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 December 29, 1994
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 01-12429
AMC ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1304369
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 West 14th Street
Kansas City, Missouri 64105-1977
(Address of principal executive offices) (Zip Code)
(816) 221-4000
(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 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.
Yes x No ________
Number of Shares
Title of Each Class of Common Stock Outstanding as of December
29, 1994
Common Stock, 66 2/3 cents par value 5,302,630
Class B Stock, 66 2/3 cents par value 11,157,000
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
PERIODS (39 AND 13 WEEKS) ENDED DECEMBER 29, 1994, DECEMBER 30, 1993
AND YEAR (52 WEEKS) ENDED MARCH 31, 1994
INDEX
Page
Number
PART I. FINANCIAL STATEMENTS
ITEM 1. CONSOLIDATED STATEMENTS OF OPERATIONS 3
CONSOLIDATED BALANCE SHEETS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION
OF PER SHARE EARNINGS 19
EXHIBIT 27 - FINANCIAL DATA SCHEDULE 20
SIGNATURES 21
2
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited) (Unaudited)
Thirteen Thirty-nine Fifty-two
Weeks Ended Weeks Ended Weeks Ended
<CAPTION>
<S> <C> <C> <C> <C> <C>
12/29/94 12/30/93 12/29/94 12/30/93 3/31/94
Revenues
Admissions $ 92,933 $ 87,465 $286,160 $297,647 $389,454
Concessions 41,881 39,455 131,387 134,773 176,274
Other 7,811 5,669 18,150 15,538 21,725
Total revenues 142,625 132,589 435,697 447,958 587,453
Expenses
Film rentals 46,448 43,737 145,082 154,910 197,461
Concession merchandise 6,458 5,725 20,469 20,004 26,349
Other 55,095 54,035 169,724 170,474 225,367
Total cost of
operations 108,001 103,497 335,275 345,388 449,177
Depreciation and
amortization 8,977 9,729 27,138 29,151 38,048
General and
administrative expenses 9,777 9,508 29,380 27,957 39,492
Total expenses 126,755 122,734 391,793 402,496 526,717
Operating income 15,870 9,855 43,904 45,462 60,736
Other expense (income)
Interest expense
Corporate borrowings 6,066 6,211 18,689 19,185 25,699
Capitalized leases 2,865 2,890 8,523 8,431 10,676
Investment income (2,064) (619) (7,581) (1,653) (1,156)
Minority interest - - - (1,599) (1,599)
Loss (gain) on
disposition of assets 4 1 79 79 (296)
Earnings before
income taxes 8,999 1,372 24,194 21,019 27,412
Income tax provision 3,600 600 9,800 8,500 12,100
Net earnings 5,399 772 14,394 12,519 15,312
Preferred dividends 1,750 - 5,250 - 538
Net earnings for
common shares $ 3,649 $ 772 $ 9,144 $ 12,519 $ 14,774
Earnings per share $.22 $.05 $.55 $ .76 $ .89
Weighted average number of
shares outstanding 16,580 16,667 16,552 16,452 16,521
See Notes to Consolidated Financial Statements
3
</TABLE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
(Unaudited)
<CAPTION>
<S> <C> <C> <C>
12/29/94 12/30/93 3/31/94
Current assets:
Cash and equivalents $ 63,465 $ 58,518 $ 32,319
Investments 107,710 - 119,150
Receivables, net of allowance
for doubtful accounts of $1,212
as of December 29, 1994, $1,270
as of March 31, 1994 and $596
as of December 30, 1993 9,308 8,349 9,197
Other current assets 12,442 8,805 11,575
Total current assets 192,925 75,672 172,241
Property, net 260,432 263,562 252,861
Intangible assets, net 45,701 42,575 49,403
Other long-term assets 17,701 25,802 26,771
Total assets $516,759 $407,611 $501,276
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 35,585 $ 35,416 $ 28,706
Accrued expenses and other liabilities 49,843 52,182 51,199
Current maturities of borrowings and
capital lease obligations 2,478 2,519 2,168
Total current liabilities 87,906 90,117 82,073
Corporate borrowings 200,166 200,126 200,115
Capital lease obligations 65,347 66,165 65,905
Other long-term liabilities 23,822 19,237 22,779
Total liabilities 377,241 375,645 370,872
Commitments and contingencies
Stockholders' equity
Cumulative Convertible Preferred stock;
4,000,000 shares issued and outstanding;
(aggregate liquidation preference
of $100,000) 2,667 - 2,667
Common stock; 5,302,630 shares
issued and outstanding
as of December 29, 1994, 5,266,830 shares
as of March 31, 1994
and 4,684,130 shares
as of December 30, 1993 3,535 3,123 3,511
Class B stock; 11,157,000 shares
issued and outstanding as of
December 29, 1994 and March 31, 1994
and 11,730,000 shares as of
December 30, 1993 7,438 7,820 7,438
Additional paid-in capital 107,130 13,979 106,951
Retained earnings 18,748 7,044 9,837
Total stockholders' equity 139,518 31,966 130,404
Total liabilities and stockholders' equity $516,759 $407,611 $501,276
See Notes to Consolidated Financial Statements
4
</TABLE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
(Unaudited)
Thirty-nine Fifty-two
Weeks Ended Weeks Ended
