On a call to discuss second-quarter
earnings results, AMC Entertainment provided an update on discussions with landlords, disclosing that the company has entered into agreements with about 75% of its more than 900 distinct leases to defer or abate rent. The vast majority of rent expenses in the second quarter have been deferred with most repayment terms around 24 months and some through the remainder of the lease. Management said it expects rent owed for 2021 to be permanently lower by at least $35 million.
During the call, management discussed the benefits of the
exchange offer and praised the parties involved, including participating senior subordinated noteholders, PGIM and H/2. The company reported $498 million of cash as of June 30, with management adding that pro forma for the debt exchange, cash would be over $700 million.
Management said on the call that if all theaters remain closed through 2020 - although some have opened internationally - the company would have a liquidity runway into 2021 based on a monthly cash burn of about $100 million.
Management said total cash burn in the second quarter was $292 million, implying about $97 million a month on average during the quarter. Management noted on the call that lower interest expense will reduce cash burn at certain points in the future and added that it has identified additional cost-saving opportunities as the company seeks to reduce operating expenses and capital expenditures by an amount in the “several hundred million dollar range.”
CEO Adam Aron pointed out that some theaters are already open, adding he believes the company has survived the coronavirus crisis. When asked whether it would be better for theaters to remain open or shut, management said that if it saw more than 25% of last year’s volumes, it would be better for theaters to be open because they would generally be profitable at that level. The company had reopened 130 international theaters as of the end of July - 134 to date - and expects to reopen all international theaters and at least two-thirds of U.S. theaters in August.
Regarding the recent
Universal deal, management said it is confident in its decision to adapt to change in the industry and believes it has a first-mover advantage. Management clarified that Universal will be able to choose whether movies will go on demand (PVOD) after 17 days, management said, emphasizing on the call that (i) not all films will go to PVOD, and (ii) films that go to PVOD will still remain in theaters, and AMC will continue to sell tickets for those films. AMC will “handsomely share in the entirety of the economics” as part of the deal, management added, saying it will greenlight more theatrical films now that it shares in the home economics.