What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-11-04 · 433 added, 770 removed, 549 unchanged (69% of the section changed)

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In millions, except share and per share amounts)

March 31, 2021

March 31, 2020

Food and beverage

11 unchanged sentences

Operating costs and expenses

Operating income (loss)

Operating loss

Other expense (income):

4 unchanged sentences

Non-cash NCM exhibitor services agreement

Equity in (earnings) loss of non-consolidated entities

Equity in loss of non-consolidated entities

Investment expense (income)

Total other expense, net

Loss before income taxes

Net loss before income taxes

Income tax provision (benefit)

Net income (loss) attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Net loss attributable to AMC Entertainment Holdings, Inc.

Loss per share attributable to AMC Entertainment Holdings, Inc.'s common stockholders:

Net loss per share attributable to AMC Entertainment Holdings, Inc.'s common stockholders:

Average shares outstanding:

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended

Nine Months Ended

September 30,

(In millions)

March 31, 2021

March 31, 2020

Other comprehensive income (loss):

Unrealized foreign currency translation adjustments

Realized loss on foreign currency transactions reclassified into other expense

Unrealized foreign currency translation adjustments, net of tax

Pension adjustments:

Realized net loss reclassified into other expense, net of tax

Equity method investee's cash flow hedge:

Unrealized net holding loss arising during the period

Other comprehensive income (loss)

Net gain arising during the period

Other comprehensive loss

Total comprehensive loss

Comprehensive income (loss) attributable to noncontrolling interests

Comprehensive loss attributable to noncontrolling interests

Comprehensive loss attributable to AMC Entertainment Holdings, Inc.

3 unchanged sentences

(In millions, except share data)

September 30, 2020

March 31, 2021

December 31, 2020

27 unchanged sentences

Commitments and contingencies

Stockholders’ equity (deficit):

AMC Entertainment Holdings, Inc.'s stockholders' equity:

Stockholders’ deficit:

AMC Entertainment Holdings, Inc.'s stockholders' deficit:

Class A common stock ($ .01 par value, 524,173,073 shares authorized;

61,882,218 shares issued and 58,149,593 outstanding as of September 30, 2020;

454,012,865 shares issued and 450,280,240 outstanding as of March 31, 2021;

176,295,874 shares issued and 172,563,249 outstanding as of December 31, 2020)

Class B common stock ($ .01 par value, 51,769,784 shares authorized, issued and outstanding as of September 30, 2020 and December 31, 2019)

Class B common stock ($ .01 par value, 0 shares authorized, issued and outstanding as of March 31, 2021 and 51,769,784 shares authorized, issued and outstanding as of December 31, 2020)

Additional paid-in capital

Treasury stock ( 3,732,625 shares as of September 30, 2020 and December 31, 2019, at cost)

Accumulated other comprehensive loss

Treasury stock ( 3,732,625 shares as of March 31, 2021 and December 31, 2020, at cost)

Accumulated other comprehensive income (loss)

Accumulated deficit

Total AMC Entertainment Holdings, Inc.'s stockholders’ equity (deficit)

Total AMC Entertainment Holdings, Inc.'s stockholders’ deficit

Noncontrolling interests

Total equity (deficit)

Total liabilities and stockholders’ equity (deficit)

Total deficit

Total liabilities and stockholders’ deficit

See Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(In millions)

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Cash flows from operating activities:

3 unchanged sentences

Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill

Amortization of net discount (premium) on corporate borrowings to interest expense

Amortization of net premium on corporate borrowings to interest expense

Amortization of deferred financing costs to interest expense

2 unchanged sentences

Gain on dispositions

(Gain) loss on derivative asset and derivative liability

Loss on repayment of indebtedness

Equity in (earnings) loss from non-consolidated entities, net of distributions

Loss on derivative asset and derivative liability

Equity in loss from non-consolidated entities, net of distributions

Landlord contributions

Other non-cash rent

Other non-cash rent expense (benefit)

Deferred rent

3 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities:

Capital expenditures

Acquisition of theatre assets

Proceeds from disposition of long-term assets

2 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of Term Loan due 2026

Payment of principal Senior Secured Notes due 2023

Payment of principal Senior Subordinated Notes due 2022

Call premiums paid for Senior Secured Notes due 2023 and Senior Subordinated Notes due 2022

Principal payment of Term Loans due 2022 and 2023

Proceeds from issuance of First Lien Notes due 2025

Proceeds from issuance of First Lien Notes due 2026

Proceeds from issuance of Odeon Term Loan due 2023

Proceeds from First Lien Toggle Notes due 2026

Borrowings (repayments) under revolving credit facilities

Scheduled principal payments under Term Loans

Scheduled principal payments under Term Loan due 2026

Proceeds from Class A common stock issuance

Proceeds from sale of noncontrolling interest

Payments related to sale of noncontrolling interest

Principal payments under finance lease obligations

2 unchanged sentences

Taxes paid for restricted unit withholdings

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents and restricted cash

Net increase (decrease) in cash and cash equivalents and restricted cash

Net increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

3 unchanged sentences

Interest (including amounts capitalized of $ 0.2 million and $ 0.3 million)

Income taxes received, net

Income taxes (received) paid, net

Schedule of non-cash activities:

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

NOTE 1—BASIS OF PRESENTATION

2 unchanged sentences

and its subsidiaries, (collectively with Holdings, unless the context otherwise requires, the “Company” or “AMC”), is principally involved in the theatrical exhibition business and owns, operates or has interests in theatres located in the United States and Europe.

Holdings is an indirect subsidiary of Dalian Wanda Group Co., Ltd.

(“Wanda”), a Chinese private conglomerate.

As of September 30, 2020 and October 30, 2020, Wanda owned approximately 47.10 % and 37.68 % of Holdings’ outstanding common stock, respectively, and 72.76 % and 64.46 %, respectively, of the combined voting power of Holdings’ outstanding common stock and has the power to control Holdings’ affairs and policies, including with respect to the election of directors (and, through the election of directors, the appointment of management), entering into mergers, sales of substantially all of the Company’s assets and other transactions.

Temporarily Suspended Operations.

As of March 17, 2020, the Company temporarily suspended all theatre operations in its U.S.

Temporarily suspended or limited operations.

As of or before March 17, 2020, the Company temporarily suspended all theatre operations in its U.S.

markets and International markets in compliance with local, state, and federal governmental restrictions and recommendations on social gatherings to prevent the spread of COVID-19 and as a precaution to help ensure the health and safety of the Company’s guests and theatre staff.

As a result of these temporarily suspended operations, the Company’s revenues and expenses for the three and nine months ended September 30, 2020 are significantly lower than the revenues and expenses for the three and nine months ended September 30, 2019.

Industry Box Office.

The North American industry box office has been significantly impacted by COVID-19 in the third quarter ending September 30, 2020.

Although certain states authorized the reopening of theatres as early as June 2020, with limited seating capacities and social distancing guidelines, some states, including California, New York, and Maryland, remain partially closed for theatrical exhibition as of the end of October 2020.

As a result, studios have postponed new film releases or moved them to the home video market, and movie release dates may continue to move in the future.

Major movie releases that were previously scheduled to be released in the fourth quarter have either been rescheduled for 2021 or slated for direct to streaming in lieu of a theatrical release, leaving a reduced slate of movie releases for the remainder of the year, and release dates may continue to move.

Certain competitors have decided to temporarily reclose their theatres in light of the ongoing pandemic and the reduced slate of movie releases, which may further exacerbate the trend described above.

On October 23, 2020, the Company resumed operations at several AMC locations throughout the state of New York as a result of the state government allowing movie theatres to reopen throughout much of the state.

The combination of theatre reopening restrictions and limited new film distribution has resulted in a significantly lower industry box office for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

In response to the current low attendance levels, the Company has made adjustments to theatre operating hours to align screen availability and associated theatre operating costs with attendance levels for each theatre.

The Company has also introduced AMC Private Screening, which allows movie goers to reserve a separate AMC Safe & Clean TM auditorium for a private screening for up to 20 people, starting at $ 99 plus tax.

Update on Theatre Reopenings-U.S.

The Company’s theatre operations in the U.S.

markets remained suspended for the entire second quarter ended June 30, 2020.

The Company resumed limited operations in its U.S.

markets in late August 2020 with the initial 115 theatre reopenings occurring on August 20, 2020.

The Company reopened 170 additional theatres on August 26, 2020, and 142 additional theatres on September 4, 2020.

As of September 30, the Company had resumed operations at 467 U.S.

theatres, with limited seating capacities of between 25 % and 40 % , representing approximately 78 % of the U.S.

theatres and 73 % of 2019 U.S.

same-theatre revenue.

Since the resumption of operations in its U.S.

markets, the Company has served more than 1,973,000 guests as of September 30, 2020, representing a same-theatre attendance decline of approximately 83 % compared to the same period a year ago.

As of the end of October 2020, the Company operated approximately 539 of its 600 U.S.

theatres, with limited seating capacities.

The remaining 10 % of the U.S.

theatres left to reopen are primarily located in

California, Maryland, and New York, and include some of the Company’s most productive theatres, representing approximately 15 % of 2019 U.S.

same theatre revenue.

In regions where theatres are not yet able to open, the Company continues to have productive discussions with local and state government authorities about the appropriate timing for a resumption of operations.

Update on Theatre Reopenings-International markets.

The Company resumed limited operations in the International markets in early June.

As of June 30, 2020, the Company had resumed operations at 37 theatres, with limited seating capacities, in nine countries and recorded attendance of 100,000 guests in June.

As of July 31, 2020, the Company had resumed operations at 182 leased and partnership theatres.

As of September 30, 2020, the Company had resumed operations at 321 leased and partnership theatres.

This represents approximately 91 % of the Company’s international theatres and approximately 93 % of 2019 international same-theatre revenue.

Seating capacity at the reopened international theatres remains limited to between 25 % and 50 % of capacity to ensure social distancing for guests.

Since the resumption of operations in its International markets on June 3, 2020, the Company’s theatres have served more than 4,637,000 guests as of September 30, 2020, representing a same-theatre attendance decline of approximately 74 % compared to the same period a year ago.

As of the end of October 2020, the Company operated 261 of its 358 international theatres.

The reduction in open international theatres between September 30, 2020 and October 30, 2020 is a result of a recent resurgence of COVID-19 cases in its International markets.

Italy, Germany, Spain, Ireland and the UK have announced or enacted plans to reinstitute national or regional lockdowns to protect their citizenry.

As a result, the Company plans to close or has closed some or all of its previously reopened theatres in these countries, depending on the respective mandate.

The Company expects to reopen these theatres when the respective mandate has been lifted and it is safe to do so and permissible under local, provincial as well as national guidelines.

In response to the COVID-19 pandemic, the Company has taken and is continuing to take significant steps to preserve cash by eliminating non-essential costs, including reductions to executive cash compensation and elements of its fixed cost structure:

● Suspended non-essential operating expenditures, including marketing & promotional and travel and entertainment expenses;

and where possible, for example:

utilities, reduced essential operating expenditures to minimum levels necessary while theatres are closed.

● Terminated or deferred all non-essential capital expenditures to minimum levels necessary while theatres are closed.

● Implemented measures to reduce corporate-level employment costs, including full or partial furloughs of all corporate-level Company employees, including senior executives, with individual work load and salary reductions ranging from 20 % to 100 % ;

The Company resumed limited operations in the International markets in early June 2020 and limited operations in the U.S.

markets in late August 2020.

A COVID-19 resurgence during the fourth quarter of 2020 resulted in additional local, state, and federal governmental restrictions and many previously reopened theatres in International markets temporarily suspended operations again.

As a result of these temporarily suspended or limited operations, the Company’s revenues and expenses for the three months ended March 31, 2021 are significantly lower than the revenues and expenses for the three months ended March 31, 2020.

As of January 1, 2021, the Company was operating at 394 domestic theatres with limited seating capacities, representing approximately 67 % of its domestic theatres.

During the three months ended March 31, 2021, in response to eased restrictions by state and local governments, the Company resumed operations in key markets such as New York and Los Angeles.

As of March 31, 2021, the Company was operating at 585 domestic theatres with limited seating capacities, representing approximately 99 % of its domestic theatres.

As of January 1, 2021, the Company was operating at 109 International leased and partnership theatres, with limited seating capacities, representing approximately 30 % of its International theatres.

As of March 31, 2021, the Company was operating at 97 International theatres with limited seating capacities, representing approximately 27 % of its International theatres.

The Company’s average screens operated during the three months ended March 31, 2021 declined by 24.2 % from the prior year.

In response to the COVID-19 pandemic, the Company adjusted certain elements of its business strategy and took and continues to take significant steps to preserve cash by eliminating non-essential costs, including reductions to its variable costs and elements of its fixed cost structure, including, but not limited to:

● Suspended non-essential operating expenditures, including some marketing and promotional and travel and entertainment expenses, and where possible, utilities and reduced essential operating expenditures to minimum levels necessary while theatres are closed.

● Terminated or deferred all non-essential capital expenditures to minimum levels necessary while theatres are operating for limited hours or closed.

● Implemented measures to reduce corporate-level employment costs while closed, including full or partial furloughs of all corporate-level Company employees for a period of time, including senior executives, with individual work load and salary reductions ranging from 20 % to 100 % ;

cancellation of pending annual merit pay increases;

and elimination or reduction of non-healthcare benefits.

With the resumption of operations, the Company eliminated the full and partial furloughs and employment costs increased.

The increase in employment costs during the three months ended March 31, 2021 was primarily due to increases in bonus expense, stock-based compensation expense as a result of the modification and acceleration of vesting of awards during the current and prior year and increases in non-qualified deferred compensation expense due to increases in the fair values of related investments.

● All domestic theatre-level crew members were fully furloughed and theatre-level managements’ hours were reduced to the minimum levels necessary to begin resumption of operations when permitted.

Similar efforts to reduce theatre-level and corporate employment costs were undertaken internationally consistent with applicable laws across the jurisdictions in which the Company operates.

As the Company resumed limited operations, employment costs increased.

● Working with the Company’s landlords, vendors, and other business partners to manage, defer, and/or abate the related rent expenses and operating expenses during the disruptions caused by the COVID-19 pandemic.

As the Company resumed limited operations,

employment costs increased.

● Working with the Company’s landlords, vendors, and other business partners to manage, defer, and/or abate the related rent expenses and operating expenses.

● Introduced an active cash management process, which, among other things, requires senior management approval of all outgoing payments.

● Since April 24, 2020, the Company has been prohibited from making dividend payments in accordance with the covenant suspension conditions in its Senior Secured Credit Facility Agreement.

The Company had also previously elected to decrease the dividend paid in the first quarter of 2020 by $ 0.17 per share when compared to the first quarter of 2019.

The cash savings as a result of the prior decrease and current prohibition on making dividend payments was $ 59.1 million during the nine months ended September 30, 2020 in comparison to the nine months ended September 30, 2019.

● The Company is prohibited from making purchases under its recently authorized stock repurchase program in accordance with the covenant suspension conditions in its Senior Secured Credit Facility Agreement.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees.

Based on the Company’s analysis of the CARES Act, the Company expects to recognize the following benefits:

● Approximately $ 17.4 million of cash tax refunds from overpayments and refundable alternative minimum tax credits with the filing of the Company’s 2019 federal tax return, amending 2018 state tax returns and filing 2019 state tax returns in which the Company expects a refund.

Thus far in 2020, the Company has received approximately $ 7.1 million of cash tax refunds.

● Deferral of social security payroll tax matches that would otherwise be required in 2020.

● Receipt of a payroll tax credit in 2020 for expenses related to paying wages and health benefits to employees who are not working as a result of temporarily suspended operations and reduced receipts associated with COVID-19.

The Company intends to seek any available potential benefits, including loans, investments or guarantees, under future government programs for which the Company qualifies domestically and internationally, including those described above.

The Company has taken advantage of many forms of governmental assistance internationally including but not limited to revenue and fixed cost reimbursements, payroll subsidies, rent support programs, direct grants, and property tax holidays.

The Company cannot predict the manner in which such benefits will be allocated or administered, and the Company cannot assure the reader that it will be able to access such benefits in a timely manner or at all.

During the three months ended September 30, 2020, the Company exchanged more than 87 % of its senior subordinated notes for newly issued 10 %/ 12 % Cash/PIK Toggle Second Lien Subordinated Secured Notes due 2026 (the “Second Lien Notes due 2026”), thereby generating a near-term cash savings for the Company of between approximately $ 120 million to $ 180 million as a result of the ability to pay interest in kind on the Second Lien Notes due 2026 for the first three interest payment periods that would be payable semi-annually in arrears on June 15 and December 15, beginning on December 15, 2020 through December 15, 2021, subject to certain limitations described herein, and received proceeds from the issuance of the new 10.5 % first lien secured notes due 2026 (the “First Lien Notes due 2026”) of $ 270.0 million, net of discounts of $ 30.0 million and deferred financing costs paid to lenders of $ 6.0 million.

Further, as discussed in Note 6—Corporate Borrowings, the Company’s lenders have granted relief from the maintenance covenants in the revolving credit agreements through March 31, 2021.

The first required compliance in the next 12 months is June 30, 2021.

The Company’s ability to maintain compliance with the covenants will depend on the recovery of its theatre operations and the generation of sufficient cash flow (or EBITDA).

If the Company is not in compliance with financial covenants, the Company’s lenders could exercise remedies including declaring the principal and interest on all outstanding indebtedness due or payable immediately.

The Company’s cash and cash equivalents as of September 30, 2020 were $ 417.9 million.

The Company’s total cash burn for the three months ended September 30, 2020 was approximately $ 388 million and included approximately $ 39 million of third party costs and $ 23.3 million of accrued interest payments related to the Exchange Offers.

