Earnings Call Transcript - AMC Q1 2020

Operator, Operator

Greetings and welcome to AMC Entertainment’s First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to your host, Mr. John Merriwether. Thank you. You may begin.

John Merriwether, Host

Thank you, Devin. Good afternoon. I'd like to welcome everyone to AMC’s first quarter 2020 earnings conference call. With me this afternoon is Adam Aron, our President and Chief Executive Officer; and Shaun Goodman, our Chief Financial Officer. Before I turn the call over to Adam, let me remind everyone that some of the comments made by management during this conference call may contain forward-looking statements, which are based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of these risks and uncertainties are discussed in our public filings, including our most recently filed 10-K and 10-Q. Several of the factors that will determine the Company's future results are beyond the ability of the Company to control or predict. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned to not place undue reliance on these statements. The Company undertakes no obligation to revise or update any forward-looking statements whether as a result of new information or future events. On this call, we may reference measures such as adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency among others, which are non-GAAP financial measures. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the Investor Relations section of our website earlier today. After our prepared remarks, there will be a question-and-answer session. This afternoon's call is being recorded and a webcast replay will be available in the Investor Relations section of our website at amctheatres.com, later today. With that, I'll turn the call over to Adam.

Adam Aron, CEO

Thank you, John. Good afternoon, everyone. We're very pleased you could join us today. Let me start by saying on behalf of all of us at AMC, we hope that each of you and your families are safe and healthy. For the past 84 days, internally within AMC we've interacted constantly via video and audio calls, but for the first time in a long time, Sean, John, and I are actually in the same room physically to bring you this call as we reopened our theater support center headquarters here in Leawood, Kansas, a lovely suburb of Kansas City, just yesterday. This afternoon, while we'll take a brief look at the first quarter results, we'll focus much more on what we believe is of primary interest to most listeners on the call, and that is the actions we've taken to manage through this crisis and the actions we will be taking to prepare to safely welcome our guests back to our theaters once again. Before we begin, given what we've seen on the streets of U.S. cities these past 14 days and nights, I'd like to preface my remarks today by pointing out that at AMC theaters in the United States, more than half of our guests and more than half of our employees come from diverse communities within the American melting pot. So, last week on the day of the very moving memorial service for George Floyd, I put out a strong and lengthy message to all of our employees expressing our outrage and heartbreak over the killing of Mr. Floyd and our special concern for the pain being felt among African-Americans. That was coupled in the strongest possible language with the reaffirmation of AMC's absolute rock-solid and unshakable commitment that discrimination of any kind against anyone has no home or shelter at AMC. Now, why don't we move from social unrest to global pandemic and economic lockdown all happening at the same time. To say that people of the world over are all experiencing extraordinary times would be a colossal understatement. With the onset of the COVID-19 global pandemic and the resulting economic hardships it has created, literally everyone on the planet Earth has been affected and affected profoundly. For what it's worth, although it's likely to be a tough long slog toward full recovery across the entire world, I'm convinced that people will emerge from this challenging time with a renewed sense of community and an appreciation of communal experiences such as moviegoing that has proven to be an integral part of this nation's social fabric for well over a century and a tried and true source of enjoyment, amusement, and emotional escape the world over. You all know that this is a time of uncertainty. Having said that, at AMC, we're focusing on what we can control and we're committed to taking big, bold action on multiple fronts to improve our circumstances. While cautious, lawyers and accountants properly like for us to air the obvious substantial doubts should more calamity happen, I for one know that AMC will lift every rock and take every reasonable action we can to put AMC on a solid and improving path. In my heart of hearts, I passionately believe that in the end, AMC will both succeed and prosper and will take every prudent step that we humanly can to achieve that all-important objective. Looking ahead, everything at AMC in the near and immediate term will be focused on four things: One, reopening our theaters as smartly and as professionally as we can, optimizing safety and cleanliness for our guests and associates, benefiting from the industry-leading caliber of our marketing to drive revenues and implementing a wide variety of strategies to optimize theater profitability; two, continuing to take actions to bolster our liquidity and to deleverage our balance sheet; three, reducing our cost structure and spending posture, realizing that revenues may take time to ramp up and understanding the need to produce and harvest free cash flow; and four, managing our business through whatever structural change, world events or industry dynamics are throwing our way. In life, change is inevitable of course, but in recent months, indeed in recent weeks, whoa, Nelly, has there been a lot of change, cataclysmic change. But smartly managing through change whatever that may entail is what management teams across all industries are paid to do. Before looking ahead further, we can take great comfort that when we look back on the first quarter prior to the mid-March theater operation suspension, it's apparent that the hard work and cost controls that we've put in place during the latter half of 2019 were taking hold. Similarly, the competitive success that we've seen continuously as a result of our marketing efforts since mid-2018 was again very much in evidence. Domestically, in the first two months of 2020, AMC admission revenues were outperforming the rest of the industry by about 260 basis points. This industry outperformance, together with strong international results, yielded total company revenue growth of nearly 10%, and when combined with the operational efficiencies in place on the cost side, thanks to our previously initiated profit improvement plan, adjusted EBITDA for the Company grew nearly $53 million compared to the first two months of 2019. But then, kaboom, our encouraging January and February results were overshadowed by world events, as we all know. During the latter part of February, only a few handful of our theaters, and these only in Italy, began to close in response to the coronavirus. But by March 17th, as you know, we had made the decision to temporarily close all 1,000 of our U.S. and international theaters across all 15 countries that we serve. In addition to all the work associated with shuttering our theaters, in March, we took swift action, focusing on three key areas: First, dramatically reducing our cash burn; second, strengthening our liquidity; and third, preserving the capabilities and commencing comprehensive planning efforts to effectively recommence operations at our theaters as soon as we were both able and it would be wise to do so, such that we can continue to grow and outperform our competition in the years ahead. Despite operating under a company-wide furlough, which included all the senior executives of AMC and myself, the AMC senior leadership team has spent what seems like every waking moment these past two and a half months working diligently on these three focus areas to generate what we firmly hope and expect will be our future success. I'll now turn the call over to Sean, our CFO, to briefly review the first quarter financial results and to take you through some of the actions that we've taken to date to deal with all things corona. Sean?

