As filed with the Securities and Exchange Commission on June 13, 1997
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------------------
AMC ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7832 43-1304369
(State or other jurisdiction of (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION (I.R.S. employer
incorporation or organization) CODE NUMBER) identification number)
</TABLE>
106 WEST 14TH STREET
KANSAS CITY, MISSOURI 64105-1977
(816) 221-4000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----------
Peter C. Brown
President and Chief Financial Officer
AMC Entertainment Inc.
106 West 14th Street
Kansas City, Missouri 64105-1977
(816) 221-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
WITH COPIES TO:
Raymond F. Beagle, Jr. Edwin D. Williamson
Lathrop & Gage L.C. Sullivan & Cromwell
2345 Grand Boulevard 125 Broad Street
Kansas City, Missouri 64108 New York, New York 10004
(816) 292-2000 (202) 956-7505
------------------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If the Securities registered on this Form are to be offered in connection with
the formation of a holding company and there is compliance with General
Instruction G, check the following box. |_|
---------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED UNIT PRICE FEE
- -------------------------------------------------------- ------------------ ------------------- ------------------- ----------------
9 1/2% Exchange Senior Subordinated Notes due 2009 $200,000,000 100% $200,000,000 $60,606
====================================================================================================================================
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, dated June 13, 1997
Prospectus
OFFER TO EXCHANGE ALL OUTSTANDING
9 1/2% SENIOR SUBORDINATED NOTES DUE MARCH 15, 2009
$200,000,000 PRINCIPAL AMOUNT OUTSTANDING FOR
9 1/2% EXCHANGE SENIOR SUBORDINATED NOTES DUE MARCH 15, 2009 OF
AMC Entertainment Inc.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON AUGUST___, 1997
-------
AMC Entertainment Inc., a Delaware corporation (the "Company" or "AMCE"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 principal amount of its 9 1/2% Exchange Senior Subordinated
Notes due March 15, 2009 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined herein) of which this Prospectus constitutes
a part, for each $1,000 principal amount of the outstanding 9 1/2% Senior
Subordinated Notes due March 15, 2009 (the "Old Notes") of the Company, of which
$200,000,000 principal amount is outstanding. The New Notes and the Old Notes
are collectively referred to herein as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be August ___, 1997 (the "Expiration Date"), unless
the Exchange Offer is extended. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date, unless previously accepted for payment. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain conditions which
may be waived by the Company and to the terms and provisions of the Registration
Rights Agreement (as defined herein). See "The Exchange Offer." Old Notes may be
tendered only in denominations of $1,000 and integral multiples thereof.
The New Notes will be obligations of the Company entitled to the benefits of
the Indenture (as defined herein). The form and terms of the New Notes are the
same in all material respects as the form and terms of the Old Notes except that
the New Notes have been registered under the Securities Act and will not contain
terms restricting the transfer thereof. Following the completion of the Exchange
Offer, none of the Notes will be entitled to the benefits of the Registration
Rights Agreement relating to contingent increases in the interest rate provided
for pursuant thereto. See "The Exchange Offer."
INVESTMENT IN THE NOTES INVOLVES SIGNIFICANT RISKS DISCUSSED UNDER
"RISK FACTORS" ON PAGE 12 WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
The New Notes will bear interest from March 19, 1997. Holders of Old Notes
whose Old Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Old Notes accrued
from March 19, 1997 to the date of the issuance of the New Notes. Interest on
the New Notes is payable semi- annually on March 15 and September 15 of each
year, commencing September 15, 1997, accruing from March 19, 1997 at a rate of 9
1/2% per annum.
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 the redemption prices set forth
herein plus accrued interest to the date of redemption. Upon a Change of Control
(as defined herein), 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 of the Notes plus accrued and unpaid interest to the date of
repurchase. (Continued on next page)
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is July ___, 1997.
<PAGE>
Old Notes initially sold to Qualified Institutional Buyers (as defined in
Rule 144A under the Securities Act) and to certain offshore purchasers (as
defined in Regulation S under the Securities Act) were represented by two global
Notes in definitive fully registered form without coupons, registered in the
name of a nominee of The Depository Trust Company ("DTC"), as depositary. The
New Notes exchanged for Old Notes represented by the global Note will be
represented by a single, global New Note in definitive fully registered form
without coupons, registered in the name of the nominee of DTC, as depositary.
See "Description of New Notes--Form and Denomination."
The Old Notes are and the New Notes will be general unsecured obligations of
the Company, subordinated in right of payment to all existing and future Senior
Indebtedness (as defined herein) of the Company. In addition, the Notes will be
effectively subordinated to all liabilities of the Company's subsidiaries,
including any liabilities of such subsidiaries as guarantors of Senior
Indebtedness or other obligations of the Company. As of April 3, 1997, there was
$111.2 million of Senior Indebtedness of the Company outstanding, and the
Company's subsidiaries had $231.4 million of liabilities, including trade
payables but excluding (i) intercompany obligations, (ii) liabilities under
guarantees of the Company's obligations and (iii) obligations under operating
leases and other obligations not reflected in the Company's consolidated
financial statements. See "Use of Proceeds" and "Capitalization."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by holders thereof (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangements with any person to participate in the distribution of such New
Notes. Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer may be a statutory underwriter and must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus and
any amendment or supplement to this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from this offering, and no
underwriter is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
The New Notes are a new issue of securities for which there is currently no
trading market. If the New Notes are traded after their initial issuance, they
may trade at a discount from their principal amount, depending upon prevailing
interest rates, the market for similar securities and other factors, including
general economic conditions and the financial condition and performance of, and
prospects for, the Company. Goldman, Sachs & Co. have advised the Company that
they currently intend to make a market in the Notes. However, they are not
obligated to do so, and any market-making activity with respect to the Old Notes
or the New Notes may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Notes. The Company does not intend to apply for listing of the New Notes on
any securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities of the
Commission at Room 1024,
(ii)
<PAGE>
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices: Seven World Trade Center, 13th Floor, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, such material can also
be obtained from the Commission's Web site at http://www.sec.gov.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
The Company's Common Stock 66 2/3(cent) par value ("Common Stock"), and
$1.75 Cumulative Convertible Preferred Stock, 66 2/3(cent) par value
("Convertible Preferred Stock"), are listed on the American Stock Exchange
("AMEX") and its Common Stock is listed also on the Pacific Stock Exchange. The
Company's periodic reports and proxy statements filed under the Exchange Act as
well as other information concerning the Company can be requested at the
American Stock Exchange, 86 Trinity Place, New York, New York 10086 and at the
Pacific Stock Exchange, 301 Pine Street, Suite 1104, San Francisco, California
94104.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission (File No.
01-12429) are incorporated in this Prospectus by reference and hereby made a
part hereof:
1. The Company's Annual Report on Form 10-K for the fiscal year ended March
28, 1996; and
2. All other reports filed pursuant to Section 13(a) of the Securities
Exchange Act of 1934 since March 28, 1996.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Ms. Nancy L. Gallagher, Vice President and Secretary, AMC Entertainment Inc.,
106 West 14th Street, Kansas City, Missouri 64105, (816) 221-4000. In order to
ensure timely delivery of the documents, any request should be made by [date
five business days prior to the Expiration Date].
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
(iii)
<PAGE>
TABLE OF CONTENTS
PAGE
Available Information............................................... (ii)
Summary............................................................. 1
Risk Factors....................................................... 12
Ratio of Earnings to Fixed Charges................................. 18
Use of Proceeds.................................................... 18
The Exchange Offer................................................. 19
Capitalization..................................................... 27
Selected Financial Data............................................ 28
Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 31
Business of the Company............................................ 42
Management of the Company.......................................... 54
Security Ownership of Beneficial Owners............................ 66
Certain Transactions............................................... 69
Description of Certain Indebtedness................................ 74
Description of New Notes........................................... 75
Registration Rights Agreement...................................... 97
Certain Federal Income Tax Consequences............................ 99
ERISA Considerations............................................... 103
Plan of Distribution............................................... 103
Legal Matters...................................................... 104
Experts............................................................ 104
Index to Financial Statements...................................... F-1
(iv)
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and consolidated financial statements appearing elsewhere
in this Prospectus (the "Prospectus"). As used herein, the term "Company" means
AMC Entertainment Inc. ("AMCE") and, unless the context otherwise requires, its
wholly-owned subsidiaries. Certain capitalized terms used in this summary are
defined elsewhere in the Prospectus. The interests of certain stockholders in
the Company shown herein are based on holdings as of May 19, 1997, at which time
there were outstanding 6,804,296 shares of Common Stock, 11,157,000 shares of
Class B Stock (as defined below) and 3,175,800 shares of Convertible Preferred
Stock. Convertible Preferred Stock is convertible into Common Stock at a
conversion ratio of 1.724 shares of Common Stock for each share of Convertible
Preferred Stock.
THE COMPANY
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
<PAGE>
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.
AMCE has three direct wholly-owned subsidiaries, American Multi-Cinema, Inc.
("AMC"), AMC Entertainment International, Inc. and National Cinema Network, Inc.
All of the Company's domestic theatrical exhibition business is conducted
through AMC and its subsidiaries. The Company is developing theatres in
international markets through AMC Entertainment International, Inc. and its
subsidiaries. The Company engages in the on-screen advertising business through
National Cinema Network, Inc.
AMCE is a Delaware corporation with 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.
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 primarily will be megaplex theatres which also will be
equipped with SONY Dynamic Digital Sound(TM) (SDDS(TM)) and AMC LoveSeat(TM)
style seating (plush, high-backed seats with retractable armrests). Other
amenities may include auditoriums with TORUS(TM) Compound Curved Screens and
High Impact Theatre Systems(TM) (HITS(TM)), 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 and picture and sound quality as well
as increased choices of films and start times. The Company believes
-2-
<PAGE>
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 are
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 and consider partnerships or joint ventures, where
appropriate, to share risk and leverage resources. 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.
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 National Association of Theatre Owners (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 ten percent of the
total screens.
PROPOSED MERGER
The Board of Directors has approved an Agreement and Plan of Merger and
Reorganization dated as of March 31, 1997 (the "Merger Agreement") providing for
the merger (the "Merger") of the Company and its principal shareholder, Durwood,
Inc. ("DI"), a corporation controlled by Mr. Stanley H. Durwood, Chairman of the
Board of Directors and Chief Executive Officer of the Company. DI is the
majority stockholder of the Company, owning as of May 19, 1997, 2,641,951, or
38.8%, of the Company's outstanding shares of Common Stock (each having one vote
per share) and 11,157,000, or 100%, of its
-3-
<PAGE>
outstanding shares of Class B Stock, par value 66 2/3(cent) per share ("Class B
Stock") (each having ten votes per share). The Company will be the surviving
company in 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 American Associated Enterprises ("AAE"), a limited partnership in which Mr.
Stanley H. Durwood is the preferred limited partner and his children
(collectively, the "Durwood Children") are the general partners. Immediately
prior to the Merger, AAE will be liquidated and DI will convert 6,141,343 shares
of the Company's Class B Stock into shares of the Company's Common Stock, so
that at the effective time of the Merger, DI will own 5,015,657 shares of Class
B Stock and 8,783,294 shares of Common Stock. In the Merger, the shares of
Company stock owned by DI will be canceled and the stockholders of DI will
exchange their shares of DI stock for shares of the Company's stock. Pursuant to
the Merger, the shares of DI stock that Mr. Stanley H. Durwood owns will be
convertible into and exchangeable for 5,015,657 shares of Class B Stock, and the
shares of DI stock that the Durwood Children own will be convertible into and
exchangeable for an aggregate of 8,783,294 shares of Common 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 will not be exchanged in the Merger. However,
as a result of the Merger and related transactions described above, based on
shares outstanding as of May 19, 1997, the percentage of shares of outstanding
Common Stock held by persons other than DI and the Durwood family ("unaffiliated
stockholders") will decrease from 61.2% to 32.3%, but the aggregate voting
interest in the Company of shares of Common Stock owned by such stockholders as
of May 19, 1997 (determined by dividing the number of votes which may be cast
with respect to the shares held by such holders by the number of votes that may
be cast by all holders of outstanding Common Stock and Class B Stock as of such
date) will increase from 3.5% to 6.6%. A condition to the Merger is that the
Merger Agreement receive the approval of the holders of a majority of the shares
of Common Stock present and voting at a special meeting of stockholders to be
held to consider the Merger, other than DI, members of the Durwood family, their
spouses and children and officers and directors of the Company. See "Certain
Transactions."
DI is primarily a holding company with no significant operations or assets
other than its equity interest in the Company. Prior to the effective time of
the Merger (the "Effective Time"), all of DI's assets (other than its equity
interest in AMCE), 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
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. Due
to certain provisions of the Merger Agreement and related agreements, discussed
in "Certain Transactions--The Merger--The Indemnification Agreement," the
Company will not realize any benefits from such credits and carryforwards. As a
result, 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 will not be affected.
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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. Under the Merger
Agreement, 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. 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 herein under "Certain Transactions--The Merger--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 "Certain Transactions--The Merger--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 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. See "Certain Transactions--The
Merger--Indemnification Agreement."
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 "Certain Transactions--The
Proposed Merger--The Stock Agreement."
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 Mr. Stanley H. Durwood and the Durwood Children
(collectively, the "Durwood Family Stockholders") will agree to sell at least
3,000,000 shares of the Company's Common Stock in a registered secondary
offering (the "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. Subject to certain conditions, the expenses of the
Secondary Offering will be borne by Mr. Stanley H. Durwood and Delta. See
"Certain Transactions--The Merger--The Registration Agreement." 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 "Certain Transactions--The Proposed
Merger--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 May 19, 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
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increased from approximately 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 the Company's
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 the 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.
Management does not believe that the transaction will have a significant
effect on the Company's financial condition, liquidity or capital resources. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Other."
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $200,000,000 aggregate
principal amount of Old Notes for up to an equal aggregate principal amount of
New Notes. The New Notes will be obligations of the Company entitled to the
benefits of the Indenture. The form and terms of the New Notes are the same as
the form and terms of the Old Notes except that the New Notes have been
registered under the Securities Act and will not contain terms restricting the
transfer thereof (and hence are not entitled to the benefits of the Registration
Rights Agreement relating to the contingent increases in the interest rate
provided for pursuant thereto). The Old Notes and the New Notes are herein
collectively referred to as the "Notes." See "Description of New Notes."
<TABLE>
<S> <C>
THE EXCHANGE OFFER............... $1,000 principal amount of New Notes will be issued in exchange for
each $1,000 principal amount of Old Notes validly tendered pursuant to
the Exchange Offer. As of the date hereof, $200,000,000 in aggregate
principal amount of Old Notes are outstanding. The Company will issue
the New Notes to tendering holders of Old Notes promptly after the
Expiration Date.
RESALE........................... Based on an interpretation by the staff of the Commission, set forth
in no-action letters to third parties, the Company believes that the
New Notes issued pursuant to the Exchange Offer generally will be
freely transferable by the holders thereof without registration or any
prospectus delivery requirement under the Securities Act, except that
a "dealer" or any "affiliate" of the Company, as such terms are
defined under the Securities Act, that exchanges Old Notes held for
its own account (a "Restricted Holder") may be required to deliver
copies of this Prospectus in connection with any resale of the New
Notes issued in exchange for such
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Old Notes. See "The Exchange Offer--General" and "Plan of Distribution."
EXPIRATION DATE.................. 5:00 p.m., New York City time, on August___, 1997, unless the Exchange
Offer is extended, in which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is extended. See "The
Exchange Offer Expiration Date; Extensions; Amendments."
ACCRUED INTEREST ON THE
NEW NOTES AND THE
OLD NOTES...................... The New Notes will bear interest from March 19, 1997. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have
waived the right to receive any payment in respect of interest on such
Old Notes accrued from March 19, 1997 to the date of the issuance of
the New Notes. Consequently, holders who exchange their Old Notes for
New Notes will receive the same interest payment on September 15, 1997
(the first interest payment date with respect to the Old Notes and the
New Notes) that they would have received had they not accepted the
Exchange Offer. See "The Exchange Offer--Interest on the New Notes."
CONDITIONS TO THE EXCHANGE
OFFER ......................... The Exchange Offer is subject to certain conditions, including the
Company's reasonable determination that it is advisable to proceed or
not to proceed with the Exchange Offer. See "The Exchange
Offer--Conditions." The Exchange Offer is not conditional upon any
minimum principal amount of Old Notes being tendered for exchange.
No federal or state regulatory requirements must be complied with or
approvals obtained in connection with the Exchange Offer, other than
applicable requirements under federal and state securities laws.
FAILURE TO EXCHANGE
OLD NOTES....................... Holders of the Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be
entitled to all the rights and subject to all limitations applicable
thereto under the Indenture except for any such rights under the
Registration Rights Agreement. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading market, if
any, for untendered Old Notes could be adversely affected.
PROCEDURES FOR TENDERING
OLD NOTES...................... Each holder of Old Notes wishing to accept the Exchange Offer must
complete, sign and date the accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such
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facsimile, together with the Old Notes to be exchanged and any other
required documentation to The Bank of New York, as Exchange Agent, at
the address set forth herein and therein or effect a tender of Old
Notes pursuant to the procedures for book-entry transfer as provided
for herein. See "The Exchange Offer--Procedures for Tendering" and
"--Book Entry Transfer."
SPECIAL PROCEDURES FOR
BENEFICIAL HOLDERS............. Any beneficial holder whose Old Notes are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender in the Exchange Offer should contact such
registered holder promptly and instruct such registered holder to
tender on his behalf. If such beneficial holder wishes to tender on
his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes,
either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power
from the registered holder. The transfer of record ownership may take
considerable time. Persons holding Old Notes through The Depository
Trust Company ("DTC") and wishing to accept the Exchange Offer must do
so pursuant to the DTC's Automated Tender Offer Program ("ATOP")
System by which each tendering participant will agree to be bound by
the Letter of Transmittal. See "The Exchange Offer--Procedures for
Tendering" and "--Book Entry Transfer."
GUARANTEED DELIVERY
PROCEDURES..................... Holders of Old Notes who wish to tender their Old Notes and whose Old
Notes are not immediately available or who cannot deliver their Old
Notes and a properly completed Letter of Transmittal or any other
documents required by the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date may tender their Old Notes according to
the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS................ Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the business day prior to the Expiration Date,
unless previously accepted for exchange. Any such notice of withdrawal
must (i) specify the name of the Person having deposited the Old Notes
to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal
amount of such Old Notes), (iii) be signed by the Depositor in the
same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer
of such Old Notes into the name of the Depositor withdrawing the
tender and (iv)
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specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. See "The Exchange
Offer--Withdrawal of Tenders."
ACCEPTANCE OF OLD NOTES
AND DELIVERY OF NEW
NOTES.......................... Subject to certain conditions (as summarized above in "Termination of
the Exchange Offer" and described more fully in "The Exchange
Offer--Termination"), the Company will accept for exchange any and all
Old Notes which are properly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange Offer--General."
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES................... The exchange pursuant to the Exchange Offer will generally not be a
taxable event for federal income tax purposes. See "Certain Federal
Income Tax Consequences."
EXCHANGE AGENT................... The Bank of New York, the Trustee under the Indenture, is serving as
exchange agent (the "Exchange Agent") in connection with the Exchange
Offer. The mailing address of the Exchange Agent is 101 Barclay
Street, 7 East, New York, New York 10286, Attention: Arwen Gibbons,
Reorganization Section. See "The Exchange Offer--Exchange Agent."
USE OF PROCEEDS.................. There will be no cash proceeds payable to the Company from the
issuance of the New Notes pursuant to the Exchange Offer. Net proceeds
received by the Company from the sale of the Old Notes were applied to
reduce outstanding bank indebtedness under the Company's Credit
Facility.
SUMMARY DESCRIPTION OF NEW NOTES
NOTES OFFERED.................... $200,000,000 principal amount of 9 1/2% Exchange Senior Subordinated
Notes due March 15, 2009 of the Company.
ISSUER........................... AMC Entertainment Inc.
MATURITY DATE.................... March 15, 2009.
INTEREST PAYMENT DATES........... March 15 and September 15 of each year, commencing September 15, 1997.
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OPTIONAL REDEMPTION.............. 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.
CHANGE OF CONTROL................ Upon a Change of Control (as defined herein), 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. See
"Description of New Notes--Change of Control."
SINKING FUND..................... None.
RANKING.......................... The Notes will be subordinated to all existing and future Senior
Indebtedness (as defined herein) of the Company. As of April 3, 1997,
the Company's subsidiaries had $231.4 million of liabilities,
including trade payables but excluding (i) intercompany obligations,
(ii) liabilities under guarantees of the Company's obligations and
(iii) obligations under operating leases and other obligations not
reflected in the Company's consolidated financial statements.
CERTAIN COVENANTS................ The Indenture contains certain covenants that, among other things,
restrict the ability of the Company and its Subsidiaries (as defined
herein) 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 the Merger with DI. If the Notes attain Investment Grade Status
(as defined herein), all of such covenants will cease to apply, other
than certain of the covenants relating to mergers and a sale of
substantially all of the Company's assets. All of these limitations
are subject to a number of important qualifications. In particular,
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). See "Risk Factors--Limitations of
Covenants" and "Description of New Notes--Certain Covenants" and
"--Merger and Sale of Assets."
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REGISTRATION RIGHTS
AGREEMENT..................... The Company is obligated to consummate the Exchange Offer or to cause
resales of the Old Notes to be registered under the Securities Act
and, in the event that either the Exchange Offer registration
statement is not declared effective on or prior to August 16, 1997 or
the Exchange Offer is not consummated or a shelf registration
statement is not declared effective on or prior to September 15, 1997,
the interest rate borne by the Old Notes shall be increased by 0.50%
per annum. The aggregate amount of such increase from the original
interest rate pursuant to these provisions will in no event exceed
1.00% per annum. Upon the effectiveness of the Exchange Offer
registration statement or the consummation of the Exchange Offer or
the effectiveness of a shelf registration statement, as the case may
be, the interest rate borne by the Old Notes from that time will be
reduced to the original interest rate set forth on the cover page of
this Prospectus. See "Registration Rights Agreement."
ABSENCE OF PUBLIC MARKET
FOR THE NEW NOTES............. The New Notes will be a new issue of securities for which there is
currently no trading market. Although Goldman, Sachs & Co., Salomon
Brothers Inc and Scotia Capital Markets (USA) Inc. have informed the
Company that they currently intend to make a market in the New Notes,
they are not obligated to do so, and any such market making may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New
Notes. The Company does not intend to apply for listing of the New
Notes on any securities exchange or for quotation on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ").
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RISK FACTORS
The Notes offered hereby involve a high degree of risk, and prospective
purchasers should carefully consider the factors described under "Risk Factors."
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RISK FACTORS
An investment in the Notes offered hereby involves a high degree of risk.
The following factors, in addition to the other information contained in this
Prospectus, should be carefully considered in evaluating the Company and its
business. This Prospectus contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. Factors that might
cause such differences include those discussed below.
SUBSTANTIAL INDEBTEDNESS
In addition to the Notes, the Company had significant amounts of
indebtedness outstanding as of April 3, 1997, including $110 million under its
$425 million revolving credit facility (the "Credit Facility") and $58.7 million
in capital lease obligations. The Company also has significant rental
obligations under operating leases. See Note 8 of the Company's Notes to
Consolidated Financial Statements (included elsewhere herein). Further, the
Company's expansion program will require financing in addition to the net
proceeds from the offering of the Old Notes (the "Offering") and the unused
commitment under the Credit Facility. Presently, the Company is pursuing
sale/leaseback or other comparable financing transactions. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
In order to satisfy the Company's obligations under the Notes, the Credit
Facility and its leases, the Company will be required to generate substantial
operating cash flow. The ability of the Company to meet debt service, rental and
other obligations will depend on the future performance of the Company, which
will be subject to prevailing economic conditions and to financial, business and
other factors beyond the control of the Company. While the Company believes
that, based upon current levels of operations and completion of its business
plan, it will be able to meet its debt service, rental and other obligations,
there can be no assurances with respect thereto. See "Selected Financial Data"
for information regarding the operating cash flow and debt service obligations
of the Company.
The amount of the Company's indebtedness could have important consequences
to holders of the Notes, including the following: (i) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired and (ii) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of principal and interest on its
indebtedness, thereby reducing the funds available to the Company for its
operations and any future business opportunities.
SUBORDINATION OF THE NOTES
The Notes will be general unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company, including obligations under the Credit Facility and the
Company's 11 7/8% Senior Notes due 2000 ($0.6 million outstanding; the "Senior
Notes"). The obligations of the Company under the Notes will be pari passu with
its obligations under its 12 5/8% Senior Subordinated Notes due 2002 ($4.9
million outstanding; the "12 5/8% Senior Subordinated Notes"). As of April 3,
1997, there was $111.2 million of Senior Indebtedness outstanding and the
Company could have borrowed up to an additional $315 million under the Credit
Facility which, if borrowed, would be included as Senior Indebtedness. Subject
to certain limitations, the Indenture will
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permit the Company to incur additional indebtedness, including Senior
Indebtedness. See "Description of Notes--Certain Covenants--Limitation on
Consolidated Indebtedness."
In the event of the liquidation, dissolution, reorganization, or any similar
proceeding regarding the Company, the assets of the Company will be available to
pay obligations on the Notes only after Senior Indebtedness of the Company has
been paid in full, and there may not be sufficient assets remaining to pay
amounts due on all or any of the Notes. In addition, the Company may not pay
principal of, premium, if any, or interest on the Notes or purchase, redeem or
otherwise retire the Notes, if any principal, premium, if any, or interest on
any Senior Indebtedness is not paid when due (whether at final maturity, upon
scheduled installment, acceleration or otherwise) unless such payment default
has been cured or waived or such Senior Indebtedness has been repaid in full. In
addition, under certain circumstances, if any non-payment default exists with
respect to Designated Senior Indebtedness (as defined herein), the Company may
not make any payments on the Notes for a specified period of time, unless such
default is cured or waived or such Designated Senior Indebtedness has been
repaid in full. If the Company fails to make any payment on the Notes when due
or within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an event of
default under the Indenture and would generally entitle the holders of the Notes
to accelerate the maturity thereof on or after the fifth business day following
such event of default. See "Description of Notes--Subordination."
Substantially all of the assets of the Company may in the future be pledged
to secure indebtedness of the Company under the Credit Facility. See
"Description of Certain Indebtedness."
HOLDING COMPANY STRUCTURE
The Company is a holding company with no operations of its own.
Consequently, the ability of the Company to service its debt, including the
Notes, is dependent upon the earnings from the businesses conducted by the
Company's subsidiaries; the distribution of those earnings, or advances or other
distributions of funds by these subsidiaries to the Company, all of which could
be subject to statutory or contractual restrictions, are contingent upon the
subsidiaries' earnings and are subject to various business considerations.
Because the Company's subsidiaries are not obligors or guarantors of the
Notes, the claims of creditors of such subsidiaries, including trade creditors,
and claims of preferred stockholders (if any) of such subsidiaries generally
will have priority with respect to the assets and earnings of such subsidiaries
over the claims of creditors of the Company. The Notes, therefore, are
effectively subordinated to creditors (including trade creditors) and preferred
stockholders (if any) of such subsidiaries. Accordingly, there can be no
assurance that, in the event of bankruptcy of the Company, after providing for
claims of creditors and preferred stockholders (if any) of the Company's
subsidiaries, there would be sufficient assets available to satisfy the
obligations of the Company under the Indenture.
LIMITATIONS OF COVENANTS
Although the Indenture limits the incurrence of indebtedness by the Company
and its Subsidiaries (as defined herein), such limitation is subject to a number
of significant qualifications. Moreover, the Indenture does not impose any
limitation on the incurrence by the Company and its Subsidiaries of liabilities
that are not considered "Indebtedness" under the Indenture, such as those that
would be incurred under the Sale/Leaseback Transaction, if consummated; nor does
the Indenture impose any limitation on
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the amount of liabilities incurred by subsidiaries, if any, that might be
designated as Unrestricted Subsidiaries (as defined herein). See "--Substantial
Indebtedness" and "Description of Notes--Certain Covenants--Limitation on
Consolidated Indebtedness." 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, the covenants in the Indenture limiting
the Company's ability to incur indebtedness, pay dividends, acquire stock or
engage in transactions with affiliates will cease to apply.
UNCERTAIN AVAILABILITY OF MOTION PICTURES
The ability of the Company to operate successfully depends upon a number of
factors, the most important of which are the availability and popularity of
motion pictures and the performance of such motion pictures in the Company's
markets.
The Company predominantly licenses "first-run" motion pictures. During the
period from January 1, 1990 to December 31, 1995, the number of first-run motion
pictures released by distributors in the United States ranged from a high of 440
in 1993 to a low of 382 in 1995. Some of the major distributors have announced
their intention to reduce production of films. Although the Company believes
that there will be a sufficient number of first-run films to allow it to operate
its existing and proposed theatres profitably, there can be no assurance that
this will be the case.
Poor performance of, or disruption in the production of or access to, motion
pictures can adversely affect the Company's business, and the Company has no
control over the operations of the distributors of motion pictures. Since film
distributors have historically released those films which they anticipate will
be the most successful during the summer and holiday seasons, poor performance
of such films or disruption in the release of films during such periods could
adversely affect the Company's quarterly results for those particular periods.
In addition, if the Company were to experience poor relationships with one or
more of such distributors, its business could be adversely affected. For
example, since fiscal 1995, the Company has licensed films of a certain
distributor for a smaller number of theatres than it otherwise would have. See
"Business of the Company--Film Licensing."
SUBSTANTIAL CAPITAL EXPENDITURES; UNCERTAINTY OF THEATRE DEVELOPMENT
The Company's growth strategy involves the development of new theatres and
may involve acquisitions of existing theatres and theatre circuits. From March
28, 1996 to April 3, 1997, the Company opened 17 theatres (314 screens) and as
of April 3, 1997, had 21 theatres (514 screens) under construction and was
adding 44 screens to existing theatres. The Company has plans to open
approximately 700 screens during fiscal 1998. If these planned screens are
opened as scheduled, the Company estimates that capital expenditures for fiscal
1998 will aggregate approximately $425 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources." These planned capital expenditures are equal to or in excess of
capital expenditures by the Company over the last several years and there can be
no assurance that the financial performance of these screens will be equivalent
to the performance of the Company's existing screens.
The development of new theatre locations involves significant risks and
investments and is also likely to have an initial negative impact on earnings.
There is significant competition in the United States for site locations from
both theatre companies and other businesses and significant competition among
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theatre companies for theatre acquisition opportunities. It typically takes the
Company 18 to 24 months to open a theatre on a site from the time the site is
identified. Moreover, the availability of attractive site locations can be
adversely affected by changes in the national, regional and local economic
climate, local conditions such as scarcity of space or an increase in demand for
real estate in the area, demographic changes, competition from other available
space and changes in real estate, zoning and tax laws. Further, the Company's
expansion program will require financing in addition to the net proceeds from
the Offering, the unused commitment amount under the Credit Facility and
internally generated funds. As a result of the foregoing, there can be no
assurance that the Company will be able to acquire attractive site locations or
existing theatres or theatre circuits on terms it considers acceptable, that the
Company will be able to acquire financing for such theatres on acceptable terms
or that the Company's strategy will result in improvements to the business,
financial condition or profitability of the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources" and "Business of the
Company--Business Strategy" and "--Competition."
RESTRICTIONS UNDER FINANCING AGREEMENTS; VARIABLE INTEREST RATE
The Credit Facility contains certain financial and other covenants,
including covenants requiring the Company to maintain certain financial ratios
and restricting the ability of the Company to incur indebtedness or to create or
suffer to exist certain liens. The Credit Facility also requires that certain
amounts of indebtedness thereunder be repaid by specified dates. The ability of
the Company to comply with such provisions may be affected by events beyond its
control.
A failure to make any required payment under the Credit Facility or to
comply with any of the financial and operating covenants included in the Credit
Facility would result in an event of default thereunder, permitting the lenders
to vote to accelerate the maturity of the indebtedness under the Credit Facility
and to vote to foreclose upon the stock of the Company's subsidiaries, if
pledged, securing the Credit Facility. Any such acceleration could also result
in the acceleration of the Company's other indebtedness. In addition, pursuant
to the subordination provisions of the Notes, a default under the Credit
Facility may result in the blockage of payments under the Notes. See
"Description of Notes--Subordination." If the lenders under the Credit Facility
accelerate the maturity of the indebtedness thereunder, there can be no
assurance that the Company will have sufficient assets to satisfy its
obligations under the Credit Facility or its other indebtedness.
The Company's indebtedness under the Credit Facility bears interest at rates
that fluctuate with changes in certain prevailing interest rates (although,
subject to certain conditions, such rates may be fixed for certain periods). If
interest rates increase, the Company may be unable to meet its debt service
obligations under the Credit Facility and the Notes.
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
theatrical exhibition companies operated approximately 56% of the total number
of screens, based on the listing of exhibitors in the NATO 1996-1997
Encyclopedia of Exhibition.
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<PAGE>
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.
CONTROLLING STOCKHOLDERS
Voting control of the Company is vested in the holders of its Class B Stock,
subject to the right of holders of the Common Stock to elect 25% of the members
of the Board of Directors. Mr. Stanley H. Durwood and his children, through DI,
beneficially own all of the shares of outstanding Class B Stock and 2,641,951
shares of the outstanding Common Stock (approximately 40% of the issued and
outstanding shares of Common Stock as of April 3, 1997), which in the aggregate
as of such date represent approximately 97% of the voting interest in the
Company. Therefore, Mr. Durwood has the ability to elect or remove a majority of
the Company's Board of Directors. See "Management of the Company" and "Security
Ownership of Beneficial Owners." Mr. Stanley H. Durwood has recently undergone
surgery for esophageal cancer.
The 1992 Durwood, Inc. Voting Trust dated December 12, 1992 (the "1992
Trust") and a revocable inter-vivos trust created pursuant to the Revocable
Trust Agreement of Mr. Stanley H. Durwood dated August 14, 1989, as amended (the
"1989 Trust"), each established by Mr. Stanley H. Durwood, hold approximately
75% of the voting power of the outstanding capital stock of DI. Mr. Stanley H.
Durwood is the sole acting trustee of these trusts. The named successor trustees
under Mr. Stanley H. Durwood's trusts are Messrs. Charles J. Egan, Jr., a
director of the Company, and Raymond F. Beagle, Jr., general counsel to the
Company. Under the terms of his revocable voting trust (the 1992 Trust), Mr.
