10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on November 8, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
September 30, |
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(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended | |
OR | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission file number
(Exact name of registrant as specified in its charter)
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Registrant’s telephone number, including area code: (
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.
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).
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.
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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interest in a share of Series A Convertible Participating Preferred Stock |
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 |
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Number of shares |
Class A common stock |
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*In addition, as of November 8, 2022 the issuer had |
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AMC ENTERTAINMENT HOLDINGS, INC.
INDEX
Page Number |
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3 |
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3 |
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4 |
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5 |
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6 |
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8 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
35 |
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67 |
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68 |
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68 |
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69 |
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72 |
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72 |
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72 |
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72 |
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73 |
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74 |
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements. (Unaudited)
AMC ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended |
Nine Months Ended |
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(In millions, except share and per share amounts) |
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September 30, 2022 |
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September 30, 2021 |
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September 30, 2022 |
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September 30, 2021 |
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(unaudited) |
(unaudited) |
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Revenues |
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Admissions |
$ |
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$ |
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$ |
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$ |
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Food and beverage |
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Other theatre |
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Total revenues |
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Operating costs and expenses |
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Film exhibition costs |
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Food and beverage costs |
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Operating expense, excluding depreciation and amortization below |
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Rent |
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General and administrative: |
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Merger, acquisition and other costs |
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Other, excluding depreciation and amortization below |
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Depreciation and amortization |
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Operating costs and expenses |
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Operating loss |
( |
( |
( |
( |
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Other expense, net: |
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Other expense (income) |
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( |
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( |
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( |
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Interest expense: |
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Corporate borrowings |
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Finance lease obligations |
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Non-cash NCM exhibitor services agreement |
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Equity in (earnings) loss of non-consolidated entities |
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( |
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( |
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( |
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Investment expense (income) |
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— |
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( |
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Total other expense, net |
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Net loss before income taxes |
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( |
( |
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( |
( |
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Income tax provision (benefit) |
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( |
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( |
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Net loss |
( |
( |
( |
( |
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Less: Net loss attributable to noncontrolling interests |
— |
— |
— |
( |
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Net loss attributable to AMC Entertainment Holdings, Inc. |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
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Net loss per share: |
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Basic |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
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Diluted |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
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Average shares outstanding: |
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Basic (in thousands) |
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Diluted (in thousands) |
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See Notes to Condensed Consolidated Financial Statements.
3
AMC ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Three Months Ended |
Nine Months Ended |
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(In millions) |
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September 30, 2022 |
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September 30, 2021 |
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September 30, 2022 |
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September 30, 2021 |
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(unaudited) |
(unaudited) |
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Net loss |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
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Other comprehensive income (loss): |
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Unrealized foreign currency translation adjustments |
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( |
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( |
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( |
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( |
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Realized loss on foreign currency transactions reclassified into investment expense (income), net of tax |
— |
— |
— |
( |
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Pension adjustments: |
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Net gain arising during the period |
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— |
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Other comprehensive income (loss): |
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( |
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( |
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( |
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( |
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Total comprehensive loss |
( |
( |
( |
( |
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Comprehensive loss attributable to noncontrolling interests |
— |
— |
— |
( |
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Comprehensive loss attributable to AMC Entertainment Holdings, Inc. |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
See Notes to Condensed Consolidated Financial Statements.
4
AMC ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share data) |
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September 30, 2022 |
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December 31, 2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Restricted cash |
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Receivables, net |
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Other current assets |
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Total current assets |
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Property, net |
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Operating lease right-of-use assets, net |
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Intangible assets, net |
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Goodwill |
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Deferred tax asset, net |
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Other long-term assets |
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Total assets |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable |
$ |
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$ |
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Accrued expenses and other liabilities |
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Deferred revenues and income |
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Current maturities of corporate borrowings |
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Current maturities of finance lease liabilities |
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Current maturities of operating lease liabilities |
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Total current liabilities |
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Corporate borrowings |
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Finance lease liabilities |
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Operating lease liabilities |
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Exhibitor services agreement |
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Deferred tax liability, net |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies |
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Stockholders’ deficit: |
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AMC Entertainment Holdings, Inc.'s stockholders' deficit: |
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Preferred stock, $ |
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Class A common stock ($ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Accumulated deficit |
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( |
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( |
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Total stockholders' deficit |
( |
( |
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Total liabilities and stockholders’ deficit |
$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements.