Sean Goodman, CFO

Thank you, Adam. And thank you, everyone, for being on the call with us today. I hope that you and your families have been safe and well during these unprecedented times. Our results for the quarter were clearly significantly impacted by the COVID-19 crisis, which began to affect our operations in early March. As Adam pointed out, we began 2020 with very solid results. For the first two months of the year, our consolidated revenue was up nearly 10% and adjusted EBITDA was up $53 million or 134% compared to the same period last year. Key drivers of our success at the beginning of the quarter included the benefits of the profit improvement plan implemented last year and the continued success of our A-List subscription program. For the first two months of the quarter, we increased food and beverage revenue per person by almost 7% and average ticket price by 4.5%, clearly evidence that our pricing and food and beverage initiatives are working. In the month of March, we were significantly impacted for the quarter. The March results took adjusted EBITDA down from $92 million for January and February down to $3 million as we suspended operations at all of our theaters across the world. Our net income for the first quarter was also materially impacted by noncash impairment charges of approximately $1.85 billion. These noncash charges were driven by the suspension of our global operations and the resulting declines in the Company's market capitalization and enterprise value. 2020 was to be the year when we would begin to see meaningful reductions in the Company's leverage levels through EBITDA growth and a natural decline in our CapEx investment cycle. All of this changed with COVID-19, and early in the first quarter, we began planning for the possible impact of this global pandemic. From a financial management perspective, our clear focus since the beginning of this crisis has been to minimize our cash burn and optimize our liquidity. With respect to managing our cash burn, some of the actions that we have taken include the following: We initiated full or partial furloughs of all corporate-level company employees, including senior executives, with salary reductions ranging from 20% to 100%; we canceled annual merit pay increases; we eliminated or reduced non-healthcare benefits including 401(k) match and vacation accruals; we fully furloughed all domestic theater-level crew members; and we reduced theater-level management to the minimum levels necessary to maintain our assets and our reopening capabilities; we eliminated nearly all contractor roles; and we cut non-essential operating expenditures, including costs that are normally considered to be fixed, but that rapidly become variable in this environment. In addition, we have also been working with our studio and landlord partners to negotiate extended payment terms. To expand a bit on theater rental costs. We are grateful to our landlords for partnering with us during this crisis. As a result of our strong and long-term landlord relationships, we have successfully been able to defer or abate the vast majority of rent due during the period that our operations remain shuttered, and this has had a positive impact on our monthly cash burn. Note that our income statement and EBITDA will reflect our full rent liability for each reporting period. You should note that we have a large number of landlords and that the terms that we have agreed with each one of them are confidential and specific to the particular facts and circumstances for each landlord and each theater. In addition, there remain some landlords where we are still finalizing agreements. For the second quarter, you should expect that the vast majority of rent protected in the income statement will be deferred. Future cash rent payments will depend on our ultimate reopening schedule and level of attendance. Regarding capital expenditure, we have reduced capital expenditure to minimum maintenance levels while theater operations are suspended. Essentially we are halting all but absolutely indispensable CapEx. During the first quarter, our CapEx spend was $75.6 million net of landlord contributions compared to $79.6 million in the first quarter of last year. We now expect 2020 net CapEx to be between $130 million and $160 million. One more thought related to expense management. While the theater closures are temporary, some of our cost-saving initiatives and learnings will not be temporary as we plan and prepare for significant EBITDA growth and margin improvement in the future. We expect to receive relief from the CARES Act in the following forms: Approximately $18.5 million cash tax refund and refundable alternative minimum tax credits; a deferral of social security payroll tax matches that would otherwise be required in 2020; and the receipt of a payroll tax credit in 2020 for expenses relating to paying wages and health benefits to employees who are not working as a result of the impact of COVID-19 on our business. In addition to the CARES Act in the United States, during Q2, we are also benefiting from various government assistance programs in Europe that provide support for ongoing payroll and rent expenses during the period of suspended operations. From a liquidity point-of-view, in March, as a precautionary measure, we drew down our revolving credit lines totaling approximately $326 million. In April, we issued $500 million of 5-year first lien notes. As part of this financing, we undertook to suspend dividends and also suspend our stock repurchase program. We also obtained agreement to suspend our maintenance debt covenant requirements through 2021. The combined efforts to reduce our cash burn and strengthen our liquidity resulted in a cash balance as of April 30, 2020, of approximately $718 million. Finally, last week, we initiated a debt exchange offer to exchange existing senior subordinated debt from 2024 to 2027 for second lien secured notes due in 2026. To the extent that our senior subordinated debt holders elect to exchange the notes, we have the potential to meaningfully reduce our leverage and further enhance our liquidity. Because this exchange offer is currently active in the market, we will not be able to take questions on today's call regarding this offer. With that, I'll turn the call back over to Adam, so he can share with you our reopening plan.

