<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 February 28, 1998
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
AMC, INC
(Exact name of registrant as specified in its charter)
GEORGIA 58-2201031
(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) 220-2000
(Registrant's telephone number, including area code)
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
--- ---
As of April 1, 1998, the Registrant has 61,962,751 shares of common
stock, par value $1.00 per share outstanding.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
February 28, August 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 375,017 $ 520,854
Restricted cash 3,622,541 2,598,375
Restricted escrow deposits 2,760,002 4,510,529
Accounts and notes receivable 2,515,370 2,845,294
Deferred income taxes 1,819,528 2,425,495
Other current assets 481,173 467,078
------------- -------------
Total current assets 11,573,631 13,367,625
Commercial property 324,283,563 333,615,976
Less accumulated depreciation 128,932,987 136,636,802
------------- -------------
Net commercial property 195,350,576 196,979,174
Notes receivable, less current maturities 469,542 939,080
Deferred income taxes 13,802,611 17,319,644
Investment in limited partnerships 3,877,378 --
Other non current assets 581,327 915,159
------------- -------------
$ 225,655,065 $ 229,520,682
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 14,400,000 $ 14,400,000
Accounts payable and accrued expenses 7,826,419 11,712,664
Deferred revenue 1,699,064 1,901,022
------------- -------------
Total current liabilities 23,925,483 28,013,686
Long-term debt, less current portion 286,219,587 294,665,115
Revolving line of credit 4,895,608 3,079,804
Other non current liabilities 3,232,860 3,070,577
------------- -------------
Total liabilities 318,273,538 328,829,182
------------- -------------
Stockholders' deficit:
Common stock - $1 par value, 100,000,000 shares
authorized, 61,962,751 shares issued and outstanding 61,962,751 61,962,751
Capital deficit (172,450,472) (172,450,472)
Retained earnings 17,869,248 11,179,221
------------- -------------
Total stockholders' deficit (92,618,473) (99,308,500)
------------- -------------
$ 225,655,065 $ 229,520,682
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE> 3
AMC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended February 28,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Rental $ 13,389,417 $ 12,165,242
Trade shows 7,764,706 6,825,879
Other revenues 1,354,037 1,308,887
------------ ------------
Total revenues 22,508,160 20,300,008
Operating expenses:
Building operations 2,286,379 2,233,938
Trade shows 1,413,311 1,079,554
Marketing 2,582,630 2,101,245
General and administrative 4,426,501 4,311,111
Bad debt expense 191,832 50,149
Property taxes 1,121,144 1,142,884
Depreciation and amortization 3,220,637 3,643,845
------------ ------------
Total operating expenses 15,242,434 14,562,726
------------ ------------
Operating income 7,265,726 5,737,282
Other (income) expenses:
Interest expense 2,084,872 2,096,197
Interest income (109,830) (98,661)
Gain on limited partnership interest (3,638,967) --
Other expense 134,819 132,972
------------ ------------
Total other (income) expenses, net (1,529,106) 2,130,508
------------ ------------
Income before income taxes 8,794,832 3,606,774
Deferred income tax expense 3,360,000 1,384,000
------------ ------------
Net income 5,434,832 2,222,774
Retained earnings at beginning of period 12,434,416 7,771,786
------------ ------------
Retained earnings at end of period $ 17,869,248 $ 9,994,560
============ ============
Net income per share - basic $ .09 $ .04
============ ============
Net income per share - diluted $ .09 $ .04
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
AMC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended February 28,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Rental $ 26,389,374 $ 24,063,932
Trade shows 9,292,979 8,446,596
Other revenues 2,065,028 2,215,619
------------ ------------
Total revenues 37,747,381 34,726,147
Operating expenses:
Building operations 4,173,612 4,110,063
Trade shows 1,764,645 1,405,195
Marketing 3,173,504 2,668,126
General and administrative 8,448,102 8,347,132
Bad debt expense 152,404 183,095
Property taxes 2,192,401 2,276,772
Depreciation and amortization 6,436,882 6,761,606
------------ ------------
Total operating expenses 26,341,550 25,751,989
------------ ------------
Operating income 11,405,831 8,974,158
Other (income) expenses:
Interest expense 4,183,599 4,223,328
Interest income (206,462) (222,465)
Gain on limited partnership interest (3,638,967) --
Other expense 254,634 594,333
------------ ------------
Total other expenses, net 592,804 4,595,196
------------ ------------
Income before income taxes 10,813,027 4,378,962
