May 6, 2021 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 001-33892

AMC ENTERTAINMENT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	26-0303916 (I.R.S. Employer Identification No.)
One AMC Way 11500 Ash Street, Leawood, KS (Address of principal executive offices)	66211 (Zip Code)

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

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

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

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

Large Accelerated Filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

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

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

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A common stock	AMC	New York Stock Exchange

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

Title of each class of common stock

Number of shares
outstanding as of May 2, 2021

Class A common stock

450,280,240

Table of Contents

AMC ENTERTAINMENT HOLDINGS, INC.

INDEX

		Page Number
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Loss	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4.	Controls and Procedures	62
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 5.	Other Information	62
Item 6.	Exhibits	64
	Signatures	66

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements. (Unaudited)

AMC ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended
(In millions, except share and per share amounts)	March 31, 2021		March 31, 2020

	(unaudited)
Revenues
Admissions	$	69.5	$	568.0
Food and beverage		50.1		288.1
Other theatre		28.7		85.4
Total revenues		148.3		941.5
Operating costs and expenses
Film exhibition costs		22.0		271.7
Food and beverage costs		9.7		53.4
Operating expense, excluding depreciation and amortization below		179.7		356.9
Rent		192.1		237.8
General and administrative:
Merger, acquisition and other costs		6.7		0.2
Other, excluding depreciation and amortization below		51.8		33.2
Depreciation and amortization		114.1		122.5
Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill		—		1,851.9
Operating costs and expenses		576.1		2,927.6
Operating loss		(427.8)		(1,986.1)
Other expense (income):
Other expense (income)		(17.4)		26.9
Interest expense:
Corporate borrowings		151.5		71.3
Finance lease obligations		1.4		1.6
Non-cash NCM exhibitor services agreement		9.9		9.9
Equity in loss of non-consolidated entities		2.8		2.9
Investment expense (income)		(2.0)		9.4
Total other expense, net		146.2		122.0
Net loss before income taxes		(574.0)		(2,108.1)
Income tax provision (benefit)		(6.8)		68.2
Net loss		(567.2)		(2,176.3)
Less: Net loss attributable to noncontrolling interests		(0.3)		—
Net loss attributable to AMC Entertainment Holdings, Inc.	$	(566.9)	$	(2,176.3)
Net loss per share attributable to AMC Entertainment Holdings, Inc.'s common stockholders:
Basic	$	(1.42)	$	(20.88)
Diluted	$	(1.42)	$	(20.88)
Average shares outstanding:
Basic (in thousands)		400,111		104,245
Diluted (in thousands)		400,111		104,245

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

AMC ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


(In millions)	March 31, 2021		March 31, 2020

	(unaudited)
Net loss	$	(567.2)	$	(2,176.3)
Other comprehensive income (loss):
Unrealized foreign currency translation adjustments, net of tax		(54.7)		(93.6)
Pension adjustments:
Net gain arising during the period		3.5		0.1
Other comprehensive loss		(51.2)		(93.5)
Total comprehensive loss		(618.4)		(2,269.8)
Comprehensive loss attributable to noncontrolling interests		(0.5)		—
Comprehensive loss attributable to AMC Entertainment Holdings, Inc.	$	(617.9)	$	(2,269.8)

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

AMC ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions, except share data)	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	813.1	$	308.3
Restricted cash		29.0		13.1
Receivables, net		86.0		91.0
Other current assets		87.9		74.6
Total current assets		1,016.0		487.0
Property, net		2,200.3		2,322.5
Operating lease right-of-use assets, net		4,348.7		4,451.5
Intangible assets, net		158.3		163.2
Goodwill		2,491.0		2,547.3
Deferred tax asset, net		1.3		0.3
Other long-term assets		273.1		304.6
Total assets	$	10,488.7	$	10,276.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	264.9	$	298.8
Accrued expenses and other liabilities		291.7		257.8
Deferred revenues and income		404.3		405.4
Current maturities of corporate borrowings		20.0		20.0
Current maturities of finance lease liabilities		12.5		12.9
Current maturities of operating lease liabilities		591.1		583.6
Total current liabilities		1,584.5		1,578.5
Corporate borrowings		5,439.4		5,695.8
Finance lease liabilities		77.8		83.1
Operating lease liabilities		4,908.9		4,957.8
Exhibitor services agreement		524.0		537.6
Deferred tax liability, net		34.0		40.5
Other long-term liabilities		207.1		241.3
Total liabilities		12,775.7		13,134.6
Commitments and contingencies
Stockholders’ deficit:
AMC Entertainment Holdings, Inc.'s stockholders' deficit:
Class A common stock ($.01 par value, 524,173,073 shares authorized; 454,012,865 shares issued and 450,280,240 outstanding as of March 31, 2021; 176,295,874 shares issued and 172,563,249 outstanding as of December 31, 2020)		4.5		1.8
Class B common stock ($.01 par value, 0 shares authorized, issued and outstanding as of March 31, 2021 and 51,769,784 shares authorized, issued and outstanding as of December 31, 2020)		—		0.5
Additional paid-in capital		3,657.1		2,465.6
Treasury stock (3,732,625 shares as of March 31, 2021 and December 31, 2020, at cost)		(56.4)		(56.4)
Accumulated other comprehensive income (loss)		(12.3)		38.7
Accumulated deficit		(5,902.3)		(5,335.3)
Total AMC Entertainment Holdings, Inc.'s stockholders’ deficit		(2,309.4)		(2,885.1)
Noncontrolling interests		22.4		26.9
Total deficit		(2,287.0)		(2,858.2)
Total liabilities and stockholders’ deficit	$	10,488.7	$	10,276.4

