AMC Entertainment (AMC) Misses Q2 EPS by 115c

AMC Entertainment (NYSE: AMC) reported Q2 EPS of ($5.44), $1.15 worse than the analyst estimate of ($4.29). Revenue for the quarter came in at $18.9 million versus the consensus estimate of $11.88 million.

Adam Aron, CEO and President of AMC commented, “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. Through stringent expense controls and cash management, we turned on a dime, and almost immediately reduced our global cash outlays by between 80% and 90%. That included the renegotiation of almost all of our theatre leases globally. Next, we raised $500 million from the issuance of new publicly-traded debt. Then, working with some of the world’s most noted health scientists, we devised AMC Safe & Clean protocols which put us in a position to reopen our theatres as safely and responsibly as possible.

Aron continued, “During the quarter, we also devoted considerable effort to a complex consensual restructuring of some $2.6 billion of our debt, in transactions that were completed and closed on July 31, 2020. Embraced by more than 87% of the holders of our subordinated notes and 100% of our convertible notes, this garnered for AMC these important results: (1) reduced our principal debt balances by $555 million, (2) generated an additional $300 million of cash from incremental first-lien financing, prior to transaction costs, premiums payable and original issue discount, (3) provides more than $120 million of cash interest savings in the coming 12 months, and (4) extends maturities on $1.7 billion of our debt to mid-2026. 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. Of course, two months ago we started reopening theatres in Europe and the Middle East, and we currently expect to resume operations in approximately two-thirds or more of our U.S. theatres later this month.

Aron said, “In international markets, as of the end of July, we already have resumed operations in more than 130 theatres in all of the countries we serve in Europe and the Middle East. That is more than one-third of our international theatres, and we expect essentially all of them to resume operations in the next two to three weeks. So far, attendance has been understandably light, as a result of our showing mostly older catalog film content. However, we are greatly encouraged that new content appears to spark enthusiasm with consumers. When a sequel to a very popular Spanishlanguage blockbuster franchise recently opened in Spain, for example, box office revenues for the sequel this year were considerably higher than those of the original movie which itself was the highest grossing domestic film in Spain in 2019. Also, we are encouraged that certain international food and beverage metrics this year, including food and beverage revenue per patron, have shown year-over-year increases despite the pandemic.

Aron added, “We would be remiss not to mention the landmark agreement just signed with Universal Studios which generates revenue for AMC when consumers watch films in our theatres or when they do so on their couches at home, and we have already commenced discussions with all of our studio partners to determine their interest in our pursuing similar agreements with them. AMC is an innovator and we are embracing change that we are confident will be financially beneficial for AMC shareholders.

Aron concluded, “A once in a century event has transformed 2020 into a brutal year, and movie theatre businesses have been hit particularly hard. Even so, as we look ahead, we remain optimistic about AMC’s long term future. Theatrical exhibition has always been resilient, and we are confident that at AMC we are taking the right steps to emerge from this crisis and to thrive once again as the leader in our industry.“

For earnings history and earnings-related data on AMC Entertainment (AMC) click here.

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