Deferred income tax expense 4,123,000 1,685,000
------------ ------------
Net income 6,690,027 2,693,962
Retained earnings at beginning of period 11,179,221 7,300,598
------------ ------------
Retained earnings at end of period $ 17,869,248 $ 9,994,560
============ ============
Net income per share - basic $ .11 $ .04
============ ============
Net income per share - diluted $ .11 $ .04
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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AMC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended February 28,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net income $ 6,690,027 $ 2,693,962
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 6,436,882 6,761,606
Deferred income tax expense 4,123,000 1,685,000
Gain on limited partnership (3,638,967) --
Decrease in accounts and notes receivables 303,699 100,548
Increase in other current and non current assets 318,014 811,712
Decrease in accounts payable and accrued expenses (4,124,656) (633,811)
Decrease in deferred revenue (201,957) (56,005)
Increase in other non current liabilities 162,280 31,033
------------ ------------
Net cash provided by operating activities 10,068,322 11,394,045
Cash flows from investing activities:
Principal repayments of notes receivable 469,538 469,538
Additions to commercial property (4,780,334) (5,662,083)
Decrease (increase) in restricted cash (1,024,166) 33,033
------------ ------------
Net cash used in investing activities (5,334,962) (5,159,512)
Cash flows from financing activities:
Decrease (increase) in restricted escrow deposits 1,750,527 (857,536)
Net increase in revolving line of credit 1,815,804 2,021,214
Principal payments of AMM Escrow Bonds -- (512,703)
Mart Bond payments (7,200,000) (6,000,000)
Principal repayments of Gift Mart Mortgage Loan (1,245,528) (1,315,173)
------------ ------------
Net cash used in financing activities (4,879,197) (6,664,198)
------------ ------------
Decrease in cash (145,837) (429,665)
Cash at beginning of period 520,854 1,052,082
------------ ------------
Cash at end of period $ 375,017 $ 622,417
============ ============
Supplemental disclosure -
Cash paid during the period for interest $ 4,202,732 $ 4,255,727
============ ============
Non-cash distribution of limited partnership interest $ 3,877,378 $ --
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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AMC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of AMC,
Inc. and Subsidiaries (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six months ended February 28, 1998 are not necessarily
indicative of the results that may be expected for the year ended August 31,
1998. For further information, refer to the consolidated financial statements
and footnotes thereto included in the AMC, Inc. and Subsidiaries' annual report
on Form 10-K for the year ended August 31, 1997.
Certain prior year amounts have been reclassified to conform to the current
period presentation.
(2) CONTINGENT MATTERS
On April 19, 1993, a former employee of AMCMC (predecessor company) 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 of approximately $320,000 in damages
and interest was accrued at August 31, 1997. The Georgia Supreme Court granted
the Company's petition requesting a review of the Court of Appeals decision. The
case was argued on March 16, 1998, and the parties are currently awaiting the
Supreme Court's ruling.
The Company is subject to certain other claims in the ordinary course of
business. Management does not expect that the resolution of such claims will
have a material impact on the Company's financial position or results of
operations.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 128, Earnings Per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes the dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
(4) COMMERCIAL PROPERTY
In December 1997 the Company wrote off approximately $14,113,000 in assets which
were fully depreciated.
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<PAGE> 7
(5) INVESTMENT IN LIMITED PARTNERSHIPS
The Company, through its wholly owned subsidiary EC Holdings, Inc. ("EC
Holdings") owns limited partnership interests in partnerships owning real estate
in two mixed use complexes in San Francisco's financial district. These
interests include two hotels, six office buildings, retail and associated
parking. In February 1998, one of the partnerships sold a hotel property for an
agreed upon number of units in another limited partnership. The Company's share
of the units, which were distributed to EC Holdings, have a fair value of
approximately $3,877,000 and have been recorded as an investment in a limited
partnership. The units are pledged as security for the Antecedent Debt Notes.