The Company’s total cash burn is impacted by, among other things, the timing of resumption of theatre operations, costs associated with the AMC Safe and Clean initiative, landlord negotiations and minimum lease payments, the timing of movie releases, theatre attendance levels, and food and beverage receipts.

Going forward, the Company’s ability to reduce cash burn rates and ultimately generate positive cash flow, and therefore the extent to which the Company will require additional sources of liquidity, will depend almost entirely on its future attendance levels that drive admission and food and beverage revenue.

Attendance in the fourth quarter of 2020 will be influenced by, among other things, the timing of new film releases, the ability to open remaining theatres in its major markets, the expansion or contraction of mandated seating capacity limitations, and consumer confidence in moviegoing.

If the Company experiences negative developments with any of these factors, among others, its cash burn rates and liquidity will also be negatively affected, and the Company may require additional sources of liquidity in amounts that could be material.

Furthermore, commencing in 2021, absent further negotiations with landlords, the Company’s cash expenditures for rent will increase significantly following periods of agreed deferrals.

Given the reduced movie slate for the fourth quarter, in the absence of significant increases in attendance from current levels or incremental sources of liquidity, at the existing cash burn rate, the Company anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021.

Thereafter, to meet its obligations as they become due, the Company will require additional sources of liquidity or increases in attendance levels.

The required amounts of additional liquidity are expected to be material.

● Since April 24, 2020, the Company has been prohibited from making dividend payments in accordance with the covenant suspension conditions in its Credit Agreement (as defined below).

The Company had also previously elected to decrease the dividend paid in the first quarter of 2020 by $ 0.17 per share.

The cash savings as a result of the prior decrease and current prohibition on making dividend payments was $ 4.3 million during the three months ended March 31, 2021 in comparison to the three months ended March 31, 2020.

● The Company is prohibited from making purchases under its authorized stock repurchase program in accordance with the covenant suspension conditions in its Senior Secured Credit Facility Agreement.

The Company has taken advantage of many forms of governmental assistance in the U.S.

and internationally including but not limited to revenue and fixed cost reimbursements, payroll subsidies, rent support programs, direct grants, and property tax holidays.

The Company cannot predict the manner in which such benefits will be allocated or administered, and the Company cannot assure it will be able to access such benefits in a timely manner or at all.

In addition to preserving cash, the Company enhanced liquidity through debt issuances, debt exchanges and equity sales as follows.

See Note 6 — Corporate Borrowings and Finance Lease Obligations and Note 7 — Stockholders’ Equity for further information.

● The April 2020 issuance of $ 500 million of 10.5 % first lien notes due 2025 (the “First Lien Notes due 2025”).

● The July 2020 completion of a debt exchange offer in which the Company issued approximately $ 1.46 billion aggregate principal amount of 10 % / 12 % Cash/PIK toggle second lien subordinated notes due 2026 (the “Second Lien Notes due 2026”) in exchange for approximately $ 2.02 billion principal amount of the Company’s senior subordinated notes, reducing the principal amounts of the Company’s debt by approximately $ 555 million and extending maturities on approximately $ 1.7 billion of debt to 2026, most of which was maturing in 2024 and 2025 previously.

Interest on the Second Lien Notes due 2026 for the first three six-month interest periods after the issue date is expected to be paid all or in part on an in-kind basis pursuant to the terms of the Second Lien Notes due 2026.

● The July 2020 issuance of the 10.5 % first lien secured notes due 2026 (the “First Lien Notes due 2026”) in which the Company received proceeds of $ 270.0 million, net of discounts and deferred charges.

● The launch of several “at-the-market” equity offerings to raise capital through the sale of the Company’s Class A common stock.

During the year ended December 31, 2020, the Company sold 91.0 million shares, generating $ 272.8 million in gross proceeds and paid fees to sales agents of $ 6.8 million.

In January 2021, the Company sold 187.1 million shares, generating $ 596.9 million in gross proceeds and paid fees to sales agents of $ 14.9 million and other fees of $ 0.4 million.

See Note 13 — Subsequent Event for information regarding the additional at-the-market offerings of 43 million shares related to the Company’s remaining authorized shares of Class A common stock.

● The December 2020 issuance of 21,978,022 shares of Class A common stock to Mudrick Capital Management, LP (“Mudrick”) in exchange for $ 104.5 million aggregate principal amount of the Second Lien Notes due 2026 and a commitment from Mudrick to purchase $ 100 million aggregate principal amount of 15 % / 17 % Cash/PIK toggle first lien secured notes due 2026 (“First Lien Toggle Notes due 2026”) which the Company issued to Mudrick in January 2021 for cash.

● The January 2021 conversion by holders of all $ 600 million of the Company’s 2.95 % Convertible Senior Secured Notes due 2026 into shares of the Company’s Class A common stock at a conversion price of $ 13.51 which resulted in the issuance of 44,422,860 shares of its Class A Common Stock and reduced annual cash interest expense by $ 17.7 million.

● The February 2021 entry into a new £ 140.0 million and € 296.0 million term loan facility agreement (the “Odeon Term Loan Facility”) by Odeon Cinemas Group Limited (“Odeon”).

Approximately £ 89.7 million and € 12.8 million of the net proceeds from the Odeon Term Loan Facility were used to repay in full Odeon’s

obligations (including principal, interest, fees and cash collateralized letters of credit) under its existing revolving credit facility and the remaining net proceeds will be used for general corporate purposes .

If attendance levels increase consistent with the Company’s assumptions described below, it currently estimates that its existing cash and cash equivalents will be sufficient to comply with minimum liquidity requirements under its debt covenants, fund operations, and satisfy obligations including cash outflows for increased rent and planned capital expenditures currently and through early May of 2022.

This requires that the Company achieve significant increases in attendance levels beginning in the third quarter of 2021 and ultimately reaching 85 % of pre COVID-19 attendance levels by the fourth quarter of 2021 and through the first and second quarters of 2022, as the vaccine rollout continues and more Hollywood product is released in its theatres.

The Company entered into the Ninth Amendment (as defined below) to the Credit Agreement (as defined below) pursuant to which the requisite revolving lenders party thereto agreed to extend the suspension period for the financial covenant applicable to the Senior Secured Revolving Credit Facility (as defined below) from March 31, 2021 to March 31, 2022, as described, and on the terms and conditions specified, therein.

As a result, the Company will be subject to the financial covenant beginning with the quarter ending June 30, 2022.

The Company is subject to minimum liquidity requirements of approximately $ 145 million of which $ 100 million is required under the conditions for the Extended Covenant Suspension Period under the Senior Secured Revolving Credit Facility during the Extended Covenant Suspension Period, as amended, and £ 32.5 million (approximately $ 45 million) required under the Odeon Term Loan Facility.

The Company’s liquidity needs thereafter will depend, among other things, on the timing of a full resumption of operations, the timing of movie releases and its ability to generate cash from operations.

The Company continues to explore potential sources of additional liquidity, including:

● Additional debt and equity financing;

to date, the Company raised gross proceeds of approximately $ 2.9 million and $ 53.2 million during September 2020 and October 2020, respectively, through its at-the-market offering of approximately 15.0 million shares of its Class A common stock, see Note 7—Stockholders’ Equity for further information.

In addition, the Company announced on October 20, 2020, it authorized the sale of 15.0 million additional shares of its Class A common stock through at-the-market offerings, under which, as of the October

30, 2020 settlement date, the Company has raised additional gross proceeds of approximately $ 33.8 million through the sale of approximately 11.8 million shares of its Class A common stock ;

● Further renegotiations with landlords regarding its lease payments;

● Potential asset sales;

● Joint-venture or other arrangements with existing business partners;

● Minority investments in the Company’s capital stock.

There is a significant risk that these potential sources of liquidity will not be realized or that they will be insufficient to generate the material amounts of additional liquidity that would be required until the Company is able to achieve more normalized levels of operating revenues.

In the event the Company determines that these sources of liquidity will not be available to it or will not allow it to meet its obligations or does not comply with financial covenants as they become due, it would likely seek an in-court or out-of-court restructuring of its liabilities, and in the event of a future liquidation or bankruptcy proceeding, holders of the Company’s common stock would likely suffer a total loss of their investment.

The Company’s cash burn is impacted by, among other things, the timing of resumption of theatre operations, including with respect to some of the Company’s most productive theatres which remain closed, the timing of movie releases and the slate of future releases, theatre attendance levels, landlord negotiations and minimum lease payments, costs associated with the AMC Safe and Clean initiative, and food and beverage receipts.

While the Company has used its best estimates based on currently available information, it is very difficult to estimate its liquidity requirements and future cash burn rates, and depending on the assumptions used regarding the timing and ability to achieve more normalized levels of operating revenue, the estimates of amounts of required liquidity vary significantly.

There can be no assurance that the accuracy of the assumptions used to estimate its liquidity requirements and future cash burn will be correct, or that the Company will be able to achieve more normalized levels of attendance described above, which are materially higher than its current attendance levels, and its ability to be predictive is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic, which has resulted in stay-at-home orders, governmental closure orders, film production and scheduling disruption, reopening uncertainties and the cessation of its entire U.S.

and International theatre operations for the first time in its history.

The Company realized significant cancellation of debt income (“CODI”) in connection with its debt restructuring.

As a result of such CODI, the Company estimates a significant portion of its net operating losses and tax credits will be eliminated as a result of tax attribute reductions.

● Additional equity financing.

On April 27, 2021, the Company’s Board of Directors (the “Board”) determined not to seek stockholder approval of the proposal to approve an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to increase the total number of shares of Class A common stock (par value $ 0.01 per share) the Company shall have the authority to issue by 500,000,000 shares to a total of 1,024,173,073 shares of Class A common stock (“Proposal 1”), and has withdrawn Proposal 1 from the agenda for the 2021 annual meeting of stockholders (the “Annual Meeting”).

The Board reserves the right to propose an amendment of the Certificate of Incorporation to increase the authorized shares or for other items at any point in the future.

The Company plans to pursue equity issuances for its remaining authorized shares.

See Note 13 — Subsequent Event for information regarding the additional at-the-market offerings of 43 million shares related to the Company’s remaining authorized shares of Class A common stock.

The amount of liquidity the Company might generate will primarily depend on the market price of its Class A common stock, trading volumes, which impact the number of shares the Company is able to sell, and the available periods during which sales may be made.

Because the Company’s market price and trading volumes are volatile, there is no guarantee as to the amounts of liquidity it might generate or that its prior experience accurately predicts the results the Company will achieve.

● Landlord negotiations .

Commencing in 2021, the Company’s cash expenditures for rent are scheduled to increase significantly as a result of rent obligations that had been deferred to 2021 and future years that were approximately $ 473.0 million as of March 31, 2021.

In light of the Company’s liquidity challenges, and in order to establish its long-term viability, the Company believes it must continue to reach accommodations with its landlords to abate or defer a substantial portion of the Company’s rent obligations, in addition to generating sufficient amounts of liquidity through equity issuances and the other potential financing arrangements discussed below.

Accordingly, the Company entered into additional landlord negotiations to seek material reductions, abatements and deferrals in its rent obligations.

In connection with these negotiations, the Company has finalized agreements or agreements in principle with the landlords for a majority of leases where the Company has entered into negotiations.

To the extent the Company achieves substantial deferrals but not abatements, its cash requirements will increase substantially in the future.

● Other creditor discussions .

While the liquidity the Company has raised has substantially extended its liquidity runway, the new debt the Company has issued or that has been committed, together with the higher interest rate payments that will be required in the future but have largely been deferred, will substantially increase its leverage and future cash requirements.

These future cash requirements, like the Company’s deferred rent obligations, will present a challenge to its long-term viability if its operating income does not return to pre-COVID levels.

Even then, the Company believes it will need to engage in discussions with its creditors to substantially reduce its leverage.

The Company expects to continue to explore alternatives that include new-

money financing and may involve converting debt to equity, which would help manage its leverage but could be dilutive to holders of its common stock.

These discussions may not result in any agreement on commercially acceptable terms.

● Covenant suspension.

The Company entered into the Ninth Amendment, pursuant to which the requisite revolving lenders party thereto agreed to extend the suspension period for the financial covenant applicable to the Senior Secured Revolving Credit Facility from March 31, 2021 to March 31, 2022, as described, and on the terms and conditions specified, therein.

See Note 6 — Corporate Borrowings and Finance Lease Obligations for further information.

● Joint-venture or other arrangements with existing business partners and minority investments in capital stock.

The Company continues to explore other potential arrangements, including equity investments, to generate additional liquidity.

It is very difficult to estimate the Company’s liquidity requirements, future cash burn rates and future attendance levels.

Depending on the Company’s assumptions regarding the timing and ability to achieve more normalized levels of operating revenue, the estimates of amounts of required liquidity vary significantly.

Similarly, it is very difficult to predict when theatre attendance levels will normalize, which the Company expects will depend on the widespread availability and use of effective vaccines for the coronavirus.

However, the Company’s current cash burn rates are not sustainable.

Further, the Company cannot accurately predict what future changes may occur to the supply or release date of movie titles available for theatrical exhibition once moviegoers are prepared to return in large numbers.

Nor can the Company know with certainty the impact on consumer movie-going behavior of Warner Bros.’s decision to release its entire 2021 slate of movies on HBO Max at the same time as the movies debut in theatres, or the potential attendance impact of other studio decisions to accelerate in home availability of their theatrical movies.

Studio negotiations regarding evolving theatrical release models and film licensing terms are ongoing.

There can be no assurance that the attendance levels and other assumptions used to estimate the Company’s liquidity requirements and future cash burn rates will be correct, and its ability to be predictive is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic.

Further, there can be no assurances that the Company will be successful in generating the additional liquidity necessary to meet its obligations beyond twelve months from the issuance of these financial statements on terms acceptable to the Company or at all.

If the Company is unable to maintain or renegotiate its minimum liquidity covenant requirements, it could have a significant adverse effect on the Company’s business, financial condition and operating results.

The Company also realized significant cancellation of debt income (“CODI”) in connection with its debt restructuring.

As a result of such CODI, the Company estimates a significant portion of its net operating losses will be eliminated as a result of tax attribute reductions.

Any loss of tax attributes as a result of such CODI may adversely affect the Company’s cash flows and therefore its ability to service its indebtedness.

Due to these factors, substantial doubt exists about the Company’s ability to continue as a going concern for a reasonable period of time.

Use of Estimates.

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consequently, a portion of its stockholders’ equity, net earnings (loss) and total comprehensive income (loss) for the periods presented are attributable to noncontrolling interests.

Due to the seasonal nature of the Company’s business and the suspension of operations at all the Company’s theatres due to the COVID-19 pandemic, results for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

Due to the seasonal nature of the Company’s business and the suspension of operations at all the Company’s theatres due to the COVID-19 pandemic, results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected

for the year ending December 31, 2021.

The Company manages its business under two reportable segments for its theatrical exhibition operations, U.S.

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Baltics’ theatre sale agreement.

On August 28, 2020, the Company entered into an agreement to sell its equity interest in Forum Cinemas OU, which consists of nine theatres located in the Baltics’ region (Latvia, Lithuania and Estonia) and is included in the Company’s International markets reportable segment, for total consideration of approximately € 77.25 million, including cash of approximately € 64.35 million or $ 76.6 million prior to any transaction costs.

On August 28, 2020, the Company entered into an agreement to sell its equity interest in Forum Cinemas OU, which consists of nine theatres located in the Baltics’ region (Latvia, Lithuania and Estonia) and was included in the Company’s International markets reportable segment, for total consideration of approximately € 77.25 million, including cash of approximately € 64.35 million or $ 76.6 million prior to any transaction costs.

This transaction was undertaken by the Company to further increase its liquidity and strengthen its balance sheet at a transaction multiple that demonstrates that market participants ascribe positive value to the business.

The completion of the sale will take place in several steps and is contingent upon clearance from each regulatory competition council in each country.

The Company received $ 37.5 million (€ 31.53 million) cash consideration upon entering into the sale agreement on August 28, 2020, transferred an equity interest of 49 % in Forum Cinemas OU to the purchaser and recognized a noncontrolling interest of $ 34.9 million in total equity (deficit).

Transaction costs of $ 1.0 million and net gain of $ 2.8 million related to the sale of 49 % equity interest were recorded in additional paid-in capital during the three and nine months ended September 30, 2020.

The carrying amounts of the major classes of assets and liabilities included as part of the disposal group that were previously included in the International markets reportable segment were;

The Company received $ 37.5 million (€ 31.53 million) cash consideration upon entering into the sale agreement on August 28, 2020, transferred an equity interest of 49 % in Forum Cinemas OU to the purchaser and recorded an initial noncontrolling interest of $ 34.9 million in total equity (deficit).

During the three months ended March 31, 2021 and the three months ended December 31, 2020, the Company received cash consideration for the remaining interest in Estonia and Latvia of $ 4.1 million (€ 3.4 million) and $ 6.4 million (€ 5.4 million), respectively.

Transaction costs of $ 1.4 million and net gain of $ 1.2 million related to the sale of 49 % equity interest of Lithuania and Estonia and the 100 % disposal of Latvia were recorded in additional paid-in capital during the six months ended December 31, 2020.

Additional transaction costs of $ 0.1 million and net gain of $ 0.3 million related to the sale of 51 % equity interest of Estonia were recorded in additional paid-in capital during the three months ended March 31, 2021.

The transaction costs and net gain recorded in additional paid-in capital will be recognized in earnings when the remaining 51 % interest in Lithuania is disposed.

At March 31, 2021, the carrying amounts of the major classes of assets and liabilities included as part of the disposal group that were previously included in the International markets reportable segment were;

goodwill of $ 36.3 million, property, net, of $ 9.1 million, operating lease right-of-use assets, net of $ 12.4 million, and current and long-term operating lease liabilities of $ 1.2 million and $ 11.4 million, respectively.

The remaining cash consideration is payable upon completion of the sale of the remaining 51 % equity interest, which is expected to occur in three separate transactions by country following competition council clearance in each country.

