AMC Theatres Posts Revenue Collapse Amid Pandemic

AMC Theater New York March 17 2020

AMC reveals its latest financials as it looks to reopen its U.S. circuit after completing a debt restructuring that injects $300 million of new cash into the company.

Cinema giant AMC Entertainment Holdings posted second-quarter financial results on Thursday as it looks to reopen its theaters and survive the coronavirus pandemic after a debt restructuring.

The extent of the COVID-19 hit taken so far by the largest U.S. cinema chain was underlined by overall revenues tumbling to $18.9 million, compared to a year-earlier $1.5 billion. Wall Street analysts forecast year-on-year revenues of $11.9 million at the end of the latest quarter.

AMC's U.S. theater circuit was closed down for the entire second quarter. The international movie theaters resumed limited operations in early June. AMC had restarted at 37 theaters in nine countries as of June 30.

The largest U.S. movie theater chain said it aimed to have around two-thirds of its domestic circuit open in August, ahead of the opening of Christopher Nolan's Tenet on Sept. 3, and "essentially all international theaters should reopen" this month.  

AMC recorded a loss of $5.44 per share, compared to a year-earlier 8 cents per-share profit. That latest performance missed a consensus Wall Street estimate for a $4.27 per-share loss.

The second quarter overall loss was $561.2 million, compared to a year-earlier profit of $49.4 million.

AMC Entertainment recently completed a debt restructuring with most of its bondholders representing $2.6 billion in subordinated debt to receive $300 million in new cash and ease worries about a possible bankruptcy protection filing.

"The result of all these actions during the quarter combined with this successful debt restructuring extends our ability, if need be, to weather a hypothetical suspension of all our theatre operations globally into 2021," AMC Entertainment CEO Adam Aron said in a statement.

But the debt restructure still hasn't dented Wall Street skepticism about AMC's ability to weather the pandemic. "AMC still has the highest risk profile within our coverage universe of exhibition related companies, even after its debt restructuring deal," Eric Handler, an analyst at MKM Partners, said in an Aug. 4 investors note.

AMC's recovery has been complicated by major Hollywood studios continuing to push back theatrical releases for their tentpoles, which forced AMC to delay its circuit reopening to this month.

“It should be no surprise to anyone that with our operations shut the world over, and almost no revenues coming in the door, this was the most challenging quarter in the 100-year history of AMC. That is why the progress the entire AMC team made since the second quarter began is all the more important and impressive in working to achieve three key priorities: to dramatically reduce operating and capital expenditures, to strengthen our liquidity position and to set plans in motion for the successful reopening of our theatres as soon as it would be wise to do so," Aron said in a statement.

On an analyst call, Aron warned investors that "revenues may take time to ramp up" as AMC continues to navigate the COVID-19 crisis. "There's signs that we're starting to emerge from the deepest of the pandemic," he added, as AMC's international theaters have begun to open before the U.S. circuit follows by turning its own lights on.

Aron argued the recent debt restructuring with bondholders "lowers leverage, provides additional liquidity and extends debt maturities," specifically on $1.7 billion of company debt to the middle of 2026. The debt exchange effectively reduced AMC's debt load by $555 million, and cut the company's cash interest expense by over $120 million in the first 12 months, the company forecast.

AMC execs also detailed efforts to preserve cash amid the pandemic by eliminating non-essential costs, including marketing, promotion and travel and entertainment expenses. "AMC remains focused on driving down costs, preserving and increasing liquidity and reducing debt as we manage our way through the current market challenges," Aron told analysts.

Without offering details, he added AMC aimed at a target reduction in operating and capital expenditures "in the hundreds of millions of dollars." The new debt covenants for AMC also enable possible asset sales, including movie theaters, with the proceeds of the sales to be split between the company and its bondholders.

Aron also defended his recent deal with Universal Studios to shrink the traditional theatrical window. "We saw a changing industry where we at AMC needed to figure out how to be included in the economics of all films," Aron argued.

He confirmed the financial terms of the Universal agreement allowed AMC to "participate handsomely" in the new film release model for studio product that Aron believes will survive the pandemic.

Aug 6, 4 p.m. Updated with comments by AMC Entertainment execs made during an analyst call.