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 the year 2030.
After giving effect to the Merger and Secondary Offering (and disregarding
shares which may be acquired by Mr. Stanley H. Durwood upon the exercise of
employee stock options and shares which the Durwood Children might acquire under
the Share Adjustment), (i) Mr. Stanley H. Durwood will own beneficially
approximately 4.5 million shares of Class B Stock, or 100% of the outstanding
shares of such class, and (ii) the Durwood Children will own an aggregate of
approximately 6.3 million shares of Common Stock. Based on the number of shares
outstanding as of May 19, 1997, (i) such shares of Class B Stock to be owned by
Mr. Stanley H. Durwood will entitle him to elect a majority of the Board of
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<PAGE>
Directors and will represent 77.0% of the voting interest in the Company
(approximately 70.4% assuming full conversion of Convertible Preferred Stock),
and (ii) the Common Stock to be owned by the Durwood Children will represent
46.6% of the shares of Common Stock expected to be then outstanding (33.1%
assuming full conversion of the Convertible Preferred Stock), representing 10.7%
of the voting interest in the Company (9.8% assuming full conversion of
Convertible Preferred Stock).
As a result of their ownership of shares of Common Stock after the Merger
and because attendance at stockholders meetings typically is less than 100%, any
corporate action requiring the approval of the holders of Common Stock voting as
a class may as a practical matter require the approval of the Durwood Children
instead of Mr. Stanley H. Durwood, as is presently the case. Matters requiring
approval of holders of the Common Stock voting as a class include any proposed
amendment to the Company's charter changing the authorized number or par value
of shares of AMCE Common Stock or altering the powers, preferences or special
rights of the shares of such class so as to affect them adversely.
INTERNATIONAL OPERATIONS RISK
The Company is investigating opportunities for operating multi-screen
theatres in Europe, Canada and Asia. The Company has recently opened a 13-screen
theatre in Japan and a 20-screen theatre in Portugal. There are significant
differences between the theatrical exhibition industry 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 can 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 which 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. 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. See "Business of the
Company--Regulatory Environment."
REPURCHASE OF THE NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined herein), the Company
will be required to make an offer to repurchase the Notes at a price equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. Certain events involving a Change of Control will
result in an event of default under the Credit Facility and may result in an
event of default under other indebtedness of the Company that may be incurred in
the future. An event of default under the Credit Facility or other future Senior
Indebtedness could result in an acceleration of such indebtedness, in which case
the subordination provisions of the Notes would require payment in full of such
Senior Indebtedness before repurchase of the Notes. See "Description of New
Notes--Change of Control," "--Subordination" and "Description of Certain
Indebtedness." There can be no assurance that the Company would have sufficient
resources to repurchase the Notes or pay its obligations if the indebtedness
under the Credit Facility or other future Senior Indebtedness were accelerated
upon the occurrence of a Change of Control. The acceleration of Senior
Indebtedness and the inability of the Company to repurchase all of the tendered
Notes would constitute Events of Default under the Indenture. These provisions
may be deemed to have anti-takeover effects and may delay, defer or prevent a
merger, tender offer or other
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<PAGE>
takeover attempt. No assurance can be given that the terms of any future
indebtedness will not contain cross default provisions based upon Change of
Control or other defaults under such debt instruments.
LACK OF PUBLIC MARKET FOR THE NOTES
The New Notes are a new issue of securities for which there is
currently no trading market. If the New Notes are traded after their initial
issuance, they may trade at a discount from their principal amount, depending
upon prevailing interest rates, the market for similar securities and other
factors, including general economic conditions and the financial condition and
performance of, and prospects for, the Company. Goldman, Sachs & Co., Salomon
Brothers Inc and Scotia Capital Markets (USA) Inc. advised the Company that they
currently intend to make a market in the Old Notes and the New Notes. However,
they are not obligated to do so, and any market making activity with respect to
the Old Notes and the New Notes may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Old Notes and the New Notes. The Company does not intend to apply
for listing of the New Notes on any securities exchange or for quotation on
NASDAQ.
RATIO OF EARNINGS TO FIXED CHARGES
The table below provides the ratio of earnings to fixed charges for the periods
indicated.
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------------------------------------
April 3, March 28, March 30, March 3, April 1,
1997 1996 1995 1994 1993
-------------- ---------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(1) 1.55x 1.81x 1.42x 1.48x 1.25x
- ---------------
<FN>
(1) For the fiscal years ended April 1, 1993 and March 31, 1994, fixed charges include $7,731,000 and
$1,334,000, respectively, for the Company's share (50%) of the fixed charges of Exhibition Enterprises
Partnership ("EEP").
</FN>
</TABLE>
For the purposes of calculating the ratios, "earnings" consist of income
(loss) before taxes, plus fixed charges (excluding capitalized interest) and
"fixed charges" consist of interest expense, amortization of debt issuance cost,
and one-third of rent expense on operating leases treated as representative of
the interest factor attributable to rent expense.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as contemplated
in this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the terms of which are the same in all material respects as
the form and terms of the New Notes except that the New Notes have been
registered under the Securities Act and will not contain terms restricting the
transfer thereof. The Old Notes surrendered in exchange for the New Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the New
Notes will not result in any increase in the indebtedness of the Company.
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<PAGE>
The net proceeds received by the Company from the offering of the Old Notes
was $193.8 million. The Company applied the net proceeds from the offering of
the Old Notes to reduce the Company's indebtedness under its Credit Facility
without reducing the commitment thereunder. The amount applied is available for
reborrowing under the Credit Facility.
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights (the "Registration
Rights"). Pursuant to the agreement governing the Registration Rights (the
"Registration Rights Agreement"), the Company agreed to use its best efforts, at
its cost, to file and cause to become effective a registration statement with
respect to the Exchange Offer to exchange the Old Notes for the New Notes. Upon
such Exchange Offer registration statement being declared effective, the Company
has agreed to offer the New Notes in return for surrender of the Old Notes. For
each Old Note surrendered to the Company under the Exchange Offer, the Holder
will receive a New Note of equal principal amount. Interest on each New Note
will accrue from March 19, 1997. In the event that applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer or under certain other circumstances, the Company has agreed, at its cost,
to use its best efforts to cause to become effective a shelf registration
statement (the "Shelf Registration Statement") with respect to resales of the
Old Notes and to keep such registration statement effective for a period of
three years, or in certain circumstances, one year. The Company shall, in the
event of such a shelf registration, provide to each holder copies of the
prospectus, notify each holder when the Shelf registration statement for the Old
Notes has become effective and take certain other actions as are required to
permit resales of the Old Notes.
In the event the Exchange Offer registration statement is not declared
effective on or prior to August 16, 1997, then the annual interest rate borne by
the Old Notes shall be increased by 0.5% per annum following August 16, 1997. If
such Exchange Offer is not consummated or a Shelf registration statement is not
declared effective by September 15, 1997, then the annual interest rate borne by
the Old Notes shall be increased by an additional 0.5% per annum after September
15, 1997. Upon the effectiveness of the Exchange Offer registration statement
after August 16, 1997 or the consummation of such Exchange Offer or the
effectiveness of such Shelf registration statement, as the case may be, after
September 15, 1997 the interest rate borne by the Old Notes from effectiveness
or consummation, as the case may be, will revert to 9 1/2%.
In the event the Exchange Offer is consummated, the Company, subject to
certain incidental registration rights, will not be required under the
Registration Rights Agreement to file the Shelf registration statement to
register any outstanding Old Notes, and the interest rate on such Old Notes will
remain at its initial level of 9 1/2%. The Exchange Offer shall be deemed to
have been consummated when the Company has exchanged, pursuant to the Exchange
Offer, New Notes for all Old Notes that have been tendered and not withdrawn
prior to the Expiration Date. In such event, holders of Old Notes seeking
liquidity in their investment would have to rely on exemptions to registration
requirements under the securities laws, including the Securities Act. See
"Registration Rights Agreement" and "Risk Factors."
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes properly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date. The Company will issue $1,000 principal amount of New Notes
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<PAGE>
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer in denominations of $1,000 and integral multiples
thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangement or understandings with any person to participate in the distribution
of such New Notes. Any holder of Old Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes could not rely
on such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, may be a statutory underwriter and must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
As of the date of this Prospectus, $200,000,000 aggregate principal amount
of the Old Notes is outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes to be eligible for trading in the
Private Offering, Resale and Trading through Automated Linkages (PORTAL) Market,
the National Association of Securities Dealers' screen based, automated market
trading of securities eligible for resale under Rule 144A under the Securities
Act.
This Prospectus, together with the accompanying Letter of Transmittal (the
"Letter of Transmittal"), is being sent to all registered holders as of July__,
1997 (the "Record Date").
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to The Bank
of New York (the "Exchange Agent"). See "Exchange Agent." The Exchange Agent
will act as agent for the tendering holders of Old Notes for the purpose of
receiving New Notes from the Company and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"Fees and Expenses."
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<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean August __, 1997, unless the Company,
in its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the record
holders of Old Notes an announcement thereof, prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Such announcement may state that the Company is extending the Exchange Offer for
a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under " --Conditions" shall have occurred and shall not have been waived
by the Company (if permitted to be waived by the Company), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of the Old Notes of such amendment.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from March 19, 1997, payable semiannually
on March 15 and September 15, of each year commencing on September 15, 1997, at
the rate of 9 1/2% per annum. Holders of Old Notes whose Old Notes are accepted
for exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Old Notes accrued from March 19, 1997 until the date
of the issuance of the New Notes. Consequently, holders who exchange their Old
Notes for New Notes will receive the same interest payment on September 15, 1997
(the first interest payment date with respect to the Old Notes and the New
Notes) that they would have received had they not accepted the Exchange Offer.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless such tender is being effected pursuant to the procedure described
under "-- Book-Entry Transfer" below) and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
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<PAGE>
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent, including through DTC's ATOP
system as described below, is at the election and risk of the holders. Instead
of delivery by mail, it is recommended that holders use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Old Notes should be sent to the
Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose Old Notes are held of record by DTC who desires to deliver
through DTC's ATOP system.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act (an "Eligible Institution") unless the Old Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by appropriate bond powers which authorize such person to tender the
Old Notes on behalf of the registered holder, in either case signed as the name
of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
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<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering holder of such Old Notes unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date, or, as set forth under "--Conditions," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.
BOOK-ENTRY TRANSFER
DTC's ATOP system is the only method of processing exchange offers through
DTC. To accept the Exchange Offer through ATOP, participants in DTC must send
electronic instruction to DTC through DTC's communication system in lieu of
sending a signed, hard copy Letter of Transmittal. DTC is obligated to
communicate those electronic instructions to the Exchange Agent. To tender Old
Notes through ATOP, the electronic instructions sent to DTC and transmitted by
DTC to the Exchange Agent must contain the character by which the participant
acknowledges its receipt of, and agrees to be bound by the terms of, the Letter
of Transmittal ("Electronic Agreement").
The exchange of New Notes for Old Notes will only be made after timely
confirmation of the transfer of Old Notes to the Exchange Agent and receipt by
the Exchange Agent of an Electronic Agreement.
The method of delivery of Old Notes is at the option and risk of the
tendering holder and, except as otherwise provided in the Letter of Transmittal,
the delivery will be deemed to be made only when actually received by the
Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
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<PAGE>
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder of the Old Notes, the certificate number or
numbers of such Old Notes and the principal amount of Old Notes tendered,
stating that the tender is being made thereby, and guaranteeing that, within
five business days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing the Old Notes
to be tendered in proper form for transfer and any other documents required by
the Letter of Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or facsimile
or electronic transmission thereof), together with the certificate(s)
representing all tendered Old Notes in proper form for transfer (or electronic
transmission thereof) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days after
the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission or, where applicable electronic transmission, notice of
withdrawal must be received by the Exchange Agent at its address set forth
herein prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date and prior to acceptance for exchange thereof by the Company. Any
such notice of withdrawal must (i) specify the name of the person having
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Old Notes), (iii) be signed by the Depositor in the same manner
as the original signature on the Letter of Transmittal by which such Old Notes
were tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to permit the Trustee with respect to the Old
Notes to register the transfer of such Old Notes into the name of the Depositor
withdrawing the tender and (iv) specify the name in which any such Old Notes are
to be registered, if different from that of the Depositor or, in the case of
Holders tendering through the ATOP system, otherwise comply with the
requirements of DTC. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices will be determined by the
Company, whose determination shall be final and binding on all parties. Any Old
Notes so withdrawn will be deemed not to have been validly tendered for purposes
of the Exchange Offer and no New Notes will be issued with respect thereto
unless the Old Notes so withdrawn are validly retendered. Any Old Notes which
have been tendered but which are not accepted for exchange will be returned to
the holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue New Notes in
exchange for any properly tendered Old Notes not theretofore accepted and may
terminate the Exchange Offer, or, at its option, modify or otherwise amend the
Exchange Offer, if any of the following occurs or is true: (i) the Exchange
Offer, or
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<PAGE>
the making of any exchange by a Holder, violates applicable law or any
applicable interpretation of the Commission or its staff, (ii) any action or
proceeding shall have been instituted or threatened in any court or by or before
any governmental agency with respect to the Exchange Offer which, in the
Company's judgment, would reasonably be expected to impair the ability of the
Company to proceed with the Exchange Offer, (iii) there shall have been adopted
or enacted any law, statute, rule or regulation which, in the Company's
judgment, would reasonably be expected to impair the ability of the Company to
proceed with the Exchange Offer, (iv) there shall have been declared by U.S.
federal, New York State or Canadian federal authorities a banking moratorium
which, in the Company's judgment, would reasonably be expected to impair the
ability of the Company to proceed with the Exchange Offer, (v) trading generally
on the New York Stock Exchange, the American Stock Exchange or NASDAQ shall have
been suspended by order of the Commission or any other governmental authority
which, in the Company's judgment, would reasonably be expected to impair the
ability of the Company to proceed with the Exchange Offer or (vi) the Company
reasonably deems it advisable to terminate the Exchange Offer.
If the Company determines that any condition set forth above exists, the
Company may (i) refuse to accept any Old Notes and return any Old Notes that
have been tendered to the holders thereof, (ii) extend the Exchange Offer and
retain all Old Notes tendered prior to the Expiration of the Exchange Offer,
subject to the rights of such holders of tendered Old Notes to withdraw their
tendered Old Notes, or (iii) waive such termination event with respect to the
Exchange Offer and accept all properly tendered Old Notes that have not been
withdrawn. If such waiver constitutes a material change in the Exchange Offer,
the Company will disclose such change by means of a supplement to this
Prospectus that will be distributed to each registered holder of Old Notes, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of disclosure
to the registered holders of the Old Notes, if the Exchange Offer would
otherwise expire during such period. See "Description of New Notes--Registration
Rights Agreement."
EXCHANGE AGENT
The Bank of New York, the Trustee under the Indenture, has been appointed as
Exchange Agent for the Exchange Offer. Questions and requests for assistance and
requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
By Mail, Hand or Overnight Courier: 101 Barclay Street, 7 East
New York, New York 10286
Attention: Arwen Gibbons
Reorganization Section
Facsimile Transmission: 212-571-3080
Confirm by Telephone: 212-815-5920
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and employees of the Company and its affiliates in person, by telegraph
or telephone.
-25-
<PAGE>
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. The expenses of the Exchange Offer
will be capitalized and amortized by the Company over the term of the New Notes
under generally accepted accounting principles.
-26-
<PAGE>
CAPITALIZATION
The following table sets forth the total capitalization of the Company
(including short-term debt) as of April 3, 1997 and as adjusted to give pro
forma effect to the Merger between the Company and DI. See "Security Ownership
of Beneficial Owners" and "Certain Transactions." This table should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto included elsewhere in this Prospectus.*
<TABLE>
<CAPTION>
As Adjusted
for Merger Actual
------------ ------
(in thousands, except share and per
share amounts)
<S> <C> <C>
Short-term debt (including current portion of long-term debt).......... $ 3,441 $ 3,441
Long-term debt:
Credit Facility (1)................................................ 110,000 110,000
9 1/2% Senior Subordinated Notes due 2009.......................... 198,940 198,940
Capital lease obligations and other long-term debt................. 61,343 61,343
Stockholders' equity
$1.75 Cumulative Convertible Preferred Stock, par value 66 2/3(cent)
per share, 10,000,000 shares authorized; 3,303,600 shares
issued and outstanding (aggregate liquidation value of
$82,590,000)....................................................... 2,202 2,202
Common Stock, par value 66 2/3(cent)per share, 45,000,000 shares
authorized; 6,604,469 shares issued; 12,745,812 as adjusted for
Merger (2)......................................................... 8,497 4,403
Class B Stock, par value 66 2/3(cent) per share, 30,000,000 shares
authorized; 11,157,000 shares issued and outstanding; 5,015,657
as adjusted for Merger............................................. 3,344 7,438
Additional paid-in capital......................................... 107,781 107,781
Foreign currency translation adjustment............................ (2,048) (2,048)
Retained earnings.................................................. 49,605 50,605
------- --------
169,381 170,381
Less--Common Stock in treasury, at cost, 20,500 shares............. 369 369
---- --------
Total stockholders' equity......................................... 169,012 170,012
-------- --------
Total capitalization................................................... $542,736 $543,736
======== ========
- -------------
<FN>
(1) As of April 3, 1997, the total availability under the Credit Facility was $425 million of which the
Company had borrowed $110 million. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
(2) Does not include 5,695,406 shares of Common Stock issuable upon the conversion of Convertible Preferred
Stock, 11,157,000 shares reserved for issuance upon conversion of the Class B Stock (5,015,657 as
adjusted for the Merger) or 774,500 shares reserved for issuance upon the exercise of outstanding
employee stock options and vesting of outstanding performance share awards, at the maximum level of
performance attainment.
* For information concerning the Company's commitments and contingencies, see Notes 8 and 10 to AMCE's
Consolidated Financial Statements included elsewhere herein.
</FN>
</TABLE>
-27-
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected data regarding the Company's five
most recent fiscal years. The historical financial information for each of the
fiscal years specified below has been derived from the Company's consolidated
financial statements for such periods. The unaudited pro forma financial
information of the Company as of and for the fiscal year ended April 3, 1997 has
been adjusted to give effect to the Merger as set forth in the Notes to the
Company's Condensed Pro Forma Financial Statements included elsewhere herein.
Such pro forma information does not purport to represent what the Company's
results of operations would have been had the Merger occurred on the dates
presented or to project the Company's financial position or results of
operations for any future period. The historical financial data set forth below
is qualified in its entirety by reference to the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. The historical and pro forma financial data set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company's Consolidated Financial
Statements and the Notes thereto and Durwood, Inc.'s Consolidated Financial
Statements and the Notes thereto included elsewhere herein.
-28-
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------------------------------------------------
April 3, 1997 April 3, March 28, March 30, March 31, April 1,
Pro Forma 1997 1996 1995 1994 1993
Merger(1)(2)(8) Actual(1)(2) Actual(1)(2) Actual(1)(2) Actual(1)(2) Actual(2)
---------------- ------------- ------------- ------------- ------------- ---------
(In thousands, except share amounts, ratios and statistical data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
Total revenues.................... $ 749,597 $ 749,597 $ 655,972 $ 563,344 $ 586,300 $403,775
Total cost of operations.......... 580,002 580,002 491,358 432,763 446,957 308,848
General and administrative ....... 56,647 56,647 52,059 41,639 40,559 37,582
Depreciation and amortization..... 59,803 59,803 43,886 37,913 38,048 28,175
Estimated loss on future
disposition of assets........... -- -- -- -- -- 2,500
---------- ---------- --------- --------- --------- --------
Operating income.................. 53,145 53,145 68,669 51,029 60,736 26,670
Interest expense.................. 22,022 22,022 28,828 35,908 36,375 31,401
Investment income................. 856 856 7,052 10,013 1,156 8,239
Minority interest................. -- -- -- -- 1,599 --
Gain (loss) on disposition of
assets.......................... (84) (84) (222) (156) 296 9,638
---------- ---------- --------- --------- --------- --------
Earnings before income taxes and
extraordinary item............. 31,895 31,895 46,671 24,978 27,412 13,146
Income tax provision.............. 12,900 12,900 19,300 (9,000) 12,100 5,400
---------- ---------- --------- --------- --------- --------
Earnings before extraordinary item 18,995 18,995 27,371 33,978 15,312 7,746
Extraordinary item................ -- -- (19,350) -- -- (6,483)
---------- ---------- --------- --------- --------- --------
Net earnings...................... $ 18,995 $ 18,995 $ 8,021 $ 33,978 $ 15,312 $ 1,263
========== ========== ========= ========= ========= ========
Preferred dividends............... 5,907 5,907 7,000 7,000 538 256
---------- ---------- --------- --------- --------- --------
Net earnings for common shares.... $ 13,088 $ 13,088 $ 1,021 $ 26,978 $ 14,774 $ 1,007
---------- ========== ========= ========= ========= ========
Earnings per share
before extraordinary item:
Primary........................ $ .74 $ .74 $ 1.21 $ 1.63 $ .89 $ .46
Fully Diluted.................. $ .73 $ .73 $ 1.20 $ 1.45 $ .89 $ .46
Earnings per share:
Primary........................ $ .74 $ .74 $ .06(4) $ 1.63 $ .89 $ .06(3)
Fully diluted.................. $ .73 $ .73 $ .06(4) $ 1.45 $ .89 $ .06(3)
Common dividends per share........ $ -- $ -- $ -- $ -- $ -- $ 1.14
Weighted average number of shares
outstanding:
Primary........................ 17,726 17,726 16,795 16,593 16,521 16,217
Fully diluted.................. 17,940 17,940 17,031 23,509 16,550 16,217
Ratio of earnings to fixed charges(5) 1.55x 1.55x 1.81x 1.42x 1.48x 1.25x
BALANCE SHEET DATA
Cash, equivalents and investments. $ 24,715 $ 24,715 $ 10,795 $140,377 $ 151,469 $ 50,106
Total assets...................... 718,213 718,213 483,458 522,154 501,276 374,102
Total debt (including capital lease
obligations)................... 373,724 373,724 188,172 267,504 268,188 255,302
Stockholders' equity.............. 169,012 170,012 158,918 157,388 130,404 18,171
OTHER FINANCIAL DATA
EBITDA(6)......................... $112,948 $ 112,948 $ 112,555 $ 88,942 $ 98,784 $ 57,345
Cash flows provided by operating
activities.................. $134,074 $ 134,074 $ 96,847 $ 44,366 $ 63,680 $ 29,062
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------------------------------------------------
April 3, 1997 April 3, March 28, March 30, March 31, April 1,
Pro Forma 1997 1996 1995 1994 1993
Merger(1)(2)(8) Actual(1)(2) Actual(1)(2) Actual(1)(2) Actual(1)(2) Actual(2)
---------------- ------------- ------------- ------------- ------------- ---------
(In thousands, except share amounts, ratios and statistical data)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
investing activities........ $ (283,917) $ (283,917) $ (66,848) $ 3,664 $ (111,505) $ 4,594
Cash flows provided by (used in)
financing activities........ 163,982 163,982 (90,437) (9,116) 56,147 (21,022)
Net interest expense(7)........... 21,453 21,453 22,337 27,904 34,206 24,416
Capital expenditures.............. 253,380 253,380 120,796 56,403 10,651 8,786
Ratio of EBITDA to net interest
expense........................ 5.26x 5.26x 5.04x 3.19x 2.89x 2.35x
STATISTICAL DATA (at period end)
Number of theatres operated....... 228 228 226 232 236 243
Number of screens operated........ 1,957 1,957 1,719 1,630 1,603 1,617
Screens per theatre............... 8.6 8.6 7.6 7.0 6.8 6.7
- -------------------
<FN>
(1) Fiscal 1997, 1996, 1995 and 1994 include the effects from the acquisition of Exhibition Enterprises Partnership ("EEP") on
May 28, 1993.
(2) Fiscal 1997 consists of 53 weeks. All other years have 52 weeks.
(3) Fiscal 1993 includes a $6,483,000 extraordinary loss equal to $.40 per common share.
(4) Fiscal 1996 includes a $19,350,000 extraordinary loss equal to $1.15 per common share.
(5) Earnings consist of income (loss) before taxes, plus fixed charges (excluding capitalized interest). Fixed charges consist of
interest expense, amortization of debt issuance cost, and one-third of rent expense on operating leases treated as
representative of the interest factor attributable to rent expense. For the fiscal years ended April 1, 1993 and March 31,
1994, fixed charges include $7,731,000 and $1,334,000, respectively, for the Company's share (50%) of the fixed charges of
EEP.
(6) 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.
(7) Net interest expense is defined as interest expense less interest income.
(8) See the Company's Condensed Pro Forma Financial Statements and the Notes thereto included elsewhere in this Prospectus.
</FN>
</TABLE>
<PAGE>
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>
YEARS (53/52 WEEKS) ENDED
-------------------------
APRIL 3, MARCH 28,
1997 1996 % CHANGE
---- ---- --------
(IN THOUSANDS)
<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>
-31-
<PAGE>
<TABLE>
<CAPTION>
YEARS (53/52 WEEKS) ENDED
-------------------------
APRIL 3, MARCH 28,
1997 1996 % CHANGE
---- ---- --------
(IN THOUSANDS)
<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 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
-32-
<PAGE>
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.
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,
-33-
<PAGE>
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 $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.
-34-
<PAGE>
<TABLE>
<CAPTION>
YEARS (52 WEEKS) ENDED
-----------------------------------------------------------
MARCH 28, % OF TOTAL MARCH 30, % OF TOTAL
1996 REVENUES 1995 REVENUES
---- -------- ---- --------
(IN THOUSANDS)
<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>
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.
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<PAGE>
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 expense 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 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.
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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
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 $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
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$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.
On March 19, 1997, the Company sold $200 million aggregate principal amount
of its Notes in the Note Offering. 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
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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 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 the Merger. 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 pursing 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.
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<PAGE>
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, 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 the Merger 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 AAE. 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 Stockholders, 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
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<PAGE>
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.
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.
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<PAGE>
BUSINESS OF THE COMPANY
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.
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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. 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.
The Company'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 the Company. DI, substantially all of whose stock is
beneficially owned by Mr. Stanley H. Durwood and his children, owned 100% of the
Company's Class B Stock and 40% of its Common Stock as of April 3, 1997,
representing in the aggregate approximately 97% of the voting power of
outstanding securities in matters other than the election of directors. Holders
of Class B Stock are entitled to ten votes per share and as a class are
presently entitled to elect 75% of the Company's Board of Directors. See
"Security Ownership of Beneficial Owners" and "Management of the Company."
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 Sound(TM) (SDDS(TM)) and AMC LoveSeat(TM)
style seating (plush, high-backed seats with retractable armrests). Other
amenities may include auditoriums with TORUS(TM) Compound Curved Screens and
High Impact Theatre Systems(TM) (HITS(TM)), 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 and consider partnerships or joint ventures, where
appropriate, to share risk and leverage
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resources. 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 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
--------------------------------------------------- -----------------------
Number of Number of Number of Number of Number of Number of
FISCAL YEAR 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 PER THEATRE
Total Total
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 --
</TABLE>
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<TABLE>
<CAPTION>
SCREENS PER THEATRE
Total Total
DOMESTIC Screens Theatres 1-13 14 +
-------- ------- -------- ---- ----
<S> <C> <C> <C> <C>
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.
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.
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In some cases, the Company's rights as tenant are subject and subordinate to
the mortgage loans of lenders to its lessors, so that if a mortgage were to be
foreclosed, the Company could lose its lease. Historically, this has never
occurred.
The majority of the concessions, projection, seating and other equipment
required for each of the Company's theatres is owned.
The Company leases its corporate headquarters, located in Kansas City,
Missouri. Regional theatre and film licensing offices are leased in Los Angeles,
California; Clearwater, Florida; and Voorhees, New Jersey.
THEATRE DEVELOPMENT
New theatre sites are typically selected on the basis of retail
concentration, access to surface transportation and demographic trends
identified by reference to census figures and other statistical sources. Each
division of the Company has a real estate function to identify potential sites,
develop the economic profile of the sites and present the concepts to senior
management. The Company obtains some sites through several large real estate
developers of regional and strip malls with which it has developed proven
working relationships.
When approved by senior management, the real estate representatives
negotiate lease or purchase terms and, once finalized, then turn the project
over to the construction department for construction management. The Company
typically targets for development areas such as specialty shopping or
entertainment centers and retail space in or near suburban malls.
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.
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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 licenses films through film buyers who enable the Company to
capitalize on local trends and to take into account actions of local competitors
in the Company's negotiation and bidding strategies. Criteria considered in
licensing each motion picture include cast, director, plot, performance of
similar motion pictures, estimated motion picture rental costs and expected
rating by the Motion Pictures Association of America (the "MPAA"). Successful
licensing depends greatly upon knowledge of the tastes of the residents in
markets served by each theatre and insight into the trends in those tastes, as
well as the availability of commercially popular motion pictures. The Company at
no time licenses any one motion picture for all of its theatres.
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.
During the period from January 1, 1990 to December 31, 1995, the annual
number of first-run motion pictures released by distributors in the United
States ranged from a low of 382 in 1995 to a high of 440 in 1993, according to
the MPAA. If a motion picture still has substantial potential following its
first-run, the Company may license it for a "sub-run." Although average daily
sub-run attendance is often less than average daily first-run attendance,
sub-run film rentals are also generally lower than first-run film rentals.
Sub-runs enable the Company to exhibit a variety of motion pictures during
periods in which there are few new film releases.
MARKETING
The Company relies primarily upon advertisements and movie schedules
published in newspapers to inform its patrons of motion picture titles and show
times. Radio, television and full-page newspaper advertisements are used on a
regular basis to promote new releases and special events. These expenses are
generally paid for by the distributors; however, the Company occasionally shares
the expense of such advertisements. The Company pays for newspaper "stack"
advertisements which display information on motion pictures at the Company's
theatres within a geographic area. The Company also exhibits "Now Playing" and
"Coming Soon" spots to promote motion pictures currently playing on the
Company's screens or motion pictures not yet released.
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THEATRE MANAGEMENT AND OPERATIONS
The Company uses a decentralized structure to operate its business on a
day-to-day basis. Each location is viewed as a discrete profit center and a
portion of management's compensation at each theatre is linked to the operating
results of each unit. All theatre level personnel complete formal training
programs to maximize both customer service and the efficiency of the Company's
operations. Theatre management additionally attends a two-week training academy
focusing on operations administration and marketing during their first 12 to 24
months with the Company.
A typical ten-screen movie theatre has approximately 60 employees and five
managers. A 24-screen megaplex may have as many as 150 employees and 12
managers. The Company is committed to developing the strongest possible
management teams and seeks college graduates for career management positions.
Three division offices, each headed by a Senior Vice President of AMC,
supervise theatre operations and personnel within their respective regions. The
division Senior Vice Presidents are also responsible within their markets for
real estate development, marketing, facilities (design and maintenance) and
profit center auditing. The division offices are located in Los Angeles,
California; Clearwater, Florida; and Voorhees, New Jersey (Philadelphia).
Policy development, strategic planning, finance and accounting for the
Company are managed at the Company's corporate office located in Kansas City,
Missouri. Additionally, the corporate office provides support to both the
division offices and individual theatres regarding management information
systems, administration, employee benefits and operations services. All film
licensing activity occurs in Woodland Hills, California, utilizing a structure
that facilitates interaction between theatre managers, division managers and
film buyers.
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.
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The Company negotiates prices for its concessions supplies directly with
concessions vendors on a national or regional basis to obtain high volume
discounts or bulk rates.
MANAGEMENT INFORMATION SYSTEMS
The Company has a point of sale ("POS") management information system to
further enhance its ability to maximize revenues, control costs and efficiently
manage the Company's theatre circuit. The POS information system provides
corporate management with a detailed daily admissions and concessions revenue
report by the start of business the following morning. This information allows
management to make adjustments to movie schedules, prolong runs or increase the
number of screens on which successful movies are being played and substitute
films when gross receipts cease to meet expected goals. Seating and box office
information is available to box office personnel, making it possible for theatre
management to avoid overselling a particular film and providing faster and more
accurate response to customer inquiries regarding showings and available
seating. The POS information system also tracks concessions sales and provides
weekly in-theatre inventory reports, leading to better inventory management and
control. The POS system also processes the MovieWatcher(R) program whereby
moviegoers earn points for each movie attended and earn discount concession
coupons and passes for movies. This frequent moviegoer program is the only
program of its type in the industry, and the Company believes it enhances
customer loyalty.
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.
The following table represents the results of a survey by NATO for 1990
through 1995 and information obtained from The Hollywood Reporter for 1996
outlining the historical trends in U.S. theatre attendance, average ticket
prices and box office sales for the last seven years.
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<PAGE>
<TABLE>
<CAPTION>
Average U.S. Box Office
Attendance Ticket Sales
YEAR (in millions) Price (in millions)
- ---- ------------- ----- -------------
<S> <C> <C> <C>
1990..................................................................... 1,189 $4.22 $5,021
1991..................................................................... 1,141 $4.21 $4,803
1992..................................................................... 1,173 $4.15 $4,871
1993..................................................................... 1,244 $4.14 $5,154
1994..................................................................... 1,292 $4.18 $5,396
1995..................................................................... 1,263 $4.35 $5,493
1996..................................................................... 1,350 $4.39 $5,920
</TABLE>
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.
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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 ("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
approximately 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.
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LEGAL PROCEEDINGS
The following paragraphs summarize significant litigation and proceedings to
which the Company is a party.
In Re: AMC Shareholder Derivative Litigation, Chancery Court For New Castle
County, Delaware (Civil Action No. 12855). On February 15, 1995, the court
ordered the consolidation of two derivative actions filed against four 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 AAE, a partnership
beneficially owned by Mr. Stanley H. Durwood and members of his family, 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, the Merger, the Secondary Offering 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 the Company
and the sale, within 12 months thereafter, of 3,000,000 shares of Common Stock
by the Durwood Family Stockholders 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 the Durwood Family Stockholders), (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 the
Company'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 Durwood Family Stockholders to vote their shares with
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respect to the election and reelection of the New Independent Directors in the
same proportion as votes cast by all stockholders not affiliated with the
Company, its directors and officers, (v) that the New Independent Directors will
have the ability to approve or disapprove (a) any proposed transaction between
the Company and any of the Durwood Family Stockholders, except with respect to
compensation issues relating to Mr. Stanley H. Durwood or any other Durwood
Family Stockholder who is an officer of the Company, which are to be governed by
existing Board procedures, and (b) the hiring and compensation of any person
related to Mr. Stanley H. Durwood who is not an officer of the Company, 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, directors and 10%
stockholders of the Company.
