Greetings and welcome to the AMC Entertainment Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Merriwether, Vice President of Investor Relations. Please go ahead..

Thank you, Victor. Good afternoon. I'd like to welcome everyone you to AMC’s third quarter 2020 earnings conference call. With me this afternoon is Adam Aron, our President and Chief Executive Officer; and Sean 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, the safe reopening of our theaters in the United States and around the world. Indeed, we are seeing guest feedback ratings on our theater cleanliness, that are demonstrably higher than anything we have ever seen in the decades and decades that we have been keeping such records. Thank you, Clorox. Thank you, Harvard School of Public Health.

Second, the successful $2.6 billion debt restructuring in July, that we discussed on our last call, which included bringing in $300 million of fresh debt capital now, on top of the 500 million we raised back in April deferring cash interest to the tune of at least $120 million over the coming year and eliminating some $555 million of debt.

Third, the signing of a definitive agreement to sell nine theater locations in Latvia, Lithuania, and Estonia for approximately $77 million, representing a 9.3 multiple of budgeted 2020 EBITDA, a budget I might add that was set before the onset of the COVID-19 virus.

So, in looking to current actual EBITDA, the sale multiple price is actually infinite. And fourth, the successful launch and completion of our at-the market or ATM equity offering, which has raised approximately $98 million on the issuance of 30 million shares in a little more than one month.

Having exhausted that offer, and given its success, we are currently seeking again to raise additional equity capital. And fifth, reaching a groundbreaking agreement this summer with universal relating to participating in a new PVOD window.

Specifically because of that agreement, Universal currently intends to release six movies theatrically in the fourth quarter, something that no other studio that does not yet have a PVOD window established, has been willing to try.

Incidentally, on the only one of those PVOD movies that has been released as of yet, our analysis is that AMC came out ahead financially as we had modeled, but much better than some of you had postulated or feared. If you look at all of the actions that AMC has taken since March, it's almost breathtaking.

In addition to all the work in first closing and then reopening our theaters, AMC has raised just under a billion dollars of cash in gross proceeds from the issuance of new debt and equity, along with including the Baltic’s theatre sale.

We have also secured over $1 billion in additional financial concessions that we have negotiated individually, with theater landlords and with our lenders. As I said before, at AMC we’re resilient and resourceful and we’re certainly braced with determination and resolve.

These significant accomplishments are why we are still here today, but to make it through this coronavirus, impacted winner, we will still need to secure additional liquidity. Our disclosures in this regard, have been thorough and fully transparent.

There is more to discuss, but before we do, I'll now turn the call over to Sean Goodman, our CFO to update you on the third quarter, and some of the more recent actions taken by AMC.

Sean?.

Thank you, Adam. And thank you everyone for joining us this afternoon. I do hope that you and your families have been safe and well during these continued difficult and unprecedented times.

As Adam mentioned, our results for the quarter were once again severely impacted by the COVID-19 crisis, which necessitated the suspension of all theater operations in the U.S. for nearly two-thirds of the third quarter, and significantly impacted our operations in international markets.

This quarter was characterized by [indiscernible] content and historically low attendance levels across all markets. Overall, our domestic attendance was 97% below the prior year's third quarter, and our international attendance was 82% below the prior year's third quarter.

Of course, this includes time periods when our theaters were closed, but even as theaters reopened with a scarcity of big new titles, attendance levels in the U.S. hovered between 10% and 20% of last year's levels while attendance numbers in Europe were only somewhat better.

A bright spot for us so far in 2020, we have tripled our theater count in the Middle East, and we expect to at least double that again in the coming half year.

Similar to our second quarter results, international average ticket price and food and beverage spend per person were again encouraging, holding up nicely with an average ticket price up more than 16% or 10% in constant currency, and food and beverage revenue per patron increasing by more than 15% or 9% in constant currency, compared to last year's.

U.S. ticket prices and food and beverage results in the third quarter showed some of the encouraging trends with both food and beverage revenue per patron and average ticket price broadly in line with last year.