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 12/29/94 12/30/93 3/31/94
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 14,394 $ 12,519 $ 15,312
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization - property 22,086 22,157 29,074
- other assets 5,052 5,081 7,075
Loss (gain) on sale of long-term assets 79 79 (296)
Change in assets and liabilities net of
effects from acquisitions:
Receivables (111) (1,995) (2,843)
Other current assets (867) 1,135 (1,925)
Accounts payable 6,879 8,940 5,187
Accrued expenses and other liabilities (313) 12,000 11,892
Other, net (1,365) 2,209 204
Total adjustments 31,440 49,606 48,368
Net cash provided by operating activities 45,834 62,125 63,680
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisitions (29,037) (6,707) (10,651)
Investments in short term instruments, net 11,440 26,109 (93,041)
Proceeds from sale of other investments 11,689 - -
Purchase of partnership interest,
net of cash acquired - (8,486) (8,486)
Proceeds from disposition of property 30 511 1,270
Other, net (1,922) (143) (597)
Net cash provided by (used in)
investing activities (7,800) 11,284 (111,505)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit agreements - 30,000 30,000
Repayments under line of credit agreements - (30,000) (30,000)
Principal payments under capital leases (1,583) (1,314) (1,700)
Repayment of acquired subsidiary indebtedness - (37,000) (37,000)
Other repayments (25) (1,400) (1,720)
Proceeds from issuance of common stock 203 1,276 1,321
Proceeds from issuance of preferred stock - - 95,600
Dividends paid on preferred stock (5,483) - -
Deferred financing costs - (450) (354)
Net cash provided by (used in)
in financing activities (6,888) (38,888) 56,147
NET INCREASE IN CASH AND EQUIVALENTS 31,146 34,521 8,322
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 32,319 23,997 23,997
CASH AND EQUIVALENTS AT END OF PERIOD $63,465 $58,518 $32,319
5
</TABLE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except narratives)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
<CAPTION>
(Unaudited)
Thirty-nine Fifty-two
Weeks Ended Weeks Ended
12/29/94 12/30/93 3/31/94
<S> <C> <C> <C>
Capital lease obligations incurred in
connection with property acquired $ 1,363 $ 3,278 $ 5,219
On May 28, 1993, a wholly-owned subsidiary of American Multi-Cinema, Inc.
("AMC"), acquired a fifty percent partnership interest in Exhibition
Enterprises Partnership ("EEP") from TPI Entertainment, Inc. Together with the
partnership interest already owned, EEP became wholly-owned by subsidiaries of
AMC. Cash and equivalents held by EEP as of May 28, 1993 totaled $9,014,000.
Liabilities assumed from the May 28, 1993 transaction follow:
Fair value of assets acquired
(including cash and equivalents) $ 70,170
Cash paid (17,500)
Liabilities assumed $ 52,670
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(Unaudited)
Thirty-nine Fifty-two
Weeks Ended Weeks Ended
12/29/94 12/30/93 3/31/94
Cash paid during the period for:
Interest (net of amounts capitalized) $ 21,066 $ 20,123 $ 35,742
Income taxes 12,737 5,425 13,659
Income taxes resulting from IRS settlement 2,332 1,650 1,650
Cash received during the period for:
Interest and dividend income 4,446 1,342 1,973
Income tax refunds - 106 417
See Notes to Consolidated Financial Statements
6
</TABLE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
(Unaudited)
<CAPTION> Additional Retained Total
Preferred Stock Common Stock Class B Stock Paid-in Earnings Stockholders'
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Amount Shares Amount Shares Amount Capital (Deficit) Equity
Balance, April 1, 1993 - $ - 4,539,380 $3,026 11,730,000 $7,820 $ 12,800 $ (5,475) $ 18,171
Net earnings for
the thirty-nine
weeks ended
December 30, 1993 - - - - - - - 12,519 12,519
Net proceeds from
sale of Common Stock - - 144,750 97 - - 1,179 - 1,276
Balance,
December 30, 1993 - - 4,684,130 3,123 11,730,000 7,820 13,979 7,044 31,966
Net earnings for
the thirteen
weeks ended
March 31, 1994 - - - - - - - 2,793 2,793
Net proceeds
from sale
of Common Stock - - 9,700 6 - - 39 - 45
Net proceeds
from sale of
Preferred Stock 4,000,000 2,677 - - - - 92,933 - 95,600
Conversion of
Class B Stock - - 573,000 382 (573,000) (382) - - -
Balance,
March 31, 1994 4,000,000 2,667 5,266,830 3,511 11,157,000 7,438 106,951 9,837 130,404
Net earnings
for the thirty-nine
weeks ended
December 29, 1994 - - - - - - - 14,394 14,394
Net proceeds from sale
of Common Stock
- - 35,800 24 - - 179 - 203
Dividends declared:
$1.75 Preferred Stock - - - - - - - (5,483) (5,483)
Balance,
December 29, 1994 4,000,000 $2,667 5,302,630 $3,535 11,157,000 $7,438 $107,130 $18,748 $139,518
See Notes to Consolidated Financial Statements.
