Greetings and welcome to AMC Entertainment’s First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I would now like to turn the conference over to your host, Mr.

John Merriwether. Thank you. You may begin..

Thank you, Devin. Good afternoon. I'd like to welcome everyone to AMC’s first quarter 2020 earnings conference call. With me this afternoon is Adam Aron, our President and Chief Executive Officer; and Shaun Goodman, our Chief Financial Officer.

Before I turn the call over to Adam, let me remind everyone that some of the comments made by management during this conference call may contain forward-looking statements, which are based on management's current expectations.

Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of these risks and uncertainties are discussed in our public filings, including our most recently filed 10-K and 10-Q.

Several of the factors that will determine the Company's future results are beyond the ability of the Company to control or predict. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned to not place undue reliance on these statements.

The Company undertakes no obligation to revise or update any forward-looking statements whether as a result of new information or future events. On this call, we may reference measures such as adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency among others, which are non-GAAP financial measures.

For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the Investor Relations section of our website earlier today. After our prepared remarks, there will be a question-and-answer session.

This afternoon's call is being recorded and a webcast replay will be available in the Investor Relations section of our website at amctheatres.com, later today. With that, I'll turn the call over to Adam..

First, dramatically reducing our cash burn; second, strengthening our liquidity; and third, preserving the capabilities and commencing comprehensive planning efforts to effectively recommence operations at our theaters as soon as we were both able and it would be wise to do so, such that we can continue to grow and outperform our competition in the years ahead.

Despite operating under a companywide furlough, which included all the senior executives of AMC and myself, the AMC senior leadership team has spent what seems like every waking moment these past two and a half months, working diligently on these three focus areas to generate what we firmly hope and expect will be our future success.

I'll now turn the call over to Sean, our CFO, to briefly review the first quarter financial results and to take you through some of the actions that we've taken to date to deal with all things corona.

Sean?.

Approximately $18.5 million cash tax refund and refundable alternative minimum tax credits; a deferral of social security payroll tax matches that would otherwise be required in 2020; and the receipt of a payroll tax credit in 2020 for expenses relating to paying wages and health benefits to employees who are not working as a result of the impact of COVID-19 on our business.

In addition to the CARES Act in the United States, during Q2, we are also benefiting from various government assistance programs in Europe that provide support for ongoing payroll and rent expenses during the period of suspended operations.

From a liquidity point-of-view, in March, as a precautionary measure, we drew down our revolving credit lines totaling approximately $326 million. In April, we issued $500 million of 5-year first lien notes. As part of this financing, we undertook to suspend dividends and also suspend our stock repurchase program.

We also obtained agreement to suspend our maintenance debt covenant requirements through 2021. The combined efforts to reduce our cash burn and strengthen our liquidity resulted in a cash balance as of April 30, 2020 of approximately $718 million.

Finally, last week, we initiated a debt exchange offer to exchange existing senior subordinated debt from 2024 to 2027 for second lien secured notes due in 2026. To the extent that our senior subordinated debt holders elect to exchange the notes, we have the potential to meaningfully reduce our leverage and further enhance our liquidity.

Because this exchange offer is currently active in the market, we will not be able to take questions on today's call regarding this offer. With that, I'll turn the call back over to Adam, so he can share with you our reopening plan.

Adam?.

Maverick, A Quiet Place II, among many, many others. Of course, I should point out that this entire situation is fluid and we stand prepared to adjust the timing of our phased theater operation schedule as necessary to comply with local regulations and the timing of major studio releases.

We have an incredibly detailed and comprehensive approach to running our theaters, to rehiring and retraining the people who will be working in our theaters to be welcoming our guests. And they're doing all of this safely.

The most critical aspect of our plan, of course, is to do all that we can to provide an environment that’s safe and comfortable both for our guests and our associates.

To that end, we have left no stone unturned, and we're working with the most trusted names in cleaning and public health and safety to develop industry leading cleaning procedures and safety protocols. Many things can change between now in July, even though that's about a few short weeks away.

But with the safety and well being of ours, guests and associates is our first priority, combined with our commitment to rebuilding a successful and thriving business. We are taking the following seven steps aimed at optimizing the timeliness, safety and profitability of our resumed theater operations.

