AMC

AMC ENTERTAINMENT HOLDINGS, INC.
Communication Services
Entertainment

AMC Entertainment Holdings, Inc., through its subsidiaries, engages in the theatrical exhibition business. The company owns, operates, or has interests in theatres in the United States and Europe. As of March 1, 2022, it operated approximately 950 theatres and 10,600 screens. The company was founded in 1920 and is headquartered in Leawood, Kansas.

AMC’s Financial Health Analysis

Our vScore classification is based on deep analysis of the financial health of companies. Below, we reduce our analysis to three simple but fundamental questions, designed to make financial statement analysis accessible to individual investors. Our analysis is based on the financial statement filed with the SEC.

1) Is the company making money from its business?

Profit

error AMC reported negative net income and negative cash flow from its sales to customers. As a group, stocks of companies with this pattern tend to underperform over time.

Net Income is the amount a company has earned after accounting for revenues less expenses, including both cash and non-cash items.

Cash from Customers (Operating Cash Flow) is the net cash a company collects from the sales of goods or services to its customers, reflecting the cash generated (positive) by or used (negative) in its core business activities.

Sources of Cash

error AMC’s net cash inflows from sales to customers in the current year and the prior year are close to or less than zero percent of total net cash inflows. This situation indicates elevated risk as it suggests that the company is not generating significant cash inflows from its sales to customers, which could impact its ability to meet financial obligations and invest in growth opportunities, essential for increasing shareholder value.

Companies are required to report cash flows in three categories: operating (cash from customers), investing (which includes buying or selling its assets), and financing (which includes selling stocks/equity or bonds/debt).

2) Can the company pay its bills without borrowing?

error AMC has negative working capital, which means that its short-term liabilities exceed its short-term assets. This issue has persisted for years. This can lead to difficulties in paying suppliers or covering operating expenses as they become due. Additionally, excessive short-term liabilities may result in increased interest expenses and financial strain, particularly in a rising interest rate environment. While negative working capital should concern common shareholders, it is important to consider this risk in the context of the company’s industry, growth stage, and overall financial strategy before making definitive decisions.

Net working capital is the difference between short-term debts due and the amount of cash and other short-term assets a company has to cover its short-term debt.

3) Is the company preserving shareholders’ equity?

error AMC has negative shareholders’ equity. Negative equity puts common shareholders at risk of not recovering their investments in the event of bankruptcy. Additionally, when debt exceeds 100% of assets, it increases financial risk, leading to difficulties in meeting debt obligations, especially in a rising interest rate environment. While high levels of debt in companies should concern common shareholders, it is important to consider this risk in the context of the company’s growth stage and overall management strategy before making definitive decisions.

Shareholders’ equity represents the amount of a company’s assets that shareholders own after deducting liabilities, including debt.