At September 30, 2020, the Company’s noncontrolling interest of 49 % in Forum Cinemas was $ 34.7 million.

The Company estimates the sale of Forum Cinemas will be completed in 2021.

Accumulated other comprehensive loss.

The following table presents the change in accumulated other comprehensive loss by component:

The remaining cash consideration of approximately $ 31.9 million (€ 26.3 million) was paid upon completion of the sale of the remaining 51 % equity interest in Lithuania on May 6, 2021.

At March 31, 2021, the Company’s noncontrolling interest of 49 % in Lithuania was $ 22.4 million in net assets.

Accumulated other comprehensive income (loss).

The following table presents the change in accumulated other comprehensive income (loss) by component:

(In millions)

Pension Benefits

Balance December 31, 2020

Other comprehensive loss before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Balance September 30, 2020

Other comprehensive (income) loss

Balance March 31, 2021

Accumulated depreciation and amortization.

Accumulated depreciation was $ 2,143.9 million and $ 1,820.1 million at September 30, 2020 and December 31, 2019, respectively, related to property.

Accumulated amortization of intangible assets was $ 34.8 million and $ 22.8 million at September 30, 2020 and December 31, 2019, respectively.

Accumulated depreciation was $ 2,330.0 million and $ 2,243.1 million at March 31, 2021 and December 31, 2020, respectively, related to property.

Accumulated amortization of intangible assets was $ 42.4 million and $ 42.0 million at March 31, 2021 and December 31, 2020, respectively.

Other expense (income).

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Three Months Ended

Nine Months Ended

September 30,

(In millions)

March 31, 2021

March 31, 2020

Derivative liability fair value adjustment for embedded conversion feature in the Convertible Notes

Derivative asset fair value adjustment for contingent call option related to the Class B common stock purchase and cancellation agreement

Credit losses related to contingent lease guarantees

International governmental assistance due to COVID-19

Loss on Pound sterling forward contract

Foreign currency transactions losses

Credit losses (income) related to contingent lease guarantees

Governmental assistance due to COVID-19

Foreign currency transaction (gains) losses

Non-operating components of net periodic benefit cost

Loss on repayment of indebtedness

Financing fees related to modification of debt agreements

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Three Months Ended

Nine Months Ended

September 30,

(In millions)

March 31, 2021

March 31, 2020

Impairment of long-lived assets

Impairment of indefinite-lived intangible assets

Impairment of definite-lived intangible assets

Impairment of indefinite-lived intangible assets

Impairment of goodwill

Investment expense

Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill

Impairment of other assets recorded in investment expense (income)

Total impairment loss

(1) See Note 4 — Goodwill for information regarding goodwill impairment.

During the three months ended March 31, 2020, the enterprise fair values of the Domestic Theatres and International Theatres reporting units were less than their carrying values and goodwill impairment charges of $ 1,124.9 million and $ 619.4 million were recorded for the Company’s Domestic Theatres and International Theatres reporting units, respectively.

The Step 1 quantitative goodwill impairment test was performed due to a decline in the common stock price and prices of the Company’s corporate borrowings and the resulting impact on market capitalization were two of several factors considered when making this evaluation, including the sustained declines during 2020 in the Company’s enterprise market capitalization and the temporary suspension of operations at all of the Company’s theatres on or before March 17, 2020 due to the COVID-19 pandemic.

See Note 4—Goodwill for further information.

The Company evaluates definite-lived and indefinite-lived intangible assets for impairment annually or more frequently as specific events or circumstances dictate or changes in circumstances indicate that the carrying amount of the asset group may not be fully recoverable.

The Company recorded non-cash impairment of long-lived assets of $ 28.1 million on 49 theatres in the U.S.

markets with 527 screens (in Alabama, California, Colorado, Florida, Illinois, Indiana, Iowa, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Wisconsin, and Wyoming) and $ 0 in the International markets during the three months ended September 30, 2020.

During the nine months ended September 30, 2020, the Company recorded non-cash impairment of long-lived assets of $ 109.5 million on 75 theatres in the U.S.

markets with 851 screens (in Alabama, Arkansas, California, Colorado, District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming) and $ 9.9 million on 23 theatres in the International markets with 213 screens (in Germany, Italy, Spain, UK and Sweden).

During the three and nine months ended September 30, 2020, the Company recorded impairment losses related to definite-lived intangible assets of $ 6.4 and $ 14.4 million, respectively.

In addition, in the three and nine months ended September 30, 2020, the Company recorded an impairment loss of $ 0 and $ 7.2 million, respectively within investment expense (income), related to equity interest investments without a readily determinable fair value accounted for under the cost method.

At September 30, 2020 and March 31, 2020, the Company performed a quantitative impairment evaluation of its indefinite-lived intangible assets related to the AMC, Odeon and Nordic tradenames.

The Company recorded

impairment charges of $ 4.5 million and $ 10.4 million related to Odeon tradename and $ 0.1 million and $ 2.5 million related to Nordic tradenames for the three and nine months ended September 30, 2020, respectively.

No impairment charges were recorded related to the AMC trade name for the three and nine months ended September 30, 2020.

During the three months ended March 31, 2020, the Company recorded non-cash impairment of long-lived assets of $ 81.4 million on 57 theatres in the U.S.

markets with 658 screens (in Alabama, Arkansas, California, District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming) and $ 9.9 million on 23 theatres in the International markets with 213 screens (in Germany, Italy, Spain, UK and Sweden).

During the three months ended March 31, 2020, the Company recorded impairment losses related to definite-lived intangible assets of $ 8.0 million.

In addition, the Company recorded an impairment loss of $ 7.2 million within investment expense (income), related to equity interest investments without a readily determinable fair value accounted for under the cost method.

During the three months ended March 31, 2020, the Company performed a quantitative impairment evaluation of its indefinite-lived intangible assets related to the AMC, Odeon and Nordic trade names and recorded impairment charges of $ 5.9 million related to Odeon trade names and $ 2.4 million related to Nordic trade names during the three months ended March 31, 2020.

To estimate fair value of the Company’s indefinite-lived trade names, the Company employed a derivation of the Income Approach known as the Royalty Savings.

No impairment charges for indefinite-lived intangible assets were recorded during the three months ended March 31, 2021.

The Company first assessed the qualitative factors to determine whether the existence of events and circumstances indicated that it was more likely than not the fair value amounts of any indefinite-lived intangible assets were less than their carrying amounts and concluded it was not more likely than not that the fair value amounts were less than their carrying amounts at March 31, 2021.

Accounting Pronouncements Recently Adopted

Financial Instruments.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets.

Such guidance impacts how the Company determines its allowance for estimated uncollectible receivables and also contingent lease guarantees, where the Company remains contingently liable for lease payments under certain leases of theatres that it previously divested, in the event that such assignees are unable to fulfill their future lease payment obligations.

ASU 2016-13 was effective for the Company in the first quarter of 2020.

The Company recognized the cumulative effect upon adoption of the new standard related to credit losses for contingent lease guarantees of $ 16.9 million.

See Note 11—Commitments and Contingencies for further information regarding contingent lease guarantees.

The adoption impact on the Company’s allowance for estimated uncollectible receivables was immaterial as of January 1, 2020 and September 30, 2020.

The cumulative effect of adoption was recorded to accumulated deficit under the modified retrospective adoption method.

Fair Value Measurement.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project.

Entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but are required to disclose the range and weighted average used to develop significant observable inputs for Level 3 fair value measurements.

The fair value measurement disclosure requirements of ASU 2018-13 was effective for the Company in the first quarter of 2020.

See Note 9—Fair Value Measurements for the required disclosures for Level 3 fair value measurements.

Cloud Computing Arrangement.

In August 2018, the FASB issued ASU 2018-15, Intangibles–Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”).

ASU 2018-15 requires a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation, setup, and other upfront costs to capitalize as assets or expense as incurred.

ASU 2018-15 was effective for the Company in the first quarter of 2020.

Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively in accordance with ASC 250-10-45.

The Company adopted ASU 2018-15 prospectively and the adoption of ASU 2018-15 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Accounting Pronouncements Issued Not Yet Adopted

Income Taxes.

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The new guidance also clarifies the accounting for transactions that result in a step-up in the tax basis for goodwill.

ASU 2019-12 is effective for the Company in the first quarter of 2021.

Early adoption is permitted.

The Company is currently evaluating the effect that ASU 2019-12 will have on its consolidated financial statements.

ASU 2019-12 was effective for the Company in the first quarter of 2021.

The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements.

NOTE 2—LEASES

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Lease terms vary but generally the leases provide for fixed and escalating rentals, contingent escalating rentals based on the Consumer Price Index and other indexes not to exceed certain specified amounts and variable rentals based on a percentage of revenues.

The Company often receives

contributions from landlords for renovations at existing locations.

The Company often receives contributions from landlords for renovations at existing locations.

The Company records the amounts received from landlords as an adjustment to the right-of-use asset and amortizes the balance as a reduction to rent expense over the base term of the lease agreement.

Equipment leases primarily consist of digital projectors and food and beverage equipment.

Equipment leases primarily consist of food and beverage equipment.

The Company received, or is in process of negotiating, rent concessions provided by the lessors that aided, or will aid, in mitigating the economic effects of COVID-19.

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The deferred payment amounts have been recorded in the Company’s lease liabilities to reflect the change in the timing of payments.

As of September 30, 2020, approximately $ 31.4 million of lease liabilities were deferred and included in current maturities of operating lease liabilities and approximately $ 47.7 million of lease liabilities were deferred and included in long-term operating lease liabilities, which are reflected in the condensed consolidated statements of cash flows as part of the change in accrued expenses and other liabilities.

The deferred payment amounts included in current maturities of operating lease liabilities and long-term operating lease liabilities are reflected in the condensed consolidated statements of cash flows as part of the change in accrued expenses and other liabilities.

Those leases that did not meet the criteria for treatment under the FASB relief were evaluated as lease modifications.

The Company recorded $ 185.1 million in accounts payable for contractual rent amounts due and not paid, which is reflected in the statement of cash flows as part of the change in accounts payable.

In addition, the Company included deferred lease payments of $ 66.3 million in operating lease right-of-use assets as a result of lease remeasurements.

The Company is in the process of negotiating or finalizing rent concessions or deferral of payments with the lessors with respect to these rent payables.

The following table reflects the lease costs for the three and nine months ended September 30, 2020 and September 30, 2019:

The deferred payment amounts included in accounts payable for contractual rent amounts due and not paid are reflected in accounts payable on the condensed consolidated balance sheets and in the condensed consolidated statements of cash flows as part of the change in accounts payable.

In addition, the Company included deferred lease payments in operating lease right-of-use assets as a result of lease remeasurements.

A summary of deferred payment amounts related to rent obligations for which payments have been deferred to 2021 and future years are provided below:

Increase (decrease)

(In millions)

in deferred amounts

Fixed operating lease deferred amounts (1) (2)

Finance lease deferred amounts

Variable lease deferred amounts (2)

Total deferred lease amounts

(1) During the three months ended March 31, 2021, the increase in fixed operating lease deferred amounts is net of $ 19.1 million of decreases in the deferred balances as of December 31, 2020 related to payments and abatements.

(2) During the three months ended March 31, 2021, decreases in variable lease deferred amounts were primarily due to resolution of contingencies, therefore, variable amounts became fixed and were reclassified to fixed operating lease deferred amounts.

The following table reflects the lease costs for the three months ended March 31, 2021 and March 31, 2020:

Three Months Ended

Nine Months Ended

Consolidated Statement

September 30,

(In millions)

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Cash flow and supplemental information is presented below:

Nine Months Ended

September 30,

Three Months Ended

(In millions)

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(1) Includes lease extensions and option exercises.

The following table represents the weighted-average remaining lease term and discount rate as of September 30, 2020:

As of September 30, 2020

The following table represents the weighted-average remaining lease term and discount rate as of March 31, 2021:

As of March 31, 2021

Weighted Average

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Finance leases

Minimum annual payments required under existing operating and finance lease liabilities (net present value thereof), as of September 30, 2020, are as follows:

Minimum annual payments required under existing operating and finance leases and the net present value thereof as of March 31, 2021 are as follows:

Operating Lease

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(In millions)

Three months ending December 31, 2020

Nine months ending December 31, 2021 (1)

Total lease payments

Less imputed interest

As of September 30, 2020, the Company had signed additional operating lease agreements for 5 theatres that have not yet commenced of approximately $ 136.6 million, which are expected to commence between 2021 and 2024, and carry lease terms of approximately 5 to 20 years .

(1) Does not include amounts recorded in accounts payable for deferred rent.

As of March 31, 2021, the Company had signed additional operating lease agreements for 6 theatres that have not yet commenced of approximately $ 150.0 million, which are expected to commence between 2021 and 2024, and carry lease terms of approximately 5 to 20 years .

The timing of lease commencement is dependent on the landlord providing the Company with control and access to the related facility.

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Three Months Ended

Nine Months Ended

September 30,

(In millions)

March 31, 2021

March 31, 2020

Major revenue types

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Other theatre:

Screen advertising

Other theatre

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Three Months Ended

Nine Months Ended

September 30,

(In millions)

March 31, 2021

March 31, 2020

Timing of revenue recognition

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(In millions)

September 30, 2020

March 31, 2021

December 31, 2020

4 unchanged sentences

(In millions)

September 30, 2020

March 31, 2021

December 31, 2020

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Foreign currency translation adjustment

Balance September 30, 2020

Balance March 31, 2021

(1) Includes movie tickets, food and beverage, gift cards, exchange tickets, and AMC Stubs® loyalty membership fees.

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The Company suspended the recognition of deferred revenues related to certain loyalty programs, gift cards, and exchange tickets during the period in which its operations were temporarily suspended.

As the Company re-opened theatres during the three months ended September 30, 2020, A-List members had the option to reactivate their subscription, which restarted the monthly charge for the program.

As the Company re-opened theatres, A-List members had the option to reactivate their subscription, which restarted the monthly charge for the program.

The Company resumed the recognition of deferred revenues related to certain loyalty programs, gift cards and exchange tickets.

The significant changes to contract liabilities included in the exhibitor services agreement, classified as long-term liabilities in the condensed consolidated balance sheets, are as follows:

The significant changes to contract liabilities included in the exhibitor services agreement in the condensed consolidated balance sheets, are as follows:

Exhibitor Services

(In millions)

Agreement (1)

Balance December 31, 2020

Common Unit Adjustment–additions of common units (1)

Negative Common Unit Adjustment–reduction of common units

Reclassification of the beginning balance to other theatre revenue, as the result of performance obligations satisfied

Balance September 30, 2020

(1) Represents the fair value amount of the National CineMedia, LLC (“NCM”) common units that were received under the annual Common Unit Adjustment (“CUA”).

Such amount will increase the deferred revenues that are being amortized to other theatre revenues over the remainder of the 30 -year term of the Exhibitor Service Agreement (“ESA”) ending in February 2037.

Balance March 31, 2021

(1) Represents the carrying amount of the National CineMedia, LLC (“NCM”) common units that were previously received under the annual Common Unit Adjustment (“CUA”).

The deferred revenues are being amortized to other theatre revenues over the remainder of the 30-year term of the Exhibitor Service Agreement (“ESA”) ending in February 2037.

Gift cards and exchange tickets.

The total amount of non-redeemed gifts cards and exchange tickets included in deferred revenues and income as of September 30, 2020 was $ 312.5 million.

This will be recognized as revenues as the gift cards and exchange tickets are redeemed or as the non-redeemed gift card and exchange ticket revenues are recognized in proportion to the pattern of actual redemptions, which is estimated to occur over the next 24 months .

The total amount of non-redeemed gifts cards and exchange tickets included

in deferred revenues and income as of March 31, 2021 was $ 315.7 million.

Historically, the Company has estimated this to occur over the next 24 months , but due to the COVID-19 pandemic and the limited or temporary suspension of theatre operations, the pattern of actual redemptions may occur over a longer period of time.

Loyalty programs.

As of September 30, 2020, the amount of deferred revenue allocated to the loyalty programs included in deferred revenues and income was $ 68.2 million.

The earned points will be recognized as revenue as the points are redeemed, which is estimated to occur over the next 24 months .

The AMC Stubs ® annual membership

fee is recognized ratably over the one-year membership period.

As of March 31, 2021, the amount of deferred revenue allocated to the loyalty programs included in deferred revenues and income was $ 64.2 million.

The earned points will be recognized as revenue as the points are redeemed.

Historically, the Company has estimated this to occur over the next 24 months , but due to the COVID-19 pandemic and the limited or temporary suspension of theatre operations, the recognition of points redeemed may occur over a longer period of time.

The AMC Stubs® annual membership fee is recognized ratably over the one-year membership period.

The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

NOTE 4—GOODWILL

The following table summarizes the changes in goodwill by reporting unit for the nine months ended September 30, 2020:

The following table summarizes the changes in goodwill by reporting unit for the three months ended March 31, 2021:

(In millions)

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Balance December 31, 2020

Impairment adjustment March 31, 2020

Impairment adjustment September 30, 2020

Currency translation adjustment

Balance September 30, 2020

Baltics disposition-Estonia (1)

Balance March 31, 2021

(1) See Note 1 — Basis of Presentation for further information regarding the Baltics’ theatre sale agreement.

The Company evaluates goodwill recorded at the Company’s two reporting units (Domestic Theatres and International Theatres) for impairment annually as of the beginning of the fourth fiscal quarter and any time an event occurs or circumstances change that would more likely than not reduce the fair value for a reporting unit below its carrying amount.

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If the estimated fair value of the reporting unit is less than its carrying value, the difference is recorded as goodwill impairment charge, not to exceed the total amount of goodwill allocated to that reporting unit.

A decline in the common stock price and prices of the Company’s corporate borrowings and the resulting impact on market capitalization are two of several factors considered when making this evaluation.