These statistics are impressive when you consider the discounted pricing on library content and food and beverage promotions offered during the quarter.

It's very clear based on our operating metrics, including customer satisfaction scores, that guests returning to the movies are extremely confident in our AMC Safe & Clean protocols and are comfortable with a theater experience and are enjoying our food and beverage offerings.

However, with such extremely low overall attendance levels, our bottom line financial performance for the third quarter is once again almost irrelevant. More important is how we performed against our priorities and what we are doing to successfully navigate through these troubled times.

From a liquidity point of view, as of September 30, 2020, we had $418 million of cash, plus $11 million of restricted cash. Our total cash burn for the third quarter was $324 million. This number normalizes for the debt exchange, and capital raising in July.

It also normalizes for the $37.5 million of partial proceeds received from the sale of our Baltic’s theaters, and $2.8 million of net cash raised from our ATM program during the second quarter. The average monthly cash burn in Q3 was $108 million. This is slightly above the approximately $100 million monthly cash burn during the second quarter.

This increased cash burn is due to costs associated with theater openings, including our AMC Safe & Clean protocols and increased rent payments as theaters began to reopen for business. Many have questioned whether it is financially wise to keep theaters open with such very low attendance levels that we are currently experiencing.

So, this is something that we of course, analyzed very carefully, and I can tell you that we have very sophisticated operational initiatives in place to align theater opening hours to attendance levels. For example, about half of our U.S. theaters are open for weekend show times only.

And all of our theaters when they're open are averaging between one and two show times daily instead of the normal four. This saves a tremendous amount of operating costs, while still giving guests a sense that we are open and preventing the stress in our buildings that stems from prolonged periods of closure.

Accordingly, we are confident that with our flexible operating model, it is economically sensible for theaters to remain open even in the current level attendance environment. The obvious next question is how long our liquidity runway will be in the current distressed environment.

When we last spoke, I shared with you that we believed that we had sufficient cash to last through to the beginning of 2021.

Despite the number of movie titles, subsequently shifting out of 2020, and continued low attendance levels associated with an absence of new titles, we continue to have sufficient liquidity to last through to the beginning of 2021, even in a worst case scenario where the current low attendance situation continues.

Of course, if the current firm slate holds, including movies scheduled for the Christmas holidays, and our current attendance levels increase accordingly, our liquidity runway could be meaningfully extended.

It is worth noting that given the low attendance levels, our current cash burn is not significantly impacted by the recently announced theater closures in Europe. Now, while our liquidity runway in the worst case scenario is limited, this is only if we are not able to raise additional capital. And our goal is to raise additional capital.

Throughout the coronavirus crisis, we have taken deliberate and decisive actions to navigate through the storm. In a period of only seven months, we have raised approximately $900 million of gross proceeds from new debt and equity. We’ve raised more than $18 million from asset sales.

And we've negotiated more than a billion dollars of concessions from creditors and landlords. And we are not finished. Our ATM equity process, which was launched at the end of September, has already raised $98 million and we are continuing to seek opportunities to generate additional liquidity and reduce our leverage.

One of our most significant expense category is rent. Our long-term relationships with landlords have enabled us to successfully negotiate meaningful concessions during this COVID-crisis. By the end of the third quarter, we had deferred rent of approximately $325 million.

Repayment terms are on average 24 months, although a number of agreements have repayment periods that extend through the remaining lease term, which in some cases is well in excess of 10 years. It's worth a reminder that the rent expense shown on the face of the income statement represents our rent obligation for the quarter.

For the third quarter actual rent payments were approximately $120 million less than what is shown on the face of the income statement.

While future cash rent payments will depend on our reopening schedule, and level of attendance, based on our current agreements, we anticipated cash rent paid in Q4 2020, will be meaningfully higher than in Q3, while still being well below the income statement rent liability.

We continue to have constructive discussions with our landlords as we work together to effectively manage through this crisis. And as always, as we've said before the terms that we have agreed with our landlords are confidential and specific to particular facts and circumstances for each landlord and each data.