Adam Aron, CEO

Thank you, Sean. Over the past three months, we have not hesitated to move expeditiously in making difficult but necessary decisions to manage through this crisis and to position AMC well for a successful resumption of theater operations when it's safe for our guests and associates to return to our theaters. On the subject of immediate cost-cutting, the robust nature of our actions is almost breathtaking. By just two weeks after our mid-March theater decision, we had already set in motion, shedding or deferring almost 90% of our ongoing cash expenditures. Think of that, a $5 billion multinational operating across 15 countries on three continents, chasing away almost 90% of its cash spending in the blink of an eye. I remember last August how we agonized over eliminating 50 positions in the name of efficiency. This March by contrast, we furloughed around 35,000 people with a single decision, not callously, not mindlessly, not indifferently, but because we knew with certainty that there simply was no other choice. Last year, I spent more than four full months discussing with and convincing our senior officers as to the wisdom of our all taking a 15% reduction in total compensation in exchange for a sizable out of the money share grant. This March by contrast, our senior officers came to me and in a single conversation insisted that we all take an additional 20% salary reduction in exchange for absolutely nothing, solely because it was the right thing to do. For a century, we paid our theater landlords the rent that we owed them, and right on time to boot. In the second quarter of 2020, nada, and with their understanding and cooperation, I might add, with almost everyone focused on getting through this now and rebuilding AMC to a position of strength and success. As I said, the Company is taking big bold action and doing so swiftly. On the subject of liquidity, Sean earned his AMC stripes really fast and did a truly masterful job in containing cash going out the door. Similarly, our success in raising $500 million of new public market debt in April, at least temporarily silenced all those journalists who were breathlessly reporting with certainty that AMC would lead to Hertz, Neiman Marcus and J Crew in the bankruptcy court. On the debt race, I would especially like to call out and thank Citibank and Silver Lake who threw everything they had into the effort of getting AMC a $0.5 billion of fresh cash. As most of you know, 2020 is AMC's 100th anniversary. In 100 years of business activity, one picks up a lot of friends and allies along the way. Citibank and Silver Lake are two of those, and we're very grateful for their extraordinary skill and dedication to our Company. And if it’s completed, the bond offer that Moelis and Weil, Gotshal crafted is currently in the market and could be another huge step forward for AMC. Now, let's turn to the subject that's on everyone's mind, the resumption of operations at our theaters. In Europe, last week, we successfully opened the doors of our first three theaters in Norway. In a highly encouraging bit of trivia, even though those three theaters were limited in ticket sales to 25% of seat capacity, we sold 83% of our available seats this past weekend. Additionally, food and beverage spending held up nicely. So, taking all things into consideration, amazing but true, these three theaters wound up doing about the same business this weekend this year as they did for the same weekend last year. As we sit here today, we now have 10 theaters currently operating across four countries, Norway, Germany, Spain, and Portugal. On Monday, we will start operations at theaters in Italy. More theaters and more countries, again, we're welcome paying guests in June. Our current expectation in our two largest territories is that but for a few exceptions, essentially all of our theaters in the United States and the United Kingdom will resume operations in the month of July. Our current plan is to have almost all of our theaters globally operating in July, which is timed for and assumes that the industry stays on schedule for Warner Brothers' release of Christopher Nolan's Tenet currently scheduled for July 17th, followed by Disney's release of Mulan currently scheduled for July 24th. The second half of this year continues to have a strong film slate that benefits from really big titles, such as Wonder Woman 1984, Black Widow, Top Gun: Maverick, A Quiet Place II, among many, many others. Of course, I