<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 November 30, 1997
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 January 9, 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
<TABLE>
<CAPTION>
November 30, August 31,
1997 1997
-------------- -------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 528,491 $ 520,854
Restricted cash 3,422,292 2,598,375
Restricted escrow deposits 2,118,739 4,510,529
Accounts and notes receivable 2,788,442 2,845,294
Deferred income taxes 1,819,528 2,425,495
Other current assets 1,680,243 467,078
------------- -------------
Total current assets 12,357,735 13,367,625
Commercial property 335,060,937 333,615,976
Less accumulated depreciation 139,839,072 136,636,802
------------- -------------
Net commercial property 195,221,865 196,979,174
Notes receivable, less current maturities 939,080 939,080
Deferred income taxes 17,162,405 17,319,644
Other non current assets 748,243 915,159
============= =============
$ 226,429,328 $ 229,520,682
============= =============
LIABILITIES AND STOCKHOLERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 14,400,000 $ 14,400,000
Accounts payable and accrued expenses 5,601,680 11,712,664
Deferred revenue 6,268,389 1,901,022
------------- -------------
Total current liabilities 26,270,069 28,013,686
Long-term debt, less current portion 291,065,115 294,665,115
Revolving line of credit 4,216,694 3,079,804
Other non current liabilities 2,930,755 3,070,577
------------- -------------
Total liabilities 324,482,633 328,829,182
------------- -------------
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 12,434,416 11,179,221
------------- -------------
Total stockholders' deficit (98,053,305) (99,308,500)
============= =============
$ 226,429,328 $ 229,520,682
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
I-1
<PAGE> 3
AMC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended November 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues:
Rental $ 12,999,957 $ 11,898,690
Trade shows 1,528,273 1,620,717
Other revenues 710,991 906,732
------------ ------------
Total revenues 15,239,221 14,426,139
Operating expenses:
Building operations 1,887,233 1,876,125
Trade shows 351,334 325,641
Marketing 590,874 566,881
General and administrative 4,021,601 4,036,021
Bad debt expense (recoveries) (39,428) 132,946
Property taxes 1,071,257 1,133,888
Depreciation and amortization 3,216,245 3,117,761
------------ ------------
Total operating expenses 11,099,116 11,189,263
------------ ------------
Operating income 4,140,105 3,236,876
Other (income) expenses:
Interest expense 2,098,727 2,127,131
Interest income (96,632) (123,804)
Other expense 119,815 461,361
------------ ------------
Total other expenses, net 2,121,910 2,464,688
------------ ------------
Income before income taxes 2,018,195 772,188
Deferred income tax expense 763,000 301,000
------------ ------------
Net income 1,255,195 471,188
Retained earnings at beginning of period 11,179,221 7,300,598
------------ ------------
Retained earnings at end of period $ 12,434,416 $ 7,771,786
============ ============
Net income per share - primary $ .02 $ .01
============ ============
Net income per share - fully diluted $ .02 $ .01
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
AMC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended November 30,
-------------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Net income $ 1,255,195 $ 471,188
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 3,216,245 3,117,761
Deferred income tax expense 763,000 301,000
Decrease in accounts and notes receivables 56,852 514,665
Increase in other current and non current assets (1,060,018) (360,171)
Decrease in accounts payable and accrued expenses (6,110,984) (1,364,830)
Increase in deferred revenue 4,367,367 3,215,584
Decrease in other non current liabilities (139,822) (208,436)
----------- -----------
Net cash provided by operating activities 2,347,835 5,686,761
Cash flows from investing activities:
Additions to commercial property (1,444,961) (3,027,623)
Decrease (increase) in restricted cash (823,917) 218,480
----------- -----------
Net cash used in investing activities (2,268,878) (2,809,143)
Cash flows from financing activities:
Decrease (increase) in restricted escrow deposits 2,391,790 (214,072)
Net increase in revolving line of credit 1,136,890 3,600,000
Principal payments of AMM Escrow Bonds -- (5,312)
Mart Bond payments (3,600,000) (3,000,000)
Principal repayments of Gift Mart Mortgage Loan -- (694,739)
----------- -----------
Net cash used in financing activities (71,320) (314,123)
----------- -----------
Increase in cash 7,637 2,563,495
Cash at beginning of period 520,854 1,052,082
=========== ===========
Cash at end of period $ 528,491 $ 3,615,577
=========== ===========
Supplemental disclosure -
Cash paid during the period for interest $ 2,016,771 $ 2,077,740
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-3
<PAGE> 5
AMC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1997
(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 three months ended November 30, 1997 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 has
granted the Company's petition requesting a review by the high court of the
Georgia Court of Appeals ruling.
The Company is subject to certain other claims in the ordinary course of
business.
(3) RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share, which is
required to be adopted in both interim and annual financial statements for
periods ending after December 15, 1997. At that time, the Company will be
required to change the method presently used to compute earnings per share and
to restate all prior period amounts. Statement 128 replaced primary and fully
diluted earnings per share with basic and diluted earnings per share. The impact
of SFAS No. 128 on the calculation of primary and fully diluted earnings per
share is not expected to be material.
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<PAGE> 6
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 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 (on average three years)
with rent payable monthly over the term of the lease. In addition, the Company
rents exhibition space during markets thereby affording non-tenant manufacturers
an opportunity to exhibit merchandise during a specific trade show.
Quarter Ended November 30, 1997 Compared to Quarter Ended November 30, 1996
Rental revenues increased approximately $1,101,000 during the quarter ended
November 30, 1997 ("Q1 1998") as compared to the quarter ended November 30, 1996
("Q1 1997"). Rental revenues increased approximately $104,000 in the Gift Mart
due to an increase in rental rates offset by a decrease in occupancy. Rental
revenues increased approximately $1,443,000 in the Merchandise Mart, reflecting
an increase in both occupancy and rental rates. Rental revenues in the Apparel
Mart decreased approximately $446,000, reflecting a decrease in occupancy offset
by an increase in rental rates.