Shifting to capital expenditures, we have continued to reduce capital expenditures to minimum maintenance levels, eliminating all but essential CapEx and previously committed growth CapEx.

During the third quarter, our CapEx spend was approximately $22 million net of landlord contributions, most of this was committed to prior to the outbreak of the pandemic. This is approximately $72 million lower than the same quarter a year ago. And we now expect 2020 net CapEx to be between $130 million and $150 million.

And finally, beforehand handing the call back over to Adam, it's worth noting that we are using these unprecedented times as an opportunity to intensely examine every single category of our spending, and all possible opportunities to enhance our efficiency and improve our profitability for the long-term.

While the closure of our theaters is temporary, learning’s and the actions that we are taking will have an enduring long-term benefit for AMC.

Adam?.

Thank you, Sean. So, everybody, it all really comes down to one thing. We believe that we will need to raise more capital to assure ourselves that we can lengthen our financial runway, at least in the next summer.

The simple question becomes, will we raise that needed capital or not? We've had considerable success in creatively raising money so far this year, and our shoulders are the grindstone yet again. Medical experts are telling us that in the Western world, our populations will be well vaccinated before next summer.

Studios are telling us that they have boatloads of blockbuster titles for us before next summer as well. By our count, while some movies have been shifted or sold off to streamers, some 44 major film titles have been deferred from 2020 and will be rescheduled to play theatrically in 2021 instead.

In the words to me, privately, from one major studio CEO, he said, ‘your LaGuardia Airport, Adam in a big thunderstorm. And there's zillions of planes in the air circling and they all have the land.

We've got to get the movies that we've already made, and which already are in the can out into the market for movie goers to buy tickets and go see, he paused for effect, and then said in your theaters’. When I relate his comment to another major studio CEO, this very weekend, he said and I quote, ‘wait a second, he stole my line.

I've been saying for months now that you're an airport in a storm. And there's tons of planes circling overhead.’ So, at AMC, it is our considered opinion that there is good news down the road. Once the movie start flowing next year, there will be a new big title almost every single week.

To that end, AMC is capital raising efforts and cash conservation efforts, because every dollar we save is offsets $1 that we would not need to raise. Those capital raising efforts and those cash confirmation efforts are in full swing. We are currently seeking to raise additional equity capital right now.

We have commenced discussions with [indiscernible] more than a dozen strategic investors about their taking an equity interest in AMC. We're also talking with our existing lenders to gauge their interest in further bolstering, our liquidity as they did this past summer.

And we've started dialogue with many of our landlords again, about helping us abate or defer rent, as they also did in the spring, when movie titles are still few in number, and when theater traffic is light.

It is too early to know whether these efforts will bear fruit, and if so, or should I say and when so by how much, but our days and nights are busy ones at AMC, and we absolutely are not sitting on our hands, bemoaning the Louisiana Cards that the Coronavirus has [dealt us].

Instead, we're out trying to raise money, something at which we're quite skilled, as we have demonstrated on multiple occasions, so far this year.

Onto a completely separate subject, lest you think we're distracted from innovating in how we market the consumers, we know that some portion of the populace is concerned about sitting intermix with strangers.

So, a few weeks back, we soft launched a private theater rental program, where consumers can book an auditorium all of themselves and use up to 20 tickets in that Auditorium for a fixed price of between $99 and $349 plus tax, depending upon the movie, the format and the market.

We've already had more than 80,000 inquiries from potential guests about private theater rentals. And that number will grow markedly once we formally announce the program with a press release and marketing support, which should launch later this month.

Before we open the call for your questions, I'd like to take a moment to recognize the truly exceptional achievements of the AMC management team. Just seven months ago, many were predicting that AMC would not survive past spring. They underestimated the sheer will of our management to power through this crisis, if that is at all humanly possible.

And even I am incredibly impressed by the skill of our theater teams who have first shut and then reopened the world's largest collection of movie theaters with extraordinary professionalism, and commitment.

