Docoh
Loading...

AMC AMC Entertainment

Filed: 6 Aug 20, 5:08pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33892

AMC ENTERTAINMENT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

26-0303916
(I.R.S. Employer
Identification No.)

One AMC Way
11500 Ash Street, Leawood, KS
(Address of principal executive offices)


66211
(Zip Code)

Registrant’s telephone number, including area code: (913213-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  

Accelerated filer  

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A common stock

AMC

New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of each class of common stock

   

Number of shares
outstanding as of August 3, 2020

Class A common stock
Class B common stock

57,549,593

51,769,784

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements. (Unaudited)

AMC ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Six Months Ended

(In millions, except share and per share amounts)

    

June 30, 2020

    

June 30, 2019

    

June 30, 2020

    

June 30, 2019

(unaudited)

(unaudited)

Revenues

Admissions

$

0.9

$

895.5

$

568.9

$

1,627.0

Food and beverage

 

0.4

 

492.5

 

288.5

 

861.3

Other theatre

 

17.6

 

118.1

 

103.0

 

218.2

Total revenues

18.9

1,506.1

960.4

2,706.5

Operating costs and expenses

Film exhibition costs

0.2

482.5

 

271.9

 

847.8

Food and beverage costs

 

4.5

 

76.4

 

57.9

 

137.9

Operating expense, excluding depreciation and amortization below

 

114.8

 

437.4

 

471.7

 

840.2

Rent

 

224.1

 

245.9

 

461.9

 

487.9

General and administrative:

Merger, acquisition and other costs

 

1.8

 

3.2

 

2.0

 

6.5

Other, excluding depreciation and amortization below

 

25.4

 

43.2

 

58.6

 

89.4

Depreciation and amortization

119.7

112.0

242.2

225.0

Impairment of long-lived assets, indefinite-lived intangible assets and goodwill

 

 

 

1,851.9

 

Operating costs and expenses

 

490.5

1,400.6

 

3,418.1

2,634.7

Operating income (loss)

(471.6)

105.5

(2,457.7)

71.8

Other expense (income):

Other expense (income):

 

(6.6)

 

(23.4)

 

20.3

 

6.4

Interest expense:

Corporate borrowings

 

79.6

 

74.2

 

150.9

 

145.5

Finance lease obligations

 

1.5

 

2.1

 

3.1

 

4.2

Non-cash NCM exhibitor services agreement

10.1

10.1

20.0

20.3

Equity in (earnings) loss of non-consolidated entities

 

12.4

 

(10.2)

 

15.3

 

(16.7)

Investment expense (income)

 

(1.3)

 

(2.1)

 

8.1

 

(18.2)

Total other expense, net

 

95.7

50.7

 

217.7

141.5

Earnings (loss) before income taxes

 

(567.3)

54.8

 

(2,675.4)

(69.7)

Income tax provision (benefit)

 

(6.1)

 

5.4

 

62.1

11.1

Net earnings (loss)

$

(561.2)

$

49.4

$

(2,737.5)

$

(80.8)

Earnings (loss) per share:

Basic

$

(5.38)

$

0.48

$

(26.25)

$

(0.78)

Diluted

$

(5.38)

$

0.17

$

(26.25)

$

(0.78)

Average shares outstanding:

Basic (in thousands)

104,319

103,845

104,282

103,814

Diluted (in thousands)

104,319

135,528

104,282

103,814

See Notes to Condensed Consolidated Financial Statements.

3

AMC ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended

Six Months Ended

(In millions)

    

June 30, 2020

    

June 30, 2019

    

June 30, 2020

    

June 30, 2019

(unaudited)

(unaudited)

Net earnings (loss)

$

(561.2)

$

49.4

$

(2,737.5)

$

(80.8)

Other comprehensive income (loss):

Unrealized foreign currency translation adjustments

 

55.4

 

(9.3)

 

(38.2)

 

(34.7)

Realized loss on foreign currency transactions reclassified into other expense

0.1

0.6

Pension adjustments:

Realized net loss reclassified into other expense, net of tax

 

0.6

 

0.1

 

0.7

 

0.1

Equity method investee's cash flow hedge:

Unrealized net holding loss arising during the period

 

 

(0.1)

 

 

(0.1)

Other comprehensive income (loss)

 

56.0

 

(9.2)

 

(37.5)

 

(34.1)

Total comprehensive income (loss)

$

(505.2)

$

40.2

$

(2,775.0)

$

(114.9)

See Notes to Condensed Consolidated Financial Statements.

4

AMC ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions, except share data)

    

June 30, 2020

    

December 31, 2019

 

ASSETS

Current assets:

Cash and cash equivalents

$

498.0

$

265.0

Restricted cash

10.4

10.5

Receivables, net

 

70.7

 

254.2

Other current assets

 

100.6

 

143.4

Total current assets

 

679.7

 

673.1

Property, net

 

2,417.5

 

2,649.2

Operating lease right-of-use assets, net

4,555.3

4,796.0

Intangible assets, net

 

174.3

 

195.3

Goodwill

 

2,988.4

 

4,789.1

Deferred tax asset, net

 

0.6

 

70.1

Other long-term assets

 

455.8

 

503.0

Total assets

$

11,271.6

$

13,675.8

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

436.1

$

543.3

Accrued expenses and other liabilities

 

257.5

 

324.6

Deferred revenues and income

 

406.1

 

449.2

Current maturities of corporate borrowings

 

20.0

 

20.0

Current maturities of finance lease liabilities

10.0

10.3

Current maturities of operating lease liabilities

581.5

585.8

Total current liabilities

 

1,711.2

 

1,933.2

Corporate borrowings

 

5,498.0

 

4,733.4

Finance lease liabilities

83.9

89.6

Operating lease liabilities

4,744.4

4,913.8

Exhibitor services agreement

 

546.3

 

549.7

Deferred tax liability, net

 

43.2

 

46.0

Other long-term liabilities

 

220.0

 

195.9

Total liabilities

 

12,847.0

 

12,461.6

Commitments and contingencies

Stockholders’ equity:

Class A common stock ($.01 par value, 524,173,073 shares authorized; 56,282,218 shares issued and 52,549,593 outstanding as of June 30, 2020; 55,812,702 shares issued and 52,080,077 outstanding as of December 31, 2019)

 

0.5

 

0.5

Class B common stock ($.01 par value, 51,769,784 shares authorized, issued and outstanding as of June 30, 2020 and December 31, 2019)

 

0.5

 

0.5

Additional paid-in capital

 

2,007.3

 

2,001.9

Treasury stock (3,732,625 shares as of June 30, 2020 and December 31, 2019, at cost)

 

(56.4)

 

(56.4)

Accumulated other comprehensive loss

 

(63.6)

 

(26.1)

Accumulated deficit

 

(3,463.7)

 

(706.2)

Total stockholders’ equity (deficit)

 

(1,575.4)

 

1,214.2

Total liabilities and stockholders’ equity

$

11,271.6

$

13,675.8

See Notes to Condensed Consolidated Financial Statements.

5

AMC ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

(In millions)

June 30, 2020

June 30, 2019

Cash flows from operating activities:

(unaudited)

Net loss

$

(2,737.5)

$

(80.8)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

242.2

225.0

Deferred income taxes

65.4

8.9

Impairment of long-lived assets, indefinite-lived intangible assets and goodwill

1,851.9

Amortization of net discount on corporate borrowings

6.6

5.0

Amortization of deferred charges to interest expense

8.4

7.8

Non-cash portion of stock-based compensation

6.4

9.4

Gain on dispositions

(2.4)

(16.0)

(Gain) loss on derivative asset and derivative liability

13.2

(12.6)

Loss on repayment of indebtedness

16.6

Equity in (earnings) loss from non-consolidated entities, net of distributions

29.6

(7.8)

Landlord contributions

24.9

64.8

Other non-cash rent

(1.5)

13.4

Deferred rent

(25.8)

(29.4)

Net periodic benefit cost

0.6

0.6

Change in assets and liabilities:

Receivables

177.3

32.0

Other assets

49.6

18.6

Accounts payable

(55.0)

(35.7)

Accrued expenses and other liabilities

(99.3)

(64.0)

Other, net

29.5

(2.2)

Net cash provided by (used in) operating activities

(415.9)

153.6

Cash flows from investing activities:

Capital expenditures

(126.7)

(229.9)

Acquisition of theatre assets

(11.8)

Proceeds from disposition of long-term assets

3.7

21.3

Investments in non-consolidated entities, net

(9.3)

(0.1)

Other, net

0.8

(0.8)

Net cash used in investing activities

(131.5)

(221.3)

Cash flows from financing activities:

Proceeds from issuance of Term Loan due 2026

1,990.0

Payment of principal Senior Secured Notes due 2023

(230.0)

Payment of principal Senior Subordinated Notes due 2022

(375.0)

Call premiums paid for Senior Secured Notes due 2023 and Senior Subordinated Notes due 2022

(15.9)

Principal payment of Term Loans due 2022 and 2023

(1,338.5)

Proceeds from issuance of First Lien Notes due 2025

490.0

Borrowings (repayments) under revolving credit facilities

322.8

(12.0)

Scheduled principal payments under Term Loans

(10.0)

(11.9)

Principal payments under finance lease obligations

(2.3)

(6.1)

Cash used to pay for deferred financing costs

(9.3)

(11.2)

Cash used to pay dividends

(4.3)

(42.6)

Taxes paid for restricted unit withholdings

(1.0)

(1.3)

Net cash provided by (used in) financing activities

785.9

(54.5)

Effect of exchange rate changes on cash and cash equivalents and restricted cash

(5.6)

(0.6)

Net increase (decrease) in cash and cash equivalents and restricted cash

232.9

(122.8)

6

Cash and cash equivalents and restricted cash at beginning of period

275.5

324.0

Cash and cash equivalents and restricted cash at end of period

$

508.4

$

201.2

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest (including amounts capitalized of $0.5 million and $0.4 million)

$

105.7

$

146.2

Income taxes received, net

$

(8.7)

$

(2.0)

Schedule of non-cash activities:

Investment in NCM

$

4.1

$

1.3

Construction payables at period end

$

35.3

$

87.4

See Notes to Condensed Consolidated Financial Statements.

7

AMC ENTERTAINMENT HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(Unaudited)

NOTE 1—BASIS OF PRESENTATION

AMC Entertainment Holdings, Inc. (“Holdings”), through its direct and indirect subsidiaries, including American Multi-Cinema, Inc. and its subsidiaries, (collectively with Holdings, unless the context otherwise requires, the “Company” or “AMC”), is principally involved in the theatrical exhibition business and owns, operates or has interests in theatres located in the United States and Europe. Holdings is an indirect subsidiary of Dalian Wanda Group Co., Ltd. (“Wanda”), a Chinese private conglomerate.

As of June 30, 2020, Wanda owned approximately 49.63% of Holdings’ outstanding common stock and 74.72% of the combined voting power of Holdings’ outstanding common stock and has the power to control Holdings’ affairs and policies, including with respect to the election of directors (and, through the election of directors, the appointment of management), entering into mergers, sales of substantially all of the Company’s assets and other transactions.

Temporarily Suspended Operations. As of or before March 17, 2020, the Company temporarily suspended all theatre operations in its U.S. markets and International markets 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. As a result of these temporarily suspended operations, the Company’s revenues and expenses for the three and six months ended June 30, 2020 are significantly lower than the revenues and expenses for the three and six months ended June 30, 2019. The theatre operations in the U.S. markets remained suspended for the entire second quarter of 2020. The Company resumed limited operations in the International markets in early June. As of June 30, 2020, the Company had resumed operations at 37 theatres in 9 countries in the International markets and recorded attendance of 100,000 guests during the three months ended June 30, 2020. On July 23, 2020, the Company announced it is currently planning to reopen its U.S. movie theatres in mid to late August 2020. In International markets, as of the end of July 2020, the Company has already resumed operations in more than 130 theatres in all of the countries the Company serves in Europe and the Middle East.

Liquidity. In response to the COVID-19 pandemic, the Company has taken and is continuing to take significant steps to preserve cash by eliminating non-essential costs, including reductions to executive compensation and elements of its fixed cost structure:

Suspended non-essential operating expenditures, including marketing & promotional and travel and entertainment expenses; and where possible, for example: utilities, reduced essential operating expenditures to minimum levels necessary while theatres are closed.
Terminated or deferred all non-essential capital expenditures to minimum levels necessary while theatres are closed.
Implemented measures to reduce corporate-level employment costs, including full or partial furloughs of all corporate-level Company employees, including senior executives, with individual work load and salary reductions ranging from 20% to 100%; cancellation of pending annual merit pay increases; and elimination or reduction of non-healthcare benefits.
All domestic theatre-level crew members have been fully furloughed and theatre-level management has been reduced to the minimum level necessary to begin resumption of operations when permitted. Similar efforts to reduce theatre-level and corporate employment costs are being undertaken internationally consistent with applicable laws across the jurisdictions in which the Company operates.
Working with the Company’s landlords, vendors, and other business partners to manage, defer, and/or abate the related rent expenses and operating expenses during the disruptions caused by the COVID-19 pandemic.
Introduced an active cash management process, which, among other things, requires senior management approval of all outgoing payments.
Since April 24, 2020, the Company has been prohibited from making dividend payments in accordance with the covenant suspension conditions in its Senior Secured Credit Agreement. The Company had also previously

8

elected to decrease the dividend paid in the first quarter of 2020 by $0.17 per share when compared to the first quarter of 2019. The cash savings as a result of the prior decrease and current prohibition on making dividend payments was $38.3 million during the six months ended June 30, 2020 in comparison to the six months ended June 30, 2019.
The Company is prohibited from making purchases under its recently authorized stock repurchase program in accordance with the covenant suspension conditions in its Senior Secured Credit Agreement.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees. Based on the Company’s preliminary analysis of the CARES Act, the Company expects to recognize the following benefits:

Approximately $17.4 million of cash tax refunds from overpayments and refundable alternative minimum tax credits with the filing of the Company’s 2019 federal tax return, amending 2018 state tax returns and filing 2019 state tax returns in which the Company expects a refund.
Deferral of social security payroll tax matches that would otherwise be required in 2020.
Receipt of a payroll tax credit in 2020 for expenses related to paying wages and health benefits to employees who are not working as a result of temporarily suspended operations and reduced receipts associated with COVID-19.

