COVID-19 Hits AMC Theatres Hard, Company Reports $2.2B Loss in First Quarter

Company has been significantly impacted by COVID-19 as theatres around the world have been shuttered during the pandemic.

To say it is a tough time to be in the movie business is an understatement. AMC Entertainment Holdings, Inc. (NYSE: AMC) parent company for AMC Theatres, took a huge hit as a result of COVID-19. The company reported its first quarter 2020 financials yesterday, most notably a $2.2 billion net loss compared to a net loss in the first quarter of 2019 of $130.2 million. Total revenue for the quarter was $941.5 million, compared to $1.2 billion for the first quarter of 2019. The company had a cash balance as of March 31 of $299.8 million, compared to $265.0 million for the same period last year.

According to a June 9 news release, AMC Theatres’ first quarter started out strong with revenues up 10% compared to the prior year through February. However, in a situation no one could have predicted, global theatres were forced to close due to the coronavirus pandemic. By March 17, AMC had closed all of its theatres, domestically and internationally. This left the company with virtually no revenue for the last two weeks of the quarter.

Adam Aron, CEO and president of AMC, expressed his sympathy to those impacted by COVID-19 as well as the frontline workers.

“After starting the year with two solid months of revenue growth compared to last year, in mid-March, we were forced to pivot the entire company to respond to the effects of the pandemic,” Aron said.

“Our top priorities remain the safety and well-being of our guests and associates, combined with our taking sweeping actions to preserve the long term viability of AMC Entertainment. In response to the suspension of theatre operations, AMC took swift action to achieve three priorities – 1) dramatically reduce our cash burn, including furloughing all of our U.S. executives and employees and the vast majority of our global workforce, as well as eliminating non-essential operating and capital expenditures, 2) strengthen our liquidity by working with our landlord and studio partners to defer or abate theatre and film rents, respectively, as well as raising an additional $500 million of public market debt, and 3) preserving our capabilities and commencing comprehensive planning efforts to effectively reopen our theatres when it is safe and smart to do so,” said Aron.

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Other highlights from the news release include the following:

  • Employer cost containment including full or partial furloughs of corporate-level employees, including senior executives, with workload and salary reductions between 20% and 100%, cancellation of annual merit pay raises, and elimination of non-healthcare benefits including 401(k) match.
  • U.S. theatre-level crew were fully furloughed, and managers were reduced to the minimum level needed to resume operations when possible.
  • Non-essential operating expenses were cut including marketing, promotion, and travel and entertainment.
  • Terminated or deferred all non-essential capital expenditures.
  • The company applied for $18.5 million in aid from the CARES Act.
  • Total revenue was $941.5 million with $568.0 million from admissions, $288.1 million from food and beverage, and $85.4 million from “other theatre” which includes subscriptions to AMC Theatres’ Stubs A-List and Premiere programs.

As the spread of COVID-19 slows down and communities around the world begin returning to a “new normal,” AMC Theatres is making plans to reopen its theatres.

  • Ten theatres have reopened in Norway, Germany, Spain and Portugal and will fully open in July.
  • In the U.S. and U.K., AMC hopes to open almost all of its theatres in time for the release of TENET (Warner Bros.) on July 17 and Mulan (Disney) on July 24.
  • The theatre chain has the following movies planned for release later this year: Unhinged, Saint Maud, Antebellum, Spongebob Square Pants, Wonder Woman 1984, A Quiet Place II, The King’s Man, Black Widow, Soul, Dune, West Side Story and Top Gun: Maverick.

Part of the reopening of the theatres will be following rigorous cleaning protocols, limited theatre capacity, blocked seating and other methods and tactics for keeping theatre staff and patrons safe.

Last week, AMC Theatres submitted an SEC filing, acknowledging the huge impact COVID-19 had on its business and indicated that the company may be looking at bankruptcy.

“We believe we have the cash resources to reopen our theatres and resume our operations this summer or later. Our liquidity needs thereafter will depend, among other things, on the timing of a full resumption of operations, the timing of movie releases and our ability to generate revenues,” the company told the SEC.

The company said it hopes the industry will rebound as consumers yearn for entertainment outside their homes, but the adverse economic impact of COVID-19 and changes in consumer behavior like social distancing, could impact their financial sustainability.

“As a result of the pandemic, all of our theatres worldwide have temporarily suspended operations through late June, and we are generating no revenue from admissions, food and beverage sales, or other revenue, which represent substantially all of our revenue and cash flow from operations. The ultimate duration of the pandemic and of responsive governmental regulations, including shelter-in-place orders and mandated business closures, is uncertain and we may need to extend such suspension with respect to some or all of our theatres. We cannot predict when or if our business will return to normal levels,” said AMC.

“While we plan to eliminate variable costs and reduce fixed costs to the extent possible, we continue to incur significant cash outflows, including interest payments, taxes, critical maintenance capital expenditures, and certain compensation and benefits payments. We cannot be certain that we will have access to sufficient liquidity to meet our obligations for the time required to allow our cash generating operations to resume or normalize. We may not be able to obtain additional liquidity and any relief provided by lenders, governmental agencies, and business partners may not be adequate and may include onerous terms. Due to these factors, substantial doubt exists about our ability to continue as a going concern for a reasonable period of time,” AMC added.

Insider Take:

COVID-19 has had a devastating impact on so many businesses, but particularly those businesses like theatres, concert venues, restaurants and non-essential retail stores. Even though this financial report only reflects the last two weeks of March, the report to the SEC makes it clear that AMC Theatres will endure significant impacts in the second and third quarters, and no one knows what to expect after that. Will consumers return to theatres? Will limited revenue be enough to offset the costs necessary to reopen theatres? Will another wave of COVID-19 wipe the company out? This is our “new normal,” but sadly, there is nothing normal about it.