscription, which restarted the monthly charge for the program.
As of December 31, 2020, we had more than 23,300,000 member households enrolled in AMC Stubs® A-List, AMC Stubs Premiere™ and AMC Stubs Insider™ programs on a combined basis. Our AMC Stubs® members represented approximately 45% of AMC U.S. markets attendance during the year ended December 31, 2020. Our large database of identified movie-goers also provides us with additional insight into our customers’ movie preferences. This enables us to have a larger, more personalized and targeted marketing effort.
In our International markets, we currently have loyalty programs in the major territories in which we operate. The movie-goers can earn points for spending money at the theatre, and those points can be redeemed for tickets and concession items at a later date. We currently have more than 11,400,000 members in our various International loyalty programs. We continue to evaluate the Odeon loyalty programs to determine how best to reward our European movie-goers and heighten guest loyalty to drive additional attendance to Odeon theatres.
Our marketing efforts are not limited to our loyalty program as we continue to improve our customer connections through our website and mobile apps and expand our online and movie offerings. We continued to roll out our upgraded mobile applications across the U.S. circuit with the ability to order food and beverage offerings via our mobile applications while ordering tickets ahead of scheduled showtimes. Our mobile applications also include AMC Theatres On Demand, a service for members of the AMC Stubs® loyalty program that allows them to rent or buy movies.
In response to the COVID-19 pandemic, AMC’s robust online and mobile platforms in our U.S. markets offer customers the safety and convenience of enhanced social distancing by allowing them to purchase tickets and concession items online, avoid the ticket line, and limit other high-touch interactions with AMC employees and other guests. Online and mobile platforms are also available in our International markets.
| 2) | Deliver the best in-person experience while at AMC theatres |
In conjunction with our advances in technology and marketing initiatives, and consistent with our long-term growth strategy, we plan to continue investing in our theatres and enhancing the consumer experience to deliver the best in-person experience and take greater advantage of incremental revenue-generating opportunities, primarily through comfort and convenience innovations, imaginative food and beverage initiatives, and exciting premium large format (“PLF”) offerings. Our ability to implement our growth strategy, however, remains highly uncertain, as the full impact and duration of the COVID-19 pandemic continues to evolve as of the date of this Annual Report on Form 10-K.
Comfort and Convenience Innovations. Recliner seating is the key feature of our theatre renovations. We believe that maximizing comfort and convenience for our customers will be increasingly necessary to maintain and improve our relevance. These renovations, in conjunction with capital contributions from our landlords, involve stripping theatres to their basic structure in order to replace finishes throughout, upgrading the sight and sound experience, installing modernized points of sale and, most importantly, replacing traditional theatre seats with plush, electric recliners that allow customers to deploy a leg rest and fully recline at the push of a button. As of December 31, 2019, prior to the COVID-19 pandemic, the quality improvement in the customer experience could drive a 33% increase in attendance, on average, at these locations in their first year post renovation. These increases will only continue post-
12
COVID-19 pandemic if attendance returns to normalized pre-COVID-19 levels. Upon reopening a remodeled theatre, we typically increase the ticket price to reflect the enhanced consumer experience.
As of December 31, 2020, in our U.S. markets we featured recliner seating in approximately 339 U.S. theatres, including Dine-in-Theatres, totaling approximately 3,342 screens and representing 43.6% of total U.S. screens. In our International markets, as of December 31, 2020, we had recliner seating in approximately 77 International theatres, totaling approximately 533 screens and representing 18.5% of total International screens.
Open-source internet ticketing makes AMC’s entire universe of seats in the U.S. (approximately 1.1 million as of December 31, 2020), for all our show times, as available as possible, on as many websites and mobile applications as possible. Our tickets are currently on sale either directly or through mobile apps, at our own website and our mobile apps and other third-party ticketing vendors. For the year ended December 31, 2020, approximately 53.0% of our tickets were purchased online in the U.S., with approximately 76.0% of total online tickets being purchased through AMC.
Imaginative Food and Beverage Initiatives. Our deployment initiatives also apply to food and beverage enhancements. We have expanded our menu of enhanced food and beverage products to include meals, healthy snacks, premium beers, wine and mixed drinks, and other gourmet products. Our long-term growth strategy calls for investment across a spectrum of enhanced food and beverage formats, ranging from simple, less capital-intensive food and beverage design improvements to the development of new dine-in theatre options. As a result of the COVID-19 pandemic, we have temporarily modified our food and beverage operations to include more simplified concession menus, cashless transactions technology, hand sanitizer and disinfecting wipes, and condiment and drink refills available by request, all in an effort to reduce the number of touch-points between guests and employees. We have also upgraded our Coca-Cola Freestyle beverage machines to include a mobile app allowing guests to dispense drinks without the need to utilize the machine’s touch screen.
Our MacGuffins Bar and Lounges (“MacGuffins”) give us an opportunity to engage our legal age customers. As of December 31, 2020, we offer alcohol in approximately 340 AMC theatres in the U.S. markets and 251 theatres in our International markets and continue to explore expansion globally.
