Why outlook for AMC is dire as the pandemic drags on

(Yahoo Finance) – The future of movie theater chains was already in some doubt prior to this year, amid the explosion in at-home streaming platforms. But the COVID-19 pandemic, set to to keep millions of Americans in their homes through winter, is hastening the industry’s demise.

AMC reported its Q3 earnings on Monday, and the numbers were brutal. Revenue fell 91% from one year ago to $119.5 million, while losses ballooned to $905 million from a loss of $54.8 million one year ago.

On Tuesday, shares of AMC surged 12% after the company disclosed that it has reopened nearly all of its U.S. theaters: 539 out of 600. That stat cheered investors.

But while some used the opportunity to pile into AMC, there’s little cause for optimism that the situation is going to get much better any time soon. Look closer at the AMC earnings call on Monday, and you’ll find mostly doom and gloom.

Since safely reopening its theaters in 39 states, “Attendance has been minimal,” warned CEO Adam Aron. He said that’s “of course stemming from virus concerns, but perhaps more importantly due to the fact that only two major new films have been released theatrically since mid-March.”

AMC needs the big studios to put big movies out for theatrical release, but the studios are not ready to play ball.

Disney last month delayed three Marvel movies deep into 2021: “Black Widow” from Nov. 6, 2020 to May 7, 2021; “Shang-Chi and the Legend of the Ten Rings” from May 7, 2021 to July 9, 2021; and “The Eternals” from Feb. 12, 2021 to Nov. 21, 2021. Warner Bros. delayed “Wonder Woman 1984” from Oct. 2 to Christmas Day, the third time that film has been delayed due to the pandemic.

On the international side, the news is getting worse. AMC had reopened 90% of its theaters abroad by Sept. 30, but the COVID-19 situation has rapidly worsened in the past few weeks. Now, Aron said, “Internationally, the numbers of opened theaters is going the other way. In the past few weeks and especially just in the last few days, we have been ordered to close our theaters for most of the month of November in the United Kingdom, Ireland, Germany, Italy and in a small portion of Spain, namely Catalonia, where we have 10 theaters.”

Even after reopening many of its theaters, AMC has resorted to creative (some might say desperate) promotions, like a “Movies in 2020 at 1920 Prices” day in August to commemorate its 100th anniversary, and offering moviegoers the ability to rent out an entire theater for as little as $99 (plus $250 to bring in outside food), something other chains including Cinemark and Alamo Drafthouse have also tried.

AMC had hefty debt on its balance sheet even before the pandemic. In March, it raised $900 million in new debt financing and equity agreements as a bridge to avoid bankruptcy. Last month, AMC again warned that filing Chapter 11 is still possible.

And it burned through more cash in Q3 ($108 million) than in Q2 ($100 million) due to costs associated with theater reopenings. In an SEC filing on Monday, AMC said it aims to offer 20 million new Class A shares to raise $47.7 million in cash.

CEO Adam Aron paints the company’s recent ability to secure new financing as a positive: “We have remained resilient and resourceful. The liquidity enhancing and leverage reducing actions that we already have taken and will further need to take, combined with our relentless focus on efficiency and cash management, are all crucial to navigating through this storm.”

The storm of the pandemic is not yet clearing, and AMC’s best-case scenario is mere survival. But for how much longer can it find creative ways to obtain financial lifelines?