AMC Entertainment Holdings, Inc. (“Holdings”), through its direct and indirect subsidiaries, including American Multi-Cinema, Inc. 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.

Temporarily suspended or limited operations. Throughout the first quarter of 2020, the Company temporarily suspended 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 of March 17, 2020, all of the Company’s U.S. and International theatre operations were temporarily suspended. 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 six months ended June 30, 2021 were significantly lower than the revenues and expenses for the six months ended June 30, 2020, with significantly lower revenues and expenses during the first quarter of 2021 compared to the first quarter of 2020, partially offset by increased revenues and expenses during the second quarter of 2021 compared to the second quarter of 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 June 30, 2021, the Company was operating at 593 domestic theatres, representing approximately 100% of its domestic theatres with remaining seating capacity restrictions winding down throughout the quarter. 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. As of June 30, 2021, the Company was operating at 335 International theatres with limited seating capacities, representing approximately 95% of its International theatres. The Company’s average consolidated screens operated during the three months ended March 31, 2021 declined by 24.2% from the prior year. The Company’s average consolidated screens operated during the three months ended June 30, 2021 increased by 8,830 screens to 8,890 screens from 60 screens in the prior year.

Liquidity. As of June 30, 2021, the Company has cash and cash equivalents of approximately $1.8 billion. In response to the COVID-19 pandemic, the Company adjusted certain elements of its business strategy and took significant steps to preserve cash and is continuing 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.

In addition to preserving cash, the Company enhanced liquidity through debt issuances, debt exchanges and equity sales as previously reported in its Annual Report on Form 10-K for the year ended December 31, 2020 and in its Quarterly Report on Form 10-Q for the three months ended March 31, 2021. See Note 6—Corporate Borrowings and Finance Lease Obligations and Note 7—Stockholders’ Equity for further information. Recent updates to the Company’s liquidity enhancement initiatives are as follows:

The Company believes its existing cash and cash equivalents, together with cash generated from operations, will be sufficient to fund its operations, satisfy its obligations, including cash outflows for deferred rent and planned capital expenditures, and comply with minimum liquidity and financial covenant requirements under its debt covenants related to borrowings pursuant to the Senior Secured Revolving Credit Facility and Odeon Term Loan Facility for at least the next 12 months. In order to achieve net positive operating cash flows and long-term profitability, the Company believes it will need to increase attendance levels significantly from their current levels to achieve levels in line with pre COVID-19 attendance. The Company believes the global re-opening of its theatres, the anticipated volume of titles available for theatrical release, and the anticipated broad appeal of many of those titles will support increased attendance levels. However, there remain significant risks that may negatively impact attendance, including a resurgence of COVID related restrictions, potential movie-goer reluctance to attend theatres due to concerns about the COVID variant strains, movie studios release schedules and direct to streaming or other changing movie studio practices.

The Company entered 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 (the secured leverage ratio) applicable to the Senior Secured Revolving Credit Facility (as defined below) from March 31, 2021 to March 31, 2022 (the “Extended Covenant Suspension Period”), as described, and on the terms and conditions specified, therein. The Company is currently subject to minimum liquidity requirements of approximately $145 million, of which $100 million is required under the conditions for the Extended Covenant Suspension Period, as amended, under the Senior Secured Revolving Credit Facility, and £32.5 million (approximately $45 million) of which is required under the Odeon Term Loan Facility. Following the expiration of the Extended Covenant Suspension Period, the Company will be subject to the financial covenant under the Senior Secured Revolving Credit Facility, beginning with the quarter ending June 30, 2022. The Company currently expects it will be able to comply with this financial covenant. See Note 6—Corporate Borrowings and Finance Lease Obligations for further information. 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 received rent concessions provided by the lessors that aided in mitigating the economic effects of COVID-19 during the pandemic. These concessions primarily consisted of rent abatements and the deferral of rent payments. As a result of the deferral of rent payments of approximately $420.6 million as of June 30, 2021, the Company’s cash expenditures for rent are scheduled to increase significantly in the second half of 2021 and future years. See Note 2—Leases for further information.

Use of Estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of AMC, as discussed above, and should be read in conjunction with the Company’s Annual Report on Form 10–K for the year ended December 31, 2020. The accompanying condensed consolidated balance sheet as of December 31, 2020, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10–Q. Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Company’s financial position and results of operations. All significant intercompany balances and transactions have been eliminated in consolidation. 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 six months ended June 30, 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. markets and International markets.

