<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------------------
Commission File Number: 333-1742
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AMC, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2201031
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
240 Peachtree St., N. W. Suite 2200 Atlanta, GA 30303
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(404) 220-3000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
61,962,751 shares of common stock, $1 par value as of July 14, 1997.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 AND AUGUST 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS May 31 August 31
------------- -------------
<S> <C> <C>
Current assets:
Cash $ 497,073 1,052,082
Restricted cash 2,686,015 2,623,528
Restricted escrow deposits 3,140,768 739,779
Current maturities of notes receivable 939,076 939,076
Receivables:
Tenants 4,522,373 5,974,210
Affiliates 204,463 327,032
------------- -------------
4,726,836 6,301,242
Allowance for doubtful receivables (1,985,476) (2,205,797)
------------- -------------
Net receivables 2,741,360 4,095,445
------------- -------------
Deferred income taxes 1,819,528 1,819,528
Other assets 1,240,037 1,250,946
------------- -------------
Total current assets 13,063,857 12,520,384
------------- -------------
Commercial property, at cost 329,382,567 321,708,239
Accumulated depreciation (133,351,683) (123,305,557)
------------- -------------
Net commercial property 196,030,884 198,402,682
------------- -------------
Notes receivable, less current maturities and allowance 1,392,376 2,268,598
Deferred income taxes 18,900,611 20,368,611
Other assets 1,121,712 1,661,261
------------- -------------
$ 230,509,440 235,221,536
============= =============
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities:
Revolving line of credit $ 1,271,108 -
Current installments of corporate notes payable:
Mart Bonds interest payments 13,800,000 12,000,000
AMM Escrow Bonds - 512,703
------------- -------------
Total current installments of corporate notes payable 13,800,000 12,512,703
------------- -------------
Accounts payable:
Trade and other 5,991,119 6,253,639
Affiliate 30,000 30,000
------------- -------------
Total accounts payable 6,021,119 6,283,639
------------- -------------
Accrued interest payable 733,070 698,617
Deferred revenue 6,785,591 2,226,144
Accrued loan extension fees 268,205 268,205
------------- -------------
Total current liabilities 28,879,093 21,989,308
------------- -------------
Corporate notes payable, excluding current installments:
Mart Bonds (face amount of $160,000,000) 192,400,000 203,200,000
Antecedent Debt Bonds 7,303,273 7,303,273
------------- -------------
Total corporate notes payable, excluding current installments 199,703,273 210,503,273
------------- -------------
Mortgage loan payable 99,920,428 102,951,830
Security deposits 2,614,720 2,427,838
Accrued loan extension fees, excluding current installments 268,205 536,410
------------- -------------
Total liabilities 331,385,719 338,408,659
------------- -------------
Stockholders' equity (deficit):
Common stock - $1 par value, 100,000,000 shares authorized and
61,962,751 shares issued and outstanding 61,962,751 61,962,751
Capital deficit (172,450,472) (172,450,472)
Retained earnings since formation 9,611,442 7,300,598
------------- -------------
Total stockholders' deficit (100,876,279) (103,187,123)
------------- -------------
$ 230,509,440 235,221,536
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
AMC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE NINE MONTH PERIODS ENDED MAY 31, 1997 AND 1996 (NOTE 1)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Revenues (note 2):
Rental $36,713,428 35,579,850
Trade shows 9,500,667 9,626,198
Other 2,957,618 2,682,317
----------- ----------
Total revenues 49,171,713 47,888,365
----------- ----------
Operating expenses:
Building operations 5,972,336 6,238,782
Trade shows 1,698,213 2,042,244
Marketing 3,282,128 3,405,760
General and administrative 13,128,573 12,020,209
Bad debt 162,237 591,367
Property taxes 3,554,184 3,527,749
Depreciation and amortization 10,197,744 9,590,053
----------- ----------
Total operating expenses 37,995,415 37,416,164
----------- ----------
Operating income 11,176,298 10,472,201
----------- ----------
Other (income) expenses:
Interest expense 6,280,061 8,584,531
Interest income (340,251) (413,586)
Other 1,457,644 (564,569)
----------- ----------
Total other expenses, net 7,397,454 7,606,376
----------- ----------
Income before income taxes 3,778,844 2,865,825
Deferred income tax expense 1,468,000 2,061,000
----------- ----------
Net income 2,310,844 804,825
=========== ==========
Retained earnings at beginning of period 7,300,598