To ensure that this leadership team continues to have incentives that are meaningful, and which completely align the interests of all our senior officers and junior officers with those of our shareholders, we have detailed in the 10-Q about to be filed that our board has decided to use its discretion to vest in this current fourth quarter some previously granted AMC equity.

However, that new vesting includes a one-year lockup that prevents the sale of such equity until a full-year from now. Our entire [officer corp] has substantial incentives therefore, to keep and to increase the equity value inherent in AMC shares.

In addition, our board also wanted to recognize and reward some 2000 AMC managers across our system in the U.S. and abroad, almost all of whom took between 20% and 100% salary reductions for almost half a year, and who all are leading our theatres and our company in a time of considerable duress.

They're also doing more with much less in the way of resources to get leaner, almost incredibly. We have reduced by about one-third, the number of management staff on our payroll, both in our headquarters operations and at our theaters then we had at the beginning of last year.

With a goal of retaining our key managers, so they do not abandon AMC at the most crucial time when we need them the most, our board further authorized the creation of a modest bonus pool in lieu of the formal 2020 annual incentive plan. It's equal to approximately 30% of their annual bonus targets.

Individual awards will range from 20% to 50% of target depending upon the individual. The most common award will be 20%. We believe this will buy us considerable loyalty amongst our strongest and most needed performers, and at a most critical time. With that, let us leave you with a laser like focus on that which matters most to AMC at the moment.

The need for us to increase our liquidity to raise new cash or to conserve cash spending that will allow us to bridge from this moment to much deeper into 2021. We do after all have our Churchillian charts. We shall fight on the beaches. We shall fight on the landing grounds. We shall fight in the fields and in the streets. We shall fight in the hills.

And may I remind you all not to forget that Great Britain was on the winning side of that war. Thank you. And we now look forward to taking your questions.

Operator?.

[Operator Instructions] Our first question comes from Eric Wold with B. Riley FBR. Please proceed with your question..

Thank you. Good afternoon. Adam, it seems though we've seen more of a willingness of exhibitors to, you know, kind of bite the bullet and open theaters in less than optimal conditions. I guess the most recent being San Francisco with a lack of concessions.

From the conversation you had with those studio heads that view you as the LaGuardia so to speak, is there a point where they start taking some of that risk taking upon themselves? You know, well before, you know, a vaccine or something meaningful with that regard?.

A New Age, just before Thanksgiving. That's accompanied by five other Universal films, only one of which has already been released. So, Universal has got five more coming out in November and December. We've had significant conversations with Warner. We know that they're desperately trying to hold on to their Christmas release of Wonder Woman.

And with all these studios, we're expressing our desire and eagerness to lean in, and do whatever we can to support their movies, and to be flexible in how we consider various strategies for not only us to prosper, but for our studio partners to prosper as they release movies, as well. So yes, it's already happening.

And with respect to San Francisco, I would point out; we actually opened Philadelphia and Boston without food, and within three to four weeks, those municipalities agreed to let us go forward with concessions as well.

So, it's a very fast evolving landscape as to what individual jurisdictions are allowing us to do and we're going to continue to fight the fight..

One follow-up if I may.

I know you’ve been operating under a lot of restrictions around capacity and obviously a limited film slate, is there any way to get – given the sense of the percentage of the circuit that has reopened that's been able to do so, you know, a positive theater level cash flow, and you know, what that attendance kind of, you know, are breakeven point kind of look like?.

Yeah, we said in the last call that for theaters to have individual profitability at a theater level we need about 25% attendance to be generating cash rather than losing cash. I can tell you that, number one, the capacity restrictions, which in most cases are 40% of available seats, which is an AMC-imposed constraint.

We have a lot of jurisdictions that are letting us go to 50%, but we've chosen to stay at 40%. I don't think we've lost a single customer because we're limited to 40% of our seat capacity. We should be so thrilled to be anxious about losing the 41st percent or 51st percent of our seat capacity.

As Sean said, we're hovering down between 10% and 20% at those theaters that are open. In the United States, we're higher than that in Europe and the Middle East. But where we need to get to is around 25%, and then those theaters are generating cash, rather than burning cash. Now, that assumes that we're paying rent.