should point out that this entire situation is fluid and we stand prepared to adjust the timing of our phased theater operation schedule as necessary to comply with local regulations and the timing of major studio releases. We have an incredibly detailed and comprehensive approach to running our theaters, to rehiring and retraining the people who will be working in our theaters to be welcoming our guests. And they're doing all of this safely. The most critical aspect of our plan, of course, is to do all that we can to provide an environment that is safe and comfortable both for our guests and our associates. To that end, we have left no stone unturned, and we're working with the most trusted names in cleaning and public health and safety to develop industry-leading cleaning procedures and safety protocols. Many things can change between now in July, even though that's about a few short weeks away. But with the safety and well-being of our guests and associates as our first priority, combined with our commitment to rebuilding a successful and thriving business, we are taking the following seven steps aimed at optimizing the timeliness, safety, and profitability of our resumed theater operations: One, maintaining close contact with local, national, and international officials to understand and coordinate the timing and requirements under which we can operate. Two, consulting with current and former faculty from the prestigious Harvard University School of Public Health, to seek guidance from the best scientists and experts on how best to create a safe environment for our guests and associates. Personal protection equipment, much more expensive cleaning regimens, employee health protocols, limited theater capacity, block seating, and other strategies are now all being planned. We are especially looking at high-tech solutions as well to aid in our sanitization techniques, including the use of electrostatic sprayers, HEPA vacuums, and wherever possible upgraded MERV 13 air ventilation filters. Three, establishing a protocol partnership with the global leader in all things clean, The Clorox Company, as they advise us as to how best we can make our theater environments as safe and clean as possible. Fourth, using our industry-leading technology in our website and smartphone apps to facilitate contactless ticketing and expanding our mobile food and beverage ordering capabilities to an additional 300 U.S. theater locations. This will help us as we implement our social distancing practices all across the Company. Five, educating our guests so that they understand the actions we are taking with their safety in mind. Sixth, implementing aggressive marketing communications and promotional activity, all aimed at jumpstarting consumer demand. And finally, seventh, seriously reducing our cost structure, intensely examining every category of our expenditures to lower our spending wherever possible. The full details of these strategies and protocols with respect to resuming theater operations will be announced publicly later this month, possibly as soon as early next week. In conclusion, after a period of time where billions of people have experienced indoor confinement and limited social interaction, we believe that there will be a significant pent-up demand to get back out into the world, including enjoying the immersive and social experience of watching compelling content on the big screen. Having said that, we're under no illusions. The waters will be choppy. There may be unforeseen tosses and turns to be navigated through, and full recovery may take quite a while. Still, AMC is extremely well-positioned to benefit from this demand with a modern and upgraded theater portfolio, with the world's largest movie-going customer database, with an industry-leading subscription, loyalty, and technology program, all combined with an unparalleled global footprint. We have a highly able executive team that is absolutely committed to AMC’s long-term survival and more importantly to our long-term success, knowing that to do so we'll have to resume our theater operations well and safely. We'll have to strengthen AMC’s liquidity and deleverage our balance sheet. And the true measure of that success, of course, will be AMC's ability to make smiles happen for our guests and to produce once again meaningful free cash flow for our shareholders. With that, we're looking forward to seeing you back at the movies. And operator, we're now ready for questions.

