10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 8, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
June 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: (
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 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
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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AMC Preferred Equity Units, each representing participating voting and economic rights in the equivalent of one (1) share of Class A common stock |
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AMC ENTERTAINMENT HOLDINGS, INC.
INDEX
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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 |
36 |
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62 |
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63 |
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64 |
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64 |
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69 |
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69 |
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69 |
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70 |
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71 |
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72 |
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements. (Unaudited)
AMC ENTERTAINMENT HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended |
Six Months Ended |
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(In millions, except share and per share amounts) |
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June 30, 2023 |
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June 30, 2022 |
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June 30, 2023 |
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June 30, 2022 |
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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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( |
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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 income (loss) |
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( |
( |
( |
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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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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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Investment expense (income) |
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( |
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( |
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Total other expense, net |
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Net earnings (loss) before income taxes |
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( |
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( |
( |
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Income tax provision |
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Net earnings (loss) |
$ |
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$ |
( |
$ |
( |
$ |
( |
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Net earnings (loss) per share attributable to AMC Entertainment Holdings, Inc.'s common stockholders: |
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Basic |
$ |
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$ |
( |
$ |
( |
$ |
( |
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Diluted |
$ |
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$ |
( |
$ |
( |
$ |
( |
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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 |
Six Months Ended |
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(In millions) |
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June 30, 2023 |
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June 30, 2022 |
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June 30, 2023 |
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June 30, 2022 |
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(unaudited) |
(unaudited) |
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Net earnings (loss) |
$ |
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$ |
( |
$ |
( |
$ |
( |
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Other comprehensive 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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Pension adjustments: |
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Net gain (loss) arising during the period |
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— |
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— |
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( |
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Other comprehensive 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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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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June 30, 2023 |
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December 31, 2022 |
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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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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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Shareholder litigation liability |
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— |
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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
Six Months Ended |
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(In millions) |
June 30, 2023 |
June 30, 2022 |
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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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(Gain) loss on extinguishment of debt |
( |
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Deferred income taxes |
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Unrealized loss (gain) on investments in Hycroft |
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( |
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Amortization of net premium on corporate borrowings to interest expense |
( |
( |
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Amortization of deferred financing costs to interest expense |
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Non-cash portion of stock-based compensation |
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Gain on disposition of Saudi Cinema Company |
( |
— |
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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 cost (income) |
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( |
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Non-cash shareholder litigation expense |
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— |
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Change in assets and liabilities: |
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Receivables |
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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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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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Acquisition of theatre assets |
— |
( |
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Proceeds from disposition of Saudi Cinema Company |
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— |
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Proceeds from disposition of long-term assets |
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Proceeds from sale of securities |
— |
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Investments in non-consolidated entities, net |
— |
( |
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Other, net |
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( |
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Net cash used in investing activities |
( |
( |
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Cash flows from financing activities: |
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Repurchase of Senior Subordinated Notes due 2026 |
( |
— |
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Proceeds from issuance of First Lien Notes due 2029 |
— |
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Principal payments under First Lien Notes due 2025 |
— |
( |
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Principal payments under First Lien Notes due 2026 |
— |
( |
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Principal payments under First Lien Toggle Notes due 2026 |
— |
( |
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Premium paid to extinguish First Lien Notes due 2025 |
— |
( |
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Premium paid to extinguish First Lien Notes due 2026 |
— |
( |
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Premium paid to extinguish First Lien Toggle Notes due 2026 |
— |
( |
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Repurchase of Second Lien Notes due 2026 |
( |
( |
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Scheduled principal payments under Term Loan due 2026 |
( |
( |
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Net proceeds from AMC Preferred Equity Units issuance |
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— |
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Principal payments under finance lease obligations |
( |
( |
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Cash used to pay for deferred financing costs |
( |
( |
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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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( |
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Effect of exchange rate changes on cash and cash equivalents and |
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( |
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6
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 |
$ |
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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 |
$ |
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$ |
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Income taxes paid, net |
$ |
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$ |
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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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Other third-party AMC Preferred Equity Units issuance costs payable |
$ |
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$ |
— |
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Extinguishment of Second Lien Notes due 2026 in exchange for share issuance |
$ |
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$ |
— |
See Notes to Condensed Consolidated Financial Statements.
7
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(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.