7
</TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 29, 1994
(UNAUDITED)
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
AMC Entertainment Inc. ("AMCE"), through American Multi-Cinema, Inc.
("AMC") and its subsidiaries (collectively with AMCE, unless the context
otherwise requires, the "Company"), is principally involved in the
operation of motion picture theatres.
In the opinion of management, the accompanying consolidated financial
data contains all adjustments (which comprise only normal recurring
accruals) necessary to present fairly its financial position as of December
29, 1994 and December 30, 1993 and the results of operations and cash
flows.
The interim consolidated financial data is submitted in response to
the requirements of Form 10-Q and should be read in conjunction with the
notes to the consolidated financial statements appearing in the Company's
1994 annual report on Form 10-K.
Due to the seasonal nature of the Company's business, results for the
thirty-nine weeks ended December 29, 1994 are not necessarily indicative of
the results to be expected for the entire year.
Fiscal Year
The Company has a 52/53 week fiscal year ending on the Thursday
closest to the last day of March (March 30, 1995 for the current year,
which includes fifty-two weeks, and March 31, 1994 for the prior year,
which included fifty-two weeks).
Earnings Per Share
Primary earnings per share is computed based upon net earnings for the
period less preferred stock dividends divided by the sum of the weighted
average number of common shares outstanding and outstanding stock options,
when their effect is dilutive.
Presentation
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation. Such
amounts were not material.
NOTE 2 - ACQUISITION OF EXHIBITION ENTERPRISES PARTNERSHIP
On May 28, 1993, the Company completed the acquisition of the
remaining partnership interest in Exhibition Enterprises Partnership
("EEP") for $17,500,000 in cash. At the time of the acquisition, EEP owned
60 theatres containing 452 screens which were managed by the Company. The
acquisition also required the repayment of $37,000,000 in EEP bank
indebtedness, which was funded by borrowings under a revolving line of
credit of $30,000,000 together with cash on hand. The acquisition was
accounted for under the purchase method of accounting and EEP was
consolidated, for financial reporting purposes, as a wholly-owned
8
subsidiary.
For fiscal 1994, the Company accounted for its investment in EEP on a
consolidated basis by including EEP's revenues and expenses in the
Consolidated Statement of Operations beginning April 2, 1993. One-half of
EEP's net loss for the period April 2, 1993 through May 27, 1993
($1,599,000) has been recorded as minority interest in the Consolidated
Statement of Operations.
NOTE 3 - BORROWINGS
Loan Agreement
Effective August 10, 1992, AMC entered into a three year loan
agreement with two banks to provide a revolving line of credit of up to
$40,000,000 for working capital and other general corporate purposes (the
"Credit Facility"). Effective June 14, 1994, the Credit Facility was
amended and restated. The new loan agreement modified the financial
covenant requirements and extended the due date of the Credit Facility to
March 30, 1997. Under the loan agreement, the Company has the option to
borrow at rates based on either the bank's base rate or LIBOR and is
required to pay an annual commitment fee based on margin ratios that could
result in a rate between 1/4 and 1/2 of 1% on the unused amount of the
commitment. As of December 29, 1994, AMC had no borrowings under the
Credit Facility and could borrow up to $40,000,000 as provided in the loan
agreement.
The Credit Facility includes several financial covenants. The Company
is required to maintain a maximum net debt to consolidated EBITDA ratio of
4.50 to 1 and a minimum fixed charge coverage ratio of 1.40 to 1. In
addition, the Credit Facility among other things (i) generally limits the
Company's capital expenditures to $100,000,000 per year, reduced by the
amount of investments made during such year in any entity which is not a
guarantor of the Credit Facility, and (ii) generally limits investments in
entities which are not guarantors of the Credit Facility, or which do not
become wholly-owned subsidiaries of AMC as a result of the investment, to
$100,000,000 in the aggregate, plus the greater of 25% of free cash flow or
50% of consolidated net income (minus 100% of consolidated net income if
negative), as defined in the Credit Facility. As of December 29, 1994, the
Company had satisfied all financial covenants relating to the Credit
Facility.
