AMC ENTERTAINMENT INC, S-3, 1998-05-21

AMC ENTERTAINMENT INC
S-3, 1998-05-21
MOTION PICTURE THEATERS

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1998

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------

AMC ENTERTAINMENT INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7832 43-1304369
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of Classification Code Number) identification)
incorporation or organization)
</TABLE>

106 WEST 14TH STREET
KANSAS CITY, MISSOURI 64105-1977
(816) 221-4000

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------

PETER C. BROWN
CO-CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF FINANCIAL OFFICER
AMC ENTERTAINMENT INC.
106 WEST 14TH STREET
KANSAS CITY, MISSOURI 64105-1977
(816) 221-4000

(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------

WITH COPIES TO:

Raymond F. Beagle, Jr., Esq. Mark Kessel, Esq.
Lathrop & Gage L.C. Shearman & Sterling
2345 Grand Boulevard 599 Lexington Avenue
Kansas City, Missouri 64108 New York, New York 10022-6069
(816) 292-2000 (212) 848-4000

------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities from an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value
66 2/3 CENTS........................ 3,795,000 $18 5/8 70,681,875 $20,851
</TABLE>

(1) Includes 495,000 shares subject to an option to be granted to the
Underwriters to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, on the
basis of the average of the high and low prices of the Registrant's Common
Stock on May 19, 1998, as reported on the American Stock Exchange.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

- --------------------------------------------------------------------------------
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 21, 1998

3,300,000 SHARES
AMC ENTERTAINMENT INC.

COMMON STOCK
(PAR VALUE 66 2/3 CENTS PER SHARE)
-------------------

All of the shares of Common Stock offered hereby are being sold by the
Selling Stockholders. See "Principal and Selling Stockholders." The Company will
not receive any of the proceeds from the Offering.

The last reported sale price of the Common Stock, which is listed under the
symbol "AEN," on the American Stock Exchange and the Pacific Stock Exchange on
May 19, 1998 was $18 11/16 per share. See "Price Range of Common Stock and
Dividend Policy."

The Common Stock has one vote per share. The Company's Class B Stock has ten
votes per share. Holders of Common Stock and Class B Stock generally vote as a
class on all matters except the election of directors. Holders of Common Stock
generally have the right to elect 25% of the Company's Board of Directors. See
"Description of Capital Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
-----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

-----------------------------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDERS(2)
--------------- --------------- ------------------------
<S> <C> <C> <C>
Per Share.......................................... $ $ $
Total(3)........................................... $ $ $
</TABLE>

- --------------

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.

(2) Before deducting estimated offering expenses of $ payable by Delta
Properties, Inc., a corporation owned by the Selling Stockholders, and Mr.
Stanley H. Durwood.

(3) The Selling Stockholders have granted to the Underwriters an option for 30
days to purchase up to an additional 495,000 shares of Common Stock at the
initial public offering price less the underwriting discount solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discounts and proceeds to the Selling
Stockholders will be $ , $ and $ , respectively. See
"Principal and Selling Stockholders" and "Underwriting."
-------------------

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the shares
will be ready for delivery in book-entry form only through the facilities of DTC
in New York, New York, on or about , 1998, against payment therefor in
immediately available funds.

JOINT LEAD MANAGERS
GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC. FURMAN SELZ MORGAN STANLEY DEAN WITTER
-------------

The date of this Prospectus is , 1998.
<PAGE>
This Prospectus (including the documents incorporated by reference herein)
contains certain "forward-looking statements" intended to qualify for the safe
harbor from liability established by the Private Securities Litigation Reform
Act of 1995. These forward-looking statements generally can be identified by use
of statements that include words or phrases such as the Company or its
management "believes," "expects," "anticipates," "intends," "plans," "foresees"
or other words or phrases of similar import. Similarly, statements that describe
the Company's objectives, plans or goals also are forward-looking statements.
All such forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
contemplated by the relevant forward-looking statement. Important factors that
could cause actual results to differ materially from the expectations of the
Company include, among others: (i) the Company's ability to enter into various
financing programs; (ii) the performance of films licensed by the Company; (iii)
competition; (iv) construction delays; (v) the ability to open new theatres and
screens as currently planned; (vi) general economic conditions, including
adverse changes in inflation and prevailing interest rates; (vii) demographic
changes; (viii) increases in the demand for real estate; and (ix) changes in
real estate, zoning and tax laws. For further discussion of such risks,
uncertainties and assumptions, see "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Potential
investors and other readers are urged to consider these factors carefully in
evaluating the forward-looking statements. The forward-looking statements
included herein are made only as of the date of this Prospectus and the Company
undertakes no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances.
--------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, CONTAINED ELSEWHERE IN THIS PROSPECTUS,
AS WELL AS THE INFORMATION APPEARING IN DOCUMENTS INCORPORATED BY REFERENCE
HEREIN. UNLESS THE CONTEXT OTHERWISE REQUIRES: (I) REFERENCES TO "AMCE" OR THE
"COMPANY" REFER TO AMC ENTERTAINMENT INC. AND ITS SUBSIDIARIES, AND (II) THE
INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS'
OVERALLOTMENT OPTION IS NOT EXERCISED. CERTAIN INFORMATION CONTAINED IN THIS
SUMMARY AND ELSEWHERE IN THIS PROSPECTUS, INCLUDING INFORMATION UNDER
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND INFORMATION WITH RESPECT TO THE COMPANY'S EXPECTED OPERATIONS,
EXPECTED FINANCIAL RESULTS, COST SAVINGS, PLANS AND STRATEGY FOR ITS BUSINESS
AND RELATED FINANCING, ARE FORWARD-LOOKING STATEMENTS. FOR A DISCUSSION OF
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS, SEE "RISK FACTORS."

