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Despite box office grosses from Avatar: The Way of Water and Black Panther: Wakanda Forever during the holiday period, AMC Entertainment Holdings has seen its fourth-quarter revenues fall and its net loss rise on a non-cash impairment write-down.
On Tuesday, the parent of AMC Theatres reported fourth-quarter revenues at $990.9 million, down from a year-earlier $1.17 billion. Wall Street analysts had forecast revenues of $1.05 billion for the latest quarter.
The per-share loss came to 26 cents, against a year-earlier loss of 13 cents, and the fourth-quarter loss came to $287.7 million, well up from a loss of $134.4 million in 2021, as AMC continues recovering from the COVID-19 crisis and contends with changing consumer habits in the age of streaming.
During the latest quarter, AMC recorded a non-cash impairment charge of $133.1 million on long-lived assets. When releasing its third-quarter earnings in November 2022, AMC Entertainment CEO Adam Aron forecast that the fourth quarter of fiscal 2022 would be a high watermark for the movie theater business on the strength of Hollywood tentpoles like Black Adam, the Avatar sequel and Wakanda Forever.
During the latest quarter, AMC reported a global attendance at 49.5 million, down from 60 million during the year-ago period as the company emerged from the depths of the pandemic.
The latest earnings from AMC Theatres will be watched for clues as to just how much the U.S. exhibition sector has gained from a Hollywood box office rebound at the multiplex amid a streaming revolution and a waning pandemic. AMC investors are also viewing a volatile share price for the cinema giant, given its strong backing from retail investors, current box office trends and its high debt load.
In early 2021, AMC became a popular stock among “meme” traders after the company appeared close to bankruptcy amid the pandemic fallout at movie theater chains. The stock surge helped the company strengthen its financial position and diversify its revenue streams — the latest initiative is starting to sell branded microwave and ready-to-eat movie popcorn varieties, initially at Walmart.
During an after-market analyst call, Aron addressed plans to continue diluting his company’s shares via an upcoming APE preferred units conversion vote set for March 14, an investor authorization that could be delayed with a possible Delaware Chancery Court injunction to follow a planned April 27 hearing.
In commentary that accompanied the financial results, Aron pointed to the long uphill climb toward a global box office recovery to justify a shake-up to AMC’s share structure, to possibly include a 10-to-1 reverse stock split and the OK to sell more shares, pending shareholder approval.
In a statement, Aron predicted box office would not return to pre-pandemic levels before 2024 or 2025, “at the earliest.” So the company had to continue raising cash and reducing its overall debt load to $4.96 billion at the end of fiscal 2022 by completing a series of debt refinancings, exchanges and repurchases.
“Therefore, this active management of our capital structure is vital for AMC to ultimately both survive the pandemic and to thrive over the long haul. Accordingly, we continue to urge our shareholders to ‘vote yes,’ voting FOR the recommended proposals at the March 14 special meeting of shareholders, which gives AMC the best chance to generate value for all of our shareholders in the months and years to come,” Aron argued.
He added during an analyst call that the Delaware Court will allow the March 14 vote on the APE preferred units conversion to go ahead, but the planned court hearing in April will delay any new debt-raising action by AMC following the shareholder vote.
Likely as a warning to investors, on the analyst call Aron also pointed to rival Cineworld, which owns and operates Regal Entertainment in the U.S. market, as he argued: “Cineworld is in bankruptcy court because they essentially ran out of cash in September .”
As a second round of final bids for Cineworld assets is set for mid-April, the Regal Entertainment parent continues to negotiate a possible reorganization plan with its lenders. Aron told investors that a successful vote during the March 14 special shareholder meeting on a proposed reverse stock split and APE unit conversion would make it easier to continue raising fresh cash by eliminating the “ridiculous gap” between the value of AMC common shares and its APE preferred dividend.
Such a convergence would stop investors buying the lower-cost APE shares and shorting the higher-cost AMC common shares as part of an arbitrage trade. “While things are looking up now, our success can literally vaporize in an instant,” Aron claimed as he urged retail investors to get behind AMC’s plans for its share structure changes during the March 14 vote.
Shares in AMC Entertainment fell by 46 cents, or 6 percent, to $7.14 in trading on Tuesday, before falling back by another 9 cents, or just over 1 percent, in after-hours trading ahead of the analyst call.
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