10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 9, 2021
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(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.
Large 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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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 ENTERTAINMENT HOLDINGS, INC.
INDEX
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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 |
34 |
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66 |
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67 |
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67 |
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69 |
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69 |
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69 |
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70 |
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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, 2021 |
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June 30, 2020 |
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June 30, 2021 |
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June 30, 2020 |
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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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Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill |
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— |
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— |
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— |
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Operating costs and expenses |
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Operating loss |
( |
( |
( |
( |
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Other expense (income): |
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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 loss of non-consolidated entities |
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Investment expense (income) |
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( |
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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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( |
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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 attributable to AMC Entertainment Holdings, Inc.'s common stockholders: |
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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 |
Six Months Ended |
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(In millions) |
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June 30, 2021 |
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June 30, 2020 |
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June 30, 2021 |
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June 30, 2020 |
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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, net of tax |
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( |
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( |
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Realized loss on foreign currency transactions reclassified into investment expense (income) |
( |
— |
( |
— |
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Pension adjustments: |
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Net gain arising during the period |
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Other comprehensive income (loss) |
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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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( |
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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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June 30, 2021 |
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December 31, 2020 |
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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’ EQUITY |
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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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Class A common stock ($ |
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Class B common stock ($ |
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— |
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Additional paid-in capital |
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Treasury stock ( |
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— |
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( |
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Accumulated other comprehensive income |
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Accumulated deficit |
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( |
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( |
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Total AMC Entertainment Holdings, Inc.'s stockholders’ deficit |
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( |
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( |
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Noncontrolling interests |
— |
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Total 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, 2021 |
June 30, 2020 |
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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 provided by (used in) operating activities: |
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Depreciation and amortization |
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Deferred income taxes |
( |
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Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill |
— |
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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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PIK interest expense |
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— |
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Non-cash portion of stock-based compensation |
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Gain on disposition of Baltics |
( |
— |
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Gain on dispositions |
— |
( |
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Loss on derivative asset and derivative liability |
— |
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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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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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( |
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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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Proceeds from disposition of Baltics, net of cash and transaction costs |
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— |
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Proceeds from disposition of long-term assets |
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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 Odeon Term Loan due 2023 |
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— |
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Proceeds from First Lien Toggle Notes due 2026 |
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— |
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Proceeds from issuance of First Lien Notes due 2025 |
— |
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Borrowings (repayments) under revolving credit facilities |
( |
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Scheduled principal payments under Term Loan due 2026 |
( |
( |
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Net proceeds from Class A common stock issuance |
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— |
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Net proceeds from Class A common stock issuance to Mudrick |
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— |
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Payments related to sale of noncontrolling interest |
( |
— |
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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 |
— |
( |
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Taxes paid for restricted unit withholdings |
— |
( |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash and cash equivalents and restricted cash |
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( |
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Net increase in cash and cash equivalents and restricted cash |
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6
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 (received) paid, 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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See Notes to Condensed Consolidated Financial Statements.
7
AMC ENTERTAINMENT HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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. Throughout the first quarter of 2020, the Company temporarily suspended theatre operations in its U.S. markets and International markets in compliance with local, state, and federal governmental restrictions and recommendations on social gatherings to prevent the spread of COVID-19 and as a precaution to help ensure the health and safety of the Company’s guests and theatre staff. As of March 17, 2020, all of the Company’s U.S. and International theatre operations were temporarily suspended. 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 six months ended June 30, 2021 were significantly lower than the revenues and expenses for the six months ended June 30, 2020, with significantly lower revenues and expenses during the first quarter of 2021 compared to the first quarter of 2020, partially offset by increased revenues and expenses during the second quarter of 2021 compared to the second quarter of 2020.
As of January 1, 2021, the Company was operating at
Liquidity. As of June 30, 2021, the Company has cash and cash equivalents of approximately $
In addition to preserving cash, the Company enhanced liquidity through debt issuances, debt exchanges and equity sales as previously reported in its Annual Report on Form 10-K for the year ended December 31, 2020 and in its Quarterly Report on Form 10-Q for the three months ended March 31, 2021. See Note 6—Corporate Borrowings and Finance Lease Obligations and Note 7—Stockholders’ Equity for further information. Recent updates to the Company’s liquidity enhancement initiatives are as follows:
● |
The launch of two additional “at-the-market” equity offerings to raise capital through the sale of the Company’s Class A common stock. During April and May of 2021, the Company sold |
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sold |
● |
The June 2021 issuance of |
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 for deferred rent 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 and Odeon Term Loan Facility for at least the next 12 months. In order to achieve net positive operating cash flows and long-term profitability, the Company believes it will need to increase attendance levels significantly from their current levels to achieve levels in line with pre COVID-19 attendance. 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. However, there remain significant risks that may negatively impact attendance, including a resurgence of COVID related restrictions, potential movie-goer reluctance to attend theatres due to concerns about the COVID variant strains, movie studios release schedules and direct to streaming or other changing movie studio practices.