And we already did say on this call that not only did we defer and abate rent in Q2 and move a lot of rents in Q3 to percentage of revenues, but we are going to be going back to our landlord community again, and talking about further abating and deferring rent, given low attendance, but why don't we assume that we get up to 25% or more so that we are generating cash.

Remember that and I've said this on multiple occasions, movie theaters are not sports stadiums that typically sell out, or Broadway theaters that typically have every seat full. Movie theaters are more like churches built for Easter Sunday.

Last year, AMC, this is 2019, all pre-COVID, AMC sold more tickets for movie theaters than anybody else in the planet. And we only sold 17% of our available seats. So, this notion that seat limitation is going to cripple us is just wrong.

We modeled that even a 50% seat limitation, which we will move to once demand rises to levels where we need more than 40% of our seats would cost us only single-digit attendance, and that's before people re-spread themselves around to pick show – available show times on different days with better seating availability.

So, the seat constraints are not the issue. The issue is, demand on the one hand related to virus fears, but I think even more than that is the availability of movie titles. That's the thing that we need.

We, you know, I've said on TV’s, interviews that we're a new car dealership, and we're in the business of selling new cars, and Detroit stopped shipping us new cars seven months ago. The showroom is a little bare and it’s pretty hard to sell new cars, when there are no cars on the showroom floor..

Got it. Thanks Adam..

Thank you. Our next question comes from Jim Goss with Barrington Research. Please proceed with your question..

Thanks. Adam I’m wondering….

Hi, Jim..

Hi, how are you doing?.

All good..

Challenging time, no doubt..

All we got to do is, raise a little money, and we'll be just fine..

Well, do you have any thoughts or analysis, and those films that so far have shifted from a theatrical run, such as a couple of the Disney films in terms of their ability to recapture what they might have had if they did have a theatrical release, you know, in terms of how that might strengthen your argument against passing up any further situations like that?.

So, I do have a lot of thoughts, but I think it's more appropriate for the studios to talk about the success or lack of success of their shifting titles to streaming or PVOD, but let me say this, the conversations that we're having with every major studio is that AMC as we proved with the Universal deal is not stuck back in 1955.

We are willing to consider alternate models. We understand that the world of streaming is upon us. We believe that it optimizes our profitability, and studio profitability. If they can have a combination of theatrical releases, and streaming then that combo is far more lucrative for them, and certainly for us.

Then, if they pick streaming only, and ignore the $43 billion of revenues, that movie theaters generated globally last year for the makers of film.

And we also understand, though, that the combination of theatrical and streaming will be more lucrative to them, but could also be more lucrative for us, if we can somehow get participation in that streaming world, as we did with universal. So, look, I think there's a very compelling case to be made.

That is in the studio's best financial interest, not to choose the streaming world over the theatrical world, but to figure out intelligently a creative path that lets them navigate towards being able to benefit from both at the same time, and AMC has clearly expressed a willingness and an eagerness to play in that arena..

Along the lines of what you're suggesting, the larger the movie, and the bigger the budget, and the T&A, the less likely it is to be vulnerable to streaming fate, but as you go down that continuum, you hit some smaller films that might be more susceptible to that.

Do you have any sense as to where those lines might be drawn?.

No, but talking about a small movie, Universal released a movie called Kajillionaire last month, I think its theatrical run was single digit millions. That counts in your world as a small movie. They took that movie, first theatrically, and then PVOD at 17 days.

And we AMC made more money with that theatrical streaming combo, or theatrical PVOD combo, then we would have if it had just exclusively been in theaters with 74 day window..

Maybe just one other one and I’ll pass it….

You get as many of you want Jim. We got all day..

No, this is – others want to ask questions.

So, is there any thought or capability to sell any of your theater properties and be able to exit leases in a favorable way as you do try to look at ways to raise funds?.