I-5
<PAGE> 7
Trade show revenues decreased approximately $92,000 in Q1 1998 compared to Q1
1997 primarily due to a decrease in convention and conference revenues. Other
revenues decreased approximately $196,000 in Q1 1998 compared to Q1 1997 due to
decreases in certain joint venture revenues and in transient parking revenues,
offset by an increase in hotel commission revenue.
Q1 1998 expenses for Building Operations, Trade Shows, Marketing and General &
Administrative were comparable to Q1 1997 expenses. Bad debt expense decreased
approximately $172,000 in Q1 1998 as compared to Q1 1997 as a result of certain
recoveries during Q1 1998 of amounts previously reserved. Property taxes
decreased approximately $63,000 in Q1 1998 compared to Q1 1997 due to a decrease
in the property tax assessment.
Depreciation and amortization expense increased approximately $98,000 in Q1 1998
as compared to Q1 1997 due to capital improvements which were made during fiscal
year 1997.
The increase in operating income of approximately $903,000 in Q1 1998 as
compared to Q1 1997 was primarily due to the increase in rental revenues.
Interest expense decreased approximately $28,000 during Q1 1998 compared to Q1
1997 due to the reduction of the principal balance of the Gift Mart Mortgage
Loan.
The decrease in other expense of approximately $342,000 in Q1 1998 compared to
Q1 1997 is the result of Olympic costs which were recorded in Q1 1997, which
were non-recurring in nature.
Income tax expense increased approximately $462,000 in Q1 1998 compared to Q1
1997 due to the increase in taxable income.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1997, the Company had approximately $291.1 million in long-term
debt outstanding, of which approximately $98.6 million represents the Gift Mart
Mortgage Loan. Additionally, approximately $4.2 million was outstanding under
the Revolving Line of Credit at November 30, 1997. 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 shows in an amount not to exceed $2.5 million. At
November 30, 1997 approximately $5.8 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 $.7 million for Q1 1997. No principal payments
were made during Q1 1998 due to the budgeted allocation of funds for capital
improvements. The approximate $.8 million increase in restricted cash is a
result of this budgeted capital allocation.
Cash flows from operations, net of cash flows of the Gift Mart, were
approximately $2.0 million during Q1 1998, and $5.1 million during Q1 1997. The
decrease in operating cash flow in Q1 1998 compared to Q1 1997 is primarily
attributable to the timing of the payment of property taxes. 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
I-6
<PAGE> 8
to create additional liens. Accordingly, such provisions may 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 maintain the
Company's properties. Total capital expenditures were approximately $1.4 million
in Q1 1998, and $3.0 million in Q1 1997, which included approximately $64,000
and $22,000 in Gift Mart capital expenditures for Q1 1998 and Q1 1997,
respectively. Management expects that capital expenditures, including tenant
improvements, of approximately $10.0 million will be needed to improve and
maintain the buildings during the year ending August 31, 1998. There can be no
assurance, however, that changes in the competitive environment, governmental
regulations or unforeseen loss or damage will not cause capital expenditures to
exceed management's estimate.
Long-term debt repayments totaled approximately $3.6 million in Q1 1998, and
$3.7 million in Q1 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.
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 planned capital expenditures provided that the Company can
maintain its operating revenues and expenses at current levels and that no
unforeseen 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, the Company would be required to seek additional financing;
however, the Company's ability to do so is limited under the terms of the
Revolving Line of Credit.
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'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 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 January 9, 1998, no foreclosure proceedings have
been initiated.
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 ten years while the term of most service contracts is one year or less.
I-7
<PAGE> 9
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.
No matters have been submitted to a vote of security holders during the
quarter ended November 30, 1997.
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 November 30, 1997 or subsequent to that date but
prior to the filing date of this Form 10-Q.
II - 1
<PAGE> 10
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: January 14, 1998
<PAGE> 1
EXHIBIT 11
AMC, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(For the three months ended November 30, 1997 and 1996)
<TABLE>
<CAPTION>
For the three months ended
November 30,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Primary
Weighted average number of outstanding common shares 61,962,751 61,962,751
=========== ===========
Net Earnings $ 1,255,195 $ 471,188
Primary earnings per common and common equivalent share $ .02 $ .01
=========== ===========
Fully Diluted
Weighted average number of outstanding common shares (a) 61,962,751
Net effect of dilutive warrants - based on the treasury stock method (a)
16,736,548
=========== ===========
(a) 78,699,299
=========== ===========
Adjusted Net Earnings (a) $ 676,188
Fully diluted earnings per common and common equivalent share $ .02 $ .01
=========== ===========
(a) Not applicable as warrants are anti-dilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMC, INC. FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 528
<SECURITIES> 0
<RECEIVABLES> 2,788
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,358
<PP&E> 335,061
<DEPRECIATION> 139,839
<TOTAL-ASSETS> 226,429
<CURRENT-LIABILITIES> 26,270
<BONDS> 291,065
0
0
<COMMON> 61,963
<OTHER-SE> (160,016)
<TOTAL-LIABILITY-AND-EQUITY> 226,429
<SALES> 0
<TOTAL-REVENUES> 15,239
<CGS> 0
<TOTAL-COSTS> 11,138
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (39)
<INTEREST-EXPENSE> 2,099
<INCOME-PRETAX> 2,018
<INCOME-TAX> 763
<INCOME-CONTINUING> 1,255
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,255
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