-----------
Retained earnings at end of period $ 9,611,442
===========
Net income per share - primary (note 4) $ .04
===========
Net income per share - fully diluted (note 4) $ .04
===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
AMC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE QUARTERS ENDED MAY 31, 1997 AND 1996 (NOTE 1)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Revenues (note 2):
Rental $12,649,496 11,869,955
Trade shows 1,020,931 1,449,261
Other 775,138 695,362
----------- ----------
Total revenues 14,445,565 14,014,578
----------- ----------
Operating expenses:
Building operations 1,862,273 2,056,752
Trade shows 293,018 520,831
Marketing 614,000 955,816
General and administrative 4,781,441 3,990,650
Bad debt (20,858) (65,041)
Property taxes 1,277,412 1,332,247
Depreciation and amortization 3,436,140 3,134,749
----------- ----------
Total operating expenses 12,243,426 11,926,004
----------- ----------
Operating income 2,202,139 2,088,574
----------- ----------
Other (income) expenses:
Interest expense 2,056,733 2,120,279
Interest income (117,786) (152,357)
Other 863,310 (744,773)
----------- ----------
Total other expenses, net 2,802,257 1,223,149
----------- ----------
Income (loss) before income taxes (600,118) 865,425
Deferred income tax expense (benefit) (217,000) 448,000
----------- ----------
Net income (loss) (383,118) 417,425
=========== ==========
Retained earnings at beginning of period 9,994,560 2,631,204
----------- ----------
Retained earnings at end of period $ 9,611,442 3,048,629
=========== ==========
Net income (loss) per share - primary (note 4) $ (.01) .01
=========== ==========
Net income per share - fully diluted (note 4) $ .00 .01
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
AMC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED MAY 31, 1997 AND 1996 (NOTE 1)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Net income $ 2,310,844 804,825
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 10,656,570 9,649,444
Deferred income tax expense 1,468,000 2,061,000
Decrease in net receivables 1,760,769 589,922
(Increase) decrease in prepaid expenses and other assets (59,987) 713,144
Increase in accrued interest payable 34,453 27,076
Decrease in accounts payable (262,520) (2,681,892)
Increase in deferred revenue and security deposits 4,746,330 4,980,606
------------ ----------
Net cash provided by operating activities 20,654,459 16,144,125
------------ ----------
Cash flows from investing activities:
Principal repayments of notes receivable 469,538 525,316
Additions to commercial property (7,674,328) (7,238,962)
(Increase) decrease in restricted cash (62,487) 325,206
------------ ----------
Net cash used in investing activities (7,267,277) (6,388,440)
------------ ----------
Cash flows from financing activities:
(Increase) decrease in restricted escrow deposits (2,400,989) 725,004
Decrease in accrued loan extension fees (268,205) -
Net increase in revolving line of credit 1,271,108 -
Principal payments of AMM Escrow Bonds (512,703) (540,863)
Mart Bond payments (9,000,000) (6,000,000)
Principal repayments of mortgage loan (3,031,402) (3,445,240)
------------ ----------
Net cash used in financing activities (13,942,191) (9,261,099)
------------ ----------
(Decrease) increase in cash (555,009) 494,586
Cash at beginning of period 1,052,082 1,557,327
------------ ----------
Cash at end of period $ 497,073 2,051,913
============ ==========
Noncash financing activities:
Principal repayment on AMM Escrow Bonds through
contribution from stockholder $ - 13,567
============ ==========
Supplemental disclosure - cash paid during the period for
interest $ 6,146,233 6,527,656
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
AMC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
(UNAUDITED)
(1) BASIS OF PRESENTATION
Except as noted below, the accompanying financial statements reflect the
consolidated accounts of AMC, Inc. and subsidiaries (the "Company"). The
financial statements for the nine month period ended May 31, 1996 include the
combined accounts of the Atlanta Market Center Companies (the predecessor
companies of AMC, Inc.) from September 1, 1995 to the formation of AMC, Inc. on
October 2, 1995. The financial statements are unaudited; however, in the
opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position at May
31, 1997 and August 31, 1996, and the results of operations for the nine month
and the three month periods ended May 31, 1997 and 1996; and the cash flows for
the nine month periods ended May 31, 1997 and 1996 have been included. These
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10K for the period ended August 31, 1996, as filed with the Securities
and Exchange Commission.