Yes. Number one, we did in the quarter sell nine theaters in the Baltics for $77 million, and a 9.3 multiple was a lot more than we're being given credit for on Wall Street, of our budgeted EBITDA let alone the incident multiple of our actual EBITDA. We have a number of leases of non-productive theaters that expire every year, and very quietly.

Although I did tell you a couple of conference calls back this was our plan. We've probably ducked out of 40 theaters within the United States and Europe, where we were losing money. And so as opposed to being behind, so we didn't renew those theater leases, we're ahead.

And we will continue to have conversation with landlords about getting out of unproductive agreements..

Okay and that you generally would have a certain number of theaters, leases expiring every year. So, you have that choice.

Are there any other issues beyond that that you would look at as potential sources of funds?.

Yes, and we already have, but probably not appropriate for me to quantify it on this phone call. But yes, conversations have been held with multiple of our landlords about getting out of theater leases. Where we think it's in our best interest to do so and where the landlord might have a higher and better use for the real estate..

All right, thank you very much. Appreciate it and good luck..

Thanks, Jim..

Thank you. Our next question comes from Eric Handler with MKM Partners. Please proceed with the question..

Yes, thank you very much and good evening.

Few questions for you on liquidity, any chance you could update us about where you ended October in terms of cash?.

Eric, it’s Sean. I can’t update you as to where we ended October. October, obviously just ended last week, but I can give you some guidance on liquidity for the remainder of Q4, which hopefully will be somewhat helpful.

And I think the way to look at it, probably the best way to look at is look at it in a worst case scenario, in a worst case scenario, where the current level of attendance continues, right. So, we have no new movies released. And we just continue with the current level of attendance.

In that scenario, our monthly cash burn during Q4 will be a little bit higher than during Q3, and the reason it will be a little bit higher, is really one thing, it's the additional lease costs that we have in Q4 versus Q3 based on the current arrangements that we have with our landlords.

But if you just look at – with that, it'll be higher, you know, and just to quantify that, to be even more helpful there is if you think about our cash burn in July and August, run 115 million a month, it will be closer to that number than the average that we were for the quarter, and maybe around 5% to 10% higher than that. It just depends.

And this is the key point.

That's based on worst case scenarios, current agreements with landlords, but if you are forecasting our cash position based on that, I can tell you right now you're going to get it wrong because as we said in our prepared remarks, we have already raised through the ATM equity program, $95 million that came during the month of October.

We've already got additional partial proceeds from the Baltic cell, that's about $8 million. We've been selling real estate. We've sold about $7 million of real estate during October. We plan as Adam said to be back in the market with the ATM process. We're in discussions with landlords, etcetera, etcetera.

So, I’ve really given you the worst case scenario, but all these actions that we’re taking will offset that worst case scenario..

That assumes that we have – that we stay at today’s level of attendance. If the Christmas movies hold, then our level of attendance should increase and our revenue should increase as well. So, and you, it was in the press release, we had $418 million of cash at the end of September.

So, obviously, we want much more than that, we need much more than that, we extend, we have a goal of extending our financial runway deep into 2021, not early into 2021..

Yeah, thanks, Adam. And that actually clarifies our internal forecast would be much better cash burn than that because we're basing it upon the foam slate as it currently stands. And we believe we’ll hold..

That's helpful.

And then I assume that, whatever that burn rate is in excess of 100 million, what is your, it's – on average, your monthly cash interest expense of that total?.

That’s included in the numbers Sean just gave you..

Right.

And how much is that?.

Well, look, and it varies. Our [monthly cash] interest expense right now is, let me just take the annual and – running around $20 million a month. But that is included in the numbers..

Great, thank you. And the last question.

The equity shelf that you filed today, do you already have a sponsor in place like you did with Goldman and Citi for the ATM deal or are you negotiating with others? And then secondly, along with that, why just 20 million, I mean, right now 20 million shares will get you a little over $40 million, you would probably need much more than that? Why not do a larger shelf offering?.

Eric to avert gun jumping concerns, we can’t make any comment at all on the filing made this morning with the SEC..

Okay. Thank you..

Thank you..