The gain of $3,639,000 recorded by the Company is net of certain related costs.
The Company records its investments in limited partnerships using the cost
method of accounting.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
Effective October 2, 1995, Mr. John C. Portman, Jr. and The Portman Companies
entered into a series of agreements with their lenders to restructure their
existing indebtedness. Under the terms of these agreements, the net assets of
the Atlanta Market Center Companies were contributed to AMC, Inc., which had
been formed principally for such purpose. In exchange for the existing debt
reduced by certain amounts forgiven by the lenders, the creditors of Mr. Portman
and certain affiliates, including the creditors of the Company, received
approximately 82.5% of the equity interest in the Company, the Mart Bonds, the
AMM Escrow Bonds, and the Antecedent Debt Notes.
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 at the
time of the restructure exceeded the fair value of the equity interests issued
and the total future principal and interest payments called for under the Mart
Bonds, the Mart Bonds have initially been 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 Mart Bonds, and no interest expense will
be recognized on the Mart Bonds.
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.
The following discussion and analysis of the financial condition and results of
operations of the Company should be read in conjunction with the unaudited
condensed consolidated financial statements and related notes of the Company
included elsewhere in this report and the AMC, Inc. and Subsidiaries' annual
report on Form 10-K for the year ended August 31, 1997.
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 with rent payable
monthly over the term of the lease. In addition, the Company rents exhibition
space during trade shows thereby affording non-tenant manufacturers an
opportunity to exhibit merchandise during a specific trade show.
Quarter Ended February 28, 1998 Compared to Quarter Ended February 28, 1997
Rental revenues increased approximately $1,224,000 during the quarter ended
February 28, 1998 ("Q2 1998") as compared to the quarter ended February 28, 1997
("Q2 1997"). Rental revenues increased approximately $271,000 in the Gift Mart
due to an increase in rental rates offset by a slight decrease in occupancy.
Rental revenues increased approximately $1,314,000 in the Merchandise Mart,
reflecting an increase in both occupancy and rental rates, primarily associated
with the Holiday and Floral area which opened in January 1997 and was expanded
in January 1998. Rental revenues in
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the Apparel Mart decreased approximately $360,000, reflecting a decrease in
occupancy and in rental rates.
Trade show revenues increased approximately $939,000 in Q2 1998 compared to Q2
1997 primarily due to an increase in January International Gift and Home
Furnishings Market revenues and the addition of the Florida Gift Show. Other
revenues increased approximately $45,000 in Q2 1998 compared to Q2 1997 due
primarily to an increase in hotel commission and advertising revenues.
Building operations expenses increased approximately $52,000 in Q2 1998 compared
to Q2 1997 due primarily to increased electrical costs.
Trade show expenses increased approximately $334,000 in Q2 1998 compared to Q2
1997 due primarily to costs associated with the Florida Gift Show.
Marketing expenses increased approximately $481,000 in Q2 1998 compared to Q2
1997 due primarily to an increase in costs associated with the January
International Gift and Home Furnishings Market and the addition of the Florida
Gift Show.
General and administrative expenses increased approximately $115,000 in Q2 1998
compared to Q2 1997 as a result of an increase in salary and benefit costs,
offset by a decrease in certain professional service costs.
Bad debt expense increased approximately $142,000 in Q2 1998 compared to Q2 1997
due to an increase in potentially uncollectible accounts.
Depreciation and amortization expense decreased approximately $423,000 in Q2
1998 compared to Q2 1997 due to certain assets becoming fully depreciated in
1998.
The increase in operating income of approximately $1,528,000 in Q2 1998 as
compared to Q2 1997 is primarily due to the increase in rental and trade show
revenues.
The gain on limited partnership interest results from the sale of a hotel
property in which the Company had an interest and the distribution of
partnership units to EC Holdings in February 1998 as a result of the sale.
Income tax expense increased approximately $1,976,000 in Q2 1998 compared to Q2
1997 due to the increase in taxable income.
Six months Ended February 28, 1998 compared to Six Months Ended February 28,
1997.