The Derivative Action Settlement Agreement provides that the Company 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. It is not
anticipated that a hearing to approve the Derivative Action Settlement Agreement
will occur until after the Merger is consummated because the Merger is a
condition to 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.
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MANAGEMENT OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
YEARS
ASSOCIATED
WITH THE
NAME AGE(1) POSITION(S) COMPANY(1)
- ---- ------ ----------- ----------
<S> <C> <C> <C>
Stanley H. Durwood............. 76 Chairman of the Board, Chief Executive Officer 51(3)
and Director (AMCE and AMC)
Peter C. Brown................. 38 President (AMCE)(4); Executive Vice President 5
(AMC); Chief Financial Officer and Director
(AMCE and AMC)
Philip M. Singleton............ 50 President (AMC)(4); Executive Vice President 22(3)
(AMCE); Chief Operating Officer and Director
(AMCE and AMC)
Charles J. Egan, Jr............ 64 Director (AMCE) 10
William T. Grant, II........... 46 Director (AMCE) --(2)
John P. Mascotte............... 57 Director (AMCE) --(2)
Paul E. Vardeman............... 67 Director (AMCE) 13(3)
Richard T. Walsh............... 43 Senior Vice President (AMC) 21(3)
Richard J. King................ 48 Senior Vice President (AMC) 25(3)
Rolando B. Rodriguez........... 37 Senior Vice President (AMC) 21(3)
Richard L. Obert............... 57 Senior Vice President--Chief Accounting and 8
Information Officer (AMCE and AMC)
Charles P. Stilley............. 42 President (AMC Realty, Inc.) 15(3)
Richard M. Fay................. 47 President (AMC Film Marketing) 1
- -------------
<FN>
(1) As of April 3, 1997.
(2) First elected to the Board of Directors on November 14, 1996.
(3) Includes years of service with the predecessor of the Company.
(4) 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.
</FN>
</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 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.
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<PAGE>
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.
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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.
-56-
<PAGE>
COMPENSATION OF DIRECTORS
From March 29, 1996 through November 13, 1996, Messrs. Charles J. Egan, Jr.
and Paul E. Vardeman received pro rated 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 $131,000, 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
the Merger of AMCE and DI. For the 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
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------------- -----------------
Awards-
Securities
NAME AND PRINCIPAL Fiscal Other Annual Underlying All Other
POSITION Year Salary Bonus Compensation(1) Options/SARs (#) Compensation(2)
- -------- ---- ------ ----- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stanley H. Durwood........ 1997 $527,322 $ -- N/A 65,000 $ --
Chief Executive 1996 492,634 275,000 N/A -- --
Officer 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 1996 257,439 137,500 N/A -- 4,726
Officer 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 1996 285,311 154,000 N/A -- 4,686
Officer 1995 273,247 64,149 N/A 4,500 4,663
</TABLE>
-57-
<PAGE>
<TABLE>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------------- -----------------
Awards-
Securities
NAME AND PRINCIPAL Fiscal Other Annual Underlying All Other
POSITION Year Salary Bonus Compensation(1) Options/SARs (#) Compensation(2)
- -------- ---- ------ ----- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
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 --- --- -- -- --
- -----------------
<FN>
(1) 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.
(2) For fiscal 1997, All Other Compensation includes AMC's contributions under AMC's 401(k) Plan and the 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 such 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 share awards under AMCE's 1994 Stock Option and
Incentive Plan entitling them to receive shares of AMCE's Common Stock at the end of a three-year period from the
date of grant upon satisfaction of performance 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 ($119,290); 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 ($119,250).
</FN>
</TABLE>
OPTION GRANTS
The following table provides certain information concerning individual
grants of stock options made during the last completed fiscal year under the AMC
Entertainment Inc. 1994 Stock Option and Incentive Plan (the "Incentive Plan")
to each of the Named Executive Officers.
-58-
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Stanley H. Durwood............ 42,500 41.16% $24.500 04/02/06 $654,837 $1,659,484
22,500 21.79% 26.375 05/15/06 373,208 945,788
Peter C. Brown................ 4,500 4.36% 26.375 05/15/06 74,642 189,158
Philip M. Singleton........... 4,500 4.36% 26.375 05/15/06 74,642 189,158
Richard T. Walsh.............. 2,250 2.18% 26.375 05/15/06 37,321 94,579
Richard M. Fay............... 2,250 2.18% 18.500 11/07/06 26,178 66,340
- -----------------
<FN>
(1) 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 AMCE's 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.
(2) 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 Commission and do not represent the Company's estimate or projections
of the future prices of AMCE's Common Stock.
</FN>
</TABLE>
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>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARs AT OPTIONS/SARs
ACQUIRED FY-End(#) ATFY-END($)(1)
ON VALUE ------------------------- ----------------------------
NAME EXERCISE 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
</TABLE>
-59-
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARs AT OPTIONS/SARs
ACQUIRED FY-End(#) ATFY-END($)(1)
ON VALUE ------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE PRICE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- -------------- ----------- -------------
(SHARES)
<S> <C> <C> <C> <C> <C> <C> <C>
Philip M. Singleton.... -- -- -- 4,500 26.375 -- --
4,500 -- 11.750 36,563 --
112,500 37,500 9.250 1,195,313 398,438
Richard T. Walsh....... -- -- -- 2,250 26.375 -- --
1,125 1,125 14.500 6,047 6,047
22,500 7,500 9.375 236,250 78,750
Richard M. Fay......... -- -- -- 2,250 18.500 -- 3,094
- -----------------
<FN>
(1) Values for "in-the-money" outstanding options represent the positive spread between the respective exercise prices
of the outstanding options and the value of the Common Stock as of April 3, 1997.
</FN>
</TABLE>
LONG-TERM INCENTIVE PLAN
The following table provides certain information concerning shares
("Performance Shares") issuable to participants 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(1) OF PERFORMANCE OR ESTIMATED FUTURE PAYOUT UNDER
SHARES, UNITS OTHER PERIOD NON-STOCK PRICE BASED PLANS
OR OTHER UNTIL MATURATION --------------------------------------------------
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
<FN>
(1) Maximum number of shares issuable under awards made during the fiscal year.
</FN>
</TABLE>
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 full
exercise of all outstanding shares of AMCE's preferred stock, Class B stock,
options and other rights to acquire shares of 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
-60-
<PAGE>
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.
-61-
<PAGE>
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, 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 under the Retirement Plan 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>
YEARS OF CREDITED SERVICE
HIGHEST CONSECUTIVE
FIVE-YEAR AVERAGE
ANNUAL
COMPENSATION 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$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 $76,950 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
-62-
<PAGE>
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
-63-
<PAGE>
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 Internal
Revenue 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
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<PAGE>
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.
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<PAGE>
<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF BENEFICIAL OWNERS
The following table sets forth certain information as of May 19, 1997 (unless otherwise noted) with respect to beneficial
owners of five percent or more of any class of AMCE's voting securities:
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- -------------- ---------------- ------------------ -----
<S> <C> <C> <C>
Common Stock Durwood Inc.(1) 2,641,951(2) 38.8%(2)
106 West 14th Street
Kansas City, MO 64105
Stanley H. Durwood(1) 2,697,101(2)(3) 39.3%(2)
106 West 14th Street
Kansas City, MO 64105
Brian H. Durwood(1) 2,641,951(2) 38.8%(2)
655 N.W. Altishan Place
Beaverton, OR 97006
Edward D. Durwood(1) 2,641,951(2) 38.8%(2)
3001 West 68th Street
Shawnee Mission, KS 66208
Peter J. Durwood(1) 2,641,951(2) 38.8%(2)
666 West End Avenue
New York, NY 10025
Thomas A. Durwood(1) 2,641,951(2) 38.8%(2)
P.O. Box 7208
Rancho Santa Fe, CA 92067
Elissa D. Grodin(1) 2,641,951(2) 38.8%(2)
187 Chestnut Hill Road
Wilton, CT 06897
Carol D. Journagan(1) 2,641,951(2) 38.8%(2)
1323 Granite Creek Drive
Blue Springs, MO 64015
Vanguard Explorer Fund, Inc. 482,720(4) 6.6%(4)
c/o The Vanguard Group of
Investment Companies
P.O. Box 2600
Valley Forge, PA 19482-2600
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- -------------- ---------------- ------------------ -----
<S> <C> <C> <C>
Wellington Management Company, 658,260(5) 8.8%(5)
LLP
75 State Street
Boston, MA 02109
Class B Stock Durwood, Inc.(1) 11,157,000(2) 100.0%
106 West 14th Street
Kansas City, MO 64105
- -------------
<FN>
(1) The 1989 and 1992 Trusts hold approximately 75% of the voting power of the outstanding capital stock of DI. Record
ownership of the DI shares is the name of the 1992 Trust, which has issued its voting trust certificates to the
1989 Trust. AAE 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 the 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, Jr., 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 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 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. Thereafter, the Durwood Family Stockholders intend to sell 3,000,000 shares of Common Stock in the
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 in the aggregate approximately 6.3 million shares of Common Stock, or 46.6% of the shares of
that class (33.1% assuming full conversion of Convertible Preferred Stock). Based on voting shares outstanding as
of May 19, 1997, the shares of Class B Stock to be retained by Mr. Stanley H. Durwood will represent 77.0% of the
combined voting power of the Company'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 the 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
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<PAGE>
Children and AMCE in connection with the Merger and other related transactions, or if additional shares of Common
Stock are issued under the Company's existing employee benefit plans.
(2) The shares of Class B Stock owned of record by DI and beneficially owned by members of the Durwood family as
indicated in footnote (1) 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.
(3) 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.
(4) 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.
(5) 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, the Company 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.
</FN>
</TABLE>
BENEFICIAL OWNERSHIP OF 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
AMCE's 1983 and 1984 Stock Option Plans 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- -------------- ------------------------ -------------------- --------
<S> <C> <C> <C>
Common Stock Stanley H. Durwood 2,697,101(1)(2) 39.3%
Peter C. Brown 156,750(2) 2.3%
Philip M. Singleton 172,750(2) 2.5%
Richard T. Walsh 33,425 *
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(2) 42.9%
Class B Stock Stanley H. Durwood 11,157,000(1) 100.0%
- -------------
<FN>
* Less than one percent.
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<PAGE>
(1) See Notes 1 and 2 under "Security Ownership of Beneficial Owners." 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 AMCE'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; Mr. Richard T. Walsh--33,375
shares; and all Executive Officers as a group--454,750 shares.
</FN>
</TABLE>
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
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 April 1, 1994 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 B 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.
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<PAGE>
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. 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 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 any 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; -- 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
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<PAGE>
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 operating 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
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<PAGE>
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 to pay DI's unpaid expenses and 50% of
the Company's Merger expenses if the Merger occurs, as required by the
Indemnification Agreement; to pay the Company's expenses in the Secondary
Offering, as required by the Registration Agreement; and 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
Mr. Durwood could be paid 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."
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<PAGE>
OTHER MATTERS
Certain corporate departments of AMC perform general and administrative
services for DI and its subsidiaries. AMC charged DI and its subsidiaries
$116,000 for such services for fiscal 1996 and 1995. There was no general and
administrative allocation in 1997.
Periodically, the Company and DI reconcile any amounts owed by one company
to the other. Charges to the intercompany account have included the allocation
of the Company's general and administrative expenses and payments made by the
Company on behalf of DI. The largest balance owed by DI and its subsidiaries to
the Company during each of fiscal years 1995, 1996 and 1997 was $831,000,
$795,000 and $795,000, respectively. 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 will receive a bonus for fiscal 1997 in
the amount of $7,500.
In January 1987, AMC loaned $200,000 to Mr. Donald P. Harris, one of the
named Executive Officers in fiscal 1995, in connection with the purchase of his
principal residence. Principal on the note originally was due on January 1,
1992, but the note was extended to January 16, 1997 and the interest rate was
increased from 6% to 7.5%. The employment of Mr. Harris by the Company or its
affiliates ceased effective as of October 1, 1995. Mr. Harris paid AMC $110,249,
the remaining amount of the principal and accrued interest on the loan, on
October 1, 1995.
The Company and Mr. Edward D. Durwood entered into an Agreement and General
Release effective October 5, 1995, pursuant to which Mr. Edward D. Durwood was
terminated as President, Vice Chairman of the Board and Director of AMCE and AMC
upon the recommendation of the Compensation Committee without cause with the
consent of the Company's Board of Directors. The Company paid Mr. Edward D.
Durwood $498,398 in severance. The Agreement and General Release also provides
for mutual releases between the Company and Mr. Durwood.
AMC and Mr. Donald P. Harris entered into an Agreement and Release effective
October 1, 1995, pursuant to which Mr. Harris resigned as President -- AMC Film
Marketing, Inc. AMC paid Mr. Harris
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$467,850 in severance. Mr. Harris paid AMC $110,249, the remaining amount of the
principal and accrued interest on a loan he had previously received from AMC.
The Agreement and Release also provided for mutual releases between AMC and Mr.
Harris.
In November, 1995, AMC purchased the principal residence of Mr. Richard M.
Fay, an Executive Officer, for $500,000. AMC is currently marketing the
residence and intends to sell it.
During fiscal years 1997 and 1996, 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 Polsinelli, White, Vardeman & Shalton, P.C.
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 "Management of the Company--Employment Contracts, Termination of
Employment and Change in Control Arrangements."
DESCRIPTION OF CERTAIN INDEBTEDNESS
As of April 3, 1997, the Company had outstanding indebtedness (net of
any unaccreted discount) aggregating $373.7 million of which $198.9 million was
outstanding under the Notes, $110 million was outstanding under the Credit
Facility, $0.6 million was outstanding under the Senior Notes, $4.9 million was
outstanding under the 12 5/8% Subordinated Notes, $58.7 million was outstanding
under capital lease obligations and $0.6 million in other indebtedness was
outstanding. The Company is also party to operating leases on open theatres and
administrative offices whose base rentals aggregate approximately $1.1 billion
over the lives of such leases. The Company has entered into agreements to lease
space for the operation of theatres not yet fully constructed, the future
minimum rental payments under which aggregate approximately $429 million as of
April 3, 1997.
Under the Credit Facility, the Company has the option to borrow up to $425
million at rates based on either the bank's base rate or LIBOR and is required
to pay an annual commitment fee based on margin ratios (as defined in the loan
agreement) that could result in a rate of .1875% to .375% on the unused amount
of the commitment.
The Credit Facility will mature on December 26, 2004. The commitment
thereunder will be reduced 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.
The Credit Facility includes several financial covenants. The Company is
required to maintain (i) a maximum net indebtedness to consolidated EBITDA
ratio, as defined in the terms of 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 (ii) a 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 capitalized 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 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
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Credit Facility, of 4.5 to 1 during the first four years of the Credit Facility
and 4.0 to 1 thereafter. The Credit Facility also (i) generally limits
investments in entities which are unrestricted subsidiaries, are not guarantors
of the Credit Facility or are not wholly-owned subsidiaries of the Company, to
$100 million in the aggregate, plus the greater of 25% of free cash flow or 50%
of consolidated net income (or minus 100% of consolidated net income if
negative) (as defined in the Credit Facility) after December 27, 1995 and (ii)
imposes limitations on the incurrence of additional indebtedness, creation of
liens, changes of control, transactions with affiliates, mergers, investments,
guarantees, asset sales, business activities and pledges.
The Credit Facility is guaranteed by each of the Company's significant
subsidiaries (as defined therein), including AMC. If at any time the ratio of
the Company's net senior indebtedness to consolidated EBITDA exceeds 3.75 to 1,
the Company and each subsidiary that is a guarantor is obligated to pledge to
the lenders under the Credit Facility all the capital stock of any subsidiary
owned by such person and all indebtedness of the Company or any subsidiary of
the Company owed to such person.
The Indentures governing the Senior Notes and the 12 5/8% Subordinated
Notes were amended in 1995 to eliminate substantially all restrictive covenants.
Certain of the Company's subsidiaries have guaranteed the Company's obligations
under the Senior Notes and the 12 5/8% Subordinated Notes.
DESCRIPTION OF NEW NOTES
The Old Notes were and the New Notes will be issued under an indenture dated
as of March 19, 1997 (the "Indenture"), between AMC Entertainment Inc., as
issuer, and The Bank of New York, as trustee (the "Trustee"). The New Notes are
subject to all of the terms of the Indenture, and Holders of New Notes are
referred to the Indenture, which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part, for a statement
thereof. The form of the New Notes and the Old Notes will be identical in all
material respects except that the New Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting their transfer.
The New Notes will not represent new indebtedness of the Company, and will rank
pari passu with the Old Notes. Any provision of the Indenture which requires
action by or approval of a specified percentage of the Holders of the
Outstanding Notes shall require the approval of the Holders of such percentage
of Outstanding Old Notes and New Notes, in the aggregate. Upon the effectiveness
of an Exchange Offer registration statement or Shelf registration statement, as
the case may be, filed under the Securities Act with respect to the Notes, the
Indenture will be subject to and governed by the Trust Indenture Act of 1939, as
amended. The following summaries of certain material provisions of the Indenture
do not purport to be complete, and where reference is made to particular
provisions of the Indenture, such provisions, including the definitions of
certain terms, are incorporated by reference as a part of such summaries or
terms, which are qualified in their entirety by such reference. The definitions
of certain capitalized terms used in the following summary are set forth below
under "--Certain Definitions."
GENERAL
The Notes will mature on March 15, 2009 and will be limited to $200 million
aggregate principal amount. Each Note will bear interest at the rate set forth
on the cover page hereof from March 19, 1997 or from the most recent interest
payment date to which interest has been paid, payable semiannually on March 15
and September 15 of each year, commencing September 15, 1997, to the person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the March 1 or September 1 next preceding such interest payment
date. Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
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Principal of and premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Company in The City of New York (which initially will be the corporate trust
office of the Trustee, The Bank of New York, 101 Barclay Street, 21W, New York,
NY 10286; provided, however, that payment of interest may be made at the option
of the Company by check mailed to the person entitled thereto as shown on the
Note Register. No service charge will be made for any registration of transfer
or exchange or redemption of Notes, except for certain taxes or other
governmental charges that may be imposed in connection with any registration of
transfer or exchange.
The Notes will not be entitled to the benefit of any sinking fund.
FALL-AWAY EVENT
In the event that the Notes achieve Investment Grade Status and no Event of
Default or Default shall have occurred and be continuing (the occurrence of the
foregoing events being collectively referred to as the "Fall-away Event"), upon
the request of the Company the covenants described under "--Certain Covenants"
will no longer be applicable to the Company and its Subsidiaries. See "--Certain
Covenants." As a result, upon the occurrence of the Fall-away Event the Notes
will be entitled to substantially no covenant protection.
SUBORDINATION
The Notes will be unsecured senior subordinated indebtedness of the Company
ranking pari passu with all other existing and future senior subordinated
indebtedness of the Company. The payment of all Obligations in respect of the
Notes will be subordinated, as set forth in the Indenture, in right of payment
to the prior payment in full in cash or Cash Equivalents of all Senior
Indebtedness.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to the Company or to its assets, or any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary, or any assignment for the benefit of creditors or other
marshaling of assets or liabilities of the Company, the holders of Senior
Indebtedness will first be entitled to receive payment in full in cash or Cash
Equivalents of all Senior Indebtedness, or provision shall be made for such
payment in full in cash or Cash Equivalents to the satisfaction of the holders
of Senior Indebtedness, before the Holders will be entitled to receive any
payment or distribution of any kind or character from any source (other than any
payment or distribution in the form of equity securities or subordinated
securities of the Company or any successor obligor provided for by a plan of
reorganization or readjustment that, in the case of any such subordinated
securities, are subordinated in right of payment to all Senior Indebtedness that
may at the time be outstanding to at least the same extent as the Notes are so
subordinated as provided in the Indenture) (such equity securities or
subordinated securities hereinafter being "Permitted Junior Securities") on
account of all Obligations in respect of the Notes or on account of the
purchase, deposit for defeasance or redemption or other acquisition of Notes.
No payment (other than any payments made pursuant to the provisions
described under "--Defeasance and Covenant Defeasance of the Indenture" from
monies or U.S. Government Obligations previously deposited with the Trustee) or
distribution of any assets of the Company of any kind or character from any
source, whether in cash, property or securities (other than Permitted Junior
Securities), may be made by the Company on account of all Obligations in respect
of the Notes or on account of the purchase, redemption, deposit for defeasance
or other acquisition of Notes upon the occurrence of any default in payment
(whether at stated maturity, upon scheduled installment, by acceleration or
otherwise) of principal of, premium, if any, or interest in respect of any
Senior Indebtedness beyond any applicable grace periods (a "Payment Default")
until such Payment Default shall have been cured or waived or have ceased to
exist or such Senior Indebtedness shall have been discharged or paid in full in
cash or Cash Equivalents.
No payment (other than any payments made pursuant to the provisions
described under "--Defeasance and Covenant Defeasance of the Indenture" from
monies or U.S. Government Obligations previously deposited with the Trustee) or
distribution of any assets of the Company of any kind or character from any
source, whether in cash, property or securities (other than Permitted Junior
Securities), may be made by the Company on account of all Obligations in respect
of the Notes or on account of the purchase, redemption, deposit for defeasance
or other acquisition of Notes for the period specified below ("Payment Blockage
Period") upon the occurrence of any
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default with respect to any Designated Senior Indebtedness not covered by the
immediately preceding paragraph pursuant to which the maturity thereof may be
accelerated (a "Non-payment Default") and receipt by the Trustee of written
notice thereof from the representatives of the holders of any Designated Senior
Indebtedness.
The Payment Blockage Period will commence upon the date of receipt by the
Trustee of written notice from such representative and shall end on the earliest
of (i) 179 days thereafter (provided any Designated Senior Indebtedness as to
which notice was given shall not theretofore have been accelerated, in which
case the provisions of the second preceding paragraph shall apply), (ii) the
date on which such Non-payment Default is cured, waived or ceases to exist or
such Designated Senior Indebtedness is discharged or paid in full in cash or
Cash Equivalents, (iii) such Designated Senior Indebtedness has been discharged
or paid in full in cash or Cash Equivalents or (iv) such Payment Blockage Period
shall have been terminated by written notice to the Trustee from the
representative initiating such Payment Blockage Period, after which the Company
will resume making any and all required payments in respect of the Notes,
including any missed payments. In any event, not more than one Payment Blockage
Period may be commenced during any period of 365 consecutive days. No event of
default that existed or was continuing on the date of the commencement of any
Payment Blockage Period will be, or can be, made the basis for the commencement
of a subsequent Payment Blockage Period, unless such default has been cured or
waived for a period of not less than 90 consecutive days.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of the Notes shall have received any payment prohibited by the foregoing, then
such payment shall be paid over to the representatives of such Designated Senior
Indebtedness initiating the Payment Blockage Period, to be held in trust for
distribution to the holders of Senior Indebtedness or, to the extent amounts are
not then due in respect of Senior Indebtedness, prompt return to the Company, or
otherwise as a court of competent jurisdiction shall direct.
Failure by the Company to make any required payment in respect of the Notes
when due or within any applicable grace period, whether or not occurring during
a Payment Blockage Period, will result in an Event of Default and, thereafter,
Holders will have the right to require repayment of the Notes in full. See
"--Events of Default."
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency of the Company, creditors of the Company who are
holders of Senior Indebtedness may recover more, ratably, than the Holders, and
assets which would otherwise be available to pay obligations in respect of the
Notes will be available only after all Senior Indebtedness has been paid in full
in cash or
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Cash Equivalents, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes.
Senior Indebtedness means (i) all obligations of the Company, now or
hereafter existing, under or in respect of the Credit Facility, whether for
principal, premium, if any, interest (including interest accruing after the
filing of, or which would have accrued but for the filing of, a petition by or
against the Company under the Bankruptcy Laws, whether or not such interest is
allowed as a claim after such filing in any proceeding under such law), fees,
expenses, indemnities, gross-ups or other payments thereunder and (ii) the
principal of, premium, if any, and interest on all other Indebtedness of the
Company (other than the Notes), whether outstanding on the date of the Indenture
or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness of the Company that is
expressly subordinated in right of payment to any Senior Indebtedness of the
Company or the Notes including Indebtedness evidenced by the Existing Senior
Subordinated Notes, (iii) Indebtedness of the Company that by operation of law
is subordinate to any general unsecured obligations of the Company, (iv)
Indebtedness of the Company to the extent incurred in violation of any covenant
of the Indenture, (v) any liability for federal, state or local taxes or other
taxes, owed or owing by the Company, (vi) trade account payables owed or owing
by the Company, (vii) amounts owed by the Company for compensation to employees
or for services rendered to the Company, (viii) Indebtedness of the Company to
any Subsidiary or any other Affiliate of the Company and (ix) Indebtedness which
when incurred and without respect to any election under Section 1111(b) of Title
11 of the United States Code is without recourse to the Company or any
Subsidiary.
Designated Senior Indebtedness means (i) all Senior Indebtedness under the
Credit Facility and (ii) any other Senior Indebtedness (a) which at the time of
determination exceeds $30 million in aggregate principal amount, (b) which is
specifically designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness" by the Company and (c) as to which the Trustee
has been given written notice of such designation.
OPTIONAL REDEMPTION
The Notes are redeemable, at the option of the Company, as a whole or in
part, at any time on or after March 15, 2002, at the Redemption Prices
(expressed as percentages of the principal amount thereof) set forth below
together with accrued and unpaid interest to the Redemption Date, if redeemed
during the 12-month period beginning on March 15 of the years indicated:
Redemption
YEAR Price
- ---- -----
2002....................................... 104.7500%
2003....................................... 103.5625%
2004....................................... 102.3750%
2005....................................... 101.1875%
2006 and thereafter........................ 100.0000%
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee not more than 60 days prior to
the Redemption Date by such method as the Trustee
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shall deem fair and appropriate; provided, however, that Notes will not be
redeemed in amounts less than the minimum authorized denomination of $1,000.
Notice of redemption shall be mailed by first class mail not less than 30 nor
more than 60 days prior to the Redemption Date to each Holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the Redemption
Date, interest will cease to accrue on Notes or portions thereof called for
redemption.
CERTAIN COVENANTS
The Indenture will provide that all of the following restrictive covenants
will be applicable to the Company unless and until the Fall-away Event occurs.
In such event, the Company will be released from its obligations to comply with
the restrictive covenants described below as well as certain other obligations.
The covenants that will be released upon the Fall-away Event are "Limitation on
Consolidated Indebtedness," "Limitation on Restricted Payments," "Limitation on
Transactions with Affiliates," "Limitation on Senior Subordinated Indebtedness"
and clause (iii) under the "Merger and Sale of Assets" covenant.
Limitation on Consolidated Indebtedness. The Company shall not, and shall
not permit any of its Subsidiaries to, create, incur, assume or guarantee, or in
any other manner become directly or indirectly liable for the payment of, any
Indebtedness (excluding Permitted Indebtedness) unless at the time of such event
and after giving effect thereto on a pro forma basis the Company's Consolidated
EBITDA Ratio for the four (4) full fiscal quarters immediately preceding such
event, taken as one period calculated on the assumption that such Indebtedness
had been incurred on the first day of such four-quarter period, is greater than
or equal to 2.0:1.
Limitation on Restricted Payments. The Company shall not directly or
indirectly:
(A) declare or pay any dividend on, or make any distribution in respect
of, any shares of the Company's or any Subsidiary's Capital Stock (excluding
dividends or distributions payable in shares of its Capital Stock or in
options, warrants or other rights to purchase such Capital Stock, but
including dividends or distributions payable in Redeemable Capital Stock or
in options, warrants or other rights to purchase Redeemable Capital Stock
(other than dividends on such Redeemable Capital Stock payable in shares of
such Redeemable Capital Stock)) held by any Person other than the Company or
any of its Wholly-Owned Subsidiaries; or
(B) purchase, redeem or acquire or retire for value any Capital Stock of
the Company or any Affiliate thereof (other than any Wholly-Owned Subsidiary
of the Company) or any options, warrants or other rights to acquire such
Capital Stock;
(such payments or any other actions described in (A) and (B) above are
collectively referred to as "Restricted Payments") unless at the time of and
after giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, as determined by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board Resolution),
(1) no Default or Event of Default shall have occurred and be continuing, (2)
the Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the provisions of "Limitation on Consolidated Indebtedness"
and (3) the aggregate amount of all Restricted Payments declared or made after
the Closing Date (including the proposed Restricted Payment) does not exceed the
sum of:
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(I)(x) Consolidated EBITDA for the Restricted Payments Computation
Period minus (y) 2 times Consolidated Interest Expense for the Restricted
Payments Computation Period;
(II) the aggregate net proceeds, including the Fair Market Value of
property other than cash (as determined by the Board of Directors, whose
determination shall be conclusive, except that for any property whose Fair
Market Value exceeds $10 million such Fair Market Value shall be confirmed
by an independent appraisal obtained by the Company), received after the
Closing Date by the Company from the issuance or sale (other than to any of
its Subsidiaries) of shares of Capital Stock of the Company (other than
Redeemable Capital Stock) or warrants, options or rights to purchase such
shares of Capital Stock;
(III) the aggregate net proceeds, including the Fair Market Value of
property other than cash (as determined by the Board of Directors, whose
determination shall be conclusive, except that for any property whose Fair
Market Value exceeds $10 million such Fair Market Value shall be confirmed
by an independent appraisal obtained by the Company), received after the
Closing Date by the Company from debt securities that have been converted
into or exchanged for Capital Stock of the Company (other than Redeemable
Capital Stock) to the extent such debt securities were originally sold for
such net proceeds plus the aggregate cash received by the Company at the
time of such conversion; and
(IV) $100 million.
Notwithstanding the foregoing limitation, the Company may (a) pay dividends
on its Capital Stock within sixty days of the declaration thereof if, on the
declaration date, such dividends could have been paid in compliance with the
foregoing limitation, (b) acquire, redeem or retire Capital Stock in exchange
for, or in connection with a substantially concurrent issuance of, Capital Stock
of the Company (other than Redeemable Capital Stock) or (c) pay dividends on the
Company's existing $1.75 Cumulative Convertible Preferred Stock or any
replacement or refinancing thereof.
Limitation on Transactions with Affiliates. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company (other than a Wholly-Owned
Subsidiary of the Company) involving aggregate consideration in excess of $5
million (other than the DI Merger) unless (A) such transaction or series of
transactions is on terms that are no less favorable to the Company or such
Subsidiary, as the case may be, than would be available at the time of such
transaction or series of transactions in a comparable transaction in an
arm's-length dealing with an unaffiliated third party, (B) such transaction or
series of transactions is in the best interests of the Company and (C) with
respect to a transaction or series of transactions involving aggregate payments
equal to or greater than $50 million, a majority of disinterested members of the
Board of Directors determines that such transaction or series of transactions
complies with clauses (A) and (B) above, as evidenced by a Board Resolution.
Notwithstanding the foregoing limitation, the Company and its Subsidiaries
may enter into or suffer to exist the following: (i) any transaction pursuant to
any contract in existence on the Closing Date; (ii) any Restricted Payment
permitted to be made pursuant to the provisions of "Limitation on Restricted
Payments" above; (iii) any transaction or series of transactions between the
Company and one or more of its Subsidiaries or between two or more of its
Subsidiaries (provided that no more than 5% of the equity interest in any such
Subsidiary is owned, directly or indirectly (other than by direct or indirect
ownership of an equity interest in the Company), by any Affiliate of the Company
other than a Subsidiary) and
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(iv) the payment of compensation (including amounts paid pursuant to employee
benefit plans) for the personal services of officers, directors and employees of
the Company or any of its Subsidiaries.
Limitation on Senior Subordinated Indebtedness. The Company will not incur,
create, issue, assume, guarantee or otherwise become liable for any Indebtedness
that is subordinate or junior in right of payment to any Senior Indebtedness and
senior in right of payment to the Notes.
MERGER AND SALE OF ASSETS
The Company shall not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person
(other than any Wholly-Owned Subsidiary) or sell, assign, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets to
any Person (other than any Wholly-Owned Subsidiary) or group of affiliated
Persons unless at the time and after giving effect thereto (i) either (A) the
Company shall be the continuing corporation or (B) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by conveyance, transfer, lease or disposition the
properties and assets of the Company substantially as an entirety (the
"Surviving Entity") shall be a corporation duly organized and validly existing
under the laws of the United States of America, any state thereof or the
District of Columbia and shall, in either case, expressly assume all the
obligations of the Company under the Notes and the Indenture, (ii) immediately
before and immediately after giving effect to such transaction on a pro forma
basis, no Default or Event of Default shall have occurred and be continuing, and
(iii) immediately before and immediately after giving effect to such transaction
on a pro forma basis, except in the case of the consolidation or merger of any
Subsidiary with or into the Company, the Company (or the Surviving Entity if the
Company is not the continuing corporation) could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the provisions of
"Limitation on Consolidated Indebtedness."
In connection with any consolidation, merger, transfer or lease contemplated
hereby, the Company shall deliver, or cause to be delivered, to the Trustee, in
the form and substance reasonably satisfactory to the Trustee, an Officer's
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, transfer or lease and the supplemental indenture in respect thereto
comply with the provisions described herein and that all conditions precedent
herein provided for or relating to such transaction have been complied with.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such a consolidation or into which the Company is merged
or to which such transfer is made shall succeed to, shall be substituted for and
may exercise every right and power of the Company under the Notes and the
Indenture, with the same effect as if such successor corporation had been named
as the Company therein. In the event of any transaction (other than a lease)
described and listed in the immediately preceding paragraphs in which the
Company is not the continuing corporation, the successor Person formed or
remaining shall succeed to, be substituted for and may exercise every right and
power of the Company, and the Company shall be discharged from all obligations
and covenants under the Notes and the Indenture.
The conditions set forth in "Merger and Sale of Assets" shall be deemed
satisfied by the DI Merger and the transactions related thereto, provided that
the Company will be the Surviving Entity with respect to the DI Merger.
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CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer (a "Change of Control Offer") to purchase all Outstanding Notes at
a purchase price (the "Change of Control Purchase Price") equal to 101% of their
principal amount plus accrued and unpaid interest, if any, to the date of
purchase.
Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first class mail, a notice to each Holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice will state, among other things, the purchase date, which must
be no earlier than 30 days nor later than 60 days from the date such notice is
mailed, other than as may be required by law (the "Change of Control Payment
Date"). The Change of Control Offer is required to remain open for at least 20
Business Days and until the close of business on the Change of Control Payment
Date.