Not wanting to duck your question, but being ordered by the Government of United States to duck your question..

Understand. Thank you..

Thanks, Eric..

Our next question comes from Alan Gould with Loop Capital. Please proceed with your question..

Thanks for taking my questions. Hello, Adam. Hello, Sean. I've got a few questions.

First, there was some trade speculation on your sale of your European theatres, not the Baltics, but the bulk of the remainder of the European Theaters [indiscernible] on chain etcetera, is there any comments you can make about that?.

Nope. We do not comment on rumors and speculation..

Okay. My next one for Sean. I believe your debt covenant waiver with the bank expires in March.

Have you already started discussions there, and you know, can you remind us what the covenant returns to after March?.

Sure. Absolutely. So, as you rightly say, we have a debt covenant holiday through March. Actually, the first time that we'll have to calculate our debt covenant numbers is at the end of June. That will be often second quarter. And after the second quarter, the debt covenant will be calculated by taking Q2 numbers multiplying it by four.

So, it's annualization of Q2. So, everything's in terms of where we sit relative to that debt covenant will depend on the fall in Q2. The covenant is 6x secured leverage, 6x EBITDA secured leverage ratio. The amount of secured debt that we have at the moment is 3.7 billion.

I will point out that the EBITDA that we use for the debt covenant calculation that's in the credit agreements is different to the EBITDA that is disclosed for financial reporting point of view, it tends to be higher. And so, you know, that's going to be our situation with the debt covenant, it's all going to be dependent on Q2 2021 performance..

Okay.

And then Adam when will we know, when will it be a better idea whether or not Warner is going to release Wonder Woman 1984 on Christmas? When would they have to start marketing it, I guess that would be our first sign of whether it's, we know the exact date that it's going to come out?.

They're going to start – look, I can tell you categorically they want to release on schedule. Their marketing will begin sometime this month, I would guess. When will we know exactly that Wonder Woman is opening on December 19, or December 20? I think on December 19, or December 20..

Okay. And then my last question for Sean. How much higher are the fixed costs today than they were say pre-COVID? So if we come out of this to the other end, how much higher are the fixed costs for the company? I know your rent is less, your interest expense is more, I'm just trying to put it all together.

Maybe your rent is more when you start having to pay back the deferred?.

Look, I think in general – a couple of things I'll say. One is, to start with our fixed cost is going to be pretty similar. But firstly, the rent is probably going to be lower based on the negotiations that we've had with landlords, right.

The second thing is, what I mentioned in my prepared remarks is the actions that we are taking looking at every single cost area that we've had, that we have in the organization. And we do see significant benefits there.

We’re targeting between $300 million and $400 million of cash benefits there, and that's cash benefits that includes reducing our CapEx. So there's significant benefits on that side. Cash rent does go up, but only in 2022, right, because of the pick interest that we have in 2021..

Okay, thanks for taking the questions..

Thank you. Our next question comes from Meghan Durkin with Credit Suisse. Please proceed with your question..

Hi, good afternoon, guys.

One for Sean, I wanted to know if you could give us a breakdown of where the cash burn is overseas versus the U.S.? And is there a minimum level of cash that you need on hand to keep running the business? And then I just – one more on market shares? How are things holding up where you are open? Has Regal closing helped you take share in those areas? How's that going?.

Hi Meghan, Sean. Just talking about the split of the cash burn between domestic and international. It's pretty normal for the relative size of the business. There's nothing dramatically different than what we see on both sides of the Atlantic.

And I think the second part of your question was, is there a minimum level of cash? There clearly is a minimal level of cash, but it's low. And that minimum level of cash is more in Europe just because of the structure of the European Organization, but we can run at pretty low levels of cash overall..

Okay..

And Meghan, yes, our market share obviously has increased given the closure of lots of other theaters. But as Sean said in his prepared remarks, we've modeled this thing extensively. At those theaters, where we're open, and half of them in the United States are only open weekends.

Most of our theaters only doing one or two show times a day, not the normal four. So, we're really pulling operating hours down, which is saving a ton of expense. It's not really much different financially for us to be open, managing tightly the way we are then closed.

