COVID-19 Ruined The Party For Even The Largest US Theater Operator

Movie theater operators hope that as more and more people get vaccinated and social distancing measures loosen up, their business will be allowed to snap back after a devastating year. Even the largest U.S. theater operator saw most of its revenue disappear last year as AMC Entertainment Holdings Inc AMC lost almost a billion dollars in the fourth quarter and $4.6 billion for all of 2020. Although people will go back to the movies, limited capacity will weigh heavily on AMC's profits. Adding the fact that AMC being forced to take on enormous amounts of debt to endure the pandemic, its interest payments will make it difficult for the company to survive over the long term.

AMC's Fourth Quarter Results

Adjusted for non-recurring items, the entertainment company came out with a quarterly loss of $3.15 per share, which is worse than Zacks Consensus Estimate of a loss of $2.80 and especially 2019's fourth earnings of $0.35 per share. With a hefty one-time impairment charge, net losses widened from $13.5 million the year before to $946 million. For full-year 2020, AMC lost $4.58 billion compared to $149 million loss in all of 2019.

On a somewhat brighter note, it topped revenue estimates although revenue plunged last quarter to $162 million from almost $1.5 billion the year before as the global pandemic created the most challenging market conditions in its century-old history. Revenue came at about $20 million above Wall Street's consensus estimates.

The Storm Is Far From Over

In a crucial move for the industry, New York City opened theaters after almost one year on March 5^th and AMC has opened all of its 13 locations but only at 25% capacity, or more precisely 50 people per screening. When Los Angeles kicks in, that will be the two biggest movie markets in the country but the ongoing European shutdowns will still be a huge headwind with not many tailwinds in sight, the strongest of which being the people's desire to return to normalcy.

Outlook

AMC has avoided bankruptcy by raising more than $1 billion in cash through stock sales and convertible debt deals since the fall. It has the cushion it needs to stay solvent through the summer. However, that puts it at a disadvantage as analysts find it could be years before the company is able to revisit its prior growth strategy as it repays its growing mountain of debt.

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