The Change of Control provision of the Notes may, in certain circumstances,
make more difficult or discourage a takeover of the Company and, as a result,
may make removal of incumbent management more difficult. The Change of Control
provision, however, is not the result of the Company's knowledge of any specific
effort to accumulate the Company's stock or to obtain control of the Company by
means of a merger, tender offer, solicitation or otherwise, or part of a plan by
management to adopt a series of anti-takeover provisions. Instead, the Change of
Control provision is a result of negotiations between the Company and the
Initial Purchasers. The Company is not presently in discussions or negotiations
with respect to any pending offers which, if accepted, would result in a
transaction involving a Change of Control, although it is possible that the
Company would decide to do so in the future.
The Credit Facility provides that certain change of control events with
respect to the Company would constitute a default thereunder. In such
circumstances, the subordination provisions in the Indenture could restrict
payments to the Holders of the Notes. Finally, the Company's ability to pay cash
to the Holders of the Notes in connection with a Change of Control may be
limited to the Company's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
required purchases.
The provisions of the Indenture would not necessarily afford Holders of the
Notes protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company that may
adversely affect the Holders.
If an offer is made to repurchase the Notes pursuant to a Change of Control
Offer, the Company will comply with all tender offer rules under state and
Federal securities laws, including, but not limited to, Section 14(e) under the
Exchange Act and Rule 14(e) thereunder, to the extent applicable to such offer.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
the Registration Rights Agreement without charge by writing to AMC Entertainment
Inc., Attention: Ms. Nancy L. Gallagher, Vice President and Secretary, 106 West
14th Street, Kansas City, Missouri 64105-1977 (telephone: (816) 221-4000).
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for the definition of any other capitalized term used
herein for which no definition is provided.
"Acquired Indebtedness" of any particular Person shall mean Indebtedness of
any other Person existing at the time such other Person merged with or into or
became a Subsidiary of such particular Person or assumed by such particular
Person in connection with the acquisition of assets from any other Person, and
not incurred by such other Person in connection with, or in contemplation of,
such other Person merging with or into such particular Person or becoming a
Subsidiary of such particular Person or such acquisition.
"Affiliate" shall mean, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any other Person that
owns, directly or indirectly, ten percent or more of such Person's Capital Stock
or any officer or director of any such Person or other Person or with respect to
any natural Person, any person having a relationship with such Person by blood,
marriage or adoption not more remote than first cousin. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board of Directors" shall mean the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under the Indenture.
"Board Resolution" shall mean a copy of a resolution, certified by the
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" shall mean any day other than a Saturday or Sunday or other
day on which banks in New York, New York, Kansas City, Missouri or the city in
which the Trustee's Office is located are authorized or required to be closed,
or, if no Note is outstanding, the city in which the principal corporate trust
office of the Trustee is located.
"Capital Lease Obligation" of any Person shall mean any obligations of such
Person and its Subsidiaries on a consolidated basis under any capital lease of a
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person shall mean any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock, any rights (other than debt securities convertible into capital
stock), warrants or options to acquire such capital stock, whether now
outstanding or issued after the date of the Indenture.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality, (iii) certificates of deposit and Eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any United States domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
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days for underlying securities of the types described in clauses (ii) and (iii)
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having one of the two highest rating
categories obtainable from Moody's or S&P in each case maturing within six
months after the date of acquisition and (vi) readily marketable direct
obligations issued by any State of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from Moody's or S&P.
"Change of Control" shall mean the occurrence of, after the date of the
Indenture, either of the following events: (a) any Person (other than a
Permitted Holder) or any Persons (other than any Permitted Holders) acting
together that would constitute a group (for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto) (a "Group"), together with any
Affiliates thereof (other than any Permitted Holders) shall beneficially own (as
defined in Rule 13d-3 under the Exchange Act, or any successor provision
thereto) at least 50% of the aggregate voting power of all classes of Capital
Stock of the Company entitled to vote generally in the election of directors
(the determination of aggregate voting power to recognize that the Company's
Class B Stock, par value 66 2/3 (cent) per share, currently has ten votes per
share and the Company's Common Stock, par value 66 2/3 (cent) per share,
currently has one vote per share) or (b) any Person (other than a Permitted
Holder) or Group (other than any Permitted Holders) together with any Affiliates
thereof (other than any Permitted Holders) shall succeed in having a sufficient
number of its nominees who are not management nominees elected to the Board of
Directors of the Company such that such nominees when added to any existing
director remaining on the Board of Directors of the Company after such election
who is an Affiliate (other than any Permitted Holder) of such Group, will
constitute a majority of the Board of Directors of the Company.
"Closing Date" shall mean the date on which the Notes are originally issued
under the Indenture.
"Consolidated EBITDA" shall mean, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period increased (to the
extent deducted in determining Consolidated Net Income) by the sum of: (i) all
income taxes of such Person and its Subsidiaries paid or accrued in accordance
with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or non-recurring gains or losses); (ii) Consolidated
Interest Expense of such Person and its Subsidiaries for such period; (iii)
depreciation expense of such Person and its Subsidiaries for such period; (iv)
amortization expense of such Person and its Subsidiaries for such period
including amortization of capitalized debt issuance costs; and (v) any other
non-cash charges of such Person and its Subsidiaries for such period (including
non-cash expenses recognized in accordance with Financial Accounting Standard
Number 106), all determined on a consolidated basis in accordance with GAAP;
provided, however, that, for purposes of this definition, all transactions
involving the acquisition of any Person by another Person shall be accounted for
on a "pooling of interests" basis and not as a purchase.
"Consolidated EBITDA Ratio" of any Person shall mean, for any period, the
ratio of Consolidated EBITDA to Consolidated Interest Expense for such period
(other than any non-cash Consolidated Interest Expense attributable to any
amortization or write-off of deferred financing costs); provided, that, (A) in
making such computation, the Consolidated Interest Expense attributable to
interest on any Indebtedness computed on a pro forma basis and bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) with
respect to any Indebtedness which bears, at the option of such Person, a fixed
or floating rate of interest, such Person shall apply, at its option, either the
fixed or floating rate for purposes of calculating the Consolidated EBITDA
Ratio.
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"Consolidated Interest Expense" of any Person shall mean, without
duplication, for any period, as applied to any Person, (A) the sum of (a) the
aggregate of the interest expense on Indebtedness of such Person and its
consolidated Subsidiaries for such period, on a consolidated basis, including,
without limitation, (i) amortization of debt discount, (ii) the net cost under
Interest Rate Protection Agreements (including amortization of discounts), (iii)
the interest portion of any deferred payment obligation and (iv) accrued
interest, plus (b) the interest component of the Capital Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
consolidated Subsidiaries during such period minus (B) the cash interest income
(exclusive of deferred financing fees) of such Person and its consolidated
subsidiaries during such period, in each case as determined in accordance with
GAAP consistently applied.
"Consolidated Net Income (Loss)" of any Person shall mean, for any period,
the consolidated net income (or loss) of such Person and its consolidated
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income (loss), by excluding all
extraordinary gains or losses (net of reasonable fees and expenses relating to
the transaction giving rise thereto) of such Person and its Subsidiaries.
"Credit Facility" shall mean that certain Credit Agreement, dated as of
December 27, 1995, among the Company, The Bank of Nova Scotia, as administrative
agent, Chemical Bank, as syndication agent, Bank of America National Trust and
Savings Association, as document agent, and the various other financial
institutions thereto, as the same may be amended from time to time.
"Currency Hedging Obligations" shall mean the obligations of any Person
pursuant to an arrangement designed to protect such Person against fluctuations
in currency exchange rates.
"Debt Rating" shall mean the rating assigned to the Notes by Moody's or S&P,
as the case may be.
"Default" means any event which is, or after notice or the passage of time
or both would be, an Event of Default.
"DI Merger" shall mean the Merger referred to in this Prospectus between the
Company and Durwood, Inc., as the same may be approved by the Board of Directors
and stockholders of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean, with respect to any asset or property, the
sale value that would be obtained in an arm's length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"Generally Accepted Accounting Principles" or "GAAP" shall mean generally
accepted accounting principles in the United States, consistently applied.
"Guarantee" shall mean, with respect to any Person, any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by agreements
to keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes
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of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guaranteed Indebtedness" of any Person shall mean, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
and all dividends of other Persons for the payment of which, in either case,
such Person is directly or indirectly responsible or liable as obligor,
guarantor or otherwise.
"Indebtedness" shall mean, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities incurred in the ordinary course of business, but
including, without limitation, all obligations of such Person in connection with
any letters of credit and acceptances issued under letter of credit facilities,
acceptance facilities or other similar facilities, now or hereafter outstanding,
(ii) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade accounts payable arising in the ordinary
course of business, (iv) every obligation of such Person issued or contracted
for as payment in consideration of the purchase by such Person or a Subsidiary
of such Person of the Capital Stock or substantially all of the assets of
another Person or in consideration for the merger or consolidation with respect
to which such Person or a Subsidiary of such Person was a party, (v) all
Indebtedness referred to in clauses (i) through (iv) above of other Persons and
all dividends of other Persons, the payment of which is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon or in property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness, (vi) all
Guaranteed Indebtedness of such Person, (vii) all obligations under Interest
Rate Protection Agreements of such Person, (viii) all Currency Hedging
Obligations of such Person and (ix) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types referred
to in clauses (i) through (viii) above.
"Interest Rate Protection Agreement" shall mean any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, option or future contract or other
similar agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in interest rates.
"Investment Grade Status" exists as of a date and thereafter if at such date
either (i) the Debt Rating of Moody's is at least Baa3 (or the equivalent) or
higher or (ii) the Debt Rating of S&P is at least BBB- (or the equivalent) or
higher.
"Lien" shall mean any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, claim, hypothecation, assignment for security, deposit
arrangement or preference or other security agreement of any kind or nature
whatsoever. A Person shall be deemed to own subject to a Lien any property which
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to Indebtedness of such Person. The right of a distributor to the
return of its film held by a Person under a film licensing agreement is not a
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Lien as used herein. Reservation of title under an operating lease by the lessor
and the interest of the lessee therein are not Liens as used herein.
"Maturity" means, with respect to any Note, the date on which the principal
of such Note becomes due and payable as provided in such Note or the Indenture,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Moody's" shall mean Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Non-Recourse Indebtedness" shall mean Indebtedness as to which (i) none of
the Company or any of its Subsidiaries (a) provides credit support (including
any undertaking, agreement or instrument which would constitute Indebtedness) or
(b) is directly or indirectly liable and (ii) no default with respect to such
Indebtedness (including any rights which the holders thereof may have to take
enforcement action against the relevant Unrestricted Subsidiary or its assets)
would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or its Subsidiaries (other than Non-Recourse
Indebtedness) to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"Obligations" means any principal (including reimbursement obligations and
guarantees), premium, if any, interest (including interest accruing on or after
the filing of, or which would have accrued but for the filing of, any petition
in bankruptcy or for reorganization relating to the Company whether or not a
claim for post-filing interest is allowed in such proceedings), penalties, fees,
expenses, indemnifications, reimbursements, claims for rescission, damages,
gross-up payments and other liabilities payable under the documentation
governing any Indebtedness or otherwise.
"Opinion of Counsel" shall mean a written opinion of counsel to the Company
or any other Person reasonably satisfactory to the Trustee.
"Permitted Holder" means (i) Mr. Stanley H. Durwood, his spouse and any of
his lineal descendants and their respective spouses (collectively, the "Durwood
Family") and any Affiliate of any member of the Durwood Family, (ii) Mr. Stanley
H. Durwood's estate, or any trust established by Mr. Stanley H. Durwood, during
any period of administration prior to the distribution of assets to
beneficiaries who are Persons described in clause (iii) below, (iii) any trust
which is established solely for the benefit of one or more members of the
Durwood Family (whether or not any member of the Durwood Family is a trustee of
such trust) or solely for the benefit of one or more charitable organizations or
solely for the benefit of a combination of members of the Durwood Family and one
or more charitable organizations and (iv) any Subsidiary, any employee stock
purchase plan, stock option plan or other stock incentive plan or program,
retirement plan or automatic reinvestment plan or any substantially similar plan
of the Company or any Subsidiary or any Person holding securities of the Company
for or pursuant to the terms of any such employee benefit plan; provided that if
any lender or other Person shall foreclose on or otherwise realize upon or
exercise any remedy with respect to any security interest in or Lien on any
securities of the Company held by any Person listed in this clause (iv), then
such securities shall no longer be deemed to be held by a Permitted Holder.
"Permitted Indebtedness" shall mean the following:
(i) Indebtedness of the Company under the Notes;
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(ii) Indebtedness of the Company under the Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed the sum
of $425 million less any amount by which any commitment thereunder has been
or shall be permanently reduced in accordance with the terms thereof;
(iii) Indebtedness of the Company or any of its Subsidiaries outstanding
on the Closing Date;
(iv) Indebtedness of the Company or any of its Subsidiaries consisting
of Permitted Interest Rate Protection Agreements;
(v) Indebtedness of the Company or any of its Subsidiaries to any one
or the other of them;
(vi) Indebtedness incurred to renew, extend, refinance or refund (each,
a "refinancing") any Indebtedness outstanding on the Closing Date in an
aggregate principal amount not to exceed the principal amount of the
Indebtedness so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness so refinanced or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refinancing by
means of a tender offer or privately negotiated repurchase, plus the
expenses of the Company incurred in connection with such refinancing;
(vii) Indebtedness of any Subsidiary incurred in connection with the
Guarantee of any Indebtedness of the Company;
(viii) Indebtedness relating to Currency Hedging Obligations entered
into solely to protect the Company or any of its Subsidiaries from
fluctuations in currency exchange rates and not to speculate on such
fluctuations;
(ix) Capital Lease Obligations of the Company or any of its
Subsidiaries;
(x) Indebtedness of the Company or any of its Subsidiaries in connection
with one or more standby letters of credit or performance bonds issued in
the ordinary course of business or pursuant to self-insurance obligations;
(xi) Indebtedness represented by property, liability and workers'
compensation insurance (which may be in the form of letters of credit);
(xii) Acquired Indebtedness, provided that such Indebtedness, if
incurred by the Company, would be in compliance with "Limitation on
Consolidated Indebtedness";
(xiii) Indebtedness of the Company or any of its Subsidiaries to an
Unrestricted Subsidiary for money borrowed, provided that such Indebtedness
is subordinated in right of payment to the Notes and the Weighted Average
Life of such Indebtedness is greater than the Weighted Average Life of the
Notes; and
(xiv) Indebtedness not otherwise permitted to be incurred pursuant to
clauses (i) through (xiii) above which, together with any other Indebtedness
pursuant to this clause (xiv), has an aggregate principal amount that does
not exceed $75 million at any time outstanding.
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"Permitted Interest Rate Protection Agreements" shall mean, with respect to
any Person, Interest Rate Protection Agreements entered into in the ordinary
course of business by such Person that are designed to protect such Person
against fluctuations in interest rates with respect to Permitted Indebtedness
and that have a notional amount no greater than the payment due with respect to
Permitted Indebtedness hedged thereby.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
"Redeemable Capital Stock" shall mean any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or otherwise, is or upon the happening of an event or passage of time would be
required to be redeemed prior to the final Stated Maturity of the Notes or is
redeemable at the option of the holder thereof at any time prior to such final
Stated Maturity, or is convertible into or exchangeable for debt securities at
any time prior to such final Stated Maturity at the option of the holder
thereof.
"Restricted Payments" shall have the meaning set forth in the "Limitation on
Restricted Payments" covenant.
"Restricted Payments Computation Period" shall mean the period (taken as one
accounting period) from the Closing Date to the last day of the Company's fiscal
quarter preceding the date of the applicable proposed Restricted Payment.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., or any successor to the rating agency business thereof.
"Stated Maturity," when used with respect to any Note or any installment of
interest thereof, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Subsidiary" of any person shall mean (i) any corporation of which more than
50% of the outstanding shares of Capital Stock having ordinary voting power for
the election of directors is owned directly or indirectly by such Person and
(ii) any partnership, limited liability company, association, joint venture or
other entity in which such Person, directly or indirectly, has more than a 50%
equity interest, and, except as otherwise indicated herein, references to
Subsidiaries shall refer to Subsidiaries of the Company. Notwithstanding the
foregoing, for purposes hereof, an Unrestricted Subsidiary shall not be deemed a
Subsidiary of the Company other than for purposes of the definition of
"Unrestricted--Subsidiary" unless the Company shall have designated in writing
to the Trustee an Unrestricted Subsidiary as a Subsidiary. A designation of an
Unrestricted Subsidiary as a Subsidiary may not thereafter be rescinded.
"Surviving Entity" shall have the meaning set forth under "Merger and Sale
of Assets."
"Unrestricted Subsidiary" shall mean a Subsidiary of the Company designated
in writing to the Trustee (i) whose properties and assets, to the extent they
secure Indebtedness, secure only Non-Recourse Indebtedness, (ii) that has no
Indebtedness other than Non-Recourse Indebtedness and (iii) that has no
Subsidiaries.
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"Voting Stock" shall mean stock of the class or classes pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
a corporation (irrespective of whether or not, at the time, stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Weighted Average Life" shall mean, as of any date, with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of the
number of years from such date to the dates of each successive scheduled
principal payment (including any sinking fund payment requirements) of such debt
security multiplied by the amount of such principal payment, by (ii) the sum of
all such principal payments.
"Wholly-Owned Subsidiary" of any Person shall mean a Subsidiary of such
Person, all of the Capital Stock (other than Directors' qualifying shares) or
other ownership interests of which shall at the time be owned by such Person or
by one or more Wholly-Owned Subsidiaries of such Person or by such Person and
one or more Wholly-Owned Subsidiaries of such Person.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of any interest on any Note when it becomes
due and payable and continuance of such default for a period of 30
days;
(ii) default in the payment of the principal of or premium, if any, on any
Note at its Maturity (upon acceleration, optional redemption,
required purchase or otherwise);
(iii) default in the performance, or breach, of any covenant or warranty of
the Company contained in the Indenture (other than a default in the
performance, or breach, of a covenant or warranty which is
specifically dealt with in clause (i) or (ii) above) and continuance
of such default or breach for a period of 60 days after written
notice shall have been given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the Notes then outstanding;
(iv) (A) one or more defaults in the payment of principal of or premium,
if any, on Indebtedness of the Company or AMC aggregating $5 million
or more, when the same becomes due and payable at the stated maturity
thereof, and such default or defaults shall have continued after any
applicable grace period and shall not have been cured or waived or
(B) Indebtedness of the Company or AMC aggregating $5 million or more
shall have been accelerated or otherwise declared due and payable, or
required to be prepaid or repurchased (other than by regularly
scheduled prepayment) prior to the stated maturity thereof;
(v) any holder of any Indebtedness in excess of $5 million in the
aggregate of the Company or AMC shall notify the Trustee of the
intended sale or disposition of any assets of the Company or AMC that
have been pledged to or for the benefit of such Person to secure such
Indebtedness or shall commence proceedings, or take action (including
by way of set-off) to retain in satisfaction of any such
Indebtedness, or to collect on, seize, dispose of or apply, any such
asset of the Company or AMC pursuant to the terms of any
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agreement or instrument evidencing any such Indebtedness of the
Company or AMC or in accordance with applicable law;
(vi) one or more final judgments or orders shall be rendered against the
Company or AMC for the payment of money, either individually or in an
aggregate amount, in excess of $5 million and shall not be discharged
and either (A) an enforcement proceeding shall have been commenced by
any creditor upon such judgment or order or (B) there shall have been
a period of 60 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise,
was not in effect; and
(vii) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or AMC.
If an Event of Default (other than an Event of Default specified in clause
(vii) above) shall occur and be continuing, the Trustee or the Holders of not
less than 25% in principal amount of the Notes then outstanding may declare the
principal of all Notes due and payable; provided, however that so long as the
Credit Facility shall be in full force and effect, if an Event of Default shall
occur and be continuing (other than an Event of Default specified in clause
(vii)), any such acceleration shall not become effective until the earlier of
(i) five Business Days following a delivery of a notice of such acceleration to
the agent under the Credit Facility and (ii) the acceleration of any amounts
under the Credit Facility. If an Event of Default specified in clause (vii)
above occurs and is continuing, then the principal of all the Notes shall become
due and payable without any declaration or other act on the part of the Trustee
or any Holder. After a declaration of acceleration, but before a judgment or
decree for payment of the money due has been obtained by the Trustee, the
Holders of a majority in principal amount of the Outstanding Notes, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if (a) the Company has paid or deposited, or caused to be
paid or deposited, with the Trustee a sum sufficient to pay (i) all sums paid or
advanced by the Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Notes, (iii) the principal of and premium, if
any, on any Notes that have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate borne by the Notes, and (b) all Events of Default, other than the
non-payment of principal of the Notes which have become due solely by such
declaration of acceleration, have been cured or waived.
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during the existence of an Event of Default to act with the
required standard of care, to be indemnified by the Holders of Notes before
proceeding to exercise any right or power under the Indenture at the request of
such Holders. The Indenture provides that the Holders of a majority in aggregate
principal amount of the Notes then Outstanding may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
The Trust Indenture Act of 1939 contains limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage
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in other transactions, provided that if it acquires any conflicting interest it
must eliminate such conflict upon the occurrence of an Event of Default or else
resign.
The Company will be required to furnish to the Trustee annually a statement
as to any default by the Company in the performance and observance of its
obligations under the Indenture.
DEFEASANCE AND COVENANT DEFEASANCE OF THE INDENTURE
The Company may, at its option, and at any time, elect to have the
obligations of the Company discharged with respect to all Outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the Outstanding Notes
and to have satisfied its other obligations under the Indenture, except for the
following which shall survive until otherwise terminated or discharged: (i) the
rights of Holders of Outstanding Notes to receive payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments are
due, (ii) the Company's obligations with respect to the Notes relating to the
issuance of temporary Notes, the registration, transfer and exchange of Notes,
the replacement of mutilated, destroyed, lost or stolen Notes, the maintenance
of an office or agency in The City of New York, the holding of money for
security payments in trust and statements as to compliance with the Indenture,
(iii) its obligations in connection with the rights, powers, trusts, duties and
immunities of the Trustee and (iv) the defeasance provisions of the Indenture.
In addition the Company may, at its option and at any time, elect to be released
from its obligations with respect to certain of its restrictive covenants under
the Indenture ("covenant defeasance") and any omission to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the Notes. In the event covenant defeasance occurs, certain events (not
including non-payment, bankruptcy and insolvency events) described under "Events
of Default" will no longer constitute Events of Default with respect to the
Notes.
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders, cash in U.S. dollars, certain U.S. government obligations, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of (and premium, if any, on) and interest on the Outstanding Notes on
the Stated Maturity (or Redemption Date, if applicable) of such principal (and
premium, if any) or installment of interest, (ii) in the case of defeasance, the
Company shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (y) since the date of this Prospectus, there has
been a change in the applicable United States federal income tax law, in either
case to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the Outstanding Notes will not recognize income, gain or
loss for United States federal income tax purposes as a result of such
defeasance and will be subject to United States federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred, (iii) in the case of covenant defeasance, the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Notes will not recognize income, gain or
loss for United States federal income tax purposes as a result of such covenant
defeasance and will be subject to United States federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred, (iv) the Company shall have delivered
to the Trustee an Opinion of Counsel to the effect that such deposit shall not
cause the Trustee or the trust so created to be subject to the Investment
Company Act of 1940 and (v) the Company must comply with certain other
conditions, including that such defeasance or covenant defeasance will not
result in a breach or violation of, or constitute a default under, the Indenture
or any material agreement or instrument to which the Company is a party or by
which it is bound.
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MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be entered into by the
Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Notes; provided,
however, that no such modification or amendment may, without the consent of the
Holder of each Outstanding Note affected thereby: (i) change the Stated Maturity
of the principal of, or any installment of interest on, any Note, or reduce the
principal amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the coin or currency in which any Note or
any premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), (ii) reduce
the amount of, or change the coin or currency of, or impair the right to
institute suit for the enforcement of, the Change of Control Purchase Price,
(iii) reduce the percentage in principal amount of Outstanding Notes, the
consent of whose Holders is necessary to amend or waive compliance with certain
provisions of the Indenture or to waive certain defaults, (iv) modify any of the
provisions relating to supplemental indentures requiring the consent of Holders
or relating to the waiver of past defaults or relating to the waiver of certain
covenants, except to increase the percentage of Outstanding Notes the consent of
whose Holders is required for such actions or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the Holder of each Note affected thereby or (v) modify any of the provisions of
the Indenture relating to the subordination of the Notes in a manner adverse to
any Holder.
The Holders of a majority in aggregate principal amount of the Outstanding
Notes may waive compliance with certain restrictive covenants and provisions of
the Indenture.
FORM AND DENOMINATION
Except as provided below, the New Notes will be represented by a global note
(the "Global Note") in definitive, fully registered form without interest
coupons and will be deposited with, or on behalf of, The Depository Trust
Company ("DTC"), or with the Trustee, as custodian for DTC, and registered in
the name of a nominee of DTC.
The Company will initially appoint the Trustee at its corporate trust office
as paying agent and registrar for the Notes. In such capacities, the Trustee
will be responsible for, among other things, (i) maintaining a record of the
aggregate holdings of Notes, accepting Notes for exchange and registration of
transfer; (ii) ensuring that payments of principal, premium, if any, and
interest in respect of the Notes received by the Trustee from the Issuer are
duly paid to DTC or its nominees and (iii) transmitting to the Issuer any
notices from holders.
The Company will cause to be kept at the office of the registrar a register
in which, subject to such reasonable regulations as it may prescribe, the
Company will provide for the registration of the Notes and registration of
transfers of the Notes. The Company may vary or terminate the appointment of any
paying agent or registrar, or appoint additional or other such agents or approve
any change in the office through which any such agent acts; provided that there
shall at all times be a paying agent and registrar in the Borough of Manhattan,
The City of New York, New York. The Company will cause notice of any
resignation, termination or appointment of the Trustee or any paying agent or
registrar, and of any change in the office through which any such agent will
act, to be provided to Holders of the Notes.
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No service charge will be made for any registration of, transfer or exchange
of the Notes, but the Company may require payment of sums sufficient to cover
any tax or other government charge payable in connection therewith.
GLOBAL NOTES
The following description of the operations and procedures of DTC, Euroclear
and CEDEL are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
Upon the issuance of a Global Note representing the New Notes, DTC will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Note to the accounts
with DTC ("participants") or persons who hold interests through participants.
Ownership of beneficial interests in the Global Note will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE,
DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND
HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE
INDENTURE AND THE NOTES. Unless DTC notifies the Company that it is unwilling or
unable to continue as a depositary for a Global Note, or ceases to be a
"Clearing Agency" registered under the Exchange Act, or announces an intention
permanently to cease business or does in fact do so, or an Event of Default has
occurred and is continuing with respect to a Global Note, owners of beneficial
interests in a Global Note will not be entitled to have any portions of such
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of Notes in definitive form and will not be considered
the owners or Holders of the Global Note (or any Notes represented thereby)
under the Indenture or the Notes. In addition, no beneficial owner of an
interest in a Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures (in addition to those under the
Indenture referred to herein and, if applicable, those of Euroclear and CEDEL).
In the event that owners of beneficial interests in a Global Note become
entitled to receive Notes in definitive form, such Notes will be issued only in
registered form in denominations of U.S. $1,000 and integral multiples thereof.
Investors may hold their interests in the Global Note through Euroclear or
CEDEL, if they are participants in such systems, or indirectly through
organizations which are participants in such systems. Investors may also hold
such interests through organizations other than Euroclear and CEDEL that are
participants in the DTC system. Euroclear and CEDEL will hold interests in the
Global Note on behalf of their participants through customers' securities
accounts in their respective names on the books of their respective
depositaries, which, in turn, will hold such interests in the Global Note in
customers' securities accounts in the depositaries' names on the books of DTC.
Investors may hold their interests in the Global Note directly through DTC, if
they are participants in such system, or indirectly through organizations
(including Euroclear and CEDEL) which are participants in such system. All
interests in a Global Note, including those held through Euroclear or CEDEL, may
be subject to the procedures and requirements of DTC. Those interests held
through Euroclear and CEDEL may also be subject to the procedures and
requirements of such system.
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Payments of the principal of, premium, if any, and interest on the Global
Note will be made to DTC or its nominee as the registered owner thereof. Neither
the Company, the Trustee nor any of their respective agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Subject to the following considerations, beneficial interests in the Global
Note will trade in DTC's Same-Day Funds Settlement System, and secondary market
trading activity in such interests will therefore settle in immediately
available funds. The Company expects that DTC or its nominee, upon receipt of
any payment of principal or interest in respect of a Global Note representing
any Notes held by it or its nominee, will immediately credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note for such Notes as shown on
the records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global Notes held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
registered in "street name." Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between DTC participants, on the one hand, and
Euroclear or CEDEL participants, on the other hand, will be effected in DTC in
accordance with DTC's rules on behalf of Euroclear or CEDEL, as the case may be,
by its respective depositary; however, such cross-market transactions will
require delivery of instructions to Euroclear or CEDEL, as the case may be, by
the counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
CEDEL, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Note in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and CEDEL participants may not deliver instructions
directly to the depositaries for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Note from a DTC participant
will be credited, and any such crediting will be reported to the relevant
Euroclear or CEDEL participant, during the securities settlement processing day
(which must be a business day for Euroclear and CEDEL) immediately following the
DTC settlement date. Cash received on Euroclear or CEDEL as a result of sales of
interests in a Global Note by or through a Euroclear or CEDEL participant to a
DTC participant will be received with value on the DTC settlement date but will
be available in the relevant Euroclear or CEDEL cash account only as of the
business day for Euroclear or CEDEL following the DTC settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account with DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of the Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC reserves the right to exchange the
Global Notes for legended Notes in certificated form, and to distribute such
notes to its participants.
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DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code, as amended, and a "Clearing Agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical transfer and delivery of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system is
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly ("indirect participants").
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures in
order to facilitate transfers of beneficial ownership interests in the Global
Note among participants of DTC, Euroclear and CEDEL, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Trustee nor
any of their respective agents will have any responsibility for the performance
by DTC, Euroclear and CEDEL, their participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations, including maintaining, supervising or reviewing the records relating
to, or payments made on account of, beneficial owner interests in the Global
Notes.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary for
the reasons set forth above under " --Global Notes", or, in the case of a Global
Note held for an account of Euroclear or CEDEL, Euroclear or CEDEL, as the case
may be, is closed for business for 14 continuous days or announces an intention
to cease or permanently ceases business, the Company will issue certificates for
the Notes in definitive, fully registered, non-global form without interest
coupons. In all cases, certificates for Notes delivered in exchange for any
Global Note or beneficial interests therein will be registered in the names, and
issued in any approved denominations, requested by DTC. Physical certificates
representing the Notes will not otherwise be available.
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee under the Indenture.
The Bank of New York is also the indenture trustee under the indenture
respecting the 125/8% Subordinated Notes.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.
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REGISTRATION RIGHTS AGREEMENT
The Company has entered into the Registration Rights Agreement with Goldman,
Sachs & Co., Salomon Brothers Inc and Scotia Capital Markets, as the initial
purchasers of the Old Notes, pursuant to which the Company has agreed, for the
benefit of the holders of the Old Notes, at the Company's cost, to (i) use its
best efforts to file a registration statement with respect to the Exchange Offer
within 90 days after the date of the original issue of the Notes with the
Commission with respect to the exchange of the Old Notes for the New Notes,
which will have terms identical in all material respects to the Old Notes
(except that the New Notes will not contain terms with respect to transfer
restrictions) and (ii) use its best efforts to cause such registration statement
to be declared effective under the Securities Act within 150 days after the date
of original issuance of the Notes. Promptly after such registration statement
has been declared effective, the Company will offer the New Notes in exchange
for surrender of the Old Notes. The Company will keep the Exchange Offer open
until the Expiration Date. For each Old Note validly tendered to the Company
pursuant to the Exchange Offer and not withdrawn by the holder thereof, the
holder of such Old Note will receive a New Note having a principal amount equal
to the principal amount of such surrendered Note.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer, or if for any reason the Exchange Offer registration statement is not
declared effective on or prior to August 16, 1997, or upon the request of an
Initial Purchaser under certain circumstances, the Company will, in lieu of
effecting the registration of the New Notes pursuant to the Exchange Offer
registration statement and at its cost, (i) as promptly as practicable, file
with the Commission a Shelf registration statement covering resales of the Old
Notes on a continuous basis, (ii) use its best efforts to cause the Shelf
registration statement to be declared effective under the Securities Act by
September 15, 1997 and (iii) use its best efforts to keep effective the Shelf
registration statement until three years after its effective date. The Company
will, in the event of the filing of a Shelf registration statement, provide to
each holder of the Old Notes copies of the prospectus which is a part of the
Shelf registration statement, notify each such holder when the Shelf
registration statement for the Notes has become effective and take certain other
actions as are required to permit unrestricted resales of the Old Notes. A
holder of Old Notes that sells such Old Notes pursuant to the Shelf registration
statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification obligations). In addition, each holder of the Old Notes
will be required to deliver information to be used in connection with the Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have their Notes included in the Shelf Registration
Statement and to benefit from the provisions regarding liquidated damages set
forth in the following paragraph.
In the event that either (a) the Exchange Offer registration statement is
not filed with the Commission 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 Old Notes is not declared effective on or prior to
September 15, 1997, the interest rate borne by the Notes shall be increased 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 in the case of clause (c) above. The aggregate amount of such
increase from the original interest rate pursuant to these provisions 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
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effectiveness of a Shelf registration statement, as the case may be, after
September 15, 1997, the interest rate borne by the Old Notes from the date of
such filing, effectiveness or consummation, as the case may be, will be reduced
to 9 1/2%.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of certain material United States federal income
tax consequences applicable to the exchange of Old Notes for New Notes pursuant
to the Exchange Offer (the "Exchange") and to the purchase, ownership and
disposition of the Notes. The discussion is based on the Internal Revenue Code
of 1986 (the "Code"), its legislative history, applicable Treasury Regulations,
judicial authority and administrative rulings and practice, all as currently
existing and in effect. There can be no assurance that the Internal Revenue
Service (the "IRS") and the courts will not take a contrary view with respect to
these tax consequences, and no ruling from the IRS has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may be retroactive and could affect
(possibly adversely) the tax consequences of the exchange or of purchasing,
owning and disposing of the Notes.
