AMC Theatres Raises ‘Going Concern’ Risks, Reports $2.4 Billion Loss

AMC  Entertainment, the country’s largest exhibition chain, acknowledged in public filings on Wednesday that the coronavirus pandemic could push it into bankruptcy.

Noting that the onset of COVID-19 has forced it to shutter its more than 1,000 theaters and layoff or furlough 600 corporate employees, the company said that it has been operating for months with no revenue. It acknowledged that when movie theaters are allowed to reopen, customers may be hesitant to come back, complying with new health guidelines could add costs and cut into profits, and the heavily indebted company could force problems gaining access to capital. Because of this laundry list of unknowns, AMC writes that “…substantial doubt exists about our ability to continue as a going concern for a reasonable period of time.”

The acknowledgment of the stark reality facing the exhibition space came as AMC said that it expects its first-quarter financial results to include a loss of between $2.1 billion to $2.4 billion. That is largely attributable to a $2 billion impairment charge related to the coronavirus shutdown.  Net losses for the quarter increased to $224.5 million,  up from $101.8 million in the prior-year period, while revenue fell to $941.5 million, down from $1.2 billion in the same quarter in 2019.

AMC said that it hoped to re-open this summer when major releases such as “Tenet” and “Mulan” are expected to play in theaters. Movie theaters are already developing plans to be able to welcome audiences back — including instituting social-distanced seating and extra cleanings.

“We believe we have the cash resources to reopen our theatres and resume our operations this summer or later,” the company writes. “Our liquidity needs thereafter will depend, among other things, on the timing of a full resumption of operations, the timing of movie releases and our ability to generate revenues. We cannot assure you that our assumptions used to estimate our liquidity requirements will be correct because we have never previously experienced a complete cessation of our operations, and as a consequence, our ability to be predictive is uncertain.”

Investors were worried that AMC would be forced into bankruptcy in the spring when coronavirus upended the exhibition space. However, the company was able to avoid a Chapter 11 filing after it raised $500 million in new debt.

As of April, the company’s cash balance stood at  $718.3 million. Shares of AMC were at $5.55 in pre-marketing trading, a drop of 1.59%.