UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 1, 1998
or
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-8747
AMC ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1304369
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 West 14th Street
Kansas City, Missouri 64105-1977
(Address of principal executive offices) (Zip Code)
(816) 221-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No ________
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Number of Shares
Title of Each Class of Common Stock Outstanding as of January 1, 1998
Common Stock, 66 2/3 cents par value 13,738,621
Class B Stock, 66 2/3 cents par value 5,015,657
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
INDEX
Page Number
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURES 24
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Thirteen Thirty-nine
Weeks Ended Weeks Ended
January 1, December 26, January 1, December 26,
1998 1996 1998 1996
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Admissions $140,317 $104,588 $411,034 $344,699
Concessions 64,049 47,584 189,476 159,355
Other 11,473 11,020 29,380 23,501
--------- --------- --------- ---------
Total revenues 215,839 163,192 629,890 527,555
Expenses
Film exhibition costs 75,583 55,169 227,563 185,438
Concession costs 10,903 8,195 30,810 26,275
Other 85,822 67,100 244,074 207,165
--------- --------- --------- ---------
Total cost of
operations 172,308 130,464 502,447 418,878
General and administrative 15,041 13,910 41,893 38,582
Depreciation and
amortization 17,227 13,129 50,116 37,543
Impairment of long-lived
assets - - 46,998 -
--------- --------- --------- ---------
Total expenses 204,576 157,503 641,454 495,003
--------- --------- --------- ---------
Operating income (loss) 11,263 5,689 (11,564) 32,552
Other expense (income)
Interest expense
Corporate borrowings 7,552 3,044 20,513 7,657
Capital lease obligations 2,318 2,231 7,007 7,379
Investment income (124) (343) (805) (664)
Loss (gain) on disposition
of assets (864) 53 (3,360) 84
--------- --------- --------- ---------
Earnings (loss) before
income taxes 2,381 704 (34,919) 18,096
Income tax provision 950 285 (14,150) 7,285
--------- --------- --------- ---------
Net earnings (loss) $1,431 $ 419 $(20,769) $ 10,811
======== ======== ======== ========
Preferred dividends 1,198 1,454 3,849 4,454
--------- --------- --------- ---------
Net earnings (loss) for
common shares $233 $(1,035) $(24,618) $ 6,357
======== ======== ======== ========
Earnings (loss) per share:
Basic $ .01 $ (.06) $ (1.34) $ .37
======== ======== ======== ========
Diluted $ .01 $ (.06) $ (1.34) $ .36
======== ======== ======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<S> <C> <C>
January 1,April 3,
1998 1997
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $ 53,525 $ 24,715
Receivables, net of allowance for
doubtful accounts of
$748 as of January 1, 1998 and
$704 as of April 3, 1997 15,559 9,837
Refundable construction advances 87,276 33,193
Other current assets 21,129 16,769
-------- --------
Total current assets 177,489 84,514
Property, net 539,222 543,058
Intangible assets, net 22,834 28,679
Other long-term assets 98,614 62,804
-------- --------
Total assets $838,159 $719,055
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 85,258 $ 61,876
Construction payables 41,476 26,491
Accrued expenses and other liabilities 70,817 43,301
Current maturities of corporate borrowings
and capital lease obligations 3,947 3,441
-------- --------
Total current liabilities 201,498 135,109
Corporate borrowings 378,977 315,046
Capital lease obligations 51,499 55,237
Other long-term liabilities 61,916 43,651
-------- --------
Total liabilities 693,890 549,043
Stockholders' equity:
$1.75 Cumulative Convertible Preferred
Stock, 66 2/3 cents par value;
2,716,700 shares issued and outstanding
as of January 1, 1998 and 3,303,600
shares issued and outstanding as of
April 3, 1997 (aggregate liquidation
preference of $67,918 as of January 1, 1998
and $82,590 as of April 3, 1997) 1,811 2,202
Common Stock, 66 2/3 cents par value; 13,759,121
shares issued as of
January 1, 1998 and 6,604,469 shares
issued as of April 3, 1997 9,173 4,403
Convertible Class B Stock, 66 2/3 cents par value;
5,015,657 shares issued and
outstanding as of January 1, 1998 and
11,157,000 shares issued
and outstanding as of April 3, 1997 3,344 7,438
Additional paid-in capital 107,518 107,781
Foreign currency translation adjustment (3,160) (2,048)
Retained earnings 25,952 50,605
-------- --------
144,638 170,381
Less - Common Stock in treasury, at cost,
20,500 shares as of January 1, 1998
and April 3, 1997 369 369
-------- --------
Total stockholders' equity 144,269 170,012
-------- --------
Total liabilities and stockholders' equity $838,159 $719,055
======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Thirty-nine
Weeks Ended
January 1, December 26,
1998 1996
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(20,769) $ 10,811
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Impairment of long-lived assets 46,998 -
Depreciation and amortization 50,116 37,543
Deferred income taxes (19,270) -
Loss (gain) on sale of long-term assets (3,360) 84
Change in assets and liabilities:
Receivables (5,620) (1,915)
Other current assets (4,360) (576)
Accounts payable 5,519 7,012
Accrued expenses and other liabilities 33,974 5,283
Other, net 499 274
-------- --------
Total adjustments 104,496 47,705
-------- --------
Net cash provided by operating activities 83,727 58,516
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (293,507) (163,645)
Proceeds from sale/leasebacks 214,300 -
Investments in real estate (4,347) (7,692)
Net change in refundable construction advances (54,083) (5,549)
Proceeds from disposition of long-term assets 7,357 1,129
Other, net (13,538) (8,678)
-------- --------
Net cash used in investing activities (143,818) (184,435)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility 70,000 145,000
Repurchase of 11 7/8% Senior and 12 5/8%
Senior Subordinated Notes (5,817) -
Principal payments under capital lease
obligations and other (2,561) (2,118)
Cash overdrafts 17,863 (8,133)
Change in construction payables 14,985 3,608
Proceeds from exercise of stock options 22 140
Dividends paid on preferred stock (3,884) (4,539)
Deferred financing costs and other (1,663) -
-------- --------
Net cash provided by financing activities 88,945 133,958
-------- --------
Effect of exchange rate changes on cash
and equivalents (44) (398)
-------- --------
NET INCREASE IN CASH AND EQUIVALENTS 28,810 7,641
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 24,715 10,795
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 53,525 $ 18,436
======== ========
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Thirty-nine
Weeks Ended
January 1, December 26,
1998 1996
(Unaudited)
<S> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized
of $5,879 and $1,955) $ 27,568 $ 16,134
Income taxes paid 11,720 5,327
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 1998
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
AMC Entertainment Inc. ("AMCE") is a holding company which, through
its direct and indirect subsidiaries, including American Multi-Cinema, Inc.
("AMC") and its subsidiaries (collectively with AMCE, unless the context
otherwise requires, the "Company"), is principally involved in the
operation of motion picture theatres throughout the United States and in
Japan and Portugal. The Company is also involved in the business of
providing on-screen advertising and other services to AMC and other theatre
circuits through a wholly-owned subsidiary, National Cinema Network, Inc.
("NCN").
Prior to fiscal 1998, NCN was consolidated with the Company as of a
fiscal period end that was one period earlier than the Company' fiscal
period end. Beginning in fiscal year 1998, this one-period reporting lag
was eliminated and NCN year to date results include activity for ten
periods.
The accompanying unaudited consolidated financial statements have been
prepared in response to the requirements of Form 10-Q and should be read in
conjunction with the Company's annual report on Form 10-K for the year (53
weeks) ended April 3, 1997. In the opinion of management, these interim
financial statements reflect all adjustments (consisting primarily of
normal recurring adjustments) necessary for a fair presentation of the
Company's financial position and results of operations. Due to the
seasonal nature of the Company's business, results for the thirteen and
thirty-nine weeks ended January 1, 1998 are not necessarily indicative of
the results to be expected for the fiscal year (52 weeks) ending April 2,
1998.
The year-end consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation.
NOTE 2 - EARNINGS PER SHARE
During the thirteen weeks ended January 1, 1998, the Company adopted
the provisions of 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. All prior-period EPS data has been
restated to conform with the new pronouncement. The impact of adopting
SFAS 128 was not material.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Thirteen Thirty-nine
Weeks Ended Weeks Ended
1/1/98 12/26/96 1/1/98 12/26/96
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Numerator:
Net earnings (loss) $ 1,431 $419 $(20,769) $ 10,811
Less: Preferred dividends 1,198 1,454 3,849 4,454
------- ------ -------- -------
Net earnings (loss) for basic
earnings per share 233 (1,035) (24,618) 6,357
Cumulative Convertible
Preferred Stock n/a(1) n/a(1) n/a(1) n/a(1)
------- ------ -------- -------
Net earnings (loss) for
diluted earnings per share $ 233 $ (1,035) $(24,618) $ 6,357
======= ======== ======== =======
Denominator:
Shares for basic earnings
per share -
average shares outstanding 18,543 17,706 18,310 17,410
Cumulative Convertible
Preferred Stock n/a(1) n/a(1) n/a(1) n/a(1)
Stock options 246 n/a(2) n/a(2) 249
Contingently issuable shares n/a(3) n/a(3) n/a(3) 44(3)
------- ------ -------- -------
Shares for diluted earnings
per share 18,789 17,706 18,310 17,703
======= ======== ======== =======
Basic earnings per share $0.01 $ (0.06) $ (1.34) $0.37
======= ======== ======== =======
Diluted earnings per share $0.01 $ (0.06) $ (1.34) $0.36
======= ======== ======== =======
</TABLE>
(1) Dividends and shares from conversion of preferred stock are excluded
from the diluted earnings per share calculation because they are anti-
dilutive.