Exciting Premium Large Format Offerings. PLF auditoriums generate our highest customer satisfaction scores, and we believe the investment in premium formats increases the value of the movie-going experience for our guests, ultimately leading to additional ticket revenue. To that end we are committed to investing in and expanding our offerings of the best sight and sound experiences through a combination of our partnerships with IMAX® and Dolby Cinema™ and the further development of our own proprietary PLF offering, AMC Prime.
| ● | IMAX®. IMAX® is one of the world’s leading entertainment technology companies, specializing in motion picture technologies and presentations. |
As of December 31, 2019, AMC was the largest IMAX® exhibitor in the U.S., with 188 (3D enabled) IMAX® screens and a 56% market share. Each one of our IMAX® local installations is protected by geographic exclusivity, and as of December 31, 2019, our IMAX® screen count was 98% greater than our closest competitor. We also operate 36 IMAX® screens in Europe. As part of our long-term growth strategy, we expect to continue to expand our IMAX® relationship across the U.S. and Europe, further strengthening our position as the largest IMAX® exhibitor in the U.S. and a leading IMAX® exhibitor in the United Kingdom and Europe. During the year ended December 31, 2020, we closed four IMAX screens related to U.S. theatres that were permanently closed and opened one new IMAX screen.
| ● | Dolby Cinema™. Dolby Cinema™ offers a premium cinema offering for movie-goers that combines state-of-the-art image and sound technologies with inspired theatre design and comfort. Dolby Cinema™ at AMC includes Dolby Vision™ laser projection and object-oriented Dolby Atmos® audio technology, as well as AMC’s plush power reclining seats with seat transducers that vibrate with the action on screen. |
As of December 31, 2020, we operated 149 Dolby Cinema™ at AMC auditoriums in the U.S. In December 2018, we introduced the first United Kingdom Dolby Cinema Auditorium in our iconic Leicester Square theatre in the heart of London, ending 2020 with six Dolby Cinema™ Auditoriums in Europe. We expect to expand the deployment of our innovative Dolby Cinema™ auditoriums in both our U.S. and International markets as part of our long-term growth strategy.
13
| ● | In-house PLF Brands. We also offer our private label PLF experience at many of our locations, with superior sight and sound technology and enhanced seating as contrasted with our traditional auditoriums. These proprietary PLF auditoriums offers an enhanced theatrical experience for movie-goers beyond our current core theatres, at a lower price premium than IMAX® or Dolby Cinema™. Therefore, it may be especially relevant in smaller or more price-sensitive markets. As of December 31, 2020, we operated 54 screens under proprietary PLF brand names in the U.S. markets and 75 screens in the International markets. |
The following table provides detail with respect to digital delivery, 3D enabled projection, large screen formats, such as IMAX® and our proprietary Dolby Cinema™, other PLF screens, enhanced food and beverage offerings and our premium seating as deployed throughout our circuit on December 31, 2020. This data represents available services in a pre-COVID-19 environment. Due to mandated government attendance restrictions, the ability for guests to utilize all these amenities has been significantly curtailed:
U.S. Markets |
International Markets |
|||||||
Format |
|
Theatres |
|
Screens |
|
Theatres |
|
Screens |
IMAX® |
|
184 |
|
185 |
36 |
|
36 |
|
Dolby Cinema™ |
|
149 |
|
149 |
6 |
|
6 |
|
Other PLF |
|
54 |
|
54 |
74 |
|
75 |
|
Dine-in theatres |
|
51 |
|
723 |
2 |
|
8 |
|
Premium seating |
|
339 |
|
3,342 |
77 |
|
533 |
|
| 3) | Expand and Strategically Close Underperforming Theatres |
Our long-term growth strategy includes the deployment of our strategic growth initiatives, opening new-build theatres and continued exploration of small acquisitions. By expanding our platform through disciplined new-build theatres and acquisitions, we are able to further deploy our proven strategic initiatives while further diversifying our consumer base, leading to greater appeal for more films. The additional scale achieved through new-build theatres and acquisitions also serves to benefit AMC through global procurement savings and increased overhead efficiencies. We believe that expansion offers us additional opportunities to introduce our proven guest-focused strategies to new movie-goers and will generate meaningful benefits to guests, employees, studio partners and our shareholders. During the year ended December 31, 2020, we reopened 18 screens to implement our strategy to install consumer experience upgrades. As a result of the COVID-19 pandemic, we have reduced capital expenditures significantly to maintenance levels and with the exception of prior commitments (which included the 18 screens noted above), have eliminated growth capital expenditures at this time. We cannot currently determine when we will be able to resume our growth strategy.
Our long-term strategy also includes strategically closing underperforming theatres. During the year ended December 31, 2020, we permanently closed 63 theatres with 593 screens for leased locations where we could not renegotiate an acceptable future rent term and also owned properties, where we are seeking to sell the real estate to monetize its value.
The following table sets forth our historical information concerning new builds (including expansions), acquisitions and dispositions (including net construction closures) and end-of-period operated theatres and screens through December 31, 2020:
Permanent/Temporary |
|
||||||||||||||||
Closures/(Openings), |
|
||||||||||||||||
New Builds |
Acquisitions |
net |
Total Theatres |
|
|||||||||||||
|
Number of |
|
Number of |
|
Number of |
|
Number of |
|
Number of |
|
Number of |
|
Number of |
|
Number of |
|
|
Fiscal Year |
Theatres |
Screens |
Theatres |
Screens |
Theatres |
Screens |
Theatres |
Screens |
|
||||||||
Beginning balance |
|
|
387 |
|
5,426 |
||||||||||||
Calendar 2016 |
|
2 |
17 |
520 |
5,201 |
3 |
86 |
|
906 |
|
10,558 |
||||||
Calendar 2017 |
|
12 |
96 |
128 |
736 |
32 |
221 |
|
1,014 |
|
11,169 |
||||||
Calendar 2018 |
|
11 |
89 |
4 |
39 |
23 |
206 |
1,006 |
11,091 |
||||||||
Calendar 2019 |
10 |
85 |
7 |
70 |
19 |
205 |
1,004 |
11,041 |
|||||||||
Calendar 2020 |
8 |
63 |
1 |
14 |
63 |
575 |
950 |
10,543 |
|||||||||
|
43 |
|
350 |
660 |
|
6,060 |
|
140 |
|
1,293 |
|||||||
14
Our Competitive Strengths
We believe we have the following competitive strengths:
Leading guest engagement through digital marketing and technology platforms. Through our AMC Stubs® loyalty program, we have developed a consumer database of some 23.3 million households, representing approximately 50 million individuals. Our digital marketing and technology platforms allow us to engage with these customers frequently, efficiently and on a very personalized level. We believe personalized data drives increased engagement, resulting in higher attendance.