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

AMC ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Three Months Ended
(In millions)	March 31, 2021		March 31, 2020

Cash flows from operating activities:	(unaudited)
Net loss	$	(567.2)	$	(2,176.3)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		114.1		122.5
Deferred income taxes		(6.2)		71.2
Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill		—		1,851.9
Amortization of net premium on corporate borrowings to interest expense		42.3		3.1
Amortization of deferred financing costs to interest expense		12.1		4.1
PIK interest expense		52.7		—
Non-cash portion of stock-based compensation		5.4		2.7
Gain on dispositions		—		(1.0)
Loss on derivative asset and derivative liability		—		19.6
Equity in loss from non-consolidated entities, net of distributions		2.8		11.2
Landlord contributions		3.7		16.1
Other non-cash rent expense (benefit)		(7.5)		2.3
Deferred rent		(21.8)		(18.3)
Net periodic benefit cost		(0.2)		0.3
Change in assets and liabilities:
Receivables		(2.7)		129.4
Other assets		(13.0)		29.2
Accounts payable		(11.9)		(169.8)
Accrued expenses and other liabilities		96.4		(105.7)
Other, net		(11.9)		23.5
Net cash used in operating activities		(312.9)		(184.0)
Cash flows from investing activities:
Capital expenditures		(11.9)		(91.7)
Proceeds from disposition of long-term assets		5.2		3.4
Investments in non-consolidated entities, net		(9.3)		—
Other, net		—		0.9
Net cash used in investing activities		(16.0)		(87.4)
Cash flows from financing activities:
Proceeds from issuance of Odeon Term Loan due 2023		534.3		—
Proceeds from First Lien Toggle Notes due 2026		100.0		—
Borrowings (repayments) under revolving credit facilities		(335.0)		325.1
Scheduled principal payments under Term Loan due 2026		(5.0)		(5.0)
Proceeds from Class A common stock issuance		581.6		—
Payments related to sale of noncontrolling interest		(0.3)		—
Principal payments under finance lease obligations		(1.9)		(2.3)
Cash used to pay for deferred financing costs		(19.0)		(0.1)
Cash used to pay dividends		—		(4.3)
Taxes paid for restricted unit withholdings		—		(1.0)
Net cash provided by financing activities		854.7		312.4
Effect of exchange rate changes on cash and cash equivalents and restricted cash		(5.1)		(6.7)
Net increase in cash and cash equivalents and restricted cash		520.7		34.3
Cash and cash equivalents and restricted cash at beginning of period		321.4		275.5
Cash and cash equivalents and restricted cash at end of period	$	842.1	$	309.8
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:

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Interest (including amounts capitalized of $0.2 million and $0.3 million)	$	26.2	$	34.6
Income taxes (received) paid, net	$	(9.0)	$	1.7
Schedule of non-cash activities:
Investment in NCM	$	5.8	$	4.5
Construction payables at period end	$	10.0	$	58.4

See Notes to Condensed Consolidated Financial Statements.

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AMC ENTERTAINMENT HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

NOTE 1—BASIS OF PRESENTATION

AMC Entertainment Holdings, Inc. (“Holdings”), through its direct and indirect subsidiaries, including American Multi-Cinema, Inc. and its subsidiaries, (collectively with Holdings, unless the context otherwise requires, the “Company” or “AMC”), is principally involved in the theatrical exhibition business and owns, operates or has interests in theatres located in the United States and Europe.