Based on sustained declines during the first quarter of 2020 in the Company’s enterprise market capitalization and the temporary suspension of operations at all the Company’s theatres on or before March 17, 2020 due to the COVID-19 pandemic, the Company performed a Step 1 quantitative goodwill impairment test of the Domestic and International reporting units as of March 31, 2020.

In performing the Step 1 quantitative goodwill impairment test as of March 31, 2020, the Company used an enterprise value approach to measure fair value of the reporting units.

The enterprise fair values of the Domestic Theatres and International Theatres reporting units were less than their carrying values and goodwill impairment charges of $ 1,124.9 million and $ 619.4 million, respectively, were recorded as of March 31, 2020 for the Company’s Domestic Theatres and International Theatres reporting units.

In accordance with ASC 350-20-35-30, the Company performed an assessment to determine whether there were any events or changes in circumstances that would warrant an interim ASC 350 impairment analysis as of September 30, 2020.

Due to the suspension of operations during the second and third quarters of 2020 and the further delay or cancellation of film releases, the Company performed a Step 1 quantitative impairment test of the Domestic and International reporting units as of September 30, 2020.

In performing the Step 1 quantitative goodwill impairment test as of September 30, 2020, the Company used an enterprise value approach to measure fair value of the reporting units.

See Note 9 — Fair Value Measurements for a discussion of the valuation methodology.

The enterprise fair value of the Domestic Theatres and International Theatres reporting units was less than their carrying values and goodwill impairment charges of $ 151.2 million and $ 5.6 million, respectively, were recorded as of September 30, 2020 for the Company’s Domestic Theatres and International Theatres reporting units.

There is considerable management judgment with respect to cash flow estimates and discount rates to be used in determining fair value, which fall under Level 3 within the fair value measurement hierarchy.

Given the nature of the Company’s business and its recent history, future impairments are possible based upon business conditions, movie release dates, and attendance levels.

NOTE 5—INVESTMENTS

Investments in non-consolidated affiliates and certain other investments accounted for under the equity method generally include all entities in which the Company or its subsidiaries have significant influence, but not more than 50 % voting control, and are recorded in the condensed consolidated balance sheets in other long-term assets.

Investments in

non-consolidated affiliates as of September 30, 2020 include interests in Digital Cinema Implementation Partners, LLC (“DCIP”) of 29.0 %, Digital Cinema Distribution Coalition, LLC (“DCDC”) of 14.6 %, AC JV, LLC (“AC JV”) owner of Fathom Events, of 32.0 %, SV Holdco LLC (“SV Holdco”), owner of Screenvision, 18.3 %, Digital Cinema Media Ltd.

Investments in non-consolidated affiliates as of March 31, 2021 include interests in Digital Cinema Implementation Partners, LLC (“DCIP”) of 29.0 %, Digital Cinema Distribution Coalition, LLC (“DCDC”) of 14.6 %, AC JV, LLC (“AC JV”) owner of Fathom Events, of 32.0 %, SV Holdco LLC (“SV Holdco”), owner of Screenvision, of 18.3 %, Digital Cinema Media Ltd.

(“DCM”) of 50.0 %, and Saudi Cinema Company LLC (“SCC”) of 10.0 %.

The Company also has partnership interests in four U.S.

motion picture theatres (“Theatre Partnerships”) and approximately 50.0 % interest in 54 theatres in Europe.

The Company also has partnership interests in three U.S.

motion picture theatres (“Theatre Partnerships”) and approximately 50.0 % interests in 54 theatres in Europe.

Indebtedness held by equity method investees is non-recourse to the Company.

Equity in Earnings (Loss) of Non-Consolidated Entities

Aggregated condensed financial information of the Company’s significant non-consolidated equity method investment (DCIP) is shown below:

Three Months Ended

Nine Months Ended

September 30,

(In millions)

Operating costs and expenses

Net earnings (loss)

The components of the Company’s recorded equity in earnings (loss) of non-consolidated entities are as follows:

Three Months Ended

Nine Months Ended

September 30,

(In millions)

The Company’s recorded equity in earnings (loss)

Related Party Transactions

The Company recorded the following related party transactions with equity method investees:

(In millions)

September 30, 2020

December 31, 2019

Due from DCM for on-screen advertising revenue

Loan receivable from DCM

Due from DCIP for warranty expenditures

Due to AC JV for Fathom Events programming

Due from Screenvision for on-screen advertising revenue

Due from Nordic JVs

Due to Nordic JVs for management services

Due from SCC related to the joint venture

theatre partnerships

Three Months Ended

Nine Months Ended

(In millions)

Condensed Consolidated Statement of Operations

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

DCM screen advertising revenues

Other revenues

DCIP equipment rental expense

Operating expense

Gross exhibition cost on AC JV Fathom Events programming

Film exhibition costs

Screenvision screen advertising revenues

Other revenues

NOTE 6—CORPORATE BORROWINGS

During the three months ended March 31, 2021 and March 31, 2020, the Company recorded equity in loss of non-consolidated entities of $ 2.8 million and $ 2.9 million, respectively.

Related party transactions with equity method investees.

At March 31, 2021 and December 31, 2020, the Company recorded net receivable amounts due from equity method investees of $ 4.6 million and $ 6.9 million, respectively, primarily related to projector warranty expenditures and other transactions.

The Company recorded related party transactions with equity method investees in other revenues, film exhibition costs, and operating expenses of $ 0.6

million, $ 0.3 million, and $ 0.4 million, respectively, during the three months ended March 31, 2021 and $ 5.7 million, $ 2.4 million, and $ 1.3 million, respectively, during the three months ended March 31, 2020.

NOTE 6—CORPORATE BORROWINGS AND FINANCE LEASE OBLIGATIONS

A summary of the carrying value of corporate borrowings and finance lease obligations is as follows:

(In millions)

September 30, 2020

March 31, 2021

December 31, 2020

First Lien Secured Debt:

Senior Secured Credit Facility-Term Loan due 2026 ( 4.08 % as of September 30, 2020)

Senior Secured Credit Facility-Revolving Credit Facility Due 2024 (range of 2.65 % to 2.76 % as of September 30, 2020)

Odeon Revolving Credit Facility Due 2022 ( 2.5785 % as of September 30, 2020)

Odeon Revolving Credit Facility Due 2022 ( 2.6 % as of September 30, 2020)

Senior Secured Credit Facility-Term Loan due 2026 ( 3.195 % as of March 31, 2021)

Senior Secured Credit Facility-Revolving Credit Facility due 2024

10.75 % in Year 1, 11.25 % thereafter Cash/PIK Odeon Term Loan Facility due 2023 (£ 140.0 million and € 296.0 million par value as of March 31, 2021)

Odeon Revolving Credit Facility Due 2022

10.5 % First Lien Notes due 2025

1 unchanged sentence

10.5 % First Lien Notes due 2026

15 %/ 17 % Cash/PIK Toggle First Lien Secured Notes due 2026

Second Lien Secured Debt:

10 %/ 12 % Cash/PIK/Toggle Second Lien Subordinated Notes due 2026

2.95 % Senior Unsecured Convertible Notes due 2024

Subordinated Debt:

6.375 % Senior Subordinated Notes due 2024 (£ 4.0 million par value)

6.375 % Senior Subordinated Notes due 2024 (£ 4.0 million par value as of March 31, 2021)

5.75 % Senior Subordinated Notes due 2025

2 unchanged sentences

Finance lease obligations

Paid-in-kind interest for 10 %/ 12 %/Cash/PIK/Toggle Second Lien Subordinated Notes due 2026

Paid-in-kind interest

Deferred financing costs

Net premium (discount) (1)

Derivative liability

Net premium (1)

Current maturities corporate borrowings

1 unchanged sentence

(1) The following table provides the net premium (discount) amounts of corporate borrowings:

September 30,

(In millions)

1 unchanged sentence

2.95 % Senior Secured Convertible Notes due 2026

2.95 % Senior Unsecured Convertible Notes due 2024

15 %/ 17 % Cash/PIK/Toggle First Lien Secured Notes due 2026

10.5 % First Lien Notes due 2026

1 unchanged sentence

Senior Secured Credit Facility-Term Loan due 2026

10.75 % in Year 1, 11.25 % thereafter Cash/PIK Odeon Term Loan Facility due 2023

6.375 % Senior Subordinated Notes due 2024

The following table provides the principal payments required and maturities of corporate borrowings as of September 30, 2020:

The following table provides the principal payments required and maturities of corporate borrowings as of March 31, 2021:

(In millions)

Three months ended December 31, 2020

Senior Subordinated Debt Exchange Offers

On July 31, 2020, the Company consummated its previously announced private offers to exchange (the “Exchange Offers”) any and all of its outstanding 6.375 % Senior Subordinated Notes due 2024, 5.75 % Senior Subordinated Notes due 2025, 5.875 % Senior Subordinated Notes due 2026 and 6.125 % Senior Subordinated Notes due 2027 (together the “Existing Subordinated Notes”) for newly issued Second Lien Notes due 2026.

T he aggregate principal amounts of the Existing Subordinated Notes set forth in the table below were validly tendered and subsequently accepted.

Such accepted Existing Subordinated Notes were retired and cancelled.

(In thousands)

Total Aggregate Principal Amount Validly Tendered

Percentage of Outstanding Existing Subordinated Notes Validly Tendered

6.375 % Senior Subordinated Notes due 2024 ( £ 496,014 par value)

5.75 % Senior Subordinated Notes due 2025

5.875 % Senior Subordinated Notes due 2026

6.125 % Senior Subordinated Notes due 2027

The Exchange Offers reduced the principal amounts of the Company’s debt by approximately $ 555 million, which represented approximately 23.9 % of the principal amount of the Existing Subordinated Notes.

The Company raised $ 300 million in additional cash from the issuance of the new First Lien Notes due 2026, prior to deducting $ 36 million related to discounts and deferred financing costs paid to the lenders.

Additionally, certain holders of the Existing Subordinated Notes that agreed to backstop the rights offering for $ 200 million of the First Lien Notes due 2026 received five million Class A common shares, or 4.6 % of AMC’s outstanding shares as of July 31, 2020, worth $ 20.2 million at the market closing price on July 31, 2020.

The closing of the Exchange Offers also allowed the Company to extend maturities on approximately $ 1.7 billion of debt to 2026, most of which was maturing in 2024 and 2025 previously.

Interest due for the coming 12 to 18 months on the Second Lien Notes due 2026 is expected to be paid all or in part on an in-kind basis, thereby generating a further near-term cash savings for the Company of between approximately $ 120 million and $ 180 million.

The Company realized significant cancellation of debt income for tax purposes in connection with its debt restructuring.

As a result of such CODI, the Company estimates a significant portion of its net operating losses and tax credits will be eliminated as a result of tax attribute reductions, see Note 8 — I ncome Taxes for further information.

In connection with the Exchange Offers, the Company also received consents from eligible holders of the Existing Subordinated Notes to amend the indentures governing the Existing Subordinated Notes to among other things, (i) release the existing subsidiary guarantees of the Existing Subordinated Notes, (ii) eliminate substantially all of the restrictive covenants, certain affirmative covenants and certain events of default contained in the indentures governing the Existing Subordinated Notes, and (iii) make other conforming changes to internally conform to certain proposed amendments.

The Company performed an assessment on a lender-by-lender basis to identify certain lenders that met the criteria for a troubled debt restructuring (“TDR”) under ASC 470-60, Troubled Debt Restructurings by Debtors (“ASC

470-60”) as the Company was experiencing financial difficulties and the lenders granted a concession.

The portion of the loans that did not meet the assessment of TDR under ASC 470-60 were treated as modifications.

The Company accounted for the exchange of approximately $ 1,782.5 million principal amount of its Existing Senior Subordinated Notes for approximately $ 1,289.1 million principal amount of the Second Lien Notes due 2026 as TDR.

The Company accounted for the exchange of the remaining approximately $ 235.0 million principal amount of its Existing Senior Subordinated Notes for approximately $ 173.2 million principal amount of the Second Lien Notes due 2026 as a modification of debt as the lenders did not grant a concession and the difference between the present value of the old and new cash flows was less than 10 % .

The TDR and modification did not result in a gain recognition and the Company established new effective interest rates based on the carrying value of the Existing Subordinated Notes and recorded the new fees paid to third parties of approximately $ 36.3 million and $ 39.1 million in other expense, during both the three and nine months ended September 30, 2020.

Second Lien Notes due 2026.

In connection with the Exchange Offers on July 31, 2020, the Company issued $ 1,462.3 million aggregate principal amount of the new Second Lien Notes due 2026 in exchange for the Existing Subordinated Notes.

The Second Lien Notes due 2026 were issued pursuant to an indenture, dated as of July 31, 2020, among the Company, the guarantors named therein and GLAS Trust Company LLC, as trustee and collateral agent.

The Company has reflected a premium of $ 535.1 million on the Second Lien Notes due 2026 as the difference between the principal balance of the Second Lien Notes due 2026 and the $ 1,997.4 million carrying value of the Existing Subordinated Notes exchanged.

The premium will be amortized to interest expense over the term of the Second Lien Notes due 2026 using the effective interest method.

In connection with the Exchange Offers and the First Lien Notes due 2026, the Company issued five million shares of Class A common stock to certain holders of subordinated notes as consideration for their commitment to backstop the issuance of $ 200 million of the First Lien Notes due 2026.

Pursuant to the Backstop Commitment Agreement dated July 10, 2020, certain of the actual or beneficial holders of Existing Subordinated Notes agreed to purchase 100 % of the First Lien Notes due 2026 that were not subscribed for in connection with the $ 200 million rights offering to holders of the Existing Subordinated Notes participating in the Exchange Offers.

Those providing a backstop commitment pursuant to the Backstop Commitment Agreement received their pro-rata share of five million shares of the Class A common stock, or 4.6 % of AMC’s outstanding shares as of July 31, 2020, worth $ 20.2 million at the market closing price on July 31, 2020.

T he equity issuance was recorded by the Company in stockholders’ deficit with an offset in corporate borrowings as a discount.

The discount will be amortized to interest expense over the term of the Second Lien Notes due 2026 using the effective interest method.

As part of the registration rights agreement related to the issuance of the Class A common stock, the Company filed a shelf registration statement in August 2020 providing for the resale of the shares of Class A common stock issued as consideration for the backstop commitment described above.

The Second Lien Notes due 2026 bear cash interest at a rate of 10 % per annum payable semi-annually in arrears on June 15 and December 15, beginning on December 15, 2020.

Subject to the limitation in the next succeeding sentence, interest for the first three interest periods after the issue date may, at the Company’s option, be paid in PIK interest at a rate of 12 % per annum.

The Company’s ability to pay PIK interest with respect to the third interest period after the issue date is subject to certain liquidity thresholds.

For all interest periods after the first three interest periods, interest will be payable solely in cash at a rate of 10 % per annum.

The Second Lien Notes due 2026 are redeemable at the Company’s option prior to June 15, 2023, at a redemption price equal to 100 % of their aggregate principal amount and accrued and unpaid interest, plus an applicable make-whole premium.

On or after June 15, 2023, the Second Lien Notes due 2026 will be redeemable, in whole or in part, at a redemption price equal to (i) 106.0 % for the twelve-month period beginning on June 15, 2023;

(ii) 103.0 % for the twelve-month period beginning on June 15, 2024 and (iii) 100.0 % at any time thereafter, plus accrued and unpaid interest.

If the Company or its restricted subsidiaries sell assets, under certain circumstances, the Company will be required to apply the net proceeds to redeem the new Second Lien Notes due 2026 at a price equal to 100 % of the issue price of the new Second Lien Notes due 2026, plus accrued and unpaid interest to, but excluding the redemption date.

Upon a Change of Control (as defined in the indenture governing the Second Lien Notes due 2026), the Company must offer to purchase the Second Lien Notes due 2026 at a purchase price equal to 101 % of the principal amount, plus accrued and unpaid interest.

The Second Lien Notes due 2026 have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and will mature on June 15, 2026.

The Second Lien Notes due 2026 are fully and unconditionally guaranteed on a joint and several basis by each of the Company’s subsidiaries that currently guarantee its obligations under the Company’s Senior Secured Credit Facility.

The Second Lien Notes due 2026 are secured on a second-priority basis by substantially all of the tangible and intangible assets owned by the Company and the guarantor subsidiaries that secure obligations under the Senior Secured

Credit Facility (“Collateral”).

The Second Lien Notes due 2026 are subordinated in right of payment to all indebtedness of the Company that is secured by a first-priority lien on the Collateral.

The indenture governing the Second Lien Notes due 2026 contains covenants that restrict the ability of the Company to:

incur additional debt or issue certain preferred shares;

pay dividends on or make other distributions in respect of its capital stock or make other restricted payments;

make certain investments;

or transfer certain assets;

create liens on certain assets to secure debt;

consolidate, merge, sell or otherwise dispose of all or substantially all of its assets;

enter into certain transactions with its affiliates;

and allow to exist certain restrictions on the ability of its subsidiaries to pay dividends or make other payments to the Company.

The Second Lien Notes due 2026 Indenture also contains certain affirmative covenants and events of default.

First Lien Notes due 2026.

In connection with the Exchange Offers, certain holders of the Existing Subordinated Notes purchased 10.5 % First Lien Notes due 2026 in an aggregate principal amount of $ 200 million.

The 10.5 % First Lien Notes due 2026 issued to certain holders of the Existing Subordinated Notes were issued pursuant to an indenture, dated as of July 31, 2020, among the Company, the guarantors named therein and GLAS Trust Company LLC, as trustee and collateral agent.

Separately, upon the closing of its private debt exchange, Silver Lake Alpine, L.P.

and Silver Lake Alpine (Offshore Master), L.P., each affiliates of Silver Lake Group, L.L.C.

(“Silver Lake”), purchased from the Company $ 100 million principal amount of First Lien Notes due 2026.