The Credit Facility permits the Company to pay dividends as long as
the amount of dividends and other restricted payments in any four
consecutive fiscal quarters (a "Relevant Period") is less than the amount
by which consolidated EBITDA exceeds the product of 1.4 times fixed charges
for the four consecutive fiscal quarters ended immediately before the
Relevant Period, as defined in the Credit Facility. As of December 29,
1994, after deducting preferred dividends declared, the most restrictive
covenant in the Credit Facility would allow the Company to pay a cash
dividend of approximately $44,006,000.
9
NOTE 4 - PROPERTY
A summary of property follows (in thousands):
(Unaudited)
12/29/94 12/30/93 3/31/94
Property owned:
Land $ 29,075 $ 20,239 $ 20,239
Buildings and improvements 89,580 86,283 86,177
Furniture, fixtures and equipment 165,865 164,099 160,944
Leasehold improvements 121,039 119,124 116,496
405,559 389,745 383,856
Less - accumulated depreciation
and amortization 187,100 170,231 174,229
218,459 219,514 209,627
Property leased under capitalized leases:
Buildings 69,723 68,313 68,162
Less - accumulated amortization 27,750 24,265 24,928
41,973 44,048 43,234
Net property $260,432 $263,562 $252,861
NOTE 5 - CONTINGENCIES
The Company, in the normal course of business, is party to various
legal actions. Management believes that the potential exposure, if any,
from such matters would not have a material adverse effect on the financial
condition or results of operations of the Company. The following
paragraphs summarize significant litigation and proceedings to which the
Company is a party.
Income Tax Litigation. The Company has been in litigation with the
Internal Revenue Service ("IRS") primarily concerning the Company's method,
for the years 1975 and 1978 to 1987, inclusive, of reporting, for income
tax purposes, film rental deductions in the year paid (cash method) rather
than in the year the related film was exhibited (accrual method). These
and other issues, including the determination of various credit and loss
carrybacks, and issues related to certain capital gains, the dividends
received deduction, and the understatement penalty, were the subject of two
United States Tax Court cases (Durwood, Inc. v. Commissioner of Internal
Revenue, Docket No. 3706-88 filed February 23, 1988 and Durwood, Inc. v.
Commissioner of Internal Revenue, Docket No. 3322-91 filed February 22,
1991).
10
Settlements have been reached with respect to all issues in each of the
tax court cases. The settlements have been approved by the Congressional
Joint Committee on Taxation as required by law. On July 26, 1994, the Tax
Court entered its decisions in each of these cases. Through December 29,
1994, the Company has recorded provisions totaling $23,751,000,
representing the estimated federal and state income taxes and interest
resulting from the IRS litigation. Through December 29, 1994, the Company
has made payments totaling $22,294,000 to federal and state tax
authorities associated with the tax court settlements. Management believes
that adequate amounts have been reserved with respect to these income tax
matters.
NOTE 6 - INCOME TAXES
The Company records deferred income taxes in accordance with Statement
of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes", using enacted tax laws and rates for the years in which the
taxes are expected to be paid.
The Company has recorded a valuation allowance against deferred tax
assets based on the lack of sufficient evidence required under SFAS 109 to
support the realizability of the deferred assets. As of December 29, 1994,
the valuation allowance amounted to approximately $22,773,000.Based on
increasing positive evidence supporting the potential realizability of the
deferred tax assets, it is possible that this valuation allowance may be
decreased in future periods. A reduction in the valuation allowance will
increase net income in the period of adjustment.
NOTE 7 - COMMITMENTS
The Company has entered into agreements to lease space for the
operation of theatres not yet fully constructed. Of the total number of
anticipated openings, leases for ten new theatres with 191 screens and
leases for the expansion of 42 screens at five existing locations have been
finalized. The scheduled completion of construction and theatre openings
are at various dates through the first quarter of fiscal 1997. The
estimated minimum rental payments that may be required under the terms of
these leases total approximately $176,000,000.
NOTE 8 - SALE OF INVESTMENTS
During the first quarter of fiscal 1995, the Company sold 1,475,144
shares of TPI Enterprises, Inc. common stock for $9,614,000, resulting in a
gain of approximately $841,000 which is included in investment income.