The Company entered 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 (the secured leverage ratio) applicable to the Senior Secured Revolving Credit Facility (as defined below) from March 31, 2021 to March 31, 2022 (the “Extended Covenant Suspension Period”), as described, and on the terms and conditions specified, therein. The Company is currently subject to minimum liquidity requirements of approximately $
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 of the deferral of rent payments of approximately $
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 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 suspension of operations at all the Company’s theatres due to the COVID-19 pandemic, results for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021. The Company manages its business under
9
Baltics’ theatre sale. On August 28, 2020, the Company entered into an agreement to sell its equity interest in Forum Cinemas OU, which consisted of
Accumulated other comprehensive income (loss). The following table presents the change in accumulated other comprehensive income (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, 2020 |
$ |
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$ |
( |
$ |
|
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Other comprehensive income (loss) |
( |
|
( |
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Realized loss on foreign currency transactions reclassified into investment expense (income) |
( |
— |
( |
||||||
Balance June 30, 2021 |
$ |
|
$ |
( |
$ |
|
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, 2021 |
June 30, 2020 |
June 30, 2021 |
June 30, 2020 |
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Derivative liability fair value adjustment for embedded conversion feature in the Convertible Notes |
$ |
— |
$ |
— |
$ |
— |
$ |
( |
||||
Derivative asset fair value adjustment for contingent call option related to the Class B common stock purchase and cancellation agreement |
— |
( |
— |
|
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Credit losses (income) related to contingent lease guarantees |
( |
|
( |
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Governmental assistance due to COVID-19- International markets |
( |
( |
( |
( |
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Governmental assistance due to COVID-19 - Domestic markets |
— |
— |
( |
— |
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Foreign currency transaction (gains) losses |
|
( |
( |
( |
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Non-operating components of net periodic benefit cost (income) |
( |
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( |
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Financing fees related to modification of debt agreements |
— |
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Other |
— |
( |
— |
( |
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Total other expense (income) |
$ |
( |
$ |
( |
$ |
( |
$ |
|
10
Impairments. The following table summarizes the Company’s assets that were impaired:
Three Months Ended |
Six Months Ended |
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(In millions) |
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June 30, 2021 |
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June 30, 2020 |
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June 30, 2021 |
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June 30, 2020 |
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Impairment of long-lived assets |
$ |
— |
$ |
— |
$ |
— |
$ |
|
||||
Impairment of definite-lived intangible assets |
— |
— |
— |
|
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Impairment of indefinite-lived intangible assets |
— |
— |
— |
|
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Impairment of goodwill |
— |
— |
— |
|
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Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill |
— |
— |
— |
|
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Impairment of other assets recorded in investment expense (income) |
— |
— |
— |
|
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Total impairment loss |
$ |
— |
$ |
— |
$ |
— |
$ |
|
There was no goodwill impairment charges during the three months ended June 30, 2021, the three months ended June 30, 2020, and the six months ended June 30, 2021. During the six months ended June 30, 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 $
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.
There was no impairment charge of long-lived assets, definite-lived intangible assets, and other assets without a readily determinable fair value accounted for under the cost method during the three months ended June 30, 2021, the three months ended June 30, 2020, and the six months ended June 30, 2021. During the six months ended June 30, 2020, the Company recorded non-cash impairment charges of long-lived assets of $
There was no impairment charge of indefinite-lived intangible assets during the three months ended June 30, 2021, the three months ended June 30, 2020, and the six months ended June 30, 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. During the six months ended June 30, 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 $
Accounting Pronouncements Recently Adopted
Income Taxes. In December 2019, the Financial Accounting Standards Board (“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
11
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.
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 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. 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 were deferred to 2021 and future years are provided below:
As of |
As of |
||||||||
December 31, |
Increase (decrease) |
June 30, |
|||||||
(In millions) |
2020 |
in deferred amounts |
2021 |
||||||
Fixed operating lease deferred amounts (1) (2) |
$ |
$ |
|
$ |
|
||||
Finance lease deferred amounts |
|
( |
|
||||||
Variable lease deferred amounts (2) |
|
( |
|
||||||
Total deferred lease amounts |
$ |
|
$ |
( |
$ |
|
(1) |
During the six months ended June 30, 2021, the increase in fixed operating lease deferred amounts is net of $ |
(2) | During the six months ended June 30, 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. |
12
The following table reflects the lease costs for the three months ended June 30, 2021 and June 30, 2020:
Three Months Ended |
Six Months Ended |
|||||||||||||
Consolidated Statement |
June 30, |
June 30, |
June 30, |
June 30, |
||||||||||
(In millions) |
of Operations |
2021 |
2020 |
2021 |
2020 |
|||||||||
Operating lease cost |
||||||||||||||
Theatre properties |
Rent |
$ |
|
$ |
|
$ |
|
$ |
|
|||||
Theatre properties |
Operating expense (income) |
( |
|
|
|
|||||||||
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 (income) |
|
( |
|
|
|||||||||
Total lease cost |
$ |
|
$ |
|
$ |
|