Rental revenues increased approximately $2,325,000 during the six months ended
February 28, 1998 ("YTD 1998") as compared to the six months ended February 28,
1997 ("YTD 1997"). Rental revenues increased approximately $355,000 in the Gift
Mart due to an increase in rental rates offset by a decrease in occupancy.
Rental revenues increased $2,777,000 in the Merchandise Mart, reflecting an
increase in both occupancy and rental rates primarily associated with the
Holiday and Floral area which opened in January 1997 and was expanded in January
1998. Rental revenues in the Apparel Mart decreased approximately $806,000
reflecting a decrease in occupancy and in rental rates.
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Trade show revenues increased approximately $846,000 in YTD 1998 compared to YTD
1997 primarily due to an increase in January International Gift and Home
Furnishings Market revenues and the addition of the Florida Gift Show. Other
revenues decreased approximately $151,000 for YTD 1998 compared to YTD 1997 due
to decreases in certain joint venture revenues and transient parking revenues,
offset by an increase in hotel commission and advertising revenues.
Building operations expenses increased approximately $64,000 for YTD 1998
compared to YTD 1997 due primarily to increased electrical costs.
Trade show expenses increased approximately $359,000 for YTD 1998 compared to
YTD 1997 due primarily to costs associated with the Florida Gift Show.
Marketing expenses increased approximately $505,000 in YTD 1998 compared to YTD
1997 due primarily to an increase in costs associated with the January
International Gift and Home Furnishings Market and the addition of the Florida
Gift Show.
General and administrative expenses increased approximately $101,000 in YTD 1998
compared to YTD 1997 as a result of increased salary and benefit costs, offset
by a decrease in certain professional service costs.
Property taxes decreased approximately $84,000 in YTD 1998 compared to YTD 1997
due to a decrease in the property tax assessment.
Depreciation and amortization expense decreased approximately $325,000 in YTD
1998 compared to YTD 1997 due to certain assets becoming fully depreciated in
1998.
The increase in operating income of $2,432,000 in YTD 1998 compared to YTD 1997
is primarily due to the increase in rental revenues.
Other expense decreased approximately $340,000 in YTD 1998 compared to YTD 1997
as a result of Olympic costs recorded in Q1 1997, which were non-recurring in
nature.
The gain on limited partnership interest results from the sale of a hotel
property in which the Company had an interest and the distribution of
partnership units to EC Holdings in February 1998 as a result of the sale.
Income tax expense increased approximately $2,438,000 in YTD 1998 compared to
YTD 1997 due to the increase in taxable income.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1998, the Company had approximately $286.2 million in long-term
debt outstanding, of which approximately $97.3 million represents the Gift Mart
Mortgage Loan. Additionally, approximately $4.9 million was outstanding under
the Revolving Line of Credit at February 28, 1998.
The Company's primary sources of cash are operating cash flows and borrowings
under the Revolving Line of Credit. Borrowings on the Revolving Line of Credit
of up to $10.0 million may be used to fund operations and capital improvements
and for acquisition and start-up costs for new trade
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shows in an amount not to exceed $2.5 million. At February 28, 1998
approximately $5.1 million was available under the Revolving Line of Credit.
The availability of operating cash flows generated by the Gift Mart is limited
by the terms of the Gift Mart Mortgage Loan. Cash flows 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 $1.2 million and $1.3 million for YTD 1998 and
YTD 1997, respectively.
Cash flows from operations, net of cash flows of the Gift Mart, were
approximately $7.8 million during YTD 1998, and $9.7 million during YTD 1997.
The decrease in operating cash flow in YTD 1998 compared to YTD 1997 is
primarily attributable to the timing of the payment of property taxes.
Significant capital expenditures were incurred during the past several years and
ongoing capital expenditures will be necessary to adequately maintain the
Company's properties. Total capital expenditures were approximately $4.8 million
in YTD 1998, and $5.7 million in YTD 1997, which included approximately $272,000
and $91,000 in Gift Mart capital expenditures for YTD 1998 and YTD 1997,
respectively. Except as discussed below, management expects that capital
expenditures, including tenant improvements, of approximately $10.0 million will
be needed to maintain the buildings and make improvements, including
improvements related to possible increased rental activity, during the year
ending August 31, 1998. There can be no assurance, that changes in the
competitive environment, governmental regulations or unforeseen loss or damage
will not cause capital expenditures to exceed management's estimate.