One, maintaining close contact with local, national and international officials to understand and coordinate the timing and requirements under which we can operate.

Two, consulting with current and former faculty from the prestigious Harvard University School of Public Health, to seek guidance from the best scientists and experts on how best to create a safe environment for our guests and associates.

Personal protection equipments, much more expensive cleaning regimens, employee health protocols, limited theater capacity, block seating, and other strategies are now all being planned.

We are especially looking at high-tech solutions as well to aid in our sanitization techniques including the use of electrostatic sprayers, HEPA vacuums and wherever possible upgraded MERV 13 air ventilation filters.

Three, establishing a protocol partnership with the global leader in all things clean, The Clorox Company, as they advise us as to how we best can make our theater environments as safe and clean as possible.

Fourth, using our industry leading technology in our website and smartphone apps to facilitate contactless ticketing and expanding our mobile food and beverage ordering capabilities to an additional 300 U.S. theater locations. This will help us as we implement our social distancing practices all across the Company.

Five, educating our guests so that they understand the actions we are taking with their safety in mind. Sixth, Implementing aggressive marketing communications and promotional activity, all aimed at jumpstarting consumer demand.

And finally, seventh, seriously reducing our cost structure, intensely examining every category of our expenditures to lower our spending wherever possible. The full details of these strategies and protocols with respect to resume theater operations will be announced publicly later this month, possibly as soon early next week.

In conclusion, after a period of time where billions of people have indoor confinement and limited social interaction, we believe that there will be a significant pent up demand to get back out into the world, including enjoying the immersive and social experience of watching compelling content on the big screen.

Having said that, we're under no illusions. The waters will be choppy. There may be unforeseen tosses and turns to be navigated through. And full recovery may take quite a while.

Still, AMC is extremely well-positioned to benefit from this demand with a modern and upgraded theater portfolio, with the world's largest movie-going customer database, with an industry leading subscription, loyalty, and technology program, all combined with an unparalleled global footprint.

We have a highly able executive team that is absolutely committed to AMC’s long-term survival and more importantly to our long-term success, knowing that to do so we'll have to resume our theater operations well and safely. We'll have to strengthen AMC’s liquidity and deleverage our balance sheet.

And the true measure of that success of course will be AMC's ability to make smiles happen for our guests and our producing once again meaningful free cash flow for our shareholders. With that, we're looking forward to seeing you back at the movies. And operator, we're now ready for questions..

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Eric Wold with B. Riley FBR. Please proceed with your question..

Thank you. Good afternoon, everyone. Glad you guys are all back, back together. A couple of questions, I guess. One, I know you saw some fluid situations out there in terms of when theaters can reopen.

Maybe give us a better sense of, once you get the green light in a region or have a fairly good sense of when that green light will come, when you start hiring employees back and what's the timeline to get a theater ready? And would you ever going to plan to have a theater ready open for tenants, even if you don't necessarily know that market will allow it yet or you have to wait until you completely have that green light?.

Thanks, Eric. So, yes, it's fluid. I believe that for 14 of the 15 countries that we serve, we have national guidelines as to reopening dates. The only country that I think has not yet declared is Saudi Arabia. In addition though to national guidelines, there are local guidelines.

And that's especially important in the United States, which is the largest movie market in the world. We were greatly heartened that last night, the Governor of California announced that theaters could open on June 12. That was new and welcome news. We still want to engage with the mayors of Los Angeles and San Francisco.

But we believe that both will be on time for a July 17 Tenet opening date, assuming that that date holds. New York State has similarly announced the theaters there can reopen for Tenet, assuming it stays on schedule of July 17. The Mayor of New York City has not yet opined as to when the five boroughs of New York, the city, not the state, will reopen.

We expect to know that soon. We can open the -- because we've been planning this now for three months and our planning efforts have been massive, we actually can open our theaters very quickly.

I actually was on the telephone earlier -- Zoom call earlier today with the managers of the 635 theaters that we have in the United States discussing our reopening planning with them and telling them to be ready to open on a moment's notice.