Liquidity. The Company believes its existing cash and cash equivalents, together with cash generated from operations, will be sufficient to fund its operations and satisfy its obligations currently and through the next twelve months. The Company also believes it will comply with the minimum liquidity covenant requirement under its Senior Secured Revolving Credit Facility through the end of the covenant suspension period. Pursuant to the Twelfth Amendment to Credit Agreement, the requisite revolving lenders party thereto agreed to extend the suspension period for the secured leverage ratio financial covenant applicable to the Senior Secured Revolving Credit Facility under the Credit Agreement through March 31, 2024. The current maturity date of the Senior Secured Revolving Credit Facility is April 22, 2024. Since the financial covenant applicable to the Senior Secured Revolving Credit Facility is tested as of the last day of any fiscal quarter for which financial statements have been (or were required to have been) delivered, the financial covenant has been effectively suspended through maturity of the Senior Secured Revolving Credit Facility. As of June 30, 2023, the Company was subject to a minimum liquidity requirement of $
The Company’s current cash burn rates are not sustainable long-term. In order to achieve net positive operating cash flows and long-term profitability, the Company believes that operating revenues will need to increase to levels in line with pre-COVID operating revenues. North American box office grosses were down approximately
There can be no assurance that the operating revenues, attendance levels, and other assumptions used to estimate the Company’s liquidity requirements and future cash burn rates will be correct, and the ability to be predictive is uncertain due to limited ability to predict studio film release dates, the overall production and theatrical release levels, and success of individual titles. Additionally, the duration of labor stoppages, including but not limited to the Writers Guild of America strike that began on May 2, 2023, and the Screen Actors Guild – American Federation of Television and Radio Artists strike that began on July 14, 2023 cannot be reasonably estimated and may have a negative impact on the Company’s future liquidity and cash burn rates. Further, there can be no assurances that the Company will be successful in generating the additional liquidity necessary to meet the Company’s obligations beyond twelve months from the issuance of these financial statements on terms acceptable to the Company or at all.
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 (including AMC Preferred Equity Units) 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 and to the extent equity is used, dilutive.
On December 22, 2022, the Company entered into a forward purchase agreement (the “Forward Purchase Agreement”) with Antara Capital LP (“Antara”) pursuant to which the Company agreed to (i) sell to Antara
8
amount of the Company’s
During the six months ended June 30, 2023 the Company raised gross proceeds of approximately $
The below table summarizes the cash debt repurchase transactions during the six months ended June 30, 2023, including related party transactions with Antara, which became a related party on February 7, 2023. See Note 6—Corporate Borrowings and Finance Lease Liabilities for more information.
Aggregate Principal |
Reacquisition |
Gain on |
Accrued Interest |
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(In millions) |
Repurchased |
Cost |
Extinguishment |
Paid |
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Related party transactions: |
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Second Lien Notes due 2026 |
$ |
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$ |
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$ |
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$ |
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Total related party transactions |
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Non-related party transactions: |
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Second Lien Notes due 2026 |
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Total non-related party transactions |
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Total debt repurchases |
$ |
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$ |
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$ |
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$ |
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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, 2022. The accompanying condensed consolidated balance sheet as of December 31, 2022, 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, results for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023. The Company manages its business under
Cash and Cash Equivalents. At June 30, 2023, cash and cash equivalents for the U.S. markets and International markets were $
9
Restricted Cash. Restricted cash is cash held in the Company’s bank accounts in International markets as a guarantee for certain landlords. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the condensed consolidated balance sheets to the total of the amounts in the condensed consolidated statements of cash flows.