Leading Market Share in Important, Affluent and Diverse Markets. As of December 31, 2019, prior to the COVID-19 pandemic, across our three biggest metropolitan markets in the United States—New York, Los Angeles and Chicago, representing 17% of the country’s total box office—we held a 39% combined market share. We had theatres located in the top 25 U.S. markets, holding the #1 or #2 position in 21 of those 25 markets based on box office revenue. During the year ended December 31, 2020, we sold our theatre operations in Latvia and divested of 49% of our interest in Lithuania operations. We are also the #1 theatre operator in Italy, Sweden, Norway, Finland, and Spain; the #2 operator in the United Kingdom, Ireland, and Portugal; and the #4 operator in Germany as of December 31, 2019, prior to the COVID-19 pandemic. Analysis of market share data in 2020 is not meaningful given the effects of the COVID-19 pandemic on the theatrical exhibition industry. We believe our strong presence in these top markets makes our theatres highly visible and therefore strategically more important to content providers, who rely on the large audiences and marketing momentum provided by major markets to drive opinion-making and deliver a movie’s overall box office results.
We also have a diversified footprint with complementary global geographic and guest demographic profiles. We have theatres in more densely populated major metropolitan markets, where there is also a scarcity of attractive retail real estate opportunities, as well as complementary suburban and rural markets. Guests from different demographic and geographic profiles have different tastes in movies, and we believe by broadening our geographic base, we can help mitigate the impact of film genre volatility on our box office revenues.
Well Located, Highly Productive Theatres. Our theatres are generally located in the top retail centers across the United States. We believe this provides for long-term visibility and higher productivity and is a key element in the success of our enhanced food and beverage and more comfort and convenience initiatives. Our location strategy, combined with our strong major market presence, enable us to deliver industry-leading theatre-level productivity. During the year ended December 31, 2019, prior to the COVID-19 pandemic, nine of the ten highest grossing theatres in the U.S. were AMC theatres, according to data provided by Comscore. Analysis of market share data in 2020 is not meaningful given the effects of the COVID-19 pandemic on the theatrical exhibition industry. During the same period, AMC’s U.S. markets average total revenues per theatre was approximately $6.3 million. This per unit productivity is important not only to content providers, but also to developers and landlords, for whom per location and per square foot sales numbers are critical measures.
AMC Classic theatres are located primarily in smaller, suburban and rural markets, which affects total revenues per theatre. However, in general, theatres located in smaller suburban and rural markets tend to have less competition and a lower cost structure.
In our International markets, many theatres are located in top retail centers in major metropolitan markets with high visibility. We believe that deploying our proven strategic initiatives in these markets will help drive attendance and greatly improve productivity. Other theatres are in larger and mid-sized cities and towns in affluent regions.
Deployment of unique pricing structures to enhance revenue. AMC has developed a dedicated pricing department and, as a result, we have deployed several different strategic pricing structures that have increased revenue and profitability.
In June 2018, we launched AMC Stubs® A-list, a subscription pricing structure that offers members three movies a week, including premium formats, for a monthly fee ranging from $19.95 to $23.95 depending on geographical location. Around the same time, we launched “Discount Tuesday” which offers AMC Stubs® members a reduced price for movie attendance on Tuesdays. Prior to the COVID-19 pandemic, the results showed an incremental increase in attendance and corresponding increase in admissions and food and beverage revenue.
15
Sources of Revenue
Film Content. Box office admissions are our largest source of revenue. We predominantly license “first-run” films from distributors owned by major film production companies and from independent distributors on a film-by-film and theatre-by-theatre basis. Film exhibition costs are accrued based on the applicable admissions revenues and estimates of the final settlement pursuant to our film licenses. These licenses typically state that rental fees are based on aggregate terms established prior to the opening of the picture. In certain circumstances and less frequently, our rental fees are based on a mutually agreed settlement upon the conclusion of the picture. In some European territories, rental fees are established on a weekly basis for the coming week’s percentage forecast. Some European licenses use a per capita agreement instead, paying a flat amount per ticket, where the sum is agreed in long-term agreements in advance of the film showing. Under an aggregate terms formula, we usually pay the distributor a specified percentage of box office gross or pay based on a scale of percentages tied to different amounts of box office gross, or in Europe, we pay based on the number of weeks since release. The settlement process allows for negotiation based upon how a film actually performs.
The North American industry box office has been significantly impacted by the COVID-19 pandemic during the year ended December 31, 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 and New York, remain partially or entirely closed for theatrical exhibition as of December 31, 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 2020 have either been rescheduled for 2021 or slated for direct to streaming or PVOD platforms in lieu of a theatrical release, which left a reduced slate of movie releases for 2020, 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. As a result of the reduced slate of first-run movie releases, we have licensed and exhibited a larger number of films that were released in prior years or decades and where the film rental terms are much lower than for first-run movie releases. The combination of theatre closures, reopening restrictions and limited new film distribution has resulted in a significantly lower industry box office for the year ended December 31, 2020 compared to the year ended December 31, 2019. In response to the current low attendance levels, (in addition to any local capacity restrictions) we have made adjustments to theatre operating hours in those markets where we are open to align screen availability and associated theatre operating costs with attendance levels for each theatre. We also introduced AMC Private Screening, which allows moviegoers to reserve a separate AMC Safe & Clean auditorium for a private screening for up to 20 people, starting at $99 plus tax.