During the second quarter of fiscal 1995, the Company sold 89,600
common shares and 64,000 preferred shares of AmeriHealth, Inc. for
$2,166,000, resulting in a gain of approximately $566,000 which is also
included in investment income.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company's revenues are derived principally from box office admissions
and theatre concession sales. Additional revenues are derived from other
sources such as on-screen advertising and license fees from electronic video
games in theatre lobbies. The Company's principal costs of operations are
film rentals, concession merchandise and other expenses such as advertising,
payroll, occupancy costs and insurance. Set forth below is a summary of
operating revenues for the thirteen week and thirty-nine week periods ended
December 29, 1994 and December 30, 1993.
<TABLE>
<CAPTION>
Thirteen Thirteen Thirty-nine Thirty-nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
% of Total % of Total % of Total % of Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/29/94 Revenues 12/30/93 Revenues 12/29/94 Revenues 12/30/93 Revenues
(Dollars in thousands)
Revenues
Admissions $ 92,933 65% $ 87,465 66% $286,160 66% $297,647 67%
Concessions 41,881 29 39,455 30 131,387 30 134,773 30
Other 7,811 6 5,669 4 18,150 4 15,538 3
Total $142,625 100% $132,589 100% $435,697 100% $447,958 100%
Cost of Operations
Film rental $ 46,448 33% $ 43,737 33% $145,082 33% 154,910 35%
Concession
merchandise 6,458 4 5,725 4 20,469 5 20,004 4
Other 55,095 39 54,035 41 169,724 39 170,474 38
Total $108,001 76% $103,497 78% $335,275 77% $345,388 77%
</TABLE>
Operating Results
Total revenues for the thirty-nine weeks ended December 29, 1994,
decreased $12,261,000, or 2.7%, from the comparable period in fiscal 1994.
The decrease in total revenues was partially the result of a decrease in
attendance of 2.9% which lowered admission and concession revenues by
$8,573,000 and $3,882,000, respectively. The attendance decline during
the current period was impacted by a dispute with a major distributor over
film terms, which resulted in the Company receiving less than its normal
allocation of film product from that distributor. The Company is taking
steps to improve its relationship with the distributor.The decrease in
admission revenue was also affected by a decrease in the average ticket
price of 1.0% from the previous year, which lowered revenues by
$2,914,000. The concession revenue decrease due to lower attendance was
partially offset by higher average concession revenue per patron,
increasing revenues by $496,000.
12
Cost of operations decreased $10,113,000, or 2.9%, from $345,388,000
in the prior period to $335,275,000 currently. Film rental expense
decreased $9,828,000, or 6.3%, of which $5,978,000 was due to lower
attendance and $3,850,000 due to a decrease in the percentage of revenues
paid to distributors. Concession merchandise cost increased $465,000, or
2.3%, from $20,004,000 in the prior period to $20,469,000 for the thirty-
nine weeks ended December 29, 1994. This increase was the result of an
increase in the percentage of concession revenue paid to vendors of .7%,
which increased expense by $968,000, offset by decreased concession
expense of $503,000 resulting from lower attendance. Other costs of
operations decreased $750,000, or .4%, from $170,474,000 in the prior
period to $169,724,000 for the thirty-nine weeks ended December 29, 1994.
Operating income decreased during the thirty-nine weeks ended December
29, 1994 by $1,558,000, or 3.4%, to $43,904,000 from $45,462,000 in the
prior period.
General and administrative expense increased $1,423,000, or 5.1%, to
$29,380,000 in the current period from $27,957,000 for the thirty-nine
weeks ended December 30, 1993. The increase was primarily the result of
additional payroll, pension costs and expenses related to the restructuring
of division offices.
Interest expense decreased $404,000, or 1.5%, to $27,212,000 during
the thirty-nine weeks ended December 29, 1994. The decrease consisted of a
$496,000 decrease in interest expense related to corporate borrowings
partially offset by $92,000 of additional interest expense associated with
capitalized leases. For the first half of fiscal 1994, the Company
incurred $507,000 of interest expense from borrowings on its $40,000,000
Credit Facility with its primary banks (the "Credit Facility") which was
used to retire Exhibition Enterprises Partnership ("EEP") indebtedness.
The Credit Facility has not been utilized in fiscal 1995.
Investment income increased $5,928,000 from $1,653,000 for the thirty-
nine weeks ended December 30, 1993, to $7,581,000 currently. This increase
was the result of additional interest income of $4,256,000 and an increase
in other investment income of $1,672,000. The increase in interest income
was due to additional cash and short-term investments as a result of the
March 3, 1994, sale of preferred stock. The increase in other investment
income was due primarily from the sale of stock of TPI Enterprises, Inc.
and AmeriHealth, Inc.
Income from minority interest in the amount of $1,599,000 was recorded
in the first quarter of fiscal 1994 relating to TPI Entertainment, Inc.'s
("TPIE") share of the EEP operating loss from April 2, 1993, through May
27, 1993, prior to the Company's acquisition of TPIE's partnership interest
in EEP.
