What changed in this filing

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Item 1A. Risk Factors

2022-05-09 compared with 2021-11-08 · 57 added, 45 removed, 11 unchanged (90% of the section changed)

Reference is made to Part I Item 1A.

Risk Factors in our Annual Report on Form 10–K for the year ended December 31, 2020 and in our Current Report on Form 8-K filed on June 1, 2021, which sets forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results.

Except as set forth below, there have been no material changes to the risk factors contained in our Quarterly Report on Form 10-Q for the three months ended September 30, 2021.

There has been significant recent dilution and there may continue to be additional future dilution of our Class A common stock, which could adversely affect the market price of shares of our Class A common stock.

The risks of future dilution must also be weighed against the risks of failing to increase our authorized shares, each of which could adversely affect the market price of shares of our Class A common stock.

From January 1, 2020 through November 2, 2021, we have issued 461,880,707 shares of our Class A common stock in a combination of at-the-market sales, conversion of Class B common stock, conversion of notes, exchanges of notes, transaction fee payments, and equity grant vesting.

As of November 2, 2021, there were 513,960,784 shares of Class A common stock issued and outstanding.

The dilutive effect of these issuances was partially offset by the cancellation of 51,769,784 shares of our Class B common stock.

If, in the future, we obtain shareholder approval to increase our authorized shares, we may issue additional shares of Class A common stock to raise cash to bolster our liquidity, to refinance indebtedness, for working capital, to finance strategic initiatives and future acquisitions or for other purposes.

We may also issue securities convertible into, or exchangeable for, or that represent the right to receive, shares of Class A common stock.

We may also acquire interests in other companies or other assets by using a combination of cash and shares of Class A common stock or just shares of Class A common stock.

Additionally, vesting under our equity compensation programs results in the issuance of new shares and shares withheld to cover tax withholding obligations upon vesting remain available for future grants.

Any of these events may dilute the ownership interests of current stockholders, reduce our earnings per share or have an adverse effect on the price of our shares of Class A common stock.

If we are unable to obtain shareholder approval to increase our authorized shares, this would create substantial risks, which could have an adverse effect on the price of our shares of Class A common stock, including:

● we will be unable to issue equity to bolster our liquidity and respond to future challenges, including if attendance levels do not return on the timing and to the levels assumed;

● for future financing, we may be required to issue additional debt, which may be unavailable on favorable terms or at all, or which would exacerbate the challenges created by our high leverage;

● we will be unable to issue equity in deleveraging transactions, including exchanges, redemptions or buy-backs of debt, which will limit our flexibility to delever;

● we will be unable to issue equity as currency in strategic transactions, including acquisitions, joint ventures or in connection with landlord negotiations, which may prevent us from entering into transactions that could increase shareholder value.

The market prices and trading volume of our shares of Class A common stock have recently experienced, and may continue to experience, extreme volatility, which could cause purchasers of our Class A common stock to incur substantial losses.

For example, during 2021 to date, the market price of our Class A common stock has fluctuated from an intra-day low of $1.91 per share on January 5, 2021 to an intra-day high on the NYSE of $72.62 on June 2, 2021.

Since June 2, 2021, the trading price has reached an intra-day low on the NYSE of $28.91 per share on August 5, 2021 and the last reported sale price of our Class A common stock on the NYSE on November 5, 2021 was $41.70 per share.

During 2021 to date, daily trading volume ranged from approximately 23,598,200 to 1,222,342,500 shares.

We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last.

Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.

Extreme fluctuations in the market price of our Class A common stock have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums.