Baltics’ theatre sale. On August 28, 2020, the Company entered into an agreement to sell its equity interest in Forum Cinemas OU, which consisted of nine theatres located in the Baltics’ region (Latvia, Lithuania and Estonia) and was included in the Company’s International markets reportable segment. The completion of the sale took place in several steps and was contingent upon clearance from each regulatory competition council in each country. In October 2020, the Company completed the divestiture of its equity interest in Latvia. In February 2021, the Company received cash consideration for the remaining equity interest in Estonia of $3.8 million (€3.2 million), net of cash of $0.3 million. In May 2021, the Company received cash consideration of $31.4 million (€26.2 million), net of cash of $0.1 million and transaction costs of $0.3 million, which completed the sale of its remaining 51% equity interest in Lithuania and eliminated the Company’s noncontrolling interest in Forum Cinemas OU. The Company recorded the net gain from the sale of its equity interest in Forum Cinemas OU of $5.5 million, net of transaction costs of $2.6 million, in investment income, during the three and six months ended June 30, 2021.

Restricted Cash. Restricted cash is cash held in the Company’s bank accounts in International markets as a guarantee for certain landlords.

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


	Foreign
(In millions)	Currency		Pension Benefits		Total
Balance December 31, 2020	$	60.1	$	(21.4)	$	38.7
Other comprehensive income (loss)		(33.4)		3.8		(29.6)
Realized loss on foreign currency transactions reclassified into investment expense (income)		(0.9)		—		(0.9)
Balance June 30, 2021	$	25.8	$	(17.6)	$	8.2

Accumulated depreciation and amortization. Accumulated depreciation was $2,417.7 million and $2,243.1 million at June 30, 2021 and December 31, 2020, respectively, related to property. Accumulated amortization of intangible assets was $43.3 million and $42.0 million at June 30, 2021 and December 31, 2020, respectively.

Other expense (income). The following table sets forth the components of other expense (income):


	Three Months Ended				Six Months Ended
(In millions)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Derivative liability fair value adjustment for embedded conversion feature in the Convertible Notes	$	—	$	—	$	—	$	(0.5)
Derivative asset fair value adjustment for contingent call option related to the Class B common stock purchase and cancellation agreement		—		(6.4)		—		13.7
Credit losses (income) related to contingent lease guarantees		(3.7)		3.9		(5.7)		9.2
Governmental assistance due to COVID-19- International markets		(42.2)		(4.4)		(50.4)		(4.4)
Governmental assistance due to COVID-19 - Domestic markets		—		—		(4.2)		—
Foreign currency transaction (gains) losses		3.4		(2.1)		(0.4)		(0.1)
Non-operating components of net periodic benefit cost (income)		(0.2)		0.1		(0.4)		0.1
Financing fees related to modification of debt agreements		—		2.8		1.0		2.8
Other		—		(0.5)		—		(0.5)
Total other expense (income)	$	(42.7)	$	(6.6)	$	(60.1)	$	20.3

Impairments. The following table summarizes the Company’s assets that were impaired:


	Three Months Ended				Six Months Ended
(In millions)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Impairment of long-lived assets	$	—	$	—	$	—	$	91.3
Impairment of definite-lived intangible assets		—		—		—		8.0
Impairment of indefinite-lived intangible assets		—		—		—		8.3
Impairment of goodwill		—		—		—		1,744.3
Impairment of long-lived assets, definite and indefinite-lived intangible assets and goodwill		—		—		—		1,851.9
Impairment of other assets recorded in investment expense (income)		—		—		—		7.2
Total impairment loss	$	—	$	—	$	—	$	1,859.1

There was no goodwill impairment charges during the three months ended June 30, 2021, the three months ended June 30, 2020, and the six months ended June 30, 2021. During the six months ended June 30, 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, which 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.

There was no impairment charge of long-lived assets, definite-lived intangible assets, and other assets without a readily determinable fair value accounted for under the cost method during the three months ended June 30, 2021, the three months ended June 30, 2020, and the six months ended June 30, 2021. During the six months ended June 30, 2020, the Company recorded non-cash impairment charges 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 six months ended June 30, 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.

There was no impairment charge of indefinite-lived intangible assets during the three months ended June 30, 2021, the three months ended June 30, 2020, and the six months ended June 30, 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. During the six months ended June 30, 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 six months ended June 30, 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 Method.

Accounting Pronouncements Recently Adopted

Income Taxes. In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to improve consistency and simplify several areas of existing guidance. ASU 2019-12 removes certain exceptions to the general principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in

an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also clarifies the accounting for transactions that result in a step-up in the tax basis for goodwill. 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.