Except as otherwise described herein, this discussion applies only to a
person who is an initial beneficial owner who purchased the Notes for their
issue price from the Initial Purchasers pursuant to the initial offering thereof
(a "Holder"), and except as otherwise described herein, who is (1) a citizen or
resident of the United States for United States federal income tax purposes, (2)
a corporation, partnership, or other entity created or organized in or under the
laws of the United States or any political subdivision thereof or (3) an estate
or trust the income of which is subject to United States federal income taxation
regardless of its source (each a "U.S. Holder"). A "non-U.S. Holder" is a Holder
who purchased the Notes pursuant to the initial offering thereof who is not a
U.S. Holder.
The summary deals only with the Notes held as capital assets by Holders and
not with subsequent holders of the Notes or with special classes of Holders,
such as banks and other financial institutions, dealers in securities, life
insurance companies, persons subject to alternative minimum tax, tax-exempt
organizations or persons holding the Notes as a hedge against, or that are
hedged against, currency risk or that are part of a straddle or conversion
transaction, or persons whose functional currency is not the U.S. dollar.
Moreover, the effect of any applicable state, local or foreign tax laws, or any
estate or gift tax laws, is not discussed.
Holders of Old Notes should consult their own tax advisors concerning the
particular consequences to them of the Exchange and the purchase, ownership and
disposition of the Notes under the Code and the law of any other taxing
jurisdiction.
EXCHANGE OFFER
For United States federal income tax purposes, the Exchange will be
disregarded and each New Note will be treated as a continuation of the
corresponding Old Note. Accordingly, Holders will not recognize gain or loss
upon the Exchange, and a Holder will have the same tax basis in its New Notes as
it did in its Old Notes.
U.S. HOLDERS
A U.S. Holder of a Note will be required to report as ordinary interest
income for U.S. federal income tax purposes interest earned on the Note in
accordance with the Holder's method of tax accounting. Although the Notes were
issued at a price that is less than their stated principal amount, the discount
was
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less than 0.25% of the stated redemption price at maturity multiplied by the
number of whole years to maturity. Therefore, for federal income tax purposes
the amount of original issue discount on the Notes that is attributable to the
difference between their purchase price and their stated redemption price is
considered to be de minimis and is treated as zero.
The interest rate on the Old Notes will be increased by up to 1% per annum
if, within the time periods set forth herein, the Exchange Offer is not
consummated and a Shelf registration statement is not declared effective. See
"The Exchange Offer--General." According to the Treasury Regulations, the
possibility of a change in the interest rate will not affect the amount of
interest income recognized by a Holder (or the timing of such recognition) if
the likelihood of the change, as of the date the Notes are issued, is remote.
The Company believes that the likelihood of a change in the interest rate on the
Old Notes was remote at the date of their issuance and does not intend to treat
the possibility of a change in the interest rate as affecting the yield to
maturity of any Note. Because the amount of original issue discount on the Notes
without regard to any change in the interest rate paid thereon is de minimis,
and because the likelihood of a change in the interest rate on the Notes was
remote at the date of their issuance, the Notes do not have original issue
discount. However, if the interest rate on the Old Notes did, in fact, change,
then the Old Notes would be treated as having been retired and reissued for
purposes of determining whether the original issue discount rules would
thereafter apply to them. The effect of the above rules is that any increased
amount of interest attributable to a change in the interest rate on the Old
Notes would be included in income over the remaining term of the Old Notes,
possibly in advance of the receipt of cash relating thereto.
If a U.S. Holder purchased a Note for an amount that is less than its stated
principal amount, the amount of the difference will be treated as "market
discount" for federal income tax purposes, unless such difference is less than a
specified de minimis amount (0.25% of its stated redemption price at maturity
multiplied by the number of whole years to maturity). Under the market discount
rules, a U.S. Holder will be required to treat any principal payment on, or any
gain on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such Note at the
time of such payment or disposition. In addition, the U.S. Holder may be
required to defer, until the maturity of the Note or its earlier disposition in
a taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably (i.e., on a
straight line basis) during the period from the date of acquisition to the
maturity date of the Note, unless the U.S. Holder elects to accrue on a constant
interest method. A U.S. Holder of a Note may elect to include market discount in
income currently as it accrues (on either a ratable or constant interest
method), in which case the rule described above regarding deferral of interest
deductions will not apply. This election to include market discount income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
A U.S. Holder that purchased a Note for an amount in excess of its stated
redemption price at its earliest call date will be considered to have purchased
the Note at a "premium." A U.S. Holder generally may elect to amortize the
premium over the remaining term of the Note on a constant yield method. The
amount amortized in any year will be treated as a reduction of the U.S. Holder's
interest income from the Note. A U.S. Holder that elects to amortize such
premium must also reduce its tax basis in a Note by the amount of premium
amortized during its holding period. Bond premium on a Note held by a U.S.
Holder that does not make such an election will decrease the gain or increase
the loss otherwise recognized on disposition of the Note. The election to
amortize premium on a constant yield method once made applies
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to all debt obligations held or subsequently acquired by the electing U.S.
Holder on or after the first day of the first taxable year to which the election
applies, other than debt instruments the interest on which is excludable from
gross income, and may not be revoked without the consent of the IRS.
Proposed regulations have been issued that, if finalized in their current
form, would require that a U.S. Holder that purchases a Note at a premium, and
elects to amortize such premium, must amortize such premium under a constant
yield method. As proposed, these rules will be applicable to debt instruments
issued on or after 60 days after the regulations are published in final form.
However, under the proposed rules, certain Holders may elect to apply the new
rules to all Notes held on or after the first day of the taxable year that
contains the day which is 60 days after the regulations are published in final
form.
A Holder's tax basis for a Note generally will be the Holder's purchase
price for the Note increased by amounts includible in income by the Holder as
market discount and reduced by any amortized premium. Upon the sale, exchange,
redemption, retirement or other disposition of a Note, a Holder will recognize
gain or loss equal to the difference (if any) between the amount realized and
the Holder's tax basis in the Note. Except to the extent that amounts are
required to be treated as ordinary income under the market discount rules
described above or are allocable to accrued or unpaid interest, such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if
the Note has been held for more than one year.
Under certain Treasury Regulations, relating to modifications and exchanges
of debt instruments, any increases in the interest rate of the Old Notes
resulting from an Exchange Offer not being consummated, or Shelf registration
statement not being declared effective, would not be treated as a taxable
exchange, as such change in interest rate would occur pursuant to the original
terms of the Old Notes.
NON-U.S. HOLDERS
Subject to the discussion of "backup" withholding below, payments of
principal, if any, and interest by the Company or its agent (in its capacity as
such) to any non-U.S. Holder will not be subject to U.S. federal withholding tax
provided, in the case of interest, that (1) such non-U.S. Holder does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote, (2) such non-U.S. Holder
is not a controlled foreign corporation for U.S. federal income tax purposes
that is related to the Company through stock ownership and (3) either (A) the
non-U.S. Holder of the Note certifies to the Company or its agent, under
penalties of perjury, that it is not a U.S. Holder and provides its name and
address or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "financial institution") certifies to the Company or its agent,
under penalties of perjury, that the certification described in clause (A)
hereof has been received from the non-U.S. Holder by it or by another financial
institution acting for the beneficial owner and furnishes the payor with a copy
thereof. The certification may be made on an IRS Form W-8 or substantially
similar substitute form, and a non-U.S. Holder must inform the Company or its
agent of any change in the information on the statement within 30 days of the
change. A non-U.S. Holder of the Notes who does not meet the requirements of the
second preceding sentence would generally be subject to U.S. federal withholding
tax at a flat rate of 30% (or a lower applicable treaty rate) on payments of
interest on the Notes. The IRS has proposed regulations that, if finalized,
would modify certain of the certification requirements described above.
If a non-U.S. Holder of a Note is engaged in a trade or business in the
United States and interest on the Note is effectively connected with the conduct
of such trade or business, then the rules set forth in
-101-
<PAGE>
the preceding paragraph will not apply. Such non-U.S. Holder will be exempt from
U.S. federal withholding tax (by reason of the delivery of a properly completed
IRS Form 4224), but will be subject to U.S. federal income tax on such interest
and on any gain realized on the sale, exchange or other disposition of a Note in
the same manner as if it were a U.S. Holder. In addition, if such non-U.S.
Holder is a foreign corporation, it may be subject to a U.S. foreign branch
profits tax equal to 30% of its effectively connected earnings and profits
(subject to adjustment) for that taxable year, unless it qualifies for a lower
rate under an applicable income tax treaty.
Subject to the discussion of "backup" withholding below, any capital gain
realized upon the sale, exchange or retirement of a Note by a non-U.S. Holder
will not be subject to U.S. federal income or withholding taxes unless (1) such
gain is effectively connected with a U.S. trade or business of the Holder or (2)
in the case of an individual, such non-U.S. Holder is present in the United
States for 183 days or more in the taxable year of the retirement or disposition
and certain other conditions are met.
Non-U.S. Holders should consult with their tax advisors regarding United
States and foreign tax consequences with respect to the Notes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
"Backup" withholding and information reporting requirements may apply to
certain payments of principal and interest on a Note and to certain payments of
proceeds of the sale or retirement of a Note. The Company, its agent, a broker,
the Trustee or any paying agent, as the case may be, will be required to
withhold tax from any payment that is subject to backup withholding at a rate of
31% of such payment if a U.S. Holder fails to furnish his taxpayer
identification number (social security number or employer identification
number), to certify that such U.S. Holder is not subject to backup withholding,
or to otherwise comply with the applicable requirements of the backup
withholding rules. Certain U.S. Holders (including, among others, all
corporations) are not subject to the backup withholding and reporting
requirements.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof
(in its capacity as such) to a Holder of a Note who has provided the required
certification under penalties of perjury that it is not a U.S. Holder as set
forth in clause (3) in the first paragraph under "Non-U.S. Holders" or has
otherwise established an exemption (provided that neither the Company nor such
agent has actual knowledge that the Holder is a U.S. Holder or that the
conditions of any other exemption are not in fact satisfied).
Payments of the proceeds from the sale by a non-U.S. Holder of a Note made
to or through a foreign office of a broker will not be subject to U.S.
information reporting or backup withholding, except that if the broker is a U.S.
person, a controlled foreign corporation for U.S. federal income tax purposes or
a foreign person 50% or more of whose gross income is effectively connected with
a United States trade or business for a specified three-year period, United
States information reporting, but not backup withholding, may apply to such
payments. Payments of the proceeds from the sale of a Note to or through the
United States office of a broker is subject to United States information
reporting and backup withholding unless the Holder certifies as to its
non-United States status or otherwise establishes an exemption from United
States information reporting and backup withholding.
Any amounts withheld under the backup withholding rules from a payment to a
Holder may be claimed as a credit against such Holder's United States federal
income tax liability, provided that the required information is provided to the
IRS.
-102-
<PAGE>
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing, retirement, or other employee
benefit plan subject to Title I of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA", and such plan, a "Plan"), should consider the
fiduciary standards under ERISA in the context of the Plan's particular
circumstances before authorizing an investment of such Plan's assets in the
Notes. Accordingly, such fiduciary should consider whether the investment
satisfies the diversification and prudence requirements of ERISA and whether the
investment is consistent with the documents and instruments governing the Plan.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA and the corresponding provisions of the Code
prohibit a wide range of transactions involving the assets of a Plan and persons
who have certain specified relationships to the Plan ("parties in interest",
within the meaning of ERISA, and "disqualified persons", within the meaning of
the Code). A prohibited transaction described in Section 406 of ERISA or Section
4975 of the Code could arise if the Company were, or were to become, a party in
interest or a disqualified person with respect to a Plan purchasing the Notes.
Certain exemptions from the prohibited transaction rules could be applicable to
the purchase of the Notes by a Plan or by a person whose assets may constitute
assets of a Plan. Included among these exemptions are: Prohibited Transaction
Class Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 91-38, regarding investments by bank collective
investment funds; PTCE 84-14, regarding transactions effected by a qualified
professional asset manager; PTCE 96-23, regarding transactions effected by
in-house asset managers; and PTCE 95-60, regarding transactions by insurance
company general accounts. Thus, a fiduciary of a Plan considering an investment
in the Notes also should consider whether the acquisition of the Notes might
constitute or give rise to a non-exempt prohibited transaction.
Certain employee benefit plans, such as governmental plans and church plans,
are not subject to the restrictions of ERISA, and assets of such plans may be
invested in the Notes without regard to the ERISA considerations described
above. The investment in the Notes by such employee benefit plans may, however,
be subject to other applicable federal, state and local laws, which should be
carefully considered by such employee benefit plans before investing in the
Notes.
Every Plan, governmental plan or church plan considering the acquisition of
the Notes should consult with its counsel with respect to the potential
applicability of ERISA, the Code and any other relevant laws to such investment.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale for a period of 180 days from the date of this Prospectus,
or such shorter period as will terminate when all Old Notes acquired by
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for New Notes and resold by such
broker-dealers.
-103-
<PAGE>
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days from the date of this Prospectus, or such shorter
period as will terminate when all Old Notes acquired by broker-dealers for their
own accounts as a result of market-making activities or other trading activities
have been exchanged for New Notes and resold by such broker-dealers, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Lathrop & Gage L.C., Kansas City, Missouri. Raymond F. Beagle, Jr., a
member of Lathrop & Gage L.C., is general counsel of the Company and a successor
voting trustee under Mr. Stanley H. Durwood's revocable voting trust. See
"Security Ownership of Beneficial Owners."
EXPERTS
The 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 included in this registration statement, have been included
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated balance sheets of AMC Entertainment Inc. and subsidiaries
as of March 28, 1996 and March 30, 1995 and the related consolidated statements
of operations, stockholders' equity and cash flows for the years (52 weeks)
ended March 28, 1996, March 30, 1995 and March 31, 1994 incorporated by
reference in this registration statement, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The consolidated balance sheets of Durwood, 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
included in this registration statement, have been included herein in reliance
on the report
-104-
<PAGE>
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
-105-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AMC ENTERTAINMENT INC.
PRO FORMA FINANCIAL STATEMENTS:
Condensed Pro Forma Financial Statements................................................................... F-2
Condensed Pro Forma Consolidated Statement of Operations for the year (53 weeks) ended April 3, 1997....... F-3
Condensed Pro Forma Consolidated Balance Sheet as of April 3, 1997......................................... F-4
Notes to Condensed Pro Forma Financial Statements.......................................................... F-5
AUDITED FINANCIAL STATEMENTS:
Report of Independent Accountants.......................................................................... F-7
Consolidated Statements of Operations for the year (53 weeks) ended April 3, 1997 and years (52 weeks)
ended March 28, 1996 and March 30, 1995.................................................................. F-8
Consolidated Balance Sheets as of April 3, 1997 and March 28, 1996......................................... F-9
Consolidated Statements of Cash Flows for the year (53 weeks) ended April 3, 1997 and years (52 weeks)
ended March 28, 1996 and March 30, 1995.................................................................. F-10
Consolidated Statements of Stockholders' Equity for the year (53 weeks) ended April 3, 1997 and years (52
weeks) ended March 28, 1996 and March 30, 1995........................................................... F-12
Notes to Consolidated Financial Statements................................................................. F-13
DURWOOD, INC.
PRO FORMA FINANCIAL STATEMENTS:
Condensed Pro Forma Financial Statements................................................................... F-32
Condensed Pro Forma Consolidated Statement of Operations for the year (53 weeks) ended April 3, 1997....... F-33
Condensed Pro Forma Consolidated Balance Sheet as of April 3, 1997......................................... F-34
Notes to Condensed Pro Forma Financial Statements.......................................................... F-35
AUDITED FINANCIAL STATEMENTS
Report of Independent Accountants.......................................................................... F-37
Consolidated Statements of Operations for the year (53 weeks) ended April 3, 1997 and years (52 weeks)
ended March 28, 1996 and March 30, 1995.................................................................. F-38
Consolidated Balance Sheets as of April 3, 1997 and March 28, 1996......................................... F-39
Consolidated Statements of Cash Flows for the year (53 weeks) ended April 3, 1997 and years (52 weeks)
ended March 28, 1996 and March 30, 1995.................................................................. F-40
Consolidated Statements of Stockholders' Equity for the year (53 weeks) ended April 3, 1997 and years (52
weeks) ended March 28, 1996 and March 30, 1995........................................................... F-42
Notes to Consolidated Financial Statements................................................................. F-43
</TABLE>
F-1
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited Condensed Pro Forma Statement of Operations and
Balance Sheet have been prepared giving effect to the Merger of Durwood, Inc.
("DI") with AMC Entertainment Inc. ("AMCE" or the "Company"). The Condensed Pro
Forma Statement of Operations for the year (53 weeks) ended April 3, 1997
assumes that the Merger occurred on March 29, 1996. The Condensed Pro Forma
Balance Sheet assumes that the Merger occurred on April 3, 1997.
The unaudited Condensed Pro Forma Financial Statements do not purport to
represent the Company's financial position or results of operations had the
above transaction in fact occurred on such dates. In addition, the unaudited
Condensed Pro Forma Financial Statements are not intended to be indicative of
the Company's future financial position or results of operations.
The unaudited Condensed Pro Forma Financial Statements should be read in
conjunction with the historical financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
F-2
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR (53 WEEKS) ENDED APRIL 3, 1997
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AMCE ADJUSTMENTS AMCE FOR
ACTUAL(1) FOR MERGER(2) MERGER
----------- -------------- -----------
<S> <C> <C> <C>
Revenues................................................................. $ 749,597 $ -- $ 749,597
Cost of operations....................................................... 580,002 -- 580,002
General and administrative expenses...................................... 56,647 -- 56,647
Depreciation and amortization............................................ 59,803 -- 59,803
----------- -------------- -----------
Operating income....................................................... 53,145 -- 53,145
Interest expense......................................................... 22,022 -- 22,022
Other income, net........................................................ 772 -- 772
----------- -------------- -----------
Earnings before income taxes............................................. 31,895 -- 31,895
Income tax provision..................................................... 12,900 -- 12,900
----------- -------------- -----------
Net earnings............................................................. $ 18,995 $ -- $ 18,995
----------- -------------- -----------
----------- -------------- -----------
Preferred dividends...................................................... 5,907 5,907
----------- -----------
Net earnings for common shares........................................... $ 13,088 $ 13,088
----------- -----------
----------- -----------
Earnings per share:
Primary................................................................ $ .74 $ .74
----------- -----------
----------- -----------
Fully diluted.......................................................... $ .73 $ .73
----------- -----------
----------- -----------
Weighted average number of shares outstanding:
Primary................................................................ 17,726 17,726
----------- -----------
----------- -----------
Fully diluted.......................................................... 17,940 17,940
----------- -----------
----------- -----------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-3
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 3, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AMCE ADJUSTMENTS FOR AMCE FOR
ACTUAL(1) MERGER(2) MERGER
----------- ---------------- -----------
<S> <C> <C> <C>
ASSETS
Current assets....................................................... $ 83,672 $ -- $ 83,672
Property, net........................................................ 543,058 -- 543,058
Intangible assets, net............................................... 28,679 -- 28,679
Other long-term assets............................................... 62,804 -- 62,804
----------- -------- -----------
Total assets....................................................... $ 718,213 $ -- $ 718,213
----------- -------- -----------
----------- -------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities.................................................. $ 134,267 $ 1,000(3) $ 135,267
Corporate borrowings................................................. 315,046 -- 315,046
Capital lease obligations............................................ 55,237 -- 55,237
Other long-term liabilities.......................................... 43,651 -- 43,651
----------- -------- -----------
548,201 1,000 549,201
Stockholders' equity:
$1.75 Cumulative Convertible Preferred Stock; 3,303,600 shares
outstanding...................................................... 2,202 -- 2,202
Common Stock; 6,604,469 shares issued; 12,745,812 on a pro forma
basis............................................................ 4,403 4,094(4) 8,497
Convertible Class B Stock; 11,157,000 shares issued and
outstanding; 5,015,657 on a pro forma basis...................... 7,438 (4,094)(5) 3,344
Additional paid-in capital......................................... 107,781 -- 107,781
Foreign currency translation adjustment............................ (2,048) -- (2,048)
Retained earnings.................................................. 50,605 (1,000)(3) 49,605
Common Stock in treasury, 20,500 shares............................ (369) -- (369)
----------- -------- -----------
170,012 (1,000) 169,012
----------- -------- -----------
$ 718,213 $ -- $ 718,213
----------- -------- -----------
----------- -------- -----------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-4
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(1) The amounts presented hereunder were taken from the Company's April 3, 1997
Consolidated Financial Statements.
(2) Prior to the Merger, all assets of DI, other than DI's equity interest in
the Company, will be transferred to DI's subsidiary, Delta Properties, Inc.
("Delta"), which will agree to assume DI's liabilities. Delta's stock then
will be distributed to the DI shareholders. See "Durwood, Inc. Condensed Pro
Forma Financial Statements." As a result, 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.
(3) Represents expenses associated with the Merger. These nonrecurring charges
have not been reflected in the Condensed Pro Forma Statement of Operations.
(4) Represents the net effect to Common Stock from the cancellation of
2,641,951 shares of Common Stock owned by DI and the issuance of 8,783,294
shares of Common Stock to the Durwood Children upon the Merger.
(5) Represents the net effect to Class B Stock from the cancellation of
11,157,000 shares of Class B Stock owned by DI and the issuance of 5,015,567
shares of Class B Stock to Stanley H. Durwood upon the Merger.
F-5
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT ACCOUNTANTS
YEAR (53 WEEKS) ENDED
APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996 AND MARCH 30, 1995
F-6
<PAGE>
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 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.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
May 16, 1997
F-7
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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)
<TABLE>
<CAPTION>
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
Cororate 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
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 3, 1997 AND MARCH 28, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
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
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS)
ENDED MARCH 28, 1996 AND MARCH 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
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>
F-10
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
(IN THOUSANDS)
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>
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
</TABLE>
See Notes to Consolidated Financial Statements.
F-11
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN
PREFERRED STOCK COMMON STOCK CLASS B STOCK ADDITIONAL CURRENCY
---------------------- ---------------------- ------------------------ PAID-IN TRANSLATION
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT
----------- --------- ----------- --------- ------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1,
1994.................. 4,000,000 $ 2,667 5,266,830 $ 3,511 11,157,000 $ 7,438 $ 106,951 $ --
Net earnings.......... -- -- -- -- -- -- -- --
Exercise of options on
Common Stock........ -- -- 39,550 27 -- -- 212 --
Dividends declared:
$1.75 Preferred
Stock............. -- -- -- -- -- -- -- --
----------- --------- ----------- --------- ------------- --------- ----------- -----------
Balance, March 30,
1995.................. 4,000,000 2,667 5,306,380 3,538 11,157,000 7,438 107,163 --
Net earnings.......... -- -- -- -- -- -- -- --
Exercise of options on
Common Stock........ -- -- 82,500 55 -- -- 823 --
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 11,157,000 7,438 107,986 --
Net earnings.......... -- -- -- -- -- -- -- --
Exercise of options on
Common Stock........ -- -- 15,000 10 -- -- 130 --
Preferred Stock
conversions......... (696,400) (465) 1,200,589 800 -- -- (335) --
Dividends declared:
$1.75 Preferred
Stock............. -- -- -- -- -- -- -- --
Foreign currency
translation
adjustment.......... -- -- -- -- -- -- -- (2,048)
----------- --------- ----------- --------- ------------- --------- ----------- -----------
Balance, April 3,
1997.................. 3,303,600 $ 2,202 6,604,469 $ 4,403 11,157,000 $ 7,438 $ 107,781 $ (2,048)
----------- --------- ----------- --------- ------------- --------- ----------- -----------
----------- --------- ----------- --------- ------------- --------- ----------- -----------
<CAPTION>
COMMON STOCK IN
TREASURY TOTAL
RETAINED ---------------------- 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>
See Notes to Consolidated Financial Statements.
F-12
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
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. 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
F-13
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
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:
<TABLE>
<S> <C>
Buildings and improvements.................................. 20 to 40 years
Leasehold improvements...................................... 5 to 25 years
Furniture, fixtures and equipment........................... 3 to 10 years
</TABLE>
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.
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.
F-14
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
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.
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
F-15
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
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 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 (in thousands):
<TABLE>
<CAPTION>
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
--------- ---------
--------- ---------
</TABLE>
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.
F-16
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 4--OTHER ASSETS AND LIABILITIES
Other assets and liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
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>
F-17
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (in thousands):
<TABLE>
<CAPTION>
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.
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.
F-18
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
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.
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.
F-19
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
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 (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OBLIGATIONS
-------------------------------------
MINIMUM NET
LEASE LESS PRESENT CORPORATE
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. 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.
F-20
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
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.
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.
F-21
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
The pro forma amounts under SFAS 123 are indicated below (in thousands
except per share amounts):
<TABLE>
<CAPTION>
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>
F-22
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
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
- ----------------- ----------- ------------------ ------------------- ----------- -------------------
<C> <C> <S> <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>
F-23
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (in thousands):
<TABLE>
<CAPTION>
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 (in thousands):
<TABLE>
<CAPTION>
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>
F-24
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 7--INCOME TAXES (CONTINUED)
The significant components of deferred income tax assets and liabilities as
of April 3, 1997 and March 28, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
DEFERRED INCOME TAX DEFERRED INCOME TAX
---------------------- ----------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------- ----------- --------- -----------
Accrued reserves and liabilities.................. $ 9,189 $ 179 $ 5,323 $ 343
<S> <C> <C> <C> <C>
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.
F-25
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 8--LEASES (CONTINUED)
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 (in thousands):
<TABLE>
<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 (in thousands):
<TABLE>
<CAPTION>
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>
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.
F-26
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
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 (in
thousands):
<TABLE>
<CAPTION>
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 (in thousands):
<TABLE>
<CAPTION>
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.
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.
F-27
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
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 (in thousands):
<TABLE>
<CAPTION>
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>
Postretirement expense includes the following components (in thousands):
<TABLE>
<CAPTION>
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
F-28
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
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.
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 (the "Merger 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
F-29
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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. (CONTINUED)
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.
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 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
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>
F-30
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS BY QUARTER
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 27, JUNE 29, SEPT. 26, SEPT. 28, DEC. 26, DEC. 28, APRIL 3, MARCH 28,
1996 1995 1996 1995 1996 1995 1997(3) 1996
--------- --------- ----------- ----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues............... $ 161,927 $ 153,409 $ 202,436 $ 184,482 $ 163,192 $ 154,970 $ 222,042 $ 163,111
Total cost of operations..... 132,821 118,738 155,593 135,497 130,464 118,252 161,124 118,871
General and administrative... 13,025 11,085 11,647 14,497 13,910 11,437 18,065 15,040
Depreciation and
amortization............... 11,674 9,972 12,740 10,471 13,129 10,399 22,260(2) 13,044(1)
--------- --------- ----------- ----------- --------- --------- --------- -----------
Operating income............. 4,407 13,614 22,456 24,017 5,689 14,882 20,593 16,156
Interest expense............. 4,909 8,309 4,852 8,318 5,275 7,883 6,986 4,318
Investment income............ 182 2,226 139 2,440 343 1,958 192 428
Gain (loss) on disposition of
assets..................... 18 (15) (49) (123) (53) 159 -- (243)
--------- --------- ----------- ----------- --------- --------- --------- -----------
Earnings (loss) before income
taxes and extraordinary
item....................... (302) 7,516 17,694 18,016 704 9,116 13,799 12,023
Income tax provision......... (125) 3,100 7,125 7,400 285 3,800 5,615 5,000
--------- --------- ----------- ----------- --------- --------- --------- -----------
Earnings (loss) before
extraordinary item......... (177) 4,416 10,569 10,616 419 5,316 8,184 7,023
Extraordinary item--Loss on
extinguishment of debt (net
of income tax benefit of
$13,400)................... -- -- -- -- -- (19,350) -- --
--------- --------- ----------- ----------- --------- --------- --------- -----------
Net earnings (loss).......... $ (177) $ 4,416 $ 10,569 $ 10,616 $ 419 $ (14,034) $ 8,184 $ 7,023
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Preferred dividends.......... 1,546 1,750 1,454 1,750 1,454 1,750 1,453 1,750
--------- --------- ----------- ----------- --------- --------- --------- -----------
Net earnings (loss) for
common shares.............. $ (1,723) $ 2,666 $ 9,115 $ 8,866 $ (1,035) $ (15,784) $ 6,731 $ 5,273
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Earnings (loss) per share
before extraordinary item:
Primary.................... $ (.10) $ .16 $ .51 $ .53 $ (.06) $ .21 $ .38 $ .31
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Fully diluted.............. $ (.10) $ .16 $ .44 $ .45 $ (.06) $ .21 $ .34 $ .29
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Earnings (loss) per share:
Primary.................... $ (.10) $ .16 $ .51 $ .53 $ (.06) $ (.93) $ .38 $ .31
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Fully diluted.............. $ (.10) $ .16 $ .44 $ .45 $ (.06) $ (.93) $ .34 $ .29
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
<CAPTION>
FISCAL YEAR
--------------------
1997(3) 1996
--------- ---------
<S> <C> <C>
Total revenues............... $ 749,597 $ 655,972
Total cost of operations..... 580,002 491,358
General and administrative... 56,647 52,059
Depreciation and
amortization............... 59,803 43,886
--------- ---------
Operating income............. 53,145 68,669
Interest expense............. 22,022 28,828
Investment income............ 856 7,052
Gain (loss) on disposition of
assets..................... (84) (222)
--------- ---------
Earnings (loss) before income
taxes and extraordinary
item....................... 31,895 46,671
Income tax provision......... 12,900 19,300
--------- ---------
Earnings (loss) before
extraordinary item......... 18,995 27,371
Extraordinary item--Loss on
extinguishment of debt (net
of income tax benefit of
$13,400)................... -- (19,350)
--------- ---------
Net earnings (loss).......... $ 18,995 $ 8,021
--------- ---------
--------- ---------
Preferred dividends.......... 5,907 7,000
--------- ---------
Net earnings (loss) for
common shares.............. $ 13,088 $ 1,021
--------- ---------
--------- ---------
Earnings (loss) per share
before extraordinary item:
Primary.................... $ .74 $ 1.21
--------- ---------
--------- ---------
Fully diluted.............. $ .73 $ 1.20
--------- ---------
--------- ---------
Earnings (loss) per share:
Primary.................... $ .74 $ .06
--------- ---------
--------- ---------
Fully diluted.............. $ .73 $ .06
--------- ---------
--------- ---------
</TABLE>
- --------------
(1) 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.
(2) During the fourth quarter of 1997, the Company recognized an impairment loss
under SFAS 121 of $7,231.
(3) Fiscal year 1997 consists of 53 weeks and the fiscal quarter ended April 3,
1997 consists of 14 weeks.
F-31
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited Condensed Pro Forma Statement of Operations and
Balance Sheet have been prepared giving effect to the Merger of Durwood, Inc.
("DI") with AMC Entertainment Inc. (the "Company"). The Condensed Pro Forma
Statement of Operations for the year (53 weeks) ended April 3, 1997 assumes that
the Merger occurred on March 29, 1996. The Condensed Pro Forma Financial Balance
Sheet assumes that the Merger occurred on April 3, 1997.
The unaudited Condensed Pro Forma Financial Statements do not purport to
represent DI's financial position or results of operations had the above
transaction in fact occurred on such dates.
The unaudited Condensed Pro Forma Financial Statements should be read in
conjunction with the historical financial statements of DI.
F-32
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR (53 WEEKS) ENDED APRIL 3, 1997
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DI PRO FORMA ADJUSTED
ACTUAL (1) ADJUSTMENTS DI
----------- ------------ -----------
<S> <C> <C> <C>
Revenues................................................................. $ 749,597 $ -- $ 749,597
Cost of operations....................................................... 580,002 -- 580,002
General and administrative expenses...................................... 56,633 14(2) 56,647
Depreciation and amortization............................................ 59,447 356(2) 59,803
----------- ------------ -----------
Operating income....................................................... 53,515 (370) 53,145
Interest expense......................................................... 23,042 (1,020)(2) 22,022
Other income, net........................................................ 1,951 (1,179)(2) 772
----------- ------------ -----------
Earnings before income taxes and minority interest....................... 32,424 (529) 31,895
Income tax provision..................................................... 12,910 (10)(2) 12,900
----------- ------------ -----------
Earnings before minority interest........................................ 19,514 (519) 18,995
Minority interest........................................................ 9,084 -- 9,084
----------- ------------ -----------
Net earnings............................................................. $ 10,430 ($ 519) $ 9,911
----------- ------------ -----------
----------- ------------ -----------
Earnings per share:
Primary................................................................ $ 63.96 $ 60.74
----------- -----------
----------- -----------
Fully diluted.......................................................... $ 63.24 $ 60.01
----------- -----------
----------- -----------
Weighted average number of shares outstanding:
Primary................................................................ 161 161
----------- -----------
----------- -----------
Fully diluted.......................................................... 161 161
----------- -----------
----------- -----------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-33
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 3, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DI PRO FORMA ADJUSTED
ACTUAL (1) ADJUSTMENTS DI
----------- ------------ -----------
<S> <C> <C> <C>
Assets
Current assets......................................................... $ 85,396 $ (1,724)(2) $ 83,672
Property, net.......................................................... 539,984 3,074(2) 543,058
Intangible assets, net................................................. 28,679 -- 28,679
Other long-term assets................................................. 63,913 (1,109)(2) 62,804
----------- ------------ -----------
Total assets......................................................... $ 717,972 $ 241 $ 718,213
----------- ------------ -----------
----------- ------------ -----------
Liabilities and Stockholders' Equity
Current liabilities.................................................... $ 135,853 $ (1,586)(2) $ 135,267
1,000 (3)
Corporate borrowings................................................... 315,046 315,046
Capital lease obligations.............................................. 55,237 -- 55,237
Other long-term liabilities............................................ 43,651 -- 43,651
----------- ------------ -----------
549,787 (586) 549,201
Minority interest...................................................... 102,015(4) (222)(3) 101,793
Stockholders' equity................................................... 66,170 1,827 (2) 67,219
(778)(3)
----------- ------------ -----------
$ 717,972 $ 241 $ 718,213
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-34
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(1) The amounts presented hereunder were taken from DI's April 3, 1997
Consolidated Financial Statements.
(2) Prior to the Merger, certain pre-merger activities will take place whereby
all assets and liabilities of DI, other than DI's equity interest in the
Company, will be transferred to DI's subsidiary, Delta Properties, Inc.