Temporarily suspended or limited operations. As of or before March 17, 2020, the Company temporarily suspended all theatre operations in its U.S. markets and International markets in compliance with local, state, and federal governmental restrictions and recommendations on social gatherings to prevent the spread of COVID-19 and as a precaution to help ensure the health and safety of the Company’s guests and theatre staff. The Company 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. As a result of these temporarily suspended or limited operations, the Company’s revenues and expenses for the three months ended March 31, 2021 are significantly lower than the revenues and expenses for the three months ended March 31, 2020.

As of January 1, 2021, the Company was operating at 394 domestic theatres with limited seating capacities, representing approximately 67% of its domestic theatres. During the three months ended March 31, 2021, in response to eased restrictions by state and local governments, the Company resumed operations in key markets such as New York and Los Angeles. As of March 31, 2021, the Company was operating at 585 domestic theatres with limited seating capacities, representing approximately 99% of its domestic theatres. As of January 1, 2021, the Company was operating at 109 International leased and partnership theatres, with limited seating capacities, representing approximately 30% of its International theatres. As of March 31, 2021, the Company was operating at 97 International theatres with limited seating capacities, representing approximately 27% of its International theatres. The Company’s average screens operated during the three months ended March 31, 2021 declined by 24.2% from the prior year.

Liquidity. In response to the COVID-19 pandemic, the Company adjusted certain elements of its business strategy and took and continues to take significant steps to preserve cash by eliminating non-essential costs, including reductions to its variable costs and elements of its fixed cost structure, including, but not limited to:

●

Suspended non-essential operating expenditures, including some marketing and promotional and travel and entertainment expenses, and where possible, utilities and reduced essential operating expenditures to minimum levels necessary while theatres are closed.

●

Terminated or deferred all non-essential capital expenditures to minimum levels necessary while theatres are 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, the Company eliminated the full and partial furloughs and employment costs increased. The increase in employment costs during the three months ended March 31, 2021 was primarily due to increases in bonus expense, stock-based compensation expense as a result of the modification and acceleration of vesting of awards during the current and prior year and increases in non-qualified deferred compensation expense due to increases in the fair values of related investments.

●

All domestic theatre-level crew members were fully furloughed and theatre-level managements’ hours were reduced to the minimum levels necessary to begin resumption of operations when permitted. Similar efforts to reduce theatre-level and corporate employment costs were undertaken internationally consistent with applicable laws across the jurisdictions in which the Company operates. As the Company resumed limited operations,

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employment costs increased.

●

Working with the Company’s landlords, vendors, and other business partners to manage, defer, and/or abate the related rent expenses and operating expenses.

●

Introduced an active cash management process, which, among other things, requires senior management approval of all outgoing payments.

●

Since April 24, 2020, the Company has been prohibited from making dividend payments in accordance with the covenant suspension conditions in its Credit Agreement (as defined below). The Company had also previously elected to decrease the dividend paid in the first quarter of 2020 by $0.17 per share. The cash savings as a result of the prior decrease and current prohibition on making dividend payments was $4.3 million during the three months ended March 31, 2021 in comparison to the three months ended March 31, 2020.

●

The Company is prohibited from making purchases under its authorized stock repurchase program in accordance with the covenant suspension conditions in its Senior Secured Credit Facility Agreement.

The Company intends to seek any available potential benefits, including loans, investments or guarantees, under future government programs for which the Company qualifies domestically and internationally. The Company has 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. The Company cannot predict the manner in which such benefits will be allocated or administered, and the Company cannot assure it will be able to access such benefits in a timely manner or at all.

In addition to preserving cash, the Company enhanced liquidity through debt issuances, debt exchanges and equity sales as follows. See Note 6—Corporate Borrowings and Finance Lease Obligations and Note 7—Stockholders’ Equity 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 the Company issued approximately $1.46 billion aggregate principal amount of 10%/12% Cash/PIK toggle second lien subordinated notes due 2026 (the “Second Lien Notes due 2026”) in exchange for approximately $2.02 billion principal amount of the Company’s senior subordinated notes, reducing the principal amounts of the Company’s 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 the Company 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 the Company’s Class A common stock. During the year ended December 31, 2020, the Company 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, the Company sold 187.1 million shares, generating $596.9 million in gross proceeds and paid fees to sales agents of $14.9 million and other fees of $0.4 million. See Note 13—Subsequent Event for information regarding the additional at-the-market offerings of 43 million shares related to the Company’s remaining authorized shares of Class A common stock.

●

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 the Company issued to Mudrick in January 2021 for cash.

●

The January 2021 conversion by holders of all $600 million of the Company’s 2.95% Convertible Senior Secured Notes due 2026 into shares of the Company’s Class A common stock at a conversion price of $13.51 which resulted in the issuance of 44,422,860 shares of its 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

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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.