The 10.5 % First Lien Notes due 2026 issued to affiliates of Silver Lake were issued pursuant to an indenture, dated as of July 31, 2020, among the Company, the guarantors named therein and U.S.

Bank National Association, as trustee and collateral agent.

The terms of the 10.5 % First Lien Notes due 2026 issued to the holders of the Existing Subordinated Notes and the 10.5 % First Lien Notes due 2026 issued to Silver Lake are substantially identical.

The $ 300 million principal amount of new funding is prior to deducting discounts of $ 30.0 million and deferred financing costs paid to lenders of $ 6.0 million related to the First Lien Notes due 2026.

Nine months ended December 31, 2021

Senior Secured Credit Facilities

The Company is party to that certain Credit Agreement, dated as of April 30, 2013 (as amended by the First Amendment to Credit Agreement, dated as of December 11, 2015, that certain Second Amendment to Credit Agreement, dated as of November 8, 2016, that certain Third Amendment to Credit Agreement, dated as of May 9, 2017, that certain Fourth Amendment to Credit Agreement, dated as of June 13, 2017, that certain Fifth Amendment to Credit Agreement, dated as of August 14, 2018, the Sixth Amendment, dated as of April 22, 2019, the Seventh Amendment, dated as of April 23, 2020, the Eighth Amendment, dated as of July 31, 2020, the Ninth Amendment and the Tenth Amendment (as defined below), with the issuing banks and lenders from time to time party thereto and Wilmington Savings Fund Society, FSB, as administrative agent (as successor to Citicorp North America, Inc., the “Administrative Agent”), pursuant to which the lenders have agreed to provide senior secured financing consisting of (a) $ 2,000.0 million in aggregate principal amount of senior secured tranche B loans maturing April 22, 2026 (the “Senior Secured Term Loan Facility”) and (b) a $ 225.0 million senior secured revolving credit facility (which is also available for letters of credit and for swingline borrowings on same-day notice) maturing April 22, 2024 (the “Senior Secured Revolving Credit Facility” and, together with the Senior Secured Term Loan Facility, collectively, the “Senior Secured Credit Facilities”).

The Senior Secured Credit Facilities are provided by a syndicate of banks and other financial institutions.

On March 8, 2021, the Company entered into the Ninth Amendment to Credit Agreement (the “Ninth Amendment”), with the requisite revolving lenders party thereto and the Administrative Agent, pursuant to which the requisite revolving lenders party thereto agreed to extend the suspension period for the financial covenant under its Credit Agreement from a period ending on March 31, 2021 to a period ending on March 31, 2022 (the “Extended Covenant Suspension Period”).

During the Extended Covenant Suspension Period, the Company will not, and will not permit any of its restricted subsidiaries to, (i) make certain restricted payments, (ii) subject to certain exceptions, incur any indebtedness for borrowed money that is pari passu or senior in right of payment or security with the Revolving Loans (as defined in the Credit Agreement) or (iii) make any investment in or otherwise dispose of any assets to any subsidiary of the Company that is not a Loan Party (as defined in the Credit Agreement) to facilitate a new financing incurred by a subsidiary of the Company.

In addition, as an ongoing condition to the suspension of the financial covenant, the Company also agreed to (i) a minimum liquidity test of $ 100 million, (ii) an anti-cash hoarding test at any time Revolving Loans are outstanding and (iii) additional reporting obligations.

On March 8, 2021 the Company entered into the Tenth Amendment to Credit Agreement (the “Tenth Amendment”), with the requisite revolving lenders party thereto and the Administrative Agent, pursuant to which the Company agreed not to consent to certain modifications to the Credit Agreement described in the Tenth Amendment without the consent of the majority of the revolving lenders party to the Tenth Amendment.

Odeon Term Loan Facility

On February 15, 2021, Odeon Cinemas Group Limited (“Odeon”), a wholly-owned subsidiary of the Company entered into a new £ 140.0 million and € 296.0 million term loan facility (the “Odeon Term Loan due 2023”) agreement (the “Odeon Term Loan Facility”), by and among Odeon, the subsidiaries of Odeon party thereto, the lenders and other loan parties thereto and Lucid Agency Services Limited as agent and Lucid Trustee Services Limited as security agent.

Approximately £ 89.7 million and € 12.8 million of the net proceeds from the Odeon Term Loan Facility were used to repay in full Odeon’s obligations (including principal, interest, fees, and cash collateralized letters of credit) under its existing revolving credit facility and the remaining net proceeds will be used for general corporate purposes.

Company recorded deferred financing cost write-off of $ 1.0 million in other expense during the three months ended March 31, 2021.

The Odeon Term Loan Facility has a maturity of August 19, 2023 ( 2.5 years from the date on which it is first drawn).

Borrowings under the Odeon Term Loan Facility bear interest at a rate equal to 10.75 % per annum during the first year and 11.25 % thereafter and each interest period shall be 3 months , or such other period agreed between the Company and the Agent.

The interest is capitalized on the last day of each interest period and added to the outstanding principal amount, however Odeon has the option to elect to pay interest in cash.

The principal amount of new funding is prior to deducting discounts of $ 19.1 million and deferred financing costs of $ 15.6 million related to the Odeon Term Loan Facility.

The discount and deferred financing costs will be amortized to interest expense over the term using the effective interest method.

The First Lien Notes due 2026 bear interest at a rate of 10.5 % per annum, payable semi-annually on June 15 and December 15, beginning on December 15, 2020.

The First Lien Notes due 2026 are redeemable at the Company’s option prior to June 15, 2022, at a redemption price equal to 100 % of their aggregate principal amount and accrued and unpaid interest, plus an applicable make-whole premium.

On or after June 15, 2022, the First Lien Notes due 2026 will be redeemable, in whole or in part, at redemption prices equal to (i) 105.250 % for the twelve-month period beginning on June 15, 2022;

(ii) 102.625 % for the twelve-month period beginning on June 15, 2023 and (iii) 100.000 % at any time thereafter, plus accrued and unpaid interest, if any.

In addition, at any time on or prior to June 15, 2022, the Company may, subject to certain limitations specified in the First Lien Notes due 2026 Indenture, on one or more occasions, redeem up to 35 % of the aggregate principal amount of the First Lien Notes due 2026 at a redemption price equal to 110.500 % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, with the net cash proceeds of certain equity offerings.

If the Company or its restricted subsidiaries sell assets, under certain circumstances, the Company will be required to use the net proceeds to redeem the First Lien Notes due 2026 at a price equal to 100 % of the issue price of the First Lien Notes due 2026, plus accrued and unpaid interest, if any.

Upon a Change of Control (as defined in the indentures governing the First Lien Notes due 2026), the Company must offer to purchase the First Lien Notes due 2026 at a purchase price equal to 101 % of the principal amount, plus accrued and unpaid interest, if any.

The First Lien Notes due 2026 have not been registered under the Securities Act and will mature on April 24, 2026.

The First Lien Notes due 2026 are fully and unconditionally guaranteed on a joint and several basis by each of the Company’s subsidiaries that currently guarantee its obligations under the Company’s Senior Secured Credit Facility.

The First Lien Notes due 2026 are secured by a first-priority lien on the Collateral.

The indentures governing the First Lien Notes due 2026 contain covenants that restrict the ability of the Company to:

incur additional debt or issue certain preferred shares;

pay dividends on or make other distributions in respect of its capital stock or make other restricted payments;

make certain investments;

or transfer certain assets;

create liens on certain assets to secure debt;

consolidate, merge, sell or otherwise dispose of all or substantially all of its assets;

enter into certain transactions with its affiliates;

and allow to exist certain restrictions on the ability of its subsidiaries to pay dividends or make other payments to the Company.

The indentures governing the First Lien Notes due 2026 also contain certain affirmative covenants and events of default.

Convertible Notes due 2026.

Concurrently with the Exchange Offers, to obtain the consent of the holders of the 2.95 % Convertible Notes due 2024 (the “Convertible Notes due 2024”) to the transactions contemplated by the

Exchange Offers, the Company restructured $ 600 million of Convertible Notes due 2024 issued in 2018 to Silver Lake and others pursuant to which the maturity of the Convertible Notes due 2024 was extended to May 1, 2026 (the “Convertible Notes due 2026”) (the “Convertible Notes” means the Convertible Notes due 2024 before July 31, 2020 and the Convertible Notes due 2026 after July 31, 2020), a first-priority lien on the Collateral was granted to secure indebtedness thereunder and certain covenants were modified.

The Convertible Notes due 2026 were issued pursuant to an amended and restated indenture, dated as of July 31, 2020, among the Company, the guarantors named therein and U.S.

Bank National Association, as trustee and collateral agent.

The Company accounted for this transaction as a modification of debt as the lenders did not grant a concession and the difference between the present value of the old and new cash flows was less than 10 %.

The modification did not result in the recognition of any gain or loss and the Company established new effective interest rates based on the carrying value of the Convertible Notes due 2024.

Third party costs related to the transaction were expensed as incurred and amounts paid to lenders were capitalized and amortized through maturity of the debt.

Senior Secured Credit Facility.

On July 31, 2020, the Company entered into the Eighth Amendment with the administrative agent to the Senior Secured Credit Facility to add restrictive provisions, including modifying covenants limiting indebtedness, liens, investments, asset sales and restricted payments, to ensure that the terms and conditions of the First Lien Notes due 2026, the Convertible Notes due 2026 and the Second Lien Notes due 2026 (subject to certain exceptions) are not materially more favorable (when taken as a whole) to the noteholders than the terms and conditions of the Senior Secured Credit Facility Agreement (when taken as a whole).

The Company accounted for this transaction as a modification of debt.

On April 23, 2020, the Company entered into the Seventh Amendment t(the “Senior Secured Credit Facility Amendment”) o the Senior Secured Credit Facility with the lenders from time to time party thereto and Citicorp North America, Inc., as administrative agent (the “Senior Secured Credit Facility”) amending the Credit Agreement dated April 30, 2013, as amended, pursuant to which the requisite lenders thereunder granted a waiver of the maintenance covenant thereunder for the period from and after the effective date of the Senior Secured Credit Facility Amendment to and including the earlier of (a) March 31, 2021 and (b) the day immediately preceding the last day of the Test Period (as defined in the Senior Secured Credit Facility Agreement) during which the Company has delivered a Financial Covenant Election (as defined in the Senior Secured Credit Facility Agreement) to the administrative agent under the Senior Secured Credit Facility Agreement (such period, the “Covenant Suspension Period”).

During the Covenant Suspension Period, the Company will not, and will not permit any of its restricted subsidiaries to, make certain restricted payments and shall maintain Liquidity (as defined in the Senior Secured Credit Facility Amendment) of no less than $ 50.0 million on the last day of each Test Period.

In addition, the Senior Secured Credit Facility Amendment provides for certain changes to the covenants limiting indebtedness, liens and restricted payments that are intended to match corresponding restrictions under the 10.5 % first lien notes due 2025 (the “First Lien Notes due 2025”) and to ensure that the terms and conditions of the First Lien Notes due 2025 (subject to certain exceptions) are not materially more favorable (when taken as a whole) to the noteholders than the terms and conditions of the Senior Secured Credit Facility Agreement (when taken as a whole) are to the lenders.

Pursuant to the terms of the Senior Secured Credit Facility Agreement, these more restrictive terms will be operative until the repayment, satisfaction, defeasance or other discharge of the obligations under the First Lien Notes due 2025 or an effective amendment of, other consent or waiver with respect to, or covenant defeasance pursuant to the Indenture as result of which the covenants limiting indebtedness, liens and restricted payments thereunder are of no further force or effect.

Odeon Revolving Credit Facility

On April 24, 2020, Odeon Cinemas Group Limited entered into an amendment to the Odeon Revolving Credit Facility with Lloyds Bank PLC as agent (the “Odeon Amendment”), pursuant to the requisite lenders thereunder granted a waiver of the maintenance covenant thereunder for the period from and after the effective date of the Odeon Amendment to and including the earlier of (a) March 31, 2021 and (b) the day immediately preceding the last day of the Relevant Period (as defined in the Odeon Amendment) during which Odeon Cinemas Group Limited has delivered a Financial Covenant Election (as defined in the Odeon Amendment) to the agent (the “Odeon Covenant Suspension Period”).

During the Odeon Covenant Suspension Period, Odeon Cinemas Group Limited will not, and will not permit any of its subsidiaries to, make certain restricted payments including payment on shareholder loans, provided that cash payments of interest with respect to shareholder loans will be permitted.

Additionally, lenders granted a waiver such that certain events or circumstances resulting from COVID-19 virus occurring prior to the Odeon Amendment and continuing will be deemed not to constitute an event of default under the Odeon Revolving Credit Facility.

First Lien Notes due 2025

On April 24, 2020, the Company issued $ 500.0 million aggregate principal amount of its 10.5 % First Lien Notes due 2025, in a private offering, pursuant to an indenture, dated as of April 24, 2020 (the “First Lien Notes Indenture”), among the Company, the guarantors named therein and U.S.

All obligations under the Odeon Term Loan Facility are guaranteed by certain subsidiaries of Odeon.

The Company is subject to minimum liquidity requirements of £ 32.5 million (approximately $ 45 million) required under the Odeon Term Loan Facility, measured at each quarter end date.

First Lien Toggle Notes due 2026

On January 15, 2021, the Company issued $ 100.0 million aggregate principal amount of its 15 %/ 17 % Cash/PIK Toggle First Lien Secured Notes due 2026 as contemplated by the previously disclosed commitment letter with Mudrick Capital Management, LP, dated as of December 10, 2020.

The First Lien Toggle Notes due 2026 were issued pursuant to an indenture dated as of January 15, 2021 among the Company, the guarantors named therein and the U.S.

Bank National Association, as trustee and collateral agent.

The Company used the net proceeds from the First Lien Notes due 2025 private offering for general corporate purposes, including further increasing the Company’s liquidity.

The First Lien Notes due 2025 were issued with a discount of $ 10.0 million and bear interest at a rate of 10.5 % per annum, payable semi-annually on April 15 and October 15 each year, commencing October 15, 2020.

The First Lien Notes due 2025 will mature on April 15, 2025.

The Company recorded deferred financing costs of approximately $ 8.9 million related to the issuance of the First Lien Notes due 2025 and will amortize those costs to interest expense under the effective interest method over the term of the First Lien Notes due 2025.

The First Lien Notes due 2025 are general senior secured obligations of the Company and are fully and unconditionally guaranteed on a joint and several senior secured basis by all of the Company’s existing and future subsidiaries that guarantee the Company’s other indebtedness, including the Company’s Senior Secured Credit Facility.

The First Lien Notes due 2025 are secured, on a pari passu basis with the Senior Secured Credit Facility, on a first-priority basis by substantially all of the tangible and intangible assets owned by the Company and guarantors that secure obligations under the Senior Secured Credit Facility including pledges of capital stock of certain of the Company’s and the guarantor’s wholly-owned material subsidiaries (but limited to 65 % of the voting stock of any foreign subsidiary), subject to certain thresholds, exceptions and permitted liens.

The Company may redeem some or all of the First Lien Notes due 2025 at any time on or after April 15, 2022, at the redemption prices set forth in the First Lien Notes Indenture.

In addition, the Company may redeem up to 35 % of the aggregate principal amount of the First Lien Notes due 2025 using net proceeds from certain equity offerings on or prior to April 15, 2022 at a redemption price equal to 110.5 % of their aggregate principal amount and accrued and unpaid interest to, but not including, the date of redemption.

The Company may redeem some or all of the First Lien Notes due 2025 at any time prior to April 15, 2022 at a redemption price equal to 100 % of their aggregate principal amount and accrued and unpaid interest to, but not including, the date of redemption, plus an applicable make-whole premium.

In addition, the Company may, at any time prior to 120 days after the issue date, redeem up to 35 % of the aggregate principal amount of the First Lien Notes due 2025 using net proceeds of any loan received pursuant to a Regulatory Debt Facility (as defined in the First Lien Notes Indenture) at a redemption price equal to 105.25 % of their aggregate principal amount and accrued and unpaid interest to, but not including, the date of redemption.

The First Lien Notes Indenture contains covenants that limit the Company’s ability to, among other things:

(i) incur additional indebtedness, including additional senior indebtedness;

(ii) pay dividends on or make other distributions in respect of its capital stock;

(iii) purchase or redeem capital stock or prepay subordinated debt or other junior securities;

(iv) create liens ranking pari passu in right of payment with or subordinated in right of payment to First Lien Notes due 2025;

(v) enter into certain transactions with its affiliates;

and (vi) merge or consolidate with other companies or transfer all or substantially all of its assets.

These covenants are subject to a number of important limitations and exceptions.

The First Lien Notes Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding First Lien Notes due 2025 to be due and payable immediately.

Convertible Notes

The table below sets forth the carrying value of the Convertible Notes:

Carrying Value

Reclassification

Carrying Value

to Additional

(In millions)

December 31, 2019

Paid-in Capital

September 30, 2020

Principal balance

Deferred financing costs

Derivative liability

Carrying value

On September 14, 2018, the Company issued $ 600.0 million aggregate principal amount of its Convertible Notes due 2024 to Silver Lake and others.

The Convertible Notes due 2024 would have matured on September 15, 2024, subject to earlier conversion by the holders thereof, repurchase by the Company at the option of the holders or redemption by the Company upon the occurrence of certain contingencies, as discussed below.

On April 24, 2020, the Company entered into a supplemental indenture (the “Supplemental Indenture”) to the Convertible Notes due 2024 indenture, dated as of September 14, 2018.

The Supplemental Indenture amended the debt covenant under the Convertible Notes due 2024 Indenture to permit the Company to issue the First Lien Notes due 2025, among other changes.