(2) REVENUE RECOGNITION
Rental revenues are recorded monthly based on amounts billed to tenants. The
leases with the Company's tenants generally require equal monthly rents. The
effects of not recording rental income on a straight-line basis for the leases
that contain variable payment amounts during the terms of the leases do not
result in significant impact to the Company's consolidated financial
statements.
Trade show revenues are generally collected in advance and initially recorded
as deferred revenue. Trade show revenues are recognized in the month the
related show occurs.
Management fee revenues are recorded as earned in accordance with the related
management agreements.
(3) MARKETING COSTS
The Company incurs costs for various marketing and advertising efforts. All
costs related to marketing and advertising are expensed in the period incurred
or, if directly related to specific trade shows, are expensed in the month the
related show occurs.
(4) INCOME PER SHARE
Weighted average shares outstanding for the nine months and the quarter ended
May 31, 1997 were 61,962,751. Primary net income per share has been calculated
assuming no common stock equivalents resulting from outstanding warrants since
such warrants are exercisable only upon certain conditions and such conditions
have not yet occurred. As a result of total warrants exceeding 20% of current
outstanding shares, fully diluted net income per share has been calculated
using the modified treasury stock method assuming 16,736,548 additional
shares issuable and outstanding and assuming earnings increases of
approximately $615,000 and $205,000 for the nine month period and the three
month period ended May 31, 1997, respectively. Such assumed earnings increases
have been determined using a tax-effected interest rate of 4.9%, applied to the
proceeds that would have been received from the additional 16,736,548 shares
assumed to be issued. For the period from October 2, 1995 (the date of the
formation of AMC, Inc.) through May 31, 1996, primary and fully diluted income
per share approximated $0.05.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
The Company was formed in conjunction with a series of transactions in 1995
which involved the exchange of certain assets, debt and equity and the debt
restructuring of Mr. John C. Portman, Jr. and a group of affiliated entities
with their creditors. As a result of these transactions, the initial assets of
the Company included the Atlanta Merchandise Mart (the "Merchandise Mart"), the
Atlanta Apparel Mart (the "Apparel Mart"), the Atlanta Gift Mart (the "Gift
Mart"); (the Merchandise Mart, the Apparel Mart and the Gift Mart hereinafter
collectively, "AmericasMart"), and the assets of Atlanta Market Center
Management Company, Inc., ("AMCMC") which operated AmericasMart and was merged
into the Company.
This restructuring has been accounted for as a troubled debt restructuring in
accordance with Statement of Financial Accounting Standards No. 15, "Accounting
by Debtors and Creditors for Troubled Debt Restructurings" (SFAS 15). As a
result of this troubled debt restructuring in which the existing debt exceeded
the fair value of the equity interests issued and the total future principal
and interest payments called for under the Company's notes, these notes have
been initially recorded at an amount equal to the total future cash payments,
including interest, specified by their terms in accordance with SFAS 15. All
future cash payments will be accounted for as a reduction of the carrying
amount of the notes, and no interest expense will be recognized.
The Company's primary business is the operation of AmericasMart and the
management of trade shows in conjunction with such marts. Additionally, the
Company manages trade shows on behalf of third parties at other locations.
