In April, AMC Theaters said a new debt offering would allow the company to resist the closings until a partial reopening before Thanksgiving. However, in a file filed with the Securities and Exchange Commission, the company expressed concerns about liquidity, its ability to generate income and the timing of reopening its theaters.
In this case, AMC published the preliminary results of its results. The theater chain expects to have lost $ 2.1 billion to $ 2.4 billion in the first quarter ended March 31. It will unveil its benefits on Tuesday.
AMC also revealed that its revenues fell to $ 941.5 million, a decrease of nearly 22% from the $ 1.2 billion it raised in the same quarter last year. The second quarter should be even worse.
“We do not actually generate any income,” the company said in its file.
As of April 30, the company said it had a cash balance of $ 718.3 million.
Despite the announcement, AMC shares were trading higher on Wednesday, recently up almost 5%, likely the result of the company’s debt restructuring, said Wedbush analyst Michael Pachter.
“Even though the rate is much higher (12% versus an average of around 6%), it does provide cash and buys it for a while,” he said.
AMC had previously sought to save money by putting its employees in the theater, shutting down operations until June, and suspending its dividend payments and share buybacks. The company has also worked with landlords to defer payment of rent and has reduced the salaries of its employees at the enterprise level.
However, as he seeks to reopen his theaters this summer, he has had to increase his cash expenses. Although AMC expects to have sufficient liquidity to resume operations this summer, or perhaps a little later, its liquidity after this point remains in question.
“We cannot guarantee that our assumptions used to estimate our liquidity needs will be correct as we have never experienced a complete cessation of our operations, and therefore our ability to be predictive is uncertain,” the company said. . “If we do not resume operations on schedule, we will need additional capital and we may also need additional funding if, for example, our operations do not generate expected revenues or a recurrence of COVID-19 resulted in a further suspension of operations. . “
“Because of these factors, there is significant doubt as to our ability to continue operating for a reasonable period of time,” he added.
AMC said distributors may continue to postpone the release of new films, either due to coronavirus restrictions on public gatherings or due to production delays. Then there is the possibility that some studios may start offering the public more on-demand or streaming movies.
AMC had a public dispute with Universal in April over the distributors’ decision to air “Trolls World Tour” in theaters and on demand the same day.
After winning a press victory over the digital success of “Trolls World Tour”, NBCUniversal CEO Jeff Shell suggested that the studio could start making more simultaneous releases, even after the cinemas reopen. The statement led AMC to say that it would no longer show Universal films in its theaters.
Pachter of Wedbush said the market appears to be pricing in the hope that AMC could return to normal soon enough after it opens. Although Pachter himself is skeptical.
“I think they can attract under 30s (around 40% of ticket sales), but they will have a hard time attracting over 50s (around 40% of ticket sales), so we really need to see s “They can be profitable with 50% or less of ticket sales,” he said.
Cinemark, a rival theater group, said it could make a profit even if attendance was only 10%. After all, outside of weekends, the occupancy rate in its theaters ranges from 20% to 30%.
It is unclear what percentage of AMC traffic should reach to remain profitable.
Movie theater inventories sold strongly during the coronavirus pandemic, but recovered some of these losses. AMC stocks have remained down more than 19% since the start of the year, while Cinemark stocks have lost nearly 53% over the same period.
AMC has a market value of $ 621.3 million, while Cinemark is valued at $ 1.9 billion.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.