Item 8.01. Other Events.
The Company has provided the following update:
Update on Theatre Reopenings
As of March 17, 2020, the Company had temporarily
suspended all theatre operations in its U.S. and International markets. This action was 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.
Industry Box Office:
The North American industry box office has
been significantly impacted by COVID-19 in the third quarter ending September 30, 2020. Although certain states authorized the
reopening of theatres as early as June 2020, with limited seating capacities and social distancing guidelines, some states, including
California, New York, Maryland, Michigan, North Carolina and Washington State, remain substantially or completely closed for theatrical
exhibition as of September 14, 2020. As a result, studios have postponed new film releases or moved them to the home video market, and movie release dates may continue to move in the future.
The combination of theatre reopening restrictions and limited new film distribution has resulted in a significantly lower industry
box office, quarter-to-date. Similarly, the International industry box office results were significantly lower quarter-to-date
compared to the prior year.
U.S.:
The Company’s theatre operations in
the U.S. markets remained suspended for the entire second quarter ended June 30, 2020. The Company resumed limited operations in
its U.S. markets in late August 2020 with the initial 115 theatre reopenings occurring on August 20, 2020. The Company reopened
170 additional theatres on August 26, 2020, and 142 additional theatres on September 4, 2020. As of September 14, 2020, the Company
had resumed operations at 461 U.S. theatres, with limited seating capacities of between 25% and 40%, representing approximately
77% of the U.S. theatres and 69% of 2019 U.S. same-theatre revenue.
Since the resumption of operations in its
U.S. markets, the Company has served more than 1,400,000 guests as of September 14, 2020, representing a same-theatre attendance
decline of approximately 81% compared to the same period a year ago. The remaining 23% of the U.S. theatres left to reopen are
located in California, Maryland, Michigan, New York, North Carolina, and Washington State, and include some of the Company’s
most productive theatres, representing approximately 28% of 2019 U.S. revenue. The Company has an active dialogue with local and
state government officials in these states, however, there is limited visibility around the timing for resumption of theatre operations
in these locales.
International:
The Company resumed limited operations in
its International markets in early June. As of June 30, 2020, the Company had resumed operations at 37 theatres, with limited seating
capacities, in nine countries and recorded attendance of 100,000 guests in June. As of July 31, 2020, the Company had resumed operations
at 182 leased and partnership theatres. As of September 14, 2020, the Company had resumed operations at 324 leased and partnership
theatres. This represents approximately 90% of the Company’s international theatres and approximately 94% of 2019 international
same-theatre revenue.
Seating capacity at the reopened international
theatres remains limited to between 25% and 50% of capacity to ensure social distancing for guests. Since the resumption of operations
in its International markets on June 3, 2020, the Company’s theatres have served more than 3,600,000 guests as of September
14, representing a same-theatre attendance decline of approximately 74% compared to the same period a year ago. The remaining 10%
of International theatres left to reopen are expected to resume operations as demand warrants.
Liquidity
The Company’s cash and cash equivalents
as of June 30, 2020, was $498.0 million. Adjusting the cash and cash equivalents to give effect to the Company’s offer to
exchange its outstanding senior subordinated notes and related financing transactions, including the issuance of New First Lien
Notes due 2026, completed on July 31, 2020 and related fees, interest and associated expenses, the cash balance as of June 30,
2020, would have been approximately $700.8 million.
The Company’s total cash burn for
the second quarter ended June 30, 2020, was approximately $292 million, within the Company’s then targeted $100 million monthly
cash burn projection assuming a continued suspension of all U.S. theatre operations and successful negotiations with landlords.
The Company’s cash burn is impacted
by, among other things, the timing of resumption of theatre operations, costs associated with the AMC Safe and Clean initiative,
landlord negotiations and minimum lease payments, the timing of movie releases, theatre attendance levels, and food and beverage
receipts.
On August 31, 2020, the Company announced
the signing of a definitive agreement to sell all nine of its theatre locations in the Baltic Region (Latvia, Lithuania, and Estonia)
for $77.0 million. Approximately half of the sale proceeds were received upon signing the definitive agreement.
As of August 31, 2020, the Company’s
cash balance was $507.9 million, this includes the initial $37.5 million proceeds received from the sale of the Baltics theatres.
The Company’s cash burn for July and August 2020, excluding the proceeds from the sale of the Baltic theatres, was $230.4
million or an average of approximately $115.2 million per month and was primarily impacted by initial reopening expenses, including
initial costs associated with AMC’s Safe and Clean initiative and minimum lease payments as theatres began to reopen.
Because
of the ramp up of costs associated with theatre reopenings and the lower attendance levels experienced as theatres have begun to
reopen, we expect the cash burn for the remainder of the third quarter of 2020 to be roughly comparable to these levels.
Going
forward, our ability to reduce cash burn rates and ultimately generate positive cash flow, and therefore the extent to which
we will require additional sources of liquidity, will depend almost entirely on our future attendance levels that drive
admission and food and beverage revenue. Attendance in the fourth quarter of 2020 will be influenced by, among other
things, the timing of new film releases, with the quarter’s largest films expected to be released prior to the
Thanksgiving holiday through the end of the year, our ability to open remaining theatres in our major markets, the expansion
or contraction of mandated seating capacity limitations, and consumer confidence in moviegoing. If we experience negative
developments with any of these factors, among others, our cash burn rates and liquidity will also be negatively affected, and
we may require additional sources of liquidity in amounts that could be material. For example, recent and any future
announcements to postpone major releases slated for the Thanksgiving and Christmas holidays to 2021 would likely significantly
impact our liquidity in the fourth quarter. Furthermore, commencing in 2021, absent further negotiations with landlords, our
cash expenditures for rent will increase significantly following periods of agreed deferrals. We currently estimate that
unless theatre attendance levels improve significantly from the third quarter of 2020 to the fourth quarter of 2020 and again
into 2021 and we achieve levels of attendance approaching approximately three-quarters of normalized levels, we will continue
to require additional sources of liquidity to meet our obligations as they become due, and our required amounts of additional
liquidity may be significant, and if we experience unanticipated developments relating to our costs or other developments, or
if we are unable to reduce costs in the way we anticipate, we may still require additional amounts of liquidity.
It is very difficult to estimate our liquidity
requirements and future cash burn rates. There can be no assurance that the accuracy of the assumptions used to estimate our liquidity
requirements and future cash burn will be correct, or that we will be able to achieve the levels of attendance described above, which are materially higher than our current attendance
levels, and our ability to be predictive is uncertain due to the unknown magnitude and
duration of the COVID-19 pandemic, which has resulted in stay-at-home orders, governmental closure orders, film production and
scheduling disruption, reopening uncertainties and the cessation of our entire U.S. and International theatre operations for the
first time in our history. See “Risks Related to Our Business – The COVID-19 pandemic has disrupted our business and
will continue to adversely affect our operations and results of operations and liquidity.”
In connection with the Offering, the Company
is filing the updated risk factors attached hereto as Exhibit 99.1, which is incorporated herein by reference.