The Company intends to seek any available potential benefits under the CARES Act, including loans, investments or guarantees, and any other such current or future government programs for which the Company qualifies domestically and internationally, including those described above. The Company cannot predict the manner in which such benefits will be allocated or administered, and the Company cannot assure the reader that it will be able to access such benefits in a timely manner or at all.

The Company believes its cash balance as of June 30, 2020, cash generated from operating activities, the proceeds from the issuance on July 31, 2020 of $300.0 million, prior to deducting discounts and cash premiums based on contract assumptions and estimates of $36 million, of new 10.5% Senior Secured Notes due 2026 (the “First Lien Notes due 2026”) and the closing of the exchange offer on July 31, 2020 (the “Exchange Offers”) (which allowed the Company to extend maturities on approximately $1.7 billion of debt to 2026, most of which was maturing in 2024 and 2025 previously, with interest due for the coming 12 to 18 months on the exchanged senior subordinated notes expected to be paid all or in part on an in-kind basis pursuant to the terms of the 10%/12% Cash/PIK Toggle Second Lien Subordinated Secured Notes due 2026 (the “Second Lien Notes due 2026”), thereby generating a further near-term cash savings for the Company of between approximately $120 million to $180 million) may provide sufficient liquidity to fund operations and essential capital expenditures for the next 12 months. Further, as discussed in Note 6—Corporate Borrowings, the Company’s lenders have granted relief from the maintenance covenants in the revolving credit agreements and the Company believes it will maintain compliance with all financial debt covenants for the next 12 months. Therefore, the Company believes it has the cash resources to reopen its theatres and resume operations this summer or later. The Company’s liquidity needs thereafter will depend, among other things, on the timing of a full resumption of operations, the timing of movie releases and its ability to generate revenues. See Note 14—Subsequent Events, for information regarding the exchange offer and the incremental 10.5% First Lien Notes due 2026 in new funding.

While the Company has used its best estimates based on currently available information, the Company cannot assure the reader that its assumptions used to estimate its liquidity requirements will be correctincluding but not limited to attendance, food and beverage revenues, rent relief, cost savings, and capital expendituresbecause the Company has never previously experienced a complete cessation of its operations, and as a consequence, its ability to be predictive is uncertain. If the Company does not recommence operations within its estimated timeline, the Company will require additional capital and may also require additional financing if, for example, its operations do not generate the expected revenues or a recurrence of COVID-19 were to cause another suspension of operations. Such additional financing may not be available on favorable terms or at all. Due to these factors, substantial doubt exists about the Company’s ability to continue as a going concern for a reasonable period of time.

Use of Estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

9

Principles of Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of AMC, as discussed above, and should be read in conjunction with the Company’s Annual Report on Form 10–K for the year ended December 31, 2019. The accompanying condensed consolidated balance sheet as of December 31, 2019, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10–Q. Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the Company’s financial position and results of operations. All significant intercompany balances and transactions have been eliminated in consolidation. There are 0 noncontrolling interests in the Company’s consolidated subsidiaries; consequently, all of its stockholders’ equity, net earnings (loss) and total comprehensive income (loss) for the periods presented are attributable to controlling interests. Due to the seasonal nature of the Company’s business and the suspension of operations at all the Company’s theatres due to the COVID-19 pandemic, results for the six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020. The Company manages its business under 2 reportable segments for its theatrical exhibition operations, U.S. markets and International markets.

Accumulated other comprehensive loss. The following table presents the change in accumulated other comprehensive loss by component:

Pension and

 

Foreign

Other

 

(In millions)

    

Currency

    

Benefits

    

Total

 

Balance December 31, 2019

$

(8.8)

$

(17.3)

$

(26.1)

Other comprehensive loss before reclassifications

 

(38.2)

 

 

(38.2)

Amounts reclassified from accumulated other comprehensive loss

 

 

0.7

 

0.7

Balance June 30, 2020

$

(47.0)

$

(16.6)

$

(63.6)

Accumulated depreciation and amortization. Accumulated depreciation was $2,028.7 million and $1,820.1 million at June 30, 2020 and December 31, 2019, respectively, related to property. Accumulated amortization of intangible assets was $33.4 million and $22.8 million at June 30, 2020 and December 31, 2019, respectively.

Other expense (income). The following table sets forth the components of other expense (income):

Three Months Ended

Six Months Ended

(In millions)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Derivative liability fair value adjustment for embedded conversion feature in the Convertible Notes due 2024

$

$

(33.9)

$

(0.5)

$

(20.6)

Derivative asset fair value adjustment for contingent call option related to the Class B common stock purchase and cancellation agreement

(6.4)

(7.1)

13.7

8.0

Credit losses related to contingent lease guarantees

3.9

9.2

International governmental assistance due to COVID-19

(4.4)

(4.4)

Loss on Pound sterling forward contract

0.7

1.0

Foreign currency transactions losses

(2.1)

0.1

(0.1)

0.6

Non-operating components of net periodic benefit cost

0.1

0.4

0.1

0.5

Loss on repayment of indebtedness

16.6

16.6

Financing fees related to modification of debt agreements

2.8

2.8

Other

(0.5)

(0.2)

(0.5)

0.3

Total other expense (income)

$

(6.6)

$

(23.4)

$

20.3

$

6.4

10

Impairments. The following table summarizes the Company’s assets that were impaired:

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(In millions)

    

2020

    

2019

    

2020

 

2019

Impairment of long-lived assets

$

$

$

91.3

$

Impairment of indefinite-lived intangible assets

8.3

Impairment of definite-lived intangible assets

8.0

Impairment of goodwill (1)

1,744.3

Investment expense

7.2

Total impairment loss

$

$

$

1,859.1

$

(1)See Note 4Goodwill for information regarding goodwill impairment.

The Company evaluates definite-lived and indefinite-lived intangible assets for impairment annually or more frequently as specific events or circumstances dictate or changes in circumstances indicate that the carrying amount of the asset group may not be fully recoverable.

During the three and six months ended June 30, 2020, the Company recorded non-cash impairment of long-lived assets of $0 and $81.4 million on 57 theatres in the U.S. markets with 658 screens (in Alabama, Arkansas, California, District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming), respectively, and $0 and $9.9 million on 23 theatres in the International markets with 213 screens (in Germany, Italy, Spain, UK and Sweden), respectively. During the three and six months ended June 30, 2020, the Company recorded impairment losses related to definite-lived intangible assets of $0 and $8.0 million, respectively. In addition, in the three and six months ended June 30, 2020, the Company recorded an impairment loss of $0 and $7.2 million, respectively within investment expense (income), related to equity interest investments without a readily determinable fair value accounted for under the cost method.

At March 31, 2020, the Company performed a quantitative impairment evaluation of its indefinite-lived intangible assets related to the AMC, Odeon and Nordic tradenames. The Company recorded impairment charges of $0 and $5.9 million related to Odeon tradenames and $0 and $2.4 million related to Nordic tradenames for the three and six months ended June 30, 2020, respectively. To estimate fair value of the Company’s indefinite-lived trade names, the Company employed a derivation of the Income Approach known as the Royalty Savings.

Accounting Pronouncements Recently Adopted

Financial Instruments. In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance impacts how the Company determines its allowance for estimated uncollectible receivables and also contingent lease guarantees, where the Company remains contingently liable for lease payments under certain leases of theatres that it previously divested, in the event that such assignees are unable to fulfill their future lease payment obligations. ASU 2016-13 was effective for the Company in the first quarter of 2020. The Company recognized the cumulative effect upon adoption of the new standard related to credit losses for contingent lease guarantees of $16.9 million. See Note 11—Commitments and Contingencies for further information regarding contingent lease guarantees. The adoption impact on the Company’s allowance for estimated uncollectible receivables was immaterial as of January 1, 2020 and June 30, 2020. The cumulative effect of adoption was recorded to accumulated deficit under the modified retrospective adoption method.

Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but are required to disclose the range and weighted average used to develop significant observable inputs for Level 3 fair value measurements. The fair value measurement disclosure requirements of ASU 2018-13 was effective for the Company in the first quarter of 2020. See Note 9—Fair Value Measurements for the required disclosures for Level 3 fair value measurements.

Cloud Computing Arrangement. In August 2018, the FASB issued ASU 2018-15, Intangibles–Goodwill and

11

Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 requires a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation, setup, and other upfront costs to capitalize as assets or expense as incurred. ASU 2018-15 was effective for the Company in the first quarter of 2020. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively in accordance with ASC 250-10-45. The Company adopted ASU 2018-15 prospectively and the adoption of ASU 2018-15 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Accounting Pronouncements Issued Not Yet Adopted

Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to improve consistency and simplify several areas of existing guidance. ASU 2019-12 removes certain exceptions to the general principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also clarifies the accounting for transactions that result in a step-up in the tax basis for goodwill. ASU 2019-12 is effective for the Company in the first quarter of 2021. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2019-12 will have on its consolidated financial statements.

NOTE 2—LEASES

The Company leases theatres and equipment under operating and finance leases. The Company typically does not believe that exercise of the renewal options is reasonably certain at the lease commencement and, therefore, considers the initial base term as the lease term. Lease terms vary but generally the leases provide for fixed and escalating rentals, contingent escalating rentals based on the Consumer Price Index and other indexes not to exceed certain specified amounts and variable rentals based on a percentage of revenues. The Company often receives contributions from landlords for renovations at existing locations. The Company records the amounts received from landlords as an adjustment to the right-of-use asset and amortizes the balance as a reduction to rent expense over the base term of the lease agreement. Equipment leases primarily consist of digital projectors and food and beverage equipment.

The Company received, or is in process of negotiating, rent concessions provided by the lessors that aided, or will aid, in mitigating the economic effects of COVID-19. These concessions primarily consist of rent abatements and the deferral of rent payments. In instances where there were no substantive changes to the lease terms, i.e., modifications that resulted in total payments of the modified lease being substantially the same or less than the total payments of the existing lease, the Company elected the relief as provided by the FASB staff related to the accounting for certain lease concessions. The Company elected not to account for these concessions as a lease modification, and therefore the Company has remeasured the related lease liability and right of use asset but did not reassess the lease classification or change the discount rate to the current rate in effect upon the remeasurement. The deferred payment amounts have been recorded in the Company’s lease liabilities to reflect the change in the timing of payments. As of June 30, 2020, approximately $6.4 million of lease liabilities were deferred and included in current maturities of operating lease liabilities and approximately $9.7 million of lease liabilities were deferred and included in long-term operating lease liabilities, which are reflected in the condensed consolidated statements of cash flows as part of the change in accrued expenses and other liabilities. Those leases that did not meet the criteria for treatment under the FASB relief were evaluated as lease modifications. The Company recorded $194.8 million in accounts payable for contractual rent amounts due and not paid, which is reflected in the statement of cash flows as part of the change in accounts payable. The Company is in the process of negotiating or finalizing rent concessions or deferral of payments with the lessors with respect to these rent payables.

12

The following table reflects the lease costs for the three and six months ended June 30, 2020 and June 30, 2019:

Three Months Ended

Six Months Ended

Consolidated Statement

June 30,

June 30,

June 30,

June 30,

(In millions)

of Operations

2020

2019

2020

2019

Operating lease cost

Theatre properties

Rent

$

203.9

$

220.7

$

420.8

$

439.6

Theatre properties

Operating expense

0.1

1.2

2.3

2.9

Equipment

Operating expense

3.8

3.5

7.7

7.0

Office and other

General and administrative: other

1.3

1.4

2.6

2.7

Finance lease cost

Amortization of finance lease assets

Depreciation and amortization

1.7

2.5

3.6

5.2

Interest expense on lease liabilities

Finance lease obligations

1.5

2.1

3.1

4.2

Variable lease cost

Theatre properties

Rent

20.2

25.2

41.1

48.3

Equipment

Operating expense

(0.5)

19.1

6.5

29.8

Total lease cost

$

232.0

$

275.7

$

487.7

$

539.7

Cash flow and supplemental information is presented below:

Six Months Ended

(In millions)

2020

2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used in finance leases

$

(3.1)

$

(4.2)

Operating cash flows used in operating leases

(249.8)

(468.2)

Financing cash flows used in finance leases

(2.3)

(6.1)

Landlord contributions:

Operating cashflows provided by operating leases

24.9

64.8

Supplemental disclosure of noncash leasing activities:

Right-of-use assets obtained in exchange for new operating lease liabilities (1)

133.7

115.5

(1)Includes lease extensions and option exercises.