(2) Shares from options to purchase 558,500 shares of Common Stock at
prices ranging from $9.25 per share to $26.38 per share are excluded from
the diluted earnings per share calculation because they are anti-dilutive.
(3) Contingently issuable shares are issuable upon the satisfaction of
certain conditions. Contingently issuable shares are excluded from the
diluted earnings per share calculation because the conditions necessary
for their issuance were not satisfied or because they are anti-
dilutive. A maximum of 216,000 shares of Common Stock were
contingently issuable as of January 1, 1998 and December 26, 1996.
NOTE 3 - MERGER WITH PARENT
Effective August 15, 1997, the Company completed a merger with its
majority stockholder, Durwood, Inc. ("DI"), with the Company remaining as
the surviving entity (the "Merger"). In connection with the Merger,
2,641,951 shares of the Company's Common Stock and 11,157,000 shares of the
Company's Class B Stock owned by DI were canceled and the Company issued
8,783,289 shares of its Common Stock and 5,015,657 shares of its Class B
Stock to the DI stockholders. The Merger was accounted for as a corporate
reorganization and the recorded balances for consolidated assets,
liabilities, total stockholders' equity and results of operations were not
affected.
In connection with the Merger, the DI stockholders granted a proxy to
the Company to vote their shares of the Company's Common Stock for each
candidate for the Company's Board of Directors in the same proportion as
the aggregate votes cast in such elections by all other holders of the
Company's Common Stock not affiliated with the Company, its directors and
officers. The proxy will remain in effect for a period of three years
commencing on the date of the Merger.
NOTE 4 - IMPAIRMENT OF LONG-LIVED ASSETS
The summer of 1997 was the first summer film season, generally the
highest grossing period for the film industry, that a significant number
of megaplexes of the Company and its competitors were operating (the first
megaplex, Grand 24, was opened by the Company in May 1995). During this
period, the financial results of certain multiplexes of the Company were
significantly less than anticipated at the beginning of fiscal 1998 due
primarily to competition from the newer megaplex theatres. As a result,
the Company initiated a review of its portfolio of theatres to identify
those theatres which are not expected to provide an adequate financial
return in the future. The Company anticipates that many of its multiplexes
may be disposed of in the intermediate term but continues to evaluate its
future plans for such theatres.
As a result of this review, the Company evaluated its theatre assets
and related intangibles for impairment in accordance with the provisions 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. The expected future cash flows of certain theatres, undiscounted and
without interest charges, were less than the carrying value of the theatre
assets. As a result, the Company recognized a non-cash impairment loss of
$46,998,000 ($27,728,000 after tax, or $1.51 per share) on 59 multiplex
theatres with 412 screens in 14 states (primarily California, Texas,
Missouri, Arizona and Florida) including a loss of $523,000 associated with
10 theatres that were included in impairment losses recognized in previous
periods. The impairment loss represents the amount by which the carrying
value of the multiplex assets, including intangibles, exceeded the
estimated fair value of those assets. The estimated fair value of assets
was determined as either the expected selling price less selling costs or
the present value of future cash flows.
The reduced carrying amount of the impaired assets will result in
reduced depreciation and amortization in future periods. For fiscal 1998,
such charge is expected to be reduced by approximately $10,500,000, which
includes a $3,500,000 reduction in depreciation and amortization for the
thirteen weeks ended January 1, 1998.
NOTE 5 - SALE AND LEASE BACK TRANSACTION
During November and December of 1997, the Company sold the real estate
assets associated with 11 megaplex theatres to Entertainment Properties
Trust ("EPT"), a real estate investment trust, for an aggregate purchase
price of $214,300,000 (the "Sale and Lease Back Transaction"). Proceeds
from the Sale and Lease Back Transaction were applied to indebtedness under
the Company's credit facility.
Concurrent with the Sale and Lease Back Transaction, the Company
leased the real estate assets associated with the theatres from EPT
pursuant to non-cancelable operating leases with terms ranging from 13 to
15 years at an initial lease rate of 10.5% with options to extend for up to
an additional 20 years. The leases are triple net leases that require the
Company to pay substantially all expenses associated with the operation of
the theatres, such as taxes and other governmental charges,
insurance, utilities, service, maintenance and any ground lease payments.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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,
construction delays, the ability to open new theatres and screens as
currently planned, the performance of films licensed by the Company and
other risks and uncertainties.
Operating Results
Set forth in the table below is a summary of revenues, cost of
operations, general and administrative, and depreciation and amortization
expenses attributable to the Company's domestic and international
theatrical exhibition operations and the Company's on-screen advertising
business.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
1/1/98 12/26/96 % Change 1/1/98 12/26/96 % Change
(in thousands, except
percentages)
REVENUES
<S> <C> <C> <C> <C> <C> <C>
Domestic
Admissions $134,924 $101,962 32.3% $394,839 $337,528 17.0%
Concessions 62,839 47,198 33.1 185,975 158,322 17.5
Other 5,735 6,846 (16.2) 12,862 12,549 2.5
--------- -------- ----- -------- --------- -----
203,498 156,006 30.4 593,676 508,399 16.8
International
Admissions 5,393 2,626 * 16,195 7,171 *
Concessions 1,210 386 * 3,501 1,033 *
Other 42 - ___*_ 60 2 *
--------- -------- ----- -------- --------- -----
6,645 3,012 * 19,756 8,206 *
On-screen advertising and other 5,696 4,174 36.5 16,458 10,950 50.3
--------- -------- ----- -------- --------- -----
Total revenues $215,839 $163,192 32.3% $629,890 $527,555 19.4%
========= ======== ===== ======== ======== =====
COST OF OPERATIONS
Domestic
Film exhibition costs $ 72,713 $ 53,593 35.7% $218,770 $181,108 20.8%
Concession costs 10,411 8,037 29.5 29,476 25,966 13.5
Rent 25,702 18,475 39.1 68,356 54,288 25.9
Other 53,905 43,358 24.3 155,312 137,485 13.0
--------- -------- ----- -------- --------- -----
162,731 123,463 31.8 471,914 398,847 18.3
International
Film exhibition costs 2,870 1,576 82.1 8,793 4,330 *
Concession costs 492 158 * 1,334 309 *
Rent 1,414 1,176 20.2 4,386 3,222 36.1
Other 1,349 1,053 28.1 4,281 3,289 30.2
--------- -------- ----- -------- --------- -----
6,125 3,963 54.6 18,794 11,150 68.6
On-screen advertising and other 3,452 3,038 13.6 11,739 8,881 32.2
--------- -------- ----- -------- --------- -----
Total cost of operations $172,308 $130,464 32.1% $502,447 $418,878 20.0%
======== ======== ===== ======== ======== =====
*Percentage change in excess of 100%.
</TABLE>
<TABLE>
Thirteen Weeks Ended Thirty-nine Weeks Ended
1/1/98 12/26/96 % Change 1/1/98 12/26/96 % Change
(in thousands, except percentages)
GENERAL AND ADMINISTRATIVE
<S> <C> <C> <C> <C> <C> <C>
Corporate and Domestic $ 12,280 $ 10,887 12.8% $ 33,440 $ 30,452 9.8%
International 1,660 1,952 (15.0) 4,804 4,890 (1.8)
On-screen advertising and other 1,101 1,071 2.8 3,649 3,240 12.6
--------- -------- ----- -------- --------- -----
Total general and
administrative $ 15,041 $ 13,910 8.1% $ 41,893 $ 38,582 8.6%
========= ======== ===== ======== ========= =====
DEPRECIATION AND AMORTIZATION
Corporate and Domestic $ 16,023 $ 12,445 28.8% $ 46,427 $ 35,619 30.3%
International 601 237 * 1,888 647 *
On-screen advertising and other 603 447 34.9 1,801 1,277 41.0%
--------- -------- ----- -------- --------- -----
Total depreciation and
amortization $ 17,227 $ 13,129 31.2% $ 50,116 $ 37,543 33.5%
======== ======== ===== ======== ========= ====
* Percentage change in excess of 100%
</TABLE>
Thirteen Weeks Ended January 1, 1998 and December 26, 1996
Revenues. Total revenues increased 32.3%, or $52,647,000, during the
thirteen weeks ended January 1, 1998 compared to the thirteen weeks ended
December 26, 1996.