The market volatility and trading patterns we have experienced create several risks for investors, including the following:

● the market price of our Class A common stock has experienced and may continue to experience rapid and substantial increases or decreases unrelated to our operating performance or prospects, or macro or industry fundamentals, and substantial increases may be significantly inconsistent with the risks and uncertainties that we continue to face;

● factors in the public trading market for our Class A common stock include the sentiment of retail investors (including as may be expressed on financial trading and other social media sites and online forums), the direct access by retail investors to broadly available trading platforms, the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our Class A common stock and any related hedging and other trading factors;

● our market capitalization, as implied by various trading prices, currently reflects valuations that diverge significantly from those seen prior to recent volatility and that are significantly higher than our market capitalization immediately prior to the COVID-19 pandemic, and to the extent these valuations reflect trading dynamics unrelated to our financial performance or prospects, purchasers of our Class A common stock could incur substantial losses if there are declines in market prices driven by a return to earlier valuations;

● to the extent volatility in our Class A common stock is caused, as has widely been reported, by a “short squeeze” in which coordinated trading activity causes a spike in the market price of our Class A common stock as traders with a short position make market purchases to avoid or to mitigate potential losses, investors purchase at inflated prices unrelated to our financial performance or prospects, and may thereafter suffer substantial losses as prices decline once the level of short-covering purchases has abated;

● if the market price of our Class A common stock declines, you may be unable to resell your shares at or above the price at which you acquired them.

We cannot assure you that the equity issuance of our Class A common stock will not fluctuate or decline significantly in the future, in which case you could incur substantial losses.

● depending on the trading prices of our Class A common stock, the Company could have a significant cash tax liability to cover withholding obligations upon vesting of awards under our Equity Incentive Plan with approximately 4,881,000 shares expected to vest over the next six months and an estimated blended tax withholding rate of 45%.

The Company expects to withhold shares based on historical elections by participants under the terms of the plan, equivalent to the cash tax requirements for federal, state and local withholdings, pay the required tax obligation and return the withheld shares to the Equity Incentive Plan.

We may continue to incur rapid and substantial increases or decreases in our stock price in the foreseeable future that may not coincide in timing with the disclosure of news or developments by or affecting us.

Accordingly, the market price of our shares of Class A common stock may fluctuate dramatically, and may decline rapidly, regardless of any developments in our business.

Supply chain disruptions may negatively impact our operating results.

We rely on a limited number of suppliers for certain products, supplies and services, including a single vendor for the warehousing and distribution of most of the products and supplies for our food and beverage operations.

Shortages, delays, or interruptions in the availability of food and beverage items and other supplies to our theatres may be caused by adverse weather conditions;

natural disasters;

governmental regulation;

commodity availability;

public health crises or pandemics;

Risk Factors in our Annual Report on Form 10–K for the year ended December 31, 2021, which sets forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results.

Except as set forth below, there have been no material changes to the risk factors contained in our Quarterly Report on Form 10-Q for the three months ended March 31, 2022.

Supply chain disruptions, labor shortages, increased cost and inflation may negatively impact our operations and operating results.

We rely on a limited number of suppliers for certain products, supplies and services, including a single U.S.

vendor for the warehousing and distribution of most of the products and supplies for our U.S.

food and beverage operations.

Items such as consumable oils used in food preparation and containers/packaging for food and beverage service have been impacted by price and availability in both the U.S.

markets and International markets.

Shortages, delays, or interruptions in the availability of food and beverage items and other supplies to our theatres may be caused by commodity availability;

public health crises or pandemics, including resulting lockdowns in areas where goods are manufactured;

social or economic unrest, terrorism, hostilities, cyber-attacks or war, including the conflict between Russia and Ukraine and the potential impact of financial and economic sanctions on the regional and global economy;

labor issues or other operational disruptions;

the inability of our suppliers to manage adverse business conditions, obtain credit or remain solvent;

adverse weather conditions;

natural disasters;

governmental regulation;

or other conditions beyond our control.

4 unchanged sentences

During the recovery from the impacts of the COVID-19 pandemic, we have, with regard to certain items, experienced difficulties in maintaining a consistent supply, seen delays in production and deliveries, been required to identify alternative suppliers, and suspended sales regionally or entirely.

We expect these issues to continue for the

foreseeable future and plan to minimize the impact by focusing on the supply of those items with the greatest impact on our sales and operations.

We expect these issues to continue for the foreseeable future and plan to minimize the impact by focusing on the supply of those items with the greatest impact on our sales and operations.

