UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended April 3, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(no fee required) for the transition period from _________________ to
______________________
Commission File Number 1-8747
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)
Registrant's telephone number, including area code: (816) 221-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, 66 2/3 cents par value American Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
$1.75 Cumulative Convertible
Preferred Stock, 66 2/3 cents par value American Stock Exchange, Inc.
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 and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the registrant's voting stock held by non-
affiliates as of May 19, 1997 computed by reference to the closing price
for such stock on the American Stock Exchange on such date, was
$95,287,321.
Number of Shares
Title of Each Class of Common Stock Outstanding as of May 19, 1997
Common Stock, 66 2/3 cents par value 6,804,296
Class B Stock, 66 2/3 cents par value 11,157,000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Stockholders' Report for the fiscal year ended
April 3, 1997 (the "Report") are incorporated by reference into Parts I
and II.
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
1997 FORM 10-K ANNUAL REPORT
PART I
PAGE NUMBER
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 11
PART III
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management 22
Item 13. Certain Relationships and Related Transactions 25
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 29
Signatures 30
<PAGE>
PART I
ITEM 1. BUSINESS
(a) General Development of Business
AMC Entertainment Inc. ("AMCE") is a holding company which, 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 and Portugal. 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").
AMCE's predecessor was founded in Kansas City, Missouri in 1920 by
the father of Mr. Stanley H. Durwood, the current Chairman of the Board
and Chief Executive Officer of AMCE and AMC. AMCE was incorporated under
the laws of the state of Delaware on June 13, 1983 and maintains its
principal executive offices located at 106 West 14th Street, Kansas City,
Missouri 64105-1977. Its telephone number at such address is (816) 221-
4000.
(b) Financial Information about Industry Segments
The Registrant operates exclusively in the motion picture exhibition
industry.
(c) Narrative Description of Business
General
The Company is one of the leading theatrical exhibition companies in
North America. In the fiscal year ended April 3, 1997, the Company's
revenues were $749,597,000. As of April 3, 1997, the Company operated
228 theatres with an aggregate of 1,957 screens located in 23 states, the
District of Columbia, Portugal and Japan. Approximately 61% of the
screens operated by the Company are located in Florida, California, Texas,
Missouri and Michigan and approximately 73% of the Company's domestic
screens are located in areas among the 20 largest "Areas of Dominant
Influence" (television market areas as defined by Arbitron Company).
The Company is an industry leader in the development and operation of
"megaplex" and "multiplex" theatres, primarily in large metropolitan
markets. Megaplex theatres are theatres having at least 14 screens with
predominantly stadium-style seating (seating with an elevation between
rows to provide unobstructed viewing). Multiplex theatres are theatres
generally without stadium-style seating and having less than 14 screens.
The Company believes that its strategy of developing megaplex theatres has
prompted the current theatrical exhibition industry trend in the United
States and Canada toward the development of larger theatre complexes.
This trend has accelerated the obsolescence of many existing movie
theatres by setting new standards for moviegoers, who have demonstrated
their preference for the more attractive surroundings, wider variety of
films, better customer services and more comfortable seating typical of
megaplexes.
In addition to providing a superior entertainment experience,
megaplex theatres realize economies of scale by serving more patrons from
common support facilities, thereby spreading costs over a higher revenue
base. The Company's megaplex theatres have consistently ranked among its
top grossing facilities on a per screen basis. During the fiscal year
ended April 3, 1997, attendance per screen at the Company's megaplex
theatres was 88,200 compared to 63,800 for the Company's multiplex
theatres. (During 1995, the last period for which data is available, the
theatrical exhibition industry in the United States averaged approximately
47,000 patrons per screen.) In addition, during the fiscal year ended
April 3, 1997, average revenue per patron at the Company's megaplex
theatres was $6.54 compared to $5.95 for its multiplex theatres, and
operating cash flow before rent of the Company's megaplex theatres was 37%
of the total revenues of such theatres, whereas operating cash flow before
rent of the Company's multiplex theatres was 33% of total revenues of such
theatres. As of April 3, 1997, 591 screens, or 30.2% of the Company's
screens, were in megaplex and multiplex theatres with 14 or more screens
and of these, 366 screens, or 18.7% of the Company's screens, were in
megaplex theatres. The average number of screens per theatre operated by
the Company is 8.6, compared to an average of 5.9 for the ten largest
North American theatrical exhibition companies (based on number of
screens) and 5.2 for all North American theatrical exhibition companies.
The Company continually upgrades its theatre circuit by opening new
theatres (primarily megaplex theatres), adding new screens to existing
theatres and selectively closing unprofitable theatres. Since April 1995,
the Company has opened 24 new theatres with 422 screens, representing
21.6% of its current number of screens, and has added 42 screens to
existing theatres. Of these 422 screens, 366 screens were in 18 megaplex
locations. Among these new theatres are the Company's first theatre in
Japan, the Canal City 13, in Fukuoka, and its first theatre in Portugal,
the Arrabida 20, in Porto. As of April 3, 1997, the Company had 21 new
theatres under construction having an aggregate of 514 screens and was
adding 44 screens to existing theatres. All of these theatres and screens
will be located in the United States.
Revenues for the Company are generated primarily from box office
admissions and theatre concessions sales, which accounted for 66% and 30%,
respectively, of fiscal 1997 revenues. The balance of the Company's
revenues are generated primarily by the Company's on-screen advertising
business, video games located in theatre lobbies and the rental of theatre
auditoriums.
Business Strategy
The Company intends to expand its theatre circuit primarily by
developing new theatres in major markets in the United States and select
international markets. New theatres will primarily be megaplex theatres
which will also be equipped with SONY Dynamic Digital SoundT (SDDST) and
AMC LoveSeatT style seating (plush, high-backed seats with retractable
armrests). Other amenities may include auditoriums with TORUST Compound
Curved Screens and High Impact Theatre SystemsT (HITST), which enhance
picture and sound quality, respectively.
The Company's strategy of establishing megaplex theatres enhances
attendance and concessions sales by enabling it to exhibit concurrently a
variety of motion pictures attractive to different segments of the movie-
going public. Megaplexes also allow the Company to match a particular
motion picture's attendance patterns to the appropriate auditorium size
(ranging from approximately 90 to 450 seats), thereby extending the run of
a motion picture and providing superior theatre economics. The Company
believes that megaplex theatres enhance its ability to license
commercially popular motion pictures and to access economically prime real
estate sites due to its desirability as an anchor tenant.
The Company believes that the megaplex format will create a new
replacement cycle for the industry. The new format raises moviegoers'
expectations by providing superior viewing lines, comfort, picture and
sound quality as well as increased choices of films and start times. The
Company believes that consumers will increasingly choose theatres based on
the quality of the movie-going experience rather than the location of the
theatre. As a result, the Company believes that older, smaller theatres
will become obsolete as the megaplex concept matures.
The Company believes that significant market opportunities exist for
development of modern megaplex and multiplex theatres in select
international markets. The theatrical exhibition business has become
increasingly global and box office receipts from international markets
approximate those of the U.S. market and are rising at a faster rate. In
addition, the production and distribution of feature films and demand for
American motion pictures is increasing in many countries. The Company
believes that its experience in developing and operating megaplex and
multiplex theatres provides it with a significant advantage in developing
megaplex and multiplex facilities in international markets and the Company
intends to utilize this experience, as well as its existing relationships
with domestic motion picture studios, to enter certain international
markets. The Company's strategy in these markets is to operate leased
theatres. Presently the Company's activities in international markets are
directed toward Japan, Portugal, Spain, Hong Kong and Canada, which
markets the Company believes are under screened.
The Company will consider partnerships or joint ventures, where
appropriate, to share risk and leverage resources. Such ventures may
include interests in projects that include restaurant, retail and other
concepts.
The Company continually monitors its theatres to determine their
performance and has improved the profitability of certain of its older
theatres by converting them to "dollar houses," which display second-run
movies and charge lower admission prices (ranging from $1.00 to $1.75).
It operated 12 such theatres with 68 screens as of April 3, 1997 (3.5% of
the Company's total screens). Other strategies for under performing
theatres include selling them to discount operators and closing them.
Divestiture strategies for theatres with longer leases include selling
them to other exhibitors, closing them or converting such theatres to
other uses and subleasing them.
Theatre Circuit
The following table sets forth information concerning additions and
dispositions of theatres and screens during, and the number of theatres
and screens operated as of the end of, the last five fiscal years. The
Company adds and disposes of theatres based on industry conditions and its
business strategy.
<TABLE>
<CAPTION>
Changes in Theatres Operated
Additions Dispositions Total
Theatres Operated
---------------------- ---------------------- ------------
- -----------
Fiscal Year Number of Number of Number of Number of Number of Number of
Ended Theatres Screens Theatres Screens Theatres Screens
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
April 1, 1993 6 72 16 72 243 1,617
March 31, 1994 2 15 9 29 236 1,603
March 30, 1995 3 53 7 26 232 1,630
March 28, 1996 7 150 13 61 226 1,719
April 3, 1997 17 314 15 76 228 1,957
-------- -------- -------- --------
Total 35 604 60 264
======== ======== ======== ========
</TABLE>
The following table provides greater detail with respect to the
Company's theatre circuit as of April 3, 1997.
<TABLE>
<CAPTION>
Screens
Total Total per Theatre
Domestic Screens Theatres 1-13 14 +
<S> <C> <C> <C> <C>
Florida 390 43 35 8
California 333 35 28 7
Texas 221 24 21 3
Missouri 127 13 10 3
Michigan 115 19 19 -
Arizona 114 13 11 2
Pennsylvania 105 15 15 -
Georgia 86 7 3 4
Colorado 65 9 9 -
Ohio 62 5 3 2
Virginia 62 8 7 1
New Jersey 50 8 8 -
Maryland 48 6 6 -
Oklahoma 22 3 3 -
North Carolina 22 1 - 1
Louisiana 20 3 3 -
Washington 20 3 3 -
New York 16 2 2 -
Massachusetts 10 2 2 -
District of Columbia 9 1 1 -
Nebraska 8 2 2 -
Illinois 8 1 1 -
Kansas 6 1 1 -
Delaware 5 2 2 -
----- ----- ----- -----
Total Domestic 1,924 226 195 31
===== ===== ===== =====
International
Japan 13 1 1 -
Portugal 20 1 - 1
----- ----- ----- -----
Total International 33 2 1 1
===== ===== ===== =====
Total Circuit 1,957 228 196 32
===== ===== ===== =====
</TABLE>
As of April 3, 1997, the Company operated 18 megaplex theatres having
an aggregate of 366 screens, representing 18.7% of its screens.
Of the Company's 228 theatres and 1,957 screens operated as of April
3, 1997, AMC was the owner or lessee of 223 theatres with 1,909 screens;
AMC Entertainment International, Inc., an AMCE subsidiary, leased one
theatre with 13 screens and its subsidiary, Actividades Multi-Cinemas E
Espectaculos, LDA, leased one theatre with 20 screens. AMC also operated
three theatres with 15 screens owned by a third party.
Film Licensing
The Company predominantly licenses "first-run" motion pictures from
distributors on a film-by-film and theatre-by-theatre basis. The Company
obtains these licenses either by negotiations directly with, or by
submitting bids to, distributors. Negotiations with distributors are
based on several factors, including theatre location, competition, season
of the year and motion picture content. Rental fees are paid by the
Company under a negotiated license and are made on either a "firm terms"
basis, where final terms are negotiated at the time of licensing, or are
adjusted subsequent to the exhibition of a motion picture in a process
known as "settlement." When motion pictures are licensed through a bidding
process, the distributor decides whether to accept bids on a previewed
basis or a non-previewed ("blind-bid") basis, subject to certain state law
requirements. In most cases, the Company licenses its motion pictures on
a previewed basis. When a film is bid on a previewed basis, exhibitors
are permitted to review the film before bidding, whereas they are not
permitted to do so when films are licensed on a non-previewed or "blind-
bid" basis.
Licenses entered into through both negotiated and bid processes
typically state that rental fees shall be based on the higher of a gross
receipts formula or a theatre admissions revenue sharing formula. Under a
gross receipts formula, the distributor receives a specified percentage of
box office receipts, with the percentages declining over the term of the
run. First-run motion picture rental fees are generally the greater of
(i) 70% of box office admissions, gradually declining to as low as 30%
over a period of four to seven weeks, and (ii) a specified percentage
(i.e. 90%) of the excess of box office receipts over a negotiated
allowance for theatre expenses (commonly known as a "90/10" clause).
Second-run motion picture rental fees typically begin at 35% of box office
admissions and often decline to 30% after the first week.
The Company may pay non-refundable guarantees of film rentals or make
advance payments of film rentals, or both, in order to obtain a license in
a negotiated or bid process, subject, in some cases, to a per capita
minimum license fee. Because of the settlement process, negotiated
licenses typically are more favorable to theatre operators with respect to
the percentage of admissions revenue ultimately paid to license a motion
picture. In the past few years, bidding has been used less frequently by
the industry. Presently, the Company licenses substantially all of its
films on a negotiated basis.
The Company's business is dependent upon the availability of
marketable motion pictures. There are several distributors which provide
a substantial portion of quality first-run motion pictures to the
exhibition industry. These include Buena Vista Pictures (Disney), Warner
Bros. Distribution, SONY Pictures Releasing (Columbia Pictures and Tri-
Star Pictures), Twentieth Century Fox, Universal Film Exchanges, Inc. and
Paramount Pictures. There are numerous other distributors and no single
distributor dominates the market. From year to year, the Company's
revenues attributable to individual distributors may vary significantly
depending upon the commercial success of each distributor's motion
pictures in any given year. In fiscal 1997, no single distributor
accounted for more than 12% of the motion pictures licensed by the Company
or for more than 21% of the Company's box office admissions. Poor
relationships with distributors, poor performance of motion pictures or
disruption in the production of motion pictures by the major studios
and/or independent producers may have an adverse effect upon the business
of the Company. Some of the major distributors have announced their
intention to reduce production of films.
Concessions
Concessions sales are the second largest source of revenue for the
Company after box office admissions. Concessions items include popcorn,
soft drinks, candy and other products. The Company's strategy emphasizes
prominent and appealing concessions counters designed for rapid service
and efficiency.
The Company's primary concessions products are various sizes of
popcorn, soft drinks, candy and hot dogs, all of which the Company sells
at each of its theatres. However, different varieties of candy and soft
drinks are offered at theatres based on preferences in that particular
geographic region. The Company has also implemented "combo-meals" for
children which offer a pre-selected assortment of concessions products.
Newer megaplex theatres are designed to have more concessions service
capacity per seat than multiplex theatres and typically have three
concessions stands, with each stand having multiple service stations to
make it easier to serve larger numbers of customers. In addition, the
primary concessions stand in such theatres generally features the "pass-
through" concept, which provides a staging area behind the concessions
equipment to prepare concessions products. This permits the concessionist
serving patrons to simply sell concessions items instead of also preparing
them, thus providing more rapid service to customers. Strategic placement
of large concessions stands within theatres heightens their visibility,
aids in reducing the length of concessions lines and improves traffic flow
around the concessions stands.
Theatrical Exhibition Industry Overview
Motion picture theatres are the primary initial distribution channel
for new motion picture releases and the Company believes that the
theatrical success of a motion picture is often the most important factor
in establishing its value in the cable television, videocassette and other
ancillary markets. The Company further believes that the emergence of new
motion picture distribution channels has not adversely affected attendance
at theatres and that these distribution channels do not provide an
experience comparable to that of viewing a movie in a theatre. The
Company believes that the public will continue to recognize the advantages
of viewing a movie on a large screen with superior audio and visual
quality, while enjoying a variety of concessions and sharing the
experience with a larger audience.
Annual domestic theatre attendance has averaged approximately one
billion persons since the early 1960s. In 1996, estimated domestic
attendance was 1.35 billion. Fluctuations and variances in year-to-year
attendance are primarily related to the overall popularity and supply of
motion pictures.
The theatrical exhibition industry in North America is comprised of
over 400 exhibitors, approximately 250 of which operate four or more
screens. Based on the listing of exhibitors in the NATO 1996-97
Encyclopedia of Exhibitions, as of May 1, 1996, the ten largest exhibitors
(in terms of number of screens) operated approximately 56% of the total
screens, with no one exhibitor operating more than 10% of the total
screens.
Competition
The Company competes against both local and national exhibitors, some
of which may have substantially greater financial resources than the
Company. There are over 400 companies competing in the domestic
theatrical exhibition industry. Industry participants vary substantially
in size, from small independent operators to large international chains.
As of May 1, 1996, the ten largest motion picture exhibition companies
operated approximately 56% of the total number of screens, based on the
listing of exhibitors in the NATO 1996-1997 Encyclopedia of Exhibitions.
The Company's theatres are subject to varying degrees of competition
in the geographic areas in which they operate. Competition is often
intense with respect to licensing motion pictures, attracting patrons and
finding new theatre sites. Theatres operated by national and regional
circuits and by smaller independent exhibitors compete aggressively with
the Company's theatres. The Company believes that the principal
competitive factors with respect to film licensing include licensing
terms, seating capacity and location and condition of an exhibitor's
theatres. The competition for patrons is dependent upon factors such as
the availability of popular motion pictures, the location and number of
theatres and screens in a market, the comfort and quality of the theatres
and pricing.
As with other exhibitors, the Company's smaller multiplex theatres
are subject to being rendered obsolete through the introduction of new,
competing megaplex theatres.
The theatrical exhibition industry also faces competition from other
distribution channels for filmed entertainment, such as cable television,
pay per view and home video systems, as well as from all other forms of
entertainment.
Regulatory Environment
The distribution of motion pictures is in large part regulated by
federal and state antitrust laws and has been the subject of numerous
antitrust cases. The consent decrees resulting from one of those cases,
to which the Company was not a party, have a material impact on the
industry and the Company. Those consent decrees bind certain major motion
picture distributors and require the motion pictures of such distributors
to be offered and licensed to exhibitors, including the Company, on a film-
by-film and theatre-by-theatre basis. Consequently, the Company cannot
assure itself of a supply of motion pictures by entering into long-term
arrangements with major distributors, but must compete for its licenses on
a film-by-film and theatre-by-theatre basis.
Bids for new motion picture releases are made, at the discretion of
the distributor (subject to state law requirements), either on a previewed
basis or blind-bid basis. Certain states have enacted laws regulating the
practice of blind-bidding. Management believes that it may be able to
make better business decisions with respect to film licensing if it is
able to preview motion pictures prior to bidding for them, and accordingly
believes that it may be less able to capitalize on its expertise in those
states which do not regulate blind-bidding.
The Company is subject to the Americans with Disabilities Act of 1990
("ADA") and believes that it is in substantial compliance with all current
applicable regulations relating to accommodations for the disabled. The
Company does not believe that compliance with ADA will have a material
adverse effect on the Company.
As the Company expands internationally, it becomes subject to
regulation by foreign governments. There are significant differences
between the theatrical exhibition industry regulatory environment in the
United States and in international markets. Regulatory barriers affecting
such matters as the size of theatres, the issuance of licenses and the
ownership of land may restrict market entry. Vertical integration of
production and exhibition companies in international markets may also have
an adverse effect on the Company's ability to license motion pictures for
international exhibition. The Company's initial attendance at its theatre
in Japan was negatively impacted by film distributors in Japan who
restricted the Company's ability to obtain film product until pproximately
two weeks after its competitors had received it. This delay in releasing
films to the Company generally has been eliminated. The Company's
international operations also face the additional risks of fluctuating
currency values. Quota systems used by some countries to protect their
domestic film industry may adversely affect revenues from theatres that
the Company develops in such markets. Such differences in industry
structure and regulatory and trade practices may adversely affect the
Company's ability to expand internationally or to operate at a profit
following such expansion.
Seasonality
The theatrical exhibition industry is seasonal in nature, with the
highest attendance and revenues occurring during the summer months and the
holiday seasons.
Employees
As of April 3, 1997, the Company had approximately 1,800 full-time
and 8,500 part-time employees. Approximately 11% of the part-time
employees were minors paid the minimum wage.
Fewer than one percent of the Company's employees, consisting
primarily of motion picture projectionists, are represented by a union,
the International Alliance of Theatrical Stagehand Employees and Motion
Picture Machine Operators. The Company believes that its relationship
with this union is satisfactory.
As an employer covered by the ADA, the Company must make reasonable
accommodations to the limitations of employees and qualified applicants
with disabilities, provided that such reasonable accommodations do not
pose an undue hardship on the operation of the Company's business. In
addition, many of the Company's employees are covered by various
government employment regulations, including minimum wage, overtime and
working conditions regulations.
ITEM 2. PROPERTIES
Of the 228 theatres operated by the Company as of April 3, 1997, 14
theatres with 157 screens were owned, 14 theatres with 135 screens were
leased pursuant to ground leases, 197 theatres with 1,650 screens were
leased pursuant to building leases and three theatres with 15 screens were
managed. The Company's leases generally have terms from 15 to 25 years,
with options to extend the lease for up to 20 additional years. The
leases typically require escalating minimum annual rent payments and
additional rent payments based on a percentage of the leased theatre's
revenue above a base amount and require the Company to pay for property
taxes, maintenance, insurance and certain other property-related expenses.
The Company leases its corporate headquarters, located in Kansas
City, Missouri. Regional theatre and film licensing offices are leased in
Los Angeles and Woodland Hills, California; Clearwater, Florida; and
Voorhees, New Jersey.
ITEM 3. LEGAL PROCEEDINGS
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 persons who were then directors of the Company, 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 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 to the Company by
American Associated Enterprises ("AAE"), a partnership beneficially owned
by Mr. Stanley H. Durwood and his children, 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
"Derivative Action Settlement Agreement") providing for, among other
things, the discharge and release of all claims against the defendants,
members of the Durwood family and the Company relating to such
transactions, the proposed settlement, a proposed merger between the
Company and Durwood, Inc. ("DI"), a proposed secondary offering by members
of the Durwood family and indemnification of defendants for their
expenses, except claims for fraud, misrepresentation or omissions in
connection with the secondary offering and claims relating to the
implementation of the settlement. The Derivative Action Settlement
Agreement provides, among other matters, (i) for the dissolution of AAE,
the merger of DI into AMCE and the sale, within 12 months thereafter, of
3,000,000 shares of Common Stock by members of the Durwood family in a
public underwritten secondary offering (which will only be made by means
of a prospectus), (ii) for the payment by certain of the defendants of an
aggregate of approximately $1.3 million to persons who were holders of
Common Stock on January 2, 1996 (other than the defendants, DI or members
of the Durwood family), (iii) for the nomination, for three annual
meetings, of two additional outside directors (initially, Messrs. William
T. Grant, II and John P. Mascotte (collectively with their replacements,
if any, the "New Independent Directors")) to serve on AMCE's Board of
Directors, whose biographical information has been furnished to
plaintiffs' counsel and which persons, to be nominated, must be serving on
the board of another public company or be a member of senior management of
a publicly held company or a privately held company with $50 million in
annual revenues, (iv) that Messrs. Stanley H. Durwood and Edward D.
Durwood will cause the other members of the Durwood family to vote their
shares with respect to the election and reelection of the New Independent
Directors in the same proportion as votes cast by all stockholders not
affiliated with AMCE, its directors and officers, (v) that the New
Independent Directors will have the ability to approve or disapprove (a)
any proposed transaction between AMCE and any of the Durwood family
members, except with respect to compensation issues relating to Mr.
Stanley H. Durwood or any other Durwood family member who is an officer of
AMCE, which are to be governed by existing AMCE Board procedures, and (b)
the hiring and compensation of any person related to Mr. Stanley H.
Durwood who is not an officer of AMCE, and (vi) that the New Independent
Directors, together with either Mr. Charles J. Egan, Jr. or Mr. Paul E.
Vardeman, are to have the ability to approve or disapprove all other
related-party transactions with all officers and 10% stockholders of AMCE.
The Derivative Action Settlement Agreement provides that AMCE will
pay the cost of providing notice of the settlement to its stockholders and
for the fees of the settlement administrator who will be responsible for
distributing the settlement amount to eligible stockholders.
The Derivative Action Settlement Agreement requires court approval
and is conditioned upon, among other things, the consummation of the
merger with DI. It is not anticipated that a hearing to approve the
Derivative Action Settlement Agreement will occur until the merger of DI
into AMCE is consummated because such merger is a condition of the
Derivative Action Settlement Agreement.
In addition, from time to time the Company is involved in various
legal proceedings arising from the ordinary course of its business
operations, such as personal injury claims, employment matters and
contractual disputes. The Company believes that its potential liability
with respect to proceedings currently pending is not material in the
aggregate to the Company's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There has been no submission of matters to a vote of security holders
during the fourteen weeks ended April 3, 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
With respect to the market for the Company's common stock, market
prices and stock ownership, reference is made to information contained on
page 64 of the Report, under the headings "Stock Listing/Symbol",
"Quarterly Common Stock Price Range" and "Stock Ownership," which
information is incorporated herein by reference.
AMCE's Certificate of Incorporation provides that holders of Common
Stock and Class B Stock shall receive, pro rata per share, such cash
dividends as may be declared from time to time by the AMCE Board of
Directors. Certain provisions of the Indenture on the 9 1/2% Senior
Subordinated Notes due 2009 and the Credit Facility govern the payment of
dividends on and purchase by AMCE of its capital stock. Presently, it is
not anticipated that the most restrictive of these provisions, set forth
in the Credit Facility, will affect the ability of AMCE to pay dividends
in the foreseeable future. Such restrictions are described in
"Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources" on page 31 of the Report,
which information is incorporated herein by reference. Except for a $1.14
per share dividend declared in connection with a recapitalization that
occurred in August 1992, AMCE has not declared a dividend on shares of
Common Stock or Class B Stock since fiscal 1989. Any payment of cash
dividends on Common Stock in the future will be at the discretion of the
Board of Directors and will depend upon such factors as earnings levels,
capital requirements, AMCE's financial condition and other factors deemed
relevant by the Board of Directors. Currently, AMCE does not contemplate
declaring or paying any dividends on its Common Stock or Class B Stock.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to information under the heading "Selected
Financial Data" on page 20 of the Report, which information is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to information under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
on pages 21 through 33 of the Report, which information is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated financial statements and notes thereto included on
pages 36 through 61 of the Report and "Statements of Operations by
Quarter" on page 62 of the Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
Years
Associated
with the
Name Age<F1> Positions
- ------- ------- ---------- Company<F1>
<S> <C> <C> <C>
Stanley H. Durwood 76 Chairman of the Board, Chief Executive 51<F3>
Officer and Director (AMCE and AMC)
Peter C. Brown 38 President (AMCE)<F4>; Executive Vice 5
President (AMC); Chief Financial
Officer and Director (AMCE and AMC)
Philip M. Singleton 50 President (AMC)<F4>; Executive 22<F3>
Vice President (AMCE); Chief Operating
Officer and Director (AMCE and AMC)
Charles J. Egan, Jr. 64 Director (AMCE) 10
William T. Grant, II 46 Director (AMCE) -<F2>
John P. Mascotte 57 Director (AMCE) -<F2>
Paul E. Vardeman 67 Director (AMCE) 13<F3>
Richard T. Walsh 43 Senior Vice President (AMC) 21<F3>
Richard J. King 48 Senior Vice President (AMC) 25<F3>
Rolando B. Rodriguez 37 Senior Vice President (AMC) 21<F3>
Richard L. Obert 57 Senior Vice President-Chief Accounting
and Information Officer (AMCE and AMC) 8
Charles P. Stilley 42 President (AMC Realty, Inc.) 15<F3>
Richard M. Fay 47 President (AMC Film Marketing) 1
- ---------------------
<FN>
<F1> As of April 3, 1997.
<F2> First elected to the AMCE Board on November 14, 1996.
<F3> Includes years of service with the predecessor of the Company.
<F4> Prior to January 10, 1997, Messrs. Brown and Singleton were serving as
Executive Vice Presidents of both AMCE and AMC. They were appointed
to their present positions as Presidents of AMCE and AMC, respectively,
on January 10, 1997.
</TABLE>
All directors are elected annually, and each holds office until his
successor has been duly elected and qualified or his earlier resignation
or removal. There are no family relationships between any Director and
any Executive Officer of the Company.
All current Executive Officers of the Company hold such offices at
the pleasure of the AMCE Board of Directors, subject, in the case of
Messrs. Stanley H. Durwood, Peter C. Brown, Philip M. Singleton and
Richard M. Fay, to rights under their respective employment agreements.
Mr. Stanley H. Durwood has served as a Director of AMCE from its
organization on June 14, 1983, and of AMC since August 2, 1968. Mr.
Durwood has served as Chairman of the Board of Directors of AMCE and AMC
since February 1986, and has served as Chief Executive Officer of AMCE
since June 1983, and of AMC since February 20, 1986. Mr. Durwood served
as President of AMCE (i) from June 1983 through February 20, 1986, (ii)
from May 1988 through June 1989, and (iii) from October 6, 1995 to January
10, 1997. Mr. Durwood served as President of AMC (i) from August 2, 1968
through February 20, 1986, (ii) from May 13, 1988 through November 8,
1990, and (iii) from October 6, 1995 to January 10, 1997. Mr. Durwood is
a graduate of Harvard University.
Mr. Peter C. Brown has served as a Director of AMCE and AMC since
November 12, 1992. Mr. Brown was appointed President of AMCE on January
10, 1997. Mr. Brown served as Executive Vice President of AMCE from
August 3, 1994 to January 10, 1997. Mr. Brown has served as Executive
Vice President of AMC since August 3, 1994, and as Chief Financial Officer
of AMCE and AMC since November 14, 1991. Mr. Brown served as Senior Vice
President of AMCE and AMC from November 14, 1991 until his appointment as
Executive Vice President in August 1994. Mr. Brown served as Treasurer of
AMCE and AMC from September 28, 1992 through September 19, 1994. Prior to
November 14, 1991, Mr. Brown served as a consultant to AMCE from October
1990 to October 1991. Mr. Brown is a graduate of the University of
Kansas.
Mr. Philip M. Singleton has served as a Director of AMCE and AMC
since November 12, 1992. Mr. Singleton was appointed President of AMC on
January 10, 1997. Mr. Singleton has served as Executive Vice President of
AMCE since August 3, 1994 and as Chief Operating Officer of AMCE and AMC
since November 14, 1991. Mr. Singleton served as Executive Vice President
of AMC from August 3, 1994 to January 10, 1997. Mr. Singleton served as
Senior Vice President of AMCE and AMC from November 14, 1991 until his
appointment as Executive Vice President in August 1994. Prior to November
14, 1991, Mr. Singleton served as Vice President in charge of operations
for the Southeast Division of AMC from May 10, 1982. Mr. Singleton holds
an undergraduate degree from California State University, Sacramento, and
an M.B.A. degree from the University of South Florida.
Mr. Charles J. Egan, Jr., has served as a Director of AMCE since
October 30, 1986. Mr. Egan is Vice President of Hallmark Cards,
Incorporated, and was General Counsel of such company until December 31,
1996. Hallmark Cards, Incorporated is primarily engaged in the business
of greeting cards and related social expressions products, Crayola crayons
and the production of movies for television. Mr. Egan also serves as a
member of the Board of Trustees, Treasurer and Chairman of the Finance
Committee of the Kansas City Art Institute. Mr. Egan holds an A.B.
degree from Harvard University and an LL.B. degree from Columbia
University.
Mr. William T. Grant, II has served as a Director of AMCE since
November 14, 1996. Mr. Grant is Chairman of the Board, President, Chief
Executive Officer and a Director of LabOne, Inc. and Chairman of the
Board, Chief Executive Officer and a Director of Seafield Capital
Corporation. Mr. Grant served as President of Seafield Capital
Corporation from 1990 to 1993, at which time he became Chairman of the
Board of Seafield Capital Corporation. LabOne, Inc. provides risk
appraisal laboratory testing services to the insurance industries in the
United States and Canada and is a subsidiary of Seafield Capital
Corporation. Seafield Capital Corporation is a holding company whose
subsidiaries operate primarily in the healthcare and insurance services
areas. Mr. Grant also serves on the board of directors of Commerce
Bancshares, Inc., Kansas City Power & Light Company, Business Men's
Assurance Company of America and Response Oncology, Inc. Mr. Grant holds
a B.A. degree from the University of Kansas and an M.B.A. degree from
the Wharton School of Finance at the University of Pennsylvania.
Mr. John P. Mascotte has served as a Director of AMCE since November
14, 1996. Mr. Mascotte is Chairman of the Board of Johnson & Higgins of
Missouri, Inc., a privately held insurance broker. Mr. Mascotte is also a
consultant to the First District, African Methodist Episcopal Church and
was Chairman of the Heart of America 1996 United Way General Campaign.
Prior thereto, Mr. Mascotte served as Chairman of the Board and Chief
Executive Officer of The Continental Corporation, a large property-
casualty insurer. Mr. Mascotte also serves on the board of directors of
Hallmark Cards, Incorporated, Business Men's Assurance Company of America
and American Home Products Corporation. In addition, from 1983 until
1996, Mr. Mascotte served on the board of directors of Chemical Banking
Corporation. Mr. Mascotte holds B.S. degrees from St. Joseph's College,
Rensselaer, Indiana, and an LL.B. degree from the University of Virginia.
Mr. Mascotte is also a certified public accountant and a chartered life
underwriter.
Mr. Paul E. Vardeman has served as a Director of AMCE since June 14,
1983. Mr. Vardeman is a director, officer and shareholder of the law firm
of Polsinelli, White, Vardeman & Shalton, P.C., Kansas City, Missouri, and
has been associated with such law firm since 1982. Prior thereto, Mr.
Vardeman served as a Judge of the Circuit Court of Jackson County,
Missouri. Mr. Vardeman holds undergraduate and J.D. degrees from the
University of Missouri - Kansas City.
Mr. Richard T. Walsh has served as Senior Vice President in charge of
operations for the West Division of AMC since July 1, 1994. Previously,
Mr. Walsh served as Vice President in charge of operations for the Central
Division of AMC from June 10, 1992, and as Vice President in charge of
operations for the Midwest Division of AMC from December 1, 1988.
Mr. Richard J. King has served as Senior Vice President in charge of
operations for the Northeast Division of AMC since January 4, 1995.
Previously, Mr. King served as Vice President in charge of operations for
the Northeast Division of AMC from June 10, 1992, and as Vice President in
charge of operations for the Southwest Division of AMC from October 30,
1986.
Mr. Rolando B. Rodriguez has served as Senior Vice President in
charge of operations for the South Division of AMC since April 2, 1996.
Previously, Mr. Rodriguez served as Vice President and South Division
Operations Manager of AMC from July 1, 1994, as Assistant South Division
Operations Manager of AMC from February 12, 1993, as South Division Senior
Operations Manager from March 29, 1992, and as South Division Operations
Manager from August 6, 1989.
Mr. Richard L. Obert has served as Senior Vice President-Chief
Accounting and Information Officer of AMCE and AMC since November 9, 1995,
and prior thereto served as Vice President and Chief Accounting Officer of
AMCE and AMC from January 9, 1989.
Mr. Charles P. Stilley has served as President of AMC Realty, Inc.,
a wholly owned subsidiary of AMC, since February 9, 1993, and prior
thereto served as Senior Vice President of AMC Realty, Inc. from March 3,
1986.
Mr. Richard M. Fay has served as President-AMC Film Marketing, a
division of AMC, since September 8, 1995. Previously, Mr. Fay served as
Senior Vice President and Assistant General Sales Manager of Sony Pictures
from 1994 until he joined AMC. From 1991 to 1994, Mr. Fay served as Vice
President and Head Film Buyer for the eastern division of United Artists
Theatre Circuit, Inc.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors
From March 29, 1996 through November 13, 1996, Messrs. Charles J.
Egan, Jr. and Paul E. Vardeman received prorated annual cash compensation
of $20,000 each for their service as members of the Boards of AMCE and AMC
and $24,000 each for their service as members of the Audit Committee of
the Boards of AMCE and AMC. They also received $900 per hour for
attending meetings of (i) any board of directors on which they served,
(ii) the Audit Committee after the twelfth meeting during the fiscal year
and (iii) any other committee on which they served.
Effective November 14, 1996, each of AMCE's non-employee directors
receives an annual fee of $32,000 for service on the Board of Directors
and an additional $4,000 for each committee of the Board on which he
serves, and, in addition, receives $1,500 and $1,000, respectively, for
each Board and Board committee meeting which he attends.
For the fiscal year ended April 3, 1997, Messrs. Charles J. Egan,
Jr., William T. Grant, II, John P. Mascotte and Paul E. Vardeman received
$141,900, $64,000, $61,000 and $131,300, respectively, for their services.
The Board of Directors has also authorized that Messrs. Charles J.
Egan, Jr. and Paul E. Vardeman be paid reasonable compensation for their
services as members of a special committee ("the Special Committee")
appointed to consider a proposed merger of AMCE and DI. For fiscal year
ended April 3, 1997, Messrs. Charles J. Egan, Jr. and Paul E. Vardeman
each received $35,000 for their services related to the Special Committee.
Compensation of Management
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the
Company's Chief Executive Officer and each of the four other most highly
compensated Executive Officers of the Company (determined as of the end of
the last fiscal year and hereafter referred to as the "Named Executive
Officers") for the last three fiscal years ended April 3, 1997, March 28,
1996 and March 30, 1995, respectively.
<TABLE>
<CAPTION>
Summary Compensation Table*
Long-Term
Compensation
Awards-Securities
ANNUAL COMPENSATION Underlying
Fiscal Other Annual Options/ All Other
Name and Principal Position Year Salary Bonus Compensation<F1> SARs(#) Compensation<F2>
- ---------------------------- ------ ------- ------- -------------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Stanley H. Durwood 1997 $527,322 $ - N/A 65,000 $ -
Chief Executive Officer 1996 492,634 275,000 N/A - -
1995 452,088 108,949 N/A 22,500 -
Peter C. Brown 1997 271,364 25,500 N/A 4,500 4,976
Chief Financial Officer 1996 257,439 137,500 N/A - 4,726
1995 234,836 55,433 N/A 4,500 4,657
Philip M. Singleton 1997 303,125 28,500 N/A 4,500 5,003
Chief Operating Officer 1996 285,311 154,000 N/A - 4,686
1995 273,247 64,149 N/A 4,500 4,663
Richard T. Walsh 1997 223,073 41,545 N/A 2,250 4,964
Senior Vice President 1996 207,204 80,000 N/A 2,250 4,620
1995 200,855 35,500 217,112 - 63,464
Richard M. Fay 1997 294,369 32,650 N/A 2,250 1,464
President-AMC Film 1996 150,049 55,000 66,283 - -
Marketing 1995 - - - - -
</TABLE>
[FN]
<F1> N/A denotes not applicable. Fiscal 1996 includes a lump sum payment
of $50,000 paid to Mr. Richard M. Fay for costs associated with
relocation. Fiscal 1995 includes a lump sum payment and gross up of
taxes on moving expenses totaling $209,408 paid to Mr. Richard T.
Walsh. For the years presented, excluding Mr. Richard M. Fay in 1996
and Mr. Richard T. Walsh in 1995, perquisites and other personal
benefits did not exceed the lesser of $50,000 or 10% of total annual
salary and bonus.
<F2> For fiscal 1997, All Other Compensation includes AMC's contributions
under AMC's 401(k) Plan and Executive Savings Plan, both of which are
defined contribution plans, in the aggregate amount of $4,976 for Mr.
Peter C. Brown, $5,003 for Mr. Philip M. Singleton, $4,964 for Mr.
Richard T. Walsh and $1,464 for Mr. Richard M. Fay. For fiscal 1996,
All Other Compensation includes AMC's contributions to such plans in
the aggregate amount of $4,726 for Mr. Peter C. Brown, $4,686 for Mr.
Philip M. Singleton and $4,620 for Mr. Richard T. Walsh. For fiscal
1995, All Other Compensation includes AMC's contributions to two
defined contribution savings plans in the amount of $4,657 for Mr.
Peter C. Brown, $4,663 for Mr. Philip M. Singleton and $4,786 for Mr.
Richard T. Walsh. In addition, moving expense for Mr. Richard T.
Walsh is included in the amount of $58,678.
* As of April 3, 1997, the Named Executive Officers held performance
shares awards under the Company's 1994 Stock Option and Incentive
Plan (the "1994 Incentive Plan") entitling them to receive shares of
the Company's Common Stock at the end of a performance period from
the date of grant upon satisfaction of certain goals. See "Long Term
Incentive Plan". The number of shares issuable to each such person
(and the value of such shares as of April 3, 1997) under awards in
effect as of April 3, 1997 upon attainment of threshold, target and
maximum performance goals is as follows: Threshold - Mr. Stanley H.
Durwood - 30,000 shares ($596,250); Mr. Peter C. Brown - 6,000 shares
($119,250); Mr. Philip M. Singleton - 6,000 shares ($119,250); Mr.
Richard T. Walsh - 3,000 shares ($59,625); and Mr. Richard M. Fay -
2,000 shares ($39,750); Target - Mr. Stanley H. Durwood - 45,000
shares ($894,375); Mr. Peter C. Brown - 9,000 Shares ($178,875); Mr.
Philip M. Singleton - 9,000 shares ($178,875); Mr. Richard T. Walsh -
4,500 shares ($89,438); and Mr. Richard M. Fay - 3,000 shares
($59,625); Maximum - Mr. Stanley H. Durwood - 90,000 shares
($1,788,750); Mr. Peter C. Brown - 18,000 shares ($357,750); Mr.
Philip M. Singleton - 18,000 shares ($357,750); Mr. Richard T. Walsh
- 9,000 shares ($178,875); and Mr. Richard M. Fay - 6,000 shares
($119,250).
Option Grants
The following table provides certain information concerning
individual grants of stock options made during the last completed fiscal
year under the 1994 Incentive Plan to each of the Named Executive
Officers.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Number of % of Total
Securities Options/SARs Potential Realizable Value at
Underlying Granted to Assumed Annual Rates of
Options/ Employees Exercise or Stock Price Appreciation for
SARs in Fiscal Base Price Expiration Option Term<F2>
----------------------------
Name Granted<F1> Year ($/share) Date 5% ($) 10% ($)
- -------------- ------------ ------------ --------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stanley H. Durwood 42,500 41.16% $24.50 4/02/06 $654,837 $1,659,484
22,500 21.79% 26.375 5/15/06 373,208 945,788
Peter C. Brown 4,500 4.36% 26.375 5/15/06 74,642 189,158
Philip M. Singleton 4,500 4.36% 26.375 5/15/06 74,642 189,158
Richard T. Walsh 2,250 2.18% 26.375 5/15/06 37,321 94,579
Richard M. Fay 2,250 2.18% 18.50 11/07/06 26,178 66,340
</TABLE>
[FN]
<F1> The stock options granted during the fiscal year ended April 3, 1997
are eligible for exercise based upon a vesting schedule. After the
first anniversary of the grant date, 50% of the options will be
eligible for exercise. After the second anniversary of the grant
date, all options are fully vested. Vesting of options will
accelerate upon the optionee's death, disability or retirement, or
upon the optionee's termination of employment within one year after
the occurrence of certain change in control events. The Compensation
Committee of the Board of Directors may permit accelerated exercise
of options if certain extraordinary events occur, such as a merger or
liquidation of AMCE, the sale of substantially all of the assets of
AMCE, a subsidiary or a division, or a change in control of AMCE.
With the consent of the Compensation Committee, optionees may satisfy
tax withholding obligations by electing to have shares otherwise
issuable upon exercise of an option withheld.
<F2> These columns show the hypothetical gains of "option spreads" of the
outstanding options granted based on assumed annual compound stock
appreciation rates of 5% and 10% over the options' terms. The 5% and
10% assumed rates of appreciation are mandated by the rules of the
Securities and Exchange Commission (the "SEC") and do not represent
the Company's estimate or projections of the future prices of AMCE's
Common Stock.
Option Exercises and Holdings
The following table provides information with respect to the Named
Executive Officers concerning the exercise of options during the last
fiscal year and unexercised options held as of April 3, 1997.
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year End Option/SAR Values
Value of
Number of Unexercised
Securities Underlying In-The-Money
Unexercised Options/ Options/SARs at
Shares Acquired SARs at FY-End (#) FY-End($)<F1>
Name on Exercise Value Realized Exercisable Unexercisable Price Exercisable Unexercisable
(shares)
<S> <C> <C> <C> <C> <C> <C> <C>
Stanley H. Durwood - - - 22,500 $26.375 $ - $ -
21,250 21,250 24.50 - -
22,500 - 11.75 182,813 -
Peter C. Brown - - - 4,500 26.375 - -
4,500 - 11.75 36,563 -
112,500 37,500 9.250 1,195,313 398,438
Philip M. Singleton - - - 4,500 26.375 - -
4,500 - 11.75 36,563 -
112,500 37,500 9.250 1,195,313 398,438
Richard T. Walsh - - - 2,250 26.375 - -
1,125 1,125 14.50 6,047 6,047
22,500 7,500 9.375 236,250 78,750
Richard M. Fay - - - 2,250 18.50 - 3,094
</TABLE>
[FN]
<F1> Values for "in-the-money" outstanding options represent the positive
spread between the respective exercise prices of the outstanding
options and the value of AMCE's Common Stock as of April 3, 1997.
Long-Term Incentive Plan
The following table provides certain information concerning shares
("Performance Shares") issuable at the end of a performance period ending
April 2, 1998 (the "Performance Period") at Threshold, Target and Maximum
levels of performance under performance stock awards approved by the
Compensation Committee during the last completed fiscal year for each of
the Named Executive Officers.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Number <F1>
of Shares, Performance or
Units or Other Period Estimated Future Payout under
Other until Maturation Non-stock Price-Based Plans
Name Rights (#) or Payout Threshold(#) Target (#) Maximum (#)
<S> <C> <C> <C> <C> <C>
Stanley H. Durwood - - - - -
Peter C. Brown - - - - -
Philip M. Singleton - - - - -
Richard T. Walsh - - - - -
Richard M. Fay 6,000 2 years 2,000 3,000 6,000
</TABLE>
[FN]
<F1> Maximum number of shares issuable under awards made during the fiscal
year.
A participant's eligibility to receive up to one-half of the maximum
number of Performance Shares issuable under an award is based upon changes
in the "private market value per share" of AMCE's Common Stock ("PMVPS")
over the Performance Period. PMVPS is determined on a fully diluted basis
(assuming exercise of all outstanding shares of preferred stock, AMCE
Class B Stock, options and other rights to acquire shares of AMCE Common
Stock), based on a multiple of theatre EBITDA (theatre EBITDA is
consolidated EBITDA less National Cinema Network, Inc. EBITDA), plus the
book value of National Cinema Network, Inc., plus cash and equivalents,
investments and investments in other long-term assets, less corporate
borrowings, capital lease obligations and the carrying value of minority
interests. EBITDA is earnings before interest, taxes, depreciation and
amortization. National Cinema Network, Inc. is a subsidiary of AMCE.
A participant's eligibility to receive up to the remaining one-half
of the maximum number of Performance Shares issuable under an award is
based upon changes in "total return to stockholders" ("TRS"), which is
measured by increases in the market value of an investment in shares of
Common Stock, assuming reinvestment of any dividends received.
PMVPS and TRS are referred to individually and collectively herein as
"Performance Criterion" and "Performance Criteria," respectively.
Such Performance Criteria will be measured against changes in the
Standard & Poor's 500 Index ("S&P 500") over the Performance Period.
Required achievement levels over the Performance Period for both PMVPS and
TRS are as set forth below:
Maximum: 2,000 basis points higher than the percentage change in
the S&P 500 over the Performance Period;
Target: 750 basis points higher than the percentage change in the
S&P 500 over the Performance Period;
Threshold: No difference between the percentage change in the S&P 500
and the percentage change in the Performance Criterion
over the Performance Period.
Generally, no shares will be issued with respect to performance over
the Performance Period as measured by a Performance Criterion if such
performance does not at least meet the Threshold achievement level over
the Performance Period. If performance as so measured by a Performance
Criterion falls between the Threshold and Target achievement levels, the
number of Performance Shares issuable under an Award with respect to that
Performance Criterion will be determined to the nearest whole number of
shares, so that the actual Award will be at the same percentage between
the Threshold and Target award levels as the actual achievement level
falls between the Threshold and Target achievement levels. Similarly, if
performance falls between Target and Maximum achievement levels, the
number of Performance Shares will be determined to the nearest whole
number of shares, so that the actual award will be at the same percentage
between the Target and Maximum award levels as the actual achievement
level falls between the Target and Maximum levels. In no event will the
number of Performance Shares issuable under an award with respect to a
Performance Criterion exceed the number of Performance Shares issuable
upon attaining the Maximum achievement level over the Performance Period
with respect to such Performance Criterion.
The right to receive Performance Shares will be accelerated and such
Performance Shares issued, based on the achievement levels of the
Performance Criteria measured to the date of termination, in the event of
a participant's death, disability or retirement, or termination of
employment within one year after the occurrence of certain change of
control events. The Compensation Committee of AMCE's Board of Directors
may waive performance goals if certain extraordinary events occur, such as
a merger or liquidation of AMCE, the sale of substantially all of the
assets of AMCE, a subsidiary or a division, or a change in control of
AMCE.
With the consent of the Compensation Committee, a Grantee may satisfy
his tax withholding obligations by electing to have Performance Shares
otherwise issuable withheld.
Until Performance Shares are issued, participants have no dividend or
voting rights with respect to Performance Shares.
Defined Benefit Retirement and Supplemental Executive Retirement Plans
AMC sponsors a defined benefit retirement plan (the "Retirement
Plan") which provides benefits to certain employees of AMC and its
subsidiaries based upon years of credited service and the highest
consecutive five-year average annual remuneration for each participant.
For purposes of calculating benefits, average annual compensation is
limited by Section 401(a)(17) of the Internal Revenue Code (the "Code"),
and is based upon wages, salaries and other amounts paid to the employee
for personal services, excluding certain special compensation. A
participant earns a vested right to an accrued benefit upon completion of
five years of vesting service.
AMC also sponsors a Supplemental Executive Retirement Plan to provide
the same level of retirement benefits that would have been provided under
the Retirement Plan had the federal tax law not been changed in the
Omnibus Budget Reconciliation Act of 1993, which reduced the amount of
compensation which can be taken into account in a qualified retirement
plan from $235,840 (in 1993), the old limit, to $160,000 (in 1997).
The following table shows the total estimated annual pension benefits
(without regard to minimum benefits) payable to a covered participant
under AMC's Retirement Plan and the Supplemental Executive Retirement
Plan, assuming retirement in calendar 1997 at age 65 payable in the form
of a single life annuity. The benefits are not subject to any deduction
for Social Security or other offset amounts. The following table assumes
the old limit would have been increased to $260,000 in 1997.
<TABLE>
<CAPTION>
Highest Consecutive
Five year Average
Annual Compensation Years of Credited Service
<S> <C> <C> <C> <C> <C>
15 20 25 30 35
$125,000 $17,716 $23,621 $29,527 $35,432 $41,337
150,000 21,466 28,621 35,777 42,932 50,087
175,000 25,216 33,621 42,027 50,432 58,837
200,000 28,966 38,621 48,277 57,932 67,587
225,000 32,716 43,621 54,527 65,432 76,337
260,000 37,966 50,621 63,277 75,932 88,587
</TABLE>
As of April 3, 1997, the years of credited service under the
Retirement Plan for each of the Named Executive Officers were: Mr. Peter
C. Brown, 6 years, Mr. Philip M. Singleton, 23 years, Mr. Richard T.
Walsh, 22 years; and Mr. Richard M. Fay, one year. The final amount
distributed to Mr. Stanley H. Durwood in fiscal 1995 from the Company's
Retirement Plan was $42,067, and was not included in the Summary
Compensation Table. In addition, the benefit Mr. Stanley H. Durwood
accrued under the Supplemental Executive Retirement Plan in fiscal 1997
was $76,590 and is not included in the Summary Compensation Table.
AMC established a Retirement Enhancement Plan ("REP") with an
effective date of March 29, 1996 for the benefit of officers who from time
to time may be designated as eligible participants therein by the Board of
Directors. The REP is a non-qualified deferred compensation plan designed
to provide an unfunded retirement benefit to an eligible participant in an
amount equal to (i) sixty percent (60%) of his or her average compensation
(including paid and deferred incentive compensation) during the last three
full years of employment, less (ii) the sum of (A) such participant's
benefits under the Retirement Plan and Social Security, and (B) the amount
of a straight life annuity commencing at the participant's normal
retirement date attributable to AMC's contributions under the Supplemental
Executive Retirement Plan, the 401(k) Savings Plan, the Non-qualified
Deferred Compensation Plan and the Executive Savings Plan. The base
amount in clause (i) will be reduced on a pro rata basis if the
participant completes fewer than twenty-five (25) years of service. The
REP benefit vests upon the Participant's attainment of age 55 or
completion of fifteen (15) years of service, whichever is later, and may
commence to a vested participant retiring on or after age 55 (who has
participated in the plan for at least 5 years) on an actuarially reduced
basis (6 2/3% for each of the first five years by which commencement
precedes age 65 and an additional 3 1/3% for each year by which
commencement precedes age 60). Benefits commence at a participant's
normal retirement date (i.e., the later of age 65 or the participant's
completion of five years of service with AMC) whether or not the
participant continues to be employed by AMC. The accrued benefit payable
upon total and permanent disability is not reduced by reason of early
commencement. Participants become fully vested in their rights under the
REP if their employment is terminated without cause or as a result of a
change in control, as defined in the REP. No death, disability or
retirement benefit is payable prior to a participant's early retirement
date or prior to the date any severance payments to which the participant
is entitled cease.
Presently, Mr. Stanley H. Durwood, Mr. Peter C. Brown and Mr. Philip
M. Singleton have been designated as eligible to participate in the REP.
The amount payable to Mr. Durwood with respect to fiscal 1997 under the
REP is $345,000. The estimated annual amounts that Mr. Brown and Mr.
Singleton will be eligible to receive under the REP at age 65 are $207,000
and $199,000, respectively; such amounts are based on certain assumptions
respecting their future compensation amounts and the amounts of AMC
contributions under other plans. Actual amounts received by such
individuals under the REP may be different than those estimated.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
Mr. Stanley H. Durwood has an employment agreement with AMCE and AMC
dated January 26, 1996 retaining him as Chairman and Chief Executive
Officer and President. It provides for an annual base salary of no less
than $500,000, plus payments and awards under AMC's Executive Incentive
Program ("EIP"), the 1994 Incentive Plan and other bonus plans in effect
for Executive Officers at a level reflecting his position, plus such other
amounts as may be paid under any other compensatory arrangement as
determined in the sole discretion of the Compensation Committee. Mr.
Durwood's current annual base salary is $540,000. The Company has also
agreed to use its best efforts to provide Mr. Durwood up to $5,000,000 in
life insurance and to pay the premiums thereon and taxes resulting from
such payment. Mr. Durwood's employment agreement has a term of three
years and is automatically extended one year on its anniversary date,
January 26, so that as of such date each year the agreement has a three-
year term. The employment agreement is terminable without severance if he
engages in intentional misconduct or a knowing violation of law or
breaches his duty of loyalty to the Company. The agreement also is
terminable (i) by Mr. Durwood, in the event of the Company's breach, and
(ii) by the Company, without cause or in the event of Mr. Durwood's death
or disability, in each case with severance payments equal to three times
the sum of his annual base salary in effect at the time of termination
plus the average of annual incentive or discretionary cash bonuses paid
during the three fiscal years preceding the year of termination. The
Company may elect to pay such severance payments in monthly installments
over a period of three years or in a lump sum after discounting such
amount to its then present value. The aggregate amount payable under this
employment agreement, assuming termination with severance occurred as of
April 3, 1997, was approximately $1,763,000.
Messrs. Peter C. Brown and Philip M. Singleton each have employment
agreements with AMC dated September 26, 1994, providing for annual base
salaries of no less than $227,000 and $266,000, respectively, and bonuses
resulting from the EIP or other bonus arrangement, if any, as determined
from time to time at the sole discretion of the Compensation Committee
upon the recommendation of the Chairman of the Board. The current annual
base salaries of Messrs. Brown and Singleton are $293,000 and $312,000,
respectively. Each employment agreement has a term of two years. On each
September 27, commencing in 1995, one year shall be added to the term of
each employment agreement, so that each employment agreement shall always
have a two-year term as of each anniversary date. Each employment
agreement terminates without severance upon such employee's resignation,
death or his disability as defined in his employment agreement, or upon
AMC's good faith determination that such employee has been dishonest or
has committed a breach of trust respecting AMC. AMC may terminate each
employment agreement at any time, with severance payments in an amount
equal to twice the annual base salary of such employee on the date of
termination. Each employee may terminate his employment agreement if Mr.
Stanley H. Durwood shall fail to control AMC as defined in the employment
agreement and receive severance payments in an amount equal to twice his
annual base salary on the date of termination. AMC may elect to pay any
severance payments in a lump sum after discounting such amount to its then
present value, or over a two-year period. The aggregate value of all
severance benefits to be paid to such employee shall not exceed 299% of
such employee's "base amount" as defined in the Code for the five-year
period immediately preceding the date of termination. The aggregate
amount payable under these employment agreements, assuming termination by
reason of a change of control and payment in a lump sum as of April 3,
1997, was approximately $1,110,000.
Mr. Richard M. Fay has an employment agreement with AMC dated April
16, 1996 which provides for an annual base salary of $275,000 and, in the
first year of the employment agreement, an additional $50,000 for costs
associated with relocation. Mr. Fay's current annual base salary is
$280,000. Mr. Fay is also eligible to receive payments resulting from the
EIP or other bonus arrangement, if any, as determined from time to time in
the sole discretion of the Compensation Committee of the Board of
Directors of AMC upon the recommendation of the Chief Executive Officer of
AMC. The employment agreement has a term of three years, from September
8, 1995 through September 7, 1998. The employment agreement terminates
without severance upon Mr. Fay's resignation, death or disability as
defined in his employment agreement, or upon AMC's good faith
determination that Mr. Fay has been dishonest or has committed a breach of
trust respecting AMC. AMC may terminate the employment agreement at any
time, with severance payments in an amount equal to, at AMC's option,
either (i) Mr. Fay's base salary per month in effect at the time of
termination, payable over the remaining term of his employment, or (ii)
the net present value of the monthly payments described in (i) above,
payable within 30 days of the date of termination. Any severance payable
to Mr. Fay shall be reduced by any wages, compensation or income, cash or
otherwise, received by Mr. Fay from sources other than AMC during the
remaining term of his employment agreement following the date of
termination. The aggregate amount payable under this employment
agreement, assuming termination with severance occurred as of April 3,
1997, was approximately $372,000.
As permitted by the 1994 Incentive Plan, stock options and
Performance Share awards granted to participants thereunder provide for
acceleration upon the termination of employment within one year after the
occurrence of certain change in control events, whether such termination
is voluntary or involuntary, or with or without cause. See " Option/SAR
Grants in Last Fiscal Year" and " Long-Term Incentive Plans Awards in Last
Fiscal Year." In addition, the Compensation Committee may permit
acceleration upon the occurrence of certain extraordinary transactions
which may not constitute a change of control.
AMC maintains a severance pay plan for full-time salaried
nonbargaining employees with at least 90 days of service. For an eligible
employee who is subject to the Fair Labor Standards Act ("FLSA") overtime
pay requirements (a "nonexempt eligible employee"), the plan provides for
severance pay in the case of involuntary termination of employment due to
layoff of the greater of two week's basic pay or one week's basic pay
multiplied by the employee's full years of service up to no more than
twelve weeks' basic pay. There is no severance pay for a voluntary
termination, unless up to two weeks' pay is authorized in lieu of notice.
There is no severance pay for an involuntary termination due to an
employee's misconduct. Only two weeks' severance pay is paid for an
involuntary termination due to substandard performance. For an eligible
employee who is exempt from the FLSA overtime pay requirements, severance
pay is discretionary (at the Department Head/Supervisor level), but will
not be less than the amount that would be paid to a nonexempt eligible
employee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 19,
1997, with respect to beneficial owners of five percent or more of any
class of the Company's voting securities:
Name and Address Number of Shares Percent
Title of Class of Beneficial Owner Beneficially Owned of Class
Common Stock Durwood, Inc. <F1> 2,641,951<F2> 38.8%<F2>
106 West 14th Street
Kansas City, MO 64105
Stanley H. Durwood <F1> 2,697,101<F2><F3> 39.3%
<F2>
106 West 14th Street
Kansas City, MO 64105
Brian H. Durwood <F1> 2,641,951<F2> 38.8%<F2>
655 N.W. Altishan Place
Beaverton, OR 97006
Edward D. Durwood <F1> 2,641,951<F2> 38.8%<F2>
3001 West 68th Street
Shawnee Mission, KS 66208
Peter J. Durwood <F1> 2,641,951<F2> 38.8%<F2>
666 West End Avenue
New York, NY 10025
Thomas A. Durwood <F1> 2,641,951<F2> 38.8%<F2>
P. O. Box 7208
Rancho Santa Fe, CA 92067
Elissa D. Grodin <F1> 2,641,951<F2> 38.8%<F2>
187 Chestnut Hill Road
Wilton, CT 06897
Carol D. Journagan <F1> 2,641,951<F2> 38.8%<F2>
1323 Granite Creek Drive
Blue Springs, MO 64015
Vanguard Explorer Fund, Inc. 482,720<F4> 6.6%<F4>
c/o The Vanguard Group of
Investment Companies
P.O Box 2600
Valley Forge, PA 19482-2600
Wellington Management
Company, LLP 658,260<F5> 8.8%<F5>
75 State Street
Boston, MA 02109
Class B Stock Durwood, Inc. <F1> 11,157,000<F2> 100%
106 West 14th Street
Kansas City, MO 64105
[FN]
<F1> The Revocable Trust Agreement of Mr. Stanley H. Durwood dated August
14, 1989, as amended (the "1989 Trust") and the 1992 Durwood, Inc.
Voting Trust dated December 12, 1992 (the "1992 Trust") hold
approximately 75% of the voting power of the outstanding capital
stock of DI. Record ownership of the DI shares is in the name of the
1992 Trust, which has issued its voting trust certificates to the
1989 Trust. American Associated Enterprises ("AAE"), a Missouri
limited partnership of which Mr. Stanley H. Durwood is the limited
partner and his six children are the general partners, holds
approximately 25% of the voting power in DI. Mr. Stanley H. Durwood
is the sole director of DI and is Chairman of the Board, Chief
Executive Officer and a Director of AMCE and AMC.
Mr. Stanley H. Durwood is the sole acting trustee of the 1989 Trust
and 1992 Trust and as such has sole voting power over the shares of
AMCE stock held by DI; the named successor trustees under Mr. Stanley
H. Durwood's trusts are Messrs. Charles J. Egan, Jr., a director of
AMCE, and Raymond F. Beagle, general counsel to the Company. Under
the terms of his revocable voting trust (the 1992 Trust), Mr. Stanley
H. Durwood has all voting powers with respect to shares held therein
during his lifetime. Thereafter, all voting rights with respect to
such shares vest in his successor trustees and any additional
trustees whom they might appoint, who shall exercise such rights by
majority vote. Unless revoked by Mr. Stanley H. Durwood or otherwise
terminated or extended in accordance with its terms, the 1992 Trust
will terminate in 2030.
Mr. Stanley H. Durwood may be deemed to share investment power with
his children (the "Durwood Children") with respect to such shares
held of record by DI. As reported in the Schedule 13Ds filed by Mr.
Stanley H. Durwood and DI and by the Durwood Children and AAE, Mr.
Stanley H. Durwood and the Durwood Children (the "Durwood Family
Stockholders") have entered into an agreement (the "Durwood Family
Settlement Agreement") expressing their intention to pursue certain
transactions to dissolve AAE and to cause shares of AMCE held by DI
to be distributed to members of the Durwood family through the merger
of DI into AMCE (the "Merger"). Thereafter, the Durwood Family
Stockholders intend to sell 3,000,000 shares of Common Stock in a
secondary offering, which will be made only by means of a prospectus.
If the proposed transactions are consummated, Mr. Stanley H. Durwood
will retain approximately 4.5 million shares (or 100%) of Class B
Stock and the Durwood Children will retain approximately 6.3 million
shares of Common Stock, or 46.6% of the shares of that class (33.1%
assuming full conversion of the Company's $1.75 Cumulative
Convertible Preferred Stock (the "Convertible Preferred Stock")).
Based on voting shares outstanding as of May 19, 1997, the shares of
Class B to be retained by Mr. Stanley H. Durwood will represent 77.0%
of the combined voting power of AMCE's voting stock (70.4% assuming
full conversion of Convertible Preferred Stock). However, provisions
of the Durwood Family Settlement Agreement could result in an
adjustment (the "Share Adjustment") pursuant to which Mr. Stanley H.
Durwood would deliver additional shares of stock to the Durwood
Children. Mr. Stanley H. Durwood has agreed with the Durwood
Children that if the price per share to the public of the 2.5 million
shares of Common Stock proposed to be sold by the Durwood Children in
a secondary offering following the Merger is less than $18, Mr.
Stanley H. Durwood will pay the Durwood Children the difference
between such sale price and $18 (net of applicable underwriting
commissions), up to $20 million in aggregate amount, in shares of
Common Stock, as an adjustment to the original allocation of shares
to be received by the Durwood Children in the Merger. Mr. Stanley H.
Durwood's holdings will diminish and the Durwood Children's holdings
will increase if the Durwood Children acquire additional shares under
such Share Adjustment. However, based on the number of shares of
Common Stock and Class B Stock outstanding as of May 19, 1997, the
Share Adjustment should not result in Mr. Stanley H. Durwood owning
shares with less than 50% of the combined voting power of the
outstanding stock of the Company unless the Durwood Family
Stockholders determine to proceed with a secondary offering of the
family's shares at a price to the public of less than approximately
$6.95 per share. Mr. Stanley H. Durwood's voting control also will
be diluted if he is obligated to dispose of shares to honor tax and
other indemnity obligations made to the Durwood Children and AMCE in
connection with the Merger and other related transactions, or if
additional shares of Common Stock are issued under AMCE's existing
employee benefit plans.
<F2> The shares of Class B Stock owned of record by DI and beneficially
owned by members of the Durwood family as indicated in footnote <F1>
above are convertible into Common Stock on a share-for-share basis.
The number and percentage of shares of Common Stock shown as
beneficially owned do not give effect to the conversion option.
<F3> The shares of Common Stock shown as beneficially owned by Mr.
Stanley H. Durwood also included 150 shares owned by him directly and
55,000 shares subject to presently exercisable stock options.
<F4> This is the number of shares of Common Stock that would be obtained
upon conversion of Convertible Preferred Stock reported as owned by
Vanguard Explorer Fund, Inc. in its Schedule 13G dated February 10,
1997. Vanguard Explorer Fund, Inc. reported that it has sole power
to vote such shares and shared power to dispose of them.
<F5> This is the number of shares of Common Stock reported as owned by
Wellington Management Company, LLP in its Schedule 13G dated February
12, 1997, which number, AMCE has been supplementally advised,
represents the number of shares that would be obtained upon
conversion of Convertible Preferred Stock beneficially owned by
Wellington Management Company, LLP. Of these shares (which, based on
the report, are believed to include the shares owned by Vanguard
Explorer Fund, Inc. referred to in note (4)), Wellington Management
Company, LLP reports that it has shared voting power with respect to
37,584 shares and shared dispositive power with respect to 658,260
shares.
Beneficial Ownership By Directors and Officers
The following table sets forth certain information as of May 19,
1997, with respect to beneficial ownership by Directors and Executive
Officers of the Company's Common Stock and Class B Stock. The amounts set
forth below include the vested portion of 454,750 shares of Common Stock
subject to options under the Company's 1983 and 1984 Stock Option Plan and
the 1994 Incentive Plan held by Executive Officers. Unless otherwise
indicated, the persons named are believed to have sole voting and
investment power over the shares shown as beneficially owned by them.
Name of Beneficial Amount and Nature Percent
Title of Class Owner of Beneficial Ownership of Class
Common Stock Stanley H. Durwood 2,697,101<F1><F2> 39.3%
Peter C. Brown 156,750<F2> 2.3%
Philip M. Singleton 172,750<F2> 2.5%
Richard T. Walsh 33,425<F2> *
John P. Mascotte 1,000 *
Paul E. Vardeman 300 *
All Directors and
Executive Officers
as a group (13 persons,
including the
individuals named above) 3,116,119<F2> 42.9%
Class B Stock Stanley H. Durwood 11,157,000<F1> 100.0%
____________________________________
*Less than one percent.
[FN]
<F1> See Notes 1 and 2 under "Security Ownership of Certain Beneficial
Owners and Management". Mr. Stanley H. Durwood has sole voting power
over the shares held by DI but may be deemed to share investment power
with respect to such shares with his children. The shares of Common
Stock shown as beneficially owned by Mr. Stanley H. Durwood also
include 150 shares owned by him directly and 55,000 shares subject to
presently exercisable stock options.
(2) Includes shares subject to presently exercisable options to purchase
Common Stock under the Company's 1983 and 1984 Stock Option Plans and the
1994 Incentive Plan, as follows: Mr. Stanley H. Durwood - 55,000 shares;
Mr. Peter C. Brown - 156,750 shares; Mr. Philip M. Singleton - 156,750
shares; and Mr. Richard T. Walsh - 33,375 shares and all executive
officers as a group - 454,750 shares.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Executive Officers and Directors, and persons who own more than
10% of the Company's Common Stock and Convertible Preferred Stock, to file
reports of ownership and changes in ownership with the SEC and the
American and Pacific Stock Exchanges. Executive Officers, Directors and
greater-than-10% beneficial owners are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the
Company believes that during fiscal 1997 its Executive Officers, Directors
and greater-than-10% beneficial owners complied with all Section 16(a)
filing requirements applicable to them.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Transactions
Since their formation, AMCE and AMC have been members of an
affiliated group of companies (the "DI affiliated group") beneficially
owned by Mr. Stanley H. Durwood and members of his family. Mr. Stanley H.
Durwood is President, Treasurer and the sole Director of DI and Chairman
of the Board, Chief Executive Officer and a Director of AMCE and AMC.
There have been transactions involving AMCE or its subsidiaries and the DI
affiliated group in prior years. AMCE intends to ensure that all
transactions with DI or other related parties are fair, reasonable and in
the best interests of the Company. In that regard, the Audit Committee of
the Board of Directors of AMCE reviews all material proposed transactions
between the Company and DI or other related parties to determine that, in
their best business judgment, such transactions meet that standard. The
Company believes that all transactions described below with DI or other
related parties are on terms at least as favorable to the Company as could
have been obtained from an unaffiliated third party. The Audit Committee
consists of Messrs. Egan, Grant and Mascotte, none of whom are officers or
employees of the Company nor stockholders, directors, officers or
employees of DI. Set forth below is a description of significant
transactions which have occurred since March 29, 1996 or involve
receivables that remain outstanding as of April 3, 1997.
The Merger
General. Upon the recommendation of a special committee of the Board
of Directors consisting of Messrs. Charles J. Egan, Jr. and Paul E.
Vardeman, the New Independent Directors and the Board of Directors have
approved the Merger Agreement providing for the Merger of the Company and
DI. The Merger has been sought by members of the Durwood Family
Stockholders so that they may hold their interests in the Company directly
instead of indirectly through DI and AAE. Consummation of the Merger also
has been made a condition of settlement of the Derivative Action to which
the Company and certain of its current and former directors are parties.
See "Business of the Company - Legal Proceedings."
Prior to consummation of the Merger, DI will convert 6,141,343 shares
of Class Stock into an equivalent number of shares of Common Stock.
Concurrent with the consummation of the Merger (and as a condition
thereto), AAE will be liquidated. After giving effect to the Merger and
liquidation of AAE, there will be issued and outstanding 5,015,657 shares
of Class B Stock, representing (based on shares outstanding as of May 19,
1997) 79.5% of the voting interest in the Company, assuming no conversion
of Convertible Preferred Stock, and 73.1% of the voting interest in the
Company, assuming full conversion of Convertible Preferred Stock into
Common Stock, all of which will be beneficially owned by Mr. Stanley H.
Durwood, and (based on the number of such shares outstanding as of May 19,
1997) 12,945,639 shares of Common Stock, of which 8,767,223, or 67.7% of
the outstanding shares of Common Stock, will be beneficially owned by the
Durwood Children. Based on shares outstanding as of May 19, 1997, the
shares of Common Stock to be held by the Durwood Children after the Merger
will represent 13.9% of the voting interest in the Company, assuming no
conversion of Convertible Preferred Stock, and 12.8% of the voting
interest in the Company, assuming full conversion of Convertible Preferred
Stock.
Prior to the Effective Time of the Merger, all of DI's assets (other
than its equity interest in the Company), consisting primarily of life
insurance policies, cash and notes of Durwood family members and a former
officer of the Company, will be contributed to Delta Properties, Inc.
("Delta"), a wholly-owned subsidiary of DI. In addition, DI's other
subsidiaries, other than the Company and its subsidiaries, have been
merged into Delta and Delta has agreed to assume DI's liabilities.
Delta's stock will be distributed to DI's shareholders so that at the
Effective Time DI's sole assets will consist of stock of the Company and
its beneficial interest in certain tax credits and operating loss
carryforwards. (As a result of certain provisions of the Merger Agreement
and related agreements described below, the Company will not realize any
benefit from such tax credits and operating loss carryforwards).
If the Merger occurs, Mr. Stanley H. Durwood will indemnify the
Company for all losses resulting from any breach by DI of the Merger
Agreement or resulting from any liability of DI and for all taxes
attributable to DI prior to the Effective Time and all losses in
connection therewith. If the Merger does not occur, subject to certain
limitations, Mr. Stanley H. Durwood and Delta will indemnify the Company
against losses resulting from the breach by DI of the Merger Agreement.
See "The Indemnification Agreement."
Under the Merger Agreement, the Company will be responsible for
paying 50% of its costs in connection with the Merger; the aggregate costs
of the Company and DI are estimated to be approximately $2 million. If
the Merger occurs, Mr. Stanley H. Durwood and Delta have agreed, subject
to certain limitations, to indemnify the Company for all of DI's Merger
expenses which are not paid prior to the Effective Time and for 50% of the
Company's expenses in connection with the Merger. This obligation of Mr.
Stanley H. Durwood may be offset by certain Credit Amounts (as defined
below under "The Indemnification Agreement") resulting from the
realization by the Company of tax benefits from the utilization of certain
tax credits and operating loss carryforwards of DI. See "The
Indemnification Agreement." If the Merger is not consummated for any
reason (other than as a result of certain terminations by the Company's
Board), DI will be responsible for all of its expenses and the Company's
expenses in the Merger. If the Merger is not consummated as a result of
certain terminations by the Company's Board of Directors, DI will be
responsible for all of its expenses and 50% of the Company's expenses in
the Merger. Mr. Stanley H. Durwood and Delta have agreed to indemnify the
Company for any breach by DI of such obligation described in the preceding
two sentences.
As promptly as practicable after March 31, 2000, the Company will pay
Mr. Stanley H. Durwood an amount equal to any Credit Amounts which have
not been used to offset various of his obligations to the Company under
the Stock Agreement, the Indemnification Agreement and the Registration
Agreement, as such terms are defined below. If such benefits are realized
after such date, the related Credit Amounts will be paid to Mr. Stanley H.
Durwood when they are realized. See "The Indemnification Agreement; The
Stock Agreement; and The Registration Agreement; Secondary Offering."
For a period of three years after the Merger, the Durwood Children
have agreed to give an irrevocable proxy to the Secretary and each
Assistant Secretary of the Company to vote their shares of Common Stock in
the election of directors for each candidate in the same proportionate
manner as the aggregate votes cast in such elections by other holders of
Common Stock not affiliated with the Company, its directors and officers.
See "The Stock Agreement."
If the Merger Agreement is not approved by the holders of a majority
of shares of Common Stock present or represented by proxy and voting at
the special meeting of stockholders to be held to consider the Merger,
other than those shares held by DI, the Durwood Family Stockholders, their
spouses, their children living in the same household and directors and
officers of the Company, the Merger Agreement will be terminated and the
Merger abandoned.
The Registration Agreement; Secondary Offering. As a condition to
the Merger, the Company and the Durwood Family Stockholders will enter
into a registration agreement (the "Registration Agreement") pursuant to
which the Durwood Family Stockholders will agree to sell at least
3,000,000 shares of Common Stock in a registered secondary offering and
the Company will agree to file a registration statement with respect to
such shares so that the registration statement becomes effective not more
than twelve months and not less than six months after the Merger.
Consummation of the secondary offering is subject to certain conditions
and other rights of the parties. Subject to certain conditions, the
expenses of the secondary offering will be borne by Mr. Stanley H. Durwood
and Delta. This obligation may be offset by certain Credit Amounts
resulting from the realization by the Company of tax benefits from the
utilization of certain tax credits and operation loss carryforwards of DI.
See "The Indemnification Agreement."
Of the 3,000,000 shares of Common Stock to be sold in the secondary
offering, 500,000 will be sold by Mr. Stanley H. Durwood or his charitable
donees who may agree to participate in the secondary offering. Based on
shares outstanding as of April 3, 1997 and after giving effect to the
secondary offering (assuming such shares are sold to unaffiliated
stockholders and disregarding shares which may be acquired by Mr. Stanley
H. Durwood upon the exercise of employee stock options and shares which he
may transfer to the Durwood Children under the Share Adjustment (as
defined herein under "Security Ownership of Beneficial Owners"), (i)
unaffiliated stockholders will own approximately 7.2 million, or 53.4%, of
the outstanding shares of Common Stock, and their voting interest in the
Company will have increased from 6.6% after the Merger to 12.3% after the
Secondary Offering, assuming no conversion of Convertible Preferred Stock,
and from 14.1% after the Merger to 19.8% after the Secondary Offering,
assuming full conversion of Convertible Preferred Stock, (ii) Mr. Stanley
H. Durwood will own approximately 4.5 million, or 100% of the outstanding,
shares of Class B Stock, which will represent 77.0% of the voting interest
in the Company, assuming no conversion of Convertible Preferred Stock, and
70.4% of the voting interest in the Company, assuming full conversion of
Convertible Preferred Stock, and will be entitled to elect 75% of the
Company's Board of Directors, and (iii) the Durwood Children will own in
the aggregate approximately 6.3 million shares of Common Stock, which will
represent 46.6% of the number of outstanding shares of that class and
10.7% of the voting interest in the Company, assuming no conversion of
Convertible Preferred Stock, and 33.1% of the number of outstanding shares
of the class, representing 9.8% of the voting interest in the Company,
assuming full conversion of Convertible Preferred Stock. Holders of
Common Stock are entitled to elect 25% of the Company's Board of
Directors.
The number of shares owned by Mr. Stanley H. Durwood could be further
reduced and the shares owned by the Durwood Children increased as a result
of other agreements among the Durwood Family Stockholders. See "Security
Ownership of Beneficial Owners."
The Indemnification Agreement. In connection with the Merger, Mr.
Stanley H. Durwood, Delta and the Durwood Children have entered into an
agreement (the "Indemnification Agreement") agreeing to indemnify the
Company from certain losses and expenses. If the Merger occurs, (i) Mr.
Stanley H. Durwood will indemnify the Company from losses resulting from
any breach by DI of its representations, warranties and covenants in the
Merger Agreement or based upon any liability of DI and for any taxes (or
losses incurred by the Company in connection therewith) attributable to
DI or its subsidiaries for taxable periods prior to the Effective Time,
(ii) each of the Durwood Family Stockholders will (severally and not
jointly) indemnify the Company for any losses which it might incur as a
result of the breach by such party of certain tax related representations,
warranties and covenants made by such party in the Stock Agreement and
(iii) subject to certain conditions, Mr. Stanley H. Durwood and Delta will
indemnify the Company from and against all of DI's Merger expenses that
have not been paid prior to the Effective Time and 50% of the Company's
Merger expenses. If the Merger does not occur, subject to certain
conditions, Mr. Stanley H. Durwood and Delta will indemnify the Company
from losses resulting from any breach by DI of its representations,
warranties and covenants in the Merger Agreement. If the Merger is not
consummated for any reason (other than as a result of certain terminations
by the Company's Board of Directors), DI will be responsible for all of
its expenses and the Company's expenses in the Merger. If the Merger is
not consummated as a result of certain terminations by the Company's Board
of Directors, DI will be responsible for all of its expenses and 50% of
the Company's expenses in the Merger. Mr. Stanley H. Durwood and Delta
have agreed to indemnify the Company for any breach by DI of such
obligation described in the preceding two sentences.
Mr. Stanley H. Durwood's obligations (i) to pay DI's unpaid expenses
and 50% of the Company's Merger expenses if the Merger occurs, as required
by the Indemnification Agreement, (ii) to pay the Company's expenses in
the secondary offering, as required by the Registration Agreement, and
(iii) to pay a $2 million penalty and 100% of the Company's Merger
expenses if the secondary offering does not occur, as required by the
Stock Agreement, may be offset by certain credit amounts resulting from
net tax benefits realized by the Company from the utilization by the
Company of DI's alternative minimum tax credit carryforwards and Missouri
operating loss carryforwards ("Credit Amounts"). Any Credit Amount not so
applied will be paid to Mr. Stanley H. Durwood promptly after March 31,
2000. Any Credit Amount that arises after March 31, 2000 also will be
paid promptly to Mr. Stanley H. Durwood. The maximum amount of Credit
Amounts that could be paid Mr. Durwood or could be used to offset his
responsibilities to the Company is approximately $1,100,000, reduced by
any amounts utilized on separate DI income tax returns for 1996 and the
portion of 1997 prior to the Effective Time.
In Connection with the Merger, the Company has agreed to indemnify
the Durwood Children from losses resulting from any breach by the Company
of any representation, warranty, covenant or agreement made by it in the
Merger Agreement.
The foregoing indemnification obligations generally will lapse on
March 31, 2000.
The Stock Agreement. As a condition precedent to the Merger, the
Durwood Family Stockholders will enter into an agreement (the "Stock
Agreement") which, for three years, limits the ability of the Durwood
Children to deposit shares in a voting trust, solicit proxies, participate
in election contests or make a proposal concerning an extraordinary
transaction involving the Company. Under the Stock Agreement, the Durwood
Children will also agree, among other matters, for a period of three
years, (i) to grant an irrevocable proxy to the Secretary and each
Assistant Secretary of the Company to vote their shares of Common Stock
for each candidate to the Company's Board of Directors in the same
proportion as the aggregate votes cast by all other stockholders not
affiliated with the Company, its directors or officers and (ii) that the
Company will have a right of first refusal with respect to any such shares
the Durwood Children wish to sell in a transaction exempt from
registration, except for such shares sold in brokers' transactions. The
Stock Agreement obligates Mr. Stanley H. Durwood and Delta, whose shares
will be distributed by DI to the Durwood Family Stockholders before the
Merger, to pay the Company $2 million and to reimburse the Company for all
of its Merger expenses if the Secondary Offering is not consummated within
12 months after the Merger. This obligation may be offset by certain
Credit Amounts resulting from the realization by the Company of tax
benefits from the utilization of certain tax credits and operating loss
carryforwards of DI. See "The Indemnification Agreement."
Periodically, the Company and DI reconcile any amounts owed by one
company to the other. Charges to the intercompany account have included
payments made by the Company on behalf of DI. The largest balance owed by
DI and its subsidiaries to the Company during fiscal 1997 was $795,000.
As of April 3, 1997, DI and its subsidiaries owed the Company $181,000.
Ms. Marjorie D. Grant, a Vice President of AMC and the sister of Mr.
Stanley H. Durwood, has an employment agreement with AMCE providing for an
annual base salary of no less than $110,000, an automobile and, at the
sole discretion of the Chief Executive Officer of AMCE, a year-end bonus.
Ms. Grant's current annual base salary is $110,000. During fiscal 1997,
Ms. Grant received a bonus of $10,000 and a lump sum payment in lieu of a
base salary increase of $4,400. Ms. Grant's employment agreement,
executed July 1, 1996, terminates on June 30, 1999, or upon her death or
disability. The agreement provides that in the event Mr. Stanley H.
Durwood fails to control the management of AMCE by reason of its sale,
merger or consolidation, or because of his death or disability, or for any
other reason, then AMCE and Ms. Grant would each have the option to
terminate the agreement. In such event, AMCE would pay to Ms. Grant in
cash a sum equal to the aggregate cash compensation, exclusive of bonus,
to the end of the term of her employment under the agreement, after
discounting such amount to its then present value using a discount rate
equal to the prime rate of interest published in The Wall Street Journal
on the date of termination. The aggregate amount payable under the
employment agreement, assuming termination by reason of a change of
control and payment in a lump sum as of April 3, 1997, was approximately
$225,000.
Since July 1992, Mr. Jeffery W. Journagan, a son-in-law of Mr.
Stanley H. Durwood, has been employed by a subsidiary of AMCE. Mr.
Journagan's current salary is approximately $82,540 and he received a
bonus for fiscal 1997 in the amount of $7,500.
During fiscal 1997, the Company retained Polsinelli, White, Vardeman
& Shalton, P.C., to provide certain legal services to a subsidiary of
AMCE. Mr. Vardeman, who is a director of AMCE, is a director, officer and
shareholder of that firm.
For a description of certain employment agreements between the
Company and Messrs. Stanley H. Durwood, Peter C. Brown, Philip M.
Singleton and Richard M. Fay, see " Employment Contracts, Termination of
Employment and Change in Control Arrangements."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of the Registrant and
its consolidated subsidiaries included in the Report are incorporated
herein by reference in Item 8:
Consolidated Balance Sheets - April 3, 1997 and March 28, 1996
Consolidated Statements of Operations - Fiscal years (53/52 weeks)
ended April 3, 1997, March 28, 1996 and
March 30, 1995
Consolidated Statements of Cash Flows - Fiscal years (53/52 weeks)
ended April 3, 1997, March 28, 1996 and
March 30, 1995
Consolidated Statements of Stockholders' Equity - Fiscal years (53/52
weeks) ended April 3, 1997,
March 28, 1996 and March 30, 1995
Notes to Consolidated Financial Statements - Fiscal years (53/52
weeks) ended April 3, 1997, March 28, 1996 and
March 30, 1995
(a)(2) Financial Statement Schedules
The following consolidated financial statement schedule of the
Registrant and its consolidated subsidiaries is filed pursuant to Item
14(d) (this schedule appears immediately following the signature page):
Schedule II - Valuation and Qualifying Accounts and Reserves
All other schedules for which provision is made in the applicable
accounting regulations of the SEC are not required under the related
instructions or are inapplicable, and therefore have been omitted.
(b) Reports on Form 8-K
On March 19, 1997, the Company filed a Form 8-K reporting under Item
5 its sale of 9 1/2% Senior Subordinated Notes due 2009 and an amendment
to its Credit Facility.
(c) Exhibits
A list of exhibits required to be filed as part of this report on
Form 10-K is set forth in the Exhibit Index, which immediately precedes
such exhibits, and is incorporated herein by reference.
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 ENTERTAINMENT INC.
By: /s/ Stanley H. Durwood
Stanley H. Durwood, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Stanley H. Durwood Chairman of the Board, Chief June 30, 1997
Stanley H. Durwood Executive Officer and Director
/s/ Charles J. Egan, Jr. Director June 30, 1997
Charles J. Egan, Jr.
/s/ William T. Grant, II Director June 30, 1997
William T. Grant, II
/s/ John P. Mascotte Director June 30, 1997
John P. Mascotte
/s/ Paul E. Vardeman Director June 30, 1997
Paul E. Vardeman
/s/ Peter C. Brown President, Chief Financial June 30, 1997
Peter C. Brown Officer and Director
/s/ Philip M. Singleton Executive Vice President, Chief June 30, 1997
Philip M. Singleton Operating Officer and Director
/s/ Richard L. Obert Senior Vice President - Chief June 30, 1997
Richard L. Obert Accounting and Information Officer
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of AMC Entertainment Inc.
Kansas City, Missouri
Our report on the consolidated financial statements of AMC Entertainment
Inc. and subsidiaries has been incorporated by reference in this Form 10-
K from page 35 of the 1997 Annual Report to Shareholders of AMC
Entertainment Inc. and subsidiaries. In connection with our audits of
such financial statements, we have also audited the related financial
statement schedule listed in Item 14(a)(2>) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
Kansas City, Missouri
May 16, 1997
<PAGE>
<TABLE>
<CAPTION>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands)
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses
Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Year ended (53 Weeks) April 3, 1997
Allowance for doubtful accounts $ 801 $ 125 $ - $ 222 $ 704
Self insurance reserves 12,635 12,561 - 10,511 14,685
Reserve for future dispositions 2,107 534 - 427 2,214
Year ended (52 Weeks) March 28, 1996
Allowance for doubtful accounts $ 1,529 $ 526 $ - $ 1,254 $ 801
Self insurance reserves 12,029 10,458 - 9,852 12,635
Reserve for future dispositions 2,827 - - 720 2,107
Year ended (52 Weeks) March 30, 1995
Allowance for doubtful accounts $ 1,270 $ 744 $ - $ 485 $ 1,529
Self insurance reserves 11,005 11,263 - 10,239 12,029
Reserve for future dispositions 4,711 500 - 2,384 2,827
Valuation allowance for deferred tax
assets 19,792 (19,792) - - -
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
2.1. Agreement and Plan of Merger dated as of March 31, 1997
between AMC Entertainment Inc. and Durwood, Inc.
(together with Exhibit A, "Pre-Merger Action Plan")
(Incorporated by reference from Exhibit 2.1 to AMCE's
Registration Statement on Form S-4 (File No. 333-25755)
filed April 24, 1997).
2.2. Form of Stock Agreement to be entered into among AMC
Entertainment Inc. and Stanley H. Durwood, Carol D.
Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa
D. Grodin, Brian H. Durwood and Peter J. Durwood
("Durwood Family Stockholders") (Incorporated by
reference from Exhibit 2.2 to AMCE's Registration
Statement on Form S-4 (File No. 333-25755) filed April
24, 1997).
2.3. Form of Registration Agreement to be entered into between
AMC Entertainment Inc. and the Durwood Family
Stockholders (Incorporated by reference from Exhibit 2.3
to AMCE's Registration Statement on Form S-4 (File No.
333-25755) filed April 24, 1997).
2.4.(a) Indemnification Agreement dated as of March 31, 1997
among AMC Entertainment, Inc., the Durwood Family
Stockholders and Delta Properties, Inc., together with
Exhibit B thereto (Escrow Agreement) (Incorporated by
reference from Exhibit 2.4.(a) to AMCE's Registration
Statement on Form S-4 (File No. 333-25755) filed April
24, 1997).
2.4.(b) Durwood Family Settlement Agreement (Incorporated by
reference from Exhibit 99.1 to Schedule 13-D of
Durwood, Inc. and Stanley H. Durwood filed May 8, 1996).
2.4.(c) First Amendment to Durwood Family Settlement Agreement
(Incorporated by reference from Exhibit 2.4.(c) to AMCE's
Registration Statement on Form S-4 (File No. 333-25755)
filed April 24, 1997).
2.5. Articles of Merger dated March 31, 1994 between American
Multi-Cinema, Inc. and its wholly owned subsidiaries,
Cinema Enterprises, Inc. and Cinema Enterprises II, Inc.
and related Plan and Agreement of Liquidation and Merger
(Incorporated by reference from Exhibit 2 to AMCE's Form
10-K (File No. 1-8747) for the fiscal year ended
March 31, 1994).
2.6. Stock Purchase, Release and Settlement Agreement dated
January 10, 1997 between American Multi-Cinema, Inc. and
H. Donald Busch respecting AMC Philadelphia, Inc.
(Incorporated by reference from Exhibit 2.1 to AMCE's
Form 10-Q (File No. 1-8747) for the quarter ended
December 26, 1996).
2.7.(a) Plan and Agreement of Liquidation and Merger dated
March 31, 1997 between AMC Realty, Inc. and its
subsidiary, AMC Canton Realty, Inc. (Incorporated by
reference from Exhibit 2.7.(a) to AMCE's Registration
Statement on Form S-4 (File No. 333-25755) filed April
24, 1997).
2.7.(b) Certificate of Ownership and Merger dated March 31, 1997
between AMC Realty, Inc. and its subsidiary, AMC Canton
Realty, Inc. (Incorporated by reference from Exhibit
2.7.(b) to AMCE's Registration Statement on Form S-4
(File No. 333-25755) filed April 24, 1997).
2.8.(a) Plan and Agreement of Liquidation and Merger dated
March 31, 1997 between AMC Philadelphia, Inc. and its
subsidiary, Budco Theatres, Inc. (Incorporated by
reference from Exhibit 2.8.(a) to AMCE's Registration
Statement on Form S-4 (File No. 333-25755) filed April
24, 1997).
2.8.(b) Certificate of Ownership and Merger dated March 31, 1997
between AMC Philadelphia, Inc. and its subsidiary, Budco
Theatres, Inc. (Delaware) (Incorporated by reference from
Exhibit 2.8.(b) to AMCE's Registration Statement on Form
S-4 (File No. 333-25755) filed April 24, 1997).
2.8.(c) Articles of Merger dated March 31, 1997 between AMC
Philadelphia, Inc. and Budco Theatres, Inc.
(Pennsylvania) (Incorporated by reference from Exhibit
2.8.(c) to AMCE's Registration Statement on Form S-4
(File No. 333-25755) filed April 24, 1997).
2.9.(a) Plan and Agreement of Liquidation and Merger dated
March 31, 1997 between American Multi-Cinema, Inc. and
its subsidiary, AMC Philadelphia, Inc. (Incorporated by
reference from Exhibit 2.9.(a) to AMCE's Registration
Statement on Form S-4 (File No. 333-25755) filed April
24, 1997).
2.9.(b) Certificate of Ownership and Merger merging AMC
Philadelphia, Inc., a Delaware corporation, into American
Multi-Cinema, Inc., a Missouri corporation (Delaware)
(Incorporated by reference from Exhibit 2.9.(b) to AMCE's
Registration Statement on Form S-4 (File No. 333-25755)
filed April 24, 1997).
2.9.(c) Articles of Merger between AMC Philadelphia, Inc., and
American Multi-Cinema, Inc. (Missouri) (Incorporated by
reference from Exhibit 2.9.(c) to AMCE's Registration
Statement on Form S-4 (File No. 333-25755) filed April
24, 1997).
3.1. Amended and Restated Certificate of Incorporation of AMC
Entertainment Inc. (Incorporated by reference from
Exhibit 3.1 to Amendment No. 2 to AMCE's Registration
Statement on Form S-2 (File No. 33-51693) filed
February 18, 1994).
3.2. Certificate of Designations relating to $1.75 Cumulative
Convertible Preferred Stock (Incorporated by reference
from Exhibit 4.1 to AMCE's Form 8-K (File No. 1-8747)
dated April 8, 1994).
3.3. Bylaws of AMC Entertainment Inc. (Incorporated by
reference from Exhibit 3.3 to AMCE's Form 10-Q (File No.
0-12429) for the quarter ended December 26, 1996).
4.1.(a) Indenture among AMC Entertainment Inc., as issuer,
American Multi-Cinema Inc., AMC Realty, Inc.,
Conservco, Inc., AMC Canton Realty, Inc., AMC
Philadelphia, Inc., Budco Theatres, Inc. and Concord
Cinema, Inc. (collectively "Guarantors") and United
States Trust Company of New York, as Trustee, respecting
AMC Entertainment Inc.'s 11 7/8% Senior Notes due 2000
(Incorporated by reference from Exhibit 4.3 to AMCE's
Form 10-Q (File No. 0-12429) for the quarter ended
July 2, 1992).
4.1.(b) First Supplemental Indenture dated as of March 31, 1993,
pursuant to which AMC Film Marketing, Inc. became a
Guarantor (Incorporated by reference from Exhibit
4.1(b) to AMCE's Form 10-K (File No. 1-8747) for the
fiscal year ended April 1, 1993).
4.1.(c) Fourth Supplemental Indenture dated as of March 31,1994,
pursuant to which American Multi-Cinema, Inc. assumed the
obligations of Cinema Enterprises, Inc., Cinema
Enterprises II, Inc. and Exhibition Enterprises
Partnership under the Senior Subordinated Note Indenture
and related guarantees of such entities (Incorporated by
reference from Exhibit 4.2.(c) to AMCE's Form 10-K (File
No. 1-8747) for the fiscal year ended March 31, 1994).
4.1.(d) Fifth Supplemental Indenture dated December 28,1995,
respecting AMC Entertainment Inc.'s 11 7/8% Senior Notes
due 2000 (Incorporated by reference from Exhibit
4.1(d) to AMCE's Registration Statement on Form S-4 (File
No. 333-29155) filed June 13, 1997).
4.1.(e) Sixth Supplemental Indenture dated March 28, 1996,
respecting AMC Entertainment Inc.'s 11 7/8% Senior Notes
due 2000 (Incorporated by reference from Exhibit
4.2(d) to AMCE's Form 10-K (File No. 0-12429) for the
fiscal year ended March 28, 1996).
4.2.(a) Indenture among AMC Entertainment Inc., as issuer,
American Multi-Cinema, Inc., AMC Realty, Inc.,
Conservco, Inc., AMC Canton Realty, Inc., AMC
Philadelphia, Inc., Budco Theatres, Inc. and Concord
Cinema, Inc. (collectively "Guarantors") and The Bank of
New York, as Trustee, respecting AMC Entertainment Inc.'s
12 5/8% Senior Subordinated Notes due 2002 (Incorporated
by reference from Exhibit 4.4 to AMCE's Form 10-Q (File
No. 0-12429) for the quarter ended July 2, 1992).
4.2.(b) First Supplemental Indenture dated as of March 31 , 1993,
pursuant to which AMC Film Marketing, Inc. became a
Guarantor (Incorporated by reference from Exhibit
4.2.(b) to AMCE's Form 10-K (File No. 1-8747) for the
fiscal year ended April 1, 1993).
4.2.(c) Fourth Supplemental Indenture dated as of March 31,1994,
pursuant to which American Multi-Cinema, Inc. assumed the
obligations of Cinema Enterprises, Inc., Cinema
Enterprises II, Inc. and Exhibition Enterprises
Partnership under the Senior Subordinated Note Indenture
and related guarantees of such entities (Incorporated by
reference from Exhibit 4.2.(c) to AMCE's Form 10-K (File
No. 1-8747) for the fiscal year ended March 31, 1994).
4.2.(d) Fifth Supplemental Indenture dated December 28,1995,
respecting AMC Entertainment Inc.'s 12 5/8% Senior
Subordinated Notes due 2002 (Incorporated by reference
from Exhibit 4.2(d) to AMCE's Registration Statement on
Form S-4 (File No. 333-29155) filed June 13, 1997).
4.2.(e) Sixth Supplemental Indenture dated March 28, 1996,
respecting AMC Entertainment Inc.'s 12 5/8% Senior
Subordinated Notes due 2002 (Incorporated by reference
from Exhibit 4.2.(e) to AMCE's Form 10-K (File No.
0-12429) for the fiscal year ended March 28, 1996).
4.3. Amended and Restated Credit Agreement dated as of
April 10, 1997, among AMC Entertainment Inc., as the
Borrower, The Bank of Nova Scotia, as Administrative
Agent and Bank of America National Trust and Savings
Association, as Documentation Agent and Various Financial
Institutions, as Lenders, together with the following
exhibits thereto; significant subsidiary guarantee, form
of notes, form of pledge agreement and form of subsidiary
pledge agreement. (Incorporated by reference from Exhibit
4.3 to AMCE's Registration Statement on Form S-4 (File
No. 333-25755) filed April 24, 1997).
4.4.(a) Indenture dated March 19, 1997, respecting AMC
Entertainment Inc.'s 9 1/2% Senior Subordinated Notes due
2009 (Incorporated by reference from Exhibit 4.1 to
AMCE's Form 8-K (File No. 1-8747) dated March 19, 1997).
4.4(b) Form of First Supplemental Indenture, respecting AMC
Entertainment Inc.'s 9 1/2% Senior Subordinated Notes due
2009 (Incorporated by reference from Exhibit 4.4(b) to
AMCE's Registration Statement on Form S-4 (File No.
333-29155) filed June 13, 1997).
4.5. Registration Rights Agreement respecting 9 1/2% Senior
Subordinated Notes due 2009 (Incorporated by reference
from Exhibit 4.2 to AMCE's Form 8-K (File No. 1-8747)
dated March 19, 1997).
4.6. In accordance with Item 601(b)<4>(iii)(A) of Regulation
S-K, certain instruments respecting long term debt of the
Registrant have been omitted but will be furnished to the
Commission upon request.
10.1. AMC Entertainment Inc. 1983 Stock Option Plan
(Incorporated by reference from Exhibit 10.1 to AMCE's
Form S-1 (File No. 2-84675) filed June 22, 1983).
10.2. Federal Income Tax Allocation Agreement dated as of
July 1, 1983, between Durwood, Inc. and AMC Entertainment
Inc. (Incorporated by reference from Exhibit 10.2 to
AMCE's Form S-1 (File No. 2-84675) filed June 22, 1983).
10.3. AMC Entertainment Inc. 1984 Employee Stock Purchase Plan
(Incorporated by reference from Exhibit 28.1 to AMCE's
Form S-8 (File No. 2-97523) filed July 3, 1984).
10.4. AMC Entertainment Inc. 1984 Employee Stock Option Plan
(Incorporated by reference from Exhibit 28.1 to AMCE's
S-8 and S-3 (File No. 2-97522) filed July 3, 1984).
10.5.(a) AMC Entertainment Inc. 1994 Stock Option and Incentive
Plan, as amended (Incorporated by reference from Exhibit
10.1 to AMCE's Form 10-Q (File No. 0-12429) for the
quarter ended December 26, 1996).
10.5.(b) Form of Performance Stock Award Agreement (Incorporated
by reference from Exhibit 10.5(d) to AMCE's Form 10-K
(File No. 0-12429) for the fiscal year ended March 30,
1995).
10.5.(c) Form of Non-Qualified (NON-ISO) Stock Option Agreement
(Incorporated by reference from Exhibit 10.2 to AMCE's
Form 10-Q (File No. 0-12429) for the quarter ended
December 26, 1996).
10.6. American Multi-Cinema, Inc. Savings Plan, a defined
contribution 401(k) plan, restated January 1, 1989, as
amended (Incorporated by reference from Exhibit 10.6 to
AMCE's Form S-1 (File No. 33-48586) filed June 12, 1992,
as amended).
10.7.(a) Defined Benefit Retirement Income Plan for Certain
Employees of American Multi-Cinema, Inc. dated January 1,
1989, as amended (Incorporated by reference from Exhibit
10.7 to AMCE's Form S-1 (File No. 33-48586) filed
June 12, 1992, as amended).
10.7.(b) AMC Supplemental Executive Retirement Plan dated
January 1, 1994 (Incorporated by reference from Exhibit
10.7(b) to AMCE's Form 10-K (File No. 0-12429) for the
fiscal year ended March 30, 1995).
10.8. Employment Agreement between American Multi-Cinema, Inc.
and Philip M. Singleton (Incorporated by reference from
Exhibit 10(a) to AMCE's Form 10-Q (File No. 1-8747) for
the quarter ended September 29, 1994).
10.9. Employment Agreement between American Multi-Cinema, Inc.
and Peter C. Brown (Incorporated by reference from
Exhibit 10(b) to AMCE's Form 10-Q (File No.1-8747) for
the quarter ended September 29, 1994).
10.10. Disability Compensation Provisions respecting Stanley H.
Durwood (Incorporated by reference from Exhibit 10.12 to
AMCE's Form S-1 (File No. 33-48586) filed June 12, 1992,
as amended).
10.11. Executive Medical Expense Reimbursement and Supplemental
Accidental Death or Dismemberment Insurance Plan, as
restated effective as of February 1, 1991 (Incorporated
by reference from Exhibit 10.13 to AMCE's Form S-1 (File
No. 33-48586) filed June 12, 1992, as amended).
10.12. Division Operations Incentive Program (incorporated by
reference from Exhibit 10.15 to AMCE's Form S-1 (File No.
33-48586) filed June 12, 1992, as amended).
10.13. Agreement and General Release between Edward D. Durwood
and American Multi- Cinema, Inc. (Incorporated by
reference from Exhibit 10.1 to AMCE's Form 10-Q (File No.
0-12429) for the quarter ended September 28, 1995).
10.14. Agreement and General Release between Donald P. Harris
and American Multi-Cinema, Inc. (Incorporated by
reference from Exhibit 10.2 to AMCE's Form 10-Q (File No.
0-12429) for the quarter ended September 28, 1995).
10.15. Partnership Interest Purchase Agreement dated May 28,
1993, among Exhibition Enterprises Partnership, Cinema
Enterprises, Inc., Cinema Enterprises II, Inc., American
Multi-Cinema, Inc., TPI Entertainment, Inc. and TPI
Enterprises, Inc. (Incorporated by reference from Exhibit
10.29 to AMCE's Form 10-K (File No. 1-8747) for the
fiscal year ended April 1, 1993).
10.16. Mutual Release and Indemnification Agreement dated
May 28, 1993, among Exhibition Enterprises Partnership,
Cinema Enterprises, Inc., American Multi-Cinema, Inc.,
TPI Entertainment, Inc. and TPI Enterprises, Inc.
(Incorporated by reference from Exhibit 10.30 to AMCE's
Form 10-K (File No. 1-8747) for the fiscal year ended
April 1, 1993).
10.17. Assignment and Assumption Agreement between Cinema
Enterprises II, Inc. and TPI Entertainment, Inc.
(Incorporated by reference from Exhibit 10.31 to AMCE's
Form 10-K (File No. 1-8747) for the fiscal year ended
April 1, 1993).
10.18. Confidentiality Agreement dated May 28,1993, among TPI
Entertainment, Inc., TPI Enterprises, Inc., Exhibition
Enterprises Partnership, Cinema Enterprises, Inc., Cinema
Enterprises II, Inc. and American Multi-Cinema, Inc.
(Incorporated by reference from Exhibit 10.32 to AMCE's
Form 10-K (File No. 1-8747) for the fiscal year ended
April 1, 1993).
10.19. Termination Agreement dated May 28, 1993, among TPI
Entertainment, Inc., TPI Enterprises, Inc. Exhibition
Enterprises Partnership, American Multi-Cinema, Inc.,
Cinema Enterprises, Inc., AMC Entertainment Inc.,
Durwood, Inc., Stanley H. Durwood and Edward D. Durwood
(Incorporated by reference from Exhibit 10.33 to AMCE's
Form 10-K (File No. 1-8747) for the fiscal year ended
April 1, 1993).
10.20. Promissory Note dated June 16, 1993, made by Thomas L.
Velde and Katherine G. Terwilliger, husband and wife,
payable to American Multi-Cinema, Inc. (Incorporated by
reference from Exhibit 10.34 to AMCE's Form 10-K (File
No. 1-8747) for the fiscal year ended April 1, 1993).
10.21. Second Mortgage dated June 16,1993, among Thomas L.
Velde, Katherine G. Terwilliger and American
Multi-Cinema, Inc. (Incorporated by reference from
Exhibit 10.35 to AMCE's Form 10-K (File No. 1-8747) for
the fiscal year ended April 1, 1993).
10.22. Summary of American Multi-Cinema, Inc. Executive
Incentive Program (Incorporated by reference from Exhibit
10.36 to AMCE's Registration Statement on Form S-2 (File
No. 33-51693) filed December 23, 1993).
10.23. AMC Non-Qualified Deferred Compensation Plans
(Incorporated by reference from Exhibit 10.37 to
Amendment No. 2 to AMCE's Registration Statement on Form
S-2 (File No. 33-51693) filed February 18, 1994).
10.24. Employment Agreement between AMC Entertainment Inc.,
American Multi-Cinema, Inc. and Stanley H. Durwood
(Incorporated by reference from Exhibit 10.32 to AMCE's
Form 10-K (File No. 0-12429) for the fiscal year ended
March 28, 1996).
10.25. Real Estate Contract dated November 1, 1995 among Richard
M. Fay, Mary B. Fay and American Multi-Cinema, Inc.
(Incorporated by reference from Exhibit 10.33 to AMCE's
Form 10-K (File No. 0-12429) for the fiscal year ended
March 28, 1996).
10.26. American Multi-Cinema, Inc. Retirement Enhancement Plan
(Incorporated by reference from Exhibit 10.26 to AMCE's
Registration Statement on Form S-4 (File No. 333-25755)
filed April 24, 1997).
10.27. Employment Agreement between American Multi-Cinema, Inc.
and Richard M. Fay (Incorporated by reference from
Exhibit 10.1 to AMCE's Form 10-Q (File No. 0-12429) for
the quarter ended June 27, 1996).
10.28. American Multi-Cinema, Inc. Executive Savings Plan
(Incorporated by reference from Exhibit 10.28 to AMCE's
Registration Statement on Form S-4 (File No. 333-25755)
filed April 24, 1997).
*11. Computation of Per Share Earnings.
*13. Incorporated portions of the Annual Stockholders Report
for the fiscal year ended April 3, 1997.
16. Letter regarding change in certifying accountant
(Incorporated by reference from Exhibit 19.6 to AMCE's
Form 10-Q (File No. 0-12429) for the quarter ended
July 2, 1992).
*21. Subsidiaries of AMC Entertainment Inc.
*23 Consent of Coopers & Lybrand L.L.P. to the use of their
report of independent accountants incorporated in Item 8
of this annual report.
*27. Financial Data Schedule
_______
* Filed herewith
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
Year (53) Weeks Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
(in thousands, except per share amounts)
1997 1996 1995
PRIMARY EARNINGS PER SHARE:
<S> <C> <C> <C>
Net earnings before extraordinary item $ 18,995 $ 27,371 $ 33,978
Extraordinary item - (19,350) -
--------- -------- --------
Net earnings 18,995 8,021 33,978
Preferred dividends (5,907) (7,000) (7,000)
--------- -------- --------
Net earnings for common shares $ 13,088 $1,021 $ 26,978
========= ======== ========
Average shares for primary earnings per share:
Weighted average number of shares outstanding 17,489 16,513 16,456
Stock options and other dilutive items 237 282 137
--------- -------- --------
Total shares outstanding 17,726 16,795 16,593
========= ======== ========
Primary earnings per share before extraordinary item $.74 $ 1.21 $ 1.63
========= ======== ========
Primary earnings per share $.74 $.06 $ 1.63
========= ======== ========
FULLY DILUTED EARNINGS PER SHARE:
Net earnings before extraordinary item $ 18,995 $ 27,371 $ 33,978
Extraordinary item - (19,350) -
--------- -------- --------
Net earnings 18,995 8,021 33,978
Preferred dividends (5,907) (7,000) n/a
--------- -------- --------
Net earnings for common shares $ 13,088 $1,021 $ 33,978
========= ======== ========
Average shares for fully diluted earnings per share:
Weighted average number of shares outstanding 17,489 16,513 16,456
Stock options and other dilutive items 451 518 157
Shares issuable upon conversion of preferred stock n/a n/a 6,896
--------- -------- --------
Total shares outstanding 17,940 17,031 23,509
========= ======== ========
Fully diluted earnings per share
before extraordinary item $.73 <F1> $1.20 <F1> $1.45 <F2>
========= ======== ========
Fully diluted earnings per share $.73 <F1> $0.06 <F1> $1.45 <F2>
========= ======== ========
<FN>
<F1> Fully diluted earnings per share for 1997 and 1996 excludes conversion
of preferred stock.
<F2> Fully diluted earnings per share for 1995 includes conversion of
preferred stock.
<PAGE>
</TABLE>
<PAGE> 1
AMC ENTERTAINMENT INC.
1997 ANNUAL REPORT
[PHOTO]
Where boundaries are erased, vision grows...
<PAGE>
<PAGE> 2
AMC ENTERTAINMENT INC.
CORPORATE PROFILE
AMC Entertainment Inc. is an entertainment company principally involved in
motion picture exhibition in the U.S. through its largest operating subsidiary,
American Multi-Cinema, Inc. The company is also involved in exhibition in select
international markets.
As of April 3, 1997, the company owned or operated 228 theatres with 1,957
screens in 23 states, the District of Columbia, Japan and Portugal.
* 90 percent of AMC's screens have the #1 or #2 market
share in their markets, in terms of box office gross.
* 73 percent of AMC screens are located in the top 20 U.S.
markets.
* AMC's average screen count per theatre is 8.6 compared
to the industry average of 5.2.
* Almost 30 percent of AMC's screens are in theatres
with 14 or more screens.
AMC common stock trades on the American and Pacific Stock Exchanges under the
symbol AEN. The preferred stock is traded on the American Stock Exchange under
the symbol AEN Pr. The company is headquartered in Kansas City, Missouri.
ABOUT THE COVER
[PHOTO]
AMC reaches beyond traditional boundaries and standard approaches to broaden
vision, excite imagination and provide a total entertainment experience.
TABLE OF CONTENTS
Financial and Operating Highlights 1
Questions and Answers 4
Beyond Boundaries 6
Innovation 8
Expansion 14
AMC Theatre Locations 18
Financial Information 20
Investor Information 64
Corporate Officers and Directors 65
<PAGE>
<PAGE> 3
FINANCIAL AND OPERATING HIGHLIGHTS
<TABLE>
<CAPTION>
(In thousands, except number April 3, March 28, March 30, March 31, April 1,
of theatres and screens) 1997<F1> 1996<F1> 1995<F1> 1994<F1> 1993<F1>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $749,597 $655,972 $563,344 $586,300 $403,775
EBITDA<F2> $112,948 $112,555 $ 88,942 $ 98,784 $ 57,345
Earnings before income taxes<F3> $ 31,895 $ 46,671 $ 24,978 $ 27,412 $ 13,146
Number of patrons<F4> 122,252 114,506 103,148 107,710 99,957
Number of theatres operated<F4> 228 226 232 236 243
Number of screens operated<F4> 1,957 1,719 1,630 1,603 1,617
Screens per theatre<F4> 8.6 7.6 7.0 6.8 6.7
<CAPTION>
Total Revenues EBITDA<F2> Earnings
in millions in millions Before Income Taxes<F3>
in millions
<S> <S> <S>
[GRAPH] [GRAPH] [GRAPH]
<FN>
<F1> Fiscal year ending April 3, 1997 consists of 53 weeks. All other fiscal
years have 52 weeks.
<F2> Represents operating income plus depreciation and amortization plus
estimated loss on future disposition of assets.
<F3> Before extraordinary item.
<F4> Includes managed and owned theatres.
</TABLE>
AMC ENTERTAINMENT INC.
------------------------
<PAGE>
<PAGE> 4
FROM THE CHAIRMAN
To Our Shareholders
The company achieved
the highest revenues and
cash flow in its history
while opening a record
314 screens in 17 loca-
tions, including two
international theatres.
Fiscal 1997 proved to be a significant year for AMC. The company achieved the
highest revenues and cash flow in its history while opening a record 314
screens in 17 locations, including two international theatres. Thanks to the
strength of our new megaplexes, we are now firmly positioned as a leading
exhibitor in the United States with a growing international presence.
Financial Highlights
Total revenues increased 14.3 percent to a record $749.6 million from
$656.0 million last year. Earnings before interest, taxes, depreciation and
amortization (EBITDA) increased to a record $112.9 million.
On a per share basis, earnings before extraordinary item, after
deducting preferred dividends, were $0.74 in fiscal 1997, compared to $1.21 in
fiscal 1996. After extraordinary item and preferred dividends, net earnings
per share were $0.74, compared to net earnings of $0.06 per share last year.
Our earnings this fiscal year were impacted by three factors. First,
during the first nine months of the fiscal year, product from the company's
key suppliers failed to deliver the box office results achieved in the prior
year. Second, the company experienced expected start-up costs associated with
the opening of 314 new AMC screens, including 268 megaplex screens. Third,
general and administrative expenses increased, as anticipated, partially due
to the company's strategic growth initiative in the United States and
internationally. Looking ahead, we are encouraged by the potential of
fiscal 1998, both in terms of the number of new AMC megaplexes coming on line
and favorable product forecasts from our key film suppliers.
Industry Highlights
The continued success of the AMC megaplex concept has inspired an
industry-wide movement to build larger theatres. Additionally, the supply of
film product remains strong in response to the increasing worldwide demand for
filmed entertainment. The recent success of the re-release of the Star Wars
Trilogy underscores the importance of the theatrical window in creating a
film's value and the brand awareness necessary for its success in ancillary
markets.
Growth Plan
Our growth plan -- to build megaplexes in major U.S. markets and select
international markets -- is on target. The success of the AMC megaplexes that we
have opened validates our
AMC ENTERTAINMENT INC.
- ------------------------
2
<PAGE>
<PAGE> 5
SHAREHOLDERS' REPORT
direction and strategy. As we continue to increase the number of megaplexes in
our circuit, we increase our ability to deliver the finest moviegoing
experience possible and attract more customers in more markets worldwide.
Included in our fiscal 1997 theatre openings was the record-breaking AMC
Ontario Mills 30 in Ontario, California, the largest theatre in the world in
terms of screen count. In addition, we opened two international theatres, the
AMC Canal City 13 in Fukuoka, Japan, and the AMC Arrabida
20 in Porto, Portugal. Both of these theatres are the largest and among the
most luxurious theatres in their countries.
The Strength Of Our People
This year we further strengthened our executive management team by
expanding the leadership roles of Peter C. Brown and Philip M. Singleton.
Peter Brown was elevated to president of AMC Entertainment Inc. In addition to
his duties as AMCE president, Peter will continue to act as chief financial
officer of the company and all subsidiaries. Phil Singleton was promoted to
president of American Multi-Cinema, Inc., the theatrical exhibition arm and
largest operating subsidiary. Both Peter and Phil will continue to report
directly to me.
The strength of any company rests in the talent and dedication of its
people. Our growth would not be possible without the support of the entire AMC
family, which now numbers more than 10,000 associates worldwide. I am
confident in the strong leadership and immense talent of our worldwide team.
Together, we create the finest moviegoing experience available anywhere in the
world.
AMC is well-positioned for continued growth and success. Our constant
focus on the customer inspires us to challenge traditional approaches and to
develop new industry standards. Where boundaries are erased, vision grows. We
remain committed to changing the way the world sees movies(TM).
Stanley H. Durwood
Chairman of the Board and
Chief Executive Officer
[PHOTO]
Stanley H. Durwood
Our constant focus
on the customer inspires
us to challenge
traditional approaches
and to develop new
industry standards.
AMC ENTERTAINMENT INC.
------------------------
3
<PAGE>
<PAGE> 6
FINANCIAL AND OPERATING
Q+A
PETER C. BROWN President and Chief Financial Officer,
AMC Entertainment Inc.
PHILIP M. SINGLETON President and Chief Operating Officer,
American Multi-Cinema, Inc.
QUESTION: WHAT DISTINGUISHES AMC FROM COMPETING THEATRE CIRCUITS?
Brown: Since 1991, we have executed a series of financial
transactions that have led us to become one of the most solidly
capitalized companies in our industry. This sound financial base
allows us to continue to invest confidently in what we feel will
drive our valuation in the future, the AMC megaplex theatre.
Singleton: Innovation is fundamental to the AMC culture and has always been
our mainstay competitive advantage. For more than three decades we
have sustained that advantage by constantly responding to the
customer and continually developing new concepts that enhance the
AMC moviegoing experience.
QUESTION: WHAT INDICATORS DO YOU HAVE THAT AMC'S GROWTH PLAN IS ON
TRACK?
Singleton: Our latest innovation, the AMC megaplex, has become the industry
benchmark. Other circuits are following our lead. Most
importantly, our customers have overwhelmingly embraced our new
concept, and our new megaplexes are performing very well.
Virtually every megaplex that we have opened has become one of the
industry's most successful in terms of attendance and film
revenue.
Brown: We look at several key measures to evaluate the success of our
megaplexes, the four most significant of which are attendance per
screen, total revenues per patron, theatre-level cash flow before
rent margin, and return on assets. Our megaplexes have demonstrated
superior results in every one of these key measures.
AMC ENTERTAINMENT INC.
- ------------------------
4
<PAGE>
<PAGE> 7
QUESTIONS AND ANSWERS
QUESTION: COULD YOU COMMENT ON THE RESULTS OF AMC'S GROWTH PLAN?
Brown: This year we achieved our goal of adding 314 screens in 17
locations, including two international theatres in Japan and
Portugal. Additionally, at the end of the fiscal year, we had
another 558 screens in 25 locations under construction, indicating
that we are well on our way toward our fiscal 1998 goal.
QUESTION: WHAT IMPACT IS AMC'S EXPANSION HAVING ON THE FILM
INDUSTRY?
Singleton: As we open more high-performance megaplexes, the more attractive
AMC becomes to film studios. Our goal is to have the screen
capacity or "shelf space" to play all available film product.
Studios need a strong theatrical opening of their films in an
often-crowded marketplace to create the value or word-of-mouth
demand for their film product. Consequently, studios are
increasingly attracted to our growing portfolio of AMC megaplexes.
QUESTION: WHAT ARE SOME OF YOUR CRITERIA FOR SELECTING FUTURE
MEGAPLEX LOCATIONS?
Singleton: We look for quality sites in densely populated urban markets.
These sites should be sufficiently large to allow us to build a
theatre with 20 to 30 screens, which would enable us to play
nearly all available film product. We prefer to build our
megaplexes in an atmosphere of entertainment-oriented retail where
our customers can benefit from the synergy of shopping, dining and
other leisure activities.
QUESTION: IS AMC CONCERNED ABOUT A POTENTIAL FOR OVERSCREENING?
Brown: AMC's growth strategy emphasizes quality over quantity. We believe
that this type of approach will govern development activity. As we
add new megaplexes, we are taking older-generation theatres off
line, resulting in a smaller aggregate theatre count.
QUESTION: HOW DOES AMC PLAN TO INCREASE ATTENDANCE?
Singleton: New AMC megaplexes generate higher attendance and revenues per
screen than many of our traditional multiplexes. We are growing
attendance by changing our circuit portfolio to a megaplex
profile, as well as by providing an outstanding AMC moviegoing
experience for our patrons.
QUESTION: WHAT MEASURES WERE TAKEN THIS YEAR TO INCREASE THE
COMPANY'S VALUE?
Brown: We continued to invest in our next-generation theatre, the AMC
megaplex, both in the United States and internationally. This
investment should enhance our position in the industry, increasing
our market share and long-term value.
[PHOTO]
Peter C. Brown (L)
Philip M. Singleton (R)
AMC ENTERTAINMENT INC.
------------------------
5
<PAGE>
<PAGE> 8
INNOVATION
BEYOND
BOUNDARIES
AMC ENTERTAINMENT INC.
- ------------------------
6
<PAGE>
<PAGE> 9
EXPANSION
AMC is changing the way the world sees movies(TM) by reaching
beyond traditional boundaries and standard approaches to
create not only a superior moviegoing experience, but a
total entertainment experience.
Where boundaries are erased, vision grows...
AMC ENTERTAINMENT INC.
------------------------
7
<PAGE>
<PAGE> 10
INNOVATION
OUR MEGAPLEX THEATRES
ARE SETTING THE INDUSTRY
STANDARD FOR INNOVATION
[PHOTO]
The AMC Ontario Mills 30 theatre, the world's largest theatre by screen count.
Even before you arrive at an AMC megaplex, the AMC entertainment experience
begins. Music fills the parking lot, and at many locations, sidewalk
entertainment, such as clowns and jugglers, delights patrons of all ages. If
you have not taken advantage of AMC's TeleTicket(TM) sales system, an abundance
of cashier stations expedites ticket purchases. Inside the theatre, personal
touches are everywhere. From efficiently designed concession areas with
delicious movie fare, to flowers and lotion in the ladies' room, AMC's
commitment to customer enjoyment and comfort sets the tone. Inside the
auditoriums, stadium seating guarantees that all seats are the "best in the
house" by providing an unobstructed view of the screen. AMC's exclusive
LoveSeat(TM)-style seating -- plush, cushioned, high-backed seats with
double-wide, retractable cupholder armrests -- turns comfortable into cozy.
AMC totally immerses you in movie magic with its exclusive High Impact Theatre
System(TM) with wall-to-wall compound-curved Torus(TM) screens that offer
maximum brilliance and clarity. Sony Dynamic Digital Sound(TM) surrounds you
with an extraordinary audio environment. So sit back, settle in and enjoy the
ultimate AMC entertainment experience.
AMC ENTERTAINMENT INC.
- ------------------------
8
<PAGE>
<PAGE> 11
INNOVATION
Innovation, the foundation of the AMC culture, has enabled AMC to maintain its
competitive advantage for more than five decades. Today, AMC is clearly
positioned at the forefront of the industry with its newest innovation, the
megaplex.
The record-breaking opening of the AMC Grand 24 in Dallas, Texas, in May
1995 launched the successful beginning of the AMC megaplex era. Now, 366
megaplex screens later, the company is rapidly becoming a circuit of
megaplexes, theatres with 14 or more screens with predominately stadium-style
seating, providing the finest moviegoing experience available.
As of the end of the fiscal year, almost 30 percent of AMC's screens were in
theatres with 14 or more screens. AMC's average screen count per theatre was
8.6 compared to the industry average of 5.2 screens.<F*>
The AMC megaplex has become the customers' theatre of choice, as demonstrated
by outstanding attendance levels and increased revenues. New AMC megaplexes
are consistently among the top one percent of the highest-grossing theatres in
the industry.
[FN]
<F*>Source: National Association of Theatre Owners
"When we go to the movies, we expect the best seat in the house. I enjoy AMC's
LoveSeat(TM)-style seating because I can relax comfortably and watch the film
without distraction."
John Justice
Customer
AMC West Oaks 14
Orlando, Florida
[PHOTO]
AMC's exclusive LoveSeat(TM)
stadium-style seats are plush and
high-backed with double-wide,
cushioned and retractable
cupholder armrests that lift so
moviegoers can "cozy up."
AMC Milestones
1963
Builds world's first
multi-screen theatre
in a mall.
1966
Introduces automated
projection booths.
1969
Opens world's first
six-screen theatre in
Omaha, Nebraska.
1979
Establishes industry's
first management
training academy.
1981
Introduces cupholder
armrests.
1982
Begins installation of
computerized box offices.
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 12
INNOVATION
"AMC's megaplexes are
growing the moviegoing
audience. With their many
amenities, such as stadium
seating, these theatres
showcase our films in the
best possible environment,
resulting in higher atten-
dance and grosses."
Jeff Blake
President
Sony Distribution
[PHOTO]
The foyer of the AMC Arrabida
20 in Porto, Portugal, features a
dramatic starlit scene.
AMC's stadium-style seating
ensures that every moviegoer has
an unobstructed view of the screen.
[PHOTO]
For the fiscal year, on an annual attendance-per-screen basis, AMC megaplexes
performed 96 percent higher than the industry average<F*> and 38 percent higher
than traditional AMC multiplexes (theatres generally without stadium-style
seating and having less than 14 screens). AMC megaplexes also generated 10
percent more revenue per patron than AMC multiplexes. Their margins, as
measured by operating-cash-flow-before-rent, were 12.5 percent higher than
traditional AMC multiplexes, further demonstrating their operational
efficiency.
Along with ticket sales, concession revenues are an important source of income
for AMC. For the fiscal year, concession sales increased 14.5 percent over the
prior year, and AMC megaplexes generated 13.5 percent more concession revenue
per patron than traditional AMC multiplexes.
[FN]
<F*>Source: National Association of Theatre Owners
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 13
INNOVATION
AMC theatres continue to offer customers a broad selection of quality
brand-name products. In addition to traditional movie fare, AMC continues to
introduce new menu items such as frozen carbonated beverages, bottled water
and fruit drinks, bulk candy and special variety packs for children.
This year, AMC introduced an innovative concession design at many of its new
megaplexes. The pass-through concession design increases efficiency and
customer convenience by separating preparation and delivery, ensuring faster
transaction times and service, and providing for maximum freshness.
AMC enhances the overall moviegoing experience through a number of value-added
national and local marketing programs. These programs have increased
attendance, strengthened brand loyalty and increased revenues. Many of these
AMC marketing programs have been recognized for their ingenuity and
excellence. In fact, for the third consecutive year, AMC was honored with the
industry's most coveted marketing and customer service awards at
the 1997 National Association of Theatre Owners (NATO) ShoWest(R) convention
held in Las Vegas. AMC theatre managers were recognized with The Hollywood
Reporter T.E.A.M. (Theatre Excellence and Marketing) award, the NATO customer
service award and the Eastman Kodak(R) marketing award.
"AMC's culture encourages
innovative customer service
ideas that will continually
improve the AMC experience.
We're trained to focus on
our customers, anticipate
their needs and provide them
with the finest entertainment
experience possible."
John Greiner
Managing Director,
AMC Burbank 28
Burbank, California
Winner of the 1997 ShoWest(R)
Customer Service Award
[PHOTO]
The AMC pass-through concession
design separates preparation and
delivery, ensuring faster transaction
times and service, and providing for
maximum freshness.
AMC Milestones cont.
1985
Opens its first overseas
theatre in England.
1987
Opens world's first
14-screen theatre in
Century City, California.
1989
Develops proprietary High
Impact Theatre System
(HITS(TM)) for maximum
sound reproduction.
1990
Establishes MovieWatcher(R)
program, the first wide-scale
program to reward frequent
moviegoers.
1990
Pioneers an ATM-style
ticketing system, allowing
customers to use
credit cards.
1991
Introduces unique
"Silence is Golden(R)"
program, encouraging
patron courtesy.
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 14
INNOVATION
[PHOTO]
A conceptual drawing of the
innovative AMC Maihama Station
16 in the world-class urban resort
district of Maihama, Japan, next to
Tokyo Disneyland(R) theme park.
The company's premier marketing program, the AMC MovieWatcher(R) club,
rewards frequent moviegoing and continues to be the only one of its kind in the
industry. This year, the club achieved a significant membership milestone of
one million avid AMC moviegoers. The MovieWatcher(R) club enhances
AMC brand loyalty and provides AMC with an extensive lifestyle and demographic
database for research, analysis and direct marketing programs.
AMC continued to enhance national marketing programs by developing
high-profile, third-party affiliations to cross-promote and drive incremental
attendance. These affiliations include The Coca-Cola Company, Planet Hollywood
International, Inc., Burger King Corporation and The Walt Disney World(R)
Resort, as well as all major film studios. AMC also has established numerous
major league sports tie-ins, including promotions with the National Football
League(R) organization and the Super Bowl(R) game.
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 15
INNOVATION
AMC continually strives to be a responsible corporate citizen and a good
neighbor in the communities it serves. AMC's "Read for the Stars(R)" program
encourages children to read during the summer. This year, AMC worked with the
U.S. Department of Education's "Read Write Now" program to promote tutorial
reading programs during the summer.
New AMC theatres open with a series of special fundraising events and
benefits, usually tied in with film premieres that demonstrate a long-term
commitment to serving the community. Nonprofit organizations such as Big
Brothers/Big Sisters, as well as Variety Club and numerous other charities,
have been the beneficiaries of such events.
AMC is already at work on the next evolution of moviegoing. Programmable
lobbies offering interactive experiences, trams to and from parking lots,
improved comfort amenities and newer and faster ways to serve customers are
already in design for AMC's next generation of world-class theatres.
[PHOTO]
AMC's 42nd Street 25 theatre in
New York City's renowned Times
Square will offer spectacular views
and film imaging innovations.
AMC Milestones cont.
1991
Introduces TeleTicket(TM)
system, allowing patrons
to purchase tickets in
advance by telephone.
1992
Installs the largest Torus(TM)
compound-curved screen
in North America.
1994
Announces plans to install
Sony Dynamic Digital
Sound(TM) (SDDS(TM)) in
all AMC auditoriums.
1995
Opens the AMC Grand 24
in Dallas, Texas, launching
the era of the AMC megaplex.
1996
Begins exporting its
new-generation theatre
concept to the Pacific Rim.
1996
Opens world's largest
theatre by screen count,
the AMC Ontario Mills 30
in Ontario, California.
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 16
EXPANSION
OUR EXPANSION BRINGS
MORE MOVIES TO MORE
PEOPLE WORLDWIDE
Since its opening in December 1996, the AMC Arrabida 20 in Porto, Portugal, is
that country's highest-grossing theatre.
AMC's growth plan is on target. As of April 3, 1997, AMC had 1,957 screens in
228 theatres around the world. Of the 314 new screens the company added last
year, 308 were in new locations and 6 were the expansion of an existing
theatre. The company has another 558 screens in construction and expects to
open approximately 700 screens by the end of fiscal 1998. As planned, AMC is
replacing some older existing theatres with new-generation megaplexes.
AMC's focus is on quality rather than quantity. The company continues to
target sites in densely populated urban markets that can support a 20- to
30-screen theatre, which will dominate its market and generate higher returns.
AMC ENTERTAINMENT INC.
- ------------------------
14
<PAGE>
<PAGE> 17
EXPANSION
The company also targets locations near entertainment-oriented retail.
Whether the theatre is the centerpiece of a mega-mall, such as the AMC Ontario
Mills 30, or a free-standing theatre like the AMC Pleasure Island 10 (expanding
to a 24-screen complex in fiscal 1998) at The Walt Disney World(R) Resort and
adjacent to the Pleasure Island attraction, the combination of the AMC
entertainment experience with shopping, dining and other leisure activities
creates an extended entertainment event.
Among AMC's fiscal 1997 highlights was the opening of the largest theatre in
the world, the AMC Ontario Mills 30, near Los Angeles, which set a record for
the highest opening weekend film gross in the history of the company. The AMC
Norwalk 20, also in Los Angeles, opened last May and is consistently among
the industry's top 10 highest-grossing theatres. Another new megaplex, the AMC
Ahwatukee 24 in Phoenix, is the highest-grossing theatre in Arizona and among
the top one percent of the industry's highest-grossing theatres. The AMC
Lennox 24 in Columbus, Ohio, was among the top 10 theatres in the industry for
each of the Star Wars Trilogy films.
AMC's fiscal 1998 domestic expansion plans include the AMC Studio 30 in
Houston, the largest of six 30-screen theatres that AMC plans to open during
the year. Earlier this year, AMC announced that the company had signed a lease
for a 25-screen theatre, the AMC 42nd Street 25, located in New York City's
renowned Times Square.
"As one of the key
anchors of many of our
Mills developments, AMC
generates a huge attendance
base, which has helped
attract other entertain-
ment-related businesses.
AMC, like the Mills
Corporation, is a quality,
customer-oriented organi-
zation. They have top-notch
people who know how to
build and operate the kind
of theatres that keep
customers coming back
again and again."
Laurence Siegel
Chairman and
Chief Executive Officer
The Mills Corporation
Shopping Center Developer
[PHOTO]
The AMC Ahwatukee 24 in
Phoenix is the highest-grossing
theatre in Arizona.
Fiscal 1997 Openings
AMC Canal City 13
Fukuoka, Japan
April 20
AMC Carolina Pavilion 22
Charlotte
May 10
AMC Norwalk 20
Los Angeles
May 10
AMC Merchants Crossing 16
Fort Myers
May 17
AMC Deerbrook 24
Houston
May 24
AMC Palace 9
Fort Worth
May 24
AMC Arrowhead 14
Phoenix
August 2
AMC Celebration 2
Orlando
October 25
AMC Tallahassee 20
Tallahassee
November 15
AMC Ahwatukee 24
Phoenix
December 13
AMC North DeKalb 16
Atlanta
December 13
AMC Ontario Mills 30
Los Angeles
December 13
AMC Lennox 24
Columbus
December 18
AMC Arrabida 20
Porto, Portugal
December 20
AMC Marina Pacifica 12
(6-screen expansion)
Long Beach
January 10
AMC West Oaks 14
Orlando
March 21
AMC Indian River 24
Vero Beach
March 28
AMC West Olive 16
St. Louis
April 3
AMC ENTERTAINMENT INC.
------------------------
15
<PAGE>
<PAGE> 18
EXPANSION
Scheduled Fiscal 1998
Openings
First Quarter
AMC Fullerton 20
(10-screen expansion)
Los Angeles
AMC Huebner Oaks 24
San Antonio
AMC Puente Hills 20
Los Angeles
AMC Studio 30
Houston
Second Quarter
AMC BarryWoods 24
Kansas City
AMC Mercado 20
San Jose
AMC Oak View 24
Omaha
AMC Orange Park 24
Jacksonville
AMC Pleasure Island 24
(14-screen expansion)
Orlando
AMC Rolling Hills 20
(14-screen expansion)
Los Angeles
AMC Saratoga 14
San Jose
Third Quarter
AMC Arizona Center 24
Phoenix
AMC Covina 30
Los Angeles
[PHOTO]
The AMC Canal City 13 in Fukuoka, Japan, has captured more than 50 percent of
the market since its opening in April 1996.
In April 1996, AMC began exporting its new-generation theatre concept with
the opening of the AMC Canal City 13 theatre in Fukuoka, Japan. Since its
opening, the theatre has captured more than 50 percent of the market. Overall
moviegoing in Fukuoka has increased approximately 30 percent since the theatre
opened.
In December, the company opened the AMC Arrabida 20 in Porto, Portugal. The
theatre is already the highest-grossing theatre in that country.
AMC's global expansion plans include the Pacific Rim, western Europe and
Canada. In addition to sites in Japan, Hong Kong, Spain and Portugal, the
company also is monitoring sites in South Korea, China, Taiwan, Italy, France,
Germany and the United Kingdom. These countries are greatly underscreened yet
are active consumers of filmed entertainment. The continued increase in
international box-office revenues combined with the AMC megaplex concept
creates a tremendous growth opportunity in the international marketplace.
AMC ENTERTAINMENT INC.
- ------------------------
16
<PAGE>
<PAGE> 19
EXPANSION
Construction for the AMC Festival Walk 11 in Hong Kong will begin this summer
with completion scheduled for spring 1998. The theatre, part of the renowned
Festival Walk development, will have direct access to rail and subway
transportation systems, making it easily accessible from as far away as
mainland China.
AMC will soon begin construction of the AMC Maihama Station 16 in the
world-class urban resort district of Maihama, Japan and next to Tokyo
Disneyland(R) theme park. The theatre is scheduled for completion in fall 1998
and will be the largest in Japan in terms of screen count and square footage.
The company also announced plans to build three 24-screen theatres in Spain,
which include two in Barcelona and one in the city of Palma on the island of
Mallorca. The AMC Terrassa 24, north of Barcelona, will be AMC's next
international theatre, scheduled to open in early 1998.
The appeal of AMC's entertainment experience is universal. With each new
megaplex opening, AMC is further establishing itself as the world's preeminent
motion picture exhibitor and is changing the way the world sees movies(TM).
"As a teenager I remember
going to the AMC
Northtown Mall 6 theatre
in Dallas. That was 25 years
ago, but I remember it being
the newest and best thing
going. Today, I go to the
AMC Deerbrook 24 in
Houston and take my own
family. AMC continues to
offer the best moviegoing
experience available."
Mary Lou Sinclair
Customer
AMC Deerbrook 24
Houston, Texas
AMC has more than a third
of the screens in the Houston
market, including the AMC
Deerbrook 24 theatre.
[PHOTO]
Scheduled Fiscal 1998
Openings
Third Quarter cont.
AMC First Colony 24
Houston
AMC Grapevine 30
Dallas
AMC Gulf Pointe 30
Houston
AMC Highlands Ranch 24
Denver
AMC Midlands 30
Chicago
AMC Olathe 30
Kansas City
AMC Southlake Pavilion 24
Atlanta
AMC Southroads 20
Tulsa
AMC Town Center 20
Kansas City
AMC Westminster
Promenade 24
Denver
Fourth Quarter
AMC Aventura 24
Miami
AMC Cantera 30
Chicago
AMC Esplanade 14
Phoenix
AMC Hampton
Town Center 24
Norfolk
AMC Livonia 20
Detroit
AMC Mesquite 30
Dallas
AMC ENTERTAINMENT INC.
------------------------
17
<PAGE>
<PAGE> 20
AMC THEATRE LOCATIONS<FDAG>
Arizona
Phoenix
Ahwatukee 24
Arizona Center 24<F*>
Arrowhead 14
Bell Plaza 8
Esplanade 14<F*>
Fiesta Village 6
Gateway Village 10
Laguna Village 10
Lakes 6
Metro Village 6
Sunvalley Plaza 10
Three Fountains 4
Town & Country 6
Tucson
El Con 6
Valencia 4
California
Bakersfield
Stockdale 6
Los Angeles
Alondra 6
Burbank 14
Century City 14
Chino Town Square 10
Commercenter 6
Covina 30<F*>
Fine Arts 1
Fullerton 10 (20<F**>)
Hermosa Beach 6
Main Place 6
Marina Pacifica 12
Media Center 6
Media Center 8
Montebello 10
Old Pasadena 8
Pine Square 16
Promenade 16
Puente East 4
Puente Hills 20<F*>
Puente Plaza 10
Rolling Hills 6 (20<F**>)
Santa Monica 7
Victor Valley 10
Norwalk 20
Ontario Mills 30
San Diego
La Jolla 12
Mission Valley 20
Santee Village 8
Wiegand Plaza 8
San Francisco
Kabuki 8
Vallejo Plaza 6
San Jose
Mercado 20<F*>
Milpitas 10
Oakridge 6
Saratoga 14<F*>
Sunnyvale 6
Town & Country 1
Colorado
Colorado Springs
Tiffany Square 6
Denver
Buckingham 6
Colorado Plaza 6
Highlands Ranch 24<F*>
Seven Hills 10
Southbridge Plaza 8
Tiffany Plaza 6
Tivoli 12
Westminster 5
Westminster 6
Westminster Promenade 24<F*>
Delaware
Philadelphia Area
Cinema Center 3
Concord 2
District of Columbia
Washington, D.C.
Courthouse Plaza 8
Potomac Mills 15
Skyline Center 12
Union Station 9
Florida
Gainesville
Oaks 6
Oaks West 4
Jacksonville
Orange Park 24<F*>
Regency 6
Regency Mall 8
Miami
Aventura 24<F*>
Cocowalk 16
Coral Ridge 10
Fashion Island 16
Kendall Town & Country 10
Mall of the Americas 14
Ocean Walk 10
Omni 4
Omni 6
Ridge Plaza 8
Sheridan 12
South Dade 8
Orlando/Daytona
Celebration 2
Fashion Village 8
Interstate 6
Lakes Square 12
Merritt 6
Merritt Square 7/12
Pleasure Island 10 (24<F**>)
Volusia Square 8
West Oaks 14
Fort Myers
Merchants Crossing 16
Tallahassee
Tallahassee 20
Tampa/St. Petersburg
Clearwater 5
Countryside 6
Crossroads Center 8
Horizon Park 4
Merchants Walk 10
Old Hyde Park 7
Regency 20
Sarasota 6
Sarasota Exp 7/12
Seminole 8
Tri-City Plaza 8
Twin Bays 4
Tyrone Square 6
Varsity 6
West Palm Beach
Cross County 8
Indian River 24
Mizner Park 8
Georgia
Atlanta
Buckhead Backlot 6<F*>
Cobb Place 8
Colonial 18
Galleria 8
Mansell 14
North DeKalb 16
Northlake Festival 8
Phipps Plaza 14
Southlake Pavilion 24<F*>
Illinois
Chicago
Cantera 30<F*>
Midlands 30<F*>
Kansas
Kansas City
Oak Park 6
Olathe 30<F*>
Town Center 20<F*>
Louisiana
New Orleans
Galleria 8
Shreveport
Bossier 6
St. Vincents 6
Maryland
Washington, D.C. Area
Academy 6
Academy 8
Carrollton 6
City Place 10
Country Club Mall 6
Rivertowne 12
Massachusetts
Springfield
Hampshire 6
Mountain Farms 4
Michigan
Detroit
Abbey 8
Americana West 6
Bel-Air Center 10
Eastland 2
Eastland Mall 5
Hampton 4
Laurel Park 10
Livonia 20<F*>
Maple 3
Old Orchard 3
Southfield City 12
Southland 4
Sterling Center 10
Towne 4
Wonderland 6
Woods Complex 6
Lansing
Elmwood Plaza 8
Meridian 1/4
Meridian 5/8
Meridian Mall 6
Missouri
Kansas City
Bannister Square 6
BarryWoods 24<F*>
Crown Center 6
Independence 20
Metro North Plaza 6
Summit 4
Ward Parkway 22
St. Louis
Crestwood Plaza 10
Esquire 7
Galleria 6
Northwest Square 10
Regency 8
Village 6
West Olive 16
Nebraska
Omaha
Oak View 24<F*>
Westroads 2
Westroads 6
New Jersey
Metro New York
Headquarters Plaza 10
Rockaway 6
Rockaway 7/12
Philadelphia Area
Deptford 8
Marlton 8
Millside 4
Quakerbridge 4
Vineland 4
New York
Buffalo
Como 8
Maple Ridge 8
North Carolina
Charlotte
Carolina Pavilion 22
Ohio
Columbus
Dublin Village 18
Eastland Centre 8
Eastland Plaza 6
Lennox 24
Westerville 6
Oklahoma
Oklahoma City
Memorial Square 8
Northwest 8
Robinson Crossing 6
AMC ENTERTAINMENT INC.
- ------------------------
18
<PAGE>
<PAGE> 21
AMC theatre locations<FDAG>
Tulsa
Southroads 20<F*>
Pennsylvania
Harrisburg
Colonial Commons 9
Hampden Center 8
Wonderland 4
Philadelphia
25th Street 4
309 Cinema 9
Andorra 8
Anthony Wayne 2
Granite Run Mall 8
Marple 10
Olde City 2
Orleans 8
Painters Crossing 9
Quakertown 6
Tilghman Square 8
Woodhaven 10
Texas
Dallas/Fort Worth
Central Park 7
Forum 6
Glen Lakes 8
Grand 24
Grapevine 30<F*>
Green Oaks 8
Highland Park 4
Hulen 10
Irving 8
Mesquite 30<F*>
Palace 9
Prestonwood 5
Sundance 11
Towne Crossing 8
Houston
Almeda Square 5
Commerce Park 8
Deerbrook 8
Deerbrook 24
Festival 6
First Colony 24<F*>
Greens Crossing 6
Gulf Pointe 30<F*>
Meyer Park 16
Northoaks 6
Studio 30<F*>
Town & Country 10
Westchase 5
Willowbrook 10
San Antonio
Huebner Oaks 24<F*>
Rivercenter 9
Virginia
Norfolk/Portsmouth/
Newport News
Circle 4
Coliseum 4
Hampton Town Center 24<F*>
Lynnhaven 8
Newmarket 4
Patrick Henry 7
Washington
Seattle/Tacoma
Center Plaza 6
Narrows Plaza 8
Seatac 6
Japan
Fukuoka
Canal City 13
Portugal
Porto
Arrabida 20
[FN]
<FDAG> As of 5/1/97
<F*> FY 1998 Opening
<F**> FY 1998 Expansion
AMC MARKETS SERVED
UNITED STATES
JAPAN PORTUGAL
AMC ENTERTAINMENT INC.
------------------------
19
<PAGE>
<PAGE> 22
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
April 3, March 28, March 30, March 31, April 1,
(Dollars in thousands, except per share data) 1997<F1><F2> 1996<F1><F2> 1995<F1><F2> 1994<F1><F2> 1993<F2>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues $ 749,597 $655,972 $563,344 $ 586,300 $403,775
Total cost of operations 580,002 491,358 432,763 446,957 308,848
General and administrative 56,647 52,059 41,639 40,559 37,582
Depreciation and amortization 59,803 43,886 37,913 38,048 28,175
Estimated loss on future disposition of assets - - - - 2,500
---------------------------------------------------------------
Operating income 53,145 68,669 51,029 60,736 26,670
Interest expense 22,022 28,828 35,908 36,375 31,401
Investment income 856 7,052 10,013 1,156 8,239
Minority interest - - - 1,599 -
Gain (loss) on disposition of assets (84) (222) (156) 296 9,638
---------------------------------------------------------------
Earnings before income taxes
and extraordinary item 31,895 46,671 24,978 27,412 13,146
Income tax provision 12,900 19,300 (9,000) 12,100 5,400
---------------------------------------------------------------
Earnings before extraordinary item 18,995 27,371 33,978 15,312 7,746
Extraordinary item - (19,350) - - (6,483)
---------------------------------------------------------------
Net earnings $ 18,995 $ 8,021 $ 33,978 $ 15,312 $ 1,263
===============================================================
Preferred dividends 5,907 7,000 7,000 538 256
---------------------------------------------------------------
Net earnings for common shares $ 13,088 $ 1,021 $ 26,978 $ 14,774 $ 1,007
===============================================================
Earnings per share before extraordinary item:
Primary $ .74 $ 1.21 $ 1.63 $ .89 $ .46
Fully diluted $ .73 $ 1.20 $ 1.45 $ .89 $ .46
Earnings per share:
Primary $ .74 $ .06<F4> $ 1.63 $ .89 $ .06<F3>
Fully diluted $ .73 $ .06<F4> $ 1.45 $ .89 $ .06<F3>
Common dividends per share $ - $ - $ - $ - $ 1.14
Weighted average number of shares outstanding:
Primary 17,726 16,795 16,593 16,521 16,217
Fully diluted 17,940 17,031 23,509 16,550 16,217
Balance Sheet Data:
Cash, equivalents and investments $ 24,715 $ 10,795 $140,377 $ 151,469 $ 50,106
Total assets 718,213 483,458 522,154 501,276 374,102
Total debt (including capital lease obligations) 373,724 188,172 267,504 268,188 255,302
Stockholders' equity 170,012 158,918 157,388 130,404 18,171
Other Financial Data:
EBITDA<F5> $ 112,948 $112,555 $ 88,942 $ 98,784 $ 57,345
Cash flows provided by operating activities 134,074 96,847 44,366 63,680 29,062
Cash flows provided by (used in) investing activities (283,917) (66,848) 3,664 (111,505) 4,594
Cash flows provided by (used in) financing activities 163,982 (90,437) (9,116) 56,147 (21,022)
Capital expenditures 253,380 120,796 56,403 10,651 8,786
<FN>
<F1> Fiscal 1997, 1996, 1995 and 1994 include the effects from the acquisition
of Exhibition Enterprises Partnership on May 28, 1993.
<F2> Fiscal 1997 consists of 53 weeks. All other fiscal years have 52 weeks.
<F3> Fiscal 1993 includes a $6,483 extraordinary loss equal to $.40 per common
share.
<F4> Fiscal 1996 includes a $19,350 extraordinary loss equal to $1.15 per
common share.
<F5> Represents operating income plus depreciation and amortization plus
estimated loss on future disposition of assets. EBITDA is a financial
measure commonly used in the Company's industry and should not be
construed as an alternative to operating income (as determined in
accordance with GAAP). EBITDA as determined by the Company, may not be
comparable to EBITDA as reported by other companies. In addition, EBITDA
is not intended to represent cash flow and does not represent the measure
of cash available for discretionary uses. EBITDA is a non-GAAP measure,
but has been used by lenders and stockholders as additional information
for estimating the Company's value and evaluating its ability to service
debt.
</TABLE>
AMC ENTERTAINMENT INC.
- ------------------------
20
<PAGE>
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
As a result of the commencement of international operations during fiscal
1997, the Company is disaggregating its domestic and international exhibition
operations and the Company's on-screen advertising and other business in order
to provide more information as to the Company's revenues, cost of operations,
depreciation and amortization, and general and administrative expenses as set
forth in the table below for the fifty-three and fifty-two week periods ended
April 3, 1997 and March 28, 1996.
<TABLE>
<CAPTION>
53 Weeks Ended 52 Weeks Ended
--------------------------------------------------
April 3, March 28,
(Dollars in thousands) 1997 1996 % Change
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Domestic
Admissions $479,629 $431,361 11.2%
Concessions 222,945 196,645 13.4
Other 15,763 15,096 4.4
----------------------------------------------
718,337 643,102 11.7
International
Admissions 13,322 - -
Concessions 2,222 - -
Other 49 - -
----------------------------------------------
15,593 - -
On-screen advertising and other 15,667 12,870 21.7
----------------------------------------------
Total revenues $749,597 $655,972 14.3%
==============================================
Cost of Operations
Domestic
Film rentals $239,480 $215,099 11.3%
Concession costs 36,045 30,417 18.5
Rent 75,116 64,813 15.9
Other 198,555 172,087 15.4
----------------------------------------------
549,196 482,416 13.8
International
Film rentals 7,719 - -
Concession costs 703 - -
Rent 4,945 - -
Other 5,377 - -
----------------------------------------------
18,744 - -
On-screen advertising and other 12,062 8,942 34.9
----------------------------------------------
Total cost of operations $580,002 $491,358 18.0%
==============================================
</TABLE>
AMC ENTERTAINMENT INC.
------------------------
21
<PAGE>
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
53 Weeks Ended 52 Weeks Ended
------------------------------------------------
April 3, March 28,
(Dollars in thousands) 1997 1996 % Change
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
General and Administrative
Domestic and corporate $45,558 $44,200 3.1%
International 6,864 4,550 50.9
On-screen advertising and other 4,225 3,309 27.7
-------------------------------------------
Total general and administrative $56,647 $52,059 8.8%
===========================================
Depreciation and Amortization
Domestic and corporate $56,623 $42,550 33.1%
International 1,436 - -
On-screen advertising and other 1,744 1,336 30.5
-------------------------------------------
Total depreciation and amortization $59,803 $43,886 36.3%
===========================================
</TABLE>
YEARS (53/52 WEEKS) ENDED APRIL 3, 1997 AND MARCH 28, 1996
Revenues. Total revenues increased 14.3%, or $93,625,000, during the year (53
weeks) ended April 3, 1997 compared to the year (52 weeks) ended March 28, 1996.
Total domestic revenues increased 11.7%, or $75,235,000, from the prior year.
Admissions revenues increased 11.2%, or $48,268,000, due to a 6.4% increase in
attendance, which contributed $27,658,000 of the increase, and a 4.7% increase
in average ticket prices, which contributed $20,610,000 of the increase. The
increase in attendance was due primarily to the Company's megaplex theatres
(theatres having at least 14 screens with predominately stadium-style seating).
Attendance at megaplex theatres increased during the year as a result of the
addition of 12 new megaplex theatres with 248 screens and from the operation for
a full fiscal year of the Company's remaining five domestic megaplex theatres
with 98 screens that were opened in fiscal 1996. The increase in attendance from
megaplex theatres was partially offset by a decrease in attendance at multiplex
theatres (theatres generally without stadium-style seating and having less than
14 screens) and the closure or sale of 15 theatres with 76 screens. Attendance
at multiplex theatres decreased as a result of competitive factors. Also, during
the first nine months of the fiscal year, attendance at all theatres was
impacted by film product from the Company's key suppliers which did not deliver
the results achieved in the prior fiscal year. The increase in average ticket
prices is due to price increases and the growing number of megaplexes in the
Company's circuit, which yield higher average ticket prices than multiplexes.
Concessions revenues at domestic theatres increased by 13.4%, or $26,300,000,
due to a 6.9% increase in average concessions per patron, which contributed
$13,692,000 of the increase, and the increase in total attendance, which
contributed $12,608,000 of the increase. The increase in average concessions
per
AMC ENTERTAINMENT INC.
- ------------------------
22
<PAGE>
<PAGE> 25
patron is attributable to the introduction of new concessions products and the
increasing number of megaplexes in the Company's circuit, where concession
spending per patron is higher than multiplex theatres.
Total international revenues were the result of admissions and concessions
revenues from the Company's two international theatres, the Canal City 13
located in Fukuoka, Japan and the Arrabida 20 located in Porto, Portugal,
which opened during the first and third quarters of fiscal 1997, respectively.
Admissions and concessions revenues accounted for 85% and 14% of total
international revenues, respectively. The Company's initial attendance at the
Canal City 13 was negatively impacted by film distributors in Japan who
restricted the Company's ability to obtain film product until approximately
two weeks after its competitors had received it. This delay in releasing films
to the Company has generally been eliminated.
On-screen advertising and other revenues increased 21.7%, or $2,797,000, due
primarily to an increase in the number of screens served by the Company's
on-screen advertising business, a result of its expansion program.
Cost of Operations. Total cost of operations increased 18.0%, or $88,644,000,
during the year (53 weeks) ended April 3, 1997 compared to the year (52 weeks)
ended March 28, 1996.
Total domestic cost of operations increased 13.8%, or $66,780,000, from the
prior year. Film rentals expense increased 11.3%, or $24,381,000, due to higher
admissions revenues. As a percentage of admissions revenues, film rentals
expense was 49.9% in each year. The 18.5%, or $5,628,000, increase in concession
costs is attributable to the increase in concessions revenues. As a percentage
of concessions revenues, concession costs increased from 15.5% to 16.2% due
primarily to increases in raw popcorn costs and the lower margins on new
concessions products. Rent expense increased 15.9%, or $10,303,000, due to the
higher number of screens in operation. Other cost of operations increased 15.4%,
or $26,468,000, from the prior year due to the higher number of screens in
operation, $1,825,000 of advertising expenses associated with the opening of new
theatres and higher expenses associated with the Company's theatre management
development program.
Total international cost of operations were the result of expenses associated
with the Company's new theatres in Japan and Portugal. As a percentage of
admissions revenues, film rentals expense was 57.9% primarily because film
rentals in Japan are generally higher than those domestically. Concession
costs were 31.6% of concessions revenues due to the high procurement costs of
concessions products sourced from the United States. As a percentage of total
revenues, rent expense was 31.7% as a result of low attendance and admissions
revenues and the higher real estate costs in Japan.
AMC ENTERTAINMENT INC.
------------------------
23
<PAGE>
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
On-screen advertising and other cost of operations increased 34.9%, or
$3,120,000, as a result of the higher number of screens served and related
start-up expenses.
General and Administrative. General and administrative expenses increased
8.8%, or $4,588,000, during the year (53 weeks) ended April 3, 1997.
Domestic and corporate general and administrative expenses increased 3.1%, or
$1,358,000, primarily due to increases in costs associated with the Company's
development of theatres and increased pension and retirement expenses of
$1,992,000. These increases were partially offset by a decrease of $3,500,000
in the current year's bonus expense and severance payments of $967,000 for two
former executive officers made during the prior year.
International general and administrative expenses increased 50.9%, or
$2,314,000, due primarily to increases in costs associated with the Company's
development of new theatres and other expenses to support the Company's
international operations and expansion plan.
General and administrative expenses associated with on-screen advertising and
other increased 27.7%, or $916,000, due primarily to an increase in payroll
and related costs to support the expansion program at the Company's on-screen
advertising business.
Depreciation and Amortization. Depreciation and amortization increased 36.3%,
or $15,917,000, during the year (53 weeks) ended April 3, 1997. This increase
was caused by an increase in employed theatre assets resulting from the
Company's expansion plan and an impairment loss of $7,231,000 due to expected
declines in future cash flows of certain theatres.
Operating income. Operating income decreased 22.6%, or $15,524,000, during the
year (53 weeks) ended April 3, 1997. The decrease in operating income is
attributable to the attendance and revenue decline at multiplex theatres and
an increase in domestic and corporate general and administrative expenses of
$1,358,000, the effects of which were partially offset by an increase in
attendance and revenues at megaplex theatres. Additionally, operating income
was reduced by operating losses of $4,587,000 from the Company's international
theatres in Japan and Portugal, an increase in international general and
administrative expenses of $2,314,000 and an increase in operating losses of
$1,647,000 from the Company's on-screen advertising business.
Interest Expense. Interest expense decreased 23.6%, or $6,806,000, during the
year (53 weeks) ended April 3, 1997 compared to the prior year. The decrease
in interest expense resulted from lower rates under the Company's
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 27
$425 million credit facility (the "Credit Facility"), which was partially
offset by an increase in average outstanding borrowings related to the Company's
expansion plan.
Investment Income. Investment income decreased 87.9%, or $6,196,000, during
the year (53 weeks) ended April 3, 1997 due to a decrease in outstanding cash
and investments compared to the prior year. Cash and investments decreased as
a result of the Company's redemption of substantially all of its 11 7/8%
Senior Notes due 2000 ("Senior Notes") and 12 5/8% Senior Subordinated Notes
due 2002 ("12 5/8% Senior Subordinated Notes") on December 28, 1995.
Earnings Before Income Taxes and Extraordinary Item. Earnings before income
taxes and extraordinary item decreased by 31.7%, or $14,776,000, during the
year (53 weeks) ended April 3, 1997 due primarily to the $15,524,000 decrease
in operating income.
Net Earnings. Net earnings before extraordinary item decreased $8,376,000
during the year (53 weeks) ended April 3, 1997 to $18,995,000 from $27,371,000
in the prior year. Net earnings for the period were $18,995,000 compared to
$8,021,000 in the prior year, which included an extraordinary item (a loss of
$19,350,000 in connection with the early extinguishment of debt). Net earnings
before extraordinary item per common share, after deducting preferred
dividends, was $.74 compared to $1.21 for the prior year. Net earnings per
common share, after deducting preferred dividends, was $.74 compared to $.06
for the prior year.
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended
------------------------------------------------------------------------
March 28, % of Total March 30, % of Total
(Dollars in thousands) 1996 Revenues 1995 Revenues
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Admissions $431,361 66% $371,145 66%
Concessions 196,645 30 169,120 30
Other 27,966 4 23,079 4
------------------------------------------------------------------------
Total $655,972 100% $563,344 100%
========================================================================
Cost of Operations
Film rentals $215,099 33% $182,669 33%
Concession costs 30,417 5 24,383 4
Rent 64,813 10 60,076 11
Other 181,029 27 165,635 29
------------------------------------------------------------------------
Total $491,358 75% $432,763 77%
========================================================================
</TABLE>
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONTITION AND RESULTS OF OPERATIONS
YEARS (52 WEEKS) ENDED MARCH 28, 1996 AND MARCH 30, 1995
Revenues. Total revenues for the year (52 weeks) ended March 28, 1996
increased 16.4%, or $92,628,000, to $655,972,000 compared to $563,344,000 for
the year (52 weeks) ended March 30, 1995. Admissions revenues increased 16.2%,
or $60,216,000, due to a 11.1% increase in attendance, which contributed
$41,151,000 of the increase, and a 4.4% increase in average ticket prices,
which contributed $19,065,000 of the increase. The increase in attendance
resulted from the popularity of films licensed during fiscal 1996 and the net
addition of 89 screens since fiscal 1995 at new and higher performing
locations. Attendance during the prior year was impacted by a dispute with a
major distributor over film licensing terms, which resulted in the Company's
licensing that distributor's films for a smaller number of its theatres than
it otherwise would have. In fiscal 1996, the Company licensed that
distributor's films for what it considers to be a more acceptable number of
the Company's theatres. Concessions revenues increased by 16.3%, or
$27,525,000, due to the increase in total attendance, which caused an increase
of $18,752,000, and a 6.9% increase in average concessions per patron, which
contributed $8,773,000 of the increase.
Cost of Operations. Total cost of operations increased 13.5%, or $58,595,000,
in fiscal 1996 to $491,358,000 from $432,763,000 in fiscal 1995. As a
percentage of total revenues, cost of operations was 75% and 77% in fiscal
1996 and 1995, respectively. Film rentals expense increased 17.8%, or
$32,430,000, in fiscal 1996 due to higher attendance levels, which contributed
$29,637,000 of the increase, and an increase in the percentage of admissions
paid to film distributors, which caused an increase of $2,793,000. Concessions
costs, rent and other costs of operations increased 10.5%, or $26,165,000,
from the prior year due to increases in payroll of $6,641,000, concession
costs of $6,034,000, rent of $4,737,000 and other theatre operating expenses
associated with the increase in admissions and concessions revenues and from
the higher number of screens in operation.
General and Administrative. General and administrative expenses increased
25.0%, or $10,420,000, to $52,059,000 in fiscal 1996 from $41,639,000 in
fiscal 1995. The increase in general and administrative expenses is primarily
attributable to payroll and other costs associated with the Company's
development of theatres in the United States and certain international
markets, additional bonus expenses of $3,074,000 related to improved
profitability of the Company and severance payments of $967,000 for two former
executive officers. As a percentage of total revenues, general and
administrative expenses increased to 7.9% in fiscal 1996 from 7.4% in fiscal
1995.
Depreciation and Amortization. Depreciation and amortization increased 15.8%,
or $5,973,000, to $43,886,000 in fiscal 1996 from $37,913,000 in fiscal 1995.
This increase resulted primarily from the reduction, effective December 30,
1994, in the estimated lives of lease rights and location premiums on certain
smaller theatres to
AMC ENTERTAINMENT INC.
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<PAGE> 29
correspond to the base terms of the theatre leases, an increase in employed
theatre assets and the recognition of an impairment loss of $1,799,000 in
connection with the adoption of Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed Of.
Interest Expense. Interest expense decreased 19.7%, or $7,080,000, to
$28,828,000 in fiscal 1996 from $35,908,000 in fiscal 1995. The decrease in
interest expense resulted from lower interest rates under the Company's Credit
Facility as compared to the rates under the Senior Notes and 12 5/8% Senior
Subordinated Notes.
Investment Income. Investment income decreased 29.6%, or $2,961,000, to
$7,052,000 in fiscal 1996 from $10,013,000 in fiscal 1995 due primarily to a net
gain of $1,407,000 recorded in fiscal 1995 from the sales of stock of TPI
Enterprises, Inc. and AmeriHealth, Inc. and a decrease of $1,513,000 in interest
income in fiscal 1996.
Earnings Before Income Taxes and Extraordinary Item. Earnings before income
taxes and extraordinary item increased 86.8%, or $21,693,000, to $46,671,000
in fiscal 1996 from $24,978,000 in fiscal 1995. The Company recorded a
$19,350,000 extraordinary loss, net of income tax benefit of $13,400,000,
related to extinguishment of debt in fiscal 1996.
Net Earnings. For the year (52 weeks) ended March 28, 1996, the Company recorded
net earnings of $8,021,000, a $25,957,000 decrease from net earnings of
$33,978,000 for the year (52 weeks) ended March 30, 1995. Net earnings per
common share, after deducting $7,000,000 of preferred dividends, was $.06 in
fiscal 1996 compared to $1.63 in fiscal 1995. The decrease in net earnings was
impacted by an extraordinary loss of $19,350,000 incurred as a result of the
Company's repurchase of Senior Notes and 12 5/8% Senior Subordinated Notes in
fiscal 1996. Also, in fiscal 1996 the Company had a tax expense of $19,300,000,
as opposed to a tax benefit of $9,000,000 in fiscal 1995. The fiscal 1995 tax
benefit resulted from a $19,792,000 reduction in the deferred tax valuation
allowance established under Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. Earnings per share before extraordinary item, after
deduction of preferred dividends, was $1.21 in fiscal 1996 compared to $1.63 in
fiscal 1995.
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, competition from other companies, changes in
AMC ENTERTAINMENT INC.
------------------------
27
<PAGE>
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
economic climate, increase in demand for real estate, demographic changes,
changes in real estate, zoning and tax laws, the performance of films licensed
by the Company and other risks and uncertainties.
The Company's revenues are collected in cash, principally through box office
admissions and theatre concessions 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. Film distributors generally release films which they anticipate
will be the most successful during the summer and holiday seasons. Consequently,
the Company typically generates higher revenues during such periods. Cash flows
from operating activities, as reflected in the Consolidated Statements of Cash
Flows, was $134,074,000, $96,847,000 and $44,366,000 in fiscal years 1997, 1996
and 1995, respectively. During fiscal 1997, the Company had capital expenditures
of $253,380,000 primarily for the development of new theatres and the addition
of screens at existing locations. The Company has continued its expansion plan
by opening 14 leased theatres with 244 screens, two owned theatres with 46
screens and one theatre with 24 screens leased pursuant to a ground lease.
Included in these openings is the Company's first theatre in Japan, the Canal
City 13 in Fukuoka, which opened in April 1996, and the Company's first theatre
in Portugal, the Arrabida 20 in Porto, which opened in late December 1996. In
addition, the Company closed or sold 14 leased theatres with 72 screens and one
owned theatre with four screens, resulting in a circuit total of 1,957 screens
in 228 theatres as of April 3, 1997.
The Company has plans to open approximately 700 screens during fiscal 1998. If
these planned screens are opened as scheduled, the Company estimates that
total capital expenditures for fiscal 1998 will aggregate approximately $425
million. Included in these amounts are assets which the Company may place into
sale/leaseback or other comparable financing programs which will have the effect
of reducing the Company's net cash outlays. As of April 3, 1997, the Company had
under construction 15 new leased theatre locations totaling 362 screens, four
new owned theatres with 104 screens, two theatres with 48 screens leased
pursuant to a ground lease and additions to four existing theatres for 44 new
screens. All of these theatres and screens will be located in the United States.
On December 28, 1995, the Company completed the redemption of substantially
all of its Senior Notes and 12 5/8% Senior Subordinated Notes. The Company
redeemed $99,383,000 of the Senior Notes at a total price of
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 31
$1,117.90 per $1,000 principal amount and $95,096,000 of the 12 5/8% Senior
Subordinated Notes 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 on a credit facility to redeem the Senior Notes and the 12 5/8%
Senior Subordinated Notes.
As a part of the refinancing plan, the Company entered into the Credit
Facility, which was subsequently amended and restated as of April 10, 1997.
The Credit Facility, 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 .1875% to .375% on the unused
portion of the commitment. The Credit Facility matures in 2004. The commitment
thereunder will reduce by $25 million on each of December 31, 2002, March 31,
2003, June 30, 2003 and September 30, 2003 and by $50 million on December 31,
2003. As of April 3, 1997, the Company had outstanding borrowings of
$110,000,000 under the Credit Facility at an average interest rate of 6.4% per
annum.
Covenants of the Credit Facility, as amended and restated, impose limitations
on the incurrence of additional indebtedness, creation of liens, change of
control, transactions with affiliates, mergers, investments, guaranties, asset
sales, business activities and pledges. The Company is required to maintain
(i) a maximum net indebtedness to consolidated EBITDA ratio, as defined in the
Credit Facility (generally, the ratio of the principal amount of outstanding
indebtedness (less cash and equivalents) to earnings before interest, taxes,
depreciation, amortization and other noncash charges), of 5.25 to 1 during the
first four years of the Credit Facility, a ratio of 4.75 to 1 during the fifth
year, a ratio of 4.25 to 1 in the sixth year and a ratio of 4.0 to 1
thereafter, and a (ii) minimum cash flow coverage ratio, as defined in the
Credit Facility (generally, the ratio of consolidated EBITDA for the most
recent four quarters to the sum of (A) consolidated interest expense for such
period, (B) amounts paid as dividends, for the optional repurchase or
redemption of subordinated debt or capital stock, or with respect to the
principal amount of capital lease obligations during such period, plus (C) the
current portion of debt with an original maturity exceeding one year), of 1.40
to 1. If the Company prepays, defeases or repurchases more than $10 million of
the Notes (as defined below) or any other subordinated debt incurred after
April 10, 1997, it is required to maintain a maximum net senior indebtedness
to EBITDA ratio, as defined in the Credit Facility, of 4.5 to 1 during the
first four years of the Credit Facility and 4.0 to 1 thereafter. As of April
3, 1997, the Company was in compliance with all financial covenants relating
to the Credit Facility.
Prior to its April 10, 1997 amendment and restatement, the Credit Facility
contained a covenant that generally limited the Company's capital
expenditures. This covenant has been eliminated.
AMC ENTERTAINMENT INC.
------------------------
29
<PAGE>
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On March 19, 1997, the Company sold $200 million aggregate principal amount of
9 1/2% Senior Subordinated Notes due 2009 (the "Notes"). Net proceeds from the
issuance of the Notes (approximately $193.8 million) were used to reduce
borrowings under the Credit Facility. Amounts repaid under the Credit Facility
will again be available for borrowing thereunder, and the Company intends to
utilize this increased availability to continue with its current expansion
program.
The Notes bear interest at the rate of 9 1/2% per annum, payable in March and
September. The Notes are redeemable at the option of the Company, in whole or
in part, at any time on or after March 15, 2002 at 104.75% of the principal
amount thereof, declining ratably to 100% of the principal amount thereof on
or after March 15, 2006, plus in each case interest accrued to the redemption
date. Upon a change of control (as defined in the Note Indenture), each holder
of the Notes will have the right to require the Company to repurchase such
holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase. The Notes are
subordinated to all existing and future senior indebtedness (as defined in the
Note Indenture) of the Company.
The Company has agreed to use its best efforts to (i) file and cause to become
effective by August 16, 1997, a registration statement relating to a
registered offer to exchange the Notes (the "Exchange Offer") for notes of
AMCE with terms identical in all material respects to the Notes and (ii) cause
the Exchange Offer to be consummated by September 15, 1997. If the Exchange
Offer registration statement is not declared effective by August 16, 1997, the
Company has agreed that in lieu thereof it will use its best efforts to cause
to become effective by September 15, 1997 a shelf registration statement with
respect to the Notes. In the event that either (a) the Exchange Offer
registration statement is not filed on or prior to June 17, 1997, (b) the
Exchange Offer registration statement is not declared effective on or prior to
August 16, 1997 or (c) the Exchange Offer is not consummated or a shelf
registration statement, with respect to the Notes, is not declared effective
on or prior to September 15, 1997, the interest rate borne by the Notes will
increase by 0.50% per annum following June 17, 1997 in the case of clause (a)
above, following August 16, 1997 in the case of clause (b) above and following
September 15, 1997 in the case of clause (c) above. The aggregate amount of
such increase will in no event exceed 1.00% per annum. Upon (x) the filing of
the Exchange Offer registration statement after June 17, 1997, (y) the
effectiveness of the Exchange Offer registration statement after August 16,
1997 or (z) the consummation of the Exchange Offer or the effectiveness of a
shelf registration statement, as the case may be, after September 15, 1997,
the interest rate borne by the Notes from the date of filing, effectiveness or
consummation, as the case may be, will be reduced to 9 1/2%. The Exchange
Offer registration statement was filed on June 13, 1997.
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 33
The Note Indenture contains certain covenants that, among other things,
restrict the ability of the Company and its subsidiaries to: incur additional
indebtedness; pay dividends or make distributions in respect of their capital
stock; purchase or redeem capital stock; enter into transactions with
stockholders or certain affiliates; or consolidate, merge or sell all or
substantially all of the Company's assets, other than in certain transactions
between the Company and one or more of its wholly-owned subsidiaries and other
than a proposed merger between the Company and its majority stockholder,
Durwood, Inc. (see discussion below). All of these limitations are subject to
a number of important qualifications. The Note Indenture does not impose any
limitation on the incurrence by the Company and its subsidiaries of
liabilities that are not considered "Indebtedness" under the Note Indenture,
such as those that would be incurred under certain sale/leaseback
transactions; nor does the Note Indenture impose any limitation on the amount
of liabilities incurred by subsidiaries, if any, that might be designated as
Unrestricted Subsidiaries (as defined therein). Furthermore, there are no
restrictions on the ability of the Company and its subsidiaries to make
advances to, or invest in, other entities (including unaffiliated entities)
and no restrictions on the ability of the Company's subsidiaries to enter into
agreements restricting their ability to pay dividends or otherwise transfer
funds to the Company. If the Notes attain "investment grade status" (as
defined in the Note Indenture), the covenants in the Note Indenture limiting
the Company's ability to incur indebtedness, pay dividends, acquire stock or
engage in transactions with affiliates will cease to apply.
The Company believes that cash generated from operations, existing cash and
equivalents, amounts received from sale/leaseback or other comparable
financing programs which the Company is currently pursuing and the unused
commitment amount under its Credit Facility will be sufficient to fund
operations and planned capital expenditures through the end of fiscal 1998.
During the year (53 weeks) ended April 3, 1997, various holders of the
Company's $1.75 Cumulative Convertible Preferred Stock (the "Convertible
Preferred Stock") converted 696,400 shares into 1,200,589 shares of Common
Stock at a conversion rate of 1.724 shares of Common Stock for each share of
Convertible Preferred Stock. Convertible Preferred Stock dividend payments
decreased 14.4%, or $1,007,000, to $5,993,000 for the year (53 weeks) ended
April 3, 1997 from $7,000,000 in the prior year 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.
The Convertible Preferred Stock is redeemable in whole or in part, at the
option of the Company, at a current redemption price of $26 per share,
declining by $.25 per share on March 15 of each year until March 15, 2001,
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
when such price will become fixed at $25. Shares called for redemption may be
converted by the holders thereof prior to the redemption date.
On January 10, 1997, the Company purchased the 20% minority interest in the
common stock of AMC Philadelphia, Inc., an 80% owned subsidiary, for
$7,400,000 in cash. The Company utilized borrowings on its Credit Facility to
finance the purchase. Management does not believe that the acquisition will
have a significant effect on the Company's results of operations.
OTHER
The Board of Directors has approved an agreement (the "Merger Agreement")
providing for the merger of the Company and its principal stockholder,
Durwood, Inc. ("DI"), with the Company remaining as the surviving entity (the
"Merger"). The Merger has been sought by members of the Durwood family so that
they may hold their interests in the Company directly instead of indirectly
through DI and a related entity. In the Merger, stockholders of DI would
exchange their shares of DI stock for shares of the Company's stock. Although
the outstanding shares of the Company's Common Stock will increase and the
outstanding shares of its Class B Stock will decrease if the Merger is
effected, no aggregate increase in total outstanding shares will occur because
the shares of the Company owned by DI will be canceled and the shares of the
Company held by other stockholders would not be exchanged in the Merger. A
condition to the Merger is that the Merger Agreement receive approval of the
holders of a majority of the shares of Common Stock other than DI, the Durwood
family, their spouses and children and officers and directors of the Company.
DI is primarily a holding company with no significant operations or assets other
than its equity interest in the Company. Management expects that the Merger will
be accounted for as a corporate reorganization and that, accordingly, the
recorded balances for consolidated assets, liabilities, total stockholders'
equity and results of operations of the Company would not be affected. If the
Merger occurs, the Company will be responsible for paying 50% of its costs in
connection with the Merger; the aggregate merger costs for both the Company and
DI are estimated to be approximately $2 million. Management does not believe
that the transaction will have a significant effect on the Company's financial
condition, liquidity or capital resources.
The Company is in the process of modifying its computer applications to ensure
their continuing functionality for the "Year 2000" and beyond. At the present
time the Company estimates that expenses related to this project will total
approximately $1.5 million to $2.0 million. These total estimated expenses are
expected to be incurred during fiscal years 1998 and 1999.
AMC ENTERTAINMENT INC.
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<PAGE>
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Congress passed legislation to increase the federal minimum hourly wage paid
to hourly wage employees over a two-year period. This 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. Such legislation is not expected
to have a material adverse effect on the Company's results of operations,
liquidity or financial condition.
IMPACT OF INFLATION
Historically, the principal impact of inflation and changing prices upon the
Company has been to increase the costs of the construction of new theatres,
the purchase of theatre equipment and the utility and labor costs incurred in
connection with continuing theatre operations. Film rentals expense, the
largest cost of operations of the Company, is customarily paid as a percentage
of admissions revenues and hence, while the film rentals expense may increase
on an absolute basis, the percentage of admissions revenues represented by
such expense is not directly affected by inflation. Except as set forth above,
inflation and changing prices have not had a significant impact on the
Company's total revenues and results of operations.
RECENTLY ISSUED FINANCIAL ACCOUNTING PRONOUNCEMENTS
During fiscal 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation. The Statement allows companies to measure compensation cost in
connection with employee stock compensation plans using a fair value based
method or to continue to use an intrinsic value based method to account for
stock options and awards. The Company has chosen to continue using the
intrinsic value based method while adopting the disclosure-only provisions of
the pronouncement.
During fiscal 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings per Share.
SFAS 128 eliminates the presentation of primary and fully diluted earnings per
share ("EPS") and requires presentation of basic and diluted EPS. The
principal difference between primary and basic EPS is that common stock
equivalents are not included with the weighted average number of shares
outstanding used in the computation of basic EPS. Diluted EPS is computed
similarly to fully diluted EPS. SFAS 128 is effective for periods ending after
December 15, 1997, including interim periods, and requires restatement of all
prior-period EPS data. Early adoption is not permitted. Management has not yet
determined the impact that this statement will have on the Company.
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 36
RESPONSIBILITY FOR PREPARATION
OF FINANCIAL STATEMENTS
TO THE STOCKHOLDERS OF AMC ENTERTAINMENT INC.
The accompanying consolidated financial statements and related notes of AMC
Entertainment Inc. and subsidiaries were prepared by management in conformity
with generally accepted accounting principles appropriate in the circumstances.
In preparing the financial statements, management has made judgments and
estimates based on currently available information. Management is responsible
for the information; representations contained elsewhere in this Annual Report
are consistent with the financial statements.
The Company has a formalized system of internal accounting controls designed
to provide reasonable assurance that assets are safeguarded and that its
financial records are reliable. Management monitors the system for compliance
to measure its effectiveness and recommends possible improvements. In
addition, as part of their audit of the consolidated financial statements, the
Company's independent accountants review and test the internal accounting
controls on a selected basis to establish a basis of reliance in determining
the nature, extent and timing of audit tests to be applied.
The Board of Directors oversees financial reporting and internal accounting
control through its Audit Committee. This committee meets (jointly and
separately) with the independent accountants, management and internal auditor
to monitor the proper discharge of responsibilities relative to internal
accounting controls and consolidated financial statements.
/s/ Peter C. Brown
Peter C. Brown
President and Chief Financial Officer
AMC ENTERTAINMENT INC.
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<PAGE>
<PAGE> 37
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF AMC ENTERTAINMENT INC.
KANSAS CITY, MISSOURI
We have audited the accompanying consolidated balance sheets of AMC
Entertainment Inc. and subsidiaries as of April 3, 1997 and March 28, 1996,
and the related consolidated statements of operations, stockholders' equity
and cash flows for the year (53 weeks) ended April 3, 1997 and the years (52
weeks) ended March 28, 1996 and March 30, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AMC
Entertainment Inc. and subsidiaries as of April 3, 1997 and March 28, 1996,
and the consolidated results of their operations and their cash flows for the
year (53 weeks) ended April 3, 1997 and the years (52 weeks) ended March 28,
1996 and March 30, 1995, in conformity with generally accepted accounting
principles.
/s/ Cooper & Lybrand L.L.P.
Kansas City, Missouri
May 16, 1997
AMC ENTERTAINMENT INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
53 Weeks Ended 52 Weeks Ended 52 Weeks Ended
--------------------------------------------------
April 3, March 28, March 30,
(In thousands, except per share amount) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Admissions $492,951 $431,361 $371,145
Concessions 225,167 196,645 169,120
Other 31,479 27,966 23,079
-----------------------------------------------
Total revenues 749,597 655,972 563,344
Expenses
Film rentals 247,199 215,099 182,669
Concession costs 36,748 30,417 24,383
Other 296,055 245,842 225,711
-----------------------------------------------
Total cost of operations 580,002 491,358 432,763
General and administrative 56,647 52,059 41,639
Depreciation and amortization 59,803 43,886 37,913
-----------------------------------------------
Total expenses 696,452 587,303 512,315
-----------------------------------------------
Operating income 53,145 68,669 51,029
Other expense (income)
Interest expense
Corporate borrowings 12,016 18,099 24,502
Capital lease obligations 10,006 10,729 11,406
Investment income (856) (7,052) (10,013)
Loss on disposition of assets 84 222 156
-----------------------------------------------
Earnings before income taxes and extraordinary item 31,895 46,671 24,978
Income tax provision 12,900 19,300 (9,000)
-----------------------------------------------
Earnings before extraordinary item 18,995 27,371 33,978
Extraordinary item - Loss on extinguishment of debt
(net of income tax benefit of $13,400) - (19,350) -
-----------------------------------------------
Net earnings $ 18,995 $ 8,021 $ 33,978
===============================================
Preferred dividends 5,907 7,000 7,000
-----------------------------------------------
Net earnings for common shares $ 13,088 $ 1,021 $ 26,978
===============================================
Earnings per share before extraordinary item:
Primary $ .74 $ 1.21 $ 1.63
===============================================
Fully diluted $ .73 $ 1.20 $ 1.45
===============================================
Earnings per share:
Primary $ .74 $ .06 $ 1.63
===============================================
Fully diluted $ .73 $ .06 $ 1.45
===============================================
See Notes to Consolidated Financial Statements.
</TABLE>
AMC ENTERTAINMENT INC.
- ------------------------
36
<PAGE>
<PAGE> 39
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 3, March 28,
(In thousands, except share amounts) 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 24,715 $ 10,795
Receivables, net of allowance for doubtful accounts of $704
as of April 3, 1997 and $801 as of March 28, 1996 42,188 20,503
Other current assets 16,769 15,179
----------------------------
Total current assets 83,672 46,477
Property, net 543,058 355,485
Intangible assets, net 28,679 36,483
Other long-term assets 62,804 45,013
----------------------------
Total assets $718,213 $483,458
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 88,367 $ 59,353
Accrued expenses and other liabilities 42,459 43,319
Current maturities of corporate borrowings and capital lease obligations 3,441 2,904
----------------------------
Total current liabilities 134,267 105,576
Corporate borrowings 315,046 126,127
Capital lease obligations 55,237 59,141
Other long-term liabilities 43,651 33,696
----------------------------
Total liabilities 548,201 324,540
Commitments and contingencies
Stockholders' equity:
$1.75 Cumulative Convertible Preferred Stock, 66 2/3 cents par value; 3,303,600 and
4,000,000 shares issued and outstanding as of April 3, 1997, and March 28,
1996, respectively (aggregate liquidation preference of $82,590 and $100,000 as
of April 3, 1997 and March 28, 1996, respectively) 2,202 2,667
Common Stock, 66 2/3 cents par value; 6,,604,469 and 5,388,880 shares
issued as of April 3, 1997, and March 28, 1996, respectively 4,403 3,593
Convertible Class B Stock, 66 2/3 cents par value; 11,157,000 shares issued and
outstanding 7,438 7,438
Additional paid-in capital 107,781 107,986
Foreign currency translation adjustment (2,048) -
Retained earnings 50,605 37,603
----------------------------
170,381 159,287
Less - Common Stock in treasury, at cost, 20,500 shares as of April 3, 1997
and March 28, 1996 369 369
----------------------------
Total stockholders' equity 170,012 158,918
----------------------------
Total liabilities and stockholders' equity $718,213 $483,458
============================
See Notes to Consolidated Financial Statements.
</TABLE>
AMC ENTERTAINMENT INC.
------------------------
37
<PAGE>
<PAGE> 40
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
53 Weeks Ended 52 Weeks Ended 52 Weeks Ended
---------------------------------------------------
April 3, March 28, March 30,
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Equivalents
Cash flows from operating activities:
Net earnings $ 18,995 $ 8,021 $ 33,978
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 59,803 43,886 37,913
Deferred income taxes (2,476) (1,328) (21,285)
Gain on sale of available for sale investments - - (1,407)
Extraordinary item - 19,350 -
Loss on sale of long-term assets 84 222 156
Change in assets and liabilities:
Receivables (609) (1,537) 807
Other current assets 1,578 10,167 (578)
Accounts payable 41,486 7,458 341
Accrued expenses and other liabilities 12,441 7,640 (5,763)
Other, net 2,772 2,968 204
-----------------------------------------------
Total adjustments 115,079 88,826 10,388
-----------------------------------------------
Net cash provided by operating activities 134,074 96,847 44,366
-----------------------------------------------
Cash flows from investing activities:
Capital expenditures (253,380) (120,796) (56,403)
Purchase of real estate investment (7,692) - -
Acquisition of minority interest (7,400) - -
Purchases of available for sale investments - (424,134) (314,368)
Proceeds from maturities of available for sale investments - 493,278 364,374
Proceeds from sales of available for sale investments - - 11,689
Proceeds from disposition of long-term assets 15,054 2,243 70
Net change in refundable construction advances (21,076) (10,394) (182)
Other, net (9,423) (7,045) (1,516)
-----------------------------------------------
Net cash provided by (used in) investing activities (283,917) (66,848) 3,664
-----------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit facility (10,000) 120,000 -
Proceeds from issuance of 9 1/2% Senior Subordinated Notes 198,938 - -
Principal payments under capital lease obligations (2,835) (2,455) (2,088)
Repurchase of 11 7/8% Senior and 12 5/8% Senior Subordinated Notes - (220,734) -
Cash overdrafts (11,673) 22,848 -
Other repayments - (404) (34)
Proceeds from exercise of stock options 140 878 239
Dividends paid on preferred stock (5,993) (7,000) (7,233)
Deferred financing costs and other (4,595) (3,570) -
-----------------------------------------------
Net cash provided by (used in) financing activities 163,982 (90,437) (9,116)
-----------------------------------------------
Effect of exchange rate changes on cash and equivalents (219) - -
-----------------------------------------------
Net increase (decrease) in cash and equivalents 13,920 (60,438) 38,914
Cash and equivalents at beginning of year 10,795 71,233 32,319
-----------------------------------------------
Cash and equivalents at end of year $ 24,715 $ 10,795 $ 71,233
===============================================
</TABLE>
AMC ENTERTAINMENT INC.
- ------------------------
38
<PAGE>
<PAGE> 41
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During 1995, capital lease obligations of $1,363 were incurred in connection
with property acquired.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
53 Weeks Ended 52 Weeks Ended 52 Weeks Ended
---------------------------------------------------
April 3, March 28, March 30,
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized of $3,344, $3,003 and $870) $24,188 $34,775 $35,878
Income taxes, net 6,285 9,787 14,822
See Notes to Consolidated Financial Statements.
</TABLE>
AMC ENTERTAINMENT INC.
------------------------
39
<PAGE>
<PAGE> 42
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
(In thousands, except share and per share amounts) Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, April 1, 1994 4,000,000 $2,667 5,266,830 $3,511
Net earnings - - - -
Exercise of options on Common Stock - - 39,550 27
Dividends declared: $1.75 Preferred Stock - - - -
---------------------------------------------------------------
Balance, March 30, 1995 4,000,000 2,667 5,306,380 3,538
Net earnings - - - -
Exercise of options on Common Stock - - 82,500 55
Dividends declared: $1.75 Preferred Stock - - - -
Acquisition of Common
Stock in Treasury - - - -
---------------------------------------------------------------
Balance, March 28, 1996 4,000,000 2,667 5,388,880 3,593
Net earnings - - - -
Exercise of options on Common Stock - - 15,000 10
Preferred Stock conversions (696,400) (465) 1,200,589 800
Dividends declared: $1.75 Preferred Stock - - - -
Foreign currency translation adjustment - - - -
---------------------------------------------------------------
Balance, April 3, 1997 3,303,600 $2,202 6,604,469 $4,403
===============================================================
See Notes to Consolidated Financial Statements.
AMC ENTERTAINMENT INC.
- ------------------------
40
<PAGE>
<PAGE> 43
<CAPTION>
Additional Foreign Currency
Class B Stock Paid-in Translation
Shares Amount Capital Adjustment
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, April 1, 1994 11,157,000 $7,438 $106,951 $ -
Net earnings - - - -
Exercise of options on Common Stock - - 212 -
Dividends declared: $1.75 Preferred Stock - - - -
----------------------------------------------------------------------
Balance, March 30, 1995 11,157,000 7,438 107,163 -
Net earnings - - - -
Exercise of options on Common Stock - - 823 -
Dividends declared: $1.75 Preferred Stock - - - -
Acquisition of Common
Stock in Treasury - - - -
----------------------------------------------------------------------
Balance, March 28, 1996 11,157,000 7,438 107,986 -
Net earnings - - - -
Exercise of options on Common Stock - - 130 -
Preferred Stock conversions - - (335) -
Dividends declared: $1.75 Preferred Stock - - - -
Foreign currency translation adjustment - - - (2,048)
----------------------------------------------------------------------
Balance, April 3, 1997 11,157,000 $7,438 $107,781 $(2,048)
======================================================================
<CAPTION>
Common Stock Total
Retained in Treasury Stockholders'
Earnings Shares Amount Equity
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, April 1, 1994 $ 9,837 - $ - $130,404
Net earnings 33,978 - - 33,978
Exercise of options on Common Stock - - - 239
Dividends declared: $1.75 Preferred Stock (7,233) - - (7,233)
--------------------------------------------------------------
Balance, March 30, 1995 36,582 - - 157,388
Net earnings 8,021 - - 8,021
Exercise of options on Common Stock - - - 878
Dividends declared: $1.75 Preferred Stock (7,000) - - (7,000)
Acquisition of Common
Stock in Treasury - 20,500 (369) (369)
--------------------------------------------------------------
Balance, March 28, 1996 37,603 20,500 (369) 158,918
Net earnings 18,995 - - 18,995
Exercise of options on Common Stock - - - 140
Preferred Stock conversions - - - -
Dividends declared: $1.75 Preferred Stock (5,993) - - (5,993)
Foreign currency translation adjustment - - - (2,048)
--------------------------------------------------------------
Balance, April 3, 1997 $50,605 20,500 $ (369) $170,012
==============================================================
</TABLE>
AMC ENTERTAINMENT INC.
------------------------
41
<PAGE>
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
AMC Entertainment Inc. ("AMCE") is a holding company, which 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 and Portugal. 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.
Approximately 78% of AMCE's outstanding voting securities are owned by
Durwood, Inc. ("DI"). See Note 12 for further description of AMCE's
transactions with DI.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Although these estimates are based on management's
knowledge of current events and actions it may undertake in the future, they
may ultimately differ from actual results.
Principles of Consolidation: The consolidated financial statements include the
accounts of AMCE and all subsidiaries. All significant intercompany balances
and transactions have been eliminated.
Fiscal Year: The Company has a 52/53 week fiscal year ending on the Thursday
closest to the last day of March. The 1997 fiscal year reflects a 53 week
period, fiscal years 1996 and 1995 each reflect a 52 week period. Fiscal year
1998 will reflect a 52 week period.
Revenues and Film Rental Costs: Revenues are recognized when admissions and
concessions sales are received at the theatres. Film rental costs are
recognized based on the applicable box office receipts and the terms of the
film licenses.
Cash and Equivalents: Cash and equivalents consists of cash on hand and
temporary cash investments with original maturities of less than thirty days.
The Company invests excess cash in deposits with major banks and in temporary
cash investments. Such investments are made only in instruments issued or
enhanced by high quality financial institutions (investment grade or better).
Amounts invested in a single institution are limited to minimize risk. Under
the Company's cash management system, checks issued but not presented to banks
frequently result in overdraft balances for accounting purposes and are
classified within accounts payable in the balance sheet.
AMC ENTERTAINMENT INC.
- ------------------------
42
<PAGE>
<PAGE> 45
The amount of these checks included in accounts payable as of April 3, 1997
and March 28, 1996 was $11,175,000 and $22,848,000, respectively.
Investments: For purposes of determining gross realized gains and losses, the
cost of investment securities sold is determined upon specific identification.
Proceeds and gross realized gains from the sales in 1995 of equity securities
classified as other long-term assets as of March 31, 1994 were $11,689,000 and
$1,407,000, respectively.
Refundable Construction Advances: Included in receivables as of April 3, 1997
and March 28, 1996 is $33,193,000 and $12,117,000, respectively, due from
developers to fund a portion of the construction costs of new theatres that
are to be operated by the Company pursuant to lease agreements. These amounts
are repaid by the developers either during construction or shortly after
completion.
Property: Property is recorded at cost. The Company uses the straight-line
method in computing depreciation and amortization for financial reporting
purposes and accelerated methods, with respect to certain assets, for income
tax purposes. The estimated useful lives are generally as follows:
Buildings and improvements 20 to 40 years
Leasehold improvements 5 to 25 years
Furniture, fixtures and equipment 3 to 10 years
Expenditures for additions (including interest during construction), major
renewals and betterments are capitalized, and expenditures for maintenance and
repairs are charged to expense as incurred. The cost of assets retired or
otherwise disposed of and the related accumulated depreciation are eliminated
from the accounts in the year of disposal. Gains or losses resulting from
property disposals are credited or charged to operations currently.
Intangible Assets: Intangible assets are recorded at cost and are comprised of
lease rights, which are amounts assigned to theatre leases assumed under
favorable terms, and location premiums on acquired theatres which are being
amortized on a straight-line basis over the estimated remaining useful life of
the theatre. Accumulated amortization on intangible assets was approximately
$41,690,000 and $36,035,000 as of April 3, 1997 and March 28, 1996,
respectively.
Effective December 30, 1994, the Company reduced the estimated lives of lease
rights and location premiums on certain smaller theatres to correspond to the
base terms of the theatre leases. This change in accounting estimate was made
to better match the estimated life of the intangible assets with the life of
the theatre due to the Company's strategic plans to primarily own and operate
larger theatres. The effect of this change in estimate was to increase
amortization expense in 1995 by $1,542,000 and decrease net earnings by
$876,000, or $.05 per share.
AMC ENTERTAINMENT INC.
------------------------
43
<PAGE>
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
Other Long-term Assets: Other long-term assets are comprised principally of
costs incurred in connection with the issuance of debt securities which are
being amortized over the respective life of the issue; investments in real
estate; investments in partnerships and corporate joint ventures accounted for
under the equity method; preopening costs relating to new theatres which are
being amortized over two years; and long-term deferred income taxes.
Foreign Currency Translation: The financial statements of subsidiaries outside
the United States are generally measured using the local currency as the
functional currency. Assets and liabilities of these subsidiaries are
translated at the rates of exchange at the balance sheet date. Income and
expense items are translated at average rates of exchange. The resultant
translation adjustments are included in foreign currency translation
adjustment, a separate component of stockholders' equity. Gains and losses
from foreign currency transactions of these subsidiaries are included in net
earnings and have not been material.
Income Taxes: Income taxes are calculated in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes. The statement requires that deferred income taxes reflect the impact of
temporary differences between the amount of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws and
regulations.
Earnings per Share: Primary earnings per share is computed by dividing net
earnings for common shares 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 17,726,000 in 1997,
16,795,000 in 1996 and 16,593,000 in 1995. On a fully diluted basis, both net
earnings and shares outstanding are adjusted to assume the conversion of $1.75
Cumulative Convertible Preferred Stock, if dilutive. The average shares used
in the computations were 17,940,000 in 1997, 17,031,000 in 1996 and 23,509,000
in 1995.
Changes in Accounting Principles: During fiscal 1996, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation. The Statement allows companies to
measure compensation cost in connection with employee stock compensation plans
using a fair value based method or to continue to use an intrinsic value based
method to account for stock options and awards. The Company has chosen to
continue using the intrinsic value based method while adopting the
disclosure-only provisions of the pronouncement.
AMC ENTERTAINMENT INC.
- ------------------------
44
<PAGE>
<PAGE> 47
During the fourth quarter of fiscal 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of ("SFAS 121").
This Statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets to be held and used. In connection with the adoption of this
Statement, the Company reviewed the assets and related intangibles of its motion
picture theatres for impairment on a disaggregated basis. The expected future
cash flows of certain theatres, undiscounted and without interest charges, were
less than the carrying value of the assets. As a result, the Company
recognized an impairment loss of $1,799,000. The impairment loss represents
the amount by which the carrying value of the theatre assets, including
intangibles, exceeded the estimated fair value of those assets. The estimated
fair value of assets was determined as the present value of estimated expected
future cash flows. The loss is included in depreciation and amortization in
the Consolidated Statements of Operations.
During fiscal 1997, the Company continued to review the assets and related
intangibles of its motion picture theatres for impairment in accordance with
the provisions of SFAS 121. As a result of expected declines in future cash
flows of certain theatres, the Company recognized an impairment loss of
$7,231,000 which is included in depreciation and amortization in the
Consolidated Statements of Operations.
During fiscal 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings per Share.
SFAS 128 eliminates the presentation of primary and fully diluted earnings per
share ("EPS") and requires presentation of basic and diluted EPS. The
principal difference between primary and basic EPS is that common stock
equivalents are not included with the weighted average number of shares
outstanding used in the computation of basic EPS. Diluted EPS is computed
similarly to fully diluted EPS. SFAS 128 is effective for periods ending after
December 15, 1997, including interim periods, and requires restatement of all
prior-period EPS data. Early adoption is not permitted. Management has not yet
determined the impact that this statement will have on the Company.
Presentation: Certain amounts have been reclassified from prior period
consolidated financial statements to conform with the current year
presentation.
NOTE 2 - ACQUISITION
On January 10, 1997, the Company purchased the 20% minority interest in the
common stock of AMC Philadelphia, Inc., an 80% owned subsidiary, for
$7,400,000 in cash. The acquisition has been accounted for using the purchase
method of accounting. The excess of the purchase price over the fair value of
the assets acquired is
AMC ENTERTAINMENT INC.
------------------------
45
<PAGE>
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
being amortized on a straight-line basis over the estimated useful life of the
assets acquired.
NOTE 3 - PROPERTY
A summary of property is as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Property owned:
Land $ 60,090 $ 35,610
Buildings and improvements 221,396 146,061
Furniture, fixtures and equipment 264,619 205,761
Leasehold improvements 211,720 146,152
--------------------------
757,825 533,584
Less-accumulated depreciation and amortization 246,476 213,654
--------------------------
511,349 319,930
Property leased under capital leases:
Buildings 66,074 67,274
Less-accumulated amortization 34,365 31,719
--------------------------
31,709 35,555
--------------------------
$543,058 $355,485
==========================
Included in property is $83,558,000 and $35,289,000 of construction in
progress as of April 3, 1997 and March 28, 1996, respectively.
AMC ENTERTAINMENT INC.
- ------------------------
46
<PAGE>
<PAGE> 49
NOTE 4 - OTHER ASSETS AND LIABILITIES
Other assets and liabilities consist of the following:
</TABLE>
<TABLE>
<CAPTION>
(In thousands):
1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Other current assets:
Prepaid rent $ 7,366 $ 6,412
Prepaid income taxes - 3,074
Deferred income taxes 6,376 3,207
Other 3,027 2,486
-------------------------
$16,769 $15,179
=========================
Other long-term assets:
Investments in real estate $15,329 $ 6,922
Investments in partnerships and corporate joint ventures 733 1,121
Deferred charges, net 12,147 6,203
Deferred income taxes 23,813 24,506
Preopening costs 6,519 2,636
Other 4,263 3,625
-------------------------
$62,804 $45,013
=========================
Accrued expenses and other liabilities:
Taxes other than income $10,030 $ 7,110
Income taxes 6,017 -
Interest 1,512 841
Payroll and vacation 4,982 6,149
Casualty claims and premiums 4,655 2,034
Deferred income 8,911 11,634
Accrued bonus 3,974 7,634
Other 2,378 7,917
-------------------------
$42,459 $43,319
=========================
</TABLE>
AMC ENTERTAINMENT INC.
------------------------
47
<PAGE>
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
NOTE 5 - CORPORATE BORROWINGS AND CAPITAL LEASE OBLIGATIONS
A summary of corporate borrowings and capital lease obligations is as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$425 million revolving Credit Facility due 2004 $110,000 $120,000
11 7/8% Senior Notes due 2000 615 614
9 1/2% Senior Subordinated Notes due 2009 198,940 -
12 5/8% Senior Subordinated Notes due 2002 4,882 4,878
Capital lease obligations, interest ranging from 7 1/4% to 20% 58,652 62,022
Other indebtedness 635 658
--------------------------
Total 373,724 188,172
Less-current maturities 3,441 2,904
--------------------------
$370,283 $185,268
==========================
</TABLE>
On December 28, 1995, the Company completed the redemption of $99,383,000 of
its outstanding 11 7/8% Senior Notes due 2000 at a 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 price of $1,144.95 per $1,000 principal
amount. In addition, the terms of the Indentures governing the remaining
Senior and Senior Subordinated Notes were amended to eliminate certain
restrictive covenants. Sources of funds for the redemption were cash and
investments on hand and borrowings on a credit facility. Premiums paid to
redeem the Senior and Senior Subordinated Notes, together with the write-off
of unamortized debt issue costs and other costs directly related to the debt
redemptions, resulted in an extraordinary loss of $19,350,000, net of income
tax benefit of $13,400,000. The extraordinary loss reduced earnings per share
by $1.15 for the year (52 weeks) ended March 28, 1996.
As a part of the refinancing plan, the Company entered into a $425 million
credit facility (the "Credit Facility"), which was amended and restated as of
April 10, 1997. The Credit Facility 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 .1875% to .375% on the
unused portion of the commitment. The Credit Facility matures in 2004. The
commitment thereunder will reduce by $25 million on each of December 31, 2002,
March 31, 2003, June 30, 2003 and September 30, 2003 and by $50 million on
December 31, 2003. As of April 3, 1997, the Company had outstanding borrowings
of $110,000,000 under the Credit Facility at an average interest rate of 6.4%
per annum.
AMC ENTERTAINMENT INC.
- ------------------------
48
<PAGE>
<PAGE> 51
Covenants of the Credit Facility impose limitations on the incurrence of
additional indebtedness, creation of liens, change of control, transactions
with affiliates, mergers, investments, guaranties, asset sales, business
activities and pledges. The Company is also required to maintain certain
financial covenants, as defined in the Credit Facility. As of April 3, 1997,
the Company was in compliance with all financial covenants relating to the
Credit Facility.
Prior to its April 10, 1997 amendment and restatement, the Credit Facility
contained a covenant that generally limited the Company's capital
expenditures. This covenant has been eliminated.
Costs related to the establishment of the Credit Facility were capitalized and
are charged to interest expense over the life of the Credit Facility.
Unamortized issuance costs of $2,821,000 as of April 3, 1997 are included in
other long-term assets.
On March 19, 1997, the Company sold $200 million of Senior Subordinated Notes
due 2009 (the "Notes"). The Notes bear interest at the rate of 9 1/2% per
annum, payable in March and September. The Notes are redeemable at the option
of the Company, in whole or in part, at any time on or after March 15, 2002 at
104.75% of the principal amount thereof, declining ratably to 100% of the
principal amount thereof on or after March 15, 2006, plus in each case
interest accrued to the redemption date. Upon a change of control (as defined
in the Note Indenture), each holder of the Notes will have the right to
require the Company to repurchase such holder's Notes at a price equal to 101%
of the principal amount thereof plus accrued and unpaid interest to the date
of repurchase. The Notes are subordinated to all existing and future senior
indebtedness (as defined in the Note Indenture) of the Company.
The Note Indenture contains certain covenants that, among other things,
restrict the ability of the Company and its subsidiaries to incur additional
indebtedness and pay dividends or make distributions in respect of their
capital stock. If the Notes attain "investment grade status" (as defined in
the Note Indenture), the covenants in the Note Indenture limiting the
Company's ability to incur additional indebtedness and pay dividends will
cease to apply. As of April 3, 1997, the Company was in compliance with all
financial covenants relating to the Note Indenture.
The Note Indenture also requires the Company to use its best efforts to
consummate a registered offer to exchange the Notes (the "Exchange Offer") for
notes of AMCE with terms identical in all material respects to the Notes or
cause a shelf registration statement with respect to the Notes to become
effective. In the event that certain filing deadlines as specified in the Note
Indenture are not met, the interest rate borne by the Notes could increase as
much as 1.0% per annum. The Company anticipates meeting its filing deadlines.
AMC ENTERTAINMENT INC.
------------------------
49
<PAGE>
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
The discount on the Notes is being amortized to interest expense following the
interest method of amortization. Costs related to the issuance of the Notes
were capitalized and are charged to interest expense, following the
interest method, over the life of the securities. Unamortized issuance costs
of $4,572,000 as of April 3, 1997 are included in other long-term assets.
Minimum annual payments required under existing capital lease obligations (net
present value thereof) and maturities of corporate borrowings as of April 3,
1997, are as follows:
<TABLE>
<CAPTION>
Capital Lease Obligations
--------------------------------------
Minimum Net
Lease Less Present Corporate
(In thousands) Payments Interest Value Borrowings Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 $ 12,795 $ 9,380 $ 3,415 $ 26 $ 3,441
1999 12,800 8,715 4,085 30 4,115
2000 12,211 8,026 4,185 34 4,219
2001 11,939 7,294 4,645 653 5,298
2002 11,110 6,529 4,581 43 4,624
Thereafter 70,161 32,420 37,741 314,286 352,027
--------------------------------------------------------------------
Total $131,016 $72,364 $58,652 $315,072 $373,724
====================================================================
</TABLE>
The Company maintains a letter of credit in the normal course of its business.
The unused portion of the letter of credit was $2,378,000 as of April 3, 1997.
NOTE 6 - STOCKHOLDERS' EQUITY
The authorized Common Stock of AMCE consists of two classes of stock. Except
for the election of directors, each holder of Common Stock (66 2/3 cents par
value; 45,000,000 shares authorized) is entitled to one vote per share, and each
holder of Class B Stock (66 2/3 cents par value; 30,000,000 shares authorized)
is entitled to 10 votes per share. Common stockholders voting as a class are
presently entitled to elect two of the seven members of AMCE's Board of
Directors with Class B stockholders electing the remainder.
Holders of the Company's stock have no pre-emptive or subscription rights and
there are no restrictions with respect to transferability. Holders of the
Common Stock have no conversion rights, but holders of Class B Stock may elect
to convert at any time on a share-for-share basis into Common Stock.
The Company has authorized 10,000,000 shares of Preferred Stock (66 2/3 cents
par value), of which 3,303,600 shares of $1.75 Cumulative Convertible Preferred
Stock (66 2/3 cents par value) (the "Convertible Preferred Stock") are issued
and outstanding. Dividends are payable quarterly at an annual rate of $1.75 per
share.
AMC ENTERTAINMENT INC.
- ------------------------
50
<PAGE>
<PAGE> 53
The Convertible Preferred Stock has preference in liquidation in the amount of
$25 per share plus accrued and unpaid dividends. The Convertible Preferred
Stock is convertible at the option of the holder into shares of Common Stock
at a conversion price of $14.50 per share of Common Stock, subject to change
in certain events. In lieu of conversion the Company may, at its option, pay
to the holder cash equal to the then market value of the Common Stock. The
Company may redeem in whole or in part the Convertible Preferred Stock at a
redemption price beginning at $26.00 per share, declining ratably to $25.00
per share after March 15, 2001.
During 1997, various holders of the Company's Convertible Preferred Stock
converted 696,400 shares into 1,200,589 shares of Common Stock at a conversion
rate of 1.724 shares of Common Stock for each share of Convertible Preferred
Stock.
Stock-Based Compensation Plans
In June 1983, AMCE adopted a stock option plan (the "1983 Plan") for selected
employees. This plan provided for the grant of rights to purchase shares of
Common Stock under both incentive and non-incentive stock option agreements.
The number of shares which could be sold under the plan could not exceed
750,000 shares. The 1983 Plan provided that the exercise price could not be
less than the fair market value of the stock at the date of grant and
unexercised options expired no later than ten years after date of grant.
Pursuant to the terms of the 1983 Plan, no further options may be granted
under this plan.
In September 1984, AMCE adopted a non-qualified stock option plan (the "1984
Plan"). This plan provided for the grant of rights to purchase shares of
Common Stock under non-qualified stock option agreements. The number of shares
which could be sold under the plan could not exceed 750,000 shares. The 1984
Plan provided that the exercise price would be determined by the Company's
Stock Option Committee and that the options expired no later than ten years
after date of grant. Pursuant to the terms of the 1984 Plan, no further
options may be granted under this plan.
In November 1994, AMCE adopted a stock option and incentive plan (the "1994
Plan"). This plan provides for three basic types of awards: (i) grants of
stock options which are either incentive or non-qualified stock options, (ii)
grants of stock awards, which may be either performance or restricted stock
awards, and (iii) performance unit awards. The number of shares of Common
Stock which may be sold or granted under the plan may not exceed 1,000,000
shares. The 1994 Plan provides that the exercise price for stock options may
not be less than the fair market value of the stock at the date of grant and
unexercised options expire no later than ten years after date of grant.
Options issued under the 1994 Plan vest over two years from the date of
issuance.
AMC ENTERTAINMENT INC.
------------------------
51
<PAGE>
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
The Company has adopted the disclosure-only provisions of SFAS 123. As
permitted by SFAS 123, the Company has chosen to continue to account for
stock-based compensation using the intrinsic value method. Accordingly,
no compensation expense has been recognized for the Company's stock-based
compensation plans other than for performance-based stock awards. In 1997 and
1996, the Company granted to certain individuals stock awards which are
issuable at the end of a performance period ending April 2, 1998 based on
certain performance criteria. The number of shares which may be issued at the
end of the performance period ranges from zero to 216,000. The Company
recognized compensation expense for performance stock awards of $586,000 and
$772,000 in 1997 and 1996, respectively. Had compensation expense for the
Company's plans been determined based on the fair value at the grant dates for
stock options and awards granted in 1997 and 1996, the Company's net earnings
and net earnings for common shares would have been different.
The pro forma amounts under SFAS 123 are indicated below:
<TABLE>
<CAPTION>
(In thousands except per share amounts) 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net earnings
As reported $18,995 $8,021
Pro forma $18,664 $8,210
Net earnings per common share
As reported $ .74 $ .06
Pro forma $ .72 $ .07
</TABLE>
The following table reflects the weighted average fair value per option
granted during the year, as well as the significant weighted average
assumptions used in determining fair value using the Black-Scholes
option-pricing model:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fair value on grant date $11.63 $ 6.96
Risk-free interest rate 6.24% 5.64%
Expected life (years) 5 5
Expected volatility 42.9 % 46.0 %
Expected dividend yield - -
</TABLE>
AMC ENTERTAINMENT INC.
- ------------------------
52
<PAGE>
<PAGE> 55
A summary of stock option activity under all plans is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Number Exercise Price Number Exercise Price Number Exercise Price
of Shares Per Share of Shares Per Share of Shares Per Share
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 487,500 $ 9.67 776,500 $ 9.57 813,300 $ 9.29
Granted 103,250 $ 24.80 23,250 $ 14.50 36,500 $ 11.75
Canceled (17,250) $ 10.04 (229,750) $ 9.46 (33,750) $ 9.38
Exercised (15,000) $ 9.375 (82,500) $ 10.65 (39,550) $ 6.01
--------------------------------------------------------------------------------------------
Outstanding at
end of year 558,500 $ 12.47 487,500 $ 9.67 776,500 $ 9.57
============================================================================================
Exercisable at
end of year 365,875 $ 10.51 233,250 $ 9.45 230,000 $ 9.79
============================================================================================
Available for grant at
end of year 630,500 746,500 817,500
============================================================================================
</TABLE>
The following table summarizes information about stock options as of April 3,
1997:
<TABLE>
<CAPTION>
Outstanding Stock Options Exercisable Stock Options
- ----------------------------------------------------------------------------------------------------------------------------
Weighted-Average
Range of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices of Shares Contractual Life Exercise Price of Shares Exercise Price
<S> <C> <C> <C> <C> <C>
$ 9.25 to $ 11.75 436,500 6.3 years $ 9.46 335,250 $ 9.51
$ 14.50 to $ 18.50 29,250 8.7 years $ 15.94 9,375 $ 14.50
$ 24.50 to $ 26.375 92,750 9.1 years $ 25.52 21,250 $ 24.50
- ----------------------------------------------------------------------------------------------------------------------------
$ 9.25 to $ 26.375 558,500 6.9 years $ 12.47 365,875 $ 10.51
============================================================================================================================
</TABLE>
AMC ENTERTAINMENT INC.
------------------------
53
<PAGE>
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
NOTE 7 - INCOME TAXES
Income taxes reflected in the Consolidated Statements of Operations for the
three years ended April 3, 1997 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 11,418 $ 5,134 $ 7,738
State 3,958 2,094 4,547
---------------------------------------------
Total current 15,376 7,228 12,285
Deferred:
Federal (2,114) (1,121) (1,238)
State (362) (207) (255)
Change in valuation allowance - - (19,792)
---------------------------------------------
Total deferred (2,476) (1,328) (21,285)
---------------------------------------------
Total provision 12,900 5,900 (9,000)
Tax benefit of extraordinary item - extinguishment of debt - 13,400 -
---------------------------------------------
Total provision before extraordinary item $ 12,900 $ 19,300 $ (9,000)
=============================================
</TABLE>
The effective tax rate on income before extraordinary items was 40.4%, 41.4%,
and (36.0%) in 1997, 1996 and 1995, respectively. The difference between the
effective rate and the U.S. federal income tax statutory rate of 35% is
accounted for as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax on earnings before provision for income tax
and extraordinary item at statutory rates $ 11,163 $ 16,335 $ 8,742
Add (subtract) tax effect of:
State income taxes, net of federal tax benefit 2,258 3,163 2,973
Change in valuation allowance - - (19,792)
Other, net (521) (198) (923)
--------------------------------------------
Income tax provision $ 12,900 $ 19,300 $ (9,000)
============================================
</TABLE>
AMC ENTERTAINMENT INC.
- ------------------------
54
<PAGE>
<PAGE> 57
The significant components of deferred income tax assets and liabilities as of
April 3, 1997 and March 28, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------------------------------------------
Deferred Income Tax Deferred Income Tax
(In thousands) Assets Liabilities Assets Liabilities
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accrued reserves and liabilities $ 9,189 $ 179 $ 5,323 $ 343
Investments in partnerships - 495 - 419
Capital lease obligations 11,464 - 10,852 -
Depreciation 5,587 - 7,842 -
Deferred rents 6,254 - 5,266 -
Other 550 2,181 683 1,491
----------------------------------------------------------------
Total 33,044 2,855 29,966 2,253
Less: Current deferred income taxes 6,586 210 3,702 495
----------------------------------------------------------------
Total noncurrent deferred income taxes $ 26,458 $ 2,645 $ 26,264 $ 1,758
================================================================
Net noncurrent deferred income taxes $ 23,813 $ 24,506
================================================================
</TABLE>
SFAS 109 requires that a valuation allowance be provided against deferred tax
assets if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. Based
upon positive earnings in recent years and the expectation that taxable income
will continue for the foreseeable future, management believes it is more
likely than not that the Company will realize its deferred tax assets and,
accordingly, no valuation allowance has been provided as of April 3, 1997 and
March 28, 1996.
NOTE 8 - LEASES
The majority of the Company's operations are conducted in premises occupied
under lease agreements with base terms ranging generally from 15 to 25 years,
with certain leases containing options to extend the leases for up to
an additional 20 years. The leases provide for fixed rentals and/or rentals
based on revenues with a guaranteed minimum. The Company also leases certain
equipment under leases expiring at various dates. The majority of the leases
provide that the Company will pay all, or substantially all, taxes,
maintenance, insurance and certain other operating expenses. Assets held under
capital lease obligations are included in property. Performance under some
leases has been guaranteed by DI.
AMC ENTERTAINMENT INC.
------------------------
55
<PAGE>
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
Following is a schedule, by year, of future minimum rental payments required
under existing operating leases that have initial or remaining non-cancellable
terms in excess of one year as of April 3, 1997:
<TABLE>
<CAPTION>
(In thousands)
- --------------------------------------------------------------------------------
<S> <C>
1998 $ 68,551
1999 69,070
2000 68,406
2001 66,388
2002 63,748
Thereafter 722,341
----------
Total minimum payments required $1,058,504
==========
</TABLE>
The Company has entered into agreements to lease space for the operation of
theatres not yet fully constructed. The scheduled completion of construction
and theatre openings are at various dates during fiscal 1998. The future
minimum rental payments required under the terms of these leases total
approximately $429 million.
In addition, the Company entered into a master lease agreement during fiscal
1997 for three theatres with an expected cost of approximately $81 million.
Rental amounts will be based on the final construction costs of the theatres
and the lessor's cost of funds and will be finalized as the theatres open. The
initial lease term under the agreement will be three years. The master lease
agreement provides for a substantial residual value guarantee by the Company
and includes purchase and renewal options. The Company expects these leases to
be classified as operating leases.
The Company records rent expense on a straight-line basis over the term of the
lease. Included in long-term liabilities as of April 3, 1997 and March 28, 1996
is $16,278,000 and $12,858,000, respectively, of deferred rent representing pro
rata future minimum rental payments for leases with scheduled rent increases.
Rent expense is summarized as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $ 80,670 $ 64,657 $ 59,790
Percentage rentals based on revenues 2,008 2,354 1,970
--------------------------------------------
$ 82,678 $ 67,011 $ 61,760
============================================
</TABLE>
AMC ENTERTAINMENT INC.
- ------------------------
56
<PAGE>
<PAGE> 59
NOTE 9 - EMPLOYEE BENEFIT PLANS
The Company sponsors a non-contributory defined benefit pension plan covering,
after a minimum of one year of employment, all employees age 21 or older, who
have completed 1,000 hours of service in their first twelve months of
employment or in a calendar year and who are not covered by a collective
bargaining agreement.
The plan calls for benefits to be paid to eligible employees at retirement
based primarily upon years of credited service with the Company (not exceeding
thirty-five) and the employee's highest five year average compensation.
Contributions to the plan reflect benefits attributed to employees' services to
date, as well as services expected to be earned in the future. Plan assets are
invested in a group annuity contract with an insurance company pursuant to
which the plan's benefits are paid to retired and terminated employees and the
beneficiaries of deceased employees.
The following table sets forth the plan's funded status as of December 31,
1996 and 1995 (plan valuation dates) and the amounts included in the
Consolidated Balance Sheets as of April 3, 1997 and March 28, 1996:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligation, including vested benefits of $11,139 and $10,041 $ 11,309 $ 10,205
===========================
Projected benefit obligation for service rendered to date $ 18,489 $ 17,051
Plan assets at fair value (10,857) (9,580)
---------------------------
Projected benefit obligation in excess of plan assets 7,632 7,471
Unrecognized net loss from past experience different from that
assumed and effects of changes in assumptions (686) (1,509)
Unrecognized net obligation upon adoption being recognized over 15 years (1,411) (1,588)
---------------------------
Pension liability $ 5,535 $ 4,374
===========================
</TABLE>
Net pension expense includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 1,191 $ 855 $ 1,261
Interest cost 1,188 966 971
Actual return on plan assets (1,218) (1,630) 55
Net amortization and deferral 563 1,096 (190)
-------------------------------------------
Net pension expense $ 1,724 $ 1,287 $ 2,097
===========================================
</TABLE>
The Company also sponsors a non-contributory Supplemental Executive Retirement
Plan (the "SERP") which provides certain employees additional pension benefits.
The actuarial present value of accumulated plan benefits related to the SERP
was $569,000 and $379,000 as of April 3, 1997 and March 28, 1996, respectively,
which is reflected in the Consolidated Balance Sheets.
AMC ENTERTAINMENT INC.
------------------------
57
<PAGE>
<PAGE> 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997, and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
The weighted average discount rate used to measure the plans' projected
benefit obligations was 7.0% for 1997 and 1996 and 7.75% in 1995. The rate of
increase in future compensation levels was 6.0% for 1997, 1996 and 1995 and
the expected long-term rate of return on assets was 8.5% for 1997, 1996 and
1995. A limited number of employees are covered by collective bargaining
agreements under which payments are made to a union-administered fund.
The Company sponsors a voluntary thrift savings plan covering the same
employees eligible for the pension plan. Since inception of the savings plan,
the Company has matched 50% of each eligible employee's elective contributions,
limited to 3% of the employee's salary.
The Company's expense under the thrift savings plan was $1,270,000, $1,032,000
and $1,015,000 for 1997, 1996 and 1995, respectively.
The Company currently offers eligible retirees the opportunity to participate
in a health plan (medical and dental) and a life insurance plan. Substantially
all employees may become eligible for these benefits provided that the employee
must be at least 55 years of age and have 15 years of credited service at
retirement. The health plan is contributory, with retiree contributions
adjusted annually; the life insurance plan is noncontributory. The accounting
for the health plan anticipates future modifications to the cost-sharing
provisions to provide for retiree premium contributions of approximately 20% of
total premiums, increases in deductibles and co-insurance at the medical
inflation rate and coordination with Medicare. Retiree health and life
insurance plans are not funded. The Company is amortizing the transition
obligation on the straight-line method over a period of 20 years.
The following table sets forth the plans' accumulated postretirement benefit
obligation reconciled with the amounts included in the Consolidated Balance
Sheets as of April 3, 1997 and March 28, 1996:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 618 $ 557
Fully eligible active plan participants 513 438
Other active plan participants 1,777 1,292
-------------------------
Accumulated postretirement benefit obligation 2,908 2,287
Unrecognized net obligation upon adoption being
recognized over 20 years (697) (747)
Unrecognized gain (loss) (190) 105
-------------------------
Postretirement benefit liability $ 2,021 $ 1,645
=========================
</TABLE>
AMC ENTERTAINMENT INC.
- ------------------------
58
<PAGE>
<PAGE> 61
Postretirement expense includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 199 $ 192 $ 188
Interest cost 172 208 202
Net amortization and deferral 50 66 66
-----------------------------------------
Postretirement expense $ 421 $ 466 $ 456
=========================================
</TABLE>
For measurement purposes, the annual rate of increase in the per capita cost
of covered health care benefits assumed for 1997 was 7.5% for medical and
4.75% for dental. The rates were assumed to decrease gradually to 5.0% for
medical and 3.0% for dental at 2020 and remain at that level thereafter. The
health care cost trend rate assumption has a significant effect on the amounts
reported. Increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of April 3, 1997 by $862,000 and the aggregate of the service and
interest cost components of postretirement expense for 1997 by $164,000. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% for 1997 and 1996 and 7.75% for
1995.
NOTE 10 - 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,
cash flows or results of operations of the Company.
NOTE 11 - FUTURE DISPOSITION OF ASSETS
The Company has provided reserves for estimated losses from discontinuing the
operation of fast food restaurants, for theatres which have been or are
expected to be closed and for other future dispositions of assets.
In conjunction with the opening of certain new theatres in fiscal 1986 through
1988, the Company expanded its food services by leasing additional space
adjacent to those theatres to operate specialty fast food restaurants. The
Company discontinued operating the restaurants due to unprofitability. The
Company continues to sub-lease or to convert to other uses the space leased
for these restaurants. The Company is obligated under long-term lease
commitments with remaining terms of up to eleven years. As of April 3, 1997,
the base rents aggregate approximately $779,000 annually, and $7,150,000 over
the remaining term of the leases. As of April 3, 1997, the Company has
subleased approximately 55% of the space with remaining terms ranging from 2
months to 68 months. Non-cancellable subleases currently aggregate
approximately $496,000 annually, and $4,216,000 over the remaining term of the
subleases.
AMC ENTERTAINMENT INC.
------------------------
59
<PAGE>
<PAGE> 62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year (53 Weeks) Ended April 3, 1997 and Years (52 Weeks) Ended March 28, 1996
and March 30, 1995
NOTE 12 - TRANSACTIONS WITH DURWOOD, INC.
The Company and DI maintain intercompany accounts. Charges to the intercompany
accounts include the allocation of AMC general and administrative expense of
$116,000 in 1996 and 1995 and payments made by AMC on behalf of DI. There were
no general and administrative allocations in 1997. DI and non-AMCE subsidiaries
owed the Company $181,000 and $795,000 as of April 3, 1997 and March 28, 1996,
respectively.
The Board of Directors has approved an agreement providing for the Merger of
the Company and DI, with the Company remaining as the surviving entity. The
Merger has been sought by members of the Durwood family so that they may hold
their interests in the Company directly instead of indirectly through DI and a
related entity. In the Merger, stockholders of DI would exchange their shares
of DI stock for shares of the Company's stock. Although the outstanding shares
of the Company's Common Stock will increase and the outstanding shares of its
Class B Stock will decrease if the Merger is effected, no aggregate increase
in total outstanding shares will occur because the shares of the Company owned
by DI will be canceled and the shares of the Company held by other stockholders
would not be exchanged in the Merger. A condition to the Merger is that the
Merger Agreement receive approval of the holders of a majority of the shares of
Common Stock other than DI, the Durwood family, their spouses and children and
officers and directors of the Company.
DI is primarily a holding company with no significant operations or assets
other than its equity interest in the Company. Management expects that the
Merger will be accounted for as a corporate reorganization and that,
accordingly, the recorded balances for consolidated assets, liabilities, total
stockholders' equity and results of operations of the Company would not be
affected. If the Merger occurs, the Company will be responsible for paying 50%
of the costs in connection with the Merger; the aggregate merger costs for both
the company and DI are estimated to be approximately $2 million. Management
does not believe that the transaction will have a significant effect on the
Company's financial condition, liquidity or capital resources.
AMC ENTERTAINMENT INC.
- ------------------------
60
<PAGE>
<PAGE> 63
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it was practicable to estimate
that value.
The carrying value of cash and equivalents and investments in debt securities
approximates fair value because of the short duration of those instruments.
The fair value of publicly held corporate borrowings was based upon quoted
market prices. For other corporate borrowings, the fair value was based upon
rates available to the Company from bank loan agreements or rates based upon
the estimated premium over U.S. treasury notes with similar
average maturities.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and equivalents $ 24,715 $ 24,715 $ 10,795 $ 10,795
Financial liabilities:
Cash overdrafts $ 11,175 $ 11,175 $ 22,848 $ 22,848
Corporate borrowings 315,072 315,804 126,150 126,992
</TABLE>
AMC ENTERTAINMENT INC.
------------------------
61
<PAGE>
<PAGE> 64
<TABLE>
STATEMENTS OF OPERATIONS BY QUARTER
<CAPTION>
June 27, June 29, Sept. 26, Sept. 28,
(In thousands, except per share amounts) (Unaudited) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $ 161,927 $ 153,409 $ 202,436 $ 184,482
Total cost of operations 132,821 118,738 155,593 135,497
General and administrative 13,025 11,085 11,647 14,497
Depreciation and amortization 11,674 9,972 12,740 10,471
---------------------------------------------------------------------
Operating income 4,407 13,614 22,456 24,017
Interest expense 4,909 8,309 4,852 8,318
Investment income 182 2,226 139 2,440
Gain (loss) on disposition of assets 18 (15) (49) (123)
---------------------------------------------------------------------
Earnings (loss) before income taxes
and extraordinary item (302) 7,516 17,694 18,016
Income tax provision (125) 3,100 7,125 7,400
---------------------------------------------------------------------
Earnings (loss) before extraordinary item (177) 4,416 10,569 10,616
Extraordinary item
- Loss on extinguishment of debt
(net of income tax benefit of $13,400) - - - -
---------------------------------------------------------------------
Net earnings (loss) $ (177) $ 4,416 $ 10,569 $ 10,616
=====================================================================
Preferred dividends 1,546 1,750 1,454 1,750
---------------------------------------------------------------------
Net earnings (loss)
for common shares $ (1,723) $ 2,666 $ 9,115 $ 8,866
=====================================================================
Earnings (loss) per share before
extraordinary item:
Primary $ (.10) $ .16 $ .51 $ .53
=====================================================================
Fully diluted $ (.10) $ .16 $ .44 $ .45
=====================================================================
Earnings (loss) per share:
Primary $ (.10) $ .16 $ .51 $ .53
=====================================================================
Fully diluted $ (.10) $ .16 $ .44 $ .45
=====================================================================
<FN>
<F1> During the fourth quarter of 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of. As a result, the Company recognized an impairment loss under SFAS 121
of $1,799.
<F2> During the fourth quarter of 1997, the Company recognized an impairment
loss under SFAS 121 of $7,231.
<F3> Fiscal year 1997 consists of 53 weeks and the fiscal quarter ended April
3, 1997 consists of 14 weeks.
AMC ENTERTAINMENT INC.
- ------------------------
62
<PAGE>
<PAGE> 65
<CAPTION>
Dec. 26, Dec. 28, April 3,
1996 1995 1997<F3>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total revenues $ 163,192 $ 154,970 $ 222,042
Total cost of operations 130,464 118,252 161,124
General and administrative 13,910 11,437 18,065
Depreciation and amortization 13,129 10,399 22,260<F2>
---------------------------------------------------------
Operating income 5,689 14,882 20,593
Interest expense 5,275 7,883 6,986
Investment income 343 1,958 192
Gain (loss) on disposition of assets (53) 159 -
---------------------------------------------------------
Earnings (loss) before income taxes
and extraordinary item 704 9,116 13,799
Income tax provision 285 3,800 5,615
---------------------------------------------------------
Earnings (loss) before extraordinary item 419 5,316 8,184
Extraordinary item
- Loss on extinguishment of debt
(net of income tax benefit of $13,400) - (19,350) -
---------------------------------------------------------
Net earnings (loss) $ 419 $ (14,034) $ 8,184
=========================================================
Preferred dividends 1,454 1,750 1,453
---------------------------------------------------------
Net earnings (loss)
for common shares $ (1,035) $ (15,784) $ 6,731
=========================================================
Earnings (loss) per share before
extraordinary item:
Primary $ (.06) $ .21 $ .38
=========================================================
Fully diluted $ (.06) $ .21 $ .34
=========================================================
Earnings (loss) per share:
Primary $ (.06) $ (.93) $ .38
=========================================================
Fully diluted $ (.06) $ (.93) $ .34
=========================================================
AMC ENTERTAINMENT INC.
------------------------
63
<PAGE>
<PAGE> 66
<CAPTION>
March 28, Fiscal Year
1996 1997<F3> 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total revenues $ 163,111 $ 749,597 $ 655,972
Total cost of operations 118,871 580,002 491,358
General and administrative 15,040 56,647 52,059
Depreciation and amortization 13,044<F1> 59,803 43,886
---------------------------------------------------------
Operating income 16,156 53,145 68,669
Interest expense 4,318 22,022 28,828
Investment income 428 856 7,052
Gain (loss) on disposition of assets (243) (84) (222)
---------------------------------------------------------
Earnings (loss) before income taxes
and extraordinary item 12,023 31,895 46,671
Income tax provision 5,000 12,900 19,300
---------------------------------------------------------
Earnings (loss) before extraordinary item 7,023 18,995 27,371
Extraordinary item
- Loss on extinguishment of debt
(net of income tax benefit of $13,400) - - (19,350)
---------------------------------------------------------
Net earnings (loss) $ 7,023 $ 18,995 $ 8,021
=========================================================
Preferred dividends 1,750 5,907 7,000
---------------------------------------------------------
Net earnings (loss)
for common shares $ 5,273 $ 13,088 $ 1,021
=========================================================
Earnings (loss) per share before
extraordinary item:
Primary $ .31 $ .74 $ 1.21
=========================================================
Fully diluted $ .29 $ .73 $ 1.20
=========================================================
Earnings (loss) per share:
Primary $ .31 $ .74 $ .06
=========================================================
Fully diluted $ .29 $ .73 $ .06
=========================================================
</TABLE>
AMC ENTERTAINMENT INC.
------------------------
63
<PAGE>
<PAGE> 67
INVESTOR INFORMATION
Stock Listing/Symbol
AMC Entertainment Inc. Common Stock is traded on the American and Pacific
Stock Exchanges under the symbol AEN. The Preferred Stock is traded on the
American Stock Exchange under the symbol AEN Pr. There is no established
public trading market for Convertible Class B Stock.
<TABLE>
Quarterly Common Stock Price Range
<CAPTION>
Fiscal 1997 Fiscal 1996
------------------------------------------------------
High Low High Low
------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $ 33.87 $ 23.12 $ 14.50 $ 11.00
Second Quarter 27.87 15.87 18.12 13.50
Third Quarter 19.50 13.75 23.50 17.62
Fourth Quarter 20.25 13.87 24.12 19.25
Year $ 33.87 $ 13.75 $ 24.12 $ 11.00
(As reported on the American Stock Exchange)
</TABLE>
Stock Ownership
At the end of fiscal 1997, the Company had 6,583,969 common shares of Common
Stock outstanding, 42.9% of which were beneficially owned by company
management. There were 470 shareholders of record on May 19, 1997. At the end
of fiscal 1997, the Company had 11,157,000 shares of Convertible Class B
outstanding, 100% of which were beneficially owned by Company management.
There was one shareholder of record on May 19, 1997.
SEC Form 1O-K
A copy of the report to the Securities and Exchange Commission on Form 10-K
may be obtained without charge upon written request to the Finance Department
at AMC headquarters.
Annual Meeting
The annual meeting of stockholders will be held on Thursday, November 13,
1997, at 11a.m. cst. Location will be announced at a later date.
Quarterly Calendar
The Company has a 52/53 week fiscal year ending on the Thursday closest to the
last day of March. Fiscal 1998 quarter-end dates will be July 3, October 2,
January 1 and April 2. Fiscal 1998 will be a 52 week year. Quarterly results
usually are announced approximately four weeks after the close of the quarter.
Registrar and Transfer Agent
UMB Bank, n.a., Securities Transfer Division
928 Grand Avenue, 13th Floor, P.O. Box 410064
Kansas City, Missouri 64141-6226
Corporate Offices
AMC Entertainment Inc., 106 West 14th Street
P.O. Box 419615, Kansas City, Missouri 64141-6615
(816) 221-4000
Independent Public Accountants
Coopers & Lybrand L.L.P., Kansas City, Missouri
Additional Information
For additional information on AMC Entertainment Inc.,
please contact:
Craig R. Ramsey, Vice President, Finance
AMC Entertainment Inc.,106 West 14th Street
P.O. Box 419615, Kansas City, Missouri 64141-6615
(816) 221-4000
AMC ENTERTAINMENT INC.
- ------------------------
64
<PAGE>
<PAGE> 68
CORPORATE OFFICERS AND DIRECTORS
Corporate Officers
AMC Entertainment Inc.
Stanley H. Durwood
Chairman of the Board and Chief Executive Officer
Peter C. Brown
President and Chief Financial Officer
Richard L. Obert
Senior Vice President and Chief Accounting
and Information Officer
James V. Beynon
Vice President and Treasurer
Craig R. Ramsey
Vice President, Finance
Nancy L. Gallagher
Vice President and Corporate Secretary
American Multi-Cinema, Inc.
Philip M. Singleton
President and Chief Operating Officer
John D. McDonald
Senior Vice President, Corporate Operations
Richard J. King
Senior Vice President, Northeast Operations
Rolando B. Rodriguez
Senior Vice President, South Operations
Richard T. Walsh
Senior Vice President, West Operations
AMC Entertainment International, Inc.
Gary S. Thyer
Vice President, International Operations
Mark A. McDonald
Senior Vice President, Asia Operations
Bruno B. Frydman
President, AMC Europe S.A.
Centertainment, Inc.
Charles P. Stilley
President
Sam J. Giordano
Executive Vice President, Design and Construction
Nicholas A. Bashkiroff
Vice President, Development
AMC Film Marketing
Richard M. Fay
President
National Cinema Network, Inc.
Robert E. Martin
President
Board of Directors
Stanley H. Durwood
Chairman of the Board and Chief Executive Officer
AMC Entertainment Inc.
Peter C. Brown
President and Chief Financial Officer
AMC Entertainment Inc.
Philip M. Singleton
President and Chief Operating Officer
American Multi-Cinema, Inc.
Charles J. Egan, Jr.
Vice President
Hallmark Cards, Incorporated
William T. Grant, II
Chairman, President and Chief Executive Officer
LabOne, Inc.
John P. Mascotte
President and Chief Executive Officer
Blue Cross and Blue Shield of Kansas City, Inc.
Paul E. Vardeman
Shareholder and Director
Polsinelli, White, Vardeman and Shalton, P.C.
AMC ENTERTAINMENT INC.
------------------------
65
EXHIBIT 21.
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
AMC ENTERTAINMENT INC.
American Multi-Cinema, Inc.
AMC Realty, Inc.
Centertainment, Inc.
AMC Entertainment International, Inc.
AMC Entertainment International Limited
AMC Entertainment EspaZa S.A.
Actividades Multi-Cinemas E Espectaculos, LDA
AMC Theatres of U.K., Limited
AMC De Mexico, S.A., De C.V.
AMC Europe S.A.
National Cinema Network, Inc.
All subsidiaries are wholly-owned.
<PAGE>
EXHIBIT 23.
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of AMC Entertainment Inc.
Kansas City, Missouri
We consent to the incorporation by reference in the registration
statement of AMC Entertainment Inc. on Form S-8 (File Nos. 33-58129, 2-
92048, 2-97522 and 2-97523) of our report dated May 16, 1997, on our
audits of the consolidated financial statements and financial statement
schedule of AMC Entertainment Inc. as of April 3, 1997 and March 28,
1996, and for each of the three years (53/52 weeks) ended April 3,
1997, which report is incorporated by reference in this Annual Report on
Form 10-K.
/s/ Coopers & Lybrand
Kansas City, Missouri
June 30, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Financial Statements of AMC Entertainment Inc. and Subsidiaries
as of and for the fifty-three weeks ended April 3, 1997, submitted in
response to the requirements to Form 10-K and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-03-1997
<PERIOD-END> APR-03-1997
<CASH> 24,715
<SECURITIES> 0
<RECEIVABLES> 42,892
<ALLOWANCES> 704
<INVENTORY> 0
<CURRENT-ASSETS> 83,672
<PP&E> 823,899
<DEPRECIATION> 280,841
<TOTAL-ASSETS> 718,213
<CURRENT-LIABILITIES> 134,267
<BONDS> 370,283
0
2,202
<COMMON> 11,841
<OTHER-SE> 155,969
<TOTAL-LIABILITY-AND-EQUITY> 718,213
<SALES> 225,167
<TOTAL-REVENUES> 749,597
<CGS> 36,748
<TOTAL-COSTS> 580,002
<OTHER-EXPENSES> 59,803
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,022
<INCOME-PRETAX> 31,895
<INCOME-TAX> 12,900
<INCOME-CONTINUING> 18,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,995
<EPS-PRIMARY> .74
<EPS-DILUTED> .73
</TABLE>