The following table represents the weighted-average remaining lease term and discount rate as of June 30, 2020:

As of June 30, 2020

Weighted Average

Weighted Average

Remaining

Discount

Lease Term and Discount Rate

Lease Term (years)

Rate

Operating leases

9.9

7.5%

Finance leases

12.8

6.5%

13

Minimum annual payments required under existing operating and finance lease liabilities (net present value thereof), as of June 30, 2020, are as follows:

Operating Lease

Financing Lease

(In millions)

Payments

Payments

Six months ending December 31, 2020

$

470.0

$

7.7

2021

931.8

16.1

2022

866.2

15.6

2023

771.6

11.7

2024

694.9

9.9

2025

645.4

9.3

Thereafter

3,185.3

68.6

Total lease payments

7,565.2

138.9

Less imputed interest

(2,239.3)

(45.0)

Total

$

5,325.9

$

93.9

As of June 30, 2020, the Company had signed additional operating lease agreements for 9 theatres that have not yet commenced of approximately $198.3 million, which are expected to commence between 2020 and 2024, and carry lease terms of approximately 5 to 25 years. The timing of lease commencement is dependent on the landlord providing the Company with control and access to the related facility.

NOTE 3—REVENUE RECOGNITION

Disaggregation of Revenue. Revenue is disaggregated in the following tables by major revenue types and by timing of revenue recognition:

Three Months Ended

Six Months Ended

(In millions)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Major revenue types

Admissions

$

0.9

$

895.5

$

568.9

$

1,627.0

Food and beverage

0.4

492.5

288.5

861.3

Other theatre:

Advertising

14.3

35.7

44.0

70.2

Other theatre

3.3

82.4

59.0

148.0

Other theatre

17.6

118.1

103.0

218.2

Total revenues

$

18.9

$

1,506.1

$

960.4

$

2,706.5

Three Months Ended

Six Months Ended

(In millions)

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Timing of revenue recognition

Products and services transferred at a point in time

$

3.6

$

1,410.2

$

855.4

$

2,520.2

Products and services transferred over time(1)

15.3

95.9

105.0

186.3

Total revenues

$

18.9

$

1,506.1

$

960.4

$

2,706.5

(1)Amounts primarily include subscription and advertising revenues.

The following tables provide the balances of receivables and deferred revenue income:

(In millions)

June 30, 2020

December 31, 2019

Current assets:

Receivables related to contracts with customers

$

12.6

$

160.3

Miscellaneous receivables

58.1

93.9

Receivables, net

$

70.7

$

254.2

14

(In millions)

June 30, 2020

December 31, 2019

Current liabilities:

Deferred revenue related to contracts with customers

$

401.0

$

447.1

Miscellaneous deferred income

5.1

2.1

Deferred revenue and income

$

406.1

$

449.2

The significant changes in contract liabilities with customers included in deferred revenues and income are as follows:

Deferred Revenues

Related to Contracts

(In millions)

with Customers

Balance December 31, 2019

$

447.1

Cash received in advance (1)

74.4

Customer loyalty rewards accumulated, net of expirations:

Admission revenues (2)

4.8

Food and beverage (2)

12.5

Other theatre (2)

(0.2)

Reclassification to revenue as the result of performance obligations satisfied:

Admission revenues (3)

(88.3)

Food and beverage (3)

(25.1)

Other theatre (4)

(22.2)

Foreign currency translation adjustment

(2.0)

Balance June 30, 2020

$

401.0

(1)Includes movie tickets, food and beverage, gift cards, exchange tickets, and AMC Stubs® loyalty membership fees.

(2)Amount of rewards accumulated, net of expirations, that are attributed to AMC Stubs® and other loyalty programs.

(3)Amount of rewards redeemed that are attributed to gift cards, exchange tickets, movie tickets, AMC Stubs® loyalty programs and other loyalty programs.

(4)Amounts relate to income from non-redeemed or partially redeemed gift cards, non-redeemed exchange tickets, AMC Stubs® loyalty membership fees and other loyalty programs.

The Company suspended the recognition of deferred revenues related to certain loyalty programs, gift cards, and exchange tickets during the period in which its operations are temporarily suspended.

The significant changes to contract liabilities included in the exhibitor services agreement, classified as long-term liabilities in the condensed consolidated balance sheets, are as follows:

Exhibitor Services

(In millions)

Agreement

Balance December 31, 2019

$

549.7

Common Unit Adjustment–additions of common units (1)

4.8

Reclassification of the beginning balance to other theatre revenue, as the result of performance obligations satisfied

(8.2)

Balance June 30, 2020

$

546.3

(1)Represents the fair value amount of the National CineMedia, LLC (“NCM”) common units that were received under the annual Common Unit Adjustment (“CUA”). Such amount will increase the deferred revenues that are being amortized to other theatre revenues over the remainder of the 30-year term of the Exhibitor Service Agreement (“ESA”) ending in February 2037.

Gift cards and exchange tickets. The total amount of non-redeemed gifts cards and exchange tickets included in deferred revenues and income as of June 30, 2020 was $317.4 million. This will be recognized as revenues as the gift cards and exchange tickets are redeemed or as the non-redeemed gift card and exchange ticket revenues are recognized in proportion to the pattern of actual redemptions, which is estimated to occur over the next 24 months.

15

Loyalty programs. As of June 30, 2020, the amount of deferred revenue allocated to the loyalty programs included in deferred revenues and income was $69.3 million. The earned points will be recognized as revenue as the points are redeemed, which is estimated to occur over the next 24 months. The AMC Stubs® annual membership fee is recognized ratably over the one-year membership period.

The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

NOTE 4—GOODWILL

The following table summarizes the changes in goodwill by reporting unit for the six months ended June 30, 2020:

(In millions)

    

Domestic Theatres

 

International Theatres

Total

Balance December 31, 2019

$

3,072.6

$

1,716.5

$

4,789.1

Impairment adjustment

(1,124.9)

(619.4)

(1,744.3)

Currency translation adjustment

(56.4)

(56.4)

Balance June 30, 2020

$

1,947.7

$

1,040.7

$

2,988.4

The Company evaluates goodwill recorded at the Company’s 2 reporting units (Domestic Theatres and International Theatres) for impairment annually as of the beginning of the fourth fiscal quarter and any time an event occurs or circumstances change that would more likely than not reduce the fair value for a reporting unit below its carrying amount. The impairment test for goodwill involves estimating the fair value of the reporting unit and comparing that value to its carrying value. If the estimated fair value of the reporting unit is less than its carrying value, the difference is recorded as goodwill impairment charge, not to exceed the total amount of goodwill allocated to that reporting unit.

A decline in the common stock price and prices of the Company’s corporate borrowings and the resulting impact on market capitalization are two of several factors considered when making this evaluation. Based on sustained declines during the first quarter of 2020 in the Company’s enterprise market capitalization and the temporary suspension of operations at all the Company’s theatres on or before March 17, 2020 due to the COVID-19 pandemic, the Company performed a Step 1 quantitative goodwill impairment test of the Domestic and International reporting units as of March 31, 2020.

In performing the Step 1 quantitative goodwill impairment test as of March 31, 2020, the Company used an enterprise value approach to measure fair value of the reporting units. See Note 9Fair Value Measurements for a discussion of the valuation methodology. The enterprise fair values of the Domestic Theatres and International Theatres reporting units were less than their carrying values and goodwill impairment charges of $1,124.9 million and $619.4 million was recorded as of March 31, 2020 for the Company’s Domestic Theatres and International Theatres reporting units, respectively.

In accordance with ASC 350-20-35-30, the Company performed an assessment to determine whether there were any events or changes in circumstances that would warrant an interim ASC 350 impairment analysis as of June 30, 2020. Given the temporary suspension of operations during the second quarter of 2020, the Company performed a qualitative impairment test to evaluate whether it is more likely than not that the fair value of the Company’s 2 reporting units is less than their respective carrying amounts as of June 30, 2020. The Company concluded that it is not more likely than not that the fair value of its 2 reporting units has been reduced below their respective carrying amounts. As a result, the Company concluded than an interim quantitative impairment test as of June 30, 2020 was not required.

NOTE 5—INVESTMENTS

Investments in non-consolidated affiliates and certain other investments accounted for under the equity method generally include all entities in which the Company or its subsidiaries have significant influence, but not more than 50% voting control, and are recorded in the condensed consolidated balance sheets in other long-term assets. Investments in non-consolidated affiliates as of June 30, 2020 include interests in Digital Cinema Implementation Partners, LLC (“DCIP”) of 29.0%, Digital Cinema Distribution Coalition, LLC (“DCDC”) of 14.6%, AC JV, LLC (“AC JV”) owner of

16

Fathom Events, of 32.0%, SV Holdco LLC (“SV Holdco”), owner of Screenvision, 18.3%, Digital Cinema Media Ltd. (“DCM”) of 50.0%, and Saudi Cinema Company LLC (“SCC”) of 10.0%. The Company also has partnership interests in 4 U.S. motion picture theatres (“Theatre Partnerships”) and approximately 50.0% interest in 55 theatres in Europe. Indebtedness held by equity method investees is non-recourse to the Company.

Equity in Earnings (Loss) of Non-Consolidated Entities

Aggregated condensed financial information of the Company’s significant non-consolidated equity method investment (DCIP) is shown below:

 

Three Months Ended

Six Months Ended

(In millions)

    

June 30, 2020

    

June 30, 2019

    

June 30, 2020

    

June 30, 2019

Revenues

 

$

(6.4)

 

$

48.0

 

$

19.7

 

$

85.7

Operating costs and expenses

31.6

19.5

68.8

38.7

Net earnings (loss)

 

$

(38.0)

 

$

28.5

 

$

(49.1)

 

$

47.0

The components of the Company’s recorded equity in earnings (loss) of non-consolidated entities are as follows:

Three Months Ended

Six Months Ended

(In millions)

    

June 30, 2020

    

June 30, 2019

    

June 30, 2020

    

June 30, 2019

DCIP

$

(9.7)

$

9.0

$

(11.6)

$

14.6

Other

 

(2.7)

 

1.2

 

(3.7)

 

2.1

The Company’s recorded equity in earnings (loss)

$

(12.4)

$

10.2

$

(15.3)

$

16.7

Related Party Transactions

The Company recorded the following related party transactions with equity method investees:

As of

    

As of

(In millions)

June 30, 2020

    

December 31, 2019

Due from DCM for on-screen advertising revenue

$

$

4.2

Loan receivable from DCM

0.7

0.7

Due from DCIP for warranty expenditures

3.5

Due to AC JV for Fathom Events programming

(1.0)

(0.8)

Due from Screenvision for on-screen advertising revenue

3.4

Due from Nordic JVs

2.3

2.5

Due to Nordic JVs for management services

(2.0)

(1.6)

Due from SCC related to the joint venture

0.4

8.3

Due to U.S. theatre partnerships

(0.6)

(1.0)

Three Months Ended

Six Months Ended

(In millions)

Condensed Consolidated Statement of Operations

June 30, 2020

   

June 30, 2019

June 30, 2020

   

June 30, 2019

DCM screen advertising revenues

Other revenues

$

$

5.3

$

3.6

$

9.2

DCIP equipment rental expense

Operating expense

(0.4)

0.8

0.9

1.9

Gross exhibition cost on AC JV Fathom Events programming

Film exhibition costs

 

2.8

 

3.2

10.1

Screenvision screen advertising revenues

Other revenues

4.2

2.1

7.7

17

NOTE 6—CORPORATE BORROWINGS

A summary of the carrying value of corporate borrowings and finance lease obligations is as follows:

(In millions)

    

June 30, 2020

    

December 31, 2019

Senior Secured Credit Facility-Term Loan due 2026 (4.08% as of June 30, 2020)

$

1,975.0

$

1,985.0

Revolving Credit Facility Due 2024 (range of 2.36% to 2.87% as of June 30, 2020)

213.2

10.5% First Lien Notes due 2025

500.0

Odeon Revolving Credit Facility Due 2022 (3.17% as of June 30, 2020)

84.4

Odeon Revolving Credit Facility Due 2022 (2.6% as of June 30, 2020)

24.4

2.95% Senior Unsecured Convertible Notes due 2024

600.0

600.0

6.375% Senior Subordinated Notes due 2024 (£500 million par value)

614.4

655.8

5.75% Senior Subordinated Notes due 2025

600.0

600.0

5.875% Senior Subordinated Notes due 2026

595.0

595.0

6.125% Senior Subordinated Notes due 2027

475.0

475.0

$

5,681.4

$

4,910.8

Finance lease obligations

 

93.9

 

99.9

Debt issuance costs

(90.0)

(88.8)

Net discounts

(73.4)

(69.1)

Derivative liability

0.5

$

5,611.9

$

4,853.3

Less:

Current maturities corporate borrowings

(20.0)

 

(20.0)

Current maturities finance lease obligations

(10.0)

(10.3)

$

5,581.9

$

4,823.0

The following table provides the principal payments required and maturities of corporate borrowings as of June 30, 2020:

Principal

Amount of

Corporate

(In millions)

    

Borrowings

Six months ended December 31, 2020

$

10.0

2021

20.0

2022

 

128.8

2023

 

20.0

2024

 

1,447.6

2025

 

1,120.0

Thereafter

 

2,935.0

Total

$

5,681.4

The Company recorded other expense related to financing fees of $2.8 million and $0 million during the three months ended June 30, 2020 and June 30, 2019, respectively, and other expense of $2.8 million and $0 million during the six months ended June 30, 2020 and June 2019, respectively.

Senior Secured Credit Facility

On April 23, 2020, the Company entered into the Seventh Amendment to the Senior Secured Credit Facility with the lenders from time to time party thereto and Citicorp North America, Inc., as administrative agent (the “Senior Secured Credit Facility Amendment”) amending the Credit Agreement dated April 30, 2013, as amended, pursuant to which the requisite lenders thereunder granted a waiver of the maintenance covenant thereunder for the period from and after the effective date of the Senior Secured Credit Facility Amendment to and including the earlier of (a) March 31, 2021 and (b) the day immediately preceding the last day of the Test Period (as defined in the Senior Secured Credit Facility Agreement) during which the Company has delivered a Financial Covenant Election (as defined in the Senior Secured Credit Facility Agreement) to the administrative agent under the Senior Secured Credit Facility Agreement (such period, the “Covenant Suspension Period”). During the Covenant Suspension Period, the Company will not, and

18

will not permit any of its restricted subsidiaries to, make certain restricted payments and shall maintain Liquidity (as defined in the Senior Secured Credit Facility Amendment) of no less than $50.0 million on the last day of each Test Period. In addition, the Senior Secured Credit Facility Amendment provides for certain changes to the covenants limiting indebtedness, liens and restricted payments that are intended to match corresponding restrictions under the 10.5% first lien notes due 2025 (the “First Lien Notes due 2025”) and to ensure that the terms and conditions of the First Lien Notes due 2025 (subject to certain exceptions) are not materially more favorable (when taken as a whole) to the noteholders than the terms and conditions of the Senior Secured Credit Facility Agreement (when taken as a whole) are to the lenders. Pursuant to the terms of the Senior Secured Credit Facility Agreement, these more restrictive terms will be operative until the repayment, satisfaction, defeasance or other discharge of the obligations under the First Lien Notes due 2025 or an effective amendment of, other consent or waiver with respect to, or covenant defeasance pursuant to the Indenture as result of which the covenants limiting indebtedness, liens and restricted payments thereunder are of no further force or effect.

Odeon Revolving Credit Facility

On April 24, 2020, Odeon Cinemas Group Limited entered into an amendment to the Odeon Revolving Credit Facility with Lloyds Bank PLC as agent (the “Odeon Amendment”), pursuant to the requisite lenders thereunder granted a waiver of the maintenance covenant thereunder for the period from and after the effective date of the Odeon Amendment to and including the earlier of (a) March 31, 2021 and (b) the day immediately preceding the last day of the Relevant Period (as defined in the Odeon Amendment) during which Odeon Cinemas Group Limited has delivered a Financial Covenant Election (as defined in the Odeon Amendment) to the agent (the “Odeon Covenant Suspension Period”). During the Odeon Covenant Suspension Period, Odeon Cinemas Group Limited will not, and will not permit any of its subsidiaries to, make certain restricted payments including payment on shareholder loans, provided that cash payments of interest with respect to shareholder loans will be permitted. Additionally, lenders granted a waiver such that certain events or circumstances resulting from COVID-19 virus occurring prior to the Odeon Amendment and continuing will be deemed not to constitute an event of default under the Odeon Revolving Credit Facility.

First Lien Notes due 2025

On April 24, 2020, the Company issued $500.0 million aggregate principal amount of its 10.5% First Lien Notes due 2025, in a private offering, pursuant to an indenture, dated as of April 24, 2020 (the “First Lien Notes Indenture”), among the Company, the guarantors named therein and U.S. Bank National Association, as trustee and collateral agent. The Company used the net proceeds from the First Lien Notes due 2025 private offering for general corporate purposes, including further increasing the Company’s liquidity. The First Lien Notes due 2025 were issued with a discount of $10.0 million and bear interest at a rate of 10.5% per annum, payable semi-annually on April 15 and October 15 each year, commencing October 15, 2020. The First Lien Notes due 2025 will mature on April 15, 2025. The Company recorded debt issuance costs of approximately $8.9 million related to the issuance of the First Lien Notes due 2025 and will amortize those costs to interest expense under the effective interest method over the term of the First Lien Notes due 2025.

The First Lien Notes due 2025 are general senior secured obligations of the Company and are fully and unconditionally guaranteed on a joint and several senior secured basis by all of the Company’s existing and future subsidiaries that guarantee the Company’s other indebtedness, including the Company’s Senior Secured Credit Facility. The First Lien Notes due 2025 are secured, on a pari passu basis with the Senior Secured Credit Facility, on a first-priority basis by substantially all of the tangible and intangible assets owned by the Company and guarantors that secure obligations under the Senior Secured Credit Facility including pledges of capital stock of certain of the Company’s and the guarantor’s wholly-owned material subsidiaries (but limited to 65% of the voting stock of any foreign subsidiary), subject to certain thresholds, exceptions and permitted liens.

The Company may redeem some or all of the First Lien Notes due 2025 at any time on or after April 15, 2022, at the redemption prices set forth in the First Lien Notes Indenture. In addition, the Company may redeem up to 35% of the aggregate principal amount of the First Lien Notes due 2025 using net proceeds from certain equity offerings on or prior to April 15, 2022 at a redemption price equal to 110.5% of their aggregate principal amount and accrued and unpaid interest to, but not including, the date of redemption. The Company may redeem some or all of the First Lien Notes due 2025 at any time prior to April 15, 2022 at a redemption price equal to 100% of their aggregate principal amount and accrued and unpaid interest to, but not including, the date of redemption, plus an applicable make-whole premium. In addition, the Company may, at any time prior to 120 days after the issue date, redeem up to 35% of the aggregate principal amount of the First Lien Notes due 2025 using net proceeds of any loan received pursuant to a Regulatory Debt Facility (as defined in the First Lien Notes Indenture) at a redemption price equal to 105.25% of their

19

aggregate principal amount and accrued and unpaid interest to, but not including, the date of redemption.

The First Lien Notes Indenture contains covenants that limit the Company’s ability to, among other things: (i) incur additional indebtedness, including additional senior indebtedness; (ii) pay dividends on or make other distributions in respect of its capital stock; (iii) purchase or redeem capital stock or prepay subordinated debt or other junior securities; (iv) create liens ranking pari passu in right of payment with or subordinated in right of payment to First Lien Notes due 2025; (v) enter into certain transactions with its affiliates; and (vi) merge or consolidate with other companies or transfer all or substantially all of its assets. These covenants are subject to a number of important limitations and exceptions. The First Lien Notes Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding First Lien Notes due 2025 to be due and payable immediately.

Senior Unsecured Convertible Notes due 2024

The table below sets forth the carrying value of the Senior Unsecured Convertible Notes due 2024:

Carrying Value

Increase

Carrying Value

as of

to Expense

as of

(In millions)

December 31, 2019

(Income)

June 30, 2020

Principal balance

$

600.0

$

$

600.0

Discount

(73.7)

6.8

(66.9)

Debt issuance costs

(11.2)

0.9

(10.3)

Derivative liability

0.5

(0.5)

Carrying value

$

515.6

$

7.2

$

522.8

On September 14, 2018, the Company issued $600.0 million aggregate principal amount of its 2.95% Senior Unsecured Convertible Notes due 2024 (the "Convertible Notes due 2024"). The Convertible Notes due 2024 mature on September 15, 2024, subject to earlier conversion by the holders thereof, repurchase by the Company at the option of the holders or redemption by the Company upon the occurrence of certain contingencies, as discussed below. Upon maturity, the $600.0 million principal amount of the Convertible Notes due 2024 will be payable in cash.

On April 24, 2020, the Company entered into a supplemental indenture (the “Supplemental Indenture”) to the Convertible Notes due 2024 indenture, dated as of September 14, 2018. The Supplemental Indenture amended the debt covenant under the Convertible Notes Indenture to permit the Company to issue the First Lien Notes due 2025, among other changes.

The Company bifurcated the conversion feature from the principal balance of the Convertible Notes due 2024 as a derivative liability because (1) a conversion feature is not clearly and closely related to the debt instrument and the reset of the conversion price discussed in the following paragraph causes the conversion feature to not be considered indexed to the Company’s equity, (2) the conversion feature standing alone meets the definition of a derivative, and (3) the Convertible Notes due 2024 are not remeasured at fair value each reporting period with changes in fair value recorded in the condensed consolidated statement of operations. The initial derivative liability of $90.4 million is offset by a discount to the principal balance and is amortized to interest expense resulting in an effective rate of 5.98% over the term of the Convertible Notes due 2024. The Company also recorded debt issuance costs of approximately $13.6 million related to the issuance of the Convertible Notes due 2024 and will amortize those costs to interest expense under the effective interest method over the term of the Convertible Notes due 2024. The Company recorded interest expense for the three months ended June 30, 2020 and June 30, 2019 of $8.3 million and $8.0 million, respectively, and interest expense for the six months ended June 30, 2020 and June 30, 2019 of $16.6 million and $16.0 million, respectively.

The derivative liability is remeasured at fair value each reporting period with changes in fair value recorded in the condensed consolidated statements of operations as other expense or income. See Note 9Fair Value Measurements for a discussion of the valuation methodology. For the three months ended June 30, 2020 and June 30, 2019, this resulted in other income of $0 million and $33.9 million, respectively, and for the six months ended June 30, 2020 and June 30, 2019, this resulted in other income of $0.5 million and $20.6 million, respectively. The if-converted value of the Convertible Notes due 2024 is less than the principal balance by approximately $464.2 million as of June 30, 2020 based on the closing price per share of the Company’s common stock of $4.29 per share.

Upon conversion by a holder of the Convertible Notes due 2024, the Company shall deliver, at its election, either cash, shares of the Company’s Class A common stock or a combination of cash and shares of the Company’s Class A common stock at a conversion rate of 52.7704 per $1,000 principal amount of the Convertible Notes due 2024

20

(which represents an initial conversion price of $18.95), in each case subject to customary anti-dilution adjustments. As of June 30, 2020, the $600.0 million principal balance of the Convertible Notes due 2024 would be convertible into 31,662,269 shares of Class A common stock. In addition to typical anti-dilution adjustments, in the event that the then-applicable conversion price is greater than 120% of the average of the volume-weighted average price of the Company’s Class A common stock for the ten days prior to the second anniversary of issuance (the “Reset Conversion Price”), the conversion price for the Convertible Notes due 2024 is subject to a reset provision that would adjust the conversion price downward to such Reset Conversion Price. However, this conversion price reset provision is subject to a conversion price floor such that the shares of the Company’s Class A common stock issuable upon conversion would not exceed 30% of the Company’s then outstanding fully-diluted share capital after giving effect to the conversion. In addition, a trigger of the reset provision would result in up to 5,666,000 shares of the Company’s Class B common stock held by Wanda becoming subject to forfeiture and retirement by the Company at no additional cost pursuant to the stock repurchase agreement between the Company and Wanda discussed in Note 7Stockholders’ Equity. This cancellation agreement is a contingent call option for the forfeiture shares, which is a freestanding derivative measured at fair value on a recurring basis. The feature is contingent on the same reset of the conversion price which is part of the conversion feature. The initial derivative asset of $10.7 million is offset by a credit to stockholders’ equity related to the Class B common stock purchase and cancellation. The forfeiture shares feature is not clearly and closely related to the Convertible Notes due 2024 host and it is bifurcated and accounted for as a derivative asset measured at fair value through earnings each reporting period with changes in fair value recorded in the condensed consolidated statement of operations as other expense or income. See Note 9Fair Value Measurements for a discussion of the valuation methodology. For the three months ended June 30, 2020 and June 30, 2019, this resulted in other income of $6.4 million and $7.1 million, respectively, and other expense of $13.7 million and $8.0 million for the six months ended June 30, 2020 and June 30, 2019, respectively. Additionally, the conversion rate will be adjusted if any cash dividend or distribution is made to all or substantially all holders of the Company’s common stock (other than the special dividend referenced above and a regular, quarterly cash dividend that does not exceed $0.20 per share until the second anniversary of issuance and $0.10 per share thereafter). Any Convertible Notes due 2024 that are converted in connection with a Make-Whole Fundamental Change (as defined in the Indenture (the “Indenture”) governing the Convertible Notes due 2024) are, under certain circumstances, entitled to an increase in the conversion rate.

The Company has the option to redeem the Convertible Notes due 2024 for cash on or after the fifth anniversary of issuance at par if the price for the Company’s Class A common stock is equal to or greater than 150% of the then applicable conversion price for 20 or more trading days out of a consecutive 30 day trading period (including the final three trading days), at which time the holders have the option to convert. The Company also has the option to redeem the Convertible Notes due 2024, between the second and third anniversary of issuance, if the reset provision described above is triggered at a redemption price in cash that would result in the noteholders realizing a 15% internal rate of return from the date of issuance regardless of when any particular noteholder acquired its Convertible Notes due 2024.

With certain exceptions, upon a change of control of the Company or if the Company’s Class A common stock is not listed for trading on The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market, the holders of the Convertible Notes due 2024 may require that the Company repurchase in cash all or part of the principal amount of the Convertible Notes due 2024 at a purchase price equal to the principal amount plus accrued and unpaid interest up to, but excluding, the date of repurchase. The Indenture includes restrictive covenants that, subject to specified exceptions and parameters, limit the ability of the Company to incur additional debt and limit the ability of the Company to incur liens with respect to the Company’s senior subordinated notes or any debt incurred to refinance the Company’s senior subordinated notes. The Indenture also includes customary events of default, which may result in the acceleration of the maturity of the Convertible Notes due 2024 under the Indenture.

21

NOTE 7—STOCKHOLDERS’ EQUITY

Dividends

The following is a summary of dividends and dividend equivalents declared to stockholders during the three and six months ended June 30, 2020:

Amount per

Total Amount

    

    

    

Share of

    

Declared

Declaration Date

Record Date

Date Paid

Common Stock

(In millions)

February 26, 2020

March 9, 2020

March 23, 2020

$

0.03

$

3.2

Related Party Transactions

As of June 30, 2020 and December 31, 2019, the Company recorded a receivable due from Wanda of $0.5 million and $0.8 million, respectively, for reimbursement of general administrative and other expense incurred on behalf of Wanda. For the three months ended June 30, 2020 and June 30, 2019, the Company recorded approximately $0.1 million in both periods of cost reductions for general and administrative services provided on behalf of Wanda. For the six months ended June 30, 2020 and June 30, 2019, the Company recorded approximately $0.2 million in both periods, of cost reductions for general and administrative services provided on behalf of Wanda. Wanda owns Legendary Entertainment, a motion picture production company. The Company will occasionally play Legendary’s films in its theatres as a result of transactions with independent film distributors.

On September 14, 2018, the Company entered into the Investment Agreement with Silver Lake Alpine, L.P., an affiliate of Silver Lake Group, L.L.C. (“Silver Lake”), relating to the issuance to Silver Lake (or its designated affiliates) of $600.0 million principal amount of the Convertible Notes due 2024. See Note 6Corporate Borrowings - Senior Unsecured Convertible Notes due 2024 for more information.

On September 14, 2018, the Company, Silver Lake and Wanda entered into a Right of First Refusal Agreement (the “ ROFR Agreement ”), which provides Silver Lake certain rights to purchase shares of the Company’s common stock that Wanda proposes to sell during a period of two years from the date of execution of the ROFR Agreement or, if earlier, until such time that Wanda and its affiliates cease to beneficially own at least 50.1% of the total voting power of the Company’s voting stock. The right of first refusal applies to both registered and unregistered transfers of shares. Under the ROFR Agreement, in the event that Wanda and its affiliates cease to beneficially own at least 50.1% of the total voting power of the Company’s voting stock, then the Company will have the same right of first refusal over sales of the Company’s common stock by Wanda as described above until the expiration of the two-year period beginning on the date of execution of the ROFR Agreement. In such event, the Company may exercise such right to purchase shares from Wanda from time to time pursuant to the ROFR Agreement in its sole discretion, subject to approval by the disinterested directors of the Board. If the Company determines to exercise its right to purchase shares from Wanda pursuant to the ROFR Agreement, it will have the obligation under the Investment Agreement to offer to sell to Silver Lake a like number of shares of the Company’s Class A Common Stock, at the same per share price at which it purchased the Wanda shares.

On September 14, 2018, the Company used the proceeds from the Convertible Notes due 2024, and pursuant to a stock repurchase agreement between the Company and Wanda, repurchased 24,057,143 shares of Class B common stock at a price of $17.50 per share or $421.0 million and associated legal fees of $2.6 million. As of June 30, 2020, Wanda owns 49.63% of AMC through its 51,769,784 shares of Class B common stock. With the three-to-one voting ratio between the Company’s Class B and Class A common stock, Wanda retains voting control of AMC with 74.72% of the voting power of the Company’s common stock. As discussed in Note 6Corporate Borrowings up to 5,666,000 shares of Class B common stock are subject to forfeiture for no consideration in connection with the reset provision contained in the Indenture.

22

Condensed Consolidated Statements of Stockholders’ Equity

For the Six Months Ended June 30, 2020

Accumulated

Class A Voting

Class B Voting

Additional

Other

Accumulated

Total

Common Stock

Common Stock

Paid-in

Treasury Stock

Comprehensive

Earnings

Stockholders’

(In millions, except share and per share data)

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

Shares

    

Amount

    

Income (Loss)

    

(Deficit)

    

Equity (Deficit)

Balances December 31, 2019

52,080,077

$

0.5

51,769,784

$

0.5

$

2,001.9

3,732,625

$

(56.4)

$

(26.1)

$

(706.2)

$

1,214.2

Cumulative effect adjustment for the adoption of new accounting principle (ASU 2016-13)

(16.9)

(16.9)

Net loss

(2,176.3)

(2,176.3)

Other comprehensive loss

(93.5)

(93.5)

Dividends declared:

Class A common stock, $0.20/share, net of forfeitures

(1.6)

(1.6)

Class B common stock, $0.20/share

(1.6)

(1.6)

Taxes paid for restricted unit withholdings

(1.0)

(1.0)

Stock-based compensation

469,516

2.7

2.7

Balances March 31, 2020

52,549,593

$

0.5

51,769,784

$

0.5

$

2,003.6

3,732,625

$

(56.4)

$

(119.6)

$

(2,902.6)

$

(1,074.0)

Net loss

(561.2)

(561.2)

Other comprehensive income

56.0

56.0

Dividends declared:

Class A common stock, $0.20/share, net of forfeitures

0.1

0.1

Stock-based compensation

3.7

3.7

Balances June 30, 2020

52,549,593

$

0.5

51,769,784

$

0.5

$

2,007.3

3,732,625

$

(56.4)

$

(63.6)

$

(3,463.7)

$

(1,575.4)

23

Condensed Consolidated Statements of Stockholders’ Equity

For the Six Months Ended June 30, 2019

Accumulated

Class A Voting

Class B Voting

Additional

Other

Accumulated

Total

Common Stock

Common Stock

Paid-in

Treasury Stock

Comprehensive

Earnings

Stockholders’

(In millions, except share and per share data)

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

Shares

    

Amount

    

Income (Loss)

    

(Deficit)

    

Equity

Balances December 31, 2018

55,401,325

$

0.5

51,769,784

$

0.5

$

1,998.4

3,732,625

$

(56.4)

$

5.5

$

(550.9)

$

1,397.6

Cumulative effect adjustments for the adoption of new accounting principle (ASU 842)

78.8

78.8

Net loss

(130.2)

(130.2)

Other comprehensive loss

(24.9)

(24.9)

Dividends declared:

Class A common stock, $0.20/share

(10.7)

(10.7)

Class B common stock, $0.20/share

(10.4)

(10.4)

Taxes paid for restricted unit withholdings

(1.1)

(1.1)

Reclassification from temporary equity

75,712

0.4

0.4

Stock-based compensation

328,904

4.0

4.0

Balances March 31, 2019

55,805,941

$

0.5

51,769,784

$

0.5

$

2,001.7

3,732,625

$

(56.4)

$

(19.4)

$

(623.4)

$

1,303.5

Cumulative effect adjustments for the adoption of new accounting principle (ASU 842)

(2.6)

(2.6)

Net earnings

49.4

49.4

Other comprehensive loss

(9.2)

(9.2)

Dividends declared:

Class A common stock, $0.20/share, net of forfeitures

(10.7)

(10.7)

Class B common stock, $0.20/share

(10.4)

(10.4)

Taxes paid for restricted unit withholdings

(0.3)

(0.3)

Stock-based compensation

3,096

5.4

5.4

Balances June 30, 2019

55,809,037

$

0.5

51,769,784

$

0.5

$

2,006.8

3,732,625

$

(56.4)

$

(28.6)

$

(597.7)

$

1,325.1

24

NOTE 8—INCOME TAXES

The Company’s worldwide effective income tax rate is based on actual income (loss), statutory rates, valuation allowances against deferred tax assets and tax planning opportunities available in the various jurisdictions in which it operates. The Company is using a discrete income tax calculation for the three and six months ended June 30, 2020 due to the inability to determine reliable annual estimates of taxable income (loss) due to COVID-19. Historically, for interim financial reporting, the Company estimates the worldwide annual income tax rate based on projected taxable income (loss) for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate, adjusted for discrete items, if any. The Company will return to the historic approach of computing quarterly tax expense based on an annual effective rate in the future interim period when more reliable estimates of annual income become available. The Company recognizes income tax-related interest expense and penalties as income tax expense and general and administrative expense, respectively.

The Company evaluates its deferred tax assets each period to determine if a valuation allowance is required based on whether it is “more likely than not” that some portion of the deferred tax assets would not be realized. The ultimate realization of these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods on a federal, state and foreign jurisdiction basis. The Company conducts its evaluation by considering all available positive and negative evidence, including historical operating results, forecasts of future profitability, the duration of statutory carryforward periods, and the outlooks for the U.S. motion picture and broader economy, among others.

During the first quarter of 2020, the severe impact of COVID-19 on operations in Germany and Spain caused the Company to conclude the realizability of deferred tax assets held in those jurisdictions does not meet the more likely than not standard. As such, a charge of $33.1 million and $40.1 million was recorded for Germany and Spain, respectively. During the fourth quarter of 2017, the Company determined that it was appropriate to record a valuation allowance against U.S. deferred tax assets. In addition, several other international jurisdictions carried valuation allowances against their deferred tax assets at the beginning of 2020.

As a result, the effective tax rate for the six months ended June 30, 2020 reflects the impact of these valuation allowances against U.S. and international deferred tax assets generated during the six month period. The actual effective rate for the six months ended June 30, 2020 was (2.3)%. The Company’s consolidated tax rate for the six months ended June 30, 2020 differs from the U.S. statutory tax rate primarily due to the valuation allowances in U.S. and foreign jurisdictions, foreign tax rate differences, federal and state tax credits, partially offset by state income taxes, permanent differences related to goodwill impairments, interest, compensation, and other discrete items. No tax impact was recorded on the $1,744.3 million goodwill impairment charge incurred during the six months ended June 30, 2020, as the portion impaired was permanently non-deductible. At June 30, 2020 and December 31, 2019, the Company has recorded net deferred tax liabilities of $42.6 million and net deferred tax assets of $24.1 million, respectively.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property, as well as loans to certain qualifying businesses. The Company continues to examine the impacts that the CARES Act may have on its business. While the Company may take advantage of certain CARES Act’s cash deferral provisions, many of the provisions are not applicable to the Company. Additionally, as of the date of this filing, the Company has not participated in CARES Act loans.

NOTE 9—FAIR VALUE MEASUREMENTS

Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts business. The inputs used to develop these fair value measurements are established in a hierarchy, which ranks the quality and reliability of the information used to determine the fair values. The fair value classification is based on levels of inputs. Assets and liabilities that are carried at fair value are classified and disclosed in one of the following categories:

Level 1:

Quoted market prices in active markets for identical assets or liabilities.

25

Level 2:

Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3:

Unobservable inputs that are not corroborated by market data.

Recurring Fair Value Measurements. The following table summarizes the fair value hierarchy of the Company’s financial assets and liabilities carried at fair value on a recurring basis as of June 30, 2020:

Fair Value Measurements at June 30, 2020 Using

Significant

    

Total Carrying

    

Quoted prices in

    

Significant other

    

unobservable

Value at

active market

observable inputs

inputs

(In millions)

June 30, 2020

(Level 1)

(Level 2)

(Level 3)

Other long-term assets:

Money market mutual funds

$

1.4

$

1.4

$

$

Derivative asset

24.3

24.3

Investments measured at net asset value (1)

10.7

 

 

 

Marketable equity securities:

Investment in NCM

4.1

4.1

Total assets at fair value

$

40.5

$

5.5

$

$

24.3

(1)The investments relate to non-qualified deferred compensation arrangements on behalf of certain members of management. The Company has an equivalent liability for this related-party transaction recorded in other long-term liabilities for the deferred compensation obligation.

Valuation Techniques. The Company’s money market mutual funds are invested in funds that seek to preserve principal, are highly liquid, and therefore are recorded on the balance sheet at the principal amounts deposited, which equals fair value.

On September 14, 2018, the Company issued Convertible Notes due 2024 with a conversion feature that gave rise to an embedded derivative instrument and a stock purchase and cancellation agreement that gave rise to a derivative asset, see Note 6Corporate Borrowings for further information. The derivative features have been valued using a Monte Carlo simulation approach. The Monte Carlo simulation approach consists of simulated common stock prices from the valuation date to the maturity of the Convertible Notes and to September 14, 2020 for the contingent call option for forfeiture shares. At June 30, 2020, the Company used a share price of $4.29, volatility rate of 13%, risk-free interest rate of 0.15%, discount yield of 36.0%, and dividend yield of 0% to the value of the derivative instrument. The Company re-values the derivative instruments at the end of each reporting period and any changes are recorded in other expense (income) in the condensed consolidated statements of operations.

Nonrecurring Fair Value Measurements. The following table summarizes the fair value hierarchy of the Company’s assets that were measured at fair value on a nonrecurring basis:

Fair Value Measurements at March 31, 2020

    

    

    

Significant other

    

Significant

 

Total Carrying

Quoted prices in

observable

unobservable

Value at

active market

inputs

inputs

Total

(In millions)

    

March 31, 2020

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Losses

Property, net:

Property net

$

40.5

$

$

$

40.5

$

30.9

Operating lease right-of-use assets

Operating lease right-of-use assets

124.0

124.0

60.4

Intangible assets, net

Definite-lived intangible assets

6.6

6.6

8.0

Indefinite-lived intangible assets

50.3

50.3

8.3

Goodwill

Goodwill

2,938.0

2,938.0

1,744.3

Other long-term assets

Cost method investments

7.2

Total

$

3,159.4

$

$

$

3,159.4

1,859.1

Long-lived assets held and used, operating lease right-of-use assets, intangible assets, and cost method investments were considered impaired and were written down to their fair value at March 31, 2020 of $3,159.4 million.

26

There is considerable management judgment with respect to cash flow estimates and discount rates used in determining fair value, and therefore are classified as Level 3 measurements within the fair value measurement hierarchy.

Valuation Techniques. There are a number of estimates and significant judgments that were made by management in performing these impairment evaluations. Such judgments and estimates include estimates of future attendance, revenues, cash flows, rent relief, cost savings, capital expenditures, and the cost of capital, among others. Attendance is expected to be significantly below historical levels for the first several months following reopening but is expected to increase as customers become more comfortable with the experience. The Company believes it used reasonable and appropriate business judgments. The Company used weighted average cost of capital (discount rate) input for the Domestic Theatres and International Theatres reporting units of 11.5% and 13.0%, respectively, and a long-term growth rate input of 2.0% for both of the reporting units. There is considerable management judgment with respect to cash flow estimates and appropriate discount rates to be used in determining fair value, and, accordingly, actual results could vary significantly from such estimates, which fall under Level 3 within the fair value measurement hierarchy. These estimates determine whether impairments have been incurred, and quantify the amount of any related impairment charge.

Other Fair Value Measurement Disclosures. The Company is required to disclose the fair value of financial instruments that are not recognized at fair value in the statement of financial position for which it is practicable to estimate that value:

    

Fair Value Measurements at June 30, 2020

    

    

Significant other

    

Significant

Total Carrying

Quoted prices in

observable

unobservable

Value at

active market

inputs

inputs

(In millions)

June 30, 2020

(Level 1)

(Level 2)

(Level 3)

Current maturities of corporate borrowings

$

20.0

$

$

14.6

$

Corporate borrowings

 

5,498.0

 

 

2,854.0

180.8

Valuation Technique. Quoted market prices and observable market based inputs were used to estimate fair value for Level 2 inputs. The Level 3 fair value measurement represents the transaction price of the corporate borrowings under market conditions. On September 14, 2018, the Company issued $600.0 million of Convertible Notes due 2024. These notes were issued by private placement, as such there is no observable market for these Convertible Notes. The Company valued these notes at principal value less a discount reflecting a market yield to maturity. See Note 6Corporate Borrowings for further information.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments.

NOTE 10—OPERATING SEGMENTS

The Company reports information about operating segments in accordance with ASC 280-10, Segment Reporting, which requires financial information to be reported based on the way management organizes segments within a company for making operating decisions and evaluating performance. The Company has identified 2 reportable segments and reporting units for its theatrical exhibition operations, U.S. markets and International markets. The International markets reportable segment has operations in or partial interest in theatres in the United Kingdom, Germany, Spain, Italy, Ireland, Portugal, Sweden, Finland, Estonia, Latvia, Lithuania, Norway, and Denmark. Each segment’s revenue is derived from admissions, food and beverage sales and other ancillary revenues, primarily screen advertising, AMC Stubs® membership fees and other loyalty programs, ticket sales, gift card income and exchange ticket income. The measure of segment profit and loss the Company uses to evaluate performance and allocate its resources is Adjusted EBITDA, as defined in the reconciliation table below. The Company does not report asset information by segment because that information is not used to evaluate the performance of or allocate resources between segments.

27

Below is a breakdown of select financial information by reportable operating segment:

Three Months Ended

Six Months Ended

Revenues (In millions)

    

June 30, 2020

June 30, 2019

June 30, 2020

    

June 30, 2019

U.S. markets

$

15.7

$

1,161.2

$

677.0

    

$

2,028.4

International markets

3.2

344.9

283.4

    

678.1

Total revenues

$

18.9

$

1,506.1

$

960.4

    

$

2,706.5

Three Months Ended

Six Months Ended

Adjusted EBITDA (1) (In millions)

    

June 30, 2020

    

June 30, 2019

June 30, 2020

    

June 30, 2019

U.S. markets

$

(241.6)

$

202.1

$

(245.4)

$

279.5

International markets

(98.7)

35.5

(91.8)

66.3

Total Adjusted EBITDA

$

(340.3)

$

237.6

$

(337.2)

$

345.8

(1)The Company presents Adjusted EBITDA as a supplemental measure of its performance. The Company defines Adjusted EBITDA as net earnings (loss) plus (i) income tax provision (benefit), (ii) interest expense and (iii) depreciation and amortization, as further adjusted to eliminate the impact of certain items that the Company does not consider indicative of the Company’s ongoing operating performance and to include attributable EBITDA from equity investments in theatre operations in International markets and any cash distributions of earnings from its other equity method investees. The measure of segment profit and loss the Company uses to evaluate performance and allocate its resources is Adjusted EBITDA, which is consistent with how Adjusted EBITDA is defined in the Company’s debt indentures.

Three Months Ended

Six Months Ended

Capital Expenditures (In millions)

    

June 30, 2020

    

June 30, 2019

June 30, 2020

    

June 30, 2019

U.S. markets

$

24.9

$

84.1

$

81.8

$

159.6

International markets

10.1

31.0

44.9

70.3

Total capital expenditures

$

35.0

$

115.1

$

126.7

$

229.9

As of

As of

Long-term assets, net (In millions)

June 30, 2020

December 31, 2019

U.S. markets

$

7,532.1

$

9,039.6

International markets

3,059.8

3,963.1

Total long-term assets (1)

$

10,591.9

$

13,002.7

(1)Long-term assets are comprised of property, operating lease right-of-use assets, intangible assets, goodwill, deferred tax assets, and other long-term assets.

28

The following table sets forth a reconciliation of net earnings (loss) to Adjusted EBITDA:

Three Months Ended

Six Months Ended

(In millions)

June 30, 2020

June 30, 2019

    

June 30, 2020

June 30, 2019

Net earnings (loss)

$

(561.2)

$

49.4

$

(2,737.5)

$

(80.8)

Plus:

Income tax provision (benefit) (1)

 

(6.1)

 

5.4

 

62.1

 

11.1

Interest expense

 

91.2

 

86.4

 

174.0

 

170.0

Depreciation and amortization

 

119.7

 

112.0

 

242.2

 

225.0

Impairment of long-lived assets, indefinite-lived intangible assets and goodwill (2)

 

 

 

1,851.9

 

Certain operating expenses (3)

 

(1.5)

 

2.3

 

0.6

 

4.8

Equity in (earnings) loss of non-consolidated entities (4)

 

12.4

 

(10.2)

 

15.3

 

(16.7)

Cash distributions from non-consolidated entities (5)

 

6.1

 

1.8

 

13.7

 

12.3

Attributable EBITDA (6)

0.6

2.0

0.5

2.9

Investment expense (income)

 

(1.3)

 

(2.1)

 

8.1

 

(18.2)

Other expense (income) (7)

 

(1.9)

 

(23.8)

 

25.0

 

6.1

Other non-cash rent (8)

(3.8)

5.8

(1.5)

13.4

General and administrative — unallocated:

Merger, acquisition and other costs (9)

 

1.8

 

3.2

 

2.0

 

6.5

Stock-based compensation expense (10)

 

3.7

 

5.4

 

6.4

 

9.4

Adjusted EBITDA

$

(340.3)

$

237.6

$

(337.2)

$

345.8

(1)For information regarding the income tax provision, see Note 8Income Taxes.
(2)During the six months ended June 30, 2020, the Company recorded non-cash impairment charges of $1,124.9 million and $619.4 million related to the enterprise fair values of its Domestic Theatres and International Theatres reporting units, respectively. The Company recorded non-cash impairment charges related to its long-lived assets of $81.4 million on 57 theatres in the U.S. markets with 658 screens which were related to property, net, operating lease right-of-use assets, net and other long-term assets and $9.9 million on 23 theatres in the International markets with 213 screens which were related to property, net and operating lease right-of-use assets, net, during the six months ended June 30, 2020. The Company recorded non-cash impairment charges related to its indefinite-lived intangible assets of $5.9 million and $2.4 million related to the Odeon and Nordic tradenames, respectively, during the six months ended June 30, 2020. The Company also recorded non-cash impairment charges of $8.0 million related to its definite-lived intangible assets.
(3)Amounts represent preopening expense related to temporarily closed screens under renovation, theatre and other closure expense for the permanent closure of screens including the related accretion of interest, non-cash deferred digital equipment rent expense, and disposition of assets and other non-operating gains or losses included in operating expenses. The Company has excluded these items as they are non-cash in nature or are non-operating in nature.
(4)Equity in (earnings) loss of non-consolidated entities was primarily due to equity in loss from DCIP of $9.7 million for the three months ended June 30, 2020 compared to equity in earnings from DCIP of $9.0 million for the three months ended June 30, 2019. Equity in (earnings) loss of non-consolidated entities was primarily due to equity in loss from DCIP of $11.6 million for the six months ended June 30, 2020 compared to equity in earnings from DCIP of $14.6 million for the six months ended June 30, 2019.
(5)Includes U.S. non-theatre distributions from equity method investments and International non-theatre distributions from equity method investments to the extent received. The Company believes including cash distributions is an appropriate reflection of the contribution of these investments to the Company’s operations.
(6)Attributable EBITDA includes the EBITDA from equity investments in theatre operators in certain International markets. See below for a reconciliation of the Company’s equity in (earnings) loss of non-consolidated entities to attributable EBITDA. Because these equity investments are in theatre operators in regions where the Company holds a significant market share, the Company believes attributable EBITDA is more indicative of the performance of these equity investments and management uses this measure to monitor and evaluate these equity investments. The Company also provides services to these theatre operators including information technology systems, certain on-screen advertising services and the Company’s gift card

29

and package ticket program.

Three Months Ended

Six Months Ended

(In millions)

June 30, 2020

    

June 30, 2019

    

June 30, 2020

    

June 30, 2019

Equity in (earnings) loss of non-consolidated entities

$

12.4

$

(10.2)

$

15.3

$

(16.7)

Less:

Equity in (earnings) loss of non-consolidated entities excluding International theatre joint ventures

12.2

(9.8)

14.3

(15.8)

Equity in earnings (loss) of International theatre joint ventures

(0.2)

0.4

(1.0)

0.9

Income tax provision (benefit)

0.1

(0.1)

0.1

Investment income

(0.3)

(0.2)

(0.5)

Interest expense

0.1

0.1

Depreciation and amortization

0.7

1.7

1.5

2.3

Other expense

0.1

0.3

Attributable EBITDA

$

0.6

$

2.0

$

0.5

$

2.9

(7)Other income for the three months ended June 30, 2020 compared to three months ended June 30, 2019 decreased $21.9 million. For the three months ended June 30, 2019, the Company recorded a gain of $33.9 million related to the change in fair value of the Company’s derivative liability for the embedded conversion feature in the Company’s Convertible Notes due 2024, partially offset by the loss on repayment of indebtedness of $16.6 million. Other expense for the six months ended June 30, 2020 compared to six months ended June 30, 2019 increased $18.9 million, primarily due to the decrease in the gain recorded for the change in fair value of the Company’s derivative liability for the embedded conversion feature in the Company’s Convertible Notes due 2024 of $20.1 million, credit losses related to contingent lease guarantees of $9.2 million, and loss due to the change in the fair value of the Company’s derivative asset for the contingent call option related to the Class B common stock purchase and cancellation agreement of $5.7 million. For the six months ended June 30, 2019, the Company recorded a loss on repayment of indebtedness of $16.6 million. See Note 1—Basis of Presentation for further information related to other expense (income).
(8)Reflects amortization expense for certain intangible assets reclassified from depreciation and amortization to rent expense due to the adoption of ASC 842 and deferred rent benefit related to the impairment of right-of-use operating lease assets.

(9)Merger, acquisition and other costs are excluded as they are non-operating in nature.

(10)Non-cash expense included in general and administrative: other

NOTE 11—COMMITMENTS AND CONTINGENCIES

The Company, in the normal course of business, is a party to various ordinary course claims from vendors (including food and beverage suppliers and film distributors), landlords, competitors, and other legal proceedings. If management believes that a loss arising from these actions is probable and can reasonably be estimated, the Company records the amount of the loss, or the minimum estimated liability when the loss is estimated using a range and no point is more probable than another. As additional information becomes available, any potential liability related to these actions is assessed and the estimates are revised, if necessary. Management believes that the ultimate outcome of such matters discussed below, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position or overall trends in results of operations. However, litigation and claims are subject to inherent uncertainties and unfavorable outcomes can occur. An unfavorable outcome might include monetary damages. If an unfavorable outcome were to occur, there exists the possibility of a material adverse impact on the results of operations in the period in which the outcome occurs or in future periods.

On January 12, 2018 and January 19, 2018, 2 putative federal securities class actions, captioned Hawaii Structural Ironworkers Pension Trust Fund v. AMC Entertainment Holdings, Inc., et al., Case No. 1:18-cv-00299-AJN

30

(the “Hawaii Action”), and Nichols v. AMC Entertainment Holdings, Inc., et al., Case No. 1:18-cv-00510-AJN (the “Nichols Action,” and together with the Hawaii Action, the “Actions”), respectively, were filed against the Company in the U.S. District Court for the Southern District of New York. The Actions, which name certain of the Company’s officers and directors and, in the case of the Hawaii Action, the underwriters of the Company’s February 8, 2017 secondary public offering, as defendants, assert claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) with respect to alleged material misstatements and omissions in the registration statement for the secondary public offering and in certain other public disclosures. On May 30, 2018, the court consolidated the Actions. On January 22, 2019, defendants moved to dismiss the Second Amended Class Action Complaint. On September 23, 2019, the court granted the motion to dismiss in part and denied it in part. On March 2, 2020, plaintiffs moved to certify the purported class and on July 22, 2020, defendants filed a brief opposing plaintiffs’ motion for class certification.

On May 21, 2018, a stockholder derivative complaint, captioned Gantulga v. Aron, et al., Case No. 2:18-cv-02262-JAR-TJJ (the “Gantulga Action”), was filed against certain of the Company’s officers and directors in the U.S. District Court for the District of Kansas. The Gantulga Action, which was filed on behalf of the Company, asserts claims under Section 14(a) of the Exchange Act and for breaches of fiduciary duty and unjust enrichment based on allegations substantially similar to the Actions. On October 12, 2018, the parties filed a joint motion to transfer the action to the U.S. District Court for the Southern District of New York, which the court granted on October 15, 2018. When the action was transferred to the Southern District of New York, it was re-captioned Gantulga v. Aron, et al., Case No. 1:18-cv-10007-AJN. The parties filed a joint stipulation to stay the action, which the court granted on December 17, 2018.

On October 2, 2019, a stockholder derivative complaint, captioned Kenna v. Aron, et al., Case No. 1:19-cv-09148-AJN (the “Kenna Action”), was filed in the U.S. District Court for the Southern District of New York. The parties filed a joint stipulation to stay the action, which the court granted on October 17, 2019. On April 20, 2020, the plaintiff filed an amended complaint. The Kenna Action asserts claims under Sections 10(b), 14(a), and 21D of the Exchange Act and for breaches of fiduciary duty and unjust enrichment based on allegations substantially similar to the Actions and the Gantulga Action. The action remains stayed.

On March 20, 2020, a stockholder derivative complaint, captioned Manuel v. Aron, et al., Case No. 1:20-cv-02456-AJN (the “Manuel Action”), was filed in the U.S. District Court for the Southern District of New York. The Manuel Action asserts claims under Sections 10(b), 21D, and 29(b) of the Exchange Act and for breaches of fiduciary duty based on allegations substantially similar to the Actions, the Gantulga Action, and the Kenna Action. The parties filed a joint stipulation to stay the action, which the court granted on May 18, 2020.

On April 7, 2020, a stockholder derivative complaint, captioned Dinkevich v. Aron, et al., Case No. 1:20-cv-02870-AJN (the “Dinkevich Action”), was filed in the U.S. District Court for the Southern District of New York. The Dinkevich Action asserts the same claims as the Manuel Action based on allegations substantially similar to the Actions, the Gantulga Action, the Kenna Action, and the Manuel Action. The parties filed a joint stipulation to stay the action, which was granted on June 25, 2020.

On February 3, 2020, the Company received a books and records demand pursuant to 8 Del. C. § 220, seeking to investigate the conduct challenged in the Actions. AMC rejected the demand on February 10, 2020.

On December 31, 2019, the Company received a stockholder litigation demand, requesting that the Board investigate the allegations in the Actions and pursue claims on the Company’s behalf based on those allegations. On May 5, 2020, the Board determined not to pursue the claims sought in the demand at this time.

On July 15, 2020, the Company received a second stockholder litigation demand requesting substantially the same action as the stockholder demand it received on December 31, 2019.

On April 22, 2019, a putative stockholder class and derivative complaint, captioned Lao v. Dalian Wanda Group Co., Ltd., et al., C.A. No. 2019-0303-JRS (the “Lao Action”), was filed against certain of the Company’s directors, Wanda, two of Wanda’s affiliates, Silver Lake, and one of Silver Lake’s affiliates in the Delaware Court of Chancery. The Lao Action asserts claims directly, on behalf of a putative class of Company stockholders, and derivatively, on behalf of the Company, for breaches of fiduciary duty and aiding and abetting breaches of fiduciary duty with respect to transactions that the Company entered into with affiliates of Wanda and Silver Lake on September 14, 2018, and the special cash dividend of $1.55 per share of common stock that was payable on September 28, 2018 to the Company’s stockholders of record as of September 25, 2018. On July 18, 2019, the

31

Company’s Board of Directors formed a Special Litigation Committee to investigate and evaluate the claims and allegations asserted in the Lao Action and make a determination as to how the Company should proceed with respect to the Lao Action. On October 25, 2019, the court granted a motion to stay the action for six months to allow the Special Litigation Committee to complete its investigation. On March 17, 2020, the court extended the stay until December 11, 2020.

The Company remains contingently liable for lease payments under certain leases of theatres that it previously divested, in the event that such assignees are unable to fulfill their future lease payment obligations. During the three and six months ended June 30, 2020, the Company recorded $3.9 million and $9.2 million, respectively, in estimated credit losses related to contingent lease guarantees in other expense. The Company applied a probability weighted approach for the estimation of credit loss reserve for contingent lease guarantees expected to be funded over the lease term using the discounted cash flow method. See Note 1Basis of Presentation for further information regarding the adoption of ASU 2016-13.

NOTE 12—EARNINGS (LOSS) PER SHARE

Basic net earnings (loss) per share is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share includes the effects of unvested restricted stock units (“RSUs”) with a service condition only, unvested contingently issuable RSUs that have service and performance conditions (“PSUs”), and unvested contingently issuable special performance stock units that have service and market conditions (“SPSUs”), if dilutive, as well as potential dilutive shares from the conversion feature of the Convertible Notes due 2024, if dilutive.

The following table sets forth the computation of basic and diluted earnings (loss) per common share:

Three Months Ended

Six Months Ended

(In millions)

    

June 30, 2020

    

June 30, 2019

    

June 30, 2020

    

June 30, 2019

Numerator:

Net earnings (loss) for basic earnings (loss) per share

$

(561.2)

$

49.4

$

(2,737.5)

$

(80.8)

Calculation of net earnings (loss) for diluted earnings (loss) per share:

Marked-to-market gain on derivative liability

(33.9)

Interest expense for Convertible Notes due 2024

8.1

Net earnings (loss) for diluted earnings (loss) per share

$

(561.2)

$

23.6

$

(2,737.5)

$

(80.8)

Denominator (shares in thousands):

Weighted average shares for basic loss per common share

 

104,319

 

103,845

 

104,282

 

103,814

Common equivalent shares for RSUs and PSUs

 

 

21

 

 

Common equivalent shares if converted: convertible notes 2024

31,662

Weighted average shares for diluted earnings (loss) per common share

 

104,319

 

135,528

 

104,282

 

103,814

Basic earnings (loss) per common share

$

(5.38)

$

0.48

$

(26.25)

$

(0.78)

Diluted earnings (loss) per common share

$

(5.38)

$

0.17

$

(26.25)

$

(0.78)

Vested RSUs and PSU’s have dividend rights identical to the Company’s Class A and Class B common stock and are treated as outstanding shares for purposes of computing basic and diluted earnings per share. For the three and six months ended June 30, 2020, unvested RSUs of 2,249,263 were not included in the computation of diluted loss per share because they would be anti-dilutive. For the six months ended June 30, 2019, unvested RSUs of 1,253,870 were not included in the computation of diluted loss per share because they would be anti-dilutive.

Unvested PSUs and SPSUs are subject to performance and market conditions, respectively, and are included in diluted earnings per share, if dilutive, based on the number of shares, if any, that would be issuable under the terms of the Company’s 2013 Equity Incentive Plan if the end of the reporting period were the end of the contingency period. Unvested PSUs of 782,992 and 502,858 at 100% performance target for the three months ended June 30, 2020 and June

32

30, 2019, respectively, unvested PSUs of 793,932 and 502,858 at 100% of performance target for the six months ended June 30, 2020 and June 30, 2019, respectively, and unvested SPSUs of 595,003 at the minimum market condition for both the three and six months ended June 30, 2020, were not included in the computation of diluted loss per share because they would not be issuable if the end of the reporting period were the end of the contingency period.

The Company uses the if-converted method for calculating any potential dilutive effect of the Convertible Notes due 2024 that were issued on September 14, 2018. For the three months ended June 30, 2020, the Company has not adjusted net loss to eliminate the interest expense of $8.3 million in the computation of diluted loss per share because the effects would be anti-dilutive. The (gain)/loss for the derivative liability related to the Convertible Notes due 2024 was $0 million for the three months ended June 30, 2020. For the six months ended June 30, 2020 and June 30, 2019, the Company has not adjusted net loss to eliminate the interest expense of $16.6 million and $16.0 million, respectively, and also the (gain)/loss for the derivative liability related to the Convertible Notes due 2024 of $(0.5) million and $(20.6) million, respectively, in the computation of diluted loss per share because the effects would be anti-dilutive. For the three months ended June 30, 2020, the six months June 30, 2020 and the six months ended June 30, 2019, the Company has not included in diluted weighted average shares approximately 31.7 million shares issuable upon conversion in both periods as the effects would be anti-dilutive. Based on the current conversion price of $18.95 per share the Convertible Notes due 2024 are convertible into 31,662,269 Class A common shares.

33

NOTE 13—CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10, Financial statements of guarantors and issuers of guaranteed securities registered or being registered. Each of the subsidiary guarantors are 100% owned by Holdings. The subsidiary guarantees of the Company’s the Convertible Notes due 2024, Sterling Notes due 2024, the Notes due 2025, the Notes due 2026, and the Notes due 2027 are full and unconditional and joint and several and subject to customary release provisions. The Company and its subsidiary guarantors’ investments in its consolidated subsidiaries are presented under the equity method of accounting.

Condensed Consolidating Statement of Operations

Three Months Ended June 30, 2020:

Subsidiary

Subsidiary

Consolidating

Consolidated

(In millions)

Holdings

Guarantors

Non-Guarantors

Adjustments

Holdings

Revenues

    

    

    

    

    

Admissions

$

$

$

0.9

$

$

0.9

Food and beverage

 

 

 

0.4

 

 

0.4

Other theatre

 

 

15.7

 

1.9

 

 

17.6

Total revenues

 

 

15.7

 

3.2

 

 

18.9

Operating costs and expenses

Film exhibition costs

 

 

(0.2)

 

0.4

 

 

0.2

Food and beverage costs

 

 

3.3

 

1.2

 

 

4.5

Operating expense, excluding depreciation and amortization

 

 

79.4

 

35.4

 

 

114.8

Rent

 

 

164.8

 

59.3

 

 

224.1

General and administrative:

Merger, acquisition and other costs

 

 

1.7

 

0.1

 

 

1.8

Other, excluding depreciation and amortization

 

 

13.8

 

11.6

 

 

25.4

Depreciation and amortization

 

91.0

 

28.7

 

 

119.7

Operating costs and expenses

 

 

353.8

 

136.7

 

 

490.5

Operating loss

 

 

(338.1)

 

(133.5)

 

 

(471.6)

Other expense (income):

Equity in net loss of subsidiaries

 

569.8

 

125.0

 

 

(694.8)

 

Other expense (income):

(6.6)

6.7

(6.7)

(6.6)

Interest expense:

Corporate borrowings

 

78.3

 

79.1

 

1.4

 

(79.2)

 

79.6

Finance lease obligations

 

 

0.3

 

1.2

 

 

1.5

Non-cash NCM exhibitor service agreement

10.1

10.1

Intercompany interest expense

6.1

(6.1)

Equity in loss of non-consolidated entities

 

 

11.4

 

1.0

 

 

12.4

Investment income

 

(80.3)

 

(5.3)

 

(1.0)

 

85.3

 

(1.3)

Total other expense, net

 

561.2

 

227.3

 

2.0

 

(694.8)

 

95.7

Loss before income taxes

 

(561.2)

 

(565.4)

 

(135.5)

 

694.8

 

(567.3)

Income tax provision (benefit)

 

 

4.4

 

(10.5)

 

 

(6.1)

Net loss

$

(561.2)

$

(569.8)

$

(125.0)

$

694.8

$

(561.2)

34

Condensed Consolidating Statement of Operations

Three Months Ended June 30, 2019:

Subsidiary

Subsidiary

Consolidating

Consolidated

(In millions)

Holdings

Guarantors

Non-Guarantors

Adjustments

Holdings

Revenues

    

    

    

    

    

    

    

    

    

    

Admissions

$

$

680.7

$

214.8

$

$

895.5

Food and beverage

 

 

401.1

 

91.4

 

 

492.5

Other theatre

 

 

79.4

 

38.7

 

 

118.1

Total revenues

 

 

1,161.2

 

344.9

 