We do believe that we can open our theaters in a matter of a week or two, at the most to find as the date from when the first employee shows up inside a theater to when all the employees are in a theater and it's open for business.

And we would expect, as I said, with a handful of exceptions, there may be a few theaters that economically we decide not to reopen, because they weren't making all that much money beforehand.

That we should have all of our theaters, essentially all of our theaters, pick the number, 97%, 98% of our theaters open in time for Tenet and Mulan, if they hold to those dates.

Other circuits, who’ve opened earlier than that have opened with what's called catalog products at discounted prices, meaning older movies, old not necessarily meaning Gone with the Wind, but, movies that some might be very old, some might be classic, some might be movies from last year.

We'll do the same, but we also think that optimizing the profitability of our theaters is a good idea. And our attendance and our revenues will be much more or lush on the new movie releases rather than playing the repertory older product.

So, we also think that it's important, as I said over and over again in the script, to operating our theater safely and well. It is our view that some jurisdictions, which try to open various venues as early as the first of May, were opening prematurely.

We're much happier opening in June and July, with the bulk of our theaters opening in July, not in June, giving more time for preparation and more time for the world to get the pandemic under better control and containment.

So, to be more safe and to be more profitable, we're going to open our movie theaters right up before Tenet but not much before Tenet. In terms of Tenet and for that matter, Mulan, based on conversations we had as recently as last night, those two movies are still on schedule for July 17 and July 24.

There are a whole host of movies that are also being released in the month of August. But, we can't guarantee you that those dates won't slip. Those decisions are made by Warner and by Disney, and by the other studios who release. What I do know is that we will be ready to open our theaters whenever new movies are ready for us..

Thank you, Adam.

Last question, I guess maybe for Sean, is given that we’re kind of going into a kind of new world so to speak, I guess with attendance restrictions, at least initially coupled with your efforts to control costs in places last year offset by intentionally new costs and cleaning procedures, et cetera, maybe give us a sense of how you expect four-wall margins to kind of vary, on various attendance levels as you kind of ramp up, if you’re initially restricted to 25% that goes to 50%, and then always you staff accordingly.

How would you expect that that delta to move your margins?.

So, we're both going to take this question, Eric, because it's so important. A reminder to one and all, even the 25% limitation is not nearly as painful as you would think on first blush.

If you think about a Broadway theater, all of us have gone to a Broadway theater in our lives at one time or another, you often find that every seat is sold for every performance. By contrast, if you look at the movie theater industry, we are very much a church built for Easter Sunday. And our theaters are mostly empty, not mostly full.

And that's the reason why it was so easy for AMC to reduce seat capacities when we renovated seats and renovated theaters by putting in reclining seats. Because what we were doing, we were pulling out empty seats.

Even with a number of theaters that have reclining seats installed today, if you look at the number of seats that we had available for sale in 2019, again, for tickets that we sold, we only sold 17% of our seats. So, when you marry that up against the 25% seat limit and certainly against the 50% seat limit, you don't chase out many guests.

Of course, you're going to chase out some Friday and Saturday night guests. But, we looked at the economic modeling, and we went back and ran our theaters, as if we had imposed a 50% seat limit last year.

And it knocked out only about 12% of our guests and that assumes that no one shifted the performances that they went to see, based on not having available seats or alternatively, because of a desire on the consumers part of social distancing to go to performances that are not as full.

So, really, even a 50% seat limitation, probably only knocks out a single -- when you especially factor in this voluntary redistribution of performances that people go to done by the consumer, even a 50% seat limitation only knocks out single-digit attendance at AMC. And the difference between 25% and 50% isn't a whole lot greater.

So, it's a counterintuitive notion, but the seat limit capacity is not as painful as you might think given that last year, we only sold 17% of our available seats.

Having said that, it goes without saying that the more full our auditoriums are, the better our margins will be, and the less full that our theaters are, the worse that our margins will be.

And while I'd love to think that the whole world is going to operate like Norway did where in our very first weekend, we essentially did the same business as last year. That seems to be too optimistic of an assumption.