For the thirty-nine weeks ended December 29, 1994, the Company
recorded earnings prior to taxes of $24,194,000, an increase of $3,175,000
compared to earnings of $21,019,000 in the comparable period of the prior
year. After taxes, net earnings were $14,394,000 in the current period
compared to $12,519,000 for the thirty-nine weeks ended December 30, 1993.
Net earnings for common shares, after deducting $5,250,000 for preferred
dividends, was $9,144,000, or $.55 per share, compared to net earnings of
13
$12,519,000, or $.76 per share, in the prior period during which there were
no preferred dividends paid.
Total revenues for the thirteen weeks ended December 29, 1994,
increased 7.6% to $142,625,000, compared to $132,589,000 in the prior year.
Admissions revenue increased $5,468,000, or 6.3%, while concession revenue
increased $2,426,000, or 6.1%. Higher attendance of 1,003,000 patrons
contributed to the majority of the revenue increase, while slight increases
in average ticket price and concession revenue per patron resulted in the
remainder. The higher attendance during the current quarter as compared to
the prior year was attributable to an overall stronger film product,
particularly during the holiday season. The Company believes that the
dispute with a major film distributor, as described previously, did not
materially affect operating results during the current period.
Liquidity, Capital Structure and Resources
On March 3, 1994, the Company sold in a public offering 4,000,000
shares of $1.75 Cumulative Convertible Preferred Stock at a purchase price
of $25 per share. The net proceeds to the Company from the sale of the
Convertible Preferred were approximately $95.6 million. The Company
intends to use such proceeds (i) to improve its domestic theatre circuit
through the construction of new theatres, the addition of screens at, or
remodeling of, existing theatres and the acquisition of existing theatres
from other circuits, (ii) to finance the construction or acquisition of
theatres in foreign markets, (iii) to repurchase and retire a portion of
its debt securities pursuant to open market or privately negotiated
purchases or otherwise and (iv) for general corporate purposes. Pending
their use for the purposes set forth above, the Company has invested the
net proceeds in interest-bearing instruments and other short-term
securities.
The Company's revenues are collected in cash, principally through box
office admissions and theatre concession sales. Cash flow from operating
activities, as reflected in the Consolidated Statement of Cash Flows, was
$45,834,000 and $62,125,000 for the first three quarters of fiscal 1995 and
1994, respectively. The Company has an operating "float" which partially
finances its operations and which permits the Company to maintain a small
amount of working capital capacity. This "float" exists because admissions
revenues are received in cash, while exhibition costs (primarily film
rentals) are ordinarily paid to distributors from 30 to 45 days following
receipt of box office admission revenues and the Company is only
occasionally required to make advance payments or non-refundable guarantees
of film rentals.
In addition to cash and cash equivalents and short-term investments of
$171,175,000 as of December 29, 1994, the Company had available to it at
such date the total commitment amount under its $40,000,000 Credit
Facility. In connection with the acquisition of EEP on May 28, 1993, the
Company borrowed $30,000,000 under the Credit Facility, which amount was
repaid from cash flow from operations by July 28, 1993. Except for this
borrowing, the Company has not utilized the Credit Facility and does not
anticipate that it will need to do so.
Effective June 14, 1994, the Company amended and restated its Credit
Facility. The amended loan agreement provides greater flexibility than the
original loan agreement by (i) increasing the maximum allowable net
14
indebtedness to EBITDA ratio to 4.50 to 1 from 4.00 to 1, (ii) increasing
allowable capital expenditures (foreign and domestic) plus investments in
non-guarantors to $100,000,000 per year from allowable capital expenditures
of $25,000,000 per year (of which $10,000,000 could be spent on foreign
capital expenditures) and investments in non-guarantors which was limited
to $3,000,000, and (iii) liberalizing permitted dividends from
approximately $6,267,000 under the original loan agreement to approximately
$44,006,000 as of December 29, 1994. (See Note 3 of the Company's "Notes
to Consolidated Financial Statements.")
The Company estimates that total capital expenditures will be
approximately $50,000,000 in fiscal 1995 (excluding property under capital
lease obligations). Such expenditures include normal maintenance capital
expenditures of approximately 1.5% of revenues and capital expenditures for
expansion of the theatre circuit. Total property acquisitions, including
those for refurbishment of existing theatres, excluding capital lease
obligations, were $29,037,000 for the thirty-nine weeks ended December 29,
1994.
The Company previously announced that it plans to convert
substantially all of its auditoriums to digital sound. The Company intends
to sign a contract with the Sony Corporation to provide the equipment for
this conversion which may cost as much as $50,000,000 over the next three
years.