5
AMC ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended |
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(In millions) |
September 30, 2022 |
September 30, 2021 |
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Cash flows from operating activities: |
(unaudited) |
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Net loss |
$ |
( |
$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Deferred income taxes |
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( |
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Loss on extinguishment of debt |
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Unrealized loss on investments in Hycroft |
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— |
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Unrealized loss on investments in NCM |
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— |
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Amortization of net discount (premium) on corporate borrowings to interest expense |
( |
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Amortization of deferred financing costs to interest expense |
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PIK interest expense |
— |
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Non-cash portion of stock-based compensation |
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Loss on disposition of assets |
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— |
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Gain on disposition of Baltics |
— |
( |
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Loss on dispositions |
— |
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Equity in loss from non-consolidated entities, net of distributions |
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Landlord contributions |
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Other non-cash rent benefit |
( |
( |
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Deferred rent |
( |
( |
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Net periodic benefit income |
( |
( |
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Change in assets and liabilities: |
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Receivables |
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( |
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Other assets |
( |
( |
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Accounts payable |
( |
( |
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Accrued expenses and other liabilities |
( |
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Other, net |
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( |
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Net cash used in operating activities |
( |
( |
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Cash flows from investing activities: |
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Capital expenditures |
( |
( |
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Proceeds from disposition of Baltics, net of cash and transaction costs |
— |
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Acquisition of theatre assets |
( |
( |
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Proceeds from disposition of long-term assets |
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Proceeds from sale of securities |
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— |
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Investments in non-consolidated entities, net |
( |
( |
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Other, net |
( |
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Net cash used in investing activities |
( |
( |
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Cash flows from financing activities: |
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Proceeds from issuance of First Lien Notes due 2029 |
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— |
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Proceeds from issuance of Odeon Term Loan due 2023 |
— |
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Proceeds from First Lien Toggle Notes due 2026 |
— |
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Principal payments under First Lien Notes due 2025 |
( |
— |
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Principal payments under First Lien Notes due 2026 |
( |
( |
||||
Principal payments under First Lien Toggle Notes due 2026 |
( |
— |
||||
Premium paid to extinguish First Lien Notes due 2025 |
( |
— |
||||
Premium paid to extinguish First Lien Notes due 2026 |
( |
( |
||||
Premium paid to extinguish First Lien Toggle Notes due 2026 |
( |
— |
||||
Repurchase of Second Lien Notes due 2026 |
( |
— |
||||
Repayments under revolving credit facilities |
— |
( |
6
Scheduled principal payments under Term Loan due 2026 |
( |
( |
||||
Net proceeds from Class A common stock issuance |
— |
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Net proceeds from Class A common stock issuance to Mudrick |
— |
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Net proceeds from AMC Preferred Equity Units issuance |
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— |
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Payments related to sale of noncontrolling interest |
— |
( |
||||
Principal payments under finance lease obligations |
( |
( |
||||
Cash used to pay for deferred financing costs |
( |
( |
||||
Cash used to pay dividends |
( |
— |
||||
Taxes paid for restricted unit withholdings |
( |
— |
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Net cash provided by (used in) financing activities |
( |
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Effect of exchange rate changes on cash and cash equivalents and restricted cash |
( |
( |
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Net increase (decrease) in cash and cash equivalents and restricted cash |
( |
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Cash and cash equivalents and restricted cash at beginning of period |
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Cash and cash equivalents and restricted cash at end of period |
$ |
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$ |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash paid during the period for: |
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Interest (including amounts capitalized of $ |
$ |
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$ |
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Income taxes paid (received), net |
$ |
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$ |
( |
||
Schedule of non-cash activities: |
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Investment in NCM |
$ |
|
$ |
— |
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Construction payables at period end |
$ |
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$ |
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AMC Preferred Equity Units issuance costs payable at period end |
$ |
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$ |
— |
See Notes to Condensed Consolidated Financial Statements.