But the benefits are, that we're still giving the sense to consumers that our theaters are open, that they can see movies when they primarily want to see them, which is weekends currently. And also, it's much less stressful on the buildings to have them open every single week, than to have them closed for a couple of months on end.

When you try to reopen a building after it's been completely buttoned down for months on end, there's a lot of extra expense that comes from starting back up from a dead stop. So, we think we're doing it the right way. And we are benefiting in the marketplace because our share is rising..

Okay, I'll leave it at that. Thanks..

Thank you..

Thank you. Our next question comes from Jason Bazinet with Citi. Please proceed with your question..

Thanks so much. I just had two questions.

Have there been any studios that have been willing to give you let's say 100% of the ticket value, at least until you get through this crunch period and sort of maybe [indiscernible] up the difference in arrears and pay it back to the studios at some later date? Then my second question is, is there any sort of wildcard here in terms of government assistance that could sort of help you through this crunch period? Thanks..

Thanks. So on your first question, we have enabled, you know, I've yet to find a studio that would like to graciously give us a 100% of the ticket sales, but I will tell you that studios have been very flexible on payment schedules. So, we've been able to hold on the money a lot longer.

In some cases, and incredibly, a lot longer than would be the norm, which helps our liquidity.

As for the wildcard, given that there's an election tomorrow, I don't think anybody can predict anything right now, but I do know that there has been discussion amongst certain political leaders of certain parties that if they're in power, post election, they might step-up their activity to support industry, but I think it's premature to get a sense of whether that will bear any fruit for our industry or our company, since nobody really knows what's going to happen tomorrow, until tomorrow comes that we may not even know tomorrow..

Fair enough. Thank you..

Thank you. Our next question comes from Chad Beynon with Macquarie. Please proceed with your question..

Good afternoon. This is [indiscernible] for Chad. So, hopefully we get a vaccine here and return to normal somewhat soon.

Once things do start to normalize, what's the CapEx environment going to look like? Are you going to have to kind of front load some of this maintenance CapEx into these theaters that you've pushed back over the last two quarters?.

Thanks.

So, since it's sort of a – let me hit your premise, so we are in touch with medical experts quite directly, both through the Harvard University School of Public Health, and I separately have had contact as recently as this past week with the former head of the FDA, and members of the boards of directors of certain pharmaceutical companies are working on vaccines.

I think there is a lot of confidence that there will be a vaccine approved by the U.S. government in November or December, but inoculations will begin in December or January. And that a sizable percentage of the U.S. population could be vaccinated as early as March or April.

Whether those predictions pan out to be true? Only time will tell, but people who are very knowledgeable in the field are telling us those are all likely scenarios. In terms of CapEx, you know, back when we were spending $500 million a year, we said if we ever needed to turn CapEx off, we could do it on a dime.

And boy, did we prove that to be the case. And if you ignore projects that were committed in prior years, we haven't even spent $50 million of CapEx on maintenance this year.

I think you should assume that we will continue to button down CapEx to the lowest conceivable number, potentially under $100 million as we go forward, if that's what is required to maintain the liquidity of the company.

So, is there any deferred maintenance that we're nervous about that's going to suddenly unleash a flood of CapEx spending? Absolutely not. It's the other way around. We're just not going to spend any money until we're out of the woods..

Okay, perfect. Thanks for the color Adam..

Remember, as I said before, a $1 of cash conserved is of equal value to AMC of an extra dollar risk. So, operator, I think that's the last question.

Is that correct?.

Yes, sir. That is the last question. I'd like to turn the floor back over to you for any closing remarks you may have..

Very brief. Thank you, everybody. As we close this call, I remind you that Goldfinger and The Hunt for Red October with Sean Connery will be at AMC all weekend. And remember this, we shall fight on the beaches. We shall fight on the landing grounds. We shall fight on the fields and in the streets. We shall fight in the hills.

Thank you for joining us today..

Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you for your participation and have a great day..