During the first three quarters of fiscal 1995, the Company opened
three new theatres with 34 screens, added 19 screens at four existing
locations and ceased operation of five theatres with 20 screens. The
Company has entered into agreements to lease space for the operation of
theatres not yet fully constructed. Of the total number of anticipated
openings, leases for ten new theatres with 191 screens and leases for the
expansion of 44 screens at five existing locations have been finalized.
The scheduled completion of construction and theatre openings are at
various dates through the first quarter of fiscal 1997. The estimated
minimum rental payments that may be required under the terms of the leases
total approximately $176,000,000.
The Company continually monitors the performance of its portfolio of
theatres to determine the best strategy given local and industry-wide
conditions. If an individual theatre's operating margins are
unsatisfactory, management may decide, among other options, to convert the
theatre to a "dollar house," to sell the property (or the lease rights
thereto) or to close the theatre. The closure of a theatre may be
coordinated with the opening of a new, modern AMC theatre complex where the
operating margins are expected to be superior to those of the replaced
theatre. The decision to sell or close a theatre may result in a loss when
the carrying value of the property exceeds the sales price or when a
theatre is closed with a remaining lease commitment.The loss is charged to
earnings during the period in which the decision is made.
The indentures to the Senior and Senior Subordinated Notes and the
Credit Facility contain covenants that, among other things, restrict the
type and amount of debt that the Company may incur and impose limitations
on the creation of liens, a change of control, transactions with
affiliates, mergers, investments, dividends and capital expenditures. The
15
Company does not anticipate that these covenants will materially impede the
operation of the Company.
PART II. OTHER INFORMATION
ITEM I. LEGAL PROCEEDINGS
Scott C. Wallace, Derivatively on Behalf of Nominal Defendant AMC
Entertainment Inc. v. Stanley H. Durwood, et al., Chancery Court for New
Castle County, Delaware (Civil Action No. 12855); and James M. Bird,
Derivatively on Behalf of Nominal Defendant AMC Entertainment Inc. v.
Stanley H. Durwood, et al., Chancery Court for New Castle County, Delaware
(Civil Action No. 12939). On January 27, 1993, Mr. Wallace filed a
derivative action on behalf of AMCE against four of its directors, Messrs.
Stanley H. Durwood, Edward D. Durwood, Paul E. Vardeman and Charles J.
Egan, Jr. (the "Wallace litigation"). AMCE was named as a nominal
defendant. The lawsuit alleges breach of fiduciary duties of care, loyalty
and candor, mismanagement and waste of assets in connection with the
provision of film licensing, accounting and financial services by American
Associated Enterprises, a partnership beneficially owned by Mr. Stanley H.
Durwood and members of his family, to the Company, certain other
transactions with affiliates of the Company, termination payments to a
former officer of the Company and other transactions. The lawsuit seeks
unspecified money damages and equitable relief and costs, including
reasonable attorneys' fees.
On April 16, 1993, Mr. Bird filed a derivative action on behalf of
AMCE against four of its directors, Messrs. Stanley H. Durwood, Edward D.
Durwood, Paul E. Vardeman and Charles J. Egan, Jr., and one of its former
directors, Mr. Phillip Ean Cohen (the "Bird litigation"). AMCE was named
as a nominal defendant. The lawsuit alleges many of the same claims that
are alleged in the Wallace litigation, as well as claims involving certain
transactions with National Cinema Supply Corporation and a fee paid by a
subsidiary of the Company to Mr. Cohen in connection with a transaction
between the Company and TPI Entertainment, Inc. The lawsuit seeks
unspecified money damages and equitable relief and costs, including
reasonable attorney's fees.
On August 20, 1993, the defendants filed motions to dismiss both the
Wallace litigation and the Bird litigation. On September 10, 1993, such
defendants filed motions to stay discovery pending the court's resolution
of defendants' motions to dismiss. On November 1, 1993, the court ordered
that discovery be stayed in the Wallace litigation and the Bird litigation
pending resolution of the motions to dismiss, except for discovery
concerning the fitness of Mr. Wallace to serve as a derivative plaintiff.
On October 18, 1994, Philip J. Bogosian, Auginco, Norman M. Werther
and Ellen K. Werther filed a Motion for Intervention and a Complaint in
Intervention in the Wallace litigation. Their Complaint alleges many of
the same claims that are alleged in the Wallace litigation and the Bird
litigation, which generally are various breaches of fiduciary duty, waste
of assets, mismanagement and constructive fraud. On December 8, 1994, the
court, pursuant to a stipulation of the parties, entered an order approving
Mr. Wallace's withdrawal as a derivative plaintiff and granting the Motion
for Intervention. From that date forward the caption of the Wallace
litigation will be Philip J. Bogosian, Auginco, Norman M. Werther and Ellen
16
K. Werther, Plaintiffs, v. Stanley H. Durwood, Edward D. Durwood, Charles
J. Egan, Jr., Paul E. Vardeman and Philip Ean Cohen, Defendants, and AMC
Entertainment Inc., Nominal Defendant. The defendants have not yet
responded to the intervenors' Complaint.