Total domestic revenues increased 30.4%, or $47,492,000, from the prior
year. Admissions revenues increased 32.3%, or $32,962,000, due to a 24.5%
increase in attendance, which contributed $25,002,000 of the increase, and
a 6.3% increase in average ticket prices, which contributed $7,960,000 of
the increase. Attendance at megaplexes (theatres with predominantly
stadium-style seating) increased during the quarter as a result of the
addition of 20 new megaplexes with 434 screens since December 26, 1996 and
a 16.5% increase in attendance at comparable megaplexes (theatres opened
before the third quarter of the prior fiscal year). Attendance at
multiplexes (theatres generally without stadium-style seating) decreased
during the quarter due to the closure or sale of 24 multiplexes with 121
screens since the third quarter of fiscal 1997, partially offset by a .8%
increase in attendance at comparable multiplexes. The popularity of the
films released during the quarter and the additional Christmas holiday
weekend included in the current period contributed to the overall increase
in attendance. The increase in average ticket prices was 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 increased 33.1%, or $15,641,000, due to the increase in total
attendance, which contributed $11,573,000 of the increase, and a 6.9%
increase in average concessions per patron, which contributed $4,068,000 of
the increase. The increase in average concessions per patron was
attributable to the increasing number of megaplexes in the Company's
circuit, where concession spending per patron is higher than multiplexes.
Total international revenues increased $3,633,000 from the prior year.
Admissions revenues increased $2,767,000 due to an increase in attendance,
offset by a decrease in average ticket prices. Attendance increased as a
result of a 69.2% increase in comparable attendance at the Canal City 13 in
Japan and the opening of the Arrabida 20 in Portugal during December of
fiscal 1997. Concessions revenues increased $824,000 due to the increase
in total attendance, offset by a decrease in average concessions per
patron. The decrease in average ticket prices and concessions per patron
was due to the lower ticket and concessions prices at the theatre in
Portugal compared to the theatre in Japan. International revenues were
also impacted by the strengthening of the U. S. dollar to the Japanese yen.
On-screen advertising and other revenues increased $1,522,000 due to an
increase in the number of screens served, a result of an expansion program
at the Company's on-screen advertising business.
Cost of Operations. Total cost of operations increased 32.1%, or
$41,844,000, during the thirteen weeks ended January 1, 1998 compared to
the thirteen weeks ended December 26, 1996.
Total domestic cost of operations increased 31.8%, or $39,268,000, from the
prior year. Film exhibition costs increased 35.7%, or $19,120,000, due to
higher attendance, which contributed $16,544,000 of the increase, and an
increase in the percentage of admissions paid to film distributors, which
caused an increase of $2,576,000. As a percentage of admissions revenues,
film exhibition costs increased to 53.9% in the current year as compared
with 52.6% in the prior year due primarily to higher film exhibition terms
on the quarter's most popular films. The 29.5%, or $2,374,000, increase in
concession costs is primarily attributable to the increase in concessions
revenues. As a percentage of concessions revenues, concession costs
decreased from 17.0% to 16.6% due to an increase in advertising and
promotional allowances received by the Company and improved procurement
terms with a major vendor. Rent expense increased 39.1%, or $7,227,000,
due to the higher number of screens in operation, the growing number of
megaplexes in the Company's circuit, which generally have higher rent per
screen than multiplexes, and the Sale and Lease Back Transaction. Other cost
of operations increased 24.3%, or $10,547,000. As a percentage of total
revenues, other cost of operations decreased from 27.8% in the prior year
to 26.5% in the current year, primarily as a result of more effective
staffing at the Company's theatres.
Total international cost of operations increased 54.6%, or $2,162,000, from
the prior year. Film exhibition costs increased 82.1%, or $1,294,000, due
to higher attendance, offset by a decrease in the percentage of admissions
paid to film distributors. The $334,000 increase in concession costs was
primarily attributable to the increase in concessions revenues. Rent
expense increased $238,000 and other cost of operations increased $296,000
from the prior year due to the opening of the Arrabida 20 in Portugal
during December of fiscal 1997. International expenses were also impacted
by the strengthening of the U.S. dollar to the Japanese yen.
On-screen advertising and other cost of operations increased $414,000 as a
result of the higher number of screens served.
General and Administrative. General and administrative expenses increased
8.1%, or $1,131,000, during the thirteen weeks ended January 1, 1998. As a
percentage of total revenues, general and administrative expenses decreased
from 8.5% in the prior year to 7.0% in the current year due primarily to
the significant increase in revenues.
Depreciation and Amortization. Depreciation and amortization increased
31.2%, or $4,098,000, during the thirteen weeks ended January 1, 1998.
This increase was caused by an increase in employed theatre assets
resulting from the Company's expansion plan which was partially offset by
lower depreciation and amortization of approximately $3,500,000 as a result
of the reduced carrying amounts of impaired multiplex assets.
Interest Expense. Interest expense increased 87.1%, or $4,595,000, during
the thirteen weeks ended January 1, 1998 compared to the prior year. The
increase in interest expense resulted primarily from an increase in average
outstanding borrowings related to the Company's expansion plan and higher
average interest rates as a result of the issuance of $200,000,000 of 9
1/2% Senior Subordinated Notes on March 19, 1997.
Gain on Disposition of Assets. Gain on disposition of assets increased
$917,000 during the thirteen weeks ended January 1, 1998 primarily from the
sale of one of the Company's multiplexes during the current period.
Income Tax Provision. The provision for income taxes increased $665,000 to
$950,000 during the thirteen weeks ended January 1, 1998 from $285,000 in
the prior year. The effective tax rate was 39.9% for the thirteen weeks
ended January 1, 1998 compared to 40.5% for the prior year.
Net Earnings. Net earnings increased $1,012,000 during the thirteen weeks
ended January 1, 1998 to $1,431,000 from $419,000 in the prior year. Net
earnings per common share, after deducting preferred dividends, was $.01
compared to a loss of $.06 in the prior year.
Thirty-nine Weeks Ended January 1, 1998 and December 26, 1996
Revenues. Total revenues increased 19.4%, or $102,335,000, during the
thirty-nine weeks ended January 1, 1998 compared to the thirty-nine weeks
ended December 26, 1996.
Total domestic revenues increased 16.8%, or $85,277,000, from the prior
year. Admissions revenues increased 17.0%, or $57,311,000, due to a 10.6%
increase in attendance, which contributed $35,943,000 of the increase, and
a 5.7% increase in average ticket prices, which contributed $21,368,000 of
the increase. Attendance at megaplexes increased as a result of the
addition of 20 new megaplexes with 434 screens since December 26, 1996 and
a 2.4% increase in attendance at comparable megaplexes (theatres opened
before the first quarter of the prior fiscal year). Attendance at
multiplexes decreased due to the closure or sale of 24 multiplexes with 121
screens since the third quarter of fiscal 1997 and a 6.3% decrease in
attendance at comparable multiplexes. The decline in attendance at
comparable multiplexes was due primarily to competition from new megaplexes
operated by the Company and other competing circuits, a trend the Company
generally anticipates will continue. The additional Christmas holiday
weekend included in the current year contributed to the overall increase in
attendance. The increase in average ticket prices was 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 increased 17.5%, or $27,653,000, due to the increase in total
attendance, which contributed $16,859,000 of the increase, and a 6.2%
increase in average concessions per patron, which contributed $10,794,000
of the increase. The increase in average concessions per patron was
attributable to the increasing number of megaplexes in the Company's
circuit, where concession spending per patron is higher than multiplexes.
Total international revenues increased $11,550,000 from the prior year.
Admissions revenues increased $9,024,000 due to an increase in attendance,
offset by a decrease in average ticket prices. Attendance increased as a
result of the opening of the Arrabida 20 in Portugal during December of
fiscal 1997 and improved attendance at the Canal City 13 in Japan.
Concessions revenues increased $2,468,000 due to the increase in total
attendance, offset by a decrease in average concessions per patron. The
decrease in average ticket prices and concessions per patron was due to the
lower ticket and concessions prices at the theatre in Portugal compared to
the theatre in Japan. International revenues were also impacted by the
strengthening of the U.S. dollar to the Japanese yen.
On-screen advertising and other revenues increased $5,508,000 due to an
increase in the number of screens served, a result of an expansion program,
and a change in the number of periods included in the results of operations
from the Company's on-screen advertising business.
Cost of Operations. Total cost of operations increased 20.0%, or
$83,569,000, during the thirty-nine weeks ended January 1, 1998 compared to
the thirty-nine weeks ended December 26, 1996.
Total domestic cost of operations increased 18.3%, or $73,067,000, from the
prior year. Film exhibition costs increased 20.8%, or $37,662,000, due to
higher attendance, which contributed $29,376,000 of the increase, and an
increase in the percentage of admissions paid to film distributors, which
caused an increase of $8,286,000. As a percentage of admissions revenues,
film exhibition costs increased to 55.4% in the current year as compared
with 53.7% in the prior year. This increase occurred primarily during the
first quarter of the year and was due to a change in attendance patterns
and the popularity of films released during the period which had higher
film exhibition terms. Attendance was more concentrated in the early weeks
for the films released during the first quarter of the year, which
typically results in higher film exhibition costs. The 13.5%, or
$3,510,000, increase in concession costs is attributable to the increase in
concessions revenues. As a percentage of concessions revenues, concession
costs decreased from 16.4% to 15.8% due to an increase in advertising and
promotional allowances received by the Company and improved procurement
terms with a major vendor. Rent expense increased 25.9%, or $14,068,000,
due to the higher number of screens in operation, the growing number of
megaplexes in the Company's circuit, which generally have higher rent per
screen than multiplexes, and the Sale and Lease Back Transaction. Other cost
of operations increased 13.0%, or $17,827,000. As a percentage of total
revenues, other cost of operations decreased from 27.0% in the prior year
to 26.2% in the current year, primarily as a result of more effective
staffing at the Company's theatres.
Total international cost of operations increased 68.6%, or $7,644,000, from
the prior year. Film exhibition costs increased $4,463,000 due to higher
attendance, offset by a decrease in the percentage of admissions paid to
film distributors. The $1,025,000 increase in concession costs was
primarily attributable to the increase in concessions revenues. Rent
expense increased $1,164,000 and other cost of operations increased
$992,000 from the prior year due to the opening of the Arrabida 20 during
December of fiscal 1997. International expenses were also impacted by the
strengthening of the U.S. dollar to the Japanese yen.
On-screen advertising and other cost of operations increased $2,858,000 as
a result of the higher number of screens served and a change in the number
of periods included in the results of operations of the Company's on-screen
advertising business.
General and Administrative. General and administrative expenses increased
8.6%, or $3,311,000, during the thirty-nine weeks ended January 1, 1998.
As a percentage of total revenues, general and administrative expenses
decreased from 7.3% in the prior year to 6.7% in the current year due
primarily to the significant increase in revenues.
Depreciation and Amortization. Depreciation and amortization increased
33.5%, or $12,573,000, during the thirty-nine weeks ended January 1, 1998.
This increase was caused by an increase in employed theatre assets
resulting from the Company's expansion plan which was partially offset by
lower depreciation and amortization of approximately $7,000,000 as a result
of the reduced carrying amounts of impaired multiplex assets.
Impairment of Long-lived Assets. During the second quarter of the current
year, the Company recognized a non-cash impairment loss of $46,998,000
($27,728,000 after tax, or $1.51 per share) on 59 multiplex theatres with
412 screens in 14 states (primarily California, Texas, Missouri, Arizona
and Florida) including a loss of $523,000 associated with 10 theatres that
were included in impairment losses recognized in previous periods.The
future cash flows of these theatres, undiscounted and without interest
charges, were less than the carrying value of the theatre assets.
The summer of 1997 was the first summer film season, generally the highest
grossing period for the film industry, that a significant number of
megaplexes of the Company and its competitors were operating (the first
megaplex, Grand 24, was opened by the Company in May 1995). During this
period, the financial results of certain multiplexes of the Company were
significantly less than anticipated at the beginning of fiscal 1998 due
primarily to competition from the newer megaplex theatres. As a result,
the Company initiated a review of its portfolio of theatres to identify
those theatres which are not expected to provide an adequate financial
return in the future. The Company anticipates that many of its multiplexes
may be disposed of in the intermediate term but continues to evaluate its
future plans for such theatres.
Interest Expense. Interest expense increased 83.0%, or $12,484,000, during
the thirty-nine weeks ended January 1, 1998 compared to the prior year.
The increase in interest expense resulted primarily from an increase in
average outstanding borrowings related to the Company's expansion plan and
higher average interest rates as a result of the issuance of $200,000,000
of 9 1/2% Senior Subordinated Notes on March 19, 1997.
Gain on Disposition of Assets. Gain on disposition of assets increased
$3,444,000 during the thirty-nine weeks ended January 1, 1998 primarily
from the sale of three of the Company's multiplexes during the current
year.
Income Tax Provision. The provision for income taxes decreased $21,435,000
to a benefit of $14,150,000 during the current year from an expense of
$7,285,000 in the prior year. The effective tax rate was 40.5% for the
current year compared to 40.3% for the prior year.
Net Earnings. Net earnings decreased $31,580,000 during the thirty-nine
weeks ended January 1, 1998 to a loss of $20,769,000 from earnings of
$10,811,000 in the prior year. Net loss per common share, after deducting
preferred dividends, was $1.34 compared to earnings of $.37 in the prior
year.
Liquidity and Capital Resources
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 admissions revenues. The Company is only occasionally required to
make advance payments or non-refundable guaranties of film rentals. Film
distributors generally release during the summer and holiday seasons the
films which they anticipate will be the most successful. Consequently, the
Company typically generates higher revenues during such periods. Cash
flows from operating activities, as reflected in the Consolidated
Statements of Cash Flows, were $83,727,000 and $58,516,000 for the thirty-
nine weeks ended January 1, 1998 and December 26, 1996, respectively.
During the current fiscal year, the Company had capital expenditures of
$293,507,000, primarily for the development of new theatres and the
addition of screens at existing locations. The Company has continued its
expansion plan during the current fiscal year by opening 16 megaplexes with
372 screens and one multiplex with 6 screens and expanding three existing
multiplexes by 38 screens. Of the 416 screens added during the year, 402
screens will be operated pursuant to long-term non-cancelable operating
leases. In addition, the Company closed or sold 16 multiplexes with 82
screens resulting in a circuit total of 37 megaplexes with 795 screens and
192 multiplexes with 1,496 screens as of January 1, 1998. As of January 1,
1998, the Company had construction-in-progress and refundable construction
advances (amounts due from landlords for new theatres) of $111,762,000 and
$87,276,000, respectively. The Company had 16 megaplexes with 375 screens
under construction on January 1, 1998.
The Company anticipates opening 192 screens during the fourth quarter
resulting in a total of 608 new screens during fiscal 1998. The Company
estimates that total capital expenditures for fiscal 1998 will aggregate
approximately $350 million. Included in these amounts are assets which the
Company has placed or may place into sale and lease back or other
comparable financing programs which will have the effect of reducing the
Company's net cash outlays. During the thirty-nine weeks ended January 1,
1998, the Company received $214,300,000 from such programs.
The Company maintains a $425 million credit facility (the "Credit
Facility"), which 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 January 1, 1998, the Company had
outstanding borrowings of $180,000,000 under the Credit Facility at an
average interest rate of 7.2% per annum and $245,000,000 was available for
borrowing under the Credit Facility.
Covenants of the Credit Facility impose limitations on indebtedness,
creation of liens, change of control, transactions with affiliates,
mergers, investments, guaranties, asset sales, dividends, business
activities and pledges. As of January 1, 1998, the Company was in
compliance with all financial covenants relating to the Credit Facility.
On March 19, 1997, the Company sold $200 million aggregate principal amount
of 9 1/2% Senior Subordinated Notes due 2009 (the "Notes"). As required by
the Note Indenture, the Company consummated a registered offer on August 5,
1997 to exchange the Notes for notes of AMCE with terms identical in all
material respects to the Notes.
On November 14, 1997, the Company completed the redemption of $617,000 of
its outstanding 11 7/8% Senior Notes due 2000 and $4,904,000 of its
outstanding 12 5/8% Senior Subordinated Notes due 2002.
During November and December of 1997, the Company sold the real estate
assets associated with 11 megaplex theatres, including 5 theatres opened
during fiscal 1998, to EPT for an aggregate purchase price of $214,300,000.
Proceeds from the Sale and Lease Back Transaction were applied to
indebtedness under the Company's Credit Facility.
Concurrent with the Sale and Lease Back Transaction, the Company leased the
real estate assets associated with the theatres from EPT pursuant to non-
cancelable operating leases with terms ranging from 13 to 15 years at an
initial lease rate of 10.5% with options to extend for up to an additional
20 years.
The Company has agreed to sell the real estate assets associated with one
additional megaplex theatre currently under construction to EPT for
approximately $34,500,000. The Company also has granted an option to EPT
to acquire two other theatres under construction for the cost to the
Company of developing and constructing such properties. In addition, for a
period of five years subsequent to November 1997, EPT will have a right of
first refusal and first offer to purchase and lease back to the Company the
real estate assets associated with any megaplex theatre and related
entertainment property acquired or developed and owned (or ground-leased)
by the Company, exercisable upon the Company's intended disposition of such
property. The leases are triple net leases that require the Company to pay
substantially all expenses associated with the operation of the theatres,
such as taxes and other governmental charges, insurance, utilities,
service, maintenance and any ground lease payments.
The Company believes that cash generated from operations, existing cash and
equivalents, amounts received from sale and lease back transactions and the
unused commitment amount under its Credit Facility will be sufficient to
fund operations and planned capital expenditures for the next twelve
months.
During the thirty-nine weeks ended January 1, 1998, various holders of the
Company's $1.75 Cumulative Convertible Preferred Stock (the "Convertible
Preferred Stock") converted 586,900 shares into 1,011,814 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 $655,000, to $3,884,000 for the thirty-nine
weeks ended January 1, 1998 from $4,539,000 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.
Other
On July 24, 1997, the Company announced the formation of a joint venture
with Planet Hollywood International, Inc. to develop, own and operate an
integrated moviegoing, dining and retail concept worldwide. The new
complexes, which will be branded "Planet Movies by AMC", will combine the
Company's megaplex theatre concept with Planet Hollywood-theming, as well
as additional dining, retail and entertainment opportunities.