If attendance levels increase consistent with the Company’s assumptions described below, it currently estimates that its existing cash and cash equivalents will be sufficient to comply with minimum liquidity requirements under its debt covenants, fund operations, and satisfy obligations including cash outflows for increased rent and planned capital expenditures currently and through early May of 2022. This requires that the Company achieve significant increases in attendance levels beginning in the third quarter of 2021 and ultimately reaching 85% of pre COVID-19 attendance levels by the fourth quarter of 2021 and through the first and second quarters of 2022, as the vaccine rollout continues and more Hollywood product is released in its theatres. The Company 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 Senior Secured 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, the Company will be subject to the financial covenant beginning with the quarter ending June 30, 2022. The Company is 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 Odeon Term Loan Facility. The Company’s liquidity needs thereafter will depend, among other things, on the timing of a full resumption of operations, the timing of movie releases and its ability to generate cash from operations.

The Company continues to explore potential sources of additional liquidity, including:

●

Additional equity financing. On April 27, 2021, the Company’s Board of Directors (the “Board”) determined not to seek stockholder approval of the proposal to approve an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to increase the total number of shares of Class A common stock (par value $0.01 per share) the Company shall have the authority to issue by 500,000,000 shares to a total of 1,024,173,073 shares of Class A common stock (“Proposal 1”), and has withdrawn Proposal 1 from the agenda for the 2021 annual meeting of stockholders (the “Annual Meeting”). The Board reserves the right to propose an amendment of the Certificate of Incorporation to increase the authorized shares or for other items at any point in the future.

The Company plans to pursue equity issuances for its remaining authorized shares. See Note 13—Subsequent Event for information regarding the additional at-the-market offerings of 43 million shares related to the Company’s remaining authorized shares of Class A common stock. The amount of liquidity the Company might generate will primarily depend on the market price of its Class A common stock, trading volumes, which impact the number of shares the Company is able to sell, and the available periods during which sales may be made. Because the Company’s market price and trading volumes are volatile, there is no guarantee as to the amounts of liquidity it might generate or that its prior experience accurately predicts the results the Company will achieve.

●

Landlord negotiations. Commencing in 2021, the Company’s 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 were approximately $473.0 million as of March 31, 2021. In light of the Company’s liquidity challenges, and in order to establish its long-term viability, the Company believes it must continue to reach accommodations with its landlords to abate or defer a substantial portion of the Company’s rent obligations, in addition to generating sufficient amounts of liquidity through equity issuances and the other potential financing arrangements discussed below. Accordingly, the Company entered into additional landlord negotiations to seek material reductions, abatements and deferrals in its rent obligations. In connection with these negotiations, the Company has finalized agreements or agreements in principle with the landlords for a majority of leases where the Company has entered into negotiations. To the extent the Company achieves substantial deferrals but not abatements, its cash requirements will increase substantially in the future.

●

Other creditor discussions. While the liquidity the Company has raised has substantially extended its liquidity runway, the new debt the Company has issued or that has been committed, together with the higher interest rate payments that will be required in the future but have largely been deferred, will substantially increase its leverage and future cash requirements. These future cash requirements, like the Company’s deferred rent obligations, will present a challenge to its long-term viability if its operating income does not return to pre-COVID levels. Even then, the Company believes it will need to engage in discussions with its creditors to substantially reduce its leverage. The Company expects to continue to explore alternatives that include new-

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money financing and may involve converting debt to equity, which would help manage its leverage but could be dilutive to holders of its common stock. These discussions may not result in any agreement on commercially acceptable terms.

●

Covenant suspension. The Company entered into the Ninth Amendment, pursuant to which the requisite revolving lenders party thereto agreed to extend the suspension period for the financial covenant applicable to the Senior Secured Revolving Credit Facility from March 31, 2021 to March 31, 2022, as described, and on the terms and conditions specified, therein. See Note 6—Corporate Borrowings and Finance Lease Obligations for further information.

●

Joint-venture or other arrangements with existing business partners and minority investments in capital stock. The Company continues to explore other potential arrangements, including equity investments, to generate additional liquidity.

It is very difficult to estimate the Company’s 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 the Company expects will depend on the widespread availability and use of effective vaccines for the coronavirus. However, the Company’s current cash burn rates are not sustainable. Further, the Company cannot accurately 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 the Company know with certainty the impact on consumer movie-going behavior of Warner Bros.’s decision to release its entire 2021 slate of movies on HBO Max at the same time as the movies debut in theatres, or the potential attendance impact of other studio decisions to accelerate in home availability of their theatrical movies. Studio negotiations regarding evolving theatrical release models and film licensing terms are ongoing. There can be no assurance that the attendance levels and other assumptions used to estimate the Company’s liquidity requirements and future cash burn rates will be correct, and its ability to be predictive 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 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.

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

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

Principles of Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of AMC, as discussed above, and should be read in conjunction with the Company’s Annual Report on Form 10–K for the year ended December 31, 2020. The accompanying condensed consolidated balance sheet as of December 31, 2020, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10–Q. Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the Company’s financial position and results of operations. All significant intercompany balances and transactions have been eliminated in consolidation. Majority-owned subsidiaries that the Company has control of are consolidated in the Company’s consolidated subsidiaries; consequently, a portion of its stockholders’ equity, net earnings (loss) and total comprehensive income (loss) for the periods presented are attributable to noncontrolling interests. Due to the seasonal nature of the Company’s business and the suspension of operations at all the Company’s theatres due to the COVID-19 pandemic, results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected

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for the year ending December 31, 2021. The Company manages its business under two reportable segments for its theatrical exhibition operations, U.S. markets and International markets.

Baltics’ theatre sale agreement. On August 28, 2020, the Company entered into an agreement to sell its equity interest in Forum Cinemas OU, which consists of nine theatres located in the Baltics’ region (Latvia, Lithuania and Estonia) and was included in the Company’s International markets reportable segment, for total consideration of approximately €77.25 million, including cash of approximately €64.35 million or $76.6 million prior to any transaction costs. This transaction was undertaken by the Company to further increase its liquidity and strengthen its balance sheet at a transaction multiple that demonstrates that market participants ascribe positive value to the business. The completion of the sale will take place in several steps and is contingent upon clearance from each regulatory competition council in each country. The Company received $37.5 million (€31.53 million) cash consideration upon entering into the sale agreement on August 28, 2020, transferred an equity interest of 49% in Forum Cinemas OU to the purchaser and recorded an initial noncontrolling interest of $34.9 million in total equity (deficit). During the three months ended March 31, 2021 and the three months ended December 31, 2020, the Company received cash consideration for the remaining interest in Estonia and Latvia of $4.1 million (€3.4 million) and $6.4 million (€5.4 million), respectively. Transaction costs of $1.4 million and net gain of $1.2 million related to the sale of 49% equity interest of Lithuania and Estonia and the 100% disposal of Latvia were recorded in additional paid-in capital during the six months ended December 31, 2020. Additional transaction costs of $0.1 million and net gain of $0.3 million related to the sale of 51% equity interest of Estonia were recorded in additional paid-in capital during the three months ended March 31, 2021. The transaction costs and net gain recorded in additional paid-in capital will be recognized in earnings when the remaining 51% interest in Lithuania is disposed. At March 31, 2021, the carrying amounts of the major classes of assets and liabilities included as part of the disposal group that were previously included in the International markets reportable segment were; goodwill of $36.3 million, property, net, of $9.1 million, operating lease right-of-use assets, net of $12.4 million, and current and long-term operating lease liabilities of $1.2 million and $11.4 million, respectively. The remaining cash consideration of approximately $31.9 million (€26.3 million) was paid upon completion of the sale of the remaining 51% equity interest in Lithuania on May 6, 2021. At March 31, 2021, the Company’s noncontrolling interest of 49% in Lithuania was $22.4 million in net assets.

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


	Foreign
(In millions)	Currency		Pension Benefits		Total
Balance December 31, 2020	$	60.1	$	(21.4)	$	38.7
Other comprehensive (income) loss		(54.5)		3.5		(51.0)
Balance March 31, 2021	$	5.6	$	(17.9)	$	(12.3)

Accumulated depreciation and amortization. Accumulated depreciation was $2,330.0 million and $2,243.1 million at March 31, 2021 and December 31, 2020, respectively, related to property. Accumulated amortization of intangible assets was $42.4 million and $42.0 million at March 31, 2021 and December 31, 2020, respectively.

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


	Three Months Ended
(In millions)	March 31, 2021		March 31, 2020
Derivative liability fair value adjustment for embedded conversion feature in the Convertible Notes	$	—	$	(0.5)
Derivative asset fair value adjustment for contingent call option related to the Class B common stock purchase and cancellation agreement		—		20.1
Credit losses (income) related to contingent lease guarantees		(2.0)		5.3
Governmental assistance due to COVID-19		(12.4)		—
Foreign currency transaction (gains) losses		(3.8)		2.0
Non-operating components of net periodic benefit cost		(0.2)		—
Financing fees related to modification of debt agreements		1.0		—
Total other expense (income)	$	(17.4)	$	26.9

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


	Three Months Ended
(In millions)	March 31, 2021		March 31, 2020
Impairment of long-lived assets	$	—	$	91.3
Impairment of definite-lived intangible assets		—		8.0
Impairment of indefinite-lived intangible assets		—		8.3
Impairment of goodwill		—		1,744.3
Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill		—		1,851.9
Impairment of other assets recorded in investment expense (income)		—		7.2
Total impairment loss	$	—	$	1,859.1

During the three months ended March 31, 2020, the enterprise fair values of the Domestic Theatres and International Theatres reporting units were less than their carrying values and goodwill impairment charges of $1,124.9 million and $619.4 million were recorded for the Company’s Domestic Theatres and International Theatres reporting units, respectively. The Step 1 quantitative goodwill impairment test was performed due to a decline in the common stock price and prices of the Company’s corporate borrowings and the resulting impact on market capitalization were two of several factors considered when making this evaluation, including the sustained declines during 2020 in the Company’s enterprise market capitalization and the temporary suspension of operations at all of the Company’s theatres on or before March 17, 2020 due to the COVID-19 pandemic. See Note 4—Goodwill for further information.

The Company evaluates definite-lived and indefinite-lived intangible assets for impairment annually or more frequently as specific events or circumstances dictate or changes in circumstances indicate that the carrying amount of the asset group may not be fully recoverable.

During the three months ended March 31, 2020, the Company recorded non-cash impairment of long-lived assets of $81.4 million on 57 theatres in the U.S. markets with 658 screens (in Alabama, Arkansas, California, District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming) and $9.9 million on 23 theatres in the International markets with 213 screens (in Germany, Italy, Spain, UK and Sweden). During the three months ended March 31, 2020, the Company recorded impairment losses related to definite-lived intangible assets of $8.0 million. In addition, the Company recorded an impairment loss of $7.2 million within investment expense (income), related to equity interest investments without a readily determinable fair value accounted for under the cost method.

During the three months ended March 31, 2020, the Company performed a quantitative impairment evaluation of its indefinite-lived intangible assets related to the AMC, Odeon and Nordic trade names and recorded impairment charges of $5.9 million related to Odeon trade names and $2.4 million related to Nordic trade names during the three months ended March 31, 2020. To estimate fair value of the Company’s indefinite-lived trade names, the Company employed a derivation of the Income Approach known as the Royalty Savings. No impairment charges for indefinite-lived intangible assets were recorded during the three months ended March 31, 2021. The Company first assessed the qualitative factors to determine whether the existence of events and circumstances indicated that it was more likely than not the fair value amounts of any indefinite-lived intangible assets were less than their carrying amounts and concluded it was not more likely than not that the fair value amounts were less than their carrying amounts at March 31, 2021.

Accounting Pronouncements Recently Adopted

Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to improve consistency and simplify several areas of existing guidance. ASU 2019-12 removes certain exceptions to the general principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also clarifies the accounting for transactions that result in a step-up in the tax basis for goodwill. ASU 2019-12 was effective for the Company in the first quarter of 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements.

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NOTE 2—LEASES

The Company leases theatres and equipment under operating and finance leases. The Company typically does not believe that exercise of the renewal options is reasonably certain at the lease commencement and, therefore, considers the initial base term as the lease term. Lease terms vary but generally the leases provide for fixed and escalating rentals, contingent escalating rentals based on the Consumer Price Index and other indexes not to exceed certain specified amounts and variable rentals based on a percentage of revenues. The Company often receives contributions from landlords for renovations at existing locations. The Company records the amounts received from landlords as an adjustment to the right-of-use asset and amortizes the balance as a reduction to rent expense over the base term of the lease agreement. Equipment leases primarily consist of food and beverage equipment.

The Company received, or is in process of negotiating, rent concessions provided by the lessors that aided, or will aid, in mitigating the economic effects of COVID-19. These concessions primarily consist of rent abatements and the deferral of rent payments. In instances where there were no substantive changes to the lease terms, i.e., modifications that resulted in total payments of the modified lease being substantially the same or less than the total payments of the existing lease, the Company elected the relief as provided by the FASB staff related to the accounting for certain lease concessions. The Company elected not to account for these concessions as a lease modification, and therefore the Company has remeasured the related lease liability and right-of-use asset but did not reassess the lease classification or change the discount rate to the current rate in effect upon the remeasurement. The deferred payment amounts have been recorded in the Company’s lease liabilities to reflect the change in the timing of payments. The deferred payment amounts included in current maturities of operating lease liabilities and long-term operating lease liabilities are reflected in the condensed consolidated statements of cash flows as part of the change in accrued expenses and other liabilities. Those leases that did not meet the criteria for treatment under the FASB relief were evaluated as lease modifications. The deferred payment amounts included in accounts payable for contractual rent amounts due and not paid are reflected in accounts payable on the condensed consolidated balance sheets and in the condensed consolidated statements of cash flows as part of the change in accounts payable. In addition, the Company included deferred lease payments in operating lease right-of-use assets as a result of lease remeasurements.

A summary of deferred payment amounts related to rent obligations for which payments have been deferred to 2021 and future years are provided below:


	As of				As of
	December 31,		Increase (decrease)		March 31,
(In millions)	2020		in deferred amounts		2021
Fixed operating lease deferred amounts (1) (2)	$	383.9	$	53.5	$	437.4
Finance lease deferred amounts		12.8		(4.6)		8.2
Variable lease deferred amounts (2)		53.3		(25.9)		27.4
Total deferred lease amounts	$	450.0	$	23.0	$	473.0

(1)

During the three months ended March 31, 2021, the increase in fixed operating lease deferred amounts is net of $19.1 million of decreases in the deferred balances as of December 31, 2020 related to payments and abatements.

(2)

During the three months ended March 31, 2021, decreases in variable lease deferred amounts were primarily due to resolution of contingencies, therefore, variable amounts became fixed and were reclassified to fixed operating lease deferred amounts.

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The following table reflects the lease costs for the three months ended March 31, 2021 and March 31, 2020:


		Three Months Ended
	Consolidated Statement	March 31,		March 31,
(In millions)	of Operations	2021		2020
Operating lease cost
Theatre properties	Rent	$	175.5	$	216.9
Theatre properties	Operating expense		0.8		2.2
Equipment	Operating expense		2.3		3.9
Office and other	General and administrative: other		1.4		1.3
Finance lease cost
Amortization of finance lease assets	Depreciation and amortization		1.3		1.9
Interest expense on lease liabilities	Finance lease obligations		1.4		1.6
Variable lease cost
Theatre properties	Rent		16.6		20.9
Equipment	Operating expense		0.2		7.0
Total lease cost		$	199.5	$	255.7

Cash flow and supplemental information is presented below:


	Three Months Ended
	March 31,		March 31,
(In millions)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in finance leases	$	(1.0)	$	(1.6)
Operating cash flows used in operating leases		(136.7)		(240.3)
Financing cash flows used in finance leases		(1.9)		(2.3)

Landlord contributions:
Operating cashflows provided by operating leases		3.7		16.1
Supplemental disclosure of noncash leasing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities (1)		23.5		69.7

(1)

Includes lease extensions and option exercises.

The following table represents the weighted-average remaining lease term and discount rate as of March 31, 2021:


	As of March 31, 2021
	Weighted Average		Weighted Average
	Remaining		Discount
Lease Term and Discount Rate	Lease Term (years)		Rate
Operating leases		10.2		9.9%
Finance leases		13.1		6.4%

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Minimum annual payments required under existing operating and finance leases and the net present value thereof as of March 31, 2021 are as follows:


	Operating Lease		Financing Lease
(In millions)	Payments		Payments
Nine months ending December 31, 2021 (1)	$	799.5	$	13.6
2022 (1)		999.0		15.0
2023		895.9		11.6
2024		792.0		9.8
2025		756.5		9.2
2026		691.1		9.0
Thereafter		3,719.8		66.5
Total lease payments		8,653.8		134.7
Less imputed interest		(3,153.8)		(44.4)
Total	$	5,500.0	$	90.3

(1)

Does not include amounts recorded in accounts payable for deferred rent.

As of March 31, 2021, the Company had signed additional operating lease agreements for 6 theatres that have not yet commenced of approximately $150.0 million, which are expected to commence between 2021 and 2024, and carry lease terms of approximately 5 to 20 years. The timing of lease commencement is dependent on the landlord providing the Company with control and access to the related facility.

NOTE 3—REVENUE RECOGNITION

Disaggregation of Revenue. Revenue is disaggregated in the following tables by major revenue types and by timing of revenue recognition:


	Three Months Ended
(In millions)	March 31, 2021		March 31, 2020
Major revenue types
Admissions	$	69.5	$	568.0
Food and beverage		50.1		288.1
Other theatre:
Screen advertising		16.9		29.7
Other theatre		11.8		55.7
Other theatre		28.7		85.4
Total revenues	$	148.3	$	941.5


	Three Months Ended
(In millions)	March 31, 2021		March 31, 2020
Timing of revenue recognition
Products and services transferred at a point in time	$	126.8	$	851.8
Products and services transferred over time(1)		21.5		89.7
Total revenues	$	148.3	$	941.5

(1)

Amounts primarily include subscription and advertising revenues.

The following tables provide the balances of receivables and deferred revenue income:


(In millions)	March 31, 2021		December 31, 2020
Current assets
Receivables related to contracts with customers	$	22.3	$	23.1
Miscellaneous receivables		63.7		67.9
Receivables, net	$	86.0	$	91.0

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(In millions)	March 31, 2021		December 31, 2020
Current liabilities
Deferred revenue related to contracts with customers	$	402.1	$	400.6
Miscellaneous deferred income		2.2		4.8
Deferred revenue and income	$	404.3	$	405.4

The significant changes in contract liabilities with customers included in deferred revenues and income are as follows:


	Deferred Revenues
	Related to Contracts
(In millions)	with Customers
Balance December 31, 2020	$	400.6
Cash received in advance(1)		15.6
Customer loyalty rewards accumulated, net of expirations:
Admission revenues (2)		0.5
Food and beverage (2)		0.8
Other theatre (2)		—
Reclassification to revenue as the result of performance obligations satisfied:
Admission revenues (3)		(7.2)
Food and beverage (3)		(3.9)
Other theatre (4)		(0.9)
Foreign currency translation adjustment		(3.4)
Balance March 31, 2021	$	402.1

(1)

Includes movie tickets, food and beverage, gift cards, exchange tickets, and AMC Stubs® loyalty membership fees.

(2)

Amount of rewards accumulated, net of expirations, that are attributed to AMC Stubs® and other loyalty programs.

(3)

Amount of rewards redeemed that are attributed to gift cards, exchange tickets, movie tickets, AMC Stubs® loyalty programs and other loyalty programs.

(4)

Amounts relate to income from non-redeemed or partially redeemed gift cards, non-redeemed exchange tickets, AMC Stubs® loyalty membership fees and other loyalty programs.

The Company suspended the recognition of deferred revenues related to certain loyalty programs, gift cards, and exchange tickets during the period in which its operations were temporarily suspended. As the Company re-opened theatres, A-List members had the option to reactivate their subscription, which restarted the monthly charge for the program. The Company resumed the recognition of deferred revenues related to certain loyalty programs, gift cards and exchange tickets.

The significant changes to contract liabilities included in the exhibitor services agreement in the condensed consolidated balance sheets, are as follows:


	Exhibitor Services
(In millions)	Agreement (1)
Balance December 31, 2020	$	537.6
Negative Common Unit Adjustment–reduction of common units		(9.2)
Reclassification of the beginning balance to other theatre revenue, as the result of performance obligations satisfied		(4.4)
Balance March 31, 2021	$	524.0

(1)

Represents the carrying amount of the National CineMedia, LLC (“NCM”) common units that were previously received under the annual Common Unit Adjustment (“CUA”). The deferred revenues are being amortized to other theatre revenues over the remainder of the 30-year term of the Exhibitor Service Agreement (“ESA”) ending in February 2037.

Gift cards and exchange tickets. The total amount of non-redeemed gifts cards and exchange tickets included

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in deferred revenues and income as of March 31, 2021 was $315.7 million. This will be recognized as revenues as the gift cards and exchange tickets are redeemed or as the non-redeemed gift card and exchange ticket revenues are recognized in proportion to the pattern of actual redemptions. Historically, the Company has estimated this to occur over the next 24 months, but due to the COVID-19 pandemic and the limited or temporary suspension of theatre operations, the pattern of actual redemptions may occur over a longer period of time.

Loyalty programs. As of March 31, 2021, the amount of deferred revenue allocated to the loyalty programs included in deferred revenues and income was $64.2 million. The earned points will be recognized as revenue as the points are redeemed. Historically, the Company has estimated this to occur over the next 24 months, but due to the COVID-19 pandemic and the limited or temporary suspension of theatre operations, the recognition of points redeemed may occur over a longer period of time. The AMC Stubs®annual membership fee is recognized ratably over the one-year membership period.

The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

NOTE 4—GOODWILL

The following table summarizes the changes in goodwill by reporting unit for the three months ended March 31, 2021:


(In millions)	Domestic Theatres		International Theatres		Total
Balance December 31, 2020	$	1,796.5	$	750.8	$	2,547.3
Currency translation adjustment		—		(52.6)		(52.6)
Baltics disposition-Estonia (1)		—		(3.7)		(3.7)
Balance March 31, 2021	$