On July 31, 2020, concurrently with the Exchange Offers to obtain the consent of the holders of the Convertible Notes due 2024 to the transactions contemplated by the Exchange Offers, the Company restructured the $ 600 million of Convertible Notes due 2024 issued in 2018 to Silver Lake and others pursuant to which the maturity of the Convertible Notes due 2024 were extended to May 1, 2026 (the reset of the conversion price as discussed below was not extended) and a first-priority lien on the Collateral was granted to secure indebtedness thereunder.

The Convertible Notes due 2026 are convertible at the option of the holders thereof on the same terms as the Convertible Notes due 2024.

Upon maturity, the $ 600.0 million principal amount of the Convertible Notes due 2026 will be payable in cash.

On September 14, 2018, the Company bifurcated the conversion feature from the principal balance of the Convertible Notes due 2024 as a derivative liability because (1) a conversion feature is not clearly and closely related to the debt instrument and the reset of the conversion price discussed in the following paragraph causes the conversion feature to not be considered indexed to the Company’s equity, (2) the conversion feature standing alone meets the definition of a derivative, and (3) the Convertible Notes due 2024 are not remeasured at fair value each reporting period with changes in fair value recorded in the condensed consolidated statement of operations.

The initial derivative liability of $ 90.4 million is offset by a discount to the principal balance and is amortized to interest expense resulting in an effective rate of 5.98 % over the extended term of the Convertible Notes due 2026.

The Company also recorded deferred financing costs of approximately $ 13.6 million related to the issuance of the Convertible Notes due 2024 and will amortize those costs to interest expense under the effective interest method over the extended term of the Convertible Notes due 2026.

For the three months ended September 30, 2020 and September 30, 2019.

the Company recorded interest expense of $ 7.8 million and $ 8.2 million, respectively, and interest expense for the nine months ended September 30, 2020 and September 30, 2019 of $ 24.4 million and $ 24.2 million, respectively.

The First Lien Toggle Notes due 2026 bear cash interest at a rate of 15 % per annum payable semi-annually in arrears on January 15 and July 15, beginning on July 15, 2021.

Interest for the first three interest periods after the issue date may, at the Company’s option, be paid in PIK interest at a rate of 17 % per annum, and thereafter interest shall be payable solely in cash.

The First Lien Toggle Notes due 2026 will mature on April 24, 2026.

The indenture provides that the First Lien Toggle Notes due 2026 are general senior secured obligations of the Company and are secured on a pari passu basis with the Senior Credit Facilities, the First Lien Notes due 2026, and the First Lien Notes due 2025.

On December 14, 2020, Mudrick received a total of 21,978,022 shares of the Company’s Class A common stock;

of which 8,241,758 shares (“Commitment Shares”) relates to consideration received for a commitment fee and 13,736,264 shares (“Exchange Shares”) as consideration received for the second lien exchange.

Mudrick exchanged $ 100 million aggregate principal amount of the Second Lien Notes due 2026 that were held by Mudrick for the Exchange Shares (the “Second Lien Exchange”) and waived its claim to PIK interest of $ 4.5 million principal amount.

The fair value of 21,978,022 shares of the Company’s Class A common stock was $ 70.1 million based on the market closing price of $ 3.19 per share on December 14, 2020.

On December 14, 2020, the Class A common shares issued were recorded by the Company in stockholders’ deficit.

During the three months ended March 31, 2021, the Company reclassified the prepaid commitment fee and deferred charges of $ 28.6 million to corporate borrowings from other long-term assets for the Commitment Shares and deferred charges.

The prepaid commitment fee is recorded as a discount and together with deferred charges will be amortized to interest expense over the term of the First Lien Toggle Notes due 2026 using the effective interest method.

The Company filed a shelf registration statement in December 2020, which was declared effective providing for the resale of the Exchange Shares.

Convertible Notes due 2026

On January 27, 2021, affiliates of Silver Lake and certain co-investors (collectively, the “Noteholders”) elected to convert (the “Conversion”) all $ 600.0 million principal amount of the Company’s Convertible Notes due 2026 (“Convertible Notes due 2026”) into shares of the Company’s Class A common stock at a conversion price of $ 13.51 per share.

The non-cash Conversion settled on January 29, 2021 and resulted in the issuance of 44,422,860 shares of the Company’s Class A common stock to the Noteholders.

The Company recorded $ 70.0 million of non-cash interest expense in the first quarter of 2021 for unamortized discount and deferred charges at the date of conversion following the guidance in ASC 815-15-40-1.

The non-cash Conversion reduced the Company’s first-lien indebtedness by $ 600.0 million.

Pursuant to the Stock Repurchase and Cancellation Agreement with Dalian Wanda Group Co., Ltd.

(“Wanda”) dated as of September 14, 2018, 5,666,000 shares of the Company’s Class B common stock held by Wanda were forfeited and cancelled in connection with the Conversion.

During the three months ended March 31, 2020, the Company recorded other expense (income) of $( 0.5 ) million related to the derivative liability fair value adjustment for the embedded conversion feature in the Convertible Notes due 2026.

The derivative liability was remeasured at fair value each reporting period until the conversion price reset on September 14, 2020, with changes in fair value recorded in the condensed consolidated statements of operations as other expense or income.

On September 14, 2020, the conversion price reset from $ 18.95 per share to $ 13.51 per share pursuant to the terms of the Indenture for the Convertible Notes due 2026 and the derivative liability as of September 14, 2020 was reclassified to permanent equity as the conversion feature is indexed to the Company’s equity.

For the three months ended September 30, 2020 and September 30, 2019, this resulted in other expense of $ 89.9 million and $ 5.7 million, respectively, and for the nine months ended September 30, 2020 and September 30, 2019, this resulted in other expense (income) of $ 89.4 million and $( 14.9 ) million, respectively.

The if-converted value of the Convertible Notes due 2026 is less than the principal balance by approximately $ 390.8 million as of September 30, 2020 based on the closing price per share of the Company’s common stock of $ 4.71 per share.

In addition, as a result of the adjustment to the conversion price, any future conversion of the Convertible Notes due 2026 will result in 5,666,000 shares of the Company’s Class B common stock held by Wanda being subject to forfeiture and retirement by the Company at no additional cost pursuant to the Stock Repurchase and Cancellation Agreement (the “Stock Repurchase Agreement”) between the Company and Wanda discussed in Note 7 — Stockholders’ Equity.

This cancellation agreement is a contingent call option for the forfeiture shares, which is a freestanding derivative measured at fair value on a recurring

The initial derivative asset of $ 10.7 million is offset by a credit to stockholders’ equity related to the Class B common stock purchase and cancellation.

The Company bifurcated the conversion feature from the principal balance of the Convertible Notes due 2026 as a derivative liability because (1) a conversion feature was not clearly and closely related

to the debt instrument and the reset of the conversion price caused the conversion feature to not be considered indexed to the Company’s equity, (2) the conversion feature standing alone met the definition of a derivative, and (3) the Convertible Notes due 2026 were not remeasured at fair value each reporting period with changes in fair value recorded in the condensed consolidated statement of operations.

During the three months ended March 31, 2020, the Company recorded other expense of $ 20.1 million related to the derivative asset fair value adjustment for the contingent call option related to the Class B common stock purchase and cancellation agreement.

Pursuant to the Stock Repurchase and Cancellation Agreement between the Company and Wanda, the conversion feature of the Convertible Notes due 2026 would result in 5,666,000 shares of the Company’s Class B common stock held by Wanda being subject to forfeiture and retirement by the Company at no additional cost.

This cancellation agreement was a contingent call option for the forfeiture shares and was a freestanding derivative.

The forfeiture shares feature was not clearly and closely related to the Convertible Notes due 2026 host and it was bifurcated and accounted for as a derivative asset measured at fair value through earnings each reporting period until the conversion feature reset on September 14, 2020, with changes in fair value recorded in the condensed consolidated statement of operations as other expense or income.

On September 14, 2020, the conversion price reset from $ 18.95 per share to $ 13.51 per share pursuant to the terms of the Indenture for the Convertible Notes due 2026 and the derivative asset as of September 14, 2020 was reclassified to permanent equity as the number of shares that will be cancelled on conversion of the Convertible Notes due 2026 are known.

For the three months ended September 30, 2020 and September 30, 2019, this resulted in other expense (income) of $ 5.9 million and $( 8.5 ) million, respectively, and other expense (income) of $ 19.6 million and $( 0.5 ) million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

Additionally, the conversion rate will be adjusted if any cash dividend or distribution is made to all or substantially all holders of the Company’s common stock (other than a regular, quarterly cash dividend that does not exceed $ 0.20 per share until September 14, 2020 and $ 0.10 per share thereafter).

Any Convertible Notes due 2026 that are converted in connection with a Make-Whole Fundamental Change (as defined in the indenture governing the Convertible Notes due 2026) are, under certain circumstances, entitled to an increase in the conversion rate.

The Company recorded an immaterial non-cash correction of $ 26.2 million recorded in other expense during the three and nine months ended September 30, 2020.

The adjustment related to the Company correcting the valuation methodology applied to the derivative asset related to the cancellation agreement entered into on September 14, 2018, a Level 3 estimate of fair value for a complex instrument developed in consultation with a third party specialist.

Upon conversion by a holder of the Convertible Notes due 2026, the Company shall deliver, at its election, either cash, shares of the Company’s Class A common stock or a combination of cash and shares of the Company’s Class A common stock at an initial conversion rate of 52.7704 per $1,000 principal amount of the Convertible Notes due 2026 (which represented an initial conversion price of $ 18.95 ), in each case subject to customary anti-dilution adjustments.

In addition to typical anti-dilution adjustments, because the then-applicable conversion price was greater than 120 % of the average of the volume-weighted average price of the Company’s Class A common stock for the ten days prior to the second anniversary of issuance on September 14, 2020 (the “Reset Conversion Price”), the conversion price for the Convertible Notes due 2026 was subject to a reset provision that adjusted the conversion price downward to such Reset Conversion Price.

However, this conversion price reset provision was subject to a conversion price floor such that the shares of the Company’s Class A common stock issuable upon conversion would not exceed 30 % of the Company’s then outstanding fully-diluted share capital after giving effect to the conversion.

The volume-weighted average price of the Company’s Class A common stock for the ten consecutive trading days ending on September 14, 2020 was $ 6.55 and, as a result, the conversion price reset provision was triggered.

Effective as of September 14, 2020, the conversion price for the Convertible Notes due 2026 was adjusted to $ 13.51 , which represents the conversion price that would result in 30 % of the Company’s then outstanding fully-diluted share capital being issued upon conversion in full of the Convertible Notes due 2026.

The conversion price reset provision was only applicable at September 14, 2020 and any future adjustments to the conversion price will be due to customary anti-dilution adjustments as set forth in the indenture governing the Convertible Notes due 2026.

The holders of the Convertible Notes due 2026 may elect to convert the Convertible Notes due 2026 at any time and from time to time until September 15, 2024.

As of September 30, 2020, the $ 600.0 million principal balance of the Convertible Notes due 2026 would be convertible into 44,422,860 , compared to 31,662,240 shares of Class A common stock before giving effect to the conversion price reset on September 14, 2020.

The Company has the option to redeem the Convertible Notes due 2026 for cash on or after September 14, 2023 at par if the price for the Company’s Class A common stock is equal to or greater than 150 % of the then applicable conversion price for 20 or more trading days out of a consecutive 30 day trading period (including the final three trading days), at which time the holders have the option to convert.

The Company also has the option to redeem the Convertible Notes due 2026, between September 14, 2020 and September 14, 2021, if the reset provision described above is triggered at a redemption price in cash that would result in the noteholders realizing a 15 % internal rate of return from the date of issuance regardless of when any particular noteholder acquired its Convertible Notes due 2026.

With certain exceptions, upon a change of control of the Company or if the Company’s Class A common stock is not listed for trading on The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market, the holders of the Convertible Notes due 2026 may require that the Company repurchase in cash all or part of the principal amount of the Convertible Notes due 2026 at a purchase price equal to the principal amount plus accrued and unpaid interest up to, but excluding, the date of repurchase.

The amended and restated Indenture governing the Convertible Notes due 2026 includes restrictive covenants that, subject to specified exceptions and parameters, limit the ability of the Company to incur additional debt and limit the ability of the Company to incur liens with respect to the

Company’s senior subordinated notes or any debt incurred to refinance the Company’s senior subordinated notes.

The Indenture also includes customary events of default, which may result in the acceleration of the maturity of the Convertible Notes due 2026 under the Indenture.

NOTE 7—STOCKHOLDERS’ EQUITY

Equity Distribution Agreement.

On September 24, 2020, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Citigroup Global Markets Inc.

and Goldman Sachs & Co.

LLC, as sales agents (each, a “Sales Agent” and collectively, the “Sales Agents”), to sell up to 15.0 million shares of the Company’s Class A common stock, par value $ 0.01 per share, from time to time, through an “at-the-market” offering program (the “Offering”).

Subject to the terms and conditions of the Equity Distribution Agreement, the Sales Agents will use reasonable efforts consistent with their normal trading and sales practices, applicable law and regulations, and the rules of the New York Stock Exchange to sell the Class A common stock from time to time based upon the Company’s instructions for the sales, including any price, time or size limits specified by the Company.

The Company intends to use the net proceeds, if any, from the sale of the Class A common stock pursuant to the Equity Distribution Agreement for general corporate purposes, which may include the repayment, refinancing, redemption or repurchase of existing indebtedness or working capital, capital expenditures and other investments.

The Company raised gross proceeds of approximately $ 2.9 million during the three months ended September 30, 2020, through its at-the-market offering of approximately 600,000 shares of its Class A common stock and paid fees to the Sales Agents of approximately $ 0.1 million.

See Note 13—Subsequent Events for further information regarding at-the-market offerings.

Exchange Offers.

Certain backstop purchasers of the First Lien Notes due 2026 that participated in the Exchange Offer received five million Class A common shares.

See Note 6 — Corporate Borrowings for further information.

The following is a summary of dividends and dividend equivalents declared to stockholders during the three and nine months ended September 30, 2020:

On December 11, 2020, the Company entered into an equity distribution agreement with Goldman Sachs & Co.

Riley Securities, Inc., as sales agents to sell up to 178.0 million shares of the Company’s Class A common stock, par value $ 0.01 per share, through an “at-the-market” offering program.

On January 25, 2021, the Company entered into equity distribution agreements with Goldman Sachs & Co.

Riley Securities, Inc., as sales agents to sell up to 50.0 million shares of the Company’s Class A common stock, par value $ 0.01 per share, through an “at-the-market” offering program.

During the three months ended March 31, 2021, the Company raised gross proceeds of approximately $ 596.9 million through its at-the-market offering for the remaining available shares under the equity distribution agreement of 187,066,293 shares of its Class A common stock and paid fees to the sales agents of approximately $ 14.9 million and other fees of $ 0.4 million.

The Company intends to use the net proceeds from the sale of the Class A common stock pursuant to the equity distribution agreement for general corporate purposes, which may include the repayment, refinancing, redemption or repurchase of existing indebtedness or working capital, capital expenditures and other investments.

See Note 13 — Subsequent Event for information regarding the additional at-the-market offerings of 43 million shares of the Company’s Class A common stock.

Class B common stock.

On January 27, 2021, pursuant to the Stock Repurchase and Cancellation Agreement with Wanda dated as of September 14, 2018 and in connection with the Conversion of the Convertible Notes due 2026 into shares of the Company’s Class A common stock by Silver Lake and certain co-investors, 5,666,000 shares of the Company’s Class B common stock held by Wanda were forfeited and cancelled.

On February 1, 2021, Wanda exercised their right to convert all outstanding Class B common stock of 46,103,784 to Class A common stock, thereby reducing the number of outstanding Class B common stock to zero, which resulted in the retirement of Class B common stock.

The Third Amended and Restated Certificate of Incorporation of the Corporation provides that Class B common stock may not be reissued by the Company.

There were no dividends declared to stockholders during the three months ended March 31, 2021.

The following is a summary of dividends and dividend equivalents declared to stockholders during the three months ended March 31, 2020:

Declaration Date

4 unchanged sentences

Related Party Transactions .

As of September 30, 2020 and December 31, 2019, the Company recorded a receivable due from Wanda of $ 0.6 million and $ 0.8 million, respectively, for reimbursement of general administrative and other expense incurred on behalf of Wanda.

For the three months ended September 30, 2020 and September 30, 2019, the Company recorded approximately $ 0 and $ 0.1 million, respectively, of cost reductions for general and administrative services provided on behalf of Wanda.

For the nine months ended September 30, 2020 and September 30, 2019, the Company recorded approximately $ 0.2 million in both periods of cost reductions for general and administrative services provided on behalf of Wanda.

Wanda owns Legendary Entertainment, a motion picture production company.

The Company will occasionally play Legendary’s films in its theatres as a result of transactions with independent film distributors.

On September 14, 2018, the Company entered into the Investment Agreement with Silver Lake, relating to the issuance to Silver Lake (or its designated affiliates) of $ 600.0 million principal amount of the Convertible Notes due 2024 and entered into an amended and restated investment agreement with Silver Lake, relating to the issuance of the Convertible Notes due 2026 on August 31, 2020.

See Note 6 — Corporate Borrowings - Convertible Notes for more information.

On September 14, 2018, the Company, Silver Lake and Wanda entered into a Right of First Refusal Agreement (the “ ROFR Agreement ”), which provides Silver Lake certain rights to purchase shares of the Company’s common stock that Wanda proposes to sell during a period of two years from the date of execution of the ROFR Agreement or, if earlier, until such time that Wanda and its affiliates cease to beneficially own at least 50.1 % of the total voting power of the Company’s voting stock.

The ROFR Agreement expired unexercised.

As of September 30, 2020, Wanda owns 47.10 % of AMC through its 51,769,784 shares of Class B common stock.

With the three -to-one voting ratio between the Company’s Class B and Class A common stock, Wanda retains voting control of AMC with 72.76 % of the voting power of the Company’s common stock.