And we've seen market research that says the vast majority of our customers are going to come immediately back to theaters, but not all of them, and that there will be a ramp up of increasing attendance over time, which does mean that there should be a ramp-up of our margin increasingly over time, which means that our margin on the first day of Tenet will not be as good as our margins at Christmas or our margins in 2021 or beyond.

Sean, do you want to add anything to that?.

No. Thank you, Adam. Two other things I'll just add to that is, one is we looked at this very carefully when designing the opening plan for our theaters. So, what you would expect is the first theaters to open versus the last theaters to open before the major studio releases.

The last theaters will be the ones that require higher level of attendance in order to break even in the first one, which could break even earlier. The other point -- and I think Adam mentioned this as well is we have a flexible asset base in terms of capacity.

Unlike live theater or sports, we can adjust times, we can adjust number of screens, we can adjust the number of screen times and that allows us to manage our profitability quite well. And then, as Adam said, we could operate very profitably at 40%, even significantly lower capacity levels as we have done in the past on average..

And if I can just add to that last point, Sean's, we’re in dialogue with every studio, big and small, as you would expect. And they're saying to us, holy mackerel! Capacity limitations. And we're saying, right, but we normally play 20 movies. We have theaters with 14 screens. We have some theaters with 24 and 30 screens.

When Tenet and Mulan come out, don't worry about seat capacity limitations, we’ll double or triple or quadruple the number of auditoriums that we allocate to showing Tenet or Mulan, as examples among many. So, we have a lot of arrows in our quiver to make sure that the seat capacity limitations don't hurt us..

Perfect. Thank you, both..

And if I can add one more thing, it's the inverse of that. Right? We can add a lot of showtimes by adding screens. Also, if attendance is light, we can decrease the number of showtimes, especially in the off peak periods. Remember, our theaters -- routinely we’re open at 10 in the morning till 1 in the morning.

If demand is lighter than normal, we can take out a lot of operating costs by reducing showtimes in those very marginal time slots when there's not much demand, which allows us to concentrate opening hours and lower costs and therefore improve our economic performance..

Our next question comes from the line of Meghan Durkin with Credit Suisse. Please stay with your question..

Hi, guys. So I want to -- so, in your discussions with the landlords, have you been able to negotiate any reductions to your rents going forward, not just the deferrals? And follow-up, I hope you allow me this one. Since Silver Lake needs to approve the exchange, I wonder if its board members were involved in the decision to commence the exchange..

Sure. Before we begin, I owe you an apology because on the last earnings call you ask me about 15 questions about the coronavirus in Italy. And I think I said something like it's like eight theaters in Italy. 2.5 weeks later, it is 1,000 theaters in 15 countries.

But back to your question of today, on landlords, yes, we've had -- we have literally hundreds and hundreds of different leases with different landlords all across the world. We've had considerable success so far in abating and deferring rent.

But yes, we've also had considerable success especially for the second half of 2020 in actually lowering rents and converting rents from fixed price rents to percentage of revenue rents. And similarly with other individual landlords, we have been talking about forgiving rents, not just deferring rents from the Q2, but actually forgiving rents in Q2.

And with other landlord we've added considerable success and discussions about actually reducing our rents going forward, not just for a short period of time like in 2020, but permanently with respect to the entire duration of the lease.

On the issue of the bond exchange offer, you're absolutely correct that to get it done, we need the consent of the bondholders, who will be exchanging their bonds. Those are individual consents, not a universal consent. We will need Silver Lake's consent to do the whole thing.

And of course, it goes without saying that our Silver Lake board member has refused himself from all matters associated with the exchange effort, as you would properly expect good corporate governance in place..

Okay, got it. I'll leave it there. And, no issues on the last call..

Got it. We got the worst health problems since 1918. We've got the worst economic crisis since the 1930s. And we have the biggest social unrest in United States of 1960s. If there is a fourth one in the world would like to throw at us, I just want to know if you want to predict what that one is, since you certainly had corona called 90 days ago..

No, please no. I can't take anymore..

Our next question comes from the line of Chad Beynon with Macquarie Group. Please proceed with your question..

Hi. Good afternoon. Good to hear you're all well. At the beginning you guys talked about just everything you've done reexamining all of your theaters and just the business in general.

