The COVID-19 pandemic has had an unprecedented impact on the world and both of the Company’s business segments. The situation continues to be volatile and the social and economic effects are widespread. As an operator of movie theatres, hotels and resorts, restaurants and bars, each of which consists of spaces where customers and guests gather in close proximity, the Company’s businesses are significantly impacted by protective actions that federal, state and local governments have taken to control the spread of the pandemic, and its customers’ reactions or responses to such actions. These actions have included, among other things, declaring national and state emergencies, encouraging social distancing, restricting freedom of movement and congregation, mandating non-essential business closures, issuing curfews, limiting business capacity, mandating mask-wearing and issuing shelter-in-place, quarantine and stay-at-home orders.

As a result of these measures, the Company temporarily closed all of its theatres on March 17, 2020, and did not generate any significant revenues from its theatre operations during its fiscal 2020 second quarter and the first two months of its fiscal 2020 third quarter (other than revenues from six theatres opened on a very limited basis in June 2020 primarily to test new operating protocols, five parking lot cinemas, and some limited online and curbside sales of popcorn, pizza and other assorted food and beverage items). As of August 28, 2020, the Company had reopened approximately 80% of its theatres, although seating capacity at reopened theatres has been temporarily reduced in response to COVID-19 as a way to ensure proper social distancing. In October 2020, the Company temporarily closed several theatres due to changes in the release schedule for new films, reducing its percentage of theatres open to approximately 66%. In November 2020, new state and local restrictions in several of the Company’s markets required it to temporarily reclose several theatres, and as a result, approximately 52% of the Company’s theatres were open as of December 31, 2020. Subsequent to year-end, several of these new restrictions were lifted and as of the date of this report, approximately 69% of the Company’s theatres are currently open with temporarily reduced seating capacity in response to COVID-19. Temporarily closed theatres are ready to quickly reopen as restrictions are lifted, new films are released and demand returns. The Company’s theatres are generating significantly reduced revenues as compared to prior years.

The Company also temporarily closed all of its hotel division restaurants and bars at approximately the same time as its theatres and closed five of its eight company-owned hotels and resorts on March 24, 2020 due to a significant reduction in occupancy at those hotels. The Company closed its remaining three company-owned hotels in early April 2020. It re-opened four of its company-owned hotels and several of its restaurants and bars during June 2020. The Company reopened three additional company-owned hotels during its fiscal 2020 third quarter and reopened its remaining company-owned hotel in November 2020. As such, as of December 31, 2020, all eight of the Company’s company-owned hotels and all but one of its managed hotels are open. The majority of the Company’s restaurants and bars in its hotels and resorts are also now open, operating under applicable state and local restrictions and guidelines. The majority of the Company’s hotels and restaurants are generating significantly reduced revenues as compared to prior years.

Since the COVID-19 pandemic began, the Company has been working proactively to preserve cash. In addition to obtaining additional financing and modifying previously existing debt covenants (see Note 7), and temporarily suspending quarterly dividend payments as required by the Credit Agreement, additional measures the Company took during all or portions of fiscal 2020 to enhance its liquidity included:

The COVID-19 pandemic and the resulting impact on the Company’s operating performance has affected, and may continue to affect, the estimates and assumptions made by management. Such estimates and assumptions include, among other things, the Company’s goodwill and long-lived asset valuations and the measurement of compensation costs for annual and long-term incentive plans. The Company’s estimates and assumptions are subject to inherent risk and uncertainty due to the ongoing impact of the COVID-19 pandemic, and actual results could differ materially from estimated amounts.

During the fourth quarter of fiscal 2020, a number of states elected to provide grants to certain businesses most impacted by the COVID-19 pandemic, utilizing funds received by the applicable state under provisions of the CARES Act. As a result, grants from seven states totaling $5,767,000 were awarded to a significant number of the Company’s theatres and grants from two states totaling $1,188,000 were awarded to several of the Company’s hotels. The $6,955,000 of total grants are reported as an offset to other operating expenses on the consolidated statement of earnings (loss) for the year ended December 31, 2020. As of December 31, 2020, the Company had received approximately $2,042,000 of these grants, and the remaining $4,913,000 was received in January 2021. Early in fiscal 2021, the Company was awarded an additional $1,300,000 in theatre grants from another state.

2. Impact of COVID-19 Pandemic (continued)

In addition, 11 of the Company’s subsidiaries successfully applied for and received funds under the CARES Act Paycheck Protection Program (PPP) that allowed its subsidiaries to rehire many of its hotel associates for eight weeks during the second quarter of fiscal 2020, as well as fund certain other qualifying expenses (see Note 7). The Company’s Credit Agreement (see Note 7) also allows the Company to consider additional borrowings from governmental authorities under provisions of the CARES Act or any other subsequent governmental actions that it could avail itself of if it deemed it necessary and appropriate. Although the Company has sought and obtained, and intends to continue to seek, any available potential benefits under the CARES Act, including those described above, there is inherent risk and uncertainty in whether the Company will be able to access such benefits.

The Company believes that the actions that have been taken will allow it to have sufficient liquidity to meet its obligations as they come due and to comply with its debt covenants for at least 12 months from the issuance date of these consolidated financial statements. However, future compliance with the Company’s debt covenants are dependent upon the timing of new movie releases and the protective actions that federal, state and local governments have taken which impact consumer confidence and the speed of recovery of the Company’s theatres and hotels and resorts businesses. The Company’s estimates and assumptions related to future forecasted results of the Company are subject to inherent risk and uncertainty due to the ongoing impact of the COVID-19 pandemic, and actual results could differ materially from estimated amounts and impact the Company’s ability to comply with its debt covenants.