During 2020, we entered into an agreement with Universal, a division of Comcast Corporation (NASDAQ:CMCSA), to distribute films utilizing a minimum 17-day theatrical exhibition window, after which time Universal will have the option to make its titles available across PVOD platforms. Subsequently, Universal revised their plans to extend the theatrical exhibition window to 31 days for films that generate opening weekend box office in the U.S. and Canada of greater than $50 million. This multi-year agreement preserves exclusivity for theatrical viewing for at least the first three weekends of a film’s release, during which time a considerable majority of a movie’s theatrical box office revenue typically is generated. AMC will also share in new revenue streams that will come to the movie ecosystem from PVOD.
During the 2020 calendar year, films licensed from our six largest distributors based on revenues accounted for approximately 80% of our U.S. admissions revenues, which consisted of Sony, Disney, Universal, Warner Bros., Paramount, and Lionsgate. In Europe, approximately 75% of our box office revenue came from films attributed to our three largest distributor groups; which consisted of Warner Bros., Disney, and various independent distributors as a whole (with each independent distributor representing 10% or less). Our revenues attributable to individual distributors may vary significantly from year to year depending upon the commercial success of each distributor’s films in any given year.
Food and Beverage. Food and beverage sales are our second largest source of revenue after box office admissions. Food and beverage items traditionally include popcorn, soft drinks, candy and hot dogs. Different varieties of food and beverage items are offered at our theatres based on preferences in the particular geographic region. We design our theatres to have more food and beverage capacity to make it easier to serve larger numbers of customers. Strategic placement of large food and beverage operations within theatres increases their visibility, aids in reducing the length of lines, allows flexibility to introduce new concepts and improves traffic flow around the food and beverage stands.
16
Prior to the COVID-19 pandemic, to address recent consumer trends, we expanded our menu of enhanced food and beverage products to include made-to-order drinks and meals, customized coffee, healthy snacks, premium beers, wine and mixed drinks, and other gourmet products. Our long-term growth strategy includes continued investment across a spectrum of enhanced food and beverage formats, ranging from simple, less capital-intensive food and beverage design improvements to the development of new dine-in theatre options. The costs of these conversions in some cases are partially covered by investments from the theatre landlord. We currently operate 51 Dine-In Theatres in the U.S. and two Dine-In Theatres in Europe that deliver chef-inspired menus with seat-side or delivery service to luxury recliners with tables. Our recent Dine-In Theatre concepts are designed to capitalize on the latest food service trend, the fast and casual eating experience.
As a result of the COVID-19 pandemic, we have temporarily modified our food and beverage operations to include more simplified concession menus, cashless transactions technology, hand sanitizer and disinfecting wipes, and condiment and drink refills available by request, all in an effort to reduce the number of touch-points between guests and employees. We have also upgraded our Coca-Cola Freestyle beverage machines to include a mobile app allowing guests to dispense drinks without the need to utilize the machine’s touch screen.
AMC Human Capital Resources
Our People. AMC associates are core to our commitment to delivering the best theatrical experience in the world. They uphold AMC’s mission of focusing on the guest experience in our theatres, an experience in which excellent customer service is complemented with amazing food and beverage, comfort and premium sight and sound.
COVID-19 Pandemic Impacts. The pandemic has had enormous impacts on our industry, guests and associates and has resulted in material variances in our associate metrics in calendar 2020 compared to prior years. As of December 31, 2020, we employed a total of approximately 25,019 employees, including part-time and furloughed employees, consisting of approximately 3,449 full-time and approximately 21,570 part-time employees, down from an aggregate of approximately 38,872 employees consisting of approximately 3,952 full-time and approximately 34,920 part-time employees as of December 31, 2019. Due to COVID-19 pandemic and the resulting temporary theatre closures for part of the year 2020, 100% of our full-time and part-time corporate and theatre associates eligible under the law were partially or fully furloughed.
Despite the challenges presented by the pandemic, our associates have been instrumental in delivering AMC’s Safe & Clean program which launched upon the reopening of our theatres in the fall of 2020. Safe & Clean is a set of cleaning protocols and measures that we have implemented to protect the health and safety of our guests and associates. Our new policies and procedures are advised by faculty members at Harvard School of Public Health and have been developed with the Clorox Company.
Talent Acquisition, Development and Retention. Critical to our operations is the hiring, developing and retaining of employees who support our guest-focused mission in our theatres. Acquiring the right talent at speed and scale is a core capability that we regularly monitor and manage, given the need to rapidly staff our frontline operations. Once hired, we focus on the development of our associates, creating experiences and programs that promote performance, growth and career opportunities for those who are life-long passionate about our business. We sponsor numerous training, education and leadership development programs for associates at all levels, from hourly associates to executive officers. These programs are designed to enhance leadership and managerial capability, ensure quality execution of our programs, drive client satisfaction and increase return on investment.