7
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(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. Total consolidated revenues increased $
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As of |
As of |
As of |
As of |
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January 1, |
March 31, |
June 30, |
September 30, |
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Theatre Operations: |
2021 |
2021 |
2021 |
2021 |
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Percentage of theatres operated - Domestic |
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% |
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% |
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% |
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% |
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Percentage of theatres operated - International |
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% |
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% |
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% |
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% |
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Percentage of theatres operated - Consolidated |
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% |
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% |
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% |
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% |
During the nine months ended September 30, 2022, the Company operated essentially
Liquidity. As of September 30, 2022, the Company has cash and cash equivalents of approximately $
Additionally, the Company enhanced future liquidity through debt refinancing that extended maturities and repurchased debt at
8
The table below summarizes net increase (decrease) in cash and cash equivalents and restricted cash by quarter for the year ended December 31, 2021:
Three Months Ended |
Year Ended |
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March 31, |
June 30, |
September 30, |
December 31, |
December 31, |
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(In millions) |
2021 |
2021 |
2021 |
2021 |
2021 |
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Cash flows from operating activities: |
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Net cash provided by (used in) operating activities |
$ |
( |
$ |
( |
$ |
( |
$ |
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$ |
( |
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Cash flows from investing activities: |
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Net cash provided by (used in) investing activities |
( |
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( |
( |
( |
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Cash flows from financing activities: |
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Net cash provided by (used in) financing activities |
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( |
( |
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Effect of exchange rate changes on cash and cash equivalents and restricted cash |
( |
|
( |
( |
( |
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Net increase (decrease) in cash and cash equivalents and restricted cash |
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( |
( |
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Cash and cash equivalents and restricted cash at beginning of period |
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Cash and cash equivalents and restricted cash at end of period |
$ |
|
$ |
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$ |
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$ |
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$ |
|
The Company’s net cash used in operating activities improved by $
The table below summarizes net decrease in cash equivalents and restricted cash by quarter for the nine months ended September 30, 2022:
Three Months Ended |
Nine Months Ended |
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March 31, |
June 30, |
September 30, |
September 30, |
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(In millions) |
2022 |
2022 |
2022 |
2022 |
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Cash flows from operating activities: |
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Net cash used in operating activities |
$ |
( |
$ |
( |
$ |
( |
$ |
( |
||||
Cash flows from investing activities: |
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Net cash used in investing activities |
( |
( |
( |
( |
||||||||
Cash flows from financing activities: |
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Net cash provided by (used in) financing activities |
( |
( |
|
( |
||||||||
Effect of exchange rate changes on cash and cash equivalents and restricted cash |
( |
( |
( |
( |
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Net decrease in cash and cash equivalents and restricted cash |
( |
( |
( |
( |
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Cash and cash equivalents and restricted cash at beginning of period |
|
|
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Cash and cash equivalents and restricted cash at end of period |
$ |
|
$ |
|
$ |
|
$ |
|
The Company’s net cash provided by (used in) operating activities deteriorated by $
9
loss and increases in seasonal working capital uses as the Company paid for the strong late fourth quarter 2021 results in early first quarter of 2022. The Company’s net cash used in operating activities improved by $
The Company’s net cash used in investing activities included:
● |
$ |