The Company has received a commitment, contingent upon the completion of certain
events, including approval of the requisite bondholders, to increase the
availability under the Revolving Line of Credit from $10 million to $20 million.
The Company is currently seeking a waiver of the terms of certain of its
indentures to permit the additional indebtedness. There can be no assurance that
the Company will receive the requested waivers. The Company intends to use the
increased availability under the Revolving Line of Credit to fund the proposed
expansion of the Gardens line of business, originally planned for FY 1999, for
the July 1998 International Gift and Home Furnishings Market, for working
capital purposes, and for an additional liquidity reserve.
Management expects that cash flows from operations and borrowings under the
Revolving Line of Credit will be sufficient to fund operations, debt service
prior to maturity and approved capital expenditures provided that the Company
can maintain its operating revenues and expenses at current levels and that no
unforeseen or additional significant capital improvements are required. There
can be no assurance 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 operating cash flows and borrowings under the Revolving Line of
Credit are insufficient, or the Company is not successful in increasing the
Revolving Line of Credit, the Company would be required to seek additional
financing or to refinance all of its debt obligations prior to maturity. The
Company's ability to seek additional financing is limited under the terms of the
Revolving Line of Credit and its indentures.
Under the terms of the Mart Bonds, the Company is required to use certain
portions of its cash flows to repay its indebtedness. The terms of such debt
also limit the Company's ability to incur additional debt or to create
additional liens. Accordingly, such provisions may limit the Company's ability
to make required capital improvements. Mart Bond repayments totaled
approximately $7.2 million in
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YTD 1998, and $6.0 million in YTD 1997. 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.
In February 1998, one of the holders of the Mart Bonds offered to purchase for
cash a portion of the outstanding Mart Bonds. This offer has expired and it is
the understanding of the Company that none of the outstanding Mart Bonds were
purchased pursuant to this offer. In connection with the offer, the offeror
indicated that it intended to engage in dicussions with the Company regarding
the refinancing of the Mart Bonds and that another holder also intends to engage
in such discussions with the Company. While the Company has from time to time
engaged in preliminary discussions with certain holders of the Mart Bonds
regarding the refinancing of those Bonds and possible arrangements under which
the Company or its affiliates would participate in repurchase of the Mart Bonds,
neither the Company nor any of its affiliates is currently a party to any
agreement, understanding or arrangement with respect to the refinancing of the
Mart Bonds or with respect to any repurchase by the Company of the Mart Bonds or
any other securities of the Company.
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 Company expects such levels to be achieved
and plans to extend the maturity of the debt. The Company's 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.
The Company is currently negotiating an agreement to engage a financial advisor
to assist the Company in the identification and evaluation of strategic
alternatives that may include certain transactions designed to maximize the
value of the Company. The possible transactions could include a capital
restructuring, asset repositioning or a sale of the Company or certain of its
assets, in either a single transaction or a series of related transactions.
Other assets of affiliates of the Company could be included in any such
transaction or series of transactions. There can be no assurance that the
Company will reach an agreement to engage a financial advisor, that the
financial advisor will formulate any strategic alternative to maximize the value
of the Company or that the Company will succeed in completing any transaction or
series of transactions recommended by the financial advisor.
EC Holdings
The stock representing the Company's interests in EC Holdings, Inc. ("EC
Holdings"), which holds an interest in limited partnerships which own two
mixed-use complexes in San Francisco's financial district, and certain
unimproved land (the "Unimproved Land") has been pledged as security for the
Antecedent Debt Notes. Under the terms of the Antecedent Debt Notes, since the
Company did not liquidate its interest in EC Holdings or the Unimproved Land by
October 2, 1997, the Antecedent Debt Note holders are entitled to direct the
trustee for the bonds to foreclose upon the Company's interest in EC Holdings
and the Unimproved Land. As of April 1, 1998, no foreclosure proceedings have
been initiated.