Diversity and Inclusion. Our goal is to create a workforce as diverse as the guests we serve and the movies we show on our screens. As such, Diversity and Inclusion are fundamental to our culture and critical to our success. In support of this goal, AMC established four councils in support of Women, Latinos, African American and LGBTQ+ associates in year 2020. The purpose of these councils is to strengthen AMC’s culture by defining opportunities to embrace our diversity, lead with fairness and impartiality and create a more inclusive work environment by leveraging associate experiences. The councils are supported by the diversity, equity, and inclusion (“DEI”) function under the guidance of the Chief Human Resources Officer. This DEI focus ensures that all communities are represented in our long-term systemic approach. Our work has been recognized externally: AMC has received a perfect score for 13 consecutive years on the Human Rights Campaign Foundation’s Corporate Equality Index as one of the “Best Places to Work for LGBTQ Equality”; and for six years running has been named one of the “Best Places to Work” for people with disabilities on the Disability Equality Index.
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Compensation, Benefits, Safety and Wellness. In addition to offering market competitive salaries and wages, we offer comprehensive health and retirement benefits to eligible employees. Our health and welfare benefits are supplemented with specific programs to manage or improve common health conditions, a variety of voluntary benefits and paid time away from work programs. We also provide a number of innovative programs designed to promote physical, emotional and financial well-being. Our commitment to the safety and health of our associates continues to be a top priority.
Theatrical Exhibition Industry and Competition
U.S. markets. In the U.S., the movie exhibition business is large, stable, and mature. While in any given calendar quarter the quantity and quality of movies can drive volatile results, box office revenues have generally advanced from 2011 to 2019. The industry’s best year ever, in terms of revenues, was 2018, with box office revenues of approximately $11.9 billion, an increase of approximately 7.1% from 2017, with 1.3 billion admissions in the U.S. and Canada. Due to the COVID-19 pandemic, local, state and federal governments issued stay-at-home orders and closure notices for certain businesses, including all theatres and studio production, for an extended portion of 2020. As a result, new film content production remained nearly non-existent and a large portion of 2020 scheduled movies were released in the home on streaming platforms or moved into 2021.
We believe it is the quality of the movie-going experience that will define future success. Whether through enhanced food and beverage options (Food and Beverage Kiosks, Marketplaces, Coca-Cola Freestyle, MacGuffins or Dine-in Theatres), more comfort and convenience (recliner seating, open-source internet ticketing, reserved seating), engagement and loyalty (AMC Stubs®, mobile apps, social media) or sight and sound (digital projectors, 3D, Dolby Cinema™ at AMC, other PLF screens or IMAX®), it is the ease of use and the amenities that these innovations bring to customers that we believe will drive sustained profitability in the years ahead.
The following table represents information about the U.S./Canada exhibition industry obtained from the National Association of Theatre Owners:
|
Box Office |
|
|
Average |
|
|
|
||||||
Revenues |
Attendance |
Ticket |
Number of |
Indoor |
|
||||||||
Calendar Year |
(in millions) |
(in millions) |
Price |
Theatres |
Screens |
|
|||||||
2020 |
$ |
2,205 |
240 |
$ |
9.18 |
5,477 |
40,200 |
||||||
2019 |
11,400 |
1,244 |
9.16 |
5,548 |
40,613 |
||||||||
2018 |
11,880 |
1,304 |
9.11 |
5,482 |
40,313 |
||||||||
2017 |
11,091 |
1,236 |
8.97 |
5,398 |
39,651 |
||||||||
2016 |
11,372 |
1,314 |
8.65 |
5,472 |
40,009 |
||||||||
2015 |
11,120 |
|
1,320 |
8.42 |
|
5,484 |
|
39,411 |
|||||
2014 |
|
10,400 |
|
1,270 |
|
8.19 |
|
5,463 |
|
39,356 |
|||
2013 |
|
10,920 |
|
1,340 |
|
8.15 |
|
5,326 |
|
39,368 |
|||
2012 |
|
10,790 |
|
1,360 |
|
7.93 |
|
5,317 |
|
39,056 |
|||
2011 |
|
10,180 |
|
1,280 |
|
7.95 |
|
5,331 |
|
38,974 |
|||
Based on information obtained from Comscore, we believe that the three largest exhibitors, in terms of U.S./Canada box office revenue (AMC, Regal Entertainment Group, and Cinemark Holdings, Inc.) generated approximately 60% of the box office revenues in 2020.
International markets. Movie-going is a popular leisure activity with high penetration across key geographies in our International markets. Theatre appeal has proven resilient to competition for consumers’ leisure spending and to recessionary periods and we believe we will continue to benefit from increased spending across International markets. The European market lags the U.S. market across a number of factors, including annual spend per customer, number of IMAX® screens and screens per capita that cause us to believe that the deployment of our customer initiatives will be successful in these markets. On the other hand, our European markets are more densely populated and operate with fewer screens per one million of population, making the screens we acquired more valuable.
Additionally, U.S. films generate the majority of the box office in Europe, but movie-goers in specific geographies welcome locally produced films with local actors and familiar story lines which can mitigate film genre attendance fluctuations. Going forward, we believe we will see positive growth in theatre attendance as we deploy our proven guest centered innovations like recliner seating, enhanced food and beverage offerings, and premium large
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format experiences. Like the U.S., the international industry box office suffered from months of theatre closures, significantly fewer new films and reopening restrictions and generated far fewer sales than 2019.