Period Ended |
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(In millions) |
June 30, 2023 |
December 31, 2022 |
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Cash and cash equivalents |
$ |
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$ |
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Restricted cash |
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Total cash and cash equivalents and restricted cash in the statement of cash flows |
$ |
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$ |
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Accumulated Other Comprehensive Loss. The following table presents the change in accumulated other comprehensive loss by component:
Foreign |
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(In millions) |
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Currency |
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Pension Benefits |
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Total |
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Balance December 31, 2022 |
$ |
( |
$ |
|
$ |
( |
|||
Other comprehensive loss |
( |
( |
( |
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Balance June 30, 2023 |
$ |
( |
$ |
|
$ |
( |
|||
Accumulated Depreciation and Amortization. Accumulated depreciation was $
Other Expense (Income). The following table sets forth the components of other expense (income):
Three Months Ended |
Six Months Ended |
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(In millions) |
June 30, 2023 |
June 30, 2022 |
June 30, 2023 |
June 30, 2022 |
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Decreases related to contingent lease guarantees |
$ |
— |
$ |
— |
$ |
— |
$ |
( |
||||
Governmental assistance due to COVID-19 - International markets |
— |
( |
— |
( |
||||||||
Governmental assistance due to COVID-19 - U.S. markets |
— |
— |
— |
( |
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Foreign currency transaction (gains) losses |
( |
|
( |
|
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Non-operating components of net periodic benefit income |
|
( |
|
( |
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Gain on extinguishment - Senior Subordinated Notes due 2026 |
— |
— |
( |
— |
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Loss on extinguishment - First Lien Notes due 2025 |
— |
— |
— |
|
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Loss on extinguishment - First Lien Notes due 2026 |
— |
— |
— |
|
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Loss on extinguishment - First Lien Toggle Notes due 2026 |
— |
— |
— |
|
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Gain on extinguishment - Second Lien Notes due 2026 |
( |
( |
( |
( |
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Derivative stockholder settlement |
— |
— |
( |
— |
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Shareholder litigation contingency |
( |
— |
|
— |
||||||||
( |
— |
( |
— |
|||||||||
Total other expense (income) |
$ |
( |
$ |
( |
$ |
|
$ |
|
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10
Accounting Pronouncements Recently Adopted
Reference Rate Reform. In March 2020, the FASB issued guidance providing optional expedients and exceptions to account for the effects of reference rate reform to contracts, hedging relationships, and other transactions affected by the transition from the use of London Interbank Offered Rate (LIBOR) to an alternative reference rate. The Company elected to apply the optional expedients under ASC 848 to modifications of contracts that previously referenced LIBOR. The optional expedients eliminate the need to remeasure the contracts or reassess any accounting determinations. See Note 6—Corporate Borrowings and Finance Lease Liabilities for further discussion on the election of the optional expedients allowed under ASC 848.
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 sight and sound and food and beverage equipment.
The Company received rent concessions from 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 $
A summary of deferred payment amounts related to rent obligations for which payments were deferred to future periods is provided below:
As of |
As of |
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December 31, |
Decrease |
June 30, |
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(In millions) |
2022 |
in deferred amounts |
2023 |
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Fixed operating lease deferred amounts (1) |
$ |
$ |
( |
$ |
|
||||
Finance lease deferred amounts |
|
( |
|
||||||
Variable lease deferred amounts |
|
( |
|
||||||
Total deferred lease amounts |
$ |
|
$ |
( |
$ |
|
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| (1) |
During the six months ended June 30, 2023, the decrease in fixed operating lease deferred amounts includes $ |
11
The following table reflects the lease costs for the periods presented:
Three Months Ended |
Six Months Ended |
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June 30, |
June 30, |
June 30, |
June 30, |
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(In millions) |
Consolidated Statements of Operations |
2023 |
2022 |
2023 |
2022 |
|||||||||
Operating lease cost |
||||||||||||||
Theatre properties |
Rent |
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Theatre properties |
Operating expense |
|
|
|
|
|||||||||
Equipment |
Operating expense |
|
|
|
|
|||||||||
Office and other |
General and administrative: other |
|
|
|
|
|||||||||
Finance lease cost |
||||||||||||||
Amortization of finance lease assets |
Depreciation and amortization |
|
|
|
|
|||||||||
Interest expense on lease liabilities |
Finance lease obligations |
|
|
|
|
|||||||||
Variable lease cost |
||||||||||||||
Theatre properties |
Rent |
|
|
|
|
|||||||||
Equipment |
Operating expense |
|
|
|
|
|||||||||
Total lease cost |
$ |
|
$ |
|
$ |
|
$ |
|
||||||
Cash flow and supplemental information is presented below:
Six Months Ended |
||||||
June 30, |
June 30, |
|||||
(In millions) |
2023 |
2022 |
||||
Cash paid for amounts included in the measurement of lease liabilities: |
||||||
Operating cash flows used in finance leases |
$ |
( |
$ |
( |
||
Operating cash flows used in operating leases |
( |
( |
||||
Financing cash flows used in finance leases |
( |
( |
||||
Landlord contributions: |
||||||
Operating cashflows provided by operating leases |
|
|
||||
Supplemental disclosure of noncash leasing activities: |
||||||
Right-of-use assets obtained in exchange for new operating lease liabilities (1) |
|
|
||||
| (1) | Includes lease extensions and option exercises. |
The following table represents the weighted-average remaining lease term and discount rate as of June 30, 2023: