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 September 26, 1996
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 September 26, 1996
Common Stock, 66 2/3 cents par value 6,549,489
Class B Stock, 66 2/3 cents par value 11,157,000
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
INDEX
Page Number
PART I.FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5-6
Notes to Consolidated Financial Statements 7
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS 8-13
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PART II.OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS 13-14
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Thirteen Twenty-six
Weeks Ended Weeks Ended
09/26/96 09/28/95 09/26/96 09/28/95
(Unaudited)(Unaudited)
Revenues
Admissions $133,826 $121,865 $240,111 $223,793
Concessions 61,940 56,658 111,771 102,839
Other 7,293 6,543 13,620 12,244
Total revenues 203,059 185,066 365,502 338,876
Film rentals 70,897 63,825 124,588 115,293
Concession merchandise 9,555 8,439 18,080 15,673
Other 76,885 64,619 149,054 125,918
Total cost of operations 157,337 136,883 291,722 256,884
Depreciation and amortization 12,740 10,471 24,414 20,443
General and administrative
expenses 10,526 13,695 22,503 23,918
Total expenses 180,603 161,049 338,639 301,245
Operating income 22,456 24,017 26,863 37,631
Other expense (income)
Interest expense
Corporate borrowings 2,278 5,599 4,613 11,145
Capitalized leases 2,574 2,719 5,148 5,482
Investment income (139) (2,440) (321) (4,666)
Loss on disposition
of assets 49 123 31 138
Earnings before income taxes 17,694 18,016 17,392 25,532
Income tax provision 7,125 7,400 7,000 10,500
Net earnings $ 10,569 $ 10,616 $ 10,392 $ 15,032
Preferred dividends 1,454 1,750 3,000 3,500
Net earnings for
common shares $ 9,115 $ 8,866 $ 7,392 $ 11,532
Earnings per share:
Primary $.51 $.53 $.42 $.69
Fully diluted $.44 $.45 $.42 $.63
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
September 26, March 28,
19961996
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $ 9,137 $ 10,795
Receivables, net of allowance
for doubtful accounts of $729 as
of September 26, 1996, and $801
as of March 28, 1996 23,095 20,503
Other current assets 14,598 15,179
Total current assets 46,830 46,477
Property, net 427,281 355,485
Intangible assets, net 33,527 36,483
Other long-term assets 49,840 45,013
Total assets $557,478 $483,458
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 54,887 $ 59,353
Accrued expenses and other liabilities 44,081 43,319
Current maturities of corporate
borrowings and capital lease obligations 3,246 2,904
Total current liabilities 102,214 105,576
Corporate borrowing 193,117 126,127
Capital lease obligations 57,604 59,141
Other long-term liabilities 38,147 33,696
Total liabilities 391,082 324,540
Stockholders' equity:
Cumulative Convertible Preferred Stock; 3,323,600
shares issued and outstanding as of
September 26, 1996 and 4,000,000 shares
issued and outstanding as of March 28, 1996
(aggregate liquidation preference of
$83,090 as of September 26, 1996, and $100,000
as of March 28, 1996) 2,216 2,667
Common Stock; 6,569,989 shares issued as of
September 26, 1996, and 5,388,880 shares
issued as of March 28, 1996 4,380 3,593
Convertible Class B Stock; 11,157,000
shares issued and outstanding 7,438 7,438
Additional paid-in-capital 107,791 107,986
Foreign currency translation adjustment 30 -
Retained earnings 44,910 37,603
Less - Common Stock in treasury, at cost, 166,765 159,287
20,500 shares as of September 26, 1996
and March 28, 1996 369 369
Total stockholders' equity 166,396 158,918
Total liabilities and stockholders' equity $557,478 $483,458
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Twenty-six
Weeks Ended
09/26/96 09/28/95
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 10,392 $ 15,032
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 24,414 20,443
Loss on sale of other long-term assets 31 138
Change in assets and liabilities:
Receivables (2,592) (3,258)
Other current assets 581 (278)
Accounts payable (7,269) 793
Accrued expenses and other liabilities 3,965 7,916
Other, net 527 2,424
Total adjustments 19,657 28,178
Net cash provided by operating activities 30,049 43,210
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (92,082) (42,155)
Purchases of available for sale investments - (344,699)
Proceeds from maturities of available
for sale investments - 304,651
Proceeds from disposition of other
long-term assets 180 719
Other, net (6,546) (2,685)
Net cash used in investing activities (98,448) (84,169)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving
credit facility 67,000 -
Principal payments under capital lease
obligations and other (1,208) (1,253)
Cash overdrafts 3,602 -
Proceeds from exercise of stock options 141 878
Dividends paid on preferred stock (3,085) (3,500)
Net cash provided by (used in)
financing activities 66,450 (3,875)
Effect of exchange rate changes on
cash and equivalents 291 -
NET DECREASE IN CASH AND EQUIVALENTS (1,658) (44,834)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 10,795 71,233
CASH AND EQUIVALENTS AT END OF PERIOD $ 9,137 $ 26,399
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Twenty-six
Weeks Ended
09/26/96 09/28/96
(Unaudited)
Cash paid during the period for:
Interest (net of amounts capitalized
of $999 and $1,264) $10,620 $ 17,264
Income taxes paid (refunded) (1,617) 5,802
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 26, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
AMC Entertainment Inc. ("AMCE"), through its direct and indirect
subsidiaries, including 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 throughout the United States and in Japan. The Company is also
involved in the business of providing on-screen advertising and other services
to AMC and other theatre circuits through a wholly-owned subsidiary, National
Cinema Network, Inc. ("NCN").
The accompanying unaudited consolidated financial statements have been
prepared in response to the requirements of Form 10-Q and should be read in
conjunction with the Company's annual report on Form 10-K for the year (52
weeks) ended March 28, 1996. In the opinion of management, these interim
financial statements reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
position and results of operations. Due to the seasonal nature of the
Company's business, results for the twenty-six weeks ended September 26, 1996,
are not necessarily indicative of the results to be expected for the fiscal
year (53 weeks) ending April 3, 1997.
The year-end consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation.
NOTE 2 - EARNINGS PER SHARE
Primary earnings per share is computed by dividing net earnings less
preferred dividends by the sum of the weighted average number of common shares
outstanding and outstanding stock options, when their effect is dilutive. The
average shares used in the computations were 17,943,000 and 17,534,000 for the
thirteen and twenty-six weeks ended September 26, 1996, respectively, and
16,822,000 and 16,742,000 for the thirteen and twenty-six weeks ended
September 28, 1995. On a fully-diluted basis, net earnings and shares
outstanding are adjusted to assume conversion of the Cumulative Convertible
Preferred Stock, if dilutive. The average shares used in the computations
were 23,866,000 and 17,726,000 for the thirteen and twenty-six weeks ended
September 26, 1996, respectively, and 23,763,000 and 23,731,000 for the
thirteen and twenty-six weeks ended September 28, 1995, respectively.
NOTE 3 - MERGER WITH PARENT
In May 1996, the Company announced that it was negotiating with its
majority stockholder, Durwood, Inc. ("DI"), to merge DI into the Company with
the Company remaining as the surviving entity. As currently proposed, shares
of DI stock would be exchanged for shares of the Company's stock. Shares held
by stockholders other than DI would be unaffected by the merger. The Company
has appointed a special committee of non-management directors to consider and
negotiate the proposed merger. A condition to the transaction will be that
it be approved by the holders of a majority of the shares of common stock,
other than DI, members of the Durwood family and officers and directors of the
Company.
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 the Company's on-screen advertising business and video
games in theatre lobbies. The Company's principal costs of operations are
film rentals, concession merchandise, rent and other expenses such as payroll,
advertising, utilities and insurance. Set forth below is a summary of
operating revenues and costs of operations for the thirteen and twenty-six
week periods ended September 26, 1996, and September 28, 1995, respectively.
<TABLE>
<CAPTION>
Thirteen Thirteen Twenty-six Twenty-six
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>
9/26/96 Revenues 9/28/95 Revenues 9/26/96 Revenues 9/28/95 Revenues
(Dollars in thousands)
Revenues
Admissions $133,826 66% $121,865 66% $240,111 66% $223,793 66%
Concession 61,940 31 56,658 31 111,771 31 102,839 30
Other 7,293 3 6,543 3 13,620 3 12,244 4
Total $203,059 100% $185,066 100% $365,502 100% $338,876 100%
Cost of Operations
Film rentals $ 70,897 35% $ 63,825 34% $124,588 34% $115,293 34%
Concession
merchandise 9,555 5 8,439 5 18,080 5 15,673 5
Rent 19,632 10 16,389 9 37,859 10 32,220 10
Other 57,253 27 48,230 26 111,195 31 93,698 27
Total $157,337 77% $136,883 74% $291,722 80% $256,884 76%<PAGE>
</TABLE>
Operating Results
Thirteen Weeks Ended September 26, 1996 and September 28, 1995
Total revenues for the thirteen weeks ended September 26, 1996, increased
9.7%, or $17,993,000, to $203,059,000 compared to $185,066,000 for the thirteen
weeks ended September 28, 1995. Admissions revenues increased by 9.8% due to
a 3.5% increase in attendance and a 6.1% increase in average ticket prices. The
increase in total attendance during the period occurred primarily as a result
of the opening of 179 screens since the second quarter of fiscal 1996.
Attendance at same theatres declined during the period due to a lack of popular
film product compared to the prior year resulting in a 7.0% decrease in
admissions revenues at same theatres. Concessions revenues increased by 9.3%
due to a 3.5% increase in attendance and a 5.7% increase in average concessions
per patron. The increase in average concessions per patron is attributable to
higher consumption at new theatres as well as new concession products. Other
revenues increased 11.5% due primarily to a 24.9% increase in revenues from the
Company's on-screen advertising business.
Total cost of operations increased 14.9%, or $20,454,000, during the
thirteen weeks ended September 26, 1996, to $157,337,000 from $136,883,000 for
the thirteen weeks ended September 28, 1995. As a percentage of total revenues,
cost of operations was 77% for the second quarter of fiscal 1997 compared to 74%
for the same period in the prior year. Film rentals expense increased 11.1% due
to higher admissions revenues. As a percentage of admissions revenues, film
rentals expense increased from 52.4% to 53.0%. The 13.2% increase in concession
merchandise cost is attributable to the increase in consumption by patrons and
higher product costs. As a percentage of concession revenues, concession
merchandise cost increased from 14.9% to 15.4%. Rent increased 19.8%, primarily
from the higher number of screens in operation and costs of the new theatre
operations in Japan. Other costs of operations increased 18.7% from the same
period in the prior year primarily due to the higher number of screens in
operation. The increase in other costs of operations as a percentage of total
revenues was primarily attributable to the decline in revenues at same theatres,
payroll, advertising expenses associated with the opening of new theatres, costs
of the new theatre operations in Japan and costs associated with the Company's
on-screen advertising business.
Depreciation and amortization increased 21.7%, or $2,269,000, from
$10,471,000 for the thirteen weeks ended September 28, 1995, to $12,740,000 for
the current period. This increase resulted primarily from an increase in
employed theatre assets in connection with the Company's expansion plans.
General and administrative expenses decreased 23.1%, or $3,169,000, from
$13,695,000 for the thirteen weeks ended September 28, 1995, to $10,526,000 for
the current period. The decrease in general and administrative expenses is
primarily attributable to severance payments for two former executive officers
during the thirteen weeks ended September 28, 1995 and a decrease in bonus
expense related to the decline in the Company's operating performance . As a
percentage of total revenues, general and administrative expenses decreased from
7.4% to 5.2%.
Operating income decreased 6.5%, or $1,561,000, during the thirteen weeks
ended September 26, 1996 to $22,456,000 from $24,017,000. The decrease in
operating income resulted primarily from the lack of popular film product and
operating losses during the period associated with the Company's on-screen
advertising business and new theatre operations in Japan, offset in part by a
decrease in general and administrative expenses.
Interest expense decreased 41.7%, or $3,466,000, to $4,852,000 for the
second quarter of fiscal 1997 from $8,318,000 for the same period in the prior
year. The decrease in interest expense resulted from lower interest rates under
the Company's New Credit Facility.
Investment income decreased 94.3%, or $2,301,000, during the thirteen
weeks ended September 26, 1996, due primarily to a decrease in cash and
investments from September 28, 1995 to September 26, 1996. Cash and investments
decreased primarily as a result of the Company's redemption of Senior and Senior
Subordinated Notes on December 28, 1995.
Net earnings decreased $47,000 during the thirteen weeks ended September
26, 1996, to $10,569,000 from $10,616,000 in the previous year. Net earnings
per common share, after deducting $1,454,000 and $1,750,000 of preferred
dividends in fiscal 1997 and 1996, respectively, was $.51 compared to $.53 for
the previous year.
Twenty-Six Weeks Ended September 26, 1996 and September 28, 1995
Total revenues for the twenty-six weeks ended September 26, 1996,
increased 7.9%, or $26,626,000, to $365,502,000 compared to $338,876,000 for the
twenty-six weeks ended September 28, 1995. Admissions revenues increased by
7.3% due to a 2.0% increase in attendance and a 5.3% increase in average ticket
prices. The increase in total attendance during the period occurred primarily
as a result of the opening of 179 screens since the second quarter of fiscal
1996. Attendance at same theatres declined during the period due to a lack of
popular film product compared to the prior year resulting in a 8.0% decrease in
admissions revenues at same theatres. Concessions revenues increased by 8.7%
due to a 2.0% increase in attendance and a 6.3% increase in average concessions
per patron. The increase in average concessions per patron is attributable to
higher consumption at new theatres as well as new concession products. Other
revenues increased 11.2% due primarily to a 16.6% increase in revenues from the
Company's on-screen advertising business.
Total cost of operations increased 13.6%, or $34,838,000, during the
twenty-six weeks ended September 26, 1996, to $291,722,000 from $256,884,000 for
the twenty-six weeks ended September 28, 1995. As a percentage of total
revenues, cost of operations was 80% for the twenty-six weeks ended September
26, 1996 compared to 76% for the same period in the prior year. Film rentals
expense increased 8.1% due to higher admissions revenues. As a percentage of
admissions revenues, film rentals expense increased from 51.5% to 51.9%. The
15.4% increase in concession merchandise cost is attributable to the increase
in consumption by patrons and higher product costs. As a percentage of
concession revenues, concession merchandise cost increased from 15.2% to 16.2%.
Rent increased 17.5% primarily from the higher number of screens in operation
and costs of the new theatre operations in Japan. Other costs of operations
increased 18.7% from the same period in the prior year primarily due to the
higher number of screens in operation. The increase in other costs of
operations as a percentage of total revenues was primarily attributable to the
decline in revenues at same theatres, payroll, advertising expenses associated
with the opening of new theatres, costs of the new theatre operations in Japan
and costs associated with the Company's on-screen advertising business.
Depreciation and amortization increased 19.4%, or $3,971,000, from
$20,443,000 for the twenty-six weeks ended September 28, 1995, to $24,414,000
for the current period. This increase resulted primarily from an increase in
employed theatre assets in connection with the Company's expansion plans.
General and administrative expenses decreased 5.9%, or $1,415,000, from
$23,918,000 for the twenty-six weeks ended September 28, 1995, to $22,503,000
for the current period. The decrease in general and administrative expenses is
primarily attributable to severance payments for two former executive officers
during the thirteen weeks ended September 28, 1995 and a decrease in bonus
expense related to the decline in the Company's operating performance. These
decreases in general and administrative expenses were partially offset by
additional employee benefit expenses and costs associated with the Company's
development of theatres in the United States and certain international markets.
As a percentage of total revenues, general and administrative expenses decreased
from 7.1% to 6.2%.
Operating income decreased 28.6%, or $10,768,000, during the twenty-six
weeks ended September 26, 1996 to $26,863,000 from $37,631,000 in the previous
year. The decrease in operating income resulted primarily from the lack of
popular film product and operating losses during the period associated with the
Company's on-screen advertising business and new theatre operations in Japan,
offset in part by a decrease in general and administrative expenses.
Interest expense decreased 41.3%, or $6,866,000, to $9,761,000 for the
twenty-six weeks ended September 26, 1996 from $16,627,000 for the same period
in the prior year. The decrease in interest expense resulted from lower
interest rates under the Company's new Credit Facility.
Investment income decreased 93.1%, or $4,345,000, during the twenty-six
weeks ended September 26, 1996, due primarily to a decrease in cash and
investments from September 28, 1995 to September 26, 1996. Cash and
investments decreased primarily as a result of the Company's redemption of
Senior Notes and Senior Subordinated Notes on December 28, 1995.
Net earnings decreased $4,640,000 during the twenty-six weeks ended
September 26, 1996, to $10,392,000 from $15,032,000 in the previous year. Net
earnings per common share, after deducting $3,000,000 and $3,500,000 of
preferred dividends in fiscal 1997 and 1996, respectively, was $.42 compared to
$.69 for the previous year.
Liquidity and Capital Resources
The forward looking statements included in this section, which reflect
management's best judgment based on factors currently known, involve risks and
uncertainties. Actual results could differ materially from those anticipated
in the forward-looking statements included herein as a result of a number of
factors, including but not limited to the Company's ability to enter into
various financing programs, the performance of film product and other risks and
uncertainties described from time to time in the Company's periodic reports
filed with the Securities and Exchange Commission.
The Company's revenues are collected in cash, principally through box
office admissions and theatre concession sales. The Company has an operating
"float" which partially finances its operations and which generally permits the
Company to maintain a smaller 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. The Company is only
occasionally required to make advance payments or non-refundable guarantees of
film rentals.
On December 28, 1995, the Company completed the redemption of
substantially all of its Senior Notes and Senior Subordinated Notes and entered
into a new loan agreement (the "Refinancing Plan"). The Company redeemed
$99,383,000 of its 11 7/8% Senior Notes Due 2000 at a total price of $1,117.90
per $1,000 principal amount and $95,096,000 of its outstanding 12 5/8% Senior
Subordinated Notes Due 2002 at a total price of $1,144.95 per $1,000 principal
amount. The Company utilized cash and investments along with borrowings of
$130,000,000 under a new loan agreement to redeem the Senior and Senior
Subordinated Notes. The Refinancing Plan was intended to improve the Company's
financial and operating flexibility, reduce its net interest expense, extend the
average life of its indebtedness and increase its available credit.
As a part of the Refinancing Plan, the Company entered into a new loan
agreement with several banks to provide a revolving credit facility of up to
$425,000,000 (the "Credit Facility"). The Credit Facility matures in 2002,
permits borrowings at interest rates based on either the bank's base rate or
LIBOR and requires an annual commitment fee based on margin ratios that could
result in a rate of .25% or .375% on the unused portion of the commitment. As
of September 26, 1996, the Company had outstanding borrowings of $187,000,000
under the Credit Facility at an average rate of 6.08%.