Operator, Operator

Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from the line of Eric Wold with B. Riley FBR. Please proceed with your question.

Eric Wold, Analyst

Thank you. Good afternoon, everyone. Glad you guys are all back together. A couple of questions, I guess. One, I know you saw some fluid situations out there in terms of when theaters can reopen. Maybe give us a better sense of, once you get the green light in a region or have a fairly good sense of when that green light will come, when you start hiring employees back and what's the timeline to get a theater ready? And would you ever plan to have a theater ready open for Tenet, even if you don't necessarily know that market will allow it yet or you have to wait until you completely have that green light?

Adam Aron, CEO

Thanks, Eric. Yes, it's a changing situation. For 14 of the 15 countries we serve, there are national guidelines for reopening dates, with Saudi Arabia being the only country that hasn't declared yet. Additionally, there are local guidelines, which are particularly crucial in the U.S., the largest movie market. We were pleased to hear that the Governor of California announced theaters could open on June 12, which was great news. We still plan to engage with the mayors of Los Angeles and San Francisco, but we believe both cities will be ready for a July 17 opening of Tenet, assuming that date remains unchanged. New York State has also announced theaters can reopen for Tenet, again depending on that schedule. The Mayor of New York City hasn't indicated when the cities' five boroughs will reopen, but we expect to know soon. We have been preparing for this for three months and can open our theaters quickly. I had a Zoom call today with the managers of our 635 U.S. theaters to discuss our reopening plans and advised them to be ready to open at a moment’s notice. We think we can open our theaters within a week or two at most from the time the first employee arrives until the theater is fully operational. We expect to have nearly all our theaters open—around 97% or 98%—in time for Tenet and Mulan, assuming those dates hold. Other circuits that have opened earlier have shown older movies at discounted prices, which we will also do, but we believe that focusing on new releases will generate better attendance and revenue. Ensuring the safe operation of our theaters is vital. Some jurisdictions that opened venues in early May did so prematurely. We prefer to open in June and July, with most of our theaters opening in July, allowing more time for preparation and for the pandemic situation to improve. Therefore, we plan to open our theaters shortly before Tenet, but not too far in advance. Regarding Tenet and Mulan, as of last night, both films remain scheduled for July 17 and July 24. Many other films are also set to release in August, but we can't guarantee that those dates won't change, as those decisions are made by Warner, Disney, and other studios. What I can assure you is that we will be ready to open our theaters whenever new movies are available.

Eric Wold, Analyst

Thank you, Adam. Last question, I guess maybe for Sean, is given that we’re kind of going into a new world so to speak, I guess with attendance restrictions, at least initially coupled with your efforts to control costs in places last year offset by intentionally new costs and cleaning procedures, et cetera, maybe give us a sense of how you expect four-wall margins to kind of vary, on various attendance levels as you kind of ramp up, if you’re initially restricted to 25% that goes to 50%, and then you staff accordingly. How would you expect that that delta to move your margins?