And I was wondering if you could comment on how you're thinking about domestically, the 200 or so classic theaters, which I believe haven't received a lot of the same CapEx and renovations as the others versus I guess your AMC branded and kind of the renovated theaters, which I believe are almost fully CapEx.

So how does that fit into your future thinking? And the sidebar of that is, should we expect any closures in either of those segments? Thanks..

Thanks, Ted. Look that's a very important question. And I'll take it the way you framed it. Let's just start with the classic theaters. While they are not as profitable as AMC theaters, they are not unprofitable, they're just not very profitable.

So for example 90% of our cash flow comes in -- that's a rough number, John will correct me if I'm wrong, 85% to 90% of our cash flow comes out of the AMC and AMC Diamond brand, but that doesn't mean that there is no cash flow coming out of the classic brand, even though each of those theaters individually is not nearly as profitable as each of the big papa bear AMC theaters.

So that's sort of one way to look at it.

The second way to look at it is to the extent that we have an unprofitable theater, you have to look at profitability two ways, is it absolutely unprofitable or is it not making a big profit, but it's providing contribution to overhead that is greater than the rent that is contractually owed to the landlord in which case it's better for that theater to be in operation because it's contributing to overhead maybe not much, but it's contributing to overhead.

So again those theaters stay open. Having said that, we have some -- we have about 50 or so theaters that we own in the United States where we don't even -- where there are no theater leases if any of those theaters are unprofitable they may not reopen.

I'm expecting that we're going to open up 97%, 98% of our US theaters in July, but I wouldn't be surprised if a couple of percentage points maybe 96%, if a couple of percentage points of our theaters we choose not to reopen because their profitability is marginal.

Over time meaning looking ahead, not just the next 90 days, or 180 days, but looking into '21 and '22 and '23, we're going to have to take a very hard look especially as theaters come up for normal lease expiration.

We're going to go through an exhaustive analysis of every single theater and make the determination whether that theater stays in our fleet or it leaves our fleet or it only stays in our fleet that we can renegotiate terms with the landlord such that rents are more affordable going forward on a let's say five year contractual extension.

I don't see anything that's going to decrease our theater count that would have us fall below, being the largest theater operator in the United States.

Having said that, I don't think we'll be at 635 theaters either because we are going to take a very hard look at profitability, and we want to run those -- we want to run those theaters that are contributing to overhead and shedding those theaters that are not..

Okay, that's perfect. Thanks, Adam.

And then Sean, I'm going to be a little greedy here, you gave us the March quarter end cash balance and then you gave us the April 30 cash balance of $718 million, are you willing to give us a more updated number? A May number, which might help us kind of bridge what your monthly cash burn was in May and then kind of what that would essentially assume for June or are you holding that back because of the bond offering?.

Well, I won't give you direct numbers, but I will give you some guidance to point you in the right direction perhaps, maybe we can compromise at that level.

If you think about the information that we've publicly disclosed at the moment, what we said when we raised the additional $500 million that would give us approximately $800 million cash equivalent at the beginning of the second quarter.

We said that that would be sufficient cash to enable us to withstand a suspension of our field operations right through to Thanksgiving, so $800 million eight months. Now, we wouldn't use all of that cash, so that would had nothing at the end of November. Obviously, there would be a cash balance to that point of view.

So our monthly cash burn is something slightly south of $100 million and that includes the debt servicing costs run at about $24 million a month. So you can kind of use that to roughly estimate what the cash position is at the end of May and at the end of period thereafter.

We have to be careful because we are in the market with the bond offering, we got to know them out and we have to be careful what new numbers we supply.

So what I will -- and just one other thing I'd add to that our cash burn is in line with to slightly better with than our expectations when we did the bond offering we are managing very well toward the projections that we had as Adam indicated in his prepared remarks, I am watching the cash very carefully..

Like a hawk. We're going to give a new nickname, like a hawk. But you didn't ask this question, but since it is related, we're not only bring down operating costs. We said in the remarks that we are taking capital expenditures to the bare bone.

I think Sean in his prepared remarks, said that CapEx expenditure in the first few months was under $80 million. We think that for the remaining 10 months of the year CapEx maybe another $50 million to $80 million, meaning that total CapEx for the year will be somewhere between $130 million and $160 million.

