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Impact Of COVID-19 Pandemic And Liquidity | 6 Months Ended
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Jun. 30, 2020
Impact Of COVID-19 Pandemic And Liquidity [Abstract] |
Impact Of COVID-19 Pandemic And Liquidity | Note 3 – Impact of COVID-19 Pandemic and Liquidity On March 11, 2020, the World Health Organization (“WHO”) declared the novel coronavirus, COVID-19, a global pandemic. Following the date of this declaration, a number of jurisdictions imposed various restrictions on “non-essential” activities. In the jurisdictions in which we operate, these restrictions typically included closure of all business deemed “non-essential” (including movie-theaters and most other indoor forms of entertainment), and that all “non-essential” workers, and all members of the public, remain in their homes. As a result, beginning in March 2020 and continuing through and beyond the end of the first quarter of 2020, we temporarily closed all of our live theatres and cinema operations in the U.S., Australia and New Zealand. Operating restrictions adopted in Australia and New Zealand also affected, and to varying degrees continue to affect, many of our tenants at our retail shopping centers. While most of these tenants have, to date, remained open for trading, we have in many cases agreed to rent abatements or deferrals. In second quarter of 2020, several jurisdictions began relaxing COVID-19 restrictions, but principally due to pressure on their economies, rather than material containment of COVID-19. Conversely, certain jurisdictions are to varying degrees reinstating their lockdowns due to the resurgence of COVID-19, while others are continuing to remove or lessen restrictions. The current uncertainty resulting from these differing approaches, and the local and global affects that these may have, is expected to continue until the COVID-19 spread is considered materially contained. There is no reliable estimate as to when this will be. Cinema Segment Impact As of June 3, 2020, we had re-opened all of the cinemas in our New Zealand circuit except for our Reading Cinemas at Courtenay Central (which continues to be closed due to seismic concerns), with social distancing measures in place. These government imposed social distancing requirements were discontinued in New Zealand on June 8, 2020. Throughout June and July, 2020, we re-opened all of our Australia circuit with social distancing measures in place, but as the state of Victoria went from partial lockdown to full lockdown on August 5, 2020, all of our seven cinemas in that state were required to close. This lockdown is currently scheduled to end on September 15, 2020, but no assurances can be given regarding this timing and no precise date for cinema re-opening can be determined with respect to this state. Our U.S. cinema circuits have not re-opened since the beginning of their temporary closures, and while we have taken steps to prepare for re-opening, the date of any re-opening has not yet been finally determined. Our decisions to re-open, and whether to remain open, will be impacted by a variety of considerations including movie availability, customer demand, and safety considerations relative to our staff and customers, as well as by applicable governmental mandates. Real Estate Segment Impact Substantially all of our tenants in our Australian real estate business are currently open for trading. We have, to varying degrees, supported certain tenants with rent abatements and deferrals, and may continue to do so until we believe that such tenants are in the position to fully perform their obligations despite COVID-19 impacts. Liquidity Impact The repercussions of COVID-19 resulted in a significant decrease in the Company’s revenues and earnings in the first six months of 2020. The closure of our cinemas resulted in effectively no revenue in the second quarter of 2020, and during the period in which our cinemas are closed, we will continue to experience significantly lower revenues and earnings. Our cinema operations will continue to generate effectively no revenue while they are closed to the public, and their revenue generating capabilities when open are dependent upon a number of factors including the timing and quality of new film product, governmental mandates regarding social distancing, customer density and hours of operation, and customer behavior and willingness to spend discretionary income on movie-going. With regards to our real estate operations, while all of our Australian real estate tenants are currently trading (other than certain tenants who have closed for reasons unrelated to COVID-19), our real estate revenue and earnings may continue to be affected by any support that we may deem necessary to provide to certain tenants through incremental rent relief measures. As a direct result of the impacts of COVID-19, we have renegotiated certain financial covenant modifications with the applicable lenders. These modifications permit us to classify the relevant debt instruments as long term and are further discussed below in Note 11 – Debt. As of June 30, 2020, the Company had negative working capital of $54.9 million. In response to the uncertainties associated with COVID-19, the Company has taken and is continuing to take significant steps to preserve cash by eliminating non-essential costs, reducing employee hours and deferring all non-essential capital expenditures to minimum levels. The Company has successfully negotiated rent abatements and deferrals with substantially all of its landlords and continues to pursue additional concessions. The Company has also successfully secured access to government wage subsidy programs in Australia and New Zealand, programs which currently expire on September 25, 2020 and August 20, 2020, respectively. The Company continues to review various programs offered by governmental agencies in the jurisdictions where it operates as those programs are further defined or revised, but there can be no guarantee that the Company will qualify for any such programs or, even if it does qualify, the degree that it may be successful in its applications for such support. As of June 30, 2020, management had drawn down in full the operating debt facilities available to the Company and is currently reviewing the potential sale of certain non-core real estate assets or the use of our unencumbered properties to provide collateral to support current or new financings in order to meet future liquidity demands. Impairment Considerations The Company considers that the events and factors described above constitute impairment indicators under ASC 360 Property, Plant and Equipment. The Company performed a quantitative recoverability test of the carrying values of all of its asset groups. The Company estimated the undiscounted future cash flows expected to result from the use of these asset groups and determined that there was no impairment as of June 30, 2020. The cash flow estimates used in this review are consistent with budgetary revisions performed by management in response to COVID-19. The realization of these forecasts is dependent on a number of variables and conditions, many of which are due to the uncertainties associated with COVID-19 and as a result, actual results may materially differ from management’s estimates. The Company considers that the events and factors described above constitute impairment indicators under ASC 350 Intangibles – Goodwill and Other. The Company performed a quantitative goodwill impairment test and determined that its goodwill was no t impaired as of June 30, 2020. The test was performed at reporting unit level by comparing each reporting unit’s carrying value, including goodwill, to its fair value. The fair value of each reporting unit was assessed using a discounted cash flow model based on the budgetary revisions performed by management in response to COVID-19. The realization of these forecasts is dependent on a number of variables and conditions, many of which are due to the uncertainties associated with COVID-19 and as a result, actual results may materially differ from management’s estimates.

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