Adam Aron, CEO

So, we're both going to take this question, Eric, because it's so important. A reminder to one and all, even the 25% limitation is not nearly as painful as you would think on first blush. If you think about a Broadway theater, all of us have gone to a Broadway theater in our lives at one time or another, you often find that every seat is sold for every performance. By contrast, if you look at the movie theater industry, we are very much a church built for Easter Sunday. And our theaters are mostly empty, not mostly full. And that's the reason why it was so easy for AMC to reduce seat capacities when we renovated seats and renovated theaters by putting in reclining seats. Because what we were doing was pulling out empty seats. Even with a number of theaters that have reclining seats installed today, if you look at the number of seats that we had available for sale in 2019, again, for tickets that we sold, we only sold 17% of our seats. So, when you marry that up against the 25% seat limit and certainly against the 50% seat limit, you don't chase out many guests. Of course, you're going to chase out some Friday and Saturday night guests. But, we looked at the economic modeling, and we went back and ran our theaters as if we had imposed a 50% seat limit last year. And it knocked out only about 12% of our guests, and that assumes that no one shifted the performances that they went to see based on not having available seats, or alternatively, because of a desire on the consumer's part of social distancing to go to performances that are not as full. So, really, even a 50% seat limitation probably only knocks out single-digit attendance at AMC. And the difference between 25% and 50% isn't a whole lot greater. So, it’s a counterintuitive notion, but the seat limit capacity is not as painful as you might think given that last year we only sold 17% of our available seats. Having said that, it goes without saying that the more full our auditoriums are, the better our margins will be, and the less full that our theaters are, the worse that our margins will be. And while I'd love to think that the whole world is going to operate like Norway did where in our very first weekend, we essentially did the same business as last year. That seems to be too optimistic of an assumption. And we've seen market research that says the vast majority of our customers are going to come immediately back to theaters, but not all of them, and that there will be a ramp-up of increasing attendance over time, which does mean that there should be a ramp-up of our margin increasingly over time, which means that our margin on the first day of Tenet will not be as good as our margins at Christmas or our margins in 2021 or beyond. Sean, do you want to add anything to that?

Sean Goodman, CFO

No. Thank you, Adam. I want to emphasize that we carefully considered this when creating our theater opening plan. The theaters that open first will do so before the major studio releases, and they will need a lower attendance to break even compared to the last theaters, which will require a higher level of attendance. Additionally, we have a flexible asset base regarding capacity. We can adjust showtimes, the number of screens, and screen times, which helps us manage profitability effectively. As Adam mentioned, we can operate profitably even at 40% capacity and at significantly lower levels, as we have experienced in the past.

Adam Aron, CEO

And if I can just add to that last point, Sean's, we’re in dialogue with every studio, big and small, as you would expect. And they're saying to us, holy mackerel! Capacity limitations. And we're saying, right, but we normally play 20 movies. We have theaters with 14 screens. We have some theaters with 24 and 30 screens. When Tenet and Mulan come out, don't worry about seat capacity limitations, we’ll double or triple or quadruple the number of auditoriums that we allocate to showing Tenet or Mulan, as examples among many. So, we have a lot of arrows in our quiver to make sure that the seat capacity limitations don't hurt us.

Eric Wold, Analyst

Perfect. Thank you, both.

Adam Aron, CEO

And if I can add one more thing, it's the inverse of that. Right? We can add a lot of showtimes by adding screens. Also, if attendance is light, we can decrease the number of showtimes, especially in the off peak periods. Remember, our theaters routinely are open at 10 in the morning till 1 in the morning. If demand is lighter than normal, we can take out a lot of operating costs by reducing showtimes in those very marginal time slots when there's not much demand, which allows us to concentrate opening hours and lower costs and therefore improve our economic performance.

Operator, Operator

Our next question comes from the line of Meghan Durkin with Credit Suisse. Please stay with your question.

Meghan Durkin, Analyst

Hi, everyone. In your discussions with the landlords, have you managed to negotiate any rent reductions moving forward, beyond just the deferrals? Additionally, since Silver Lake needs to approve the exchange, were its board members involved in the decision to initiate the exchange?

Adam Aron, CEO

Sure. Before we start, I want to apologize because during the last earnings call, you asked me about 15 questions regarding the coronavirus in Italy. I mentioned something like there were eight theaters in Italy. Two and a half weeks later, that number has increased to 1,000 theaters across 15 countries. Now, addressing your current question about landlords, we have numerous leases with different landlords worldwide. We have made significant progress in abating and deferring rent. Additionally, especially for the second half of 2020, we've successfully lowered rents and transitioned from fixed-price rents to a percentage of revenue model. With certain landlords, we have also been negotiating to forgive rents, not just defer them from the second quarter, but actually forgive them. We've successfully engaged in discussions with other landlords about reducing our rents not just temporarily for 2020 but permanently throughout the entire lease duration. Regarding the bond exchange offer, you're right that to proceed, we need the consent of the bondholders who will be exchanging their bonds. These are individual consents, not a universal agreement. We will also require Silver Lake's consent to complete the entire process. It is important to note that our board member from Silver Lake has recused himself from all matters related to the exchange effort, which is in line with good corporate governance.