You may recall, last year we were spending over $400 million, two years before that we were spending around $600 million and we gave guidance that CapEx would be $250 million to $300 million this year, we always said that if we needed to turn on the brakes and turn CapEx off immediately, we have the ability to do it.

And if anybody doubted that we could pull that off, well we just pulled that off because CapEx this year is going to be $130 million to $160 million in total.

Had we not spend $80 million in the first or $75 million to $80 million in the first two months of this year, the CapEx burn would have been a lot less than $130 million to $160 million this year..

And just one quick clarification on that. That's net CapEx, the numbers that Adam is referring to..

All of those numbers were net CapEx, including for the prior period..

Our next question comes from the line of Eric Handler with MKM Partners. Please stay with your question..

Thank you very much for the question.

One to Adam, wonder if you could talk about New York City a little bit, specifically what percentage of your US circuit in terms of screens or revenue does New York City account for? And considering that the state or the city just entered its Phase 1 of reopening and theaters I believe are part of the Phase for opening, how hopeful are you that New York City could be part of a July opening?.

Well, you know, we're a major player in New York City. We have a market share in excess of 40%. But we do have 600 -- well, we -- pre-corona, we had 635 open theaters in the United States. New York City represents single digit percentage of our total circuit.

You know Eric, obviously I would love for New York City open as soon as it can and as soon as it's safely can. I've already said that as a company, AMC did not rush out the opening of theaters ahead of when we thought it was safe to do so.

So we are empathetic with the public officials in New York City who have a herculean task to try to get a city of 8 million people open in a healthy manner. I don't -- so I don't really want to make any predictions whether New York City will be open for a July 17 Tenet date or not. I hope so. They probably will just skirt through it. They might not.

And the reality is, I think if you asked the mayor of New York that question, he wouldn't know the answer either. I think what we learn over the next four weeks will determine what happens four weeks from now. As I said in my earlier remarks, it's a very fluid situation. But let's hope we can get open.

New York State certainly -- I shouldn't say -- I should never use the word certainly about anything in this environment, but based on current expectations, New York State is supposed to open broadly in early July ahead of Tenet. New York City will be right on the cusp.

And of course that assumes that the Tenet holds on July 17 and that's a decision that's being made in a different boardroom than ours..

Fair enough. I wonder, could you comment a little about A-List, where ended up in the first quarter? I'm assuming you've -- that you're telling your customers that you're halting their payments and how churn is holding up through this pandemic..

So let's just talk about January-February, we talk about now. So A-List was great in January and February. We were over 900,000 members. Film usage was right in the sweet spot of where it had been in the months prior. The program as we look at -- the program profitability was greatly profitable.

It was a big reason, not the only reason, but a big reason why our EBITDA was up $53 million as a company year-over-year in two months. Extrapolate that. If we had been up $53 million every two months of EBITDA for all of 2020, how would this company have looked financially going forward.

This was a year we were going to harvest free cash flow and all these wonderful plans we laid out pre-coronavirus.

As soon as we did theater shutdown, we went out to all of our AMC Stubs members and all of our AMC Stubs A-List members, we paused all payments without them having to take any action, and we are -- when -- I talked in my remarks, there were seven things we're going to do.

One of them is an aggressive plan of marketing communications and promotional activity. Some of that will be aimed at our A-List population. When we go out with our -- our resumption of operations, communications to our guests will tell them what we're going to do with respect to A-List going forward. I don't want to jump that gun.

I think our members deserve to hear first, what we're going to do for them, rather than doing it on this call and having it bleed out into the press. But I can tell you that A-List population is a very important part of our customer base. Roughly 15%, in very round numbers, of our customer base.

The Stubs population in total -- these are of our US customer base. The Stubs population in total is a very important part of our customer base. It's right around half of our customer base. They're very important to us.

We will take a lot of action to make them happy with AMC to give them benefit that hopefully will propel them to come right back into our theaters. What the result of all that activity will be, none of us are going to really know until, A, we do it, and B, the theaters are open and operating, and we see how they respond.