The following table provides information about the exhibition industry attendance for the International markets where we operate obtained from Screen Digest as well as territory industry trade sources:
Calendar Year |
||||||||
(In millions) |
2020 |
2019 |
2018 |
2017 |
||||
United Kingdom |
44.0 |
176.0 |
177.3 |
170.6 |
||||
Germany |
37.3 |
119.9 |
104.2 |
122.3 |
||||
Spain |
28.7 |
105.8 |
97.8 |
99.8 |
||||
Italy |
30.2 |
104.7 |
91.8 |
99.0 |
||||
Sweden |
5.4 |
15.8 |
16.3 |
16.9 |
||||
Ireland |
3.9 |
15.1 |
15.8 |
16.1 |
||||
Portugal |
3.6 |
15.2 |
14.6 |
15.6 |
||||
Norway |
4.8 |
11.3 |
12.1 |
11.8 |
||||
Baltics (1) |
3.7 |
10.1 |
10.5 |
9.2 |
||||
Finland |
3.9 |
8.4 |
8.1 |
8.5 |
||||
Total |
165.5 |
582.3 |
548.5 |
569.8 |
||||
| (1) | 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). The completion of the sale will take place in several steps and is contingent upon clearance from each regulatory competition council in each country. For further information see Note 1—The Company and Significant Accounting Policies in the Notes to the Consolidated Financial Statements under Part II, Item 8 thereof. |
Competition. Our theatres are subject to varying degrees of competition in the geographic areas in which they operate. Competition is often intense with respect to attracting patrons, licensing motion pictures and finding new theatre sites. Where real estate is readily available, it is easier to open a theatre near one of our theatres, which may adversely affect operations at our theatre. However, in certain of our densely populated major metropolitan markets, we believe a scarcity of attractive retail real estate opportunities enhances the strategic value of our existing theatres. We also believe the complexity inherent in operating in these major metropolitan markets is a deterrent to other less sophisticated competitors, protecting our market share position.
The theatrical exhibition industry faces competition from other forms of out-of-home entertainment, such as concerts, amusement parks and sporting events, and from other distribution channels for filmed entertainment, such as cable television, pay-per-view, video streaming services, PVOD, and home video systems, as well as from all other forms of entertainment.
We believe movie-going is a compelling consumer out-of-home entertainment experience. Movie theatres currently garner a relatively small share of overall consumer entertainment time and spend, and our industry benefits from available capacity to satisfy additional consumer demand without capital investment.
Regulatory Environment
The distribution of motion pictures is subject to regulation under federal and state antitrust laws and has been the subject of numerous antitrust cases. Consent decrees, resulting from one of those cases to which we were not a party, have had a material impact on the industry and us. Those consent decrees bound certain major motion picture distributors and limited how motion pictures could be distributed. The U.S. Department of Justice recently terminated the consent decrees, subject to a two-year sunset period for certain prohibitions including block booking and circuit dealing. At this time, we cannot project what impact, if any, termination of the consent decrees may have on industry licensing practices.
Our theatres in the United States must comply with Title III of the Americans with Disabilities Act, or ADA. Compliance with the ADA requires that public accommodations, including websites and mobile apps for such accommodations, be accessible to individuals with disabilities and that new construction or alterations made to conform to accessibility guidelines. Non-compliance with the ADA could result in the imposition of injunctive relief, fines, and awards of damages to private litigants and additional capital expenditures to remedy such noncompliance. As an
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employer covered by the ADA, we must make reasonable accommodations to the limitations of employees and qualified applicants with disabilities, provided that such reasonable accommodations do not pose an undue hardship on the operation of our business. In addition, many of our employees are covered by various government employment regulations, including minimum wage, overtime and working conditions regulations. In Europe, all territories have similar national regulations relating to disabilities.
Our operations also are subject to federal, state and local laws regulating such matters as construction, renovation and operation of theatres as well as wages and working conditions, citizenship, health and sanitation requirements, consumer and employee privacy rights, and licensing, including alcoholic beverage sales. We believe our theatres are in material compliance with such requirements.
We own and operate theatres and other properties in the United States, United Kingdom, Spain, Italy, Germany, Portugal, Ireland, Sweden, Finland, Norway, Denmark, and Saudi Arabia, which are subject to various federal, state and local laws and regulations. Certain of these laws and regulations, including those relating to environmental protection, may impose joint and several liability on certain statutory classes of persons for the costs of investigation or remediation of contamination, regardless of fault or the legality of original disposal. We believe our theatres are in material compliance with such requirements.
During the COVID-19 pandemic, our theatres have been subject to various governmental orders requiring us to take or refrain from certain activities including, but not limited to, suspending operations, reduction in seating capacities, enforcement of social distancing, establishment of enhanced cleaning protocols, restrictions on food and beverage sales, tracking the identity of guests, employee protection protocols, and limitation on operating hours. Although the orders have been modified frequently, we believe our theatres have maintained material compliance with such orders. We currently cannot predict when or if COVID-19 related governmental orders will be fully terminated and whether similar orders will be utilized more frequently during future public health outbreaks.
Seasonality
Our revenues are dependent upon the timing of motion picture releases by distributors. The most marketable motion pictures are usually released during the summer and the year-end holiday seasons. Therefore, our business is seasonal, with higher attendance and revenues generally occurring during the summer months and holiday seasons. During the COVID-19 pandemic, and in following periods, our business and results of operations have not and may continue to not experience our historically typical patterns of seasonality.
Available Information
We make available free of charge on our website (www.amctheatres.com) under “Investor Relations” / Financial Performance”/ “SEC Filings,” annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy materials on Schedule 14A and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials with the Securities and Exchange Commission. The contents of our Internet website are not incorporated into this report. The Securities and Exchange Commission maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information about the Company.