The Company has performed a review of its computer applications related to
their continuing functionality for the year 2000 and beyond. Certain of
the Company's existing systems have been upgraded and the Company expects
that its remaining systems will be upgraded through modification or
replacement by the end of fiscal 1999. The Company does not believe that
these modifications will cause reported financial information not to be
indicative of future operating results or financial condition. The year
2000 issue may impact the operations of the Company indirectly by affecting
the operations of its suppliers. The Company expects to complete during
fiscal 1999, a review of potential year 2000 issues with its significant
suppliers.
Recently Issued Financial Accounting Pronouncements
During fiscal 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting
Comprehensive Income, and Statement of Financial Accounting Standards No.
131 ("SFAS 131"), Disclosures About Segments of an Enterprise and Related
Information. SFAS 130 requires disclosure of comprehensive income and its
components in a company's financial statements and is effective for fiscal
years beginning after December 15, 1997. SFAS 131 requires new disclosures
of segment information in a company's financial statements and is effective
for fiscal years beginning after December 15, 1997. These pronouncements
will become effective for the Company in fiscal 1999. Adoption of these
statements will not impact the Company's consolidated financial position,
results of operations or cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II.
ITEM 1. LEGAL PROCEEDINGS
The following paragraphs summarize significant litigation and
proceedings to which the Company is a party.
In Re: AMC Shareholder Derivative Litigation, Chancery Court For New
Castle County, Delaware (Civil Action No. 12855). On February 15, 1995,
the court ordered the consolidation of two derivative actions filed against
four directors of 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 included 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 alleged breach of fiduciary
duties of care, loyalty and candor, mismanagement, constructive fraud and
waste of assets in connection with, among other allegations, the provision
of film licensing, accounting and financial services by American Associated
Enterprises ("AAE"), a partnership beneficially owned by Mr. Stanley H.
Durwood and members of his family, to the Company, certain other
transactions with affiliates of the Company, termination payments to a
former officer of the Company, certain transactions between the Company and
National Cinema Supply Corporation, and a fee paid by a subsidiary of the
Company to Mr. Cohen in connection with a transaction between the Company
and TPI Entertainment, Inc. The Derivative Action sought unspecified money
damages and equitable relief and costs, including reasonable attorney's
fees.
On October 10, 1996, counsel for the parties in the Derivative Action
entered into a Stipulation and Agreement of Compromise and Settlement (the
"Settlement Agreement") providing for, among other things (i) the
dissolution of AAE, the merger of Durwood, Inc. ("DI") into the Company and
the sale, within 12 months thereafter, of 3,000,000 shares of Company
Common Stock by Mr. Stanley H. Durwood and his children (the "Durwood
Family Stockholders") in a public underwritten secondary offering (the
Secondary Offering") (which will only be made by means of a prospectus),
(ii) the payment by certain of the defendants of an aggregate of
approximately $1.3 million to persons who were holders of Company Common
Stock on January 2, 1996 (other than the defendants, DI or the Durwood
Family Stockholders), (iii) 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,
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 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 Company 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. Egan or Mr. Vardeman, are to have the ability to
approve or disapprove all other related-party transactions with all
officers, directors and ten percent stockholders of the Company. The
Settlement Agreement also provides for the discharge and release of all
claims against the defendants, the Durwood Family Stockholders 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 Settlement Agreement was approved by the Court of Chancery on
October 16, 1997. The settlement became final on November 16, 1997. The
settlement amount was paid to eligible stockholders on January 5, 1998.
Pursuant to the Settlement Agreement, the Company paid the cost of
providing notice of the settlement to its stockholders and for the fees of
the settlement administrator who distributed the settlement amount to
eligible stockholders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders on December 2,
1997.
(b) The Board of Directors of the Company is composed of seven (7)
members. Five (5) of the directors are elected by the holders of Class
B Stock, voting as a class, and two (2) of the directors are elected by
the holders of Common Stock, voting as a class.
The following were the nominees of management voted upon and elected by
the holders of the Company's Class B Stock and Common Stock as of the
record date:
Class B Stock Common Stock
Stanley H. Durwood William T. Grant, II
Peter C. Brown John P. Mascotte
Philip M. Singleton
Charles J. Egan, Jr.
Paul E. Vardeman
(c) At the meeting, the following matters were voted upon by the
stockholders:
(i) The election of Directors for the upcoming year;
(ii) A proposal to ratify the appointment of Coopers & Lybrand L.L.P.
as independent public accountants of the Company for the fiscal
year ending April 2, 1998; and
(iii) A proposal to amend Article FOURTH of the Restated and Amended
Certificate of Incorporation.
All of the shares of Class B Stock (5,015,657 shares) were voted
for the nominees of management. In the election of directors by
the holders of Common Stock, there were 11,294,951 votes "for"
William T. Grant, II and 49,315 votes "withheld" and 11,294,951
"for" John P. Mascotte and 49,315 votes "withheld".
The total votes cast concerning the ratification of the
appointment of Coopers & Lybrand L.L.P. were as follows:
61,448,598 voted "for", 4,384 voted "against" and 47,854 votes
"abstained".
The total votes cast concerning the proposal to approve the
proposed amendment to Article FOURTH of the Restated and Amended
Certificate of Incorporation were as follows: 59,076,215 votes
"for", 25,651 votes "against", 28,202 votes "abstained" and there
were 2,370,768 "broker non-votes".
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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. (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. Stock Agreement among AMC Entertainment Inc. and Stanley H.
Durwood, his children: Carol D. Journagan, Edward D. Durwood, Thomas A.
Durwood, Elissa D. Grodin, Brian H. Durwood and Peter J. Durwood (the
"Durwood Children"), The Thomas A. and Barbara F. Durwood Family Investment
Partnership (the "TBD Partnership") and Delta Properties, Inc.
(Incorporated by reference from Exhibit 99.3 to Amendment No. 2 to Schedule
13D of Stanley H. Durwood filed September 30, 1997).
2.3. Registration Agreement among AMC Entertainment Inc. and the
Durwood Children and Delta Properties, Inc. (Incorporated by reference from
Exhibit 99.2 to Amendment No. 2 to Schedule 13D of Stanley H. Durwood filed
September 30, 1997).
2.4.(a) Indemnification Agreement dated as of March 31, 1997 among
AMC Entertainment Inc., Stanley H. Durwood, the Durwood Children and Delta
Properties, Inc. (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 dated as of January 22,
1996 among Stanley H. Durwood and the Durwood Children (Incorporated by
reference from Exhibit 99.1 to Schedule 13-D of Durwood, Inc. and Stanley
H. Durwood filed May 7, 1996).
2.4.(c) First Amendment to Durwood Family Settlement Agreement
dated as of March 18, 1997 among Stanley H. Durwood and the Durwood
Children (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).
2.4.(d) Second Amendment to Durwood Family Settlement Agreement
dated as of August 15, 1997, among Stanley H. Durwood, the Durwood Children
and the TBD Partnership (Incorporated by reference from Exhibit 99.7 to
Amendment No. 2 to Schedule 13D of Stanley H. Durwood filed September 30,
1997).
* 3.1. Amended and Restated Certificate of Incorporation of AMC
Entertainment Inc., (as amended on December 2, 1997).
3.2. Certificate of Designations relating to $1.75 Cumulative
Convertible Preferred Stock (Incorporated by reference from Exhibit 4.1 to
AMCE's Form 8-K (File No. 1-8747) dated April 8, 1994).
3.3. Bylaws of AMC Entertainment Inc. (Incorporated by reference
from Exhibit 3.3 to AMCE's Form 10-Q (File No. 0-12429) for the quarter
ended December 26, 1996).
4.1. 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).
*4.2. Second Amendment, dated January 16, 1998, to Amended and
Restated Credit Agreement dated as of April 10, 1997.
4.3. First Supplemental Indenture respecting AMC Entertainment
Inc.'s 9 1/2% Senior Subordinated Notes due 2009. (Incorporated by
reference from Exhibit 4.4(b) to Amendment No. 2 to AMCE's Registration
Statement on Form S-4 (File No. 333-29155) filed August 4, 1997).
*27. Financial Data Schedule
_______
* Filed herewith
(b) Reports on Form 8-K
On December 9, 1997, the Company filed a Form 8-K reporting under Item
2 the sale and subsequent lease back of 8 megaplex theatres to EPT and
related pro forma financial information under Item 7 (b).
On January 9, 1998, the Company filed a Form 8-K reporting under Item
5 the sale and subsequent lease back of 3 megaplex theatres to EPT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMC ENTERTAINMENT INC.
Date: February 9, 1998 /s/ Peter C. Brown
Peter C. Brown
President and Chief Financial Officer
Date: February 9, 1998 /s/ Richard L. Obert
Richard L. Obert
Senior Vice President-
Chief Accounting and
Information Officer
EXHIBIT 3.1
RESTATED AND AMENDED CERTIFICATE OF
INCORPORATION OF
AMC ENTERTAINMENT INC. (as amended)
(RESTATED FOR FILING PURPOSES IN ACCORDANCE WITH RULE 102
(c) OF REGULATION S-T)
AMC Entertainment Inc., a corporation organized and
existing under the General Corporation Law of the State of
Delaware (the "corporation"), does hereby certify:
I.The corporation has issued and received payment
for its stock.
II. The name of the corporation is AMC Entertainment
Inc., which is the name under which the corporation
was originally incorporated. The corporation's
original Certificate of Incorporation was filed with
the Delaware Secretary of State on June 13, 1983.
III.This Restated and Amended Certificate of
Incorporation was duly adopted by the corporation's
board of directors and stockholders in accordance
with Section 242 and Section 245 of the Delaware
General Corporation Law. Written consent to the
adoption hereof was given in accordance with
Section 228 of the Delaware General Corporation Law.
Written notice of the action so taken in accordance
with Section 228 of the Delaware General
Corporation Law has been provided to all
stockholders who did not consent to the adoption
hereof.
IV. The corporation's certificate of incorporation
is hereby amended and restated as follows:
FIRST: The name of the corporation is AMC
Entertainment Inc.
SECOND: The registered office of the corporation in
the State of Delaware is located at Corporation Trust
Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in
any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law.
FOURTH: (a) The aggregate number of shares of capital
stock that the corporation shall have authority to issue is
85,000,000 shares, consisting of 45,000,000 shares of Common
Stock, par value 66 2/3 CENTS per share (the "Common
Stock"), 30,000,000 shares of Class B Stock, par value 66
2/3 CENTS per share (the "Class B Stock"), and 10,000,000
shares of Preferred Stock, par value 66 2/3 CENTS per share
(the "Preferred Stock").
(b) The board of directors is authorized to establish by
resolution or resolutions one or more series of the
Preferred Stock, the number of shares of each series, and
the powers, preferences, rights, qualifications, limitations
and restrictions of each series of the Preferred Stock.
(c) The powers, preferences, rights, qualifications,
limitations and restrictions of the Common Stock and the
Class B Stock are set forth below:
(i) DIVIDENDS. The holders of Common Stock
and the holders of Class B Stock shall receive,
pro rata per share, such cash dividends, out of
funds legally available therefor, as from time
to time may be declared thereon by the board of
directors.
(ii) STOCK DIVIDENDS, ETC. No stock
dividend, stock split, subscription right,
combination, subdivision or exchange may be
paid or issued to holders of Common Stock or
the holders of Class B Stock except in shares
of (or a right to subscribe to shares of) the
same class, and only if such action is taken at
the same time with respect to the other class
so that the number of shares of Common Stock
and Class B Stock outstanding (or subject to a
subscription right) is increased or decreased
in like proportion. The corporation may not
merge or consolidate unless the terms and
conditions of the merger or consolidation shall
provide that all holders of Common Stock then
outstanding and all holders of Class B Stock
then outstanding receive, pro rata per share,
consideration therein of equal value.
(iii) LIQUIDATION. Subject to
such preferences and rights on liquidation as
may be granted by the board of directors in
resolutions establishing one or more series of
Preferred Stock, in the event of any
liquidation, dissolution, or winding up of the
corporation, whether voluntary or involuntary,
the holders of shares of Common Stock then
outstanding and the holders of Class B Stock
then outstanding shall receive, pro rata per
share, any remaining assets of the corporation
available for distribution to its stockholders.
(iv) CONVERSION.
(A) OPTIONAL CONVERSION.
Subject to and upon compliance with the
terms and provisions of this paragraph
(c)(iv)(A) of Article Fourth, each holder
of Class B Stock shall be entitled at any
time and from time to time to convert all
or any portion of such holder's shares of
Class B Stock into the same number of
shares of Common Stock. Each conversion of
shares of Class B Stock into shares of
Common Stock shall be effected by the
surrender of the certificate or
certificates representing the shares to be
converted at the principal office of the
Corporation at any time during normal
business hours, together with a written
notice by the holder of such shares,
stating that such holder desires to
convert such shares, or a stated number of
such shares, represented by such
surrendered certificate or certificates
into shares of Common Stock, and the name
or names (with addresses) and
denominations in which the certificate or
certificates for shares to be issued in
such conversion shall be issued together
with instructions for delivery thereof.
Promptly after such surrender and the
receipt of such written notice, the
corporation will issue and deliver in
accordance with such instructions (1) the
certificate or certificates for the shares
of Common Stock issuable upon such
conversion, and (2) a certificate
representing the number of shares of Class
B Stock which were evidenced by the
certificate or certificates surrendered to
the corporation in connection with such
conversion but which were not converted.
Any such conversion shall be deemed to
have been effected as of the close of
business on the date on which such
certificate or certificates shall have
been surrendered and such notice shall
have been received by the corporation, and
at such time the rights of such holder
with respect to the converted shares shall
cease and the person or persons in whose
name or names the certificate or
certificates for shares issued upon such
conversion are to be issued shall be
deemed to have become the holder or
holders of the shares represented thereby.
(B) AUTOMATIC CONVERSION. The
holders of Class B Stock shall be entitled
to vote at any annual meeting of
stockholders or at a special meeting
called for such purpose or to consent
thereto in writing with respect to a
resolution providing that a pro rata
percentage of shares of Class B Stock of
each holder of record, as shall be
specified in such resolution, shall be
automatically converted into and for all
purposes shall be deemed to be the same
number of shares of Common Stock. Upon
approval of such resolution by a majority
of the outstanding shares of Class B Stock
or the receipt by the corporation of a
consent thereto signed by at least such a
majority, the rights of each holder to
such percentage of shares of Class B Stock
shall cease automatically, and the holders
thereof shall be entitled to all rights
attendant to holders of such shares of
Common Stock.
(C) NO CONVERSION CHARGES. Any
issuance of certificates for shares of
Common Stock upon conversion (whether
optional or automatic) of shares of Class
B Stock shall be made without charge to
the holders of such shares for any
issuance tax in respect thereof or other
cost incurred by the corporation in
connection with such conversion and the
related issuance of shares of Common
Stock.
(D) AVAILABLE COMMON STOCK. The
corporation shall at all times reserve and
keep available out of its authorized but
unissued shares of Common Stock, solely
for the purpose of issue upon conversion
of outstanding shares of Class B Stock,
such number of shares of Common Stock as
shall then be issuable upon a conversion
of all of the outstanding shares of Class
B Stock. The shares of Common Stock so
issuable shall, when so issued, be duly
and validly issued, fully paid and non-
assessable.
(v) VOTING.
(A) GENERAL. Except as otherwise
provided (1) by this section (c)(v) of
Article Fourth, (2) by the board of
directors in resolutions establishing one
or more series of Preferred Stock, or (3)
by law, the right to vote on all matters
to be voted upon by the stockholders of
the corporation is vested in the holders
of the outstanding shares of Common Stock
and Class B Stock, voting together as if a
single class, with each outstanding share
of Common Stock having one vote per share
for such purposes and each outstanding
share of Class B Stock having ten votes
per share for such purposes.
(B) VOTE REGARDING AUTOMATIC
CONVERSION. The holders of the Class B
Stock, having one vote per share for such
purpose, shall have the exclusive right to
vote with respect to an automatic
conversion of Class B Stock pursuant to
paragraph (c)(iv)(B) of Article Fourth
hereof.
* (C) ELECTION OF DIRECTORS.
The right to vote on the election of
directors of the corporation is subject to
the following terms and conditions:
(1) So long as any shares
of Class B Stock shall be outstanding (and
not converted into shares of Common Stock
pursuant to section (c)(iv) of Article
Fourth hereof), at any time that the
holders of any class of securities of the
Corporation generally having the right to
vote in the election of directors shall
take any action for the purpose of
electing directors, whether at an annual
or special meeting of stockholders or
otherwise, the holders of the shares of
Class B Stock then outstanding, voting
separately as a single class, with each
outstanding share of Class B Stock having
one vote per share for such purpose, shall
have the exclusive right to elect such
number of directors as shall equal 75% of
the members of the board of directors to
be elected by holders of shares generally
having the right to vote in the election
of directors; provided, however, that if
such number of directors is not an
integral multiple of four, the holders of
Class B Stock shall have the exclusive
right to elect such number of directors as
shall equal 75% of the board of directors
to be elected by holders of shares
generally having the right to vote in the
election of directors with any fraction of
one-half or more rounded up and with any
fraction of less than one-half eliminated;
and, provided further, however, that so
long as shares of Common Stock are listed
on either The American Stock Exchange, The
New York Stock Exchange or The National
Association of Securities Dealers
Automated Quotation National Market System
or any similar system of automated
dissemination of quotations of securities
prices in the United States (each a
"National Market") any such fraction shall
be eliminated. Notwithstanding anything
herein to the contrary, in the event that
the total number of shares of Class B
Stock outstanding is less than 12 1/2% of the
total number of shares of Class B Stock
and Common Stock outstanding, then, so
long as shares of Common Stock are listed
on a National Market, the right to elect
the said 75% of the board of directors to
be elected by holders of shares generally
having the right to vote in the election
of directors shall be vested in the
holders of the outstanding shares of
Common Stock and Class B Stock, voting
together as if a single class, with each
outstanding share of Common Stock having
one vote per share for such purpose and
each outstanding share of Class B Stock
having ten votes per share for such
purpose.