So I think rather than guessing -- it would just be a guess. Rather than guessing how they'll perform ahead of time, we'll be very open and comprehensive in giving you information about how they did perform as we report third quarter numbers..

And just as a refresh….

Hey Eric, I can tell you how they're going to perform in the second quarter. They're not going to go to a single movie in the second quarter..

Yes. Just as a refresh, you said January-February, there was about 900,000 members.

How does that compare to where you ended 2019 in December?.

It was right around the same. We think we....

Okay..

Thank you. Thank you, Eric..

Our next question comes from the line of David Miller with Imperial Capital. Proceed with your question..

Hey guys, a few questions. Sean, I'll start with you, and Adam, if you want to chime in or contribute, that would be great. I know you guys are still in the market with the second-lien notes. Can you say though whether or not the second-lien notes are going to rank pari passu with the term loan? And then I've a couple of follow-ups. Thanks..

It's Sean. We're not in the market with the first-lien notes.

Sorry, just repeat the -- you said you know we are still in the market with the first-lien notes?.

So, my understanding is that the first-lien notes rank pari passu with the term loan. So, but you're out with second-lien notes. You're out in the market with second-line notes..

With the Exchange Offers? Yes..

Yes..

Sorry, and what was the question?.

Will that rank pari passu as well as the initial offering?.

No. It won't..

Okay. All right, fair enough. And then....

Second-lien is second-lien. First-lien is first-lien. But those notes that exchange would be ahead of those notes that do not exchange..

Correct..

Right, exactly. We can -- there are some nuances to that we can talk about it offline, that's totally fine..

Actually, we -- hey, Sean -- actually, David, we can't talk about it on this call, and we can't talk about it online. We're in the market with an active bond exchange. We've got to live on the OM, and not say much more than that publicly..

Okay. And then, I appreciate the color about the rents. In many cases, obviously rents are going to be deferred.

Can you talk about like in general, how is this going to be reconciled on the back end of the virus? Is some or all of it going to have to be paid back in 2021, or is it more like fourth quarter '20, or how would you -- if you were us, how would you model that?.

It literally varies agreement by agreement, landlord by landlord. But we are trying to get agreements in place that extend repayment at least until the end of 2021. And in some cases, we've got -- we're approaching agreement to have repayment over a period of six years. So it really depends deal by deal. All the deals aren't done yet.

We'll probably be able to give you more color on a future call as we make more progress..

Okay, great. And then, Adam, any progress in sort of warming relations with Universal? We're obviously aware of the letter that you wrote. You stated that you're not going to show any Universal films that was, I don't know, six, seven, eight weeks ago or so.

I'm more asking the question actually on behalf of MGM shareholders who might be on the call and who are somewhat worried about James Bond 25 out in November because Universal is the international distributor on that film..

Thank you for the question. So look, relations are warm with Universal. You said they were not warm. Relations with Universal have always been warm. And I am using warm as a good word as opposed to not a good word. There is nothing personal about this issue with Universal. I have great respect for Universal executives.

I think they have great respect for us. This is just an issue about money. And we are in active dialog with Universal, but if you look at the press release on Page 3, it says and I quote, while we are in active dialog with Universal, no movies made by Universal Studios are currently on our docket. We'll see how it all shakes out..

Okay.

And then real quickly, Adam, were you aware of the attendance caps imposed by the State of California Health Department today prior to what you announced today? Were you aware of that when you wrote up the script, or were you just made aware of that today?.

Are you talking about the 100 cap on attendance?.

No, the 25% caps out here in California with this limit and its caps..

It's a 25% cap, and in no case more than 100 people. We had all that yesterday -- well, before it was announced by the Governor, but certainly immediately after it was announced by the Governor, and all the comments we made on this call today assumed those caps, were it -- would be in place.

The Governor of California also said that they would quickly reevaluate those caps of 25% and 100 seat -- 100 maximum people per performance and possibly re-evaluate that in a matter of weeks after the June 12 reopening.

But as I -- that's why I've been saying throughout the call more than once, this whole situation is quite fluid and things are going to change. And they're not going to -- and they're going to change on a daily and weekly basis. And you can be sure we're very much in touch with all these authorities and have a very good sense of what's going on..