The limited partnership interests held by EC Holdings have interests in two
hotels, six office buildings, retail and associated parking. In February 1998,
one of the partnerships sold a hotel property for an agreed upon number of units
in another limited partnership. The Company's share of the units, which were
distributed to EC Holdings, have a fair value of approximately $3,877,000 and
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have been recorded as an investment in a limited partnership. The units are
pledged as security for the Antecedent Debt Notes.
The other hotel in which EC Holdings has a limited partnership interest is
currently under a non-binding letter of intent to be sold. In addition, the
interests which own the office buildings, retail and parking are currently being
offered for sale, although no agreement for the sale is currently pending.
INFLATION
The Company deals with the effects of inflation by adjusting rental rates on new
leases and renewal leases, and by providing for annual rental rate increases in
most 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 ten
years while the term of most service contracts is one year or less.
YEAR 2000 INFORMATION
The Company is currently assessing the potential impact of the Year 2000
computer systems issue on its operations. Based upon preliminary assessments,
the Company's accounting system is the primary system which is currently not
Year 2000 compliant. An upgraded version of the software which is Year 2000
compliant will be installed by November 1998. All other system changes or
upgrades which are required to ensure Year 2000 compliance will be implemented
by the end of fiscal year 1999. It is management's belief that the impact of the
issue will not materially affect the Company's future operating results or
financial condition.
I-12
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See note 1 to Part 1, Item 1 - Financial Statements.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the annual meeting of shareholders here on January 26, 1998, the following
proposals were adopted by the margins indicated:
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Re-election to the Board of Directors of
D. Raymond Riddle, for a three year period. 49,417,353 0 0
Re-election to the Board of Directors of
John M. Ryan, for a three year period. 49,417,353 0 0
Proposal to ratify the appointment of
KPMG Peat Marwick LLP as independent auditors. 49,417,353 0 0
</TABLE>
ITEM 5. OTHER INFORMATION
None.
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 February 28, 1998 or subsequent to that date but
prior to the filing date of this Form 10-Q.
II-1
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
/S/ JOHN M. RYAN
----------------
John M. Ryan
President
/S/ HENRY G. ALMQUIST, JR.
--------------------------
Henry G. Almquist, Jr.
Sr. Vice President - Finance and
Accounting, Chief Financial Officer
(Principal financial and accounting officer)
Date: April 9, 1998
<PAGE> 1
EXHIBIT 11
AMC, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(For the three and six months ended February 28, 1998 and 1997)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
February 28, February 28,
---------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BASIC
Net Earnings $ 5,434,832 $ 2,222,774 $ 6,690,027 $ 2,693,962
Weighted average outstanding common shares 61,962,751 61,962,751 61,962,751 61,962,751
=========== =========== =========== ===========
Basic Earnings Per Share $ .09 $ .04 $ .11 $ .04
=========== =========== =========== ===========
DILUTED
Net Earnings $ 5,434,832 $ 2,222,774 $ 6,690,027 $ 2,693,962
Weighted average outstanding common shares 61,962,751 61,962,751 61,962,751 61,962,751
Net effect of dilutive securities (a) (a) (a) (a)
Diluted earnings per share $ .09 $ .04 $ .11 $ .04
=========== =========== =========== ===========
</TABLE>
(a) Not applicable as warrants are anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMC, INC. FOR THE SIX MONTH PERIOD ENDED FEBRUARY 28,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 375
<SECURITIES> 0
<RECEIVABLES> 2,515
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,574
<PP&E> 324,284
<DEPRECIATION> 129,933
<TOTAL-ASSETS> 225,655
<CURRENT-LIABILITIES> 23,925
<BONDS> 286,220
0
0
<COMMON> 61,963
<OTHER-SE> (154,581)
<TOTAL-LIABILITY-AND-EQUITY> 225,655
<SALES> 0
<TOTAL-REVENUES> 37,747
<CGS> 0
<TOTAL-COSTS> 26,190
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 152
<INTEREST-EXPENSE> 4,184
<INCOME-PRETAX> 10,813
<INCOME-TAX> 4,123
<INCOME-CONTINUING> 6,690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,690
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