For additional information relative to legal proceedings, See Note 5
of Notes to Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders on November 10,
1994.
(c) At the meeting, the following matters were voted upon by stockholders:
1. The election of Directors for the upcoming year.
2. Proposal to ratify the appointment of Coopers & Lybrand as
independent public accountants of the
Company for the fiscal year ending March 30, 1995.
3. Proposal to approve the AMC Entertainment Inc. 1994 Stock
Option and Incentive Plan.
The Board of Directors of the Company is composed of six (6)
members. Four (4) of the directors are elected by the holders of Class
B Stock, voting as a class, and two (2) of the directors are elected by
the holders of Common Stock, voting as a class.
The following were the nominees of management voted upon and
elected by the holders of the Company's Class B Stock and Common Stock
as of the record date:
Class B Stock Common Stock
Stanley H. Durwood Paul E. Vardeman
Edward D. Durwood Charles J. Egan, Jr.
Peter C. Brown
Philip M. Singleton
All of the shares of Class B Stock (11,157,000 shares) were voted
for the nominees of management. Of the 5,302,630 shares of Common
Stock outstanding as of the record date (October 7, 1994), 5,171,832
were voted; 4,827,099 votes "for" their election and 344,733 votes
"against" their election.
The total votes cast concerning the ratification of the
appointment of Coopers & Lybrand were as follows: 116,518,162 "for" and
222,145 voted "against," with 1,525 "abstentions."
The total votes cast concerning the proposal to approve the AMC
Entertainment Inc. 1994 Stock Option and Incentive Plan were as
follows: 115,582,058 "for" and 428,421 "against," with 5,623
"abstentions" and 725,730 " broker non-votes."
17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. AMC Entertainment Inc. 1994 Stock Option and Incentive Plan.
Incorporated by reference from Exhibit A to the AMCE Proxy
Statement (File No. 001-08747) dated October 18, 1994.
11. Statement Regarding Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed or required to be filed for the
thirty-nine weeks ended December 29, 1994.
EXHIBIT 11
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share amounts)
(Unaudited)
Thirty-nine
Weeks Ended
12/29/94 12/30/93
Net earnings $ 14,394 $ 12,519
Preferred dividends (5,250) -
Net earnings applicable to common
stock for primary and fully
diluted earnings per share $ 9,144 $ 12,519
Average shares for primary earnings per share:
Weighted average number of
shares outstanding 16,454 16,340
Stock options outstanding
whose effect is dilutive 98 112
Total shares outstanding 16,552 16,452
Average shares for fully diluted earnings per share:
Weighted average number
of shares outstanding 16,454 16,340
Stock options outstanding
whose effect is dilutive 127 144
18
Total shares outstanding 16,581 16,484
Primary earnings per share $ .55 $ .76
Fully diluted earnings per share $ .55 $ .76
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
Filed with EDGAR
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 ENTERTAINMENT INC.
Date: January 31, 1995 /s/ Peter C. Brown
Peter C. Brown
Executive Vice
President and
Chief Financial Officer
Date: January 31, 1995 /s/ Richard L. Obert
Richard L. Obert
Vice President and
Chief Accounting
Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AMC ENTERTAINMENT INC. AS OF AFOR THE
THIRTY-NINE WEEKS ENDED DECEMBER 29, 1994 SUMITTED IN RESPONSE TO THE
REQUIREMENTS TO FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1995
<PERIOD-END> DEC-29-1994
<CASH> 63,465
<SECURITIES> 107,710
<RECEIVABLES> 10,520
<ALLOWANCES> 1,212
<INVENTORY> 0
<CURRENT-ASSETS> 192,925
<PP&E> 475,282
<DEPRECIATION> 214,850
<TOTAL-ASSETS> 516,759
<CURRENT-LIABILITIES> 87,906
<BONDS> 265,513
<COMMON> 10,973
0
2,667
<OTHER-SE> 125,878
<TOTAL-LIABILITY-AND-EQUITY> 516,759
<SALES> 131,387
<TOTAL-REVENUES> 435,697
<CGS> 20,469
<TOTAL-COSTS> 335,275
<OTHER-EXPENSES> 27,138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,212
<INCOME-PRETAX> 24,194
<INCOME-TAX> 9,800
<INCOME-CONTINUING> 14,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,144
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
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