THE COMPANY

The Company is one of the leading theatrical exhibition companies in North
America, based on revenues. In the fiscal year ended April 2, 1998, the
Company's revenues were $846,795,000. As of April 2, 1998, the Company operated
229 theatres with an aggregate of 2,442 screens located in 23 states, the
District of Columbia, Portugal and Japan. Approximately 61% of the screens
operated by the Company are located in California, Florida, Texas, Missouri and
Arizona, and approximately 70% of the Company's domestic screens are located in
areas among the 20 largest "Designated Market Areas" (television market areas as
defined by Nielsen Media Research).

The Company is an industry leader in the development and operation of
"megaplex" and "multiplex" theatres, primarily in large metropolitan markets.
Megaplexes are theatres with predominantly stadium-style seating (seating with
an elevation between rows to provide unobstructed viewing) and other amenities
to enhance the movie-going experience. Mutliplexes are theatres generally
without stadium-style seating. The Company believes that its strategy of
developing megaplexes has prompted the current theatrical exhibition industry
trend in the United States and Canada toward the development of larger theatre
complexes. This trend has accelerated the obsolescence of many existing movie
theatres, including certain multiplexes, by setting new standards for
moviegoers, who have demonstrated their preference for the more attractive
surroundings, wider variety of films, better customer services and more
comfortable seating typical of megaplexes.

In addition to providing a superior entertainment experience, megaplexes
generally realize economies of scale by serving more patrons from common support
facilities, thereby spreading costs over a higher revenue base. The Company's
megaplexes have consistently ranked among its top grossing facilities on a per
screen basis and are among the top grossing theatres in North America. During
the fiscal year ended April 2, 1998 ("fiscal 1998"), attendance per screen at
the Company's domestic megaplexes (those opened at the beginning of the period)
was 77,400 compared to 57,700 for the Company's domestic multiplexes. (During
1997, the last period for which data is available, the theatrical exhibition
industry in the United States averaged approximately 45,000 patrons per screen.)
In addition, during fiscal 1998, average revenue per patron at such megaplexes
was $6.83 compared to $6.18 for such multiplexes, and operating cash flow before
rent of such megaplexes was 37.1% of total revenues of such theatres, whereas
operating cash flow before rent of the Company's multiplexes was 33.8% of total
revenues of such theatres. Operating cash flow before rent is an internal
statistic used by the Company to measure theatre level cash flow. As of April 2,
1998, 987 screens, or 40.4%, of the Company's screens were located in
megaplexes. The average number of screens per theatre operated by the Company as
of April 2, 1998 was 10.7, compared to an average of 6.5 for the ten largest
North American theatrical exhibition companies (based on number of screens) and
5.3 for all North American theatrical exhibition companies, based on the listing
of exhibitors in the National Association of Theatre Owners ("NATO") 1997-98
Encyclopedia of Exhibition, as of May 1, 1997.

3
<PAGE>
The Company continually upgrades its theatre circuit by opening new theatres
(primarily megaplexes), adding new screens to existing theatres and selectively
closing or disposing of unprofitable multiplexes. Since April 1996, the Company
has opened 41 new theatres with 878 screens, representing 36% of its current
number of screens, and has added 44 screens to existing theatres. Of the 878
screens, 845 screens were located in an aggregate of 37 megaplexes. As of April
2, 1998, the Company had 13 megaplexes under construction with an aggregate of
283 screens.

Revenues for the Company are generated primarily from box office admissions
and theatre concessions sales, which accounted for 65% and 30%, respectively, of
fiscal 1998 revenues. The balance of the Company's revenues are generated
primarily by the Company's on-screen advertising business, video games located
in theatre lobbies and the rental of theatre auditoriums.