(2) At any time that the
holders of any class of securities of the
Corporation generally having the right to
vote in the election of directors shall
take any action for the purpose of
electing directors, the holders of the
shares of Common Stock then outstanding,
voting separately as a single class, with
each outstanding share of Common Stock
having one vote per share for such
purpose, shall have the exclusive right to
elect such number of directors as shall
equal 25% of the members of the board of
directors to be elected by holders of
shares generally having the right to vote
in the election of directors; provided,
however, that if such number of directors
is not an integral multiple of four, the
holders of Common Stock shall have the
exclusive right to elect such number of
directors as shall equal 25% of the board
of directors to be elected by holders of
shares generally having the right to vote
in the election of directors with any
fraction of more than one-half rounded up
and with any fraction of one-half or less
eliminated; and provided further, however,
that so long as shares of Common Stock are
listed on a National Market any such
fraction shall be rounded up.
* This provision was adopted by the Board of Directors
on October 20, 1997, and approved by the shareholders
on December 2, 1997.
(D) REMOVAL OF DIRECTORS. Any
director elected pursuant to this section
(c)(v) of Article Fourth may be removed
either for or without cause at any time by
the affirmative vote of the holders of a
majority of all of the outstanding shares
of the class of stock which elected such
director, at a special meeting of
stockholders called for such purpose, and
any vacancy created by such removal may be
filled, at such special meeting, by the
affirmative vote of the holders of a
majority of all of the outstanding shares
entitled to vote on such removal;
PROVIDED, HOWEVER, that if such director
was elected by the holders of the
outstanding shares of Class B Stock and at
or prior to the time such special meeting
is held no shares of Class B Stock shall
be outstanding (whether due to any
conversion pursuant to section (c)(iv) of
Article Fourth or otherwise), the
affirmative vote of the holders of a
majority of all of the outstanding shares
of Common Stock shall be required for any
such removal and the filling of any
vacancy created by such removal.
(E) VACANCIES. If prior to the
end of the term of any director elected by
the holders of Common Stock or Class B
Stock pursuant to this section (c)(v) of
Article Fourth, such director shall cease
to be a director by reason of death,
resignation or disability, the vacancy so
created shall be filled by the appointment
of a new director for the unexpired term
of such former director by a majority of
the remaining directors elected by the
holders of the same class of stock which
elected such former director or, as the
case may be, by the sole remaining
director so elected; PROVIDED, HOWEVER,
that if such former director was elected
by the holders of the outstanding shares
of Class B Stock and at the time such
vacancy is created no shares of Class B
Stock shall be outstanding (whether due to
any conversion pursuant to section (c)(iv)
of Article Fourth or otherwise), such
vacancy shall be filled by a majority of
all the remaining directors elected by the
holders of Common Stock and Class B Stock
or, as the case may be, by the sole
remaining director elected by the holders
of Common Stock and Class B Stock. If
either the holders of the shares of Common
Stock or the holders of the shares of
Class B Stock shall fail to elect such
number of directors as such holders shall
have the right to elect pursuant to
section (c)(v)(C) of Article Fourth, the
vacancy or vacancies created by such
failure to elect may be filled at any time
prior to the end of the terms of the
directors then in office by a majority of
the remaining directors elected by the
holders of each such class which so failed
to elect, or as the case may be, by the
sole remaining director so elected;
PROVIDED, HOWEVER, that if such vacancy or
vacancies were created by failure of the
holders of outstanding shares of Class B
Stock so to elect and at the time such
vacancy or vacancies are to be filled no
shares of Class B Stock shall be
outstanding (whether due to any conversion
pursuant to section (c)(iv) of Article
Fourth or otherwise), such vacancy or
vacancies shall be filled by a majority of
all of the remaining directors elected by
the holders of Common Stock and Class B
Stock or, as the case may be, by the sole
remaining director elected by the holders
of Common Stock and Class B Stock.
(F) CERTAIN AMENDMENTS. The
holders of the outstanding shares of
Common Stock or Class B Stock shall be
entitled to vote separately as a class
upon any proposed amendment, if such
amendment would increase or decrease the
aggregate number of authorized shares of
such class, increase or decrease the par
value of the shares of such class, or
alter or change the powers, preferences or
special rights of the shares of such class
so as to affect them adversely.
FIFTH: The business and affairs of the corporation
shall be managed by or under the direction of the board of
directors, and the directors need not be elected by ballot
unless required by the by-laws of the corporation.
SIXTH: In furtherance and not in limitation of the
powers conferred by the laws of the State of Delaware, the
board of directors is expressly authorized to make, amend
and repeal the by-laws of the corporation.
SEVENTH: (a) Each person who was or is a party or is
involuntarily made a party threatened to be made a party to
or is involuntarily involved in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative ("proceeding"), by reason of the fact that he
or a person of whom he is the legal representative is or was
a director or officer of the corporation or is or was
serving at the request of the corporation as a director or
officer of another corporation, or as its representative in
a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an
official capacity as a director, officer or representative
or in any other capacity while serving as a director,
officer or representative, shall be indemnified and held
harmless by the corporation to the fullest extent permitted
by the Delaware General Corporation law, as the same exists
or may hereafter be amended, against all expenses, liability
and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by him in
connection therewith. Such right shall be a contract right
and shall include the right to be paid by the corporation
expenses incurred in defending any such proceeding in
advance of its final disposition upon delivery to the
corporation of an undertaking, by or on behalf of such
person, to repay all amounts so advanced if it should be
determined ultimately that such person is not entitled to be
indemnified under this Article Seventh or otherwise.
(b) If a claim under this Article Seventh is not paid in
full by the corporation within ninety days after a written
claim has been received by the corporation, the claimant may
at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and if successful, in
whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation)
that the claimant has not met the standards of conduct which
make it permissible under the Delaware General Corporation
Law for the corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall
be on the corporation. Neither the failure of the
corporation (including its board of directors, independent
legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the
circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law,
nor an actual determination by the corporation (including
its board of directors, independent legal counsel, or its
stockholders) that the claimant had not met such applicable
standard of conduct, shall be a defense to the action or
create a presumption that claimant had not met the
applicable standard of conduct.
(c) The rights conferred by this Article Seventh shall not
be exclusive of any other right which such persons may have
or hereafter acquire under any statute, provision, by-law,
agreement, vote of stockholders or disinterested directors
or otherwise.
(d) The corporation may maintain insurance, at its expense,
to protect itself and any such director, officer, or
representative against any such expense, liability or loss,
whether or not the corporation would have the power to
indemnify him against such expense, liability or loss under
the Delaware General Corporation Law.
EIGHTH: The corporation reserves the right to amend and
repeal any provision contained in this Certificate of
Incorporation in the manner from time to time prescribed by
the laws of the State of Delaware. All rights herein
conferred are granted subject to this reservation.
NINTH: A director of the corporation shall not be
personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (a) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (b)
for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c)
under Section 174 of the Delaware General Corporation Law,
or (d) for any transaction from which the director derived
an improper personal benefit. If the Delaware General
Corporation Law is amended to authorize the further
elimination or limitation of the personal liability of a
director, then the liability of a director of the
corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as
amended. No amendment to or repeal of this Article Ninth
shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or
with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
IN WITNESS WHEREOF, AMC Entertainment Inc. has caused
this Restated and Amended Certificate of Incorporation to be
signed this 17th day of February, 1994.
(Corporation Seal) AMC ENTERTAINMENT INC.
By: /s/S. H. DURWOOD
Stanley H. Durwood
Chairman of the Board and
Chief Executive Officer
ATTEST:
By: /s/NANCY L. GALLAGHER
Nancy L. Gallagher
Secretary
Exhibit 4.2
[EXECUTION COPY]
SECOND AMENDMENT
THIS SECOND AMENDMENT, dated as of January 16, 1998
(this "Amendment"), is among AMC ENTERTAINMENT INC. (the
"Borrower") and the Lenders (as defined below) signatures
hereto.
W I T N E S S E T H
WHEREAS, the Borrower, certain financial institutions
from time to time parties thereto (the "Lenders"), The Bank
of Nova Scotia (the "Administrative Agent") and Bank of
America National Trust and Savings Association (the
"Documentation Agent") are parties to the Amended and
Restated Credit Agreement, dated as of April 10, 1997 (as
amended or otherwise modified through the date hereof, the
"Existing Credit Agreement");
WHEREAS, the Borrower has requested that the Lenders
amend the Existing Credit Agreement as set forth below; and
WHEREAS, the Lenders have agreed, subject to the terms
and conditions hereinafter set forth, to amend the Existing
Credit Agreement in certain respects and as provided below
(the Existing Credit Agreement, as so amended or otherwise
modified by this Amendment, being referred to as the "Credit
Agreement");
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration (the receipt and
sufficiency of which is hereby acknowledged), the parties
hereto agree as follows.