 

1,506.1

Operating costs and expenses

Film exhibition costs

 

 

390.2

 

92.3

 

 

482.5

Food and beverage costs

 

 

56.1

 

20.3

 

 

76.4

Operating expense, excluding depreciation and amortization

 

 

320.9

 

116.5

 

 

437.4

Rent

 

 

179.6

 

66.3

 

 

245.9

General and administrative:

Merger, acquisition and other costs

 

 

2.4

 

0.8

 

 

3.2

Other, excluding depreciation and amortization

 

 

24.9

 

18.3

 

 

43.2

Depreciation and amortization

 

 

84.2

 

27.8

 

 

112.0

Operating costs and expenses

 

 

1,058.3

 

342.3

 

 

1,400.6

Operating income

 

 

102.9

 

2.6

 

 

105.5

Other expense (income):

Equity in net loss of subsidiaries

 

9.1

 

18.2

 

 

(27.3)

 

Other expense (income)

(40.9)

17.7

(0.2)

(23.4)

Interest expense:

Corporate borrowings

 

73.6

 

74.4

 

0.7

 

(74.5)

 

74.2

Finance lease obligations

 

 

0.6

 

1.5

 

 

2.1

Non-cash NCM exhibitor service agreement

10.1

10.1

Intercompany interest expense

21.4

(21.4)

Equity in earnings of non-consolidated entities

 

 

(9.9)

 

(0.3)

 

 

(10.2)

Investment income

 

(91.2)

 

(4.9)

 

(1.9)

 

95.9

 

(2.1)

Total other expense (income), net

 

(49.4)

 

106.2

 

21.2

 

(27.3)

 

50.7

Earnings (loss) before income taxes

 

49.4

 

(3.3)

 

(18.6)

 

27.3

 

54.8

Income tax provision (benefit)

 

 

5.8

 

(0.4)

 

 

5.4

Net earnings (loss)

$

49.4

$

(9.1)

$

(18.2)

$

27.3

$

49.4

35

Condensed Consolidating Statement of Operations

Six Months Ended June 30, 2020:

Subsidiary

Subsidiary

Consolidating

Consolidated

(In millions)

Holdings

Guarantors

Non-Guarantors

Adjustments

Holdings

Revenues

    

    

    

    

    

    

    

    

    

    

Admissions

$

$

389.1

$

179.8

$

$

568.9

Food and beverage

 

 

216.6

 

71.9

 

 

288.5

Other theatre

 

 

71.3

 

31.7

 

 

103.0

Total revenues

 

 

677.0

 

283.4

 

 

960.4

Operating costs and expenses

Film exhibition costs

 

 

198.7

 

73.2

 

 

271.9

Food and beverage costs

 

 

38.2

 

19.7

 

 

57.9

Operating expense, excluding depreciation and amortization

 

 

331.3

 

140.4

 

 

471.7

Rent

 

 

339.2

 

122.7

 

 

461.9

General and administrative:

Merger, acquisition and other costs

 

 

2.0

 

 

 

2.0

Other, excluding depreciation and amortization

 

 

31.1

 

27.5

 

 

58.6

Depreciation and amortization

 

 

183.4

 

58.8

 

 

242.2

Impairment of long-lived assets, indefinite-lived intangible assets and goodwill

1,214.3

637.6

1,851.9

Operating costs and expenses

 

 

2,338.2

 

1,079.9

 

 

3,418.1

Operating loss

 

 

(1,661.2)

 

(796.5)

 

 

(2,457.7)

Other expense (income):

Equity in net loss of subsidiaries

 

2,728.0

 

869.2

 

 

(3,597.2)

 

Other expense (income)

13.6

12.0

(5.3)

20.3

Interest expense:

Corporate borrowings

 

149.0

 

150.1

 

2.2

 

(150.4)

 

150.9

Finance lease obligations

 

 

0.7

 

2.4

 

 

3.1

Non-cash NCM exhibitor service agreement

20.0

20.0

Intercompany interest expense

12.1

(12.1)

Equity in loss of non-consolidated entities

 

 

13.3

 

2.0

 

 

15.3

Investment income

 

(153.1)

 

 

(1.3)

 

162.5

 

8.1

Total other expense, net

 

2,737.5

 

1,065.3

 

12.1

 

(3,597.2)

 

217.7

Loss before income taxes

 

(2,737.5)

 

(2,726.5)

 

(808.6)

 

3,597.2

 

(2,675.4)

Income tax provision

 

 

1.5

 

60.6

 

 

62.1

Net loss

$

(2,737.5)

$

(2,728.0)

$

(869.2)

$

3,597.2

$

(2,737.5)

36

Condensed Consolidating Statement of Operations

Six Months Ended June 30, 2019:

Subsidiary

Subsidiary

Consolidating

Consolidated

(In millions)

Holdings

Guarantors

Non-Guarantors

Adjustments

Holdings

Revenues

    

    

    

    

    

    

    

    

    

    

Admissions

$

$

1,196.0

$

431.0

$

$

1,627.0

Food and beverage

 

 

688.7

 

172.6

 

 

861.3

Other theatre

 

 

143.6

 

74.6

 

 

218.2

Total revenues

 

 

2,028.3

 

678.2

 

 

2,706.5

Operating costs and expenses

Film exhibition costs

 

 

667.5

 

180.3

 

 

847.8

Food and beverage costs

 

 

99.0

 

38.9

 

 

137.9

Operating expense, excluding depreciation and amortization

 

 

606.5

 

233.7

 

 

840.2

Rent

 

 

356.2

 

131.7

 

 

487.9

General and administrative:

Merger, acquisition and other costs

 

 

3.5

 

3.0

 

 

6.5

Other, excluding depreciation and amortization

 

 

52.4

 

37.0

 

 

89.4

Depreciation and amortization

 

 

167.9

 

57.1

 

 

225.0

Operating costs and expenses

 

 

1,953.0

 

681.7

 

 

2,634.7

Operating income (loss)

 

 

75.3

 

(3.5)

 

 

71.8

Other expense (income):

Equity in net loss of subsidiaries

 

303.7

 

215.0

 

 

(518.7)

 

Other expense (income)

(12.0)

18.2

0.2

6.4

Interest expense:

Corporate borrowings

 

144.5

 

145.3

 

1.4

 

(145.7)

 

145.5

Finance lease obligations

 

 

1.4

 

2.8

 

 

4.2

Non-cash NCM exhibitor service agreement

20.3

20.3

Intercompany interest expense

218.9

(218.9)

Equity in earnings of non-consolidated entities

 

 

(16.0)

 

(0.7)

 

 

(16.7)

Investment income

 

(355.4)

 

(14.5)

 

(12.9)

 

364.6

 

(18.2)

Total other expense (income), net

 

80.8

 

369.7

 

209.7

 

(518.7)

 

141.5

Loss before income taxes

 

(80.8)

 

(294.4)

 

(213.2)

 

518.7

 

(69.7)

Income tax provision

 

 

9.3

 

1.8

 

 

11.1

Net loss

$

(80.8)

$

(303.7)

$

(215.0)

$

518.7

$

(80.8)

37

Condensed Consolidating Statement of Comprehensive Loss

Three Months Ended June 30, 2020:

Subsidiary

Subsidiary

Consolidating

Consolidated

 

(In millions)

    

Holdings

    

Guarantors

    

Non-Guarantors

    

Adjustments

    

Holdings

 

Net loss

    

$

(561.2)

    

$

(569.8)

    

$

(125.0)

    

$

694.8

    

$

(561.2)

Other comprehensive income (loss):

Equity in other comprehensive loss of subsidiaries

 

56.0

 

55.0

 

 

(111.0)

 

Unrealized foreign currency translation adjustments

 

 

0.9

 

54.5

 

 

55.4

Pension adjustments:

Realized net loss reclassified into other expense, net of tax

0.1

0.5

0.6

Other comprehensive income (loss)

 

56.0

 

56.0

 

55.0

 

(111.0)

 

56.0

Total comprehensive loss

$

(505.2)

$

(513.8)

$

(70.0)

$

583.8

$

(505.2)

Condensed Consolidating Statement of Comprehensive Income (Loss)

Three Months Ended June 30, 2019:

Subsidiary

Subsidiary

Consolidating

Consolidated

 

(In millions)

    

Holdings

    

Guarantors

    

Non-Guarantors

    

Adjustments

    

Holdings

 

Net earnings (loss)

    

$

49.4

    

$

(9.1)

    

$

(18.2)

    

$

27.3

    

$

49.4

Other comprehensive income (loss):

Equity in other comprehensive loss of subsidiaries

 

(9.2)

 

(4.1)

 

 

13.3

 

Unrealized foreign currency translation adjustments

 

 

(5.1)

 

(4.2)

 

 

(9.3)

Realized loss on foreign currency transactions reclassified into other expense, net of tax

0.1

0.1

Pension adjustments:

Net gain arising during the period, net of tax

0.1

0.1

Equity method investee's cash flow hedge:

 

Unrealized net holding loss arising during the period, net of tax

 

 

(0.1)

 

 

 

(0.1)

Other comprehensive loss

 

(9.2)

 

(9.2)

 

(4.1)

 

13.3

 

(9.2)

Total comprehensive income (loss)

$

40.2

$

(18.3)

$

(22.3)

$

40.6

$

40.2

38

Condensed Consolidating Statement of Comprehensive Loss

Six Months Ended June 30, 2020:

Subsidiary

Subsidiary

Consolidating

Consolidated

 

(In millions)

    

Holdings

    

Guarantors

    

Non-Guarantors

    

Adjustments

    

Holdings

 

Net loss

    

$

(2,737.5)

    

$

(2,728.0)

    

$

(869.2)

    

$

3,597.2

    

$

(2,737.5)

Other comprehensive loss:

Equity in other comprehensive loss of subsidiaries

 

(37.5)

 

(53.6)

 

 

91.1

 

Unrealized foreign currency translation adjustment, net of tax

 

16.0

 

(54.2)

 

 

(38.2)

Pension adjustments:

Realized net loss reclassified into other expense, net of tax

0.1

0.6

0.7

Other comprehensive loss

 

(37.5)

 

(37.5)

 

(53.6)

 

91.1

 

(37.5)

Total comprehensive loss

$

(2,775.0)

$

(2,765.5)

$

(922.8)

$

3,688.3

$

(2,775.0)

Condensed Consolidating Statement of Comprehensive Loss

Six Months Ended June 30, 2019:

Subsidiary

Subsidiary

Consolidating

Consolidated

 

(In millions)

    

Holdings

    

Guarantors

    

Non-Guarantors

    

Adjustments

    

Holdings

 

Net loss

    

$

(80.8)

    

$

(303.7)

    

$

(215.0)

    

$

518.7

    

$

(80.8)

Other comprehensive income (loss):

Equity in other comprehensive loss of subsidiaries

 

(34.1)

 

(19.3)

 

 

53.4

 

Unrealized foreign currency translation adjustment, net of tax

 

 

(15.4)

 

(19.3)

 

 

(34.7)

Realized loss on foreign currency transactions reclassified into other expense, net of tax

0.6

0.6

Pension and other benefit adjustments:

Net gain arising during the period, net of tax

 

 

0.1

 

 

 

0.1

Equity method investee's cash flow hedge:

 

Unrealized net holding loss arising during the period, net of tax

 

 

(0.1)

 

 

 

(0.1)

Other comprehensive loss

 

(34.1)

 

(34.1)

 

(19.3)

 

53.4

 

(34.1)

Total comprehensive loss

$

(114.9)

$

(337.8)

$

(234.3)

$

572.1

$

(114.9)

39

Condensed Consolidating Balance Sheet

As of June 30, 2020:

Subsidiary

Subsidiary

Consolidating

Consolidated

(In millions)

Holdings

Guarantors

Non-Guarantors

Adjustments

Holdings

Assets

    

    

    

    

    

    

    

    

    

    

Current assets:

Cash and cash equivalents

$

$

413.1

$

84.9

$

$

498.0

Restricted cash

10.4

10.4

Receivables, net

 

 

34.8

 

46.9

 

(11.0)

 

70.7

Other current assets

 

 

74.1

 

26.5

 

 

100.6

Total current assets

 

 

522.0

 

168.7

 

(11.0)

 

679.7

Investment in equity of subsidiaries

 

947.1

 

930.2

 

 

(1,877.3)

 

Property, net

 

 

1,805.7

 

611.8

 

 

2,417.5

Operating lease right-of-use assets, net

3,327.1

1,228.2

4,555.3

Intangible assets, net

 

 

120.9

 

53.4

 

 

174.3

Intercompany advances

 

2,911.9

 

(2,543.8)

 

(368.1)

 

 

Goodwill

 

(2.1)

 

1,949.8

 

1,040.7

 

 

2,988.4

Deferred tax asset, net

 

 

 

0.6

 

 

0.6

Other long-term assets

 

32.6

 

298.1

 

125.1

 

 

455.8

Total assets

$

3,889.5

$

6,410.0

$

2,860.4

$

(1,888.3)

$

11,271.6

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

$

256.6

$

190.6

$

(11.1)

$

436.1

Accrued expenses and other liabilities

 

55.7

 

110.3

 

91.4

 

0.1

 

257.5

Deferred revenues and income

 

 

321.9

 

84.2

 

 

406.1

Current maturities of corporate borrowings

 

20.0