The Credit Facility contains covenants that generally limit the Company's
capital expenditures, as defined in the loan agreement, to $150,000,000 per year
plus amounts for unused capital expenditures from the prior year of
approximately $34,000,000 and proceeds received from sale/leaseback transactions
or other comparable financing programs. The Company is presently pursuing a
sale/leaseback transaction that will allow it to continue with its increased
rate of capital expenditures and comply with the terms of the loan agreement.
Additionally, other covenants impose limitations on the incurrence of
additional indebtedness, creation of liens, a change of control, transactions
with affiliates, mergers, investments, guaranties and asset sales. The Company
is required to maintain a maximum net indebtedness to consolidated earnings
before interest, taxes, depreciation and amortization ("EBITDA") ratio, as
defined in the loan agreement, of 4.50 to 1 during the first four years of the
Credit Facility and a ratio of 4.0 to 1 thereafter, and a minimum cash flow
coverage ratio, as defined in the loan agreement, of 1.40 to 1. The Company
does not anticipate that any such covenants will materially impede its
operations. As of September 26, 1996, the Company was in compliance with all
financial covenants relating to the Credit Facility.
For the twenty-six weeks ended September 26, 1996, the Company had
capital expenditures of $92,082,000, primarily for the development of new
theatres and the addition of screens at existing locations. The Company
anticipates that total capital expenditures, including assets that may be placed
in sale/leaseback or other comparable financing programs, will be approximately
$260,000,000 for fiscal 1997. The Company believes that cash generated from
operations, existing cash and cash equivalents, amounts which the Company
anticipates receiving for assets placed in sale/leaseback programs and the
unused commitment amount under its Credit Facility will be sufficient to fund
operations and planned capital expenditures for the next twelve months.
During the twenty-six weeks ended September 26, 1996, various holders of
the Company's Cumulative Convertible Preferred Stock converted 676,400 shares
into 1,166,109 shares of Common Stock at a conversion rate of 1.724 shares of
Common Stock for each share of Convertible Preferred Stock. Preferred Stock
dividend payments decreased 11.9%, or $415,000, from $3,500,000 for the twenty-
six weeks ended September 28, 1995 to $3,085,000 for the current period as a
result of the conversions. Future conversions will continue to reduce the
amount of dividends paid by the Company and increase the number of shares of
Common Stock outstanding.
During the current fiscal year, the Company opened 8 leased theatres with
129 screens including its first international theatre, the Canal City 13 in
Fukuoka, Japan. In addition, the Company closed 4 leased theatres with 19
screens resulting in a circuit total of 1,820 screens in 230 theatres as of
September 26, 1996. The Company has under construction 9 new leased theatre
locations totaling 160 screens, 3 new owned theatres with 76 screens, 1 theatre
with 24 screens leased pursuant to a ground lease and additions to existing
theatres for 16 new screens.
Other
In May 1996, the Company announced that it was negotiating with its majority
stockholder, Durwood, Inc. ("DI"), to merge DI into the Company with the
Company remaining as the surviving entity. As currently proposed, shares of DI
stock would be exchanged for shares of the Company's stock. Shares held by
stockholders other than DI would be unaffected by the merger. The Company has
appointed a special committee of non-management directors to consider and
negotiate the proposed merger. A condition to the transaction will be that it
be approved by the holders of a majority of the shares of common stock, other
than DI, members of the Durwood family and officers and directors of the
Company.
DI is primarily a holding company with no significant operations or net
assets other than its majority ownership of shares of the Company. Although the
merger is essentially a corporate reorganization, generally accepted accounting
principles require that the transaction be treated as if DI had acquired the
minority interest in the Company. Accordingly, the purchase method of
accounting will be used to account for the merger, resulting in the allocation
of the purchase price to the net assets of the Company based upon their
estimated fair value. Management is presently determining the fair values of
the Company's assets and liabilities. Pending the completion of this analysis,
management is unable to estimate whether the results of any future period will
be materially affected. Management does not believe that the transaction will
have a significant affect on the Company's liquidity or capital resources.
Congress recently passed legislation to increase the federal minimum
hourly wage paid to hourly wage employees over a two year period. This recent
legislation will increase the aggregate average hourly wage paid by the Company.
The Company intends to relieve the cost pressure from the minimum wage increase
by pursuing better labor and operating efficiencies as well as some price
adjustments for theatres in certain markets. The effect of such legislation is
not expected to have a material adverse affect on the Company's results of
operations, liquidity or financial position.
PART II.
ITEM 1. LEGAL PROCEEDINGS
The following paragraphs summarize significant litigation and proceedings
to which the Company is a party.
In Re: AMC Shareholder Derivative Litigation, Chancery Court For New
Castle County, Delaware (Civil Action No. 12855). On February 15, 1995, the
court ordered the consolidation of two derivative actions filed against four
directors of AMCE, Mr. Stanley H. Durwood, Mr. Edward D. Durwood, Mr. Paul E.
Vardeman and Mr. Charles J. Egan, Jr., and one of its former directors, Mr.
Phillip Ean Cohen. The two cases were originally filed on January 27, 1993, by
Mr. Scott C. Wallace and on April 16, 1993, by Mr. James M. Bird, respectively.
On December 8, 1994, the court, pursuant to a stipulation by the parties,
entered an order approving Mr. Wallace's withdrawal as a derivative plaintiff,
granting the motion for intervention filed by Mr. Philip J. Bogosian, Auginco,
Mr. Norman M. Werther and Ms. Ellen K. Werther, and authorizing the filing of
the intervenors' complaint. The intervenors' complaint includes substantially
the same allegations as the Wallace and Bird complaints. The two actions, as
consolidated, are referred to below as the "Derivative Action."
In the Derivative Action, plaintiffs allege breach of fiduciary duties
of care, loyalty and candor, mismanagement, constructive fraud and waste of
assets in connection with, among other allegations, 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, certain
transactions between the Company and 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 Derivative
Action seeks unspecified money damages and equitable relief and costs, including
reasonable attorneys' fees.
On February 9, 1995, the defendants filed a motion to dismiss the
Derivative Action. Discovery has been stayed pending resolution of the motion
to dismiss.
On October 10, 1996, counsel for the parties in the Derivative Action
entered into a Stipulation and Agreement of Compromise and Settlement (the
"Settlement Agreement") providing for, among other things (i) the discharge of
claims against the defendants, (ii) the nomination of two additional outside
directors to serve on the Company's Board of Directors and the voting of the
shares owned by Durwood family members for such nominees in the same proportion
as votes cast by all stockholders not affiliated with the Company, its directors
and officers, (iii) the sale by members of the Durwood family in an underwritten
secondary offering (which will only be made by means of a prospectus) of 3
million shares of the Company's common stock within 12 months after consummation
of the proposed merger referred to below, and (iv) the payment by defendants of
an aggregate of approximately $1.3 million to persons who were holders of the
Company's common stock on January 2, 1996, other than Durwood, Inc. or members
of the Durwood family.
The obligation to nominate the additional outside directors would
continue for three years, and during this time such directors would be empowered
to approve, (i) certain transactions between the Company and members of the
Durwood family, and (ii) together with either of the directors who presently
serves on the Company's Audit Committee, all other related-party transactions
with certain other affiliates of the Company.
The Settlement Agreement will require court approval and is conditioned
upon, among other things, the consummation of a proposed merger between the
Company and Durwood, Inc., which is presently being negotiated.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT INDEX
EXHIBIT
NUMBERDESCRIPTION
3.1. Amended and Restated Certificate of Incorporation of AMC
Entertainment Inc. (1)
3.2. Certificate of Designations relating to $1.75 Cumulative
Convertible Preferred Stock (2)
3.3. Bylaws of AMC Entertainment Inc. (1)
3.4. Articles of Incorporation, as amended, of American Multi-Cinema,
Inc. (3)
3.5. Bylaws of American Multi-Cinema, Inc. (3)
3.6. Certificate of Incorporation, as amended, of AMC Philadelphia,
Inc. (3)
3.7. Bylaws of AMC Philadelphia, Inc. (3)
3.8. Certificate of Incorporation, as amended, of AMC Realty, Inc. (3)
3.9. Bylaws of AMC Realty, Inc. (3)
3.10. Certificate of Incorporation, as amended, of AMC Canton Realty,
Inc. (3)
3.11. Bylaws of AMC Canton Realty, Inc. (3)
3.12. Certificate of Incorporation, as amended, of Budco Theatres,
Inc. (3)
3.13. Bylaws of Budco Theatres, Inc. (3)
*11. Computation of Per Share Earnings
*27. Financial Data Schedule
(1) Incorporated by reference from Amendment No. 2 to AMCE's Registration
Statement on Form S-2 (File No. 33-51693) filed February 18, 1994
(2) Incorporated by reference from AMCE's Form 8-K (File No. 01-12429) dated
April 7, 1994
(3) Incorporated by reference from AMCE's Form S-1 (File No. 33-48586) filed
June 12, 1992, as amended
* - Filed herewith
(b)Reports on Form 8-K
No reports on Form 8-K were filed or required to be filed for the
thirteen weeks ended September 26, 1996.
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: November 6, 1996 /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and
Chief Financial Officer
Date: November 6, 1996 /s/ Richard L. Obert
Richard L. Obert
Senior Vice President-
Chief Accounting and
Information Officer
<PAGE>
EXHIBIT 11.
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share amounts)
Twenty-Six
Weeks Ended
09/26/96 09/28/95
PRIMARY EARNINGS PER SHARE
Net earnings $10,392 $15,032
Preferred dividends (3,000) (3,500)
Net earnings for common shares $ 7,392 $11,532
Average shares for primary earnings per share:
Weighted average number of shares outstanding 17,261 16,500
Stock options whose effect is dilutive 273 242
Total shares outstanding 17,534 16,742
Primary earnings per share $0.42 $0.69
FULLY DILUTED EARNINGS PER SHARE
Net earnings $10,392 $15,032
Preferred dividends (3,000) n/a
Net earnings for common shares $ 7,392 $15,032
Average shares for fully diluted
earnings per share:
Weighted average number of shares outstanding 17,261 16,500
Stock options whose effect is dilutive 465 335
Shares issuable upon conversion of
preferred stock n/a (2) 6,896 (1)
Total shares outstanding 17,726 23,731
Fully diluted earnings per share $ 0.42 $0.63
(1) Shares from conversion of preferred stock are included in the fully diluted
earnings per share calculation because they are dilutive.
(2) Shares from conversion of preferred stock are excluded from the fully
diluted earnings per share calculation because they are anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Financial Statements of AMC Entertainment Inc. as of and for the
thirteen weeks ended September 26, 1996, submitted 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> 3-MOS
<FISCAL-YEAR-END> APR-03-1997
<PERIOD-END> SEP-26-1996
<CASH> 9137
<SECURITIES> 0
<RECEIVABLES> 23824
<ALLOWANCES> 729
<INVENTORY> 0
<CURRENT-ASSETS> 46830
<PP&E> 690575
<DEPRECIATION> 263294
<TOTAL-ASSETS> 557478
<CURRENT-LIABILITIES> 102214
<BONDS> 250721
0
2216
<COMMON> 11818
<OTHER-SE> 152362
<TOTAL-LIABILITY-AND-EQUITY> 557478
<SALES> 111771
<TOTAL-REVENUES> 365502
<CGS> 18080
<TOTAL-COSTS> 291722
<OTHER-EXPENSES> 24414
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9761
<INCOME-PRETAX> 17392
<INCOME-TAX> 7000
<INCOME-CONTINUING> 10392
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10392
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