Information about our Executive Officers
The following table sets forth certain information regarding our executive officers and key employees as of February 12, 2021:
Name |
|
Age |
|
Position(s) Held |
Adam M. Aron |
66 |
Chief Executive Officer, President and Director |
||
Sean D. Goodman |
55 |
Executive Vice President and Chief Financial Officer |
||
John D. McDonald |
63 |
Executive Vice President, U.S. Operations |
||
Elizabeth Frank |
51 |
Executive Vice President, Worldwide Programming and Chief Content Officer |
||
Stephen A. Colanero |
54 |
Executive Vice President and Chief Marketing Officer |
||
Kevin M. Connor |
58 |
Senior Vice President, General Counsel and Secretary |
||
Chris A. Cox |
55 |
Senior Vice President and Chief Accounting Officer |
||
Carla C. Chavarria |
55 |
Senior Vice President, and Chief Human Resources Officer |
||
Daniel Ellis |
52 |
Senior Vice President, Domestic Development |
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All our current executive officers hold their offices at the pleasure of our board of directors, subject to rights under their respective employment agreements in some cases. There are no family relationships between or among any executive officers.
Mr. Adam Aron has served as Chief Executive Officer, President and Director of the Company since January 2016. From February 2015 to December 2015, Mr. Aron was Chief Executive Officer of Starwood Hotels and Resorts Worldwide, Inc. and served on the board from 2006 to 2015. Since 2006, Mr. Aron has served as Chairman and Chief Executive Officer of World Leisure Partners, Inc., a personal consultancy for matters related to travel and tourism, high-end real estate development, and professional sports, that he founded. Mr. Aron served as Chief Executive Officer and Co-Owner of the Philadelphia 76ers from 2011 to 2013, and remains an investor. From 2006 to 2015, Mr. Aron served as Senior Operating Partner of Apollo Management L.P. Mr. Aron currently serves on the board of directors of Norwegian Cruise Line Holdings, Ltd. and HBSE, which owns the NHL’s New Jersey Devils and the NBA’s Philadelphia 76ers. Mr. Aron served on the board of directors of Prestige Cruise Holdings Inc. from 2007 to 2014. Mr. Aron received a Master’s of Business Administration degree with distinction from the Harvard Business School and a Bachelor of Arts degree cum laude from Harvard College.
Mr. Sean D. Goodman has served as AMC’s Executive Vice President since December 2, 2019 and Executive Vice President and Chief Financial Officer since February 28, 2020. From July 2017 until November 2019, Mr. Goodman was the Chief Financial Officer of Asbury Automotive Group, Inc. (“ABG”). Prior to joining ABG, Mr. Goodman served as the Chief Financial Officer and Chief Accounting Officer from January 2016 to June 2017 of Unifi, Inc. Mr. Goodman also served as the Chief Financial Officer of the Americas region of Landis+Gyr, AG., from April 2011 to January 2016. Prior to that, Mr. Goodman served in various roles from February 2006 to April 2011 at The Home Depot, Inc. Mr. Goodman began his career as an investment banker with Morgan Stanley, Inc. and in various consulting and accounting positions with Deloitte LLP. Mr. Goodman is a certified public accountant and has a Bachelor of Business Science from the University of Cape Town in South Africa and an M.B.A. from The Harvard Business School.
Mr. John D. McDonald has served as Executive Vice President, U.S. Operations of AMC since July 2009. Prior to July 2009, Mr. McDonald served as Executive Vice President, U.S. and Canada Operations effective October 1998. Mr. McDonald served as Senior Vice President, Corporate Operations from November 1995 to October 1998. Mr. McDonald is a member of the National Association of Theatre Owners Advisory board of directors, Chairman of the Technology Committee for the National Association of Theatre Owners, and member of the board of directors for Digital Cinema Distribution Coalition, LLC. Mr. McDonald has successfully managed the integration for the Gulf States, General Cinema, Loews, Kerasotes, and Carmike mergers and acquisitions. Mr. McDonald attended California State Polytechnic University where he studied economics and history.
Ms. Elizabeth Frank has served as Executive Vice President, Worldwide Programming and Chief Content Officer for AMC since July 2012. Between August 2010 and July 2012, Ms. Frank served as Senior Vice President, Strategy and Strategic Partnerships. From 2006 to 2010, Ms. Frank served as Senior Vice President of Global Programs for AmeriCares. From 2003 to 2006, Ms. Frank served as Vice President of Corporate Strategic Planning for Time Warner Inc. Prior to Time Warner Inc., Ms. Frank was a partner at McKinsey & Company for nine years. Ms. Frank holds a Bachelor of Business Administration degree from Lehigh University and a Masters of Business Administration from Harvard University.
Mr. Stephen A. Colanero has served as Executive Vice President and Chief Marketing Officer of AMC since December 2009. Prior to joining AMC, Mr. Colanero served as Vice President of Marketing for RadioShack Corporation from April 2008 to December 2009. Mr. Colanero also served as Senior Vice President of Retail Marketing for Washington Mutual Inc. from February 2006 to August 2007 and as Senior Vice President, Strategic Marketing for Blockbuster Inc. from November 1994 to January 2006. Mr. Colanero holds a B.S. degree in Accounting from Villanova University and a M.B.A. in Marketing and Strategic Management from The Wharton School at the University of Pennsylvania.
Mr. Kevin M. Connor has served as Senior Vice President, General Counsel and Secretary of AMC since April 2003. Prior to April 2003, Mr. Connor served as Senior Vice President, Legal beginning November 2002. Prior thereto, Mr. Connor was in private practice in Kansas City, Missouri as a partner with the firm Seigfreid Bingham, P.C. from October 1995. Mr. Connor holds a Bachelor of Arts degree in English and History from Vanderbilt University, a Juris Doctorate degree from the University of Kansas School of Law and LLM in Taxation from the University of Missouri-Kansas City.