RESULTS OF OPERATIONS
The Company's principal sources of revenues are rental revenues from the lease
of showroom and exhibition space in AmericasMart and trade show revenues, which
relate to specific shows staged for related industries. The Company leases
showroom space over terms ranging from one to ten years (on average three
years) with rent payable monthly over the term of the lease. In addition, the
Company rents exhibition space for short terms thereby affording manufacturers
an opportunity to exhibit merchandise during a specific trade show.
Nine Months Ended May 31, 1997 Compared to Nine Months Ended May 31, 1996
Rental revenues increased approximately $1,134,000 during the nine months ended
May 31, 1997 as compared to the nine months ended May 31, 1996. Rental
revenues increased approximately $281,000 in the Gift Mart due to an increase
in rental rates of approximately $735,000, partially offset by a decrease of
$454,000 due to a decrease in occupancy. Rental revenues increased
approximately $1,214,000 in the Merchandise Mart, reflecting an increase in
rental rates of approximately $1,243,000, partially offset by a decrease of
approximately $29,000 due to a decrease in occupancy. Rental revenues in the
Apparel Mart decreased approximately $361,000, reflecting a decrease due to
occupancy of approximately $830,000, partially offset by an approximate
increase of $469,000 due to rental rates.
Trade show revenues decreased approximately $126,000 for the nine months ended
May 31, 1997, compared to the nine months ended May 31, 1996. This decrease
was due to a decrease in revenue from the April Apparel shows and a decrease in
meeting room rental, partially offset by an increase in trade show booth
revenue from the January gift show.
Other revenues increased approximately $275,000 for the nine months ended May
31, 1997, compared to the nine months ended May 31, 1996 due to an increase in
management fees earned from independent trade shows and vendor commissions,
partially offset by a decrease in parking revenue.
Building operations expenses decreased approximately $266,000 for the nine
months ended May 31, 1997 as compared to the nine months ended May 31, 1996 due
primarily to a decrease in security and utilities costs.
Trade show expenses decreased approximately $344,000 for the nine months ended
May 31, 1997 as compared to the nine months ended May 31, 1996 due to a
decrease in meeting room and trade show expenses resulting from the decrease in
meeting room and trade show revenues.
Marketing expenses decreased approximately $124,000 for the nine months ended
May 31, 1997 as compared to the nine months ended May 31, 1996. This decrease
was primarily the result of timing of expenditures.
<PAGE> 8
General and administrative expenses increased approximately $1,108,000 for the
nine months ended May 31, 1997 as compared to the nine months ended May 31,
1996. This increase was due to an increase in insurance costs, a decrease in
certain reimbursed costs received from independent trade shows and one-time
expenditures of approximately $395,000 incurred for strategic planning,
including associated legal fees.
Bad debt expense decreased approximately $429,000 for the nine months ended May
31, 1997 as compared to the nine months ended May 31, 1996. This decrease was
due to improved cash collections during 1997.
Property tax expense remained relatively stable for the nine months ended May
31, 1997, compared to the nine months ended May 31, 1996.
Depreciation and amortization expense increased approximately $608,000 for the
nine months ended May 31, 1997 as compared to the nine months ended May 31,
1996. This increase was due to certain building and tenant improvements being
written-off during the period ended May 31, 1997. This write-off was primarily
related to assets disposed of in order to open the Holiday and Floral Center in
the Merchandise Mart.
The resulting operating income was approximately $11,176,000 for the nine
months ended May 31, 1997 as compared to $10,472,000 for the nine months ended
May 31, 1996. This increase in operating income was primarily due to the
increase in rental revenues and a decrease in bad debt expense, which were
partially offset by an increase in administrative and depreciation and
amortization expenses.
Interest expense decreased approximately $2,304,000 during the nine months
ended May 31, 1997 as compared to the nine months ended May 31, 1996. This
decrease in interest expense was primarily due to the fact that, subsequent to
the formation of the Company, interest on the Company's Mart Bonds is charged
against their carrying value and no interest expense is recognized on the Mart
Bonds.