PART I.
AMENDMENTS TO THE EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the
Second Amendment Effective Date (as defined in Subpart 3.1),
the Existing Credit Agreement is hereby amended in accordance
with this Part; except as so amended or otherwise modified by
the consents granted below, the Existing Credit Agreement and
the Loan Documents shall continue in full force and effect in
accordance with their terms.
SUBPART 1.1Amendment to Section 1.1 of the
Existing Credit Agreement. The proviso contained in clause
(y) (iv) of the definition of "Cash Flow Coverage Ratio" is
hereby amended in its entity to read as follows:
"(provided, that there shall be excluded from this
clause (iv) (A) all amounts paid by AMC
Philadelphia or AMC to H. Donald Busch or his
estate ("Busch") to repurchase all of the shares
held by Busch in AMC Philadelphia in any optional
repurchase of such share by AMC Philadelphia or
AMC, but only to the extent that the purchase price
paid by AMC Philadelphia or AMC therefor is not
greater than the purchase price that AMC
Philadelphia would be obligated to pay in the event
of the exercise by Busch of his right to require
AMC Philadelphia to repurchase such stock pursuant
to Section 5 of the Stockholders' Agreement dated
December 30, 1986 among AMC, AMC Philadelphia and
Busch, assuming such mandatory repurchase occurred
at the same time as such optional repurchase and
(B) if expended on or prior to December 31, 1998,
up to $71,000,000 in aggregate amount applied by
the Borrower to redeem up to 2,720,700 shares of
the Borrower's Preferred Stock that were issued and
outstanding on January 9, 1997)"
PART II.
REPRESENTATIONS
SUBPART 2.1 Representations and Warranties. in
order to induce the Lenders to execute and deliver this
Amendment, the Borrower represents and warrants to the Agents
and the Lenders that:
(a)both before and after giving effect to this
Amendment, the representations and warranties made in Article
VII of the Existing Credit Agreement are true and correct on
and as of the Second Amendment Effective Date with the same
effect as if made on and as of the Second Amendment Effective
Date;
(b)both before and after giving effect to this
Amendment, no Default has occurred and is continuing or will
result from the execution and delivery of this Amendment;
(c)the execution and delivery by the Borrower of
this Amendment and the performance by the Borrower of its
obligations under the Credit Agreement (i) are within the
corporate powers of the Borrower, (ii) have been duly
authorized by all necessary corporate action, (iii) have
received all necessary governmental approval and (iv) do not
and will not contravene or conflict with any provision of law
or of any Organic Document of the Borrower or any Subsidiary
or of any material Contractual Obligation or court decree or
order which is binding upon the Borrower or any Subsidiary;
and
(d)the Credit Agreement is the legal, valid and
binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles
relating to enforceability.
PART III.
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1.Effectiveness. This Amendment shall
become effective on such date (the "Second Amendment
Effective Date") when the Administrative Agent shall have
received a counterpart of this Amendment executed by the
Borrower and the Required Lenders (or, in the case of any
party other than the Borrower from which the Administrative
Agent has not received a counterpart hereof, facsimile
confirmation of the execution of a counterpart hereof by such
party) and (b) each of the following documents, each in form
and substance satisfactory to the Administrative Agent.
SUBPART 3.2. Confirmation. A confirmation
executed by each Significant Subsidiary, substantially in the
form of Exhibit A hereto.
SUBPART 3.3.Other Documents. Such other
documents as any Agent or any Lender may reasonably request
in connection with the Borrower's authorization, execution
and delivery of this Amendment.
PART IV.
MISCELLANEOUS
SUBPART 4.1.Continuing Effectiveness, etc. As
amended hereby, the Credit Agreement shall remain in full
force and effect and is hereby ratified and confirmed in all
respects. After the Second Amendment Effective Date, all
references in the Credit Agreement, the Notes, each other
Loan Document and any similar document to the "Credit
Agreement" or similar terms shall refer to the Existing
Credit Agreement, after giving effect to the amendments set
forth above.
SUBPART 4.2.Counterparts. This Amendment may be
executed in any number of counterparts and by the different
parties on separate counterparts, and each such counterpart
shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.
SUBPART 4.3.Expenses. The Borrower agrees to
pay the reasonable costs and expenses of the Administrative
Agent (including reasonable attorney's fees and
disbursements) in connection with the preparation, execution
and delivery of this Amendment.
SUBPART 4.4.Governing Law. THIS AMENDMENT SHALL
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK.
SUBPART 4.5.Successors and Assigns. This
Amendment shall be binding upon the Borrower, the Lenders and
the Agents and their respective successors and assigns, and
shall inure to the benefit of the Borrower, the Lenders and
the Agents and the successors and assigns of the Lenders and
the Agents.
EXHIBIT A
CONFIRMATION
Dated as of January 16, 1998
To:The Bank of Nova Scotia, as Administrative Agent, and
the other financial institutions party to the Existing
Credit Agreement referred to below
Please refer to: (a) the Amended and Restated Credit
Agreement, dated as of April 10, 1997 (as amended or
otherwise modified to the date hereof, the "Existing Credit
Agreement"), among AMC Entertainment Inc. (the "Borrower"),
the Lenders from time to time parties thereto, The Bank of
Nova Scotia, as Administrative Agent and Bank of America
National Trust and Savings Association, as the Documentation
Agent; (b) the Second Amendment, dated as of January 16,
1998, (the "Second Amendment") to the Existing Credit
Agreement; and (c) the Significant Subsidiary Guaranty (the
"Guaranty").
Each of the undersigned hereby confirms to the
Administrative Agent and the Lenders that, after giving
effect to the Second Amendment and the transactions
contemplated thereby, the Guaranty and each other Loan
Document (as defined in the Credit Agreement) to which such
undersigned is a party continues in full force and effect and
is the legal, valid and binding obligation of such
undersigned, enforceable against the undersigned in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally or
by equitable principles relating to enforceability.
AMERICAN MULTI-CINEMA, INC.
By_____________________________________
Title: Executive Vice President and
Chief Financial Officer
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their respective
authorized officers as of the day and year first above
written.
AMC ENTERTAINMENT INC.
By__________________________________
Title:
THE BANK OF NOVA SCOTIA, as Administrative Agent and a Lender
By__________________________________
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Documentation Agent and a Lender
By__________________________________
Title:
THE BANK OF NEW YORK
By__________________________________
Title:
THE MITSUBISHI TRUST AND BANKING CORPORATION
By__________________________________
Title:
ITEM 4. Section 7.13. Existing Subsidiaries and Significant
Subsidiaries
Jurisdiction of Percentage
Name of SubsidiaryIncorporation or Formation
Owned
SUBSIDIARIES OF AMC ENTERTAINMENT INC.
*American Multi-Cinema, Inc. Missouri 100%
National Cinema Network, Inc. Missouri 100%
AMC Entertainment
International, Inc. Delaware 100%
SUBSIDIARIES OF AMERICAN MULTI-CINEMA, INC.
AMC Realty, Inc. Delaware 100%
SUBSIDIARIES OF AMC REALTY, INC.
Centertainment, Inc. Delaware 100%
SUBSIDIARIES OF AMC ENTERTAINMENT INTERNATIONAL, INC.
AMC Europe S.A. France 99%**
AMC de Mexico, S.A. de C.V. Mexico 98%***
AMC Entertainment
International Limited United Kingdom 99%****
SUBSIDIARIES OF AMC ENTERTAINMENT INTERNATIONAL LIMITED
AMC Entertainment Espana S.A. Spain 100%
Actividades Multi-Cinemas E
Espectaculos, LDA
Portugal 95%*****
*Significant Subsidiary
**Remaining 1% is owned by directors of AMC Europe S.A.
***Remaining 2% is owned by American Multi-Cinema, Inc.
****Remaining 1% is owned by AMC Entertainment Inc.
*****Remaining 5% is owned by AMC Entertainment
International, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the Consolidated
Financial Statements of AMC Entertainment Inc. as of and for the thirty-nine
weeks ended January 1, 1998 submitted in response to the requirements to Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-2-1998
<PERIOD-END> JAN-1-1998
<CASH> 53,525
<SECURITIES> 0
<RECEIVABLES> 103,583
<ALLOWANCES> 748
<INVENTORY> 0
<CURRENT-ASSETS> 177,489
<PP&E> 870,204
<DEPRECIATION> 330,982
<TOTAL-ASSETS> 838,159
<CURRENT-LIABILITIES> 201,498
<BONDS> 430,476
0
1,811
<COMMON> 9,173
<OTHER-SE> 133,285
<TOTAL-LIABILITY-AND-EQUITY> 838,159
<SALES> 189,476
<TOTAL-REVENUES> 629,890
<CGS> 30,810
<TOTAL-COSTS> 502,447
<OTHER-EXPENSES> 97,114
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,520
<INCOME-PRETAX> (34,919)
<INCOME-TAX> (14,150)
<INCOME-CONTINUING> (20,769)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,618)
<EPS-PRIMARY> ($1.34)
<EPS-DILUTED> ($1.34)
</TABLE>