Meghan Durkin, Analyst

Okay, got it. I'll leave it there. And, no issues on the last call.

Adam Aron, CEO

Got it. We got the worst health problems since 1918. We've got the worst economic crisis since the 1930s. And we have the biggest social unrest in United States of 1960s. If there is a fourth one in the world would like to throw at us, I just want to know if you want to predict what that one is, since you certainly had corona called 90 days ago.

Meghan Durkin, Analyst

No, please no. I can't take anymore.

Operator, Operator

Our next question comes from the line of Chad Beynon with Macquarie Group. Please proceed with your question.

Chad Beynon, Analyst

Hi. Good afternoon. Good to hear you're all well. At the beginning you talked about everything you've done reexamining all of your theaters and just the business in general. And I was wondering if you could comment on how you're thinking about domestically, the 200 or so classic theaters, which I believe haven't received a lot of the same CapEx and renovations as the others versus I guess your AMC branded and kind of the renovated theaters, which I believe are almost fully CapEx. So how does that fit into your future thinking? And the sidebar of that is, should we expect any closures in either of those segments? Thanks.

Adam Aron, CEO

Thank you, Chad. That's a significant question, and I appreciate how you framed it. Let's begin with the classic theaters. Though they aren't as profitable as AMC theaters, they aren't losing money; they just don't make as much profit. For instance, around 85% to 90% of our cash flow comes from AMC and the AMC Diamond brand, but it doesn't imply that the classic brand generates no cash flow, even if each of those theaters isn't nearly as profitable as the major AMC theaters. Another perspective is that when evaluating an unprofitable theater, we need to assess profitability in two ways: is it completely unprofitable or is it generating some contribution to overhead that exceeds the rent owed to the landlord? If the latter is true, keeping that theater open is beneficial, even if the contribution is small. Thus, those theaters remain operational. We also have about 50 theaters in the U.S. without any leases, and if any of these are unprofitable, they may not reopen. I anticipate that we will open 97% to 98% of our U.S. theaters in July, but it wouldn't surprise me if a few, possibly 96%, are left closed due to marginal profitability. Looking further ahead, not just in the next 90 or 180 days but into 2021, 2022, and 2023, we will thoroughly evaluate each theater, especially as their leases come up for renewal. We will conduct a comprehensive analysis to decide whether to keep a theater in our portfolio, let it go, or renegotiate terms with the landlord for more affordable rent on a potential five-year lease extension. I don’t anticipate a decrease in our theater count that would lead us to be anything but the largest theater operator in the U.S., but I also don’t expect to maintain all 635 theaters. We will closely examine profitability, focusing on operating those theaters that contribute to overhead while phasing out those that do not.

Chad Beynon, Analyst

Okay, that's perfect. Thanks, Adam. And then Sean, I'm going to be a little greedy here, you gave us the March quarter end cash balance and then you gave us the April 30 cash balance of $718 million, are you willing to give us a more updated number? A May number, which might help us kind of bridge what your monthly cash burn was in May and then kind of what that would essentially assume for June or are you holding that back because of the bond offering?

Sean Goodman, CFO

I won't provide specific numbers, but I can offer some guidance to help. Based on the information we've publicly shared, when we raised the additional $500 million, that would give us about $800 million in cash at the start of the second quarter. We mentioned that this amount would be enough to sustain us even if we had to pause our field operations until Thanksgiving, which is about eight months. We wouldn't spend all of that cash, so there would be some remaining at the end of November. Our monthly cash burn is just under $100 million, which includes debt servicing costs of around $24 million each month. You can use this to estimate our cash position at the end of May and thereafter. We need to be cautious as we are currently in the market with a bond offering and need to manage the information we disclose. Additionally, our cash burn aligns with, and is slightly better than, our expectations outlined during the bond offering, and I am closely monitoring our cash flow.