● |
$ |
● |
$ |
The Company’s net cash used in financing activities included:
● |
$ |
● |
$ |
● |
$ |
The Company believes its existing cash and cash equivalents, together with cash generated from operations, will be sufficient to fund its operations, satisfy its obligations, including cash outflows to repay rent amounts that were deferred during the COVID-19 pandemic and planned capital expenditures, and comply with minimum liquidity and financial covenant requirements under its debt covenants related to borrowings pursuant to the Senior Secured Revolving Credit Facility for at least the next 12 months. In order to achieve net positive operating cash flows and long-term profitability, the Company believes that box office revenues will need to increase significantly compared to 2021 and the combined first, second, and third quarter of 2022 to levels in line with pre COVID-19 box office revenues. The Company believes the global re-opening of its theatres, the anticipated volume of titles available for theatrical release, and the anticipated broad appeal of many of those titles will support increased attendance levels. The Company believes that recent attendance levels are positive signs of continued demand for the moviegoing experience. For the nine months ended September 30, 2022 attendance was
10
continue to be impacted during the fourth quarter by interest payments, deferred rent payments and the cash used in part to repay in full the Odeon Term Loan Facility. If anticipated levels of attendance during the fourth quarter holiday season and beyond do not materialize, the rate of cash burn will be higher than expected. Moreover, it is difficult to predict future attendance levels and there remain significant risks that may negatively impact attendance, including a potential resurgence of COVID-19 related restrictions, potential movie-goer reluctance to attend theatres due to concerns about COVID-19 variant strains, movie studios release schedules, the production and theatrical release of fewer films compared to levels before the onset of the COVID-19 pandemic, and direct to streaming or other changing movie studio practices.
The Company currently estimates that its existing cash and cash equivalents will be sufficient to comply with minimum liquidity and financial covenant requirements under its debt covenants related to borrowings pursuant to the Senior Secured Revolving Credit Facility, currently and through the next twelve months. The Company entered the Ninth Amendment to the Credit Agreement, dated as of March 8, 2021, pursuant to which the requisite revolving lenders party thereto agreed to extend the suspension period for the financial covenant (the secured leverage ratio) applicable to the Senior Secured Revolving Credit Facility from March 31, 2021 to March 31, 2022, which was further extended from March 31, 2022 to March 31, 2023 by the Eleventh Amendment, dated as of December 20, 2021, as described, and on the terms and conditions specified, therein. As of September 30, 2022, the Company was subject to minimum liquidity requirements of approximately $
The
The Company may, at any time and from time to time, seek to retire or purchase its outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as it may determine, and will depend on prevailing market conditions, its liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
The Company received rent concessions provided by the lessors that aided in mitigating the economic effects of COVID-19 during the pandemic. These concessions primarily consisted of rent abatements and the deferral of rent payments. As a result, deferred lease amounts were approximately $
AMC Preferred Equity Units. On August 4, 2022, the Company announced that its Board of Directors declared a special dividend of
Each AMC Preferred Equity Unit is a depositary share and represents an interest in
11
been allocated and
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, 2021. The accompanying condensed consolidated balance sheet as of December 31, 2021, 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 presentation of the Company’s financial position and results of operations. All significant intercompany balances and transactions have been eliminated in consolidation. Due to the seasonal nature of the Company’s business and the recovery of the industry from the global COVID-19 pandemic, results for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022. The Company manages its business under
Cash and equivalents. At September 30, 2022, cash and cash equivalents for the U.S. markets and International markets were $
Accumulated other comprehensive loss. The following table presents the change in accumulated other comprehensive loss by component:
Foreign |
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(In millions) |
|
Currency |
|
Pension Benefits |
|
Total |
|||
Balance December 31, 2021 |
$ |
( |
$ |
( |
$ |
( |
|||
Other comprehensive income (loss) |
( |
|
( |
||||||
Balance September 30, 2022 |
$ |
( |
$ |
( |
$ |
( |
Accumulated depreciation and amortization. Accumulated depreciation was $
12
Other expense (income). The following table sets forth the components of other expense (income):
Three Months Ended |
Nine Months Ended |
|||||||||||
(In millions) |
September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
||||||||
Decreases related to contingent lease guarantees |
$ |
( |
$ |
— |
$ |
( |
$ |
( |
||||
Governmental assistance due to COVID-19 - International markets |
( |
( |
( |
( |
||||||||
Governmental assistance due to COVID-19 - U.S. markets |
( |
( |