One of the impacts of COVID-19 has been extended labor shortages, resulting in our demand for staff outweighing the available supply.

The success of our business depends on our ability to recruit and retain staff members for our theatres.

Without proper staffing, wait times to buy tickets and concessions are extended, operating hours may be reduced, and, in some cases, theatres cannot open at all.

As patrons begin to return to our theatres in greater numbers, these conditions may result in a poor guest experience, perhaps causing them to not return in the future.

These labor shortages have also required us to raise wages to be competitive in the small available workforce.

Increased labor costs cut into profits already extremely affected by COVID-19.

In addition, we are dependent upon natural gas and electricity to operate our theatres.

The cost of natural gas and electricity may fluctuate widely due to economic and political conditions, government policy and regulations, war, or other unforeseen circumstances.

Substantial future increases in prices for, or shortages of, natural gas and electricity could have a negative effect on our profitability.

There can be no assurance that we can cover these potential cost increases through future pricing actions.

Inflation may adversely affect us by increasing our food and beverage costs, utilities, and labor.

In an inflationary environment, such as the current economic environment, depending on the market conditions in each region or country, we may be unable to raise the prices of our movie tickets or food and beverage products enough to keep up with the rate of inflation, which would reduce our profitability, and continued inflationary pressures could impact our business, financial condition, and results of operations.

Our business is subject to international economic, political and other risks that could negatively affect our business, results of operations and financial condition.

As a result of our international operations, 28.3% of our revenues were derived from countries outside the United States for the three months ended March 31, 2022.

The success of our international operations is subject to risks that are beyond our control.

Accordingly, our business is subject to risks associated with doing business internationally, including:

● difficulties and costs of staffing and managing international operations among diverse geographies, languages and cultures;

● the impact of regional or country-specific business cycles and economic instability;

● the potential for political, social, or economic unrest, terrorism, hostilities, cyber-attacks or war, including the conflict between Russia and Ukraine and that Sweden and Finland (countries where we operate approximately 100 theatres) have recently agreed to submit simultaneous applications to the NATO alliance as early as May 2022, which could cause a deterioration in the relationship each country has with Russia, and the potential impact of financial and economic sanctions on the regional and global economy;

● fluctuations in foreign currency exchange rates which could lead to fluctuations in our reported results of operations or result in significant decreases in the value of our international investments as denominated in U.S.

● increased foreign interest rates, foreign exchange fees and other bank charges as a result of financing our foreign operations;

● exposure to anti-corruption laws, including the Foreign Corrupt Practices Act (“FCPA”) and the U.K.

Bribery Act (the “Bribery Act”), and export-control regulations and economic sanctions regulations, including those promulgated by the Office of Foreign Assets Control, United States Department of Treasury (“OFAC”);

● exposure to local economic conditions and local laws and regulations;

● exposure to local labor and employment laws;

● relationships with local labor unions and works councils;

● limited borrowing capabilities relating to activities in non-U.S.

● economic and/or credit conditions abroad;

● potential adverse changes in the political and/or economic stability of foreign countries or in their diplomatic relations with the United States;

● restrictions on the withdrawal of foreign investment and earnings;

● government policies against businesses owned by foreigners;

● investment restrictions or requirements;

● diminished ability to legally enforce our contractual rights in foreign countries;

● difficulty in protecting our brand, reputation and intellectual property;

● restrictions on the ability to obtain or retain licenses required for operation;

● foreign exchange restrictions;

● adverse changes in regulatory or tax requirements;

● restrictions on foreign ownership of subsidiaries;

● data protection and privacy laws, including GDPR and other restrictions on transferring personally identifiable information outside of a jurisdiction;

● tariffs and other trade barriers.

If we are unable to manage the complexity of our global operations successfully, it could have a material adverse effect on our business, financial condition and results of operations.

Unregistered Sales of Equity Securities and Use of Proceeds

Defaults Upon Senior Securities

Mine Safety Disclosures

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 1A. Risk Factors