Okay, great. Thank you very much..

Ladies and gentlemen, we have time for one final question from the line of Jim Goss with Barrington Research. Proceed with your question..

Thank you. One question is involving the capacity limitations that was just brought up, to some extent.

But in general, to the extent that -- are the limitations and capacity really primarily an issue in just the most densely populated urban areas, which I know is a big share of your emphasis? And are those areas also ones where you might have the most flexibility in say film times and that sort of thing that might have people willing to spread around and maybe minimize the impact? Just want to know what your thoughts are on that..

Yes. So Jim, it's a great question. I don't -- I think if you look at the whole portfolio of our theaters, we got flexibility everywhere. We have 1.1 million seats in the United States with an average of 4.5 show times a day pre-corona's -- 365 days a year. And we only sold 250 million tickets. We do not lack for seats.

And we have 8,000 screens in the United States. And whether it's a big city or a small location, the average AMC theater has more than 12 screens. Between all those screens, all the showtimes, we have enormous flexibility to move people around.

That's why I said that the seating limitation cap is much less of a problem for us than it is for other industries. Let's just think of other industries that sell seats. Right. The load factor on U.S. airplanes pre-corona was probably in excess of 75% of their seats sold.

The average sports team tends to sell out its arenas every night with often with 100% of seats being occupied. At AMC, we sold 17% of our seats last year. If there is anybody who can get through this social distancing, seat-blocking capacity limitation thing, it's our industry as an industry.

And with respect to AMC as a company, I do believe that our company is data-rich, very analytic, has lots of quantitative analyst resource within the company. And so I think within the industry, our ability to manage through this is even better than a lot of our smaller competitors who may not be as quantitatively sophisticated as is AMC..

Okay. And one other....

Jim, just -- I don't think the issue that you should to be worried about is a limitation on supply. The issue is, what's the level of demand. We can accommodate whatever level of demand the world wants to throw at us.

Last year, we could have basically increased our demand and accommodate our demand if it grew six-fold, which it certainly is not going to do in a coronavirus situation.

So the issue for us to manage through is what happens if it's less than last year and how we manage our way through that from a cash burn standpoint, from a profitability standpoint, from a ramp-up standpoint. And we're all over it. And you had one more that you wanted to ask..

Well, the one other thing I was going to ask was related to some of the cost benefits you might have developed.

How does the coronavirus -- mainly working from home and office space utilization, are there savings you think might persist beyond this where you may not need quite as much space or in terms of -- yeah, suppose it's mainly headquarters, but it could be other areas as well within the company.

So, are there things that will persist beyond the pandemic?.

Oh! Yes. The answer to your question is, oh! Yes. Remember, we had a profit improvement plan that we announced a year back? I think we said that we did identified $75 million of savings and therefore we were going to commit to $50 million because we wanted to make sure we got it all. We told you something, we want to deliver on it.

We got to be looking for hundreds of millions of dollars of savings, because the revenues are not going to come back to pre-corona levels on the first day. They're going to ramp up and they're going to start at some level and they're going to grow. And it's anybody's guess whether that they grow over six weeks, six months or six years.

But it's going to take time for them to grow. We're going to be operating not just AMC as a company, but as an industry. And by the way, the whole of the economy is going to be operating in a demand-limited environment, which means that revenues will be harder to come by, which means costs are going to have to be cut.

So this isn't just about whether we need less office space at our headquarters. We're going to have to run our company more efficiently at our theaters, in our headquarters. We're going to have to cut labor cost, we're going to have to cut non-labor cost, and the management team here does not have small targets or small aims.

We've got to balance our revenues with our costs -- or, we got to balance our costs with our revenues to the extent that it's possible to do so, and we are on the case with big targets in mind..

All right, thanks. I'll let it go there..

Ladies and gentlemen, we have reached the end of our question-and-answer session. And I would like to turn the call back over to Mr. Adam Aron for any closing remarks..

Thank you, operator. Look, I thank you for participating in the call. I'm just going to end it with one sentence. We will do everything in our power to make sure that this company thrives and prospers. With that, see you at the movies..

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day..