Other income and expenses net increased approximately $2,022,000 during the
nine months ended May 31, 1997 as compared to the nine months ended May 31,
1996. Other expense during the 1997 period included a reserve of approximately
$407,000 for a note receivable and unpaid interest from AMC Tampa, Inc., an
affiliate of the Company, a charge to earnings of approximately $320,000 for
certain litigation described in Part II, Item 1 of this Report, and
approximately $372,000 of expenses relating to Company - sponsored Olympic
activities held during 1996. Other income in 1996 included a cash settlement of
approximately $884,000 for an insurance claim relating to litigation under
which Portman and certain affiliates were defendants, and approximately
$39,000 of other non-operating revenue.
Income tax expense decreased approximately $593,000 for the nine months ended
May 31, 1997 as compared to the nine months ended May 31, 1996. This decrease
is due to the fact that prior to the formation of the Company, the predecessor
companies were partnerships and S corporations, and any liability or benefit
for income taxes was that of the partners and stockholders and not that of the
Company.
Net income was approximately $2,311,000 for the nine months ended May 31, 1997
as compared to $805,000 for the nine months ended May 31, 1996. This increase
in net income is due primarily to the fact that, subsequent to the formation of
the Company, interest expense relating to the Mart Bonds is charged against
principal and no interest expense is recognized on such debt.
Quarter Ended May 31, 1997 Compared to Quarter Ended May 31, 1996
Rental revenues increased approximately $780,000 during the quarter ended May
31, 1997 as compared to the quarter ended May 31, 1996. Rental revenues
increased approximately $65,000 in the Gift Mart due to an increase in rental
rates of approximately $279,000, partially offset by a decrease due to
decreased occupancy of approximately $214,000. Rental revenues increased
approximately $915,000 in the Merchandise Mart, reflecting an increase of
approximately $447,000 due to occupancy, and an increase due to rental rates of
approximately $468,000, resulting from the opening of the Holiday and Floral
Center in January 1997. Rental revenues in the Apparel Mart decreased
approximately $200,000, reflecting a decrease due to occupancy of approximately
$294,000, partially offset by an increase of approximately $94,000 due to
rental rates.
Trade show revenues decreased approximately $428,000 for the quarter ended May
31, 1997, compared to the quarter ended May 31, 1996. This decrease relates to
a decrease in meeting room and revenues relating to the April Apparel shows.
Other revenues increased approximately $80,000 for the quarter ended May 31,
1997, compared to the quarter ended May 31, 1996 due to an increase in
management fees earned from independent trade shows and vendor commissions,
partially offset by a decrease in parking revenue.
<PAGE> 9
Building operations expense decreased approximately $194,000 for the quarter
ended May 31, 1997, compared to the quarter ended May 31, 1996. This decrease
was primarily the result of a decrease in electrical and security expenses.
Trade show expenses decreased approximately $228,000 for the quarter ended May
31, 1997, compared to the quarter ended May 31, 1996. This decrease was the
result of a decrease in meeting room and trade show expenses resulting from the
decrease in meeting room and trade show revenues.
Marketing expenses decreased approximately $342,000 for the quarter ended May
31, 1997 as compared to the quarter ended May 31, 1996. This decrease was the
result of timing of marketing expenditures.
General and administrative expenses increased approximately $791,000 for the
quarter ended May 31, 1997 as compared to the quarter ended May 31, 1996 due to
one-time expenses incurred for strategic planning and reduction of reimbursed
expenses from independent trade shows.
Bad debt expense remained relatively stable for the quarter ended May 31, 1997
as compared to the quarter ended May 31, 1996.
Property tax expense remained relatively stable for the quarter ended May 31,
1997, compared to the quarter ended May 31, 1996.
Depreciation and amortization expense increased approximately $301,000 for the
quarter ended May 31, 1997 as compared to the quarter ended May 31, 1996. This
increase was due to certain building and tenant improvements being written-off
during the quarter ended May 31, 1997.
The resulting operating income was approximately $2,202,000 for the quarter
ended May 31, 1997 as compared to $2,089,000 for the quarter ended May 31,
1996. This increase in operating income was primarily due to an increase in
rental revenues and a decrease in marketing expenses, partially offset by a
decrease in trade show revenues, and an increase in administrative and
depreciation and amortization expenses.