("Delta"), which will agree to assume DI's liabilities. Delta's stock then
will be distributed to the DI shareholders.
(3) Represents expenses of the Company associated with the Merger. These
nonrecurring charges have not been reflected in the Condensed Pro Forma
Statement of Operations. Expenses of DI associated with the Merger are not
reflected in the Condensed Pro Forma Statement of Operations or Balance
Sheet as they represent expenses which will be paid prior to the pre-merger
activities described in Note (2) or if not paid, they represent obligations
of Mr. Stanley H. Durwood and Delta.
(4) Minority interest represents the liquidation value of the outstanding shares
of AMC Entertainment Inc. $1.75 Cumulative Convertible Preferred Stock at
the book value of the 3,942,018 shares of AMC Entertainment Inc. Common
Stock not owned by DI.
F-35
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT ACCOUNTANTS
YEAR (53 WEEKS) ENDED
APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996 AND MARCH 30, 1995
F-36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Durwood, Inc.
Kansas City, Missouri
We have audited the accompanying consolidated balance sheets of Durwood,
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 Durwood, 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.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
May 22, 1997
F-37
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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)
<TABLE>
<CAPTION>
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 23,082
--------- --------- ---------
Total revenues.......................................... 749,597 655,972 563,347
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................................ 56,633 52,583 41,702
Depreciation and amortization............................. 59,447 43,537 37,569
--------- --------- ---------
Total expenses.......................................... 696,082 587,478 512,034
--------- --------- ---------
Operating income........................................ 53,515 68,494 51,313
Other expense (income)
Interest expense
Corporate borrowings.................................... 13,036 19,076 25,408
Capital lease obligations............................... 10,006 10,729 11,406
Investment income......................................... (2,035) (7,432) (10,838)
Loss on disposition of assets............................. 84 220 142
--------- --------- ---------
Earnings before income taxes, extraordinary item and
minority interest......................................... 32,424 45,901 25,195
Income tax provision........................................ 12,910 19,360 (10,160)
--------- --------- ---------
Earnings before extraordinary item and minority interest.... 19,514 26,541 35,355
Extraordinary item--Loss on extinguishment of debt (net of
income tax benefit of $13,400)............................ -- 19,350 --
--------- --------- ---------
Earnings before minority interest........................... 19,514 7,191 35,355
Minority interest........................................... 9,084 7,168 11,559
--------- --------- ---------
Net earnings................................................ $ 10,430 $ 23 $ 23,796
--------- --------- ---------
--------- --------- ---------
Earnings per share before extraordinary item:
Primary................................................... $ 63.96 $ 98.78 $ 146.65
--------- --------- ---------
--------- --------- ---------
Fully diluted............................................. $ 63.24 $ 97.34 $ 131.32
--------- --------- ---------
--------- --------- ---------
Earnings (loss) per share:
Primary................................................... $ 63.96 $ .05 $ 146.65
--------- --------- ---------
--------- --------- ---------
Fully diluted............................................. $ 63.24 $ (.02) $ 131.32
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-38
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 3, 1997 AND MARCH 28, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
1997 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash and equivalents................................................ $ 26,042 $ 12,888
Receivables, net of allowance for doubtful accounts of $704 as of
April 3, 1997 and $801 as of March 28, 1996....................... 42,585 19,866
Other current assets................................................ 16,769 13,697
--------- ---------
Total current assets.............................................. 85,396 46,451
Property, net......................................................... 539,984 352,055
Intangible assets, net................................................ 28,679 36,483
Other long-term assets................................................ 63,913 46,838
--------- ---------
Total assets...................................................... $ 717,972 $ 481,827
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 88,367 $ 59,353
Accrued expenses and other liabilities.............................. 44,045 43,409
Current maturities of corporate borrowings and capital lease
obligations....................................................... 3,441 2,904
--------- ---------
Total current liabilities......................................... 135,853 105,666
Corporate borrowings.................................................. 315,046 126,127
Capital lease obligations............................................. 55,237 59,141
Other long-term liabilities........................................... 43,651 33,696
--------- ---------
Total liabilities................................................. 549,787 324,630
Minority interest..................................................... 102,015 109,721
Commitments and contingencies
Stockholders' equity:
Common Stock, $100 par value; 120,000 shares issued and
outstanding....................................................... 12,000 12,000
Class B Stock, $100 par value; 40,784 shares issued and
outstanding....................................................... 4,078 4,078
Foreign currency translation adjustment............................. (1,596) --
Retained earnings................................................... 51,680 30,836
Unrealized gain on available for sale investments, net of income
taxes of $5 and $391.............................................. 8 562
--------- ---------
Total stockholders' equity........................................ 66,170 47,476
--------- ---------
Total liabilities and stockholders' equity........................ $ 717,972 $ 481,827
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-39
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
Cash Flows from Operating Activities:
Net earnings............................................... $ 10,430 $ 23 $ 23,796
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization............................ 59,447 43,537 37,570
Deferred income taxes.................................... (2,476) (1,328) (21,285)
Gain on sale of available for sale investments........... (1,094) -- (1,407)
Extraordinary item....................................... -- 19,350 --
Minority interest........................................ 3,091 168 4,326
Loss on sale of long-term assets......................... 84 220 142
Change in assets and liabilities:
Receivables............................................ (1,643) (530) 826
Other current assets................................... 96 11,134 (63)
Accounts payable....................................... 41,486 7,495 219
Accrued expenses and other liabilities................. 13,937 6,944 (6,081)
Other, net............................................... 2,860 2,985 410
--------- --------- ---------
Total adjustments.................................... 115,788 89,975 14,657
--------- --------- ---------
Net cash provided by operating activities.................. 126,218 89,998 38,453
--------- --------- ---------
Cash Flows from Investing Activities:
Capital expenditures....................................... (253,380) (120,796) (56,701)
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...... 1,094 -- 11,689
Proceeds from disposition of long-term assets.............. 15,054 2,265 70
Net change in refundable construction advances............. (21,076) (10,394) (182)
Other, net................................................. (9,349) (7,217) (1,532)
--------- --------- ---------
Net cash provided by (used in) investing activities........ (282,749) (66,998) 3,350
--------- --------- ---------
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........................................... -- (448) (34)
Increase in minority interest from issuance of AMC
Entertainment Inc. common stock.......................... 69 637 100
Deferred financing costs and other......................... (4,595) (3,570) --
--------- --------- ---------
Net cash provided by (used in) financing activities........ 169,904 (83,722) (2,022)
--------- --------- ---------
Effect of exchange rate changes on cash and equivalents.... (219) -- --
--------- --------- ---------
Net increase (decrease) in cash and equivalents.............. 13,154 (60,722) 39,781
Cash and equivalents at beginning of year.................... 12,888 73,610 33,829
--------- --------- ---------
Cash and equivalents at end of year.......................... $ 26,042 $ 12,888 $ 73,610
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-40
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
(IN THOUSANDS)
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>
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)............. $ 25,208 $ 35,762 $ 36,784
Income taxes, net............................................................ 6,280 9,573 13,905
</TABLE>
See Notes to Consolidated Financial Statements.
F-41
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK CLASS B STOCK CURRENCY
---------------------- ------------------------ TRANSLATION RETAINED
SHARES AMOUNT SHARES AMOUNT ADJUSTMENT EARNINGS
--------- ----------- ----------- ----------- ------------- -----------
Balance, April 1, 1994........................ 120,000 $ 12,000 40,784 $ 4,078 $ -- $ 7,017
<S> <C> <C> <C> <C> <C> <C>
Net earnings................................ -- -- -- -- -- 23,796
--------- ----------- ----------- ----------- ------------- -----------
Balance, March 30, 1995....................... 120,000 12,000 40,784 4,078 -- 30,813
Net earnings................................ -- -- -- -- -- 23
Change in unrealized gain on available for
sale investments, net of income taxes of
$391...................................... -- -- -- -- -- --
--------- ----------- ----------- ----------- ------------- -----------
Balance, March 28, 1996....................... 120,000 12,000 40,784 4,078 -- 30,836
Net earnings................................ -- -- -- -- -- 10,430
Change in investment in AMC Entertainment
Inc. from conversion of preferred stock
into common stock......................... -- -- -- -- -- 10,414
Change in unrealized gain on available for
sale investments, net of income taxes of
$386...................................... -- -- -- -- -- --
Foreign currency translation adjustment..... -- -- -- -- (1,596) --
--------- ----------- ----------- ----------- ------------- -----------
Balance, April 3, 1997........................ 120,000 $ 12,000 40,784 $ 4,078 $ (1,596) $ 51,680
--------- ----------- ----------- ----------- ------------- -----------
--------- ----------- ----------- ----------- ------------- -----------
<CAPTION>
UNREALIZED GAIN TOTAL
ON AVAILABLE FOR STOCKHOLDERS'
SALE INVESTMENTS EQUITY
------------------- ---------------
Balance, April 1, 1994........................ $ -- $ 23,095
<S> <C> <C>
Net earnings................................ -- 23,796
------ ---------------
Balance, March 30, 1995....................... -- 46,891
Net earnings................................ -- 23
Change in unrealized gain on available for
sale investments, net of income taxes of
$391...................................... 562 562
------ ---------------
Balance, March 28, 1996....................... 562 47,476
Net earnings................................ -- 10,430
Change in investment in AMC Entertainment
Inc. from conversion of preferred stock
into common stock......................... -- 10,414
Change in unrealized gain on available for
sale investments, net of income taxes of
$386...................................... (554) (554)
Foreign currency translation adjustment..... -- (1,596)
------ ---------------
Balance, April 3, 1997........................ $ 8 $ 66,170
------ ---------------
------ ---------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-42
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
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
Durwood, Inc. (the "Company" or "DI") is principally a holding company. Its
primary subsidiary, AMC Entertainment Inc. ("AMCE") through its wholly-owned
subsidiary, American Multi-Cinema, Inc. ("AMC"), is principally involved in the
operation of motion picture theatres throughout the United States and in Japan
and Portugal. AMCE 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. Other subsidiaries of DI
are engaged in real estate and investment activities.
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 DI and all subsidiaries, all of which are wholly-owned, except
AMCE in which the Company owns 77.8% and 83.5% of AMCE common stock as of April
3, 1997 and March 28, 1996, respectively. 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. 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: Included in other long-term assets are marketable securities
which the Company classifies as available for sale. The difference between cost
and fair value, as adjusted for income taxes, is classified as an unrealized
gain in stockholders' equity.
For purposes of determining gross realized gains and losses, the cost of
securities sold is determined upon specific identification. Proceeds and gross
realized gains from the sale in 1997 of equity securities were $1,094,000.
Proceeds and gross realized gains from the sales in 1995 of equity securities
were $11,689,000 and $1,407,000, respectively.
F-43
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
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 AMCE 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:
<TABLE>
<S> <C>
Buildings and improvements.................................. 20 to 40 years
Leasehold improvements...................................... 5 to 25 years
Furniture, fixtures and equipment........................... 3 to 10 years
</TABLE>
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, AMCE 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 AMCE'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 $5.44
per share.
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.
MINORITY INTEREST: Minority interest represents the 22.2% and 16.5%
separate public ownership of the common stock of AMCE as of April 3, 1997 and
March 28, 1996, respectively, and the 100% separate public ownership of the
preferred stock of AMCE. As of April 3, 1997 and March 28, 1996, minority
interest was comprised of $19,425,000 and $9,721,000, respectively, related to
the separate public ownership of the Common Stock of AMCE and $82,590,000 and
$100,000,000, respectively, related to the separate public ownership of the
preferred stock of AMCE.
F-44
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
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 the
parent company net earnings plus the Company's proportionate interest in AMCE's
earnings for common shares by the weighted average number of common shares
outstanding. The average shares used in the computations were 161,000 in 1997,
1996 and 1995. On a fully-diluted basis, the Company's proportionate interest in
AMCE's earnings are adjusted to assume conversion of AMCE's $1.75 Cumulative
Convertible Preferred Stock, if dilutive. The average shares used in the
computations were 161,000 in 1997, 1996 and 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.
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
F-45
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
$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, AMCE 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 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 (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Property owned:
Land................................................ $ 59,153 $ 34,673
Buildings and improvements.......................... 214,951 139,616
Furniture, fixtures and equipment................... 264,619 205,761
Leasehold improvements.............................. 211,732 146,164
--------- ---------
750,455 526,214
Less--accumulated depreciation and amortization..... 242,180 209,714
--------- ---------
508,275 316,500
Property leased under capital leases:
Buildings........................................... 66,074 67,274
Less--accumulated amortization...................... 34,365 31,719
--------- ---------
31,709 35,555
--------- ---------
$ 539,984 $ 352,055
--------- ---------
--------- ---------
</TABLE>
F-46
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 3--PROPERTY (CONTINUED)
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.
NOTE 4--OTHER ASSETS AND LIABILITIES
Other assets and liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Other current assets:
Prepaid rent........................................... $ 7,366 $ 6,412
Prepaid income taxes................................... -- 1,592
Deferred income taxes.................................. 6,376 3,207
Other.................................................. 3,027 2,486
--------- ---------
$ 16,769 $ 13,697
--------- ---------
--------- ---------
Other long-term assets:
Investments in real estate............................. $ 15,329 $ 6,922
Investments in partnerships and corporate joint
ventures............................................. 733 1,208
Deferred charges, net.................................. 12,147 6,203
Deferred income taxes.................................. 23,808 24,115
Preopening costs....................................... 6,519 2,636
Available for sale investments......................... 16 956
Other.................................................. 5,361 4,798
--------- ---------
$ 63,913 $ 46,838
--------- ---------
--------- ---------
Accrued expenses and other liabilities:
Taxes other than income................................ $ 10,030 $ 7,110
Income taxes........................................... 7,514 --
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.................................................. 2,467 8,007
--------- ---------
$ 44,045 $ 43,409
--------- ---------
--------- ---------
</TABLE>
F-47
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (in thousands):
<TABLE>
<CAPTION>
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, AMCE 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 $98.73 for the year (52 weeks)
ended March 28, 1996.
As a part of the refinancing plan, AMCE 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, AMCE 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 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. AMCE is also required to maintain certain financial covenants, as
defined in the Credit Facility. As of April 3, 1997, AMCE 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 AMCE's capital expenditures. This
covenant has been eliminated.
F-48
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
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, AMCE 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 AMCE,
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 AMCE 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 AMCE.
The Note Indenture contains certain covenants that, among other things,
restrict the ability of AMCE 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 AMCE's ability to incur
additional indebtedness and pay dividends will cease to apply. As of April 3,
1997, AMCE was in compliance with all financial covenants relating to the Note
Indenture.
The Note Indenture also requires AMCE 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. AMCE anticipates meeting its filing deadlines.
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.
F-49
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (CONTINUED)
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 (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OBLIGATIONS
-------------------------------------
MINIMUM NET
LEASE LESS PRESENT CORPORATE
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
CAPITAL STOCK
The authorized capital stock of Durwood, Inc. consists of two classes of
stock. The Class A Common Stock (the "Common Stock") has a $100 par value with
150,000 shares authorized of which 120,000 shares are issued and outstanding.
The Class B Common Stock (the "Class B Stock") has a $100 par value with 50,000
shares authorized of which 40,784 shares are issued and outstanding. Both
classes of stock are entitled to one vote per share.
The Common Stock has preference as to dividends and liquidation. Annual
dividends are first paid on the Common Stock up to $25.50 per share before any
dividends are declared on the Class B Stock. If payment of dividends on the
Class B Stock reaches $25.50 per share, further dividends may be declared on the
Common Stock up to $19.50 per share before further dividends are paid on the
Class B Stock.
The Common Stock is entitled to receive $255 per share in the event of
liquidation (after payment of declared dividends) before any liquidating
distribution is made on the Class B Stock. If the liquidating distribution
reaches $255 per share on the Class B Stock, the Common Stock is entitled to
receive any remaining distributions up to another $195 per share. Afterward, any
remaining assets are distributed to holders of Class B Stock.
The Common Stock cannot be redeemed or purchased by the Company during the
lifetime of Stanley H. Durwood (President and sole Director of Durwood, Inc.),
thereafter, it can be redeemed or purchased by the Company at a price which
approximates its maximum liquidation value. The Class B Stock is nonredeemable.
F-50
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
CUMULATIVE CONVERTIBLE PREFERRED STOCK OF SUBSIDIARY
AMCE 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. 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 AMCE
Common Stock at a conversion price of $14.50 per share of AMCE Common Stock,
subject to change in certain events. In lieu of conversion AMCE may, at its
option, pay to the holder cash equal to the then market value AMCE Common Stock.
AMCE 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 AMCE's Convertible Preferred Stock converted
696,400 shares into 1,200,589 shares of AMCE Common Stock at a conversion rate
of 1.724 shares of AMCE Common Stock for each share of AMCE Convertible
Preferred Stock. The conversions reduced minority interest which resulted in an
increase in the equity of the Company of $10,414,000.
STOCK-BASED COMPENSATION PLANS
The Company's primary subsidiary, AMCE, offers various stock option and
incentive plans as discussed below.
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 AMCE 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 AMCE
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 AMCE'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 AMCE 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.
F-51
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
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 AMCE's stock-based compensation
plans other than for performance-based stock awards. In 1997 and 1996, AMCE
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. AMCE recognized compensation expense for
performance stock awards of $586,000 and $772,000 in 1997 and 1996,
respectively. Had compensation expense for AMCE'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 earnings per share would have been
different.
The pro forma amounts under SFAS 123 for the Company are indicated below (in
thousands except per share amounts):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net earnings
As reported.............................................. $ 10,430 $ 23
Pro forma................................................ $ 10,180 $ 181
Net earnings per common share
As reported.............................................. $ 63.96 $ .05
Pro forma................................................ $ 62.42 $ 1.02
</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 for
options on AMCE Common Stock:
<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>
F-52
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
A summary of stock option activity under all AMCE 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
- ------------------------------- ----------- ------------------ ------------------ ----------- ------------------
<C> <C> <S> <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>
F-53
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal..................................................... $ 11,423 $ 5,194 $ 6,563
State....................................................... 3,963 2,094 4,562
--------- --------- ---------
Total current............................................. 15,386 7,288 11,125
Deferred:
Federal..................................................... (1,909) (1,429) (1,957)
State....................................................... (312) (271) (300)
Change in valuation allowance............................... (255) 372 (19,028)
--------- --------- ---------
Total deferred............................................ (2,476) (1,328) (21,285)
--------- --------- ---------
Total provision............................................... 12,910 5,960 (10,160)
Tax benefit of extraordinary item--extinguishment of debt..... -- 13,400 --
--------- --------- ---------
Total provision before extraordinary item..................... $ 12,910 $ 19,360 $ (10,160)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The effective tax rate on income before extraordinary item and minority
interest was 39.8%, 42.2% and (40.3%) 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 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Tax on earnings before provision for income tax, extraordinary
item and minority interest at statutory rates............... $ 11,348 $ 16,065 $ 8,818
Add (subtract) tax effect of:
State income taxes, net of federal tax benefit.............. 2,274 3,118 2,983
Change in valuation allowance............................... (255) 372 (19,028)
Income tax credits.......................................... -- -- (1,282)
Other, net.................................................. (457) (195) (1,651)
--------- --------- ---------
Income tax provision.......................................... $ 12,910 $ 19,360 $ (10,160)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-54
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 7--INCOME TAXES (CONTINUED)
The significant components of deferred income tax assets and liabilities as
of April 3, 1997 and March 28, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
DEFERRED INCOME DEFERRED INCOME
TAX TAX
---------------------- ----------------------
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 --
Tax credits carryforwards......................... 513 -- 619 --
State net operating loss carryforwards............ 864 -- 868 --
Other............................................. 1,811 2,186 2,089 1,882
--------- ----------- --------- -----------
Total............................................. 35,682 2,860 32,859 2,644
Less: Valuation allowance......................... 2,638 -- 2,893 --
--------- ----------- --------- -----------
Net............................................... 33,044 2,860 29,966 2,644
Less: Current deferred income taxes............... 6,586 210 3,702 495
--------- ----------- --------- -----------
Total noncurrent deferred income taxes............ $ 26,458 $ 2,650 $ 26,264 $ 2,149
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Net noncurrent deferred income taxes.............. $ 23,808 $ 24,115
--------- ---------
--------- ---------
</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. As of
April 3, 1997 and March 28, 1996, management believed it was more likely than
not that certain deferred tax assets related to tax credit carryforwards and
certain future deductible amounts would not be realized due to uncertainties as
to the timing and amounts of future taxable income. Accordingly, a valuation
allowance of $2,638,000 and $2,893,000 was established related to the deferred
tax assets of DI as of April 3, 1997 and March 28, 1996, respectively. Based
upon positive earnings of AMCE in recent years and the expectation that taxable
income will continue for the foreseeable future, management believes it is more
likely than not that AMCE will realize its deferred tax assets and, accordingly,
no valuation allowance has been provided as of April 3, 1997 and March 28, 1996,
for AMCE's deferred tax assets.
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
F-55
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 8--LEASES (CONTINUED)
substantially all, taxes, maintenance, insurance and certain other operating
expenses. Assets held under capital lease obligations are included in property.
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 (in thousands):
<TABLE>
<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 (in thousands):
<TABLE>
<CAPTION>
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>
NOTE 9--EMPLOYEE BENEFIT PLANS
Employees of the Company are included in the benefit plans offered to AMC
employees. Descriptions of these plans are discussed below.
F-56
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
AMC 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 (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 (in
thousands):
<TABLE>
<CAPTION>
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 (in thousands):
<TABLE>
<CAPTION>
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>
AMC 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.
F-57
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
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.
AMC sponsors a voluntary thrift savings plan covering the same employees
eligible for the pension plan. Since inception of the savings plan, AMC 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.
AMC 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. AMC 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 (in thousands):
<TABLE>
<CAPTION>
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>
F-58
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
Postretirement expense includes the following components (in thousands):
<TABLE>
<CAPTION>
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.
NOTE 12--MERGER WITH SUBSIDIARY
The Board of Directors has approved an agreement providing for the Merger of
DI and AMCE with AMCE remaining as the surviving entity. The Merger has been
sought by members of the Durwood
F-59
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995
NOTE 12--MERGER WITH SUBSIDIARY (CONTINUED)
family so that they may hold their interests in AMCE 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 AMCE's stock.
Prior to the effective time of the Merger, all of DI's assets (other than
its equity interest in AMCE) will be contributed to Delta Properties, Inc.
("Delta"), a subsidiary of the Company. In addition, DI's other subsidiaries,
other than AMCE 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 of the Merger DI's sole assets will
consist of stock of AMCE and its beneficial interest in certain tax credits and
operating loss carryforwards.
If the Merger occurs, DI will be responsible for paying all of its costs in
connection with the Merger; the aggregate merger costs for both the Company and
AMCE are estimated to be approximately $2 million.
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 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
Financial assets:
Cash and equivalents........... $ 26,042 $ 26,042 $ 12,888 $ 12,888
Available for sale
investments.................. 16 16 956 956
Financial liabilities:
Cash overdrafts................ $ 11,175 $ 11,175 $ 22,848 $ 22,848
Corporate borrowings........... 315,072 315,804 126,150 126,992
</TABLE>
F-60
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AMC Entertainment Inc. is incorporated in Delaware. Under Section 145
of the Delaware General Corporation Law, a corporation has the power, under
specified circumstances, to indemnify its directors, officers, employees and
agents in connection with actions, suits or proceedings brought against them by
a third party or in the right of the corporation, by reason of the fact that
they were or are such directors, officers, employees or agents, against expenses
incurred in any such action, suit or proceeding. AMCE's certificate of
incorporation requires indemnification of directors and officers to the full
extent permitted by the Delaware General Corporation Law and provides that, in
any action by a claimant, AMCE shall bear the burden of proof that the claimant
is not entitled to indemnification.
Section 102(b)(7) of the Delaware General Corporation Law provides that
a certificate of incorporation may contain a provision eliminating or limiting
the personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 (relating to
liability for unauthorized acquisitions or redemptions of, or dividends on,
capital stock) of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit. The
Certificate of Incorporation of AMCE contains the provisions permitted by
Section 102(b)(7) of the Delaware General Corporation Law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by a director, officer or controlling person thereof
in connection with the securities being registered pursuant to this Registration
Statement, the Company will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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).
II-1
<PAGE>
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 dated May 3, 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 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 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).
II-2
<PAGE>
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 AMCE's
Form 8-K (File No. 1-8747) dated April 7, 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 117/8% Senior Notes due 2000 (Incorporated by reference from
Exhibit 4.3 to AMCE's Form 10-Q (File No. 0-12429) dated 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 fiscal year ended April 1, 1993).
II-3
<PAGE>
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 Note Indenture
and related guarantees of such entities (Incorporated by reference
from Exhibit 4.1(c) to AMCE's Form 10-K (File No. 1-8747) for
fiscal year ended March 31, 1994.
*4.1.(d) Fifth Supplemental Indenture dated December 28, 1995, respecting
AMC Entertainment Inc.'s 117/8% Senior Notes due 2000.
4.1(e) Sixth Supplemental Indenture dated March 28, 1996, respecting AMC
Entertainment Inc.'s 117/8% 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 125/8%
Senior Subordinated Notes due 2002 (Incorporated by reference from
Exhibit 4.4 to ACME's Form 10-Q (File No. 0-12429) dated 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 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 fiscal year ended March 31, 1994).
*4.2(d) Fifth Supplemental Indenture dated December 28, 1995, respecting
AMC Entertainment Inc.'s 125/8% Senior Subordinated Notes due 2002.
4.2(e) Sixth Supplemental Indenture dated March 28, 1996, respecting AMC
Entertainment Inc.'s 125/8% 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).
II-4
<PAGE>
*4.4(b) Form of First Supplemental Indenture, respecting AMC Entertainment
Inc.'s 9 1/2% Senior Subordinated Notes due 2009.
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.
**5 Opinion of Lathrop & Gage L.C.
10.1 AMC Entertainment Inc.'s 1983 Stock Option Plan (Incorporated by
reference from Exhibit 10.1 to AMCE's Form S-1 (File No. 2-84657)
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.'s 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.'s 1984 Employee Stock Option Plan
(Incorporated by reference from Exhibit 28.1 to AMCE's S-8 and S-3
(File No. 2-97523) 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-Q (File No.
0-12429) for the quarter ended December 26, 1996).
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 fiscal year ended March 30, 1995).
II-5
<PAGE>
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 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 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 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 fiscal year ended April 1, 1993).
II-6
<PAGE>
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 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 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 fiscal year ended April 1, 1993).
10.22 Summary of American Multi-Cinema, Inc.'s 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.
*12.1 Computation of ratio of earnings to fixed charges.
*12.2 Computation of ratio of EBITDA to net interest expense.
II-7
<PAGE>
13 Incorporated portions of the Annual Stockholder's Report for the
fiscal year ended March 28, 1996 (Incorporated by reference from
Exhibit 13 to AMCE's Form 10-K (File No. 0-12429) for the fiscal
year ended March 28, 1996).
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.
*23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Coopers & Lybrand L.L.P. regarding Durwood, Inc.
**23.3 Consent of Lathrop & Gage L.C. to the use of their opinion filed as
Exhibit 5 (Incorporated in Exhibit 5) (executed opinion to be filed
by amendment).
*24 Power of Attorney (included on signature page).
*25 Statement of Eligibility and Authorization of The Bank of New York,
Trustee.
*27 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
- ----------------
* Filed herewith
** To be filed by amendment
II-8
<PAGE>
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the the Securities Act and will be govered by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, AMC
Entertainment Inc. has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Kansas
City and the State of Missouri, on the 11th day of June, 1997.
AMC ENTERTAINMENT INC.
By: /s/ Peter C. Brown
--------------------------------
President and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Peter C. Brown and Richard L. Obert, and
each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments or post-effective amendments to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each such attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each such attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
Title Date
----- ----
/s/ Stanley H. Durwood Chairman of the Board, June 11, 1997
- --------------------------------- Chief Executive Officer and
Stanley H. Durwood Director
/s/ Paul E. Vardeman Director June 11, 1997
- ---------------------------------
Paul E. Vardeman
/s/ Charles J. Egan, Jr. Director June 11, 1997
- ---------------------------------
Charles J. Egan, Jr.
II-10
<PAGE>
/s/ William T. Grant II Director June 11, 1997
- ---------------------------------
William T. Grant II
/s/ John P. Mascotte Director June 11, 1997
- ---------------------------------
John P. Mascotte
/s/ Peter C. Brown President, Chief Financial June 11, 1997
- --------------------------------- Officer and Director
Peter C. Brown
Executive Vice President, June 11, 1997
/s/ Philip M. Singleton Chief Operating Officer and
- --------------------------------- Director
Philip M. Singleton
/s/ Richard L. Obert Senior Vice President, June 11, 1997
- --------------------------------- Chief Accounting and
Richard L. Obert Information Officer
</TABLE>
II-11
<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 dated May 3, 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 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 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. 0-12429) 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).
<PAGE>
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 AMCE's
Form 8-K (File No. 1-8747) dated April 7, 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).
<PAGE>
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) dated
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 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 Note Indenture
and related guarantees of such entities (Incorporated by reference
from Exhibit 4.1(c) to AMCE's Form 10-K (File No. 1-8747) for
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.
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) dated 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 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 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.
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).
<PAGE>
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.
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.
**5 Opinion of Lathrop & Gage L.C.
10.1 AMC Entertainment Inc.'s 1983 Stock Option Plan (Incorporated by
reference from Exhibit 10.1 to AMCE's Form S-1 (File No. 2-84657)
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.'s 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.'s 1984 Employee Stock Option Plan
(Incorporated by reference from Exhibit 28.1 to AMCE's S-8 and S-3
(File No. 2-97523) 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-Q (File No.
0-12429) for the quarter ended December 26, 1996).
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).
<PAGE>
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 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 fiscal year ended April 1, 1993).
<PAGE>
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 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 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 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 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 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 fiscal year ended April 1, 1993).
10.22 Summary of American Multi-Cinema, Inc.'s 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).
<PAGE>
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.
*12.1 Computation of ratio of earnings to fixed charges.
*12.2 Computation of ratio of EBITDA to net interest expense.
13 Incorporated portions of the Annual Stockholder's Report for the
fiscal year ended March 28, 1996 (Incorporated by reference from
Exhibit 13 to AMCE's Form 10-K (File No. 0-12429) for the fiscal
year ended March 28, 1996).
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.
*23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Coopers & Lybrand L.L.P. regarding Durwood, Inc.
**23.3 Consent of Lathrop & Gage L.C. to the use of their opinion filed as
Exhibit 5 (Incorporated in Exhibit 5) (executed opinion to be filed
by amendment).
*24 Power of Attorney (included on signature page).
*25 Statement of Eligibility and Authorization of The Bank of New York,
Trustee.
*27 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
- ----------
* Filed herewith
** To be filed by amendment
Exhibit 4.1(d)
- -------------------------------------------------------------------------------
AMC ENTERTAINMENT INC.
and
the Guarantors Named Herein
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
FIFTH SUPPLEMENTAL INDENTURE,
Dated as of December 28, 1995,
to
INDENTURE
Dated as of August 1, 1992,
As Supplemented by
THE FIRST SUPPLEMENTAL INDENTURE,
Dated as of March 31, 1993,
and by
THE SECOND SUPPLEMENTAL INDENTURE,
Dated as of May 28, 1993
and by
THE THIRD SUPPLEMENTAL INDENTURE,
Dated as of May 28, 1993,
and by
THE FOURTH SUPPLEMENTAL INDENTURE,
Dated as of March 31, 1994
--------------------------------------------
$100,000,000
11 7/8% Senior Notes Due 2000
- -------------------------------------------------------------------------------
<PAGE>
FIFTH SUPPLEMENTAL INDENTURE, dated as of December 28, 1995 (the "Fifth
Supplemental Indenture"), among AMC ENTERTAINMENT INC., a Delaware corporation
(the "Company"), AMERICAN MULTI-CINEMA, INC., a Missouri corporation, AMC
REALTY, INC., a Delaware corporation, CONSERVCO, INC., a Missouri corporation,
AMC CANTON REALTY, INC., a Delaware corporation, AMC PHILADELPHIA, INC., a
Delaware corporation, BUDCO THEATRES, INC., a Pennsylvania corporation, CONCORD
CINEMA, INC., a Delaware corporation, and AMC FILM MARKETING, INC., a Missouri
corporation (collectively, the "Guarantors" and each a "Guarantor"), and UNITED
STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, as Trustee
(the "Trustee"), to the Indenture, dated as of August 1, 1992, as supplemented
by the First Supplemental Indenture, dated as of March 31, 1993, the Second
Supplemental Indenture, dated as of May 28, 1993, the Third Supplemental
Indenture dated as of May 28, 1993, and the Fourth Supplemental Indenture dated
as of March 31, 1994 (collectively, the "Indenture"), among the Company, as
issuer, the Guarantors and the Trustee.
WHEREAS, the Company and the Guarantors are parties to the Indenture,
pursuant to which $100,000,000 aggregate principal amount of 11 7/8% Senior
Notes due 2000 (the "Securities") of the Company were issued; and
WHEREAS, there are now outstanding under the Indenture Securities in
the aggregate principal amount of $100,000,000; and
WHEREAS, pursuant to Section 9.2 of the Indenture, a majority in
aggregate principal amount of the outstanding Securities have consented to the
amendments and modifications contained in this Fifth Supplemental Indenture; and
WHEREAS, the execution and delivery of this Fifth Supplemental
Indenture has been authorized by resolutions of the Board of Directors of each
of the Company and the Guarantors; and
2
<PAGE>
WHEREAS, the Company, the Guarantors and the Trustee each desire to
execute this Fifth Supplemental Indenture to revise the Indenture to modify
Sections 1.1, 1.3, 4.8, 5.1 and 6.1 thereof, and to delete in their entirety
Sections 4.9 through 4.14, inclusive, 4.16 and 4.17 thereof; and
WHEREAS, the Company, the Guarantors and the Trustee each desire that
such modifications and deletions become operative upon the acceptance by the
Company for purchase of all Securities (and related consents) validly tendered
or delivered (and not withdrawn) pursuant to its offer to purchase upon the
terms and subject to the conditions set forth in the Offer to Purchase and
Consent Solicitation dated November 29, 1995, as amended (the "Tender Offer and
Consent Solicitation");
NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefit of the other and for the equal and ratable benefit of
the Holders of the Securities, as follows:
Section 1. Definitions in Indenture. All capitalized terms not defined
in this Fifth Supplemental Indenture shall have their respective meanings set
forth in the Indenture.
Section 2. Amendment to SECTION 1.1. The text of Section 1.1 of the
Indenture, captioned "Definitions," is hereby amended as follows:
a. The following definitions are hereby deleted in their entirety from
the Indenture: "Acquired Indebtedness," "Asset Acquisition," "Asset Sale,"
"Capital Expenditures," "CENI," "Change of Control," "Consolidated Cash Flow,"
"Consolidated EBITDA," "Consolidated EBITDA Coverage Ratio," "Consolidated
Interest Expense," "Consolidated Net Income," "Consolidated Net Worth,"
"Disqualified Stock," "EEP," "EEP Junior Subordinated Notes," "EEP Partnership
Agreement," "11 7/8% Debentures," "Investment," "Management Agreement," "Net
Cash Proceeds," "Non-Recourse Indebtedness," "Permitted Holder," "Permitted
Indebtedness," "Permitted Investments," "Permitted Liens," "Preferred Share
Redemption," "Required Capital Contribution," "Restricted
3
<PAGE>
Payment," "Securityholders' Portion," "Special Dividend," "13.60% Debenture,"
"Tri-City Purchase Agreement" and "Unrestricted Subsidiary."
b. The definition of "Guarantor Senior Indebtedness" is amended to be
and read in its entirety as follows:
"Guarantor Senior Indebtedness" means, with respect
to any Guarantor, the principal of, premium, if any, and
interest on (including interest accruing subsequent to the
occurrence of any event specified in Sections 6.1(a)(vii) or
(viii) relating to such Guarantor whether or not the claim
for such interest is allowed under any applicable Bankruptcy
Code) all obligations of every nature of such Guarantor under
or in respect of up to $40 million in aggregate principal
amount under the Revolving Credit Facility, whether
outstanding on the Issue Date or thereafter incurred without
giving effect to any reduction in the amount of such
Indebtedness necessary to render the obligation of any
Guarantor with respect thereto (as obligor, guarantor or
otherwise) not voidable under applicable law relating to
"fraudulent conveyance" or "fraudulent transfer."
Notwithstanding the foregoing, "Guarantor Senior
Indebtedness" shall not include, (a) Indebtedness that is
expressly subordinate or junior in right of payment to any
Indebtedness of such Guarantor, (b) Indebtedness which, when
incurred and without respect to any election under Section
1111(b) of Title 11, United States Code, is without recourse
to such Guarantor, and (c) that portion of any Indebtedness
which at the time of its issuance is issued in violation of
this Indenture.
c. The definition of "Revolving Credit Facility" is amended to be and
read in its entirety as follows:
"Revolving Credit Facility" means the Revolving
Credit Agreement dated as of December 27, 1995, among AMCE,
as borrower, certain of its subsidiaries, as guarantors, and
The Bank of Nova Scotia, Chemical Bank, Bank of America
National Trust and Savings Association and certain other
lenders together with the exhibits and schedules thereto, as
the same may be amended, supplemented or otherwise modified
from time to time, and any refinancings, replacements or
renewals thereof.
d. The definition of "Subsidiary" is amended to be and read in its
entirety as follows:
"Subsidiary" means, with respect to any Person, (i)
any corporation of which the outstanding Capital Stock having
at least a majority of the votes entitled to be cast in the
election of directors shall at the time be owned, directly or
indirectly, by such Person, or (ii) any other Person of which
at least a majority of voting interest is at the time,
directly or indirectly, owned by such Person.
4
<PAGE>
Section 3. Amendment to SECTION 1.3. The text of Section 1.3 of the
Indenture, captioned "Rules of Construction," is hereby amended by amending
paragraph (e) of such Section to read in its entirety as follows:
(e) unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall
be prepared in accordance with GAAP as in effect from time to
time and applied on a consistent basis with the Company's
most recent financial statements; and, unless otherwise
specified herein, all accounting determinations of any Person
hereunder shall be made on a consolidated basis in accordance
with the GAAP.
Section 4. Amendment to SECTION 4.8. The text of Section 4.8 of the
Indenture, captioned "Reports," is hereby amended to read in its entirety as
follows:
In accordance with the provisions of TIA ss.
314(a), at any time that the Company or a Guarantor has a
class of securities registered under the Exchange Act, the
Company or such Guarantor, as the case may be, shall file
with the Trustee, within 15 days after it files them with the
SEC, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company or such Guarantor is required to
file with the SEC pursuant to Section 13 or 15 of the
Exchange Act. The Company also shall comply with the other
provisions of TIA ss. 314(a).
Section 5. Amendment to SECTION 4.9. Section 4.9 of the Indenture,
entitled "Limitation on Indebtedness," is hereby amended by deleting such
Section 4.9 in its entirety.
Section 6. Amendment to SECTION 4.10. Section 4.10 of the Indenture,
entitled "Limitation on Issuance of Preferred Stock by Subsidiaries," is hereby
amended by deleting such Section 4.10 in its entirety.
Section 7. Amendment to SECTION 4.11. Section 4.11 of the Indenture,
entitled "Limitation on Guarantees by Subsidiaries," is hereby amended by
deleting such Section 4.11 in its entirety.
5
<PAGE>
Section 8. Amendment to SECTION 4.12. Section 4.12 of the Indenture,
entitled "Limitation on Liens," is hereby amended by deleting such Section 4.12
in its entirety.
Section 9. Amendment to SECTION 4.13. Section 4.13 of the Indenture,
entitled "Limitation on Restricted Payments," is hereby amended by deleting such
Section 4.13 in its entirety.
Section 10. Amendment to SECTION 4.14. Section 4.14 of the Indenture,
entitled "Limitation on Certain Sales of Assets and Subsidiary Stock," is hereby
amended by deleting such Section 4.14 in its entirety.
Section 11. Amendment to SECTION 4.16. Section 4.16 of the Indenture,
entitled "Change of Control," is hereby amended by deleting such Section 4.16 in
its entirety.
Section 12. Amendment to SECTION 4.17. Section 4.17 of the Indenture,
entitled "Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries," is hereby amended by deleting such Section 4.17 in its entirety.
Section 13. Amendment to SECTION 5.1. The text of Section 5.1 of the
Indenture, captioned "When Company May Merge, Etc.," is hereby amended by
amending paragraph (a) of such Section to read in its entirety as follows:
(a) The Company shall not consolidate with or merge
with or into any Person or, directly or indirectly, sell,
assign, convey, lease, transfer or otherwise dispose of all
or substantially all of its properties and assets in a single
transaction or through a series of transactions (including by
way of merger or consolidation of the Company or any of its
Subsidiaries) unless:
(i) either (a) the Company shall be the
continuing Person, or (b) the resulting, surviving
or transferee Person (the "surviving entity") shall
be a corporation organized and existing under the
laws of the United States, any State thereof or the
District of Columbia;
(ii) the surviving entity shall expressly
assume, by a supplemental indenture executed and
delivered to the Trustee, in form and substance
reasonably satisfactory to the Trustee, all of the
obligations of the Company under the Securities and
this Indenture;
6
<PAGE>
(iii) immediately before and immediately
after giving effect to such transaction or series
of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in
respect of such transaction or series of
transactions), no Default or Event of Default shall
have occurred and be continuing;
(iv) [DELETED]
(v) [DELETED]
(vi) the Company or the surviving entity
shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition
and, if a supplemental indenture is required in
connection with such transaction or series of
transactions, such supplemental indenture, complies
with this Section 5.1(a), and that all conditions
precedent provided for in this Indenture relating
to such transaction or series of transactions have
been satisfied; and
(vii) each Guarantor shall, by
supplemental indenture, confirm that its Guarantee
shall apply to the Company's or the surviving
entity's obligations under the Securities and this
Indenture, as modified by such supplemental
indenture, and confirm the due and punctual
performance of the Guarantee and every covenant in
this Indenture on the part of the Guarantors to be
performed or observed.
Section 14. Amendment to SECTION 6.1. The text of Section 6.1 of the
Indenture, captioned "Events of Default," is hereby amended to read in its
entirety as follows:
(a) An "Event of Default" shall occur if:
(i) a default in the payment of interest
on the Securities when the same becomes due and
payable shall have occurred and any such Default
shall have continued for a period of 30 days
(whether or not such payment shall be prohibited by
the subordination provisions of Article X hereof);
or
(ii) a default in the payment of the
principal of, or premium, if any, on the Securities
when the same becomes due and payable upon
maturity, acceleration, redemption, pursuant to an
offer to purchase required by this Indenture or
otherwise shall have occurred (whether or not such
payment shall be prohibited by the subordination
provisions of Article X hereof); or
(iii) a default in the performance of, or
breach of, any covenant of this Indenture (other
than defaults specified in clause (i) or (ii)
above) shall have
7
<PAGE>
occurred, and such Default shall have continued for
a period of 30 days after written notice to the
Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate
principal amount of the outstanding Securities; or
(iv) [DELETED]
(v) [DELETED]
(vi) any provision of Article X shall be
declared or adjudged to be invalid or unenforceable
in a judgment, order or decree which shall either
be subject to no further appeal or shall have
remained in effect for a period of 60 days during
which no appeal shall be in effect; or
(vii) the Company, any Guarantor that is
a Material Subsidiary or any other Material
Subsidiary of the Company pursuant to or within the
meaning of any Bankruptcy Law:
(V) commences a voluntary case
or proceeding,
(W) consents to the entry of an
order for relief against it in an
involuntary case or proceeding,
(X) consents to the appointment
of a Custodian of it or for all or
substantially all of its property,
(Y) makes a general assignment
for the benefit of its creditors or
(Z) admits in writing that it
generally cannot pay its debts when such
debts become due; or
(viii) a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law
that:
(X) is for relief against the
Company, any Guarantor that is a Material
Subsidiary or any other Material
Subsidiary of the Company in an
involuntary case or proceeding,
(Y) appoints a Custodian of the
Company, any Guarantor that is a Material
Subsidiary or any other Material
Subsidiary of the Company for all or
substantially all of its properties, or
8
<PAGE>
(Z) orders the liquidation of
the Company, any Guarantor that is a
Material Subsidiary or any other Material
Subsidiary of the Company
and in each case the order or decree remains unstayed and in
effect for 60 days; provided, however, that if the entry of
such order or decree is appealed and dismissed on appeal then
the Event of Default hereunder by reason of the entry of such
order or decree shall be deemed to have been cured.
(b) For purposes of this Section 6.l, the term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or
similar official charged with maintaining possession or control over
property for one or more creditors.
(c) [DELETED]
(d) Subject to the provisions of Sections 7.1 and 7.2, the
Trustee shall not be charged with knowledge of any Event of Default
unless written notice thereof shall have been given to a Trust Officer
at the corporate trust office of the Trustee by the Company, the Paying
Agent, any Holder or an agent of any Holder or unless a Trust Officer
otherwise has actual knowledge thereof.
Section 15. Revision of Form of Notes. Pursuant to Section 9.5 of the
Indenture, paragraph 4 of the Form of Notes will be revised, and paragraph 7
will be deleted, to give effect to the amendments made hereby.
Section 16. Operative Effect of Amendments. Sections 2 through 15
hereof shall not become operative unless and until the acceptance by the Company
of all Securities (and related consents) validly tendered or delivered (and not
withdrawn) pursuant to the Tender Offer and Consent Solicitation, at which time
such Sections shall become operative and shall be in full force and effect.
Section 17. Confirmation of Indenture. The Company and each of the
Guarantors affirms the continuing effect of the Indenture, as supplemented by
this Fifth Supplemental Indenture; and each of the Guarantors affirms the
continuing effect of its guarantee of the obligations of the Company under the
Indenture and the Securities issued under the Indenture.
9
<PAGE>
Section 18. Instrument. From and after the date hereof, the Indenture,
as supplemented by this Fifth Supplemental Indenture, shall be read, taken and
construed as one and the same instrument with respect to the Securities.
Section 19. Counterparts. This Fifth Supplemental Indenture may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 20. Termination. This Fifth Supplemental Indenture shall be
terminated and shall be of no further force and effect if the Tender Offer and
Consent Solicitation is terminated or expires without the purchase of any
Securities by the Company.
Section 21. GOVERNING LAW. THIS FIFTH SUPPLEMENTAL INDENTURE SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR
ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS FIFTH SUPPLEMENTAL
INDENTURE.
Section 22. Trustee Disclaimer. The Trustee accepts the supplement to
the Indenture effected by this Fifth Supplemental Indenture and agrees to
execute the trust created by the Indenture as hereby supplemented, but only upon
the terms and conditions set forth in the Indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit its
liabilities and responsibilities in the performance of the trust created by the
Indenture hereby supplemented. Except to the extent that they relate to action
taken by the Trustee, the Trustee shall not be responsible in any manner
whatsoever for or with respect
10
<PAGE>
to (i) the validity, efficacy or sufficiency of this Fifth Supplemental
Indenture or any of the terms or provisions hereof, (ii) the proper
authorization hereof by the Company and the Guarantors by corporate action or
otherwise, (iii) the due execution hereof by the Company and the Guarantors, or
(iv) the consequences (direct or indirect and whether deliberate or inadvertent)
of any supplement herein provided for, and the Trustee makes no representation
with respect to any such matters.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Supplemental Indenture to be duly executed, all as of the date first written
above.
ATTEST: AMC ENTERTAINMENT INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
/s/ Patricia Stermer By: /s/ Cynthia Chaney
Name: Cynthia Chaney
Title: Assistant Vice President
ATTEST: AMERICAN MULTI-CINEMA, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
11
<PAGE>
ATTEST: AMC REALTY, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: CONSERVCO, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: AMC CANTON REALTY, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: AMC PHILADELPHIA, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: BUDCO THEATRES, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
12
<PAGE>
ATTEST: CONCORD CINEMA, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: AMC FILM MARKETING, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
13
Exhibit 4.2(d)
- -------------------------------------------------------------------------------
AMC ENTERTAINMENT INC.
and
the Guarantors Named Herein
and
THE BANK OF NEW YORK,
as Trustee
FIFTH SUPPLEMENTAL INDENTURE,
Dated as of December 28, 1995,
to
INDENTURE
Dated as of August 1, 1992,
As Supplemented by
THE FIRST SUPPLEMENTAL INDENTURE,
Dated as of March 31, 1993,
and by
THE SECOND SUPPLEMENTAL INDENTURE,
Dated as of May 28, 1993
and by
THE THIRD SUPPLEMENTAL INDENTURE,
Dated as of May 28, 1993,
and by
THE FOURTH SUPPLEMENTAL INDENTURE,
Dated as of March 31, 1994
--------------------------------------------
$100,000,000
12 5/8% Senior Subordinated Notes Due 2002
- -------------------------------------------------------------------------------
<PAGE>
FIFTH SUPPLEMENTAL INDENTURE, dated as of December 28, 1995 (the "Fifth
Supplemental Indenture"), among AMC ENTERTAINMENT INC., a Delaware corporation
(the "Company"), AMERICAN MULTI-CINEMA, INC., a Missouri corporation, AMC
REALTY, INC., a Delaware corporation, CONSERVCO, INC., a Missouri corporation,
AMC CANTON REALTY, INC., a Delaware corporation, AMC PHILADELPHIA, INC., a
Delaware corporation, BUDCO THEATRES, INC., a Pennsylvania corporation, CONCORD
CINEMA, INC., a Delaware corporation, and AMC FILM MARKETING, INC., a Missouri
corporation (collectively, the "Guarantors" and each a "Guarantor"), and THE
BANK OF NEW YORK, a New York banking corporation, as Trustee (the "Trustee"), to
the Indenture, dated as of August 1, 1992, as supplemented by the First
Supplemental Indenture, dated as of March 31, 1993, the Second Supplemental
Indenture, dated as of May 28, 1993, the Third Supplemental Indenture dated as
of May 28, 1993, and the Fourth Supplemental Indenture dated as of March 31,
1994 (collectively, the "Indenture"), among the Company, as issuer, the
Guarantors and the Trustee.
WHEREAS, the Company and the Guarantors are parties to the Indenture,
pursuant to which $100,000,000 aggregate principal amount of 12 5/8% Senior
Subordinated Notes due 2002 (the "Securities") of the Company were issued; and
WHEREAS, there are now outstanding under the Indenture Securities in
the aggregate principal amount of $100,000,000; and
WHEREAS, pursuant to Section 9.2 of the Indenture, a majority in
aggregate principal amount of the outstanding Securities have consented to the
amendments and modifications contained in this Fifth Supplemental Indenture; and
WHEREAS, the execution and delivery of this Fifth Supplemental
Indenture has been authorized by resolutions of the Board of Directors of each
of the Company and the Guarantors; and
2
<PAGE>
WHEREAS, the Company, the Guarantors and the Trustee each desire to
execute this Fifth Supplemental Indenture to revise the Indenture to modify
Sections 1.1, 1.3, 4.8, 5.1 and 6.1 thereof, and to delete in their entirety
Sections 4.9 through 4.14, inclusive, 4.16 and 4.17 thereof; and
WHEREAS, the Company, the Guarantors and the Trustee each desire that
such modifications and deletions become operative upon the acceptance by the
Company for purchase of all Securities (and related consents) validly tendered
or delivered (and not withdrawn) pursuant to its offer to purchase upon the
terms and subject to the conditions set forth in the Offer to Purchase and
Consent Solicitation dated November 29, 1995, as amended (the "Tender Offer and
Consent Solicitation");
NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefit of the other and for the equal and ratable benefit of
the Holders of the Securities, as follows:
Section 1. Definitions in Indenture. All capitalized terms not defined
in this Fifth Supplemental Indenture shall have their respective meanings set
forth in the Indenture.
Section 2. Amendment to SECTION 1.1. The text of Section 1.1 of the
Indenture, captioned "Definitions," is hereby amended as follows:
a. The following definitions are hereby deleted in their entirety from
the Indenture: "Acquired Indebtedness," "Asset Acquisition," "Asset Sale,"
"Capital Expenditures," "CENI," "Change of Control," "Consolidated Cash Flow,"
"Consolidated EBITDA," "Consolidated EBITDA Coverage Ratio," "Consolidated
Interest Expense," "Consolidated Net Income," "Consolidated Net Worth,"
"Disqualified Stock," "EEP," "EEP Junior Subordinated Notes," "EEP Partnership
Agreement," "11 7/8% Debentures," "Investment," "Management Agreement," "Net
Cash Proceeds," "Non-Recourse Indebtedness," "Permitted Holder," "Permitted
Indebtedness," "Permitted Investments," "Permitted Liens," "Preferred Share
Redemption," "Required Capital Contribution," "Restricted
3
<PAGE>
Payment," "Securityholders' Portion," "Special Dividend," "13.60% Debenture,"
"Tri-City Purchase Agreement" and "Unrestricted Subsidiary."
b. The definition of "Revolving Credit Facility" is amended to be and
read in its entirety as follows:
"Revolving Credit Facility" means the Revolving
Credit Agreement dated as of December 27, 1995, among AMCE,
as borrower, certain of its subsidiaries, as guarantors, and
The Bank of Nova Scotia, Chemical Bank, Bank of America
National Trust and Savings Association and certain other
lenders together with the exhibits and schedules thereto, as
the same may be amended, supplemented or otherwise modified
from time to time, and any refinancings, replacements or
renewals thereof.
c. The definition of "Subsidiary" is amended to be and read in its
entirety as follows:
"Subsidiary" means, with respect to any Person, (i)
any corporation of which the outstanding Capital Stock having
at least a majority of the votes entitled to be cast in the
election of directors shall at the time be owned, directly or
indirectly, by such Person, or (ii) any other Person of which
at least a majority of voting interest is at the time,
directly or indirectly, owned by such Person.
Section 3. Amendment to SECTION 1.3. The text of Section 1.3 of the
Indenture, captioned "Rules of Construction," is hereby amended by amending
paragraph (e) of such Section to read in its entirety as follows:
(e) unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall
be prepared in accordance with GAAP as in effect from time to
time and applied on a consistent basis with the Company's
most recent financial statements; and, unless otherwise
specified herein, all accounting determinations of any Person
hereunder shall be made on a consolidated basis in accordance
with the GAAP.
Section 4. Amendment to SECTION 4.8. The text of Section 4.8 of the
Indenture, captioned "Reports," is hereby amended to read in its entirety as
follows:
In accordance with the provisions of TIA ss.
314(a), at any time that the Company or a Guarantor has a
class of securities registered under the Exchange Act, the
Company
4
<PAGE>
or such Guarantor, as the case may be, shall file with the Trustee,
within 15 days after it files them with the SEC, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) which the Company or such Guarantor is required
to file with the SEC pursuant to Section 13 or 15 of the Exchange Act.
The Company also shall comply with the other provisions of TIA ss.
314(a).
Section 5. Amendment to SECTION 4.9. Section 4.9 of the Indenture,
entitled "Limitation on Indebtedness," is hereby amended by deleting such
Section 4.9 in its entirety.
Section 6. Amendment to SECTION 4.10. Section 4.10 of the Indenture,
entitled "Limitation on Issuance of Preferred Stock by Subsidiaries," is hereby
amended by deleting such Section 4.10 in its entirety.
Section 7. Amendment to SECTION 4.11. Section 4.11 of the Indenture,
entitled "Limitation on Guarantees by Subsidiaries," is hereby amended by
deleting such Section 4.11 in its entirety.
Section 8. Amendment to SECTION 4.12. Section 4.12 of the Indenture,
entitled "Limitation on Liens," is hereby amended by deleting such Section 4.12
in its entirety.
Section 9. Amendment to SECTION 4.13. Section 4.13 of the Indenture,
entitled "Limitation on Restricted Payments," is hereby amended by deleting such
Section 4.13 in its entirety.
Section 10. Amendment to SECTION 4.14. Section 4.14 of the Indenture,
entitled "Limitation on Certain Sales of Assets and Subsidiary Stock," is hereby
amended by deleting such Section 4.14 in its entirety.
Section 11. Amendment to SECTION 4.16. Section 4.16 of the Indenture,
entitled "Change of Control," is hereby amended by deleting such Section 4.16 in
its entirety.
5
<PAGE>
Section 12. Amendment to SECTION 4.17. Section 4.17 of the Indenture,
entitled "Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries," is hereby amended by deleting such Section 4.17 in its entirety.
Section 13. Amendment to SECTION 5.1. The text of Section 5.1 of the
Indenture, captioned "When Company May Merge, Etc.," is hereby amended by
amending paragraph (a) of such Section to read in its entirety as follows:
(a) The Company shall not consolidate with or merge
with or into any Person or, directly or indirectly, sell,
assign, convey, lease, transfer or otherwise dispose of all
or substantially all of its properties and assets in a single
transaction or through a series of transactions (including by
way of merger or consolidation of the Company or any of its
Subsidiaries) unless:
(i) either (a) the Company
shall be the continuing Person, or (b)
the resulting, surviving or transferee
Person (the "surviving entity") shall be
a corporation organized and existing
under the laws of the United States, any
State thereof or the District of
Columbia;
(ii) the surviving entity shall
expressly assume, by a supplemental
indenture executed and delivered to the
Trustee, in form and substance reasonably
satisfactory to the Trustee, all of the
obligations of the Company under the
Securities and this Indenture;
(iii) immediately before and
immediately after giving effect to such
transaction or series of transactions on
a pro forma basis (including, without
limitation, any Indebtedness incurred or
anticipated to be incurred in connection
with or in respect of such transaction or
series of transactions), no Default or
Event of Default shall have occurred and
be continuing;
(iv) [DELETED]
(v) [DELETED]
(vi) the Company or the
surviving entity shall have delivered to
the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that
such consolidation, merger, sale,
assignment, conveyance, transfer, lease
or other disposition and, if a
supplemental indenture is required in
connection with such transaction or
series of transactions, such supplemental
indenture, complies with this Section
5.1(a), and that all conditions precedent
provided for in this
6
<PAGE>
Indenture relating to such transaction or
series of transactions have been satisfied;
and
(vii) each Guarantor shall, by
supplemental indenture, confirm that its
Guarantee shall apply to the Company's or
the surviving entity's obligations under
the Securities and this Indenture, as
modified by such supplemental indenture,
and confirm the due and punctual
performance of the Guarantee and every
covenant in this Indenture on the part of
the Guarantors to be performed or
observed.
Section 14. Amendment to SECTION 6.1. The text of Section 6.1 of the
Indenture, captioned "Events of Default," is hereby amended to read in its
entirety as follows:
(a) An "Event of Default" shall occur if:
(i) a default in the payment of
interest on the Securities when the same
becomes due and payable shall have occurred
and any such Default shall have continued for
a period of 30 days (whether or not such
payment shall be prohibited by the provisions
of Article X or the subordination provisions
of Article XI hereof); or
(ii) a default in the payment of the
principal of, or premium, if any, on the
Securities when the same becomes due and
payable upon maturity, acceleration,
redemption, pursuant to an offer to purchase
required by this Indenture or otherwise shall
have occurred (whether or not such payment
shall be prohibited by the provisions of
Article X or the subordination provisions of
Article XI hereof); or
(iii) a default in the performance
of, or breach of, any covenant of this
Indenture (other than defaults specified in
clause (i) or (ii) above) shall have occurred,
and such Default shall have continued for a
period of 30 days after written notice to the
Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in
aggregate principal amount of the outstanding
Securities; or
(iv) [DELETED]
(v) [DELETED]
(vi) any provision of Article X
shall be declared or adjudged to be invalid or
unenforceable in a judgment, order or decree
which shall either be subject to no further
appeal or shall have remained in effect for a
period of 60 days during which no appeal shall
be in effect; or
7
<PAGE>
(vii) the Company, any Guarantor
that is a Material Subsidiary or any other
Material Subsidiary of the Company pursuant to
or within the meaning of any Bankruptcy Law:
(V) commences a voluntary
case or proceeding,
(W) consents to the entry
of an order for relief against it in
an involuntary case or proceeding,
(X) consents to the
appointment of a Custodian of it or
for all or substantially all of its
property,
(Y) makes a general
assignment for the benefit of its
creditors or
(Z) admits in writing that
it generally cannot pay its debts
when such debts become due; or
(viii) a court of competent
jurisdiction enters an order or decree under
any Bankruptcy Law that:
(X) is for relief against
the Company, any Guarantor that is a
Material Subsidiary or any other
Material Subsidiary of the Company
in an involuntary case or
proceeding,
(Y) appoints a Custodian
of the Company, any Guarantor that
is a Material Subsidiary or any
other Material Subsidiary of the
Company for all or substantially all
of its properties, or
(Z) orders the liquidation
of the Company, any Guarantor that
is a Material Subsidiary or any
other Material Subsidiary of the
Company
and in each case the order or decree remains
unstayed and in effect for 60 days; provided,
however, that if the entry of such order or
decree is appealed and dismissed on appeal
then the Event of Default hereunder by reason
of the entry of such order or decree shall be
deemed to have been cured.
(b) For purposes of this Section 6.1, the term
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official charged with
maintaining possession or control over property for one or
more creditors.
(c) [DELETED]
8
<PAGE>
(d) Subject to the provisions of Sections 7.1 and
7.2, the Trustee shall not be charged with knowledge of any
Event of Default unless written notice thereof shall have
been given to a Trust Officer at the corporate trust office
of the Trustee by the Company, the Paying Agent, any Holder
or an agent of any Holder or unless a Trust Officer otherwise
has actual knowledge thereof.
Section 15. Revision of Form of Notes. Pursuant to Section 9.5 of the
Indenture, paragraph 4 of the Notes will be revised, and paragraph 7 will be
deleted, to give effect to the amendments made hereby.
Section 16. Operative Effect of Amendments. Sections 2 through 15
hereof shall not become operative unless and until the acceptance by the Company
of all Securities (and related consents) validly tendered or delivered (and not
withdrawn) pursuant to the Tender Offer and Consent Solicitation, at which time
such Sections shall become operative and shall be in full force and effect.
Section 17. Confirmation of Indenture. The Company and each of the
Guarantors affirms the continuing effect of the Indenture, as supplemented by
this Fifth Supplemental Indenture; and each of the Guarantors affirms the
continuing effect of its guarantee of the obligations of the Company under the
Indenture and the Securities issued under the Indenture.
Section 18. Instrument. From and after the date hereof, the Indenture,
as supplemented by this Fifth Supplemental Indenture, shall be read, taken and
construed as one and the same instrument with respect to the Securities.
Section 19. Counterparts. This Fifth Supplemental Indenture may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 20. Termination. This Fifth Supplemental Indenture shall be
terminated and shall be of no further force and effect if the Tender Offer and
Consent Solicitation is terminated or expires without the purchase of any
Securities by the Company.
9
<PAGE>
Section 21. GOVERNING LAW. THIS FIFTH SUPPLEMENTAL INDENTURE SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR
ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS FIFTH SUPPLEMENTAL
INDENTURE.
Section 22. Trustee Disclaimer. The Trustee accepts the supplement to
the Indenture effected by this Fifth Supplemental Indenture and agrees to
execute the trust created by the Indenture as hereby supplemented, but only upon
the terms and conditions set forth in the Indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit its
liabilities and responsibilities in the performance of the trust created by the
Indenture hereby supplemented. Except to the extent that they relate to action
taken by the Trustee, the Trustee shall not be responsible in any manner
whatsoever for or with respect to (i) the validity, efficacy or sufficiency of
this Fifth Supplemental Indenture or any of the terms or provisions hereof, (ii)
the proper authorization hereof by the Company and the Guarantors by corporate
action or otherwise, (iii) the due execution hereof by the Company and the
Guarantors, or (iv) the consequences (direct or indirect and whether deliberate
or inadvertent) of any supplement herein provided for, and the Trustee makes no
representation with respect to any such matters.
10
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Supplemental Indenture to be duly executed, all as of the date first written
above.
ATTEST: AMC ENTERTAINMENT INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: THE BANK OF NEW YORK, as Trustee
/s/ Paul Schmazel By: /s/ Mary La Gumina
Name: Mary La Gumina
Title: Assistant Vice President
ATTEST: AMERICAN MULTI-CINEMA, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: AMC REALTY, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and
Chief Financial Officer
11
<PAGE>
ATTEST: CONSERVCO, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and
Chief Financial Officer
ATTEST: AMC CANTON REALTY, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and
Chief Financial Officer
ATTEST: AMC PHILADELPHIA, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: BUDCO THEATRES, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
ATTEST: CONCORD CINEMA, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
12
<PAGE>
ATTEST: AMC FILM MARKETING, INC.
/s/ Nancy L. Gallagher By: /s/ Peter C. Brown
Peter C. Brown
Executive Vice President and Chief
Financial Officer
13
Exhibit 4.4(b)
- -------------------------------------------------------------------------------
AMC ENTERTAINMENT INC.,
Issuer
and
THE BANK OF NEW YORK,
as Trustee
FIRST SUPPLEMENTAL INDENTURE,
Dated as of ______, 1997
to
INDENTURE
Dated as of March 19, 1997
--------------------------------------------
$200,000,000
9 1/2% Senior Subordinated Notes Due 2009
- -------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of May __, 1997 (the "First
Supplemental Indenture"), among AMC ENTERTAINMENT INC., a Delaware corporation
(the "Company"), and THE BANK OF NEW YORK, a New York banking corporation, as
Trustee (the "Trustee"), to the Indenture, dated as of March 19, 1997 (the
"Indenture"), between the Company and the Trustee.
WHEREAS, the Indenture provides for the issuance of both Initial
Securities and Exchange Securities, and
WHEREAS, the Indenture provides for the issuance of the Initial
Securities in the form of Global Securities but does not clearly provide that
the Exchange Securities may also be in the form of Global Securities; and
WHEREAS, the Company desires to provide for the issuance of Exchange
Securities in the form of Global Securities; and
WHEREAS, pursuant to Sections 901(c) and (f) of the Indenture such
changes may be made to the Indenture without the consent of Holders inasmuch as
they cure an ambiguity in the Indenture and benefit Holders of Securities;
WHEREAS, the execution and delivery of this First Supplemental
Indenture has been authorized by resolutions of the Board of Directors of the
Company; and
WHEREAS, the Company and the Trustee each desire to execute this First
Supplemental Indenture to revise the Indenture by modifying Section 201 thereof;
and
WHEREAS, upon the execution and delivery hereof, all conditions and
requirements necessary to make this First Supplemental Indenture a valid,
binding and legal instrument in accordance with its terms shall have been
performed and fulfilled;
2
<PAGE>
NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefit of the other and for the equal and ratable benefit of
the Holders of the Securities, as follows:
Section 1. Definitions in Indenture. All capitalized terms not defined
in this First Supplemental Indenture shall have their respective meanings set
forth in the Indenture.
Section 2. Amendment to Section 201. The text of Section 201 of the
Indenture, captioned "Forms Generally," is hereby amended to read in its
entirety as follows:
Section 201. Forms Generally.
The Initial Securities shall be known as the "9
1/2% Senior Subordinated Notes due 2009" and the Exchange
Securities shall be known as the "9 1/2% Exchange Senior
Subordinated Notes due 2009", in each case, of the Company.
The Securities and the Trustee's certificate of
authentication shall be in substantially the forms set forth
in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or
permitted by this Indenture and may have such letters,
numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with
the rules of any securities exchange or as may, consistently
herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the
Securities. Any portion of the text of any Security may be
set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
The definitive Securities shall be printed,
lithographed, typewritten or engraved or produced by any
combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on
which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their
execution of such Securities.
The Initial Securities are being offered and sold
by the Company pursuant to a Purchase Agreement, dated March
14, 1997, between the Company, Goldman, Sachs & Co., Salomon
Brothers Inc and Scotia Capital Markets (USA) Inc.
The Exchange Securities shall be issued in the form
of one or more permanent global securities in definitive,
fully registered form without interest coupons substantially
in the form set forth in this Article (collectively, the
"Exchange Global Security") deposited with, or on behalf of,
the Depositary or
3
<PAGE>
with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the
Exchange Global Security may from time to time be increased
or decreased by adjustments made on the records of the
Depositary or its nominee, or of the Trustee, as custodian
for the Depositary or its nominee, as hereinafter provided.
Initial Securities offered and sold to "qualified
institutional buyers" (as defined in Rule 144A) in reliance
on Rule 144A shall be issued initially in the form of one or
more permanent global Securities in definitive, fully
registered form without interest coupons substantially in the
form set forth in this Article (collectively, the "Restricted
Global Security") deposited with, or on behalf of, the
Depositary or with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal
amount of the Restricted Global Security may from time to
time be increased or decreased by adjustments made on the
records of the Depositary or its nominee, or of the Trustee,
as custodian for the Depositary or its nominee, as
hereinafter provided.
Initial Securities offered and sold in reliance on
Regulation S shall be issued in the form of one or more
permanent global Securities in fully registered form without
interest coupons (collectively, the "Regulation S Global
Security" and, together with the Restricted Global Security
and the Exchange Global Security, the "Global Securities" or
each individually, a "Global Security") substantially in the
form set forth in this Article. The Regulation S Global
Securities will be registered in the name of a nominee of DTC
and deposited with the Trustee on behalf of the Purchasers,
for the accounts of the Euroclear System ("Euroclear") and
Cedel Bank, S.A. ("CEDEL"). The aggregate principal amount of
the Regulation S Global Security may from time to time be
increased or decreased by adjustments made on the records of
the Depositary or its nominee, or of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter
provided. Until and including the 40th day after the date of
this Indenture, beneficial interests in the Regulation S
Global Security may be held only through Euroclear or CEDEL,
unless delivery is made through the Restricted Global
Security in accordance with the certification requirements
provided in this Indenture.
If DTC is at any time unwilling or unable to
continue as a depositary, or if, in the case of the
Regulation S Global Security held for an account of Euroclear
or CEDEL, Euroclear or CEDEL, as the case may be, is closed
for business for 14 continuous days or announces an intention
to cease or permanently ceases business, the Company will
issue certificates for the Securities in definitive, fully
registered, non-global form without interest coupons in
4
<PAGE>
exchange for the Regulation S Global Security, the Restricted
Global Security or the Exchange Global Security, as the case
may be. In all cases, certificates for Securities delivered
in exchange for any Global Security or beneficial interests
therein will be registered in the names, and issued in any
approved denominations, requested by DTC.
In the case of certificates for Securities in
non-global form issued in exchange for the Regulation S
Global Security or Restricted Global Security, such
certificates will bear the first legend appearing under
Section 202 of this Indenture (unless the Company determines
otherwise in accordance with applicable law). The holder of a
Security in non-global form may transfer such Security,
subject to compliance with the provisions of such legend, by
surrendering it at the office or agency maintained by the
Company for such purpose in the Borough of Manhattan, The
City of New York, which initially will be the office of the
Trustee.
Initial Securities offered and sold other than as
global securities shall be issued in the form of permanent
certificated Securities in registered form in substantially
the form set forth in this Article (the "U.S. Physical
Securities").
Section 3. Indenture. Except as supplemented or amended hereby, the
Indenture and Securities are in all respects ratified and confirmed and all the
terms thereof shall remain in full force and effect. From and after the date
hereof, the Indenture, as supplemented by the First Supplemental Indenture,
shall be read, taken and construed as one and the same instrument with respect
to the Securities.
Section 4. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 5. GOVERNING LAW. THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR
ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
5
<PAGE>
LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS FIRST SUPPLEMENTAL INDENTURE.
Section 6. Trustee Disclaimer. The Trustee accepts the supplement to
the Indenture effected by this First Supplemental Indenture and agrees to
execute the trust created by the Indenture as hereby supplemented, but only upon
the terms and conditions set forth in the Indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit its
liabilities and responsibilities in the performance of the trust created by the
Indenture hereby supplemented. Except to the extent that they relate to action
taken by the Trustee, the Trustee shall not be responsible in any manner
whatsoever for or with respect to (i) the validity, efficacy or sufficiency of
this First Supplemental Indenture or any of the terms or provisions hereof, (ii)
the proper authorization hereof by the Company by corporate action or otherwise,
(iii) the due execution hereof by the Company, or (iv) the consequences (direct
or indirect and whether deliberate or inadvertent) of any supplement herein
provided for, and the Trustee makes no representation with respect to any such
matters.
Section 7. Effectiveness. The provisions of this First Supplemental
Indenture will take effect immediately upon its execution and delivery by the
Trustee in accordance with the provisions of Section 904 of the Indenture.
6
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, all as of the date first written
above.
ATTEST: AMC ENTERTAINMENT INC.
By:
Peter C. Brown
President and Chief Financial Officer
By:
Richard L. Obert
Senior Vice President - Chief
Accounting and Information Officer
THE BANK OF NEW YORK, as Trustee
By:
Name:
Title:
7
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)
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
PRIMARY 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) (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(1) $ 1.20(1) $ 1.45(2)
------- -------- -------
------- -------- -------
Fully diluted earnings per
share....................... $ .73(1) $ 0.06(1) $ 1.45(2)
------- -------- -------
------- -------- -------
</TABLE>
- --------------
(1) Fully diluted earnings per share for 1997 and 1996 excludes conversion of
preferred stock.
(2) Fully diluted earnings per share for 1995 includes conversion of preferred
stock.
Exhibit 12.1
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
MERGER YEAR ACTUAL YEAR ACTUAL YEAR ACTUAL YEAR
(53 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS)
ENDED ENDED APRIL ENDED MARCH ENDED MARCH
APRIL 3, 3, 28, 28,
1997 1997 1996 1995
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
EARNINGS:
Earnings (loss) before income taxes and extraordinary item......... $ 31,895 $ 31,895 $ 46,671 $ 24,978
Add: Fixed charges (below)......................................... 52,231 52,231 54,090 57,599
Depreciation on capitalized interest............................. 410 410 298 289
Less: Interest capitalized (below)................................. (3,344) (3,344) (3,003) (870)
Undistributed (income) loss--Joint Ventures...................... (191) (191) (8) (335)
--------------- ----------- ----------- -----------
Earnings for ratio............................................... 81,001 81,001 98,048 81,661
--------------- ----------- ----------- -----------
FIXED CHARGES:
Interest on borrowings............................................. 12,016 12,016 18,099 24,502
Interest on capital leases......................................... 10,006 10,006 10,729 11,406
Interest capitalized............................................... 3,344 3,344 3,003 870
Amortization of debt issuance costs................................ 178 178 655 796
Estimated interest portion of rental expense(1).................... 26,687 26,687 21,604 20,025
50% share of EEP:
Interest on borrowings(2)........................................ -- -- -- --
Interest on capital leases....................................... -- -- -- --
Interest capitalized............................................. -- -- -- --
Estimated interest portion of rent(1)............................ -- -- -- --
--------------- ----------- ----------- -----------
Fixed Charges.................................................... 52,231 52,231 54,090 57,599
--------------- ----------- ----------- -----------
FIXED CHARGES IN EXCESS OF EARNINGS.................................. $ -- $ -- $ -- $ --
--------------- ----------- ----------- -----------
--------------- ----------- ----------- -----------
RATIO OF EARNINGS TO FIXED CHARGES................................... 1.55 1.55 1.81 1.42
--------------- ----------- ----------- -----------
--------------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
ACTUAL YEAR ACTUAL YEAR
(52 WEEKS) (52 WEEKS)
ENDED MARCH ENDED APRIL
31, 1,
1994 1993
----------- -----------
<S> <C> <C>
EARNINGS:
Earnings (loss) before income taxes and extraordinary item......... $ 27,412 $ 13,146
Add: Fixed charges (below)......................................... 57,963 52,531
Depreciation on capitalized interest............................. 319 251
Less: Interest capitalized (below)................................. (52) (112)
Undistributed (income) loss--Joint Ventures...................... 202 63
----------- -----------
Earnings for ratio............................................... 85,844 65,879
----------- -----------
FIXED CHARGES:
Interest on borrowings............................................. 25,699 22,828
Interest on capital leases......................................... 10,676 8,573
Interest capitalized............................................... 49 90
Amortization of debt issuance costs................................ 724 655
Estimated interest portion of rental expense(1).................... 19,481 12,644
50% share of EEP:
Interest on borrowings(2)........................................ 565 3,844
Interest on capital leases....................................... 180 1,236
Interest capitalized............................................. 3 22
Estimated interest portion of rent(1)............................ 586 2,629
----------- -----------
Fixed Charges.................................................... 57,963 52,531
----------- -----------
FIXED CHARGES IN EXCESS OF EARNINGS.................................. $ -- $ --
----------- -----------
----------- -----------
RATIO OF EARNINGS TO FIXED CHARGES................................... 1.48 1.25
----------- -----------
----------- -----------
</TABLE>
- ------------------
The ratio of earnings to fixed charges represents the number of times fixed
charges are covered by earnings. For purposes of computing this ratio, earnings
consist of income (loss) before income taxes and extraordinary item, plus fixed
charges except capitalized interest. Fixed charges consist of interest expense,
amortization of debt issuance costs, and one-third of rent expense on operating
leases, estimated by the Company to be representative of the interest factor
attributable to such rent expense. For fiscal 1993 and 1994, fixed charges
include the Company's share (50%) of the fixed charges of EEP prior to the May
28, 1993 acquisition of the remaining 50% partnership interest.
(1) Used one-third of rent expense on operating leases.
(2) Interest expense including interest on promissory note payable to AMC, net
of interest capitalized.
Exhibit 12.2
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
RATIO OF EBITDA TO NET INTEREST EXPENSE
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
MERGER ACTUAL ACTUAL ACTUAL
YEAR YEAR YEAR YEAR
(53 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS)
ENDED ENDED ENDED ENDED
APRIL 3, APRIL 3, MARCH 28, MARCH 30,
1997 1997 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
EBITDA.................................................................. $ 112,948 $ 112,948 $ 112,555 $ 88,942
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INTEREST EXPENSE....................................................
Interest Expense...................................................... $ 22,022 $ 22,022 $ 28,828 $ 35,908
Interest Income....................................................... (569) (569) (6,491) (8,004)
----------- ----------- ----------- -----------
Net Interest Expense.................................................. $ 21,453 $ 21,453 $ 22,337 $ 27,904
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
RATIO OF EBITDA TO NET INTEREST EXPENSE................................. 5.26 5.26 5.04 3.19
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
ACTUAL ACTUAL
YEAR YEAR
(52 WEEKS) (52 WEEKS)
ENDED ENDED
MARCH 31, APRIL 1,
1994 1993
----------- -----------
<S> <C> <C>
EBITDA.................................................................. $ 98,784 $ 57,345
----------- -----------
----------- -----------
NET INTEREST EXPENSE....................................................
Interest Expense...................................................... $ 36,375 $ 31,401
Interest Income....................................................... (2,169) (6,985)
----------- -----------
Net Interest Expense.................................................. $ 34,206 $ 24,416
----------- -----------
----------- -----------
RATIO OF EBITDA TO NET INTEREST EXPENSE................................. 2.89 2.35
----------- -----------
----------- -----------
</TABLE>
Exhibit 21
AMC ENTERTAINMENT INC. AND SUBSIDIAIRES
AMC Entertainment Inc.
American Multi-Cinema, Inc.
AMC Realty, Inc.
Centertainment, Inc.
AMC Entertainment International, Inc.
AMC Entertainment International Limited
AMC Entertainment Espana 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.
Exhibit 23.1
[Letterhead of Coopers & Lybrand]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
of our report dated May 16, 1997, on our audits of the financial statements of
AMC Entertainment Inc. and subsidiaries as of April 3, 1997 and March 28, 1996,
and the year (53 weeks) ended April 3, 1997 and the years (52 weeks) ended
March 28, 1996 and March 30, 1995. We also consent to the incorporation by
reference in this registration statement on Form S-4 of AMC Entertainment Inc.
and subsidiaries of our report dated May 17, 1996 on our audits of the financial
statements and financial statement schedules of AMC Entertainment Inc. as of
March 28, 1996 and March 30, 1995 and for the years (52 weeks) ended March 28,
1996, March 30, 1995 and March 31, 1994 which report is incorporated in this
Form S-4 and AMC Entertainment Inc.'s Annual Report on Form 10-K for the year
ended March 28, 1996. We also consent to the reference to our Firm under the
capition "Experts".
/s/ Coopers & Lybrand L.L.P.
Kansas City, Missouri
June 10, 1997
Exhibit 23.2
[Letterhead of Coopers & Lybrand]
CONSENT OF INDEPEDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated May 22, 1997, on our audits of the financial statements of Durwood,
Inc. and subsidiaries. We also consent to the reference to our firm under the
caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Kansas City, Missouri
June 10, 1997
Exhibit 25
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
___________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
___________________
AMC ENTERTAINMENT INC.
(Exact name of obligor 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)
___________________
9 1/2% Exchange Senior Subordinated Notes due 2009
(Title of the indenture securities)
===============================================================================
<PAGE>
1. General Information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- -------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed
with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1
filed with Registration Statement No. 33-21672 and Exhibit 1 to Form
T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 5th day of June, 1997.
THE BANK OF NEW YORK
By: /S/MARY LAGUMINA
-----------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business December 31, 1996, published in accordance with
a call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 6,024,605
Interest-bearing balances .......... 808,821
Securities:
Held-to-maturity securities ........ 1,071,747
Available-for-sale securities ...... 3,105,207
Federal funds sold in domestic offices
of the bank: .......................... 4,250,941
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ................. 31,962,915
LESS: Allowance for loan and
lease losses .............. 635,084
LESS: Allocated transfer risk
reserve........................ 429
Loans and leases, net of unearned
income, allowance, and reserve 31,327,402
Assets held in trading accounts ...... 1,539,612
Premises and fixed assets (including
capitalized leases) ................ 692,317
Other real estate owned .............. 22,123
Investments in unconsolidated
subsidiaries and associated
companies .......................... 213,512
Customers' liability to this bank on
acceptances outstanding ............ 985,297
Intangible assets .................... 590,973
Other assets ......................... 1,487,903
------------
Total assets ......................... $52,120,460
============
LIABILITIES
Deposits:
In domestic offices ................ $25,929,642
Noninterest-bearing ................ 11,245,050
Interest-bearing ................... 14,684,592
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 12,852,809
Noninterest-bearing ................ 552,203
<PAGE>
Interest-bearing ................... 12,300,606
Federal funds purchased and securities
sold under agreements to repurchase
in domestic offices of the
bank and of its Edge and Agreement
subsidiaries, and in IBFs:
Federal funds purchased ............ 1,360,877
Securities sold under agreements
to repurchase....................... 226,158
Demand notes issued to the U.S.
Treasury ........................... 204,987
Trading liabilities .................. 1,437,445
Other borrowed money:
With original maturity of one year
or less .......................... 2,312,556
With original maturity of more than
one year ......................... 20,766
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,014,717
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,721,291
-----------
Total liabilities .................... 48,095,648
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,354,095
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 7,030
Cumulative foreign currency transla-
tion adjustments .................. ( 9,916)
-----------
Total equity capital ................ 4,024,812
-----------
Total liabilities and equity
capital ........................... $52,120,460
============
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot |
Thomas A. Renyi | Directors
Alan R. Griffith |
_________________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AMC ENTERTAINMENT AND ITS SUBSIDIARIES
AS OF AND FOR THE FIFTY-THREE WEEKS ENDED APRIL 3, 1997
</LEGEND>
<CIK> 0000722077
<NAME> AMC ENTERTAINMENT INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> APR-03-1997
<PERIOD-START> MAR-29-1996
<PERIOD-END> APR-03-1997
<EXCHANGE-RATE> 1.000
<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>
Exhibit 99.1
LETTER OF TRANSMITTAL
FOR
9 1/2% SENIOR SUBORDINATED NOTES
OF
AMC ENTERTAINMENT INC.
PURSUANT TO THE
EXCHANGE OFFER
IN RESPECT OF
ALL OF ITS OUTSTANDING 9 1/2% SENIOR SUBORDINATED
NOTES DUE MARCH 15, 2009
FOR
9 1/2% EXCHANGE SENIOR SUBORDINATED NOTES DUE MARCH 15, 2009
---------------
PURSUANT TO THE PROSPECTUS DATED JULY __, 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST __,
1997 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF
OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE BUSINESS DAY
PRIOR TO THE EXPIRATION DATE.
- -------------------------------------------------------------------------------
To: The Bank of New York as Exchange Agent
By Mail: By Facsimile: By Hand or Overnight Courier:
The Bank of New York (212) 571-3080 The Bank of New York
101 Barclay Street, 7 East 101 Barclay Street, 7 East
New York, New York 10268 Confirm by Telephone: New York, New York 10268
Attention: Arwen Gibbons Attention: Arwen Gibbons
Reorganization Section (212) 815-5920 Reorganization Section
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION
VIA TELEGRAM, TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD
NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the
Prospectus (the "Prospectus"), dated July __, 1997, of AMC Entertainment Inc., a
Delaware corporation (the "Company"), which, together
<PAGE>
with this Letter of Transmittal and the instructions hereto (the "Letter of
Transmittal"), constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 9 1/2% Exchange Senior Subordinated Notes due
March 15, 2009 (the "New Notes") that have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which the Prospectus constitutes a part, for each
$1,000 principal amount of its outstanding 9 1/2% Senior Subordinated Notes due
March 15, 2009 (the "Old Notes"), upon the terms and subject to the conditions
set forth in the Prospectus.
This Letter of Transmittal is to be used by Holders if: (i)
certificates representing Old Notes are to be physically delivered to the
Exchange Agent herewith by Holders; (ii) tender of Old Notes is to be made
through the Authorized Tender Offer Program ("ATOP") System at The Depository
Trust Company ("DTC") pursuant to the procedures set forth in the Prospectus
under "The Exchange Offer--Procedures for Tendering and "--Book Entry
Procedures;" or (iii) tender of Old Notes is to be made according to the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Procedures for Tendering." DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Unless the context otherwise requires, the term "Holder" with respect
to the Exchange Offer means any person: (i) in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered Holder; or (ii) whose Old
Notes are held of record by DTC who desires to deliver such Old Notes by
participating in the ATOP System.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this letter in its entirety.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
The instructions included with this Letter of Transmittal must be
followed. Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 8 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
-2-
<PAGE>
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Old Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
DESCRIPTION OF OLD NOTES
CERTIFICATE AGGREGATE
NUMBER(S) PRINCIPAL
(ATTACH SIGNED AMOUNT
NAME(S) AND ADDRESS(ES) OF HOLDER(S) LIST IF NECESSARY) TENDERED (IF LESS
(PLEASE FILL IN, IF BLANK) THAN ALL) *
TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED
===============================================================================
* Need not be completed by Holders who wish to tender with respect to all Old
Notes listed. See Instruction 2.
- --------------------------------------------------------------------------------
-3-
<PAGE>
If Holders desire to tender Old Notes pursuant to the Exchange Offer and (i)
certificates representing such Old Notes are not lost but are not immediately
available or (ii) time will not permit this Letter of Transmittal, certificates
representing such Old Notes or other required documents to reach the Exchange
Agent prior to the Expiration Date, such Holders may effect a tender of such Old
Notes in accordance with the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer -- Procedures for Tendering."
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE
EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Holder(s) of Old Notes:
Window Ticket No. (if any):
Date of Execution of
Notice of Guaranteed Delivery:
Name of Eligible Institution that Guaranteed Delivery:
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:
Address:
-4-
<PAGE>
Gentlemen:
Subject to the terms of the Exchange Offer, the undersigned hereby
tenders to the Company the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company and as Trustee under the Indenture for the Old
Notes and the New Notes) with respect to the tendered Old Notes with full power
of substitution to (i) deliver certificates for such Old Notes to the Company,
or transfer ownership of such Old Notes on the account books maintained by DTC,
together in either such case, with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company and (ii) present such Old
Notes for transfer on the books of the Company and receive all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, when the same are acquired by the Company. The
undersigned also acknowledges that this Exchange Offer is being made in reliance
upon an interpretation by the staff of the Securities and Exchange Commission
that the New Notes issued in exchange for the Old Notes pursuant to the Exchange
Offer may be offered for sale, resold and otherwise transferred by holders
thereof (other than any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such New Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such New Notes.
The undersigned represents that (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder has no arrangements with any person to participate in
the distribution of such New Notes and (iii) such holder is not an "affiliate,"
as defined under Rule 405 of the Securities Act of the Company or, if such
holder is an affiliate, that such holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the undersigned is not a broker-dealer or is a broker-dealer but will not
receive New Notes for its own account in exchange for Old Notes, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes, it represents
that the Old Notes to be exchanged for New Notes were acquired by it as a result
of market-making activities or other trading activities and acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act of
1933, as amended, in connection with any resale of such New Notes acquired
pursuant to the Exchange Offer; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned will upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered
hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, and if, the Company has given oral or
written notice thereof to the Exchange
-5-
<PAGE>
Agent. If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned (except with respect to tenders through DTC), without expense,
to the undersigned at the address shown below or at a different address shown
below or at a different address as may be indicated under "Special Issuance
Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation under this Letter of Transmittal shall be
binding upon the undersigned's heirs, personal representatives, successors and
assigns.
The undersigned understands that the Company reserves the right, at any
time and from time to time, in its sole discretion (subject to its obligation
under the Registration Rights Agreement) (i) to delay accepting any Old Notes or
to delay the issuance and exchange of New Notes for Old Notes, to extend the
Exchange Offer or, if any of the conditions set forth in the Prospectus under
the caption "The Exchange Offer --Conditions" shall not have been satisfied, to
terminate the Exchange Offer, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. Any tender of Old Notes
pursuant to this Letter of Transmittal may be withdrawn only in accordance with
the applicable procedures set forth herein and in the Prospectus.
Unless otherwise indicated under "Special Issuance Instructions,"
please issue the certificates representing the New Notes issued in exchange for
the Old Notes accepted for exchange and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned. Similarly, unless otherwise
indicated under "Special Delivery Instructions," please send the certificates
representing the New Notes issued in exchange for the Old Notes accepted for
exchange and any certificates for Old Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signatures, unless, in either event, tender is being
made through DTC. In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the New Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged in the name(s)
of, and send said certificates to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Old Notes from
the name of the registered holder(s) thereof if the Company does not accept for
exchange any of the Old Notes so tendered.
-6-
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF
OLD NOTES REGARDLESS OF WHETHER OLD NOTES ARE BEING PHYSICALLY
DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes, or by
person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below under "Capacity" and submit evidence
satisfactory to the Company of such person's authority to so act. See
Instruction 3 herein.
If the signature appearing below is not of the registered Holder(s) of
the Old Notes, then the registered Holder(s) must sign a valid proxy.
X . . . . . . . . . . . . . . . . . . . . . Date: . . . . . . . . . . . . .
X . . . . . . . . . . . . . . . . . . . . . Date: . . . . . . . . . . . . .
SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY
Name(s): . . . . . . . . . . . Address: . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE PRINT) (INCLUDING ZIP CODE)
Capacity: . . . . . . . . . . . . Area Code and Telephone No.: . . . . . .
Social Security No.: . . . . . . . . . . . . . . .
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN)
Certain Signatures Must Be Guaranteed by an Eligible Institution
...............................................................................
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
...............................................................................
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER
(INCLUDING AREA CODE) OF FIRM)
...............................................................................
(AUTHORIZED SIGNATURE)
...............................................................................
(PRINTED NAME)
...............................................................................
(TITLE)
Date: . . . . . . . . . . . . .
- -------------------------------------------------------------------------------
-7-
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 4 HEREIN) (SEE INSTRUCTION 4 HEREIN)
To be completed ONLY if certificates To be completed ONLY if certificates
for Old Notes in a principal amount not for Old Notes in a principal amount
tendered are to be issued in the name not tendered or not accepted for
of, or the New Notes issued pursuant purchase or the New Notes issued
to the Exchange Offer are to be pursuant to the Exchange Offer are
issued to the order of, someone other to be sent to someone other than the
than the person or persons whose person or persons whose signature(s)
signature(s) appear(s) within this appear(s) within this Letter of
Letter of Transmittal or issued to an Transmittal or to an address
address different from that shown in different from that shown in the box
the box entitled "Description of Old entitled "Description of Old Notes"
Notes" within this Letter of Transmittal. within this Letter of Transmittal.
Name: ............................ Name: ............................
(PLEASE PRINT) (PLEASE PRINT)
Address: ............................ Address: ............................
(PLEASE PRINT) (PLEASE PRINT)
..................................... .....................................
ZIP CODE ZIP CODE
..................................... .....................................
TAXPAYER IDENTIFICATION OR SOCIAL TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER (SEE SUBSTITUTE SECURITY NUMBER (SEE SUBSTITUTE
FORM W-9 HEREIN) FORM W-9 HEREIN)
-8-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER AND THE SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. The
certificates for the tendered Old Notes (or a confirmation of a book-entry
transfer into the Exchange Agent's account at DTC in case of Holders
participating in the ATOP System), as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile hereof (or electronic
acceptance of and agreement to this Letter of Transmittal in the case of Holders
participating through the ATOP System) and any other documents required by this
Letter of Transmittal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 P.M., New York City time, on the Expiration Date. The
method of delivery of the tendered Old Notes, this Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder and, except as otherwise provided below, the delivery will be deemed
made only when actually received by the Exchange Agent. Instead of delivery by
mail, it is recommended that the Holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Letter of Transmittal or Old Notes should be sent to the Company.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date must tender their Old Notes and follow the
guaranteed delivery procedures set forth in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution;
(ii) prior to the Expiration Date, the Exchange Agent must have received from
the Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the Holder of the Old Notes, the certificate
number or numbers of such Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that,
within five business days after the Expiration Date, this Letter of Transmittal
(or facsimile or electronic transmission thereof) together with the
certificate(s) representing the Old Notes (or electronic transmission thereof)
and any of the required documents will be deposited by the Eligible Institution
with the Exchange Agent; and (iii) such properly completed and executed Letter
of Transmittal (or facsimile hereof), as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all tendered Old
Notes in proper form for transfer, must be received by the Exchange Agent within
five business days after the Expiration Date, all as provided in the Prospectus
under the caption "Guaranteed Delivery Procedures." Any Holder of Old Notes who
wishes to tender his Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery prior to 5:00 P.M., New York City time, on the Expiration
Date.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in this Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes
-9-
<PAGE>
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering Holders of Old Notes, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted
in all denominations of $1,000 and integral multiples in excess thereof. If less
than the entire principal amount of any Old Notes is tendered, the tendering
Holder should fill in the principal amount tendered in the third column of the
chart entitled "Description of Old Notes." The entire principal amount of Old
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old Notes is
not tendered, Old Notes for the principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, Old Notes for
the principal amount of Old Notes not tendered and a certificate or certificates
representing New Notes issued in exchange of any Old Notes accepted will be sent
to the Holder at his or her registered address, unless a different address is
provided in the appropriate box on this Letter of Transmittal or unless tender
is made through the ATOP System, promptly after the Old Notes are accepted for
exchange.
A tender pursuant to the Exchange Offer may be withdrawn subject to the
procedures set forth in this Letter of Transmittal and the Prospectus, at any
time prior to the Expiration Date, if not theretofore accepted for exchange. To
withdraw a tender of Old Notes in the Exchange Offer, a written, facsimile, or
where applicable, electronic transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Old Notes to be withdrawn
(the "Depositor"), (ii) specify the serial numbers on the particular
certificates evidencing the Old Notes to be withdrawn and the name of the
registered holder thereof (if certificates have been delivered or otherwise
identified to the Exchange Agent), (iii) be signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents or transfer sufficient to have the Securities Registrar
with respect to the Old Notes register the transfer of such Old Notes into the
name of the person withdrawing the tender, and (iv) specify the name in which
any such Old Notes are to be registered, if different from that of the
Depositor, or, in the case of Holders tendering through the ATOP System,
otherwise comply with the requirements of DTC. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company in its sole discretion, which determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Properly withdrawn Old Notes may be retendered by following
one of the procedures described in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering" at any time prior to the Expiration
Date.
3. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or
facsimile hereof) is signed by the registered Holder(s) of the Old Notes
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Old Notes without alternation, enlargement or any change
whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder(s) of Old Notes tendered and the certificate(s) for New Notes
issued in exchange therefor is to be issued (or any untendered principal amount
of Old Notes is to be reissued) to the registered Holder, such Holder need not
and should not endorse any tendered Old Note, nor provide a separate bond power.
In any other case, such holder must
-10-
<PAGE>
either properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal, with the signatures on the
endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered Holder(s) of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers signed as the
name of the registered Holder(s) appears on the Old Notes and guaranteed by an
Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 3 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal (or facsimile hereof) must be
guaranteed by an Eligible Institution unless the Old Notes tendered pursuant
thereto are tendered (i) by a registered Holder who has not completed the box
set forth herein entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" or (ii) for the account of an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable spaces, the name and address to which New Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
5. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered Holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other person) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
6. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify specified conditions in the Exchange Offer in the case of
any Old Notes tendered.
7. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instruction.
-11-
<PAGE>
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
specified in the Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
Certificate Surrendered Old Notes Tendered Old Notes Accepted
Delivery Prepared by __________ Checked by ________________ Date ___________
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $500 penalty may be imposed by the Internal Revenue
Service, and payments made with respect to New Notes purchased pursuant to the
Exchange Offer may be subject to backup withholding. A willful failure to
provide a correct TIN may subject a Holder to criminal penalties, including
imprisonment.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to
withhold 31% of any payments made to the Holder or other payee. Backup
withholding is not an additional federal income tax. Rather, the amount of
federal income tax liability of persons subject to backup withholding that would
have to be paid (through estimated tax payments, other withholding, or other
means) will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the New
Notes, the Holder is required to provide the Exchange Agent with either: (i) the
Holder's correct TIN by completing
-12-
<PAGE>
the form below, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such Holder is awaiting a TIN) and that (A) the Holder has not
been notified by the Internal Revenue Service that the Holder is subject to
backup withholding as a result of failure to report all interest or dividends or
(B) the Internal Revenue Service has notified the Holder that the Holder is no
longer subject to backup withholding; or (ii) an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Old Notes. If the Old Notes are held in more than one name or are held not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
-13-
<PAGE>
PAYER'S NAME: _________________________
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE
BOX AT RIGHT AND CERTIFY BY SIGNING AND
FORM W-9 DATING BELOW
Department of the Treasury PART 2--Certification--Under Penalties of
Internal Revenue Service Perjury, I certify that:
(1) The number shown on this form is my
correct Taxpayer Identification Number
Payer's Request for Taxpayer (or I am waiting for a number to be
Identification Number (TIN) issued to me) and
(2) I am not subject to backup withholding
because: (a) I am exempt from back-up
withholding or (b) I have not been
notified by the Internal Revenue Service
(IRS) that I am subject to backup
withholding as a result of a failure to
report all interest or dividends or (c)
the IRS has notified me that I am no long
subject to backup withholding.
______________________
Social Security Number
OR
--------------------------
Employer Identification Number
PART 3--
Awaiting TIN |_|
Certificate instructions -- You must cross out item (2) in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
SIGNATURE __________________________________ DATE __________________
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF NEW NOTES PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
- ---------------------------------------- -------------------------------
Signature Date
- -------------------------------------------------------------------------------
<PAGE>
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
By Mail: By Facsimile: By Hand or Overnight Courier:
The Bank of New York (212) 571-3080 The Bank of New York
101 Barclay Street, 7 East 101 Barclay Street, 7 East
New York, New York 10268 Confirm by Telephone: New York, New York, 10268
Attention: Arwen Gibbons Attention: Arwen Gibbons
Reorganization Section (312) 815-5920 Reorganization Section
-14-
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
9 1/2% SENIOR SUBORDINATED NOTES DUE MARCH 15, 2009
OF
AMC ENTERTAINMENT INC.
As set forth in the Prospectus, dated July __, 1997 (the "Prospectus"),
of AMC Entertainment Inc. (the "Company") in the section entitled "The Exchange
Offer --Procedures for Tendering", and in the accompanying Letter of Transmittal
and instructions thereto (the "Letter of Transmittal"), this form or one
substantially equivalent hereto must be used to accept the Company's exchange
offer (the "Exchange Offer") to purchase all of its outstanding 9 1/2% Senior
Subordinated Notes due March 15, 2009 (the "Old Notes") if (i) certificates
representing the Old Notes to be tendered for purchase and payment are not lost
but are not immediately available or (ii) time will not permit the Letter of
Transmittal, certificates representing such Old Notes or other required
documents to reach the Exchange Agent prior to the Expiration Date. This form
may be delivered by an Eligible Institution by mail or hand delivery or
transmitted, via telegram, telex or facsimile, to the Exchange Agent as set
forth below. All capitalized terms used herein but not defined herein shall have
the meanings ascribed to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST __,
1997 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES
MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE BUSINESS DAY PRIOR TO THE
EXPIRATION DATE.
- -------------------------------------------------------------------------------
The Exchange Agent:
THE BANK OF NEW YORK
By Mail: By Facsimile: By Hand or Overnight Courier:
The Bank of New York (212) 571-3080 The Bank of New York
101 Barclay Street, 7 East 101 Barclay Street, 7 East
New York, NY 10286 Confirm by Telephone: New York, NY 10286
Attention: Arwen Gibbons Attention: Arwen Gibbons
Reorganization Section (212) 815-5920 Reorganization Section
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA
TELEGRAM, TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE
A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on
the Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Exchange Offer and the Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Old Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus (and Letter of Transmittal).
The undersigned understands that tenders of Old Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange Offer
may not be withdrawn after 5:00 p.m., New York City time on the Business Day
prior to the Expiration Date. Tenders of Old Notes may also be withdrawn if the
Exchange Offer is terminated without any such Old Notes being purchased
thereunder or as otherwise provided in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<PAGE>
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Owner(s) Name(s) of Registered Holder(s):
or Authorized Signatory:
Principal Amount of Old Notes Tendered: Address:
Certificate No(s). of Old Notes Area Code and Telephone No.:
(if available): If Old Notes will be delivered
by book-entry transfer at
The Depository Trust Company,
insert, Depository Account
No.:
Date:
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of
Old Notes exactly as its (their) name(s) appear on certificates for Old Notes or
on a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must
provide the following information.
Please print name(s) and address(es)
Name(s):
Capacity:
Address(es):
Do not send old notes with this form. Notes should be sent to the Exchange Agent
together with a properly completed and duly executed Letter of Transmittal.
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GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States, hereby (a) represents that each holder of Old Notes on whose
behalf this tender is being made "own(s)" the Old Notes covered hereby within
the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended,
(b) represents that such tender of Old Notes complies with such Rule 14e-4, and
(c) guarantees that, within five New York Stock Exchange trading days from the
date of this Notice of Guaranteed Delivery, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with
certificates representing the Old Notes covered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Old Notes into the
Exchange Agent's account at The Depository Trust Company, pursuant to the
procedure for book-entry transfer set forth in the Prospectus) and required
documents will be deposited by the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Old Notes tendered hereby to the Exchange Agent within the time
period set forth above and that failure to do so could result in financial loss
to the undersigned.
Name of Firm:
Authorized Signature
Address: Name:
Title:
Area Code and Telephone No.: Date:
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