As discussed in Note 6 —

Corporate Borrowings up to 5,666,000 shares of Class B common stock are now subject to forfeiture for no consideration in connection with the reset provision contained in the indenture governing the Convertible Notes due 2026.

Condensed Consolidated Statements of Stockholders’ Equity

For the Nine Months Ended September 30, 2020

As of March 31, 2021 and December 31, 2020, the Company recorded a receivable due from Wanda of $ 0 and $ 0.7 million, respectively, for reimbursement of general administrative and other expense incurred on behalf of Wanda.

For the three months ended March 31, 2021 and March 31, 2020, the Company recorded approximately $ 0 million and $ 0.1 million, respectively, of cost reductions for general and administrative services provided on behalf of Wanda.

Stock-Based Compensation

The Company recorded stock-based compensation expense of $ 5.4 million and $ 2.7 million within general and administrative:

other during the three months ended March 31, 2021 and March 31, 2020, respectively.

As of March 31, 2021, the remaining unrecognized compensation cost related to stock-based compensation arrangements was approximately $ 43.1 million.

The weighted average period over which this remaining compensation expense will be recognized is approximately 1.5 years.

Awards Granted in 2021

During the three months ended March 31, 2021, AMC’s Board of Directors approved awards of stock, restricted stock units (“RSUs”), and performance stock units (“PSUs”) to certain of the Company’s employees and directors under the 2013 Equity Incentive Plan.

The grant date fair value of these awards during the three months ended March 31, 2021 was based on the closing price of AMC’s Class A common stock on February 23, 2021 of $ 7.70 per share.

Each RSU and PSU held by a participant as of a dividend record date is entitled to a dividend equivalent equal to the amount paid with respect to one share of Class A common stock underlying the unit.

Any such accrued dividend equivalents are paid to the holder upon vesting of the units.

Each unit represents the right to receive one share of Class A common stock at a future date.

The 2021 award agreements generally had the following features:

● Stock Award Agreement:

The Company granted awards of 124,054 fully vested shares of Class A common stock to its independent members of AMC’s Board of Directors during the three months ended March 31, 2021 with a grant date fair value of $ 0.9 million.

● Restricted Stock Unit Award Agreement:

The Company granted RSU awards of 2,687,813 to certain members of management during the three months ended March 31, 2021 with a grant date fair value of $ 20.7 million.

Each RSU represents the right to receive one share of Class A common stock at a future date.

The RSUs vest over three years with 1/3 vesting in each year.

These RSUs will be settled within 30 days of vesting.

● Performance Stock Unit Award Agreement:

During the three months ended March 31, 2021, total PSUs of 2,687,813 were awarded (“2021 PSU award”) to certain members of management and executive officers, with the total PSUs divided into three separate year tranches with each tranche allocated to a fiscal year within the performance period (“Tranche Year”).

The PSUs within each Tranche Year are further divided between 2 performance targets;

the Adjusted EBITDA performance target and free cash flow performance target.

The 2021 PSU awards will vest based on achieving 80 % to 120 % of the performance targets with the corresponding vested unit amount ranging from 50 % to 200 %.

If the performance targets are met at 100%, the 2021 PSU awards will vest at 2,687,813 units in the aggregate.

No PSUs will vest for each Tranche Year if the Company does not achieve 80% of the Tranche Year’s Adjusted EBITDA and free cash flow targets.

Additionally, vesting is subject to the participant’s continued employment through the end of the three-year cumulative period, ending on December 31, 2023.

The vested PSUs will be settled within 30 days of vesting which will occur upon certification of performance results by the Compensation Committee of the Board of Directors.

The Compensation Committee establishes the annual performance targets at the beginning of each year, therefore, the grant date (and fair value measurement date) for each Tranche Year is the date at the beginning of each year when a mutual understanding of the key terms and conditions are reached per ASC 718-10-55-95.

The 2021 PSU award grant date fair value on February 23, 2021 for the 2021 Tranche Year award of 895,951 units was approximately $ 6.9 million.

In addition, the February 23, 2021 grant date fair value for the 2021 Tranche Year under the 2020 PSU award agreement of 438,244 units and the 2019 PSU award agreement of 181,916 units was approximately $ 3.4 million and $ 1.4 million, respectively.

● Special Performance Stock Unit (“SPSU”) Executive Award Agreement:

In January 2021, the market condition requirement for SPSUs awarded in calendar year 2020 was met as a result of exceeding the 20-day trailing volume weighted average stock price threshold target for tranche 5 and tranche 6 of $ 4 and $ 8 , respectively.

The stock-based compensation costs for SPSUs are recorded on a straight-line basis through October 30, 2021, which is the end of the service requirement period.

The following table represents the nonvested RSU, PSU and SPSU activity for the three months ended March 31, 2021:

Shares of RSU

Beginning balance at January 1, 2021 (1)

Nonvested at March 31, 2021

(1) Includes awards modified during 2020 where grant date fair value was not determined until 2021.

(2) Excludes Tranche Years 2022 and 2023 awarded under the 2021 PSU award.

Condensed Consolidated Statements of Stockholders’ Deficit

For the Three Months Ended March 31, 2021

Class A Voting

8 unchanged sentences

Balances December 31, 2020

Cumulative effect adjustment for the adoption of new accounting principle (ASU 2016-13)

Other comprehensive loss

Dividends declared:

Class A common stock, $ 0.03 /share, net of forfeitures

Class B common stock, $ 0.03 /share

Taxes paid for restricted unit withholdings

Stock-based compensation

Balances March 31, 2020

Other comprehensive income

Dividends declared:

Class A common stock, accrued dividend forfeitures

Stock-based compensation

Balances June 30, 2020

Other comprehensive income

Baltics noncontrolling capital contribution

Class A common stock, accrued dividend equivalent adjustment

Class A common stock issuance

Exchange Offer Class A common stock issuance

Derivative asset valuation allowance adjustment

Reclassification of derivative liability and derivative asset for Conversion Price Reset of Convertible Notes due 2026

Wanda conversion of Class B shares to Class A shares

( 46,103,784 )

Convertible Notes due 2026 stock conversion

Wanda forfeit and cancellation of Class B shares

( 5,666,000 )

Taxes paid for restricted unit withholdings

Stock-based compensation

Balances September 30, 2020

Condensed Consolidated Statements of Stockholders’ Equity

For the Nine Months Ended September 30, 2019

Balances March 31, 2021

Condensed Consolidated Statements of Stockholders’ Deficit

For the Three Months Ended March 31, 2020

Class A Voting

4 unchanged sentences

(In millions, except share and per share data)

Income (Loss)

Equity (Deficit)

Balances December 31, 2019

Cumulative effect adjustments for the adoption of new accounting principle (ASU 842)

Other comprehensive loss

Dividends declared:

Class A common stock, $ 0.20 /share

Class B common stock, $ 0.20 /share

Taxes paid for restricted unit withholdings

Reclassification from temporary equity

Stock-based compensation

Balances March 31, 2019

Cumulative effect adjustments for the adoption of new accounting principle (ASU 842)

Cumulative effect adjustment for the adoption of new accounting principle (ASU 2016-13)

Other comprehensive loss

4 unchanged sentences

Stock-based compensation

Balances June 30, 2019

Other comprehensive loss

Dividends declared:

Class A common stock, $ 0.20 /share, net of forfeitures

Class B common stock, $ 0.20 /share

Stock-based compensation

Balances September 30, 2019

Balances March 31, 2020

NOTE 8—INCOME TAXES

The Company’s worldwide effective income tax rate is based on actual income (loss), statutory rates, valuation allowances against deferred tax assets and tax planning opportunities available in the various jurisdictions in which it operates.

The Company is using a discrete income tax calculation for the three and nine months ended September 30, 2020 due to the inability to determine reliable annual estimates of taxable income (loss) due to COVID-19.

Historically, for interim financial reporting, the Company estimates the worldwide annual income tax rate based on projected taxable income (loss) for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate, adjusted for discrete items, if any.

The Company is using a discrete income tax calculation for the three months ended March 31, 2021 due to the inability to determine reliable annual estimates of taxable income (loss) due to COVID-19.

Historically, for interim financial reporting, the Company estimated the worldwide annual income tax rate based on projected taxable income (loss) for the full year and recorded a quarterly income tax provision or benefit in accordance with the anticipated annual rate, adjusted for discrete items, if any.

The Company will return to the historic approach of computing quarterly tax expense based on an annual effective rate in the future interim period when more reliable estimates of annual income become available.

4 unchanged sentences

motion picture and broader economy, among others.

During the first quarter of 2020, the severe impact of COVID-19 on operations in Germany and Spain caused the Company to conclude the realizability of deferred tax assets held in those jurisdictions does not meet the more likely than not standard.

As such, a charge of $ 33.1 million and $ 40.1 million was recorded for Germany and Spain, respectively.

During the fourth quarter of 2017, the Company determined that it was appropriate to record a valuation allowance against U.S.

deferred tax assets.

In addition, several other international jurisdictions carried valuation allowances against their deferred tax assets at the beginning of 2020.

Cancellation of Debt Income.

On July 31, 2020, the Company consummated its previously announced private offers to exchange its Existing Subordinated Notes for newly issued Second Lien Notes due 2026.

See Note 6 — Corporate Borrowings for further information.

For US tax purposes the Company is required to recognize CODI on the difference between the face value of debt exchanged and the fair market value of the new debt issued.

The Company has determined that it should recognize an estimated $ 1.2 billion of CODI for tax purposes.

IRS §108 provides relief from recognizing the CODI as current taxable income to the extent that the tax paying legal entity is insolvent as defined by the US Tax Code.

The Company currently estimates that the level of its insolvency at July 31, 2020 exceeds the indicated amount of CODI resulting from the debt exchange.

To the extent that the entity is insolvent, rather than recognize current taxable income, the entity may reduce its tax attributes including net operating losses, capital losses, tax credits, depreciable assets, investment in subsidiaries and other investments in the amount of the excluded CODI.

For purposes of determining the current and deferred tax provision, and uncertain tax positions for the nine months ended September 30, 2020, the Company estimated a significant portion of its net operating losses and tax credits have been eliminated as a result of tax attribute reduction.

A valuation allowance is recorded against the Company’s U.S.

deferred tax assets and most of the Company’s International deferred tax assets as we have determined the realization of these assets does not meet the more likely than not criteria.

For purposes of determining the current and deferred tax provision, and uncertain tax positions for the three months ended March 31, 2021, the Company estimated a significant portion of its net operating losses and tax credits have been eliminated as a result of tax attribute reduction related to the debt exchange transaction that occurred in July 2020.

The process of determining the attribute reduction is complex, subject to the taxpayer making certain elections regarding which attributes are to be reduced and cannot be calculated until the completion of taxable income for the year in which the CODI was incurred.

Therefore, the estimated impact of the tax attribute reduction is subject to change until the finalization of its 2020 tax returns that will contain the tax consequences of the debt exchange.

The effective tax rate for the nine months ended September 30, 2020 reflects the impact of these valuation allowances against U.S.

and international deferred tax assets generated during the nine-month period.

The actual effective rate for the nine months ended September 30, 2020 was ( 1.9 )%.

The Company’s consolidated tax rate for the nine months ended September 30, 2020 differs from the U.S.

The effective tax rate for the three months ended March 31, 2021 reflects the impact of these valuation allowances against U.S.

and international deferred tax assets generated during the three-month period.

The actual effective rate for the three months ended March 31, 2021 was 1.2 %.

The Company’s consolidated tax rate for the three months ended March 31, 2021 differs from the U.S.

statutory tax rate primarily due to the valuation allowances in U.S.

and foreign jurisdictions, foreign tax rate differences, federal and state tax credits, partially offset by state income taxes, permanent differences related to goodwill impairments, interest, compensation, and other discrete items.

No tax impact was recorded on the $ 1,901.1 million goodwill impairment charge incurred during the nine months ended September 30, 2020, as the portion impaired was permanently non-deductible.

At September 30, 2020 and December 31, 2019, the Company has recorded net deferred tax liabilities of $ 42.8 million and net deferred tax

assets of $ 24.1 million, respectively.

On March 27, 2020, the U.S.

government enacted the CARES Act.

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property, as well as loans to certain qualifying businesses.

The Company continues to examine the impacts that the CARES Act may have on its business.

While the Company may take advantage of certain CARES Act’s cash deferral provisions, many of the provisions are not applicable to the Company.

Additionally, as of the date of this filing, the Company has not participated in CARES Act loans.

and foreign jurisdictions, foreign tax rate differences, federal and state tax credits, permanent differences and other discrete items.

At March 31, 2021 and December 31, 2020, the Company has recorded net deferred tax liabilities of $ 32.7 million and net deferred tax assets of $ 40.2 million, respectively.

Utilization of the Company’s net operating loss carryforwards, disallowed business interest carryforwards and other tax attributes became subject to the Section 382 ownership change limitation due to changes in the Company’s stock ownership on January 27, 2021.

Accordingly, the Company’s ability to utilize any net operating loss carryforwards and other tax attributes may be significantly limited.

Accordingly, although they are fully valued and there would be no financial statement impact, the Company’s ability to utilize any net operating loss carryforwards and other tax attributes in future periods may be significantly limited.

NOTE 9—FAIR VALUE MEASUREMENTS

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Recurring Fair Value Measurements.

The following table summarizes the fair value hierarchy of the Company’s financial assets and liabilities carried at fair value on a recurring basis as of September 30, 2020:

Fair Value Measurements at September 30, 2020 Using

The following table summarizes the fair value hierarchy of the Company’s financial assets and liabilities carried at fair value on a recurring basis as of March 31, 2021:

Fair Value Measurements at March 31, 2021 Using

Total Carrying

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(In millions)

September 30, 2020

March 31, 2021

Other long-term assets:

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The Company’s money market mutual funds are invested in funds that seek to preserve principal, are highly liquid, and therefore are recorded on the balance sheet at the principal amounts deposited, which equals fair value.

Nonrecurring Fair Value Measurements.

The following table summarizes the fair value hierarchy of the Company’s assets that were measured at fair value on a nonrecurring basis:

Fair Value Measurements at September 30, 2020 Using

Significant other

Total Carrying

Quoted prices in

active market

(In millions)

September 30, 2020

Property, net:

Operating lease right-of-use assets

Intangible assets, net

Definite-lived intangible assets

Indefinite-lived intangible assets

Fair Value Measurements at March 31, 2020 Using

Significant other

Total Carrying

Quoted prices in

active market

(In millions)

March 31, 2020

Property, net:

Operating lease right-of-use assets

Intangible assets, net

Definite-lived intangible assets

Indefinite-lived intangible assets

Other long-term assets

Cost method investments

Long-lived assets held and used, operating lease right-of-use assets, intangible assets, and cost method investments were considered impaired and were written down to their fair value at March 31, 2020 of $ 3,159.4 million.

There is considerable management judgment with respect to cash flow estimates and discount rates used in determining fair value, and therefore are classified as Level 3 measurements within the fair value measurement hierarchy.

Valuation Techniques.

There are a number of estimates and significant judgments that were made by management in performing these impairment evaluations.

Such judgments and estimates include estimates of future attendance, revenues, cash flows, rent relief, cost savings, capital expenditures, and the cost of capital, among others.

Attendance is expected to be significantly below historical levels following reopening with limited seating capacities and social distancing guidelines and studios have postponed new film releases or moved them to the home video market, and movie release dates may continue to move in the future.

The Company believes it used reasonable and appropriate business judgments.

At September 30, 2020, the Company used weighted average cost of capital (discount rate) input for the Domestic Theatres and International Theatres reporting units of 12.0 % and 13.0 %, respectively, and a long-term growth rate input of 1.0 % for both of the reporting units.

At March 31, 2020, the Company used weighted average cost of capital (discount rate) input for the Domestic Theatres and International Theatres reporting units of 11.5 % and 13.0 %, respectively, and a long-term growth rate input of 2.0 % for both of the reporting units.

There is considerable management judgment with respect to cash flow estimates and appropriate discount rates to be used in determining fair value, and, accordingly, actual results could vary significantly from such estimates, which fall under Level 3 within the fair value measurement hierarchy.

These estimates determine whether impairments have been incurred, and quantify the amount of any related impairment charge.

The investment in NCM was measured at fair value using National CineMedia, Inc.’s underlying stock price at the date of measurement.

Other Fair Value Measurement Disclosures.

The Company is required to disclose the fair value of financial instruments that are not recognized at fair value in the statement of financial position for which it is practicable to estimate that value:

Fair Value Measurements at September 30, 2020

Fair Value Measurements at March 31, 2021 Using

Significant other

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(In millions)

September 30, 2020

March 31, 2021

Current maturities of corporate borrowings

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Quoted market prices and observable market based inputs were used to estimate fair value for Level 2 inputs.

The Level 3 fair value measurement represents the transaction price of the corporate borrowings under market conditions.

On September 14, 2018, the Company issued $ 600.0 million of Convertible Notes due 2024.

These notes were issued by private placement, as such there is no observable market for these convertible notes (now the Convertible Notes due 2026).

The Company valued these notes at principal value less a discount reflecting a market yield to maturity.

See Note 6 — Corporate Borrowings for further information.

The Level 3 fair value measurement represents the transaction price of the corporate borrowings under estimated market conditions.

The Company valued these notes at principal value less an estimated discount reflecting a market yield to maturity.

See Note 6 — Corporate Borrowings and Finance Lease Obligations for further information.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments.

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markets and International markets.

The International markets reportable segment has operations in or partial interest in theatres in the United Kingdom, Germany, Spain, Italy, Ireland, Portugal, Sweden, Finland, Estonia, Latvia, Lithuania, Norway, and Denmark.

On August 28, 2020, the Company divested of 49 % of its interest in Estonia, Latvia, and Lithuania operations.