Interest expense decreased approximately $64,000 during the quarter ended May
31, 1997 as compared to the quarter ended May 31, 1996. The decrease in
interest expense was primarily due to the repayment of $512,703 AMM Escrow Bonds
during January 1997.
Other income and expenses net increased approximately $1,608,000 for the quarter
ended May 31, 1997 compared to the quarter ended May 31, 1996. The increase
relates to a reserve of approximately $407,000 for a note receivable and unpaid
interest from AMC Tampa, Inc., an affiliate of the Company, a charge to
earnings of approximately $320,000 for certain litigation described in Part II,
Item 1 of this Report, and a one-time cash settlement during 1996 resulting
in income of approximately $884,000 for an insurance claim relating to
litigation under which Portman and certain affiliates were defendants.
Income tax expense decreased approximately $665,000 for the quarter ended May
31, 1997, compared to the quarter ended May 31, 1996 due to a decrease in
income before taxes during 1997.
The Company reported a net loss of approximately $383,000 for the quarter ended
May 31, 1997 as compared to net income of approximately $417,000 for the
quarter ended May 31, 1996. This decrease in net income was due primarily to
the increase in other expenses in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of cash is internally generated funds from
operations. The availability of cash flows generated by the Gift Mart are
limited by the terms of its financing. Net income from operations less capital
improvements of the Gift Mart must be used to repay principal outstanding on
the Gift Mart financing and cannot be used to fund operations or capital
improvements of other properties of the Company. Principal payments on the
Gift Mart financing totaled approximately $3.0 million and $3.4 million for the
nine months ended May 31, 1997 and May 31, 1996, respectively.
The Company has entered into a line of credit agreement (the "Revolver") with a
bank for up to $10 million which may be used to fund operations and capital
improvements and for acquisition and start-up costs for new trade shows in an
amount not to exceed $2.5 million. At May 31, 1997, the Company had $8.7
million available under the Revolver.
<PAGE> 10
Cash flows from operations were approximately $20.7 million during the nine
months ended May 31, 1997, and $16.1 million during the nine months ended May
31, 1996. Cash flows from operations have been significantly higher than net
income during the past two years, primarily due to the fact that net income is
negatively impacted by depreciation expense, which is a non-cash charge to
earnings. Under the terms of its indebtedness, the Company is required to use
certain portions of its cash flows to repay its indebtedness. The terms of
such debt limit the Company's ability to make required capital improvements.
Significant capital expenditures were incurred during the past several years
and ongoing capital expenditures will be necessary to adequately improve and
maintain the Company's properties. Total capital expenditures were
approximately $7.7 million during the nine months ended May 31, 1997, and
approximately $7.2 million during the nine months ended May 31, 1996. Capital
expenditures relating to the Gift Mart were approximately $0.4 million during
the nine months ended May 31, 1997, and $0.7 million during the nine months
ended May 31, 1996. Capital expenditures of the Gift Mart are included in the
Company total above. Management expects that additional capital expenditures,
including tenant improvements, of approximately $2.3 million to $4.3 million
will be needed to improve and maintain the buildings during the remainder of
the year ending August 31, 1997. There can be no assurance, however, that
changes in the competitive environment, governmental regulations or unforeseen
losses or damage will not cause capital expenditures to exceed management's
estimate.
Debt repayments totaled approximately $12.5 million during the nine months ended
May 31, 1997, and $10.0 million during the nine months ended May 31, 1996.
Principal payments to reduce the indebtedness under the Gift Mart financing and
the Mart Bonds will be determined based upon cash flows of the Gift Mart and of
the Company, respectively.
Management expects that cash flows from operations and borrowings under the
Revolver will be sufficient to fund planned capital expenditures and interest
and principal payments on the Company's indebtedness during the 1997 fiscal
year. Over the longer term, management anticipates that internally generated
funds will be sufficient to fund required capital expenditures and scheduled
debt service prior to the maturity date for the Gift Mart financing, provided
the Company can maintain its operating revenues and expenses at current levels.
There can be no assurance that the Company can maintain current revenue levels
which are affected by changing economic conditions in the specific industries
represented at its Marts and trade shows. In addition, there can be no
assurance that the overall level of capital expenditures will not increase as
the Marts age. In the event that internally generated funds and borrowings
under the Revolver are insufficient, the Company would be required to seek
financing; however, the Company's ability to do so is limited under the terms
of the Revolver.
The remaining principal balance on the Gift Mart financing is due on July 31,
1998, with an option to extend the maturity date for one year, if specified
performance levels are achieved. The Mart Bonds are due and payable on July
31, 2000. The Company will not generate sufficient cash to repay such
indebtedness and intends to refinance both of these debt obligations at
maturity by extending their maturity dates or securing other financing. There
can be no assurance that the Company will be able to extend the maturity dates
of any of its indebtedness or secure alternative financing to fund the
repayment thereof.
INFLATION
The Company deals with the effects of inflation by adjusting rental rates on
new leases and renewal leases. In times of higher inflation, the Company's
operating results are negatively impacted due to the fact that most lease terms
are from one to five years while the terms of most service contracts are one
year or less.
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On April 19, 1993, a former employee of AMCMC filed suit against AMCMC for
breach of contract and related tort claims. On January 19, 1996, the trial
court granted summary judgment in favor of AMC on all counts. On March 5, 1997,
the Georgia Court of Appeals reversed the trial court, and directed that
judgment be entered in favor of the former employee on the breach of contract
count and remanded the case for trial on the tort claims. The amount awarded
for the breach of contract claim was approximately $247,000 plus interest,
which has been estimated at $73,000. AMC has filed a petition seeking review by
the Georgia Supreme Court.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
11. Computation of Earnings Per Common Share
27. Financial Data Schedule
(b) The Company has not filed any reports on Form 8-K during the
quarter ended May 31, 1997 or subsequent to that date but prior
to the filing date of this Form 10-Q.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMC, INC
----------------------------------------------
(Registrant)
July 15, 1997 John M. Ryan , President
- -------------------- -----------------------------------------------
Date (Signature)
July 15, 1997 Henry G. Almquist, Jr. , Principal Financial and
- -------------------- --------------------------------- Accounting Officer
Date (Signature)
<PAGE> 1
EXHIBIT 11
AMC, INC. AND SUBSIDIARIES
COMPUTATION OF (LOSS) EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
May 31, 1997 May 31, 1997
----------- -----------
<S> <C> <C>
Net (loss) earnings $ (383,118) $ 2,310,844
Weighted average number of outstanding common shares 61,962,751 61,962,751
Earnings per common and common stock equivalent shares $ (.01) $ .04
=========== ===========
Assumed earnings increases due to exercise of warrants $ 205,000 $ 615,000
----------- -----------
Adjusted net (loss) earnings (178,118) 2,925,844
Additional shares assumed issued due to exercise of
warrants 16,736,548 16,736,548
----------- -----------
Adjusted weighted average number of outstanding common
shares 78,699,299 78,699,299
Earnings per common and common stock equivalent shares-
fully diluted $ .00 $ .04
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMC, INC. FOR THE NINE MONTHS ENDED MAY 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1997
<CASH> 497
<SECURITIES> 0
<RECEIVABLES> 4,727
<ALLOWANCES> 1,985
<INVENTORY> 0
<CURRENT-ASSETS> 13,064
<PP&E> 329,383
<DEPRECIATION> 133,352
<TOTAL-ASSETS> 230,509
<CURRENT-LIABILITIES> 28,879
<BONDS> 199,703
0
0
<COMMON> 61,963
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 230,509
<SALES> 0
<TOTAL-REVENUES> 49,172
<CGS> 0
<TOTAL-COSTS> 37,995
<OTHER-EXPENSES> 7,397
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,280
<INCOME-PRETAX> 3,779
<INCOME-TAX> 1,468
<INCOME-CONTINUING> 2,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,311
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