Adam Aron, CEO

Like a hawk. We're going to give a new nickname, like a hawk. But you didn't ask this question, but since it is related, we're not only bringing down operating costs. We said in the remarks that we are taking capital expenditures to the bare bone. I think Sean in his prepared remarks said that CapEx expenditure in the first few months was under $80 million. We think that for the remaining 10 months of the year CapEx maybe another $50 million to $80 million, meaning that total CapEx for the year will be somewhere between $130 million and $160 million. You may recall last year we were spending over $400 million, two years before that we were spending around $600 million and we gave guidance that CapEx would be $250 million to $300 million this year. We always said that if we needed to turn on the brakes and turn CapEx off immediately, we have the ability to do it. And if anybody doubted that we could pull that off, well we just pulled that off because CapEx this year is going to be $130 million to $160 million in total. Had we not spend $80 million in the first or $75 million to $80 million in the first two months of this year, the CapEx burn would have been a lot less than $130 million to $160 million this year.

Sean Goodman, CFO

And just one quick clarification on that. That's net CapEx; the numbers that Adam is referring to.

Operator, Operator

Our next question comes from the line of Eric Handler with MKM Partners. Please stay with your question.

Eric Handler, Analyst

Thank you very much for the question. One to Adam, wonder if you could talk about New York City a little bit, specifically what percentage of your US circuit in terms of screens or revenue does New York City account for? And considering that the state or the city just entered its Phase 1 of reopening and theaters I believe are part of the Phase for opening, how hopeful are you that New York City could be part of a July opening?

Adam Aron, CEO

We are a significant player in New York City, holding a market share of over 40%. Before the pandemic, we had 635 theaters operating in the United States, and New York City represents a small portion of our overall operations. I would love for New York City to reopen as soon as it's safe to do so. AMC has been cautious about reopening theaters, prioritizing safety. I understand the challenge faced by public officials in New York City to safely reopen for its large population. I hesitate to predict if New York City will be ready for the July 17 release of Tenet. I hope it can be, but there are uncertainties. The mayor may not even have a definitive answer at this time. The next four weeks will be crucial in determining our direction. As I mentioned earlier, the situation is very uncertain, but we can remain hopeful for a reopening. While I should be careful about making assurances, there are current expectations for New York State to open more broadly in early July, which could align with Tenet's release. New York City will be very close to that timeline, contingent upon Tenet being released as planned on July 17, a decision made elsewhere.

Eric Handler, Analyst

Fair enough. I wonder if you could comment a little about A-List and where it ended up in the first quarter. I'm assuming you're informing your customers that you're halting their payments and how churn is holding up through this pandemic.

Adam Aron, CEO

Let's discuss January and February. The A-List program performed excellently during those months, exceeding 900,000 members. Film usage was at a peak similar to the previous months. When evaluating the program, its profitability was significantly positive, contributing to an increase of $53 million in our EBITDA year-over-year over just two months. If we had maintained that increase throughout all of 2020, it would have drastically improved our financial outlook. This was supposed to be a year focused on generating free cash flow and realizing the plans we established before the coronavirus hit. Once we had to shut down theaters, we proactively paused payments for all AMC Stubs and A-List members without requiring any action from them. In my earlier comments, I outlined seven initiatives we will pursue, including an aggressive marketing and promotional strategy that will target our A-List members. As we prepare to resume operations, we will communicate clearly with our guests about future plans for A-List. I prefer to share this information directly with our members before publicizing it, as they deserve to hear it first. The A-List members are a vital segment of our customer base, comprising about 15% of it. Additionally, the overall Stubs population represents nearly half of our U.S. customers and holds significant importance for us. We are committed to taking actions that will satisfy them and encourage their return to our theaters. However, we cannot predict the outcomes of these efforts until we implement them and see how customers react once theaters reopen. Instead of making assumptions about their performance, we will provide thorough updates on their response as we report our third-quarter results.

Eric Handler, Analyst

And just as a refresh…

Adam Aron, CEO

Hey Eric, I can tell you how they're going to perform in the second quarter. They're not going to go to a single movie in the second quarter.

Operator, Operator

Ladies and gentlemen, we have reached the end of our question-and-answer session. And I would like to turn the call back over to Mr. Adam Aron for any closing remarks.

Adam Aron, CEO

Thank you, operator. Look, I thank you for participating in the call. I'm just going to end it with one sentence. We will do everything in our power to make sure that this company thrives and prospers. With that, see you at the movies.

Operator, Operator

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.