The Company completed the 100% divestiture of Latvia during the three months ended December 31, 2020 and Estonia during the three months ended March 31, 2021.

See Note 1 — Basis of Presentation for further information on the Baltics theatre sale agreement.

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Three Months Ended

Nine Months Ended

September 30,

Revenues (In millions)

March 31, 2021

March 31, 2020

International markets

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Three Months Ended

Nine Months Ended

September 30,

Adjusted EBITDA (In millions)

March 31, 2021

March 31, 2020

International markets

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The Company defines Adjusted EBITDA as net earnings (loss) plus (i) income tax provision (benefit), (ii) interest expense and (iii) depreciation and amortization, as further adjusted to eliminate the impact of certain items that the Company does not consider indicative of the Company’s ongoing operating performance and to include attributable EBITDA from equity investments in theatre operations in International markets and any cash distributions of earnings from its other equity method investees.

The measure of segment profit and loss the

Company uses to evaluate performance and allocate its resources is Adjusted EBITDA, which is consistent with how Adjusted EBITDA is defined in the Company’s debt indentures.

The measure of segment profit and loss the Company uses to evaluate performance and allocate its resources is Adjusted EBITDA, which is consistent with how Adjusted EBITDA is defined in the Company’s debt indentures.

Three Months Ended

Nine Months Ended

September 30,

Capital Expenditures (In millions)

March 31, 2021

March 31, 2020

International markets

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Long-term assets, net (In millions)

September 30, 2020

March 31, 2021

December 31, 2020

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Three Months Ended

Nine Months Ended

September 30,

(In millions)

Net loss attributable to AMC Entertainment Holdings, Inc.

March 31, 2021

March 31, 2020

Income tax provision (benefit)

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Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill (1)

Certain operating expenses (3)

Equity in (earnings) loss of non-consolidated entities (4)

Certain operating expense (2)

Equity in loss of non-consolidated entities

Cash distributions from non-consolidated entities (3)

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Other expense (income) (5)

Other non-cash rent (8)

Other non-cash rent expense (benefit) (6)

General and administrative — unallocated:

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Adjusted EBITDA

(1) For information regarding the income tax provision, see Note 8 — Income Taxes.

(2) During the three months ended September 30, 2020, the Company recorded goodwill non-cash impairment charges of $ 151.2 million and $ 5.6 million related to the enterprise fair value of the Domestic Theatres and International Theatres reporting units, respectively.

(1) During the three months ended March 31, 2020, the Company recorded non-cash impairment charges of $ 1,124.9 million and $ 619.4 million related to the enterprise fair values of its Domestic Theatres and International Theatres reporting units, respectively.

The Company recorded non-cash impairment charges related to its long-lived assets of $ 81.4 million on 57 theatres in the U.S.

markets with 527 screens which were related to property, net, operating lease right-of-use assets, net and other long-term assets and $ 0 in the International markets during the three months ended September 30, 2020.

The Company recorded non-cash impairment charges related to definite-lived intangible assets of $ 6.4 million in the Domestic Theatres reporting unit and indefinite-lived intangible assets of $ 4.5 million and $ 0.1 million related to the Odeon and Nordic tradenames, respectively, in the International Theatres reporting unit during the three months ended September 30, 2020.

During the nine months ended September 30, 2020, the Company recorded goodwill non-cash impairment charges of $ 1,276.1 million and $ 625.0 million related to the enterprise fair values of the Domestic Theatres and International Theatres reporting units, respectively.

During the nine months ended September 30, 2020, the Company recorded non-cash impairment charges related to its long-lived assets of $ 109.5 million on 75 theatres in the U.S.

markets with 851 screens which were related to property, net, operating lease right-of-use assets, net and other long-term assets and $ 9.9 million on 23 theatres in the International markets with 213 screens which were related to property, net and operating lease right-of-use assets, net.

The Company recorded non-cash impairment charges related to indefinite-lived intangible assets of $ 10.4 million and $ 2.5 million related to the Odeon and Nordic tradenames, respectively, in the International Theatres reporting unit during the nine months ended September 30, 2020.

The Company also recorded non-cash impairment charges of $ 14.4 million related to its definite-lived intangible assets in the Domestic Theatres reporting unit during the nine months ended September 30, 2020.

markets with 658 screens which were related to property, net, operating lease right-of-use assets, net and other long-term assets and $ 9.9 million on 23 theatres in the International markets with 213 screens which were related to property, net and operating lease right-of-use assets, net, during the three months ended March 31, 2020.

The Company recorded non-cash impairment charges related to its indefinite-lived intangible assets of $ 5.9 million and $ 2.4 million related to the Odeon and Nordic trade names, respectively, during the three months ended March 31, 2020.

The Company also recorded non-cash impairment charges of $ 8.0 million related to its definite-lived intangible assets.

(2) Amounts represent preopening expense related to temporarily closed screens under renovation, theatre and other closure expense for the permanent closure of screens including the related accretion of interest, non-cash deferred digital equipment rent expense, and disposition of assets and other non-operating gains or losses included in operating expenses.

The Company has excluded these items as they are non-cash in nature or are non-operating in nature.

(4) Equity in (earnings) loss of non-consolidated entities was primarily due to equity in loss from DCIP of $ 7.5 million for the three months ended September 30, 2020 compared to equity in earnings from DCIP of $ 6.5 million for the three months ended September 30, 2019.

Equity in (earnings) loss of non-consolidated entities was primarily due to equity in loss from DCIP of $ 19.1 million for the nine months ended September 30, 2020 compared to equity in earnings from DCIP of $ 21.1 million for the nine months ended September 30, 2019.

(3) Includes U.S.

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Three Months Ended

Nine Months Ended

September 30,

(In millions)

Equity in (earnings) loss of non-consolidated entities

Equity in (earnings) loss of non-consolidated entities excluding International theatre joint ventures

Equity in earnings (loss) of International theatre joint ventures

Income tax provision (benefit)

March 31, 2021

March 31, 2020

Equity in loss of non-consolidated entities

Equity in loss of non-consolidated entities excluding International theatre joint ventures

Equity in loss of International theatre joint ventures

Income tax benefit

Investment income

Interest expense

Depreciation and amortization

1 unchanged sentence

Attributable EBITDA

(7) For the three months ended September 30, 2020 compared to the three months ended September 30, 2019, the Company recorded increases in other expense related to financing fees of $ 36.3 million due to the Exchange

Offers, increases in other expense due to the change in fair value of the Company’s derivative liability of $ 84.2 million for the embedded conversion feature in the Company’s Convertible Notes due 2026, increases in other expense due to the change in fair value of the Company’s derivative asset of $ 14.4 million for the contingent call option related to the Class B common stock purchase and cancellation agreement, and increases in other expense for credit losses due to contingent lease guarantees of $ 6.1 million.

For the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, the Company recorded increases in other expense related to financing fees of $ 39.1 million due to the Exchange Offers, increases in other expense due to the change in fair value of the Company’s derivative liability of $ 104.3 million for the embedded conversion feature in the Company’s Convertible Notes due 2026, increases in other expense due to the change in fair value of the Company’s derivative asset of $ 20.1 million for the contingent call option related to the Class B common stock purchase and cancellation agreement, and increase in other expense for the credit losses related to contingent lease guarantees of $ 15.3 million.

For the nine months ended September 30, 2019, the Company recorded a loss on repayment of indebtedness of $ 16.6 million.

See Note 1 —Basis of Presentation for further information related to other expense (income).

(8) Reflects amortization expense for certain intangible assets reclassified from depreciation and amortization to rent expense due to the adoption of ASC 842 and deferred rent benefit related to the impairment of right-of-use operating lease assets.

(5) Other expense (income) for the three months ended March 31, 2021 included foreign currency transaction gains of $ 3.8 million and income related to contingent lease guarantees of $ 2.0 million, partially offset by financing fees of $ 1.0 million primarily related to deferred financing cost write-off for the Odeon revolving credit facility.

During the three months ended March 31, 2020, the Company recorded a loss of $ 20.1 million for the fair value adjustment of the derivative asset related to the Convertible Notes due 2026, credit losses related to contingent lease guarantees of $ 5.3 million, and foreign currency transaction losses of $ 2.0 million, partially offset by a gain of $ 0.5 million for the fair value adjustment of the derivative liability related to the Convertible Notes due 2026.

(6) Reflects amortization expense for certain intangible assets reclassified from depreciation and amortization to rent expense due to the adoption of ASC 842, Leases and deferred rent benefit related to the impairment of right-of-use operating lease assets.

(7) Merger, acquisition and other costs are excluded as they are non-operating in nature.

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On March 2, 2020, plaintiffs moved to certify the purported class.

The motion was fully briefed on September 21, 2020.

On March 30, 2021, the court granted the motion to certify the class.

On May 21, 2018, a stockholder derivative complaint, captioned Gantulga v.

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The parties filed a joint stipulation to stay the action, which was granted on June 25, 2020.

On February 3, 2020, the Company received a books and records demand pursuant to 8 Del.

§ 220, seeking to investigate the conduct challenged in the Actions.

AMC rejected the demand on February 10, 2020.

On December 31, 2019, the Company received a stockholder litigation demand, requesting that the Board investigate the allegations in the Actions and pursue claims on the Company’s behalf based on those allegations.

8 unchanged sentences

On July 18, 2019, the Company’s Board of Directors formed a Special Litigation Committee to investigate and evaluate the claims and allegations asserted in the Lao Action and make a determination as to how the Company should proceed with respect to the Lao Action.

On October 25, 2019, the court granted a motion to stay the action for six months to allow the Special Litigation Committee to complete its investigation.

On March 17, 2020, the court extended the stay until August 7, 2020, and on July 29, 2020 the court further extended the stay until December 11, 2020.

On January 8, 2021, the Special Litigation Committee filed a report with the court recommending that the court dismiss all of the claims asserted in the Lao Action, and moved to dismiss all of the claims in the Lao Action.

The court has not yet ruled on the Special Litigation Committee’s motion to dismiss.

The Company remains contingently liable for lease payments under certain leases of theatres that it previously divested, in the event that such assignees are unable to fulfill their future lease payment obligations.

During the three and nine months ended September 30, 2020, the Company recorded $ 6.1 million and $ 15.3 million, respectively, in estimated credit losses related to contingent lease guarantees in other expense.

During the three months ended March 31, 2021 and March 31, 2020, the Company recorded estimated credit losses (income) related to the contingent lease guarantees of $( 2.0 ) million and $ 5.3 million, respectively, in other expense (income).

The Company applied a probability weighted approach for the estimation of credit loss reserve for contingent lease guarantees expected to be funded over the lease term using the discounted cash flow method.

See Note 1 — Basis of Presentation for further information regarding the adoption of ASU 2016-13.

At March 31, 2021 and December 31, 2020, the contingent lease liabilities recorded in other long-term liabilities was $ 11.2 million and $ 30.2 million, respectively.

NOTE 12—LOSS PER SHARE

Basic loss per share is computed by dividing net loss by the weighted-average number of common shares

Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding.

Diluted loss per share includes the effects of potential dilutive shares from the conversion feature of the Convertible Notes, if dilutive.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In millions)

Net loss for basic loss per share

Net loss for diluted loss per share

Net loss for basic loss per share attributable to AMC Entertainment Holdings, Inc.

Net loss for diluted loss per share attributable to AMC Entertainment Holdings, Inc.

Denominator (shares in thousands):

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Diluted loss per common share

Vested restricted stock units (“RSUs”), performance stock units (“PSUs”), and special performance stock units (“SPSUs”) have dividend rights identical to the Company’s Class A and Class B common stock and are treated as outstanding shares for purposes of computing basic and diluted earnings per share.

For the nine months ended September 30, 2020 and September 30, 2019, unvested RSUs of 2,203,996 and 1,207,102 , respectively, were not included in the computation of diluted loss per share because they would be anti-dilutive.

Vested RSUs, PSUs, and SPSUs have dividend rights identical to the Company’s Class A common stock and are treated as outstanding shares for purposes of computing basic and diluted earnings per share.

For the three months ended March 31, 2021 and March 31, 2020, unvested RSUs of 3,812,964 and 2,210,736 , respectively, were not included in the computation of diluted loss per share because they would be anti-dilutive.

Unvested PSUs and SPSUs are subject to performance and market conditions, respectively, and are included in diluted earnings per share, if dilutive, based on the number of shares, if any, that would be issuable under the terms of the Company’s 2013 Equity Incentive Plan if the end of the reporting period were the end of the contingency period.

Unvested PSUs of 769,414 and 488,931 at 100 % performance target for the nine months ended September 30, 2020 and September 30, 2019, respectively, and unvested SPSUs of 578,328 at the minimum market condition for nine months ended September 30, 2020, were not included in the computation of diluted loss per share because they would not be issuable if the end of the reporting period were the end of the contingency period.

The Company uses the if-converted method for calculating any potential dilutive effect of the Convertible Notes that were issued on September 14, 2018.

For the three and nine months ended September 30, 2020, the Company has not adjusted net loss to eliminate the interest expense of $ 7.8 million and $ 24.4 million, respectively, and the other expense for the derivative liability related to the Convertible Notes of $ 89.9 million and $ 89.4 million, respectively, in the computation of diluted loss per share because the effects would be anti-dilutive.

For the three and nine months ended September 30, 2019, the Company has not adjusted net loss to eliminate the interest expense of $ 8.2 million and $ 24.2 million, respectively, and the other expense (income) for the derivative liability related to the Convertible Notes of $ 5.7 million and $( 14.9 ) million, respectively, in the computation of diluted loss per share because the effects would be anti-dilutive.

The Company has not included in diluted weighted average shares approximately 34.0 million and 32.5 million shares issuable upon conversion for the three and nine months ended September 30, 2020, respectively, and 31.7 million shares for the three and nine months ended September 30, 2019, as the effects would be anti-dilutive.

Based on the current conversion price of $ 13.51 per share the Convertible Notes are convertible into 44,422,860 Class A common shares.

NOTE 13—SUBSEQUENT EVENTS

As part of the Equity Distribution Agreement described in Note 7 — Stockholders’ Equity, the Company raised gross proceeds of approximately $ 53.2 million during the month of October 2020 through its at-the-market offering of approximately 14.4 million shares of its Class A common stock and paid fees to the Sales Agents of approximately $ 1.3 million.

The Company entered into an additional Equity Distribution Agreement with the Sales Agents, dated October 20, 2020, on substantially the same terms as the Equity Distribution Agreement, to sell 15.0 million additional shares of Class A common stock.

As of October 30, 2020 settlement date, the Company raised additional gross proceeds of approximately $ 33.8 million during the month of October 2020 through its at-the-market offering of approximately 11.8

million shares of its Class A common stock and paid fees to the Sales Agents of approximately $ 0.8 million.

On October 30, 2020, the Board of Directors approved (1) modifications to certain equity awards under its 2013 Employee Incentive Plan and (2) certain cash bonuses in lieu of any potential future payments under its 2020 Annual Incentive Plan as more fully described in Item 5.

Other Information of Part II of this Form 10-Q.

Unvested PSUs of 2,161,337 and 793,932 at 100 % performance targets for the three months ended March 31, 2021 and March 31, 2020, respectively, and unvested SPSUs of 1,156,656 and 595,003 at the minimum market condition for three months ended March 31, 2021 and March 31, 2020, respectively, were not included in the computation of diluted loss per share because they would not be issuable if the end of the reporting period were the end of the contingency period or they would be anti-dilutive.

On January 29, 2021, the $ 600.0 million principal amount of the Company’s Convertible Notes due 2026 were converted into the Company’s Class A common stock at a conversion price of $ 13.51 per share and resulted in the issuance of 44,422,860 shares.

For the three months ended March 31, 2020, the Company used the if-converted method for calculating any potential dilutive effect of the Convertible Notes due 2026.

For the three months ended March 31, 2020, the Company has not adjusted net loss to eliminate the interest expense of $ 8.3 million and the other expense for the derivative liability related to the Convertible Notes due 2026 of $( 0.5 ) million in the computation of diluted loss per share because the effects would be anti-dilutive.

For the three months ended March 31, 2020, the Company has not included in diluted weighted average shares approximately 31.7 million shares issuable upon conversion as the effects would be anti-dilutive.

NOTE 13—SUBSEQUENT EVENT

Additional equity financing.

On April 27, 2021, the Company’s Board determined not to seek stockholder approval of the proposal to approve an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to increase the total number of shares of Class A common stock (par value $ 0.01 per share) the Company shall have the authority to issue by 500,000,000 shares to a total of 1,024,173,073 shares of Class A common stock, and has withdrawn Proposal 1 from the agenda for the Annual Meeting.

The Board reserves the right to propose an amendment of the Certificate of Incorporation to increase the authorized shares or for other items at any point in the future.

The Company plans to pursue equity issuances for its remaining authorized shares

On April 27, 2021, the Company entered into an equity distribution agreement with Goldman Sachs & Co.

Riley Securities, Inc.

and Citigroup Global Markets Inc.

as sales agents, to sell up to 43 million shares of Class

A common stock, par value $ 0.01 per share, through an “at-the-market” offering program for its remaining authorized shares.

The Company intends to use the net proceeds from the sale of the Class A common stock for general corporate purposes, which may include working capital, the repayment, refinancing, redemption or repurchase of existing indebtedness, capital expenditures and other investments.

The Class A common stock is offered and sold pursuant to the Company’s shelf registration statement on Form S-3 filed on April 27, 2021 with the Securities and Exchange Commission (the “SEC”).

The Company filed a prospectus supplement, dated April 27, 2021, to the prospectus, dated April 27, 2021, with the SEC in connection with the offer and sale of the Class A common stock.

As of the trade date of May 5, 2021, the Company raised gross proceeds related to this equity distribution agreement of approximately $ 153 million through its at-the-market offering of approximately 15.5 million shares of its Class A common stock and paid fees to the sales agents and other fees of approximately $ 3.8 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements