"AMC HAS DOUBTS IT CAN STAY IN BUISNESS"

[Jim Cassedy]

AMC Theatres Has Doubts It Can Stay in Business, According to New Filing
AMC reported a net loss of well over $2 billion. "We are generating effectively
no revenue," it said in a Q1 2020 regulatory filing.

Coronavirus may put the world’s largest theater chain out of business. Blaming the far-reaching impact
of COVID-19, AMC Theatres told regulators today that it cannot predict if or when business will return
to normal, and said loans may not be enough to cover its cash-flow needs.

“We may not be able to obtain additional liquidity and any relief provided by lenders, governmental
agencies, and business partners may not be adequate and may include onerous terms,” the 8K filing
stated. “Due to these factors, substantial doubt exists about our ability to continue as a going concern
for a reasonable period of time.”

AMC Theaters currently operates 996 theatres and 10,993 screens in 15 countries. In the U.S., AMC
has 630 theatres with 8,048 screens. In the first three months of 2020, AMC reported a net loss of
somewhere between $2.12 billion and $2.42 billion. In the same period of 2019, it reported a net loss
of $130.2 million. It also identified its pending inability to service its debt.

The filing also outlined concerns that included when studios will make films available for release in
theaters; employees’ willingness to work at the theaters; and the possibility that future COVID-19
outbreaks will mean further closures. It also identified a risk of “damned if you do/damned it you don’t”:
If the theaters remain open when the public still views them as a health risk, that perception could cause
financial damage of its own.

“If we do not respond appropriately to the pandemic, or if customers do not perceive our response to
be adequate, we could suffer damage to our reputation, which could significantly adversely affect our
business,” the filing stated.

The 8K filing closed with an extensive list of more than 30 “particular uncertainties that could cause
our actual results to be materially different than those expressed in our forward-looking statements.”
In addition to the impact of COVID-19, these included: “Our lack of control over distributors of films,”
“increased use of alternative film delivery methods or other forms of entertainment,” “shrinking exclusive
theatrical release windows,” and “our ability to utilize interest expense deductions may be limited annually
due to Section 163(j) of the Tax Cuts and Jobs Act of 2017.”

AMC will report full financial results for first-quarter 2020 after the market closes on June 9

< END >

[Rusty Gordon]

I think they're fishing for a government bailout that may or may not come. They may very well be in the condition they describe in the filing and a bailout may be their only hope.

[Randy Stankey]

It seems to me that more and more businesses are using the virus as an excuse to close up shop, dump employees and/or do other financial shenanigans.

There have been several businesses in the area that have closed because they were in precarious financial condition to begin with but I have also seen a few that should have been able to stay open, despite the pandemic, at least by outside appearance.

It just makes me think that some people are using this whole thing as a way to justify cashing out.

[Jim Cassedy]

I think they're fishing for a government bailout that may or may not come.

☞ SARCASM ALERT!
Wait a minute.... don't The Chinese own AMC now? Than let the Chinese Government
bail them out - - after all, it's their virus!

[Leo Enticknap]

It seems to me that more and more businesses are using the virus as an excuse to close up shop, dump employees and/or do other financial shenanigans.

Agreed completely. Around 20 Target stores in Southern California announced that they were "temporarily" closing on Monday, ostensibly as a response to the riots and looting. However, an email (that got leaked) circulated to the employees in these locations offered them support in "finding other opportunities within the Target family" (or some such wording), leading some to speculate that the closures are in fact permanent, had already been planned, and are just being done this way to avoid bad publicity. The business environment for bricks-and-mortar retail stores in California has become more difficult and hostile in the last few years. Discussion of the reasons why would have to get political, but suffice as to say that with the possible exception of supermarkets, stores of all descriptions have been closing in these parts in increasing numbers.

Wait a minute.... don't The Chinese own AMC now? Than let the Chinese Government bail them out

Per Wikipedia, Dailan Wanda now only owns two thirds of AMC, but the voting shares are structured such that it still has an absolute majority on the Board.

Reading between the lines of the regulatory filing, I'm guessing that Dailan Wanda have indicated that they will not bail out AMC, and are prepared to eat the loss if it goes Chapter 7. If so, that is not a vote of confidence in the ability of the movie theater industry to recover from this.

[Marcel Birgelen]

According to the statistics on-line, they've had 4,408 full-time and 35,754 part-time employees at the end of 2018 and 11,041 screens at the end of 2019. I'm not saying that ~40k employees isn't a lot, but compared to the number of screens and total revenue, it's not a very good contender for a major government bailout.

I'd guess before it will go Chapter 7, it will first try to keep existing in the current form in Chapter 11 for a few months. Then we'll likely see how it gets divided up into pieces, which may, in the long run, even prove to be beneficial for the exhibition industry.

[Mitchell Dvoskin]

I have my doubts if AMC should stay in business.

[Bobby Henderson]

If AMC folds it may result in quite a few movie-going markets losing screens permanently. Under normal circumstances one might expect a competing chain to just swoop in and buy up the locations. That may not happen this time. AMC had already been closing a lot of former Carmike properties. Wanda may end up asking more money than anyone is willing to pay for the locations. It's possible many of those locations may sit empty for years waiting for the wrecking ball.

Just looking at the local situation in my town, AMC runs the one "good" theater we have, although they've been doing a terrible job maintaining the place over the last year or so. We have a far more crappy 12-plex in our obsolete indoor mall in downtown Lawton; that site is almost 20 years old and has little dinky screens. But the bigger problem with that mall theater is the mall itself is dying. It had 3 anchor tenants: Sears, Dillard's and JCPenney. Sears has been gone for a few years. JCPenney (as expected) filed chapter 11 bankruptcy a couple weeks ago. Their store here in Lawton was not on the initial list of 150 stores to close. But they plan on closing 250 or so. I think the really bad new for our mall was Dillard's announcement they were closing their store on July 31. Maybe JCPenney is weighing their options, but I still think chances are pretty likely they'll close the Lawton location and completely seal the fate of that mall. Outside of the mall our town has some other big pieces of commercial real estate sitting empty. That includes the old Carmike 8 theater that has been boarded up for years. Anyway, there is a pretty credible chance our market of 120,000 people could end up with no first run theaters anymore.

[Marcel Birgelen]

That may not happen this time. AMC had already been closing a lot of former Carmike properties. Wanda may end up asking more money than anyone is willing to pay for the locations. It's possible many of those locations may sit empty for years waiting for the wrecking ball.

Keep in mind that once the thing goes Chapter 7, Wanda doesn't have any control about what's going to happen with those sites. If nobody is acquiring those sites from the receiver, leases will be cancelled and in the rare case Wanda actually owns the property, it will be auctioned off to the highest bidder. For parties that actually want to expand their market presence, it's a cheap way to gobble up some real estate (leases) under good conditions. The question remains, who will eventually do so? It's not like there is a single exhibitor out there that's in really great shape right now and the future of the whole industry remains pretty uncertain.

[Lyle Romer]

Keep in mind that once the thing goes Chapter 7, Wanda doesn't have any control about what's going to happen with those sites. If nobody is acquiring those sites from the receiver, leases will be cancelled and in the rare case Wanda actually owns the property, it will be auctioned off to the highest bidder. For parties that actually want to expand their market presence, it's a cheap way to gobble up some real estate (leases) under good conditions. The question remains, who will eventually do so? It's not like there is a single exhibitor out there that's in really great shape right now and the future of the whole industry remains pretty uncertain.

Back when General Cinema went Chapter 7, they just left all the equipment (projection, sound, concession) except the POS computer system behind at all the locations. I'm not sure why it wasn't sold off unless the leases require it as collateral if the lease is broken.

AMC announced that they will be reopening wherever they are allowed to in July to be open for Tenet. I guess we'll see how it goes.

[Marcel Birgelen]

What I've seen before in "Chapter 7" cases, is that a lot of equipment tends to end up entangled in some kind of broken lease contract or banks executing some kind of lien (because of a previous default) before the receiver has actually been appointed and the Chapter 7 status has been assigned. In that case, the receiver can't just auction it off, as he/she doesn't legally control the ownership and the original lienholder may not be able to recover their assets, because they can't access the relevant properties or they may simply not know where it is. In some cases, the lienholder may even have written it off already and have stopped recovery procedures, because the recovery efforts will probably cost more than the recovered assets will earn after selling them off in a fire-sale...

[Leo Enticknap]

But the bigger problem with that mall theater is the mall itself is dying. It had 3 anchor tenants: Sears, Dillard's and JCPenney. Sears has been gone for a few years. JCPenney (as expected) filed chapter 11 bankruptcy a couple weeks ago.

Outdoor, full sized malls have been dealt a double whammy this year: first the coronavirus lockdowns, and then the riots and looting. As I mentioned above 20 Targets in SoCal closed indefinitely, the day after a store in San Bernardino was looted. JCP have announced a bunch of closures, Walmart a few, etc. etc.

A traditional mega store is very expensive to operate (rent in a popular location, labor, etc.), and because it is designed to admit thousands of members of the public, very difficult to defend, both from public health risks and from criminal activity. Both remain a significant risk for store operators going forward. Governors have threatened to reinstate the lockdowns if coronavirus cases start an upward trend again, and in some larger metros, law enforcement made little or no attempt to prevent stores from being looted and/or burned.

A distribution warehouse for online orders, on the other hand, can be defended a lot more easily. It is viable to put a massive fence around the property, with one guarded entrance/exit, if the only vehicle movements are 100 or so big rigs coming and going each day. You can't do that if 10,000 cars are coming and going. It is also a lot cheaper to operate (fewer staff needed, and it can be situated in an area where land costs and rent are lower).

For these reasons, I suspect that the future is grim for just-outside-downtown mega malls, including the movie theaters that are often found in them. Maybe one silver lining might be a resurgence of neighborhood stores, traditional main streets, and the smaller movie theaters that once inhabited them.

[Mike Blakesley]

The future looks good for the small theater? Awesome!

If only we can get movies to show. Crowds have been picking up for the oldies though..... we brushed up against our 50% capacity last night for "Jurassic Park."

[Marcel Birgelen]

The future looks good for the small theater? Awesome!

If only we can get movies to show. Crowds have been picking up for the oldies though..... we brushed up against our 50% capacity last night for "Jurassic Park."

I'm by no means the non-plus-ultra reference on this, but I think that a small movie theater, supported by the local community probably has a brighter future than the average, nondescript, 13-in-a-dozen multiplex. That doesn't mean you won't need to put in a lot of efforts to continue to draw crowds, but in a world with shrinking release windows, ever-improving picture and sound quality at home, an aging population and more distractions than ever, I think people will look for other values, like the more personal touch and better service for their night out.

Regarding those oldies, I recognize the struggle of matching them to your potential audience, it's often hard to judge what makes a movie fly... Local example: The Big Lebowsky: Complete sellout (up to the capacity restrictions); Saving Private Ryan: Literally nobody showed up. Maybe people are more into "feel good" movies right now than war spectacles...

[Leo Enticknap]

Saving Ryan's Privates did almost no business after the opening weekend at the theater where I was working at the time (in Exeter, UK), either. As a general rule, the mainstream audience likes war movies, as long as they don't try too hard to show what war is actually like.

Agreed on your broader point, though - playing older movies (be they classics or lesser-known ones) in a theater that usually does new mainstream releases (not an arthouse or cinematheque, in other words) is a crap shoot. My local Harkins did a Tuesday night classic before it closed for the coronavirus. There seemed to be no predictability to which would be so popular that they played in one of the larger screens (Die Hard, Oklahoma), and those for which we had almost a private screening (The Terminator, Casablanca).