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Mr. Chris A. Cox has served as Senior Vice President and Chief Accounting Officer of AMC since June 2010. Prior thereto Mr. Cox served as Vice President and Chief Accounting Officer since May 2002. Prior to May 2002, Mr. Cox had served as Vice President and Controller since November 2000. Previously, Mr. Cox had served as Director of Corporate Accounting for the Dial Corporation from December 1999 until November 2000. Prior to Dial Corporation, Mr. Cox held various positions at PwC LLP. Mr. Cox holds a Bachelor of Business Administration degree in Accounting and Finance from the University of Iowa.
Ms. Carla C. Chavarria has served as Senior Vice President, Chief Human Resources Officer of AMC since January 2019 and Senior Vice President, Human Resources of AMC since January 2014. Ms. Chavarria served as Vice President, Human Resources Services from September 2006 to January 2014. Prior thereto, Ms. Chavarria served as Vice President, Recruitment and Development from April 2005 to September 2006. Ms. Chavarria’s prior experience includes human resources manager and director of employment practices. Ms. Chavarria began her career at AMC in 1988 as a theatre manager in Philadelphia. Ms. Chavarria serves as co-chair for the AMC Cares Invitational and is a member of the AMC Investment Committee. She is formerly a board member for the Quality Hill Playhouse, Big Brothers Big Sisters of Kansas City, the Kansas City Zoo, Negro League Baseball Museum, the chair of Win Win, Visit KC, and the National YMCA. She is currently a Board and Compensation Committee member of First Business Financial Services. Ms. Chavarria has over 20 years of human resources experience. Ms. Chavarria holds a B.S. from The Pennsylvania State University.
Mr. Daniel Ellis has served as the Senior Vice President Development & International since March 2020. From December 21, 2016 to March 2020, he served as Senior Vice President, Domestic Development. From August 2011 until December 2016, Mr. Ellis was Senior Vice President, General Counsel and Secretary of Carmike Cinemas, Inc. From 1999 until 2011, Mr. Ellis served in several roles with Lodgian, Inc., including as President, Chief Executive Officer, and a member of the Board of Directors from 2009 through 2010 and Senior Vice-President, General Counsel and Secretary from 2002 through 2009. Prior to joining Lodgian, Mr. Ellis was engaged in private law practice and also served as an Assistant District Attorney for the State of Georgia.
Item 1A. Risk Factors
The following is a summary list of risk factors:
Risks Related to the COVID-19 Pandemic
| ● | the impact of the COVID-19 virus on us, the motion picture exhibition industry, and the economy in general, including our response to the COVID-19 virus related to suspension of operations at our theatres, personnel reductions and other cost-cutting measures and measures to maintain necessary liquidity and increases in expenses relating to precautionary measures at our facilities to protect the health and well-being of our customers and employees. |
Financial Risks
| ● | our ability to obtain additional liquidity, which if not realized or insufficient to generate the material amounts of additional liquidity that may be required if we are able to achieve more normalized levels of attendance and operating revenues, likely would result with us seeking an in-court or out-of-court restructuring of our liabilities, and in the event of such future liquidation or bankruptcy proceeding, holders of our common stock and other securities would likely suffer a total loss of their investment; |
| ● | our substantial level of indebtedness and our current liquidity constraints could adversely affect our financial condition and our ability to service our indebtedness, and our ability to take advantage of certain business opportunities, which could negatively impact your ability to recover your investment in the common stock; |
| ● | risks relating to impairment losses, including with respect to goodwill and other intangibles, and theatre and other closure charges; |
| ● | limitations on the availability of capital may prevent us from deploying strategic initiatives; |
| ● | we are currently not paying dividends and in the future may not generate sufficient cash flows or have sufficient restricted payment capacity under our Senior Secured Credit Facility or the indentures governing our debt securities to pay dividends on our Class A common stock; |
22
| ● | our ability to recognize interest deduction carryforwards and net operating loss carryforwards to reduce our future tax liability; |
| ● | our ability to recognize certain international deferred tax assets which currently do not have a valuation allowance recorded; |
| ● | impact of the elimination of the calculation of USD LIBOR rates on our contracts indexed to USD LIBOR; and |
| ● | risks of poor financial results may prevent us from deploying strategic initiatives. |
Operational Risks
| ● | risks relating to motion picture production and performance; |
| ● | our lack of control over distributors of films; |
| ● | intense competition in the geographic areas in which we operate; |
| ● | increased use of alternative film delivery methods including premium video on demand or other forms of entertainment; |
| ● | shrinking exclusive theatrical release windows; |
| ● | AMC Stubs® A-List may not meet anticipated revenue projections which could result in a negative impact upon operating results; |
| ● | failures, unavailability or security breaches of our information systems; |
| ● | dependence on key personnel for current and future performance and our ability to attract and retain senior executives and other key personnel, including in connection with any future acquisitions; |
| ● | our ability to achieve expected synergies, benefits and performance from our strategic theatre acquisitions and strategic initiatives; and |
| ● | optimizing our theatre circuit through new construction and the transformation of our existing theatres may be subject to delay and unanticipated costs. |
Regulatory Risks
| ● | general and international economic, political, regulatory, social and financial market conditions, widespread health emergencies, such as COVID-19 or other pandemics, and other risks, including the effects of the exit of the United Kingdom from the European Union; |
| ● | review by antitrust authorities in connection with acquisition opportunities; |
| ● | risks relating to the incurrence of legal liability, including costs associated with ongoing securities class action lawsuits; |
| ● | increased costs in order to comply or resulting from a failure to comply with governmental regulation, including the General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”) and pending future domestic privacy laws and regulations; |
| ● | geopolitical events, including the threat of terrorism or cyber-attacks, or widespread health emergencies, such as the novel coronavirus or other pandemics or epidemics, causing people to avoid our theatres or other public places where large crowds are in attendance; and |
| ● |