The Company's principal subsidiaries are American Multi-Cinema, Inc., AMC
Entertainment International, Inc., National Cinema Network, Inc. and AMC Realty,
Inc. All of the Company's domestic theatrical exhibition business is conducted
through American Multi-Cinema, Inc. The Company is developing theatres in
international markets through AMC Entertainment International, Inc. and its
subsidiaries. The Company engages in the on-screen advertising business through
National Cinema Network, Inc. The Company's real estate activities are conducted
through AMC Realty, Inc. and its subsidiary, Centertainment, Inc.

The Company's predecessor was founded in Kansas City, Missouri in 1920 by
the father of Mr. Stanley H. Durwood, the current Co-Chairman of the Board and
Chief Executive Officer of the Company. As part of its succession planning and
with the approval of Mr. Stanley H. Durwood, the Company's Board of Directors
has recently appointed the Company's President and Chief Financial Officer, Mr.
Peter C. Brown, as Co-Chairman. Mr. Brown will oversee all Company matters with
Mr. Durwood.

The Company is a Delaware corporation with its principal executive offices
located at 106 West 14th Street, Kansas City, Missouri 64105-1977. Its telephone
number at such address is (816) 221-4000.

BUSINESS STRATEGY

The Company's strategy is to expand its theatre circuit primarily by
developing new megaplexes in major markets in the United States and select
international markets. New theatres will primarily be megaplexes which will be
equipped with SONY Dynamic Digital Sound-TM- (SDDS-TM-) and AMC
LoveSeat-Registered Trademark- style seating (plush, high-backed seats with
retractable armrests). Other amenities may include auditoriums with TORUS-TM-
Compound Curved Screens and High Impact Theatre Systems-TM- (HITS-TM-), which
enhance picture and sound quality, respectively.

The Company's strategy of establishing megaplexes enhances attendance and
concessions sales by enabling it to exhibit concurrently a variety of motion
pictures attractive to different segments of the movie-going public. Megaplexes
also allow the Company to match a particular motion picture's attendance
patterns to the appropriate auditorium size (ranging from approximately 90 to
450 seats), thereby extending the run of a motion picture and providing superior
theatre economics. The Company believes that megaplexes enhance its ability to
license commercially popular motion pictures and to economically access prime
real estate sites due to its desirability as an anchor tenant.

The Company believes that the megaplex format has created a new replacement
cycle for the industry. The new format raises moviegoers' expectations by
providing superior viewing lines, comfort, picture and sound quality as well as
increased choices of films and start times. The Company believes that consumers
will increasingly choose theatres based on the quality of the movie-going
experience rather than simply upon the location of the theatre. As a result, the
Company believes that older, smaller theatres will become obsolete as the
megaplex concept matures.

4
<PAGE>
The Company believes that significant market opportunities exist for
development of modern megaplexes in select international markets. The theatrical
exhibition business has become increasingly global, and box office receipts from
international markets exceed those of the U.S. market. In addition, the
production and distribution of feature films and demand for American motion
pictures are increasing in many countries. The Company believes that its
experience in developing and operating megaplexes provides it with a significant
advantage in developing megaplexes in international markets, and the Company
intends to utilize this experience, as well as its existing relationships with
domestic motion picture studios, to enter select international markets. The
Company's strategy in these markets is to operate leased theatres. Presently the
Company's activities in international markets are directed toward Japan,
Portugal, Spain, China (Hong Kong) and Canada, which the Company believes are
under screened.

The costs of constructing new theatres are funded by the Company through
internally generated cash flow or borrowed funds. The Company generally leases
its theatres pursuant to long-term non-cancelable operating leases which require
the developer, who owns the property, to reimburse the Company for a portion of
the construction costs. However, the Company may decide to own the real estate
assets of new theatres and, following construction, sell and leaseback the real
estate assets pursuant to long-term non-cancelable operating leases.
Historically, the Company has owned and paid for the equipment necessary to
fixture a theatre; however, it is considering other methods of providing for its
equipment needs, including operating leases. Recently, the Company has engaged
in transactions with Entertainment Properties Trust ("EPT"), a real estate
investment trust, through which the Company has sold to and leased back from EPT
13 megaplexes (the "Sale and Leaseback Transaction") and granted an option to
purchase and lease back one additional megaplex scheduled to open by September
1998. The Company also has granted EPT, for a period of five years subsequent to
November 1997, a right of first refusal and first offer to purchase and lease
back to the Company any other megaplex owned or ground leased by the Company or
its subsidiaries, exercisable upon the Company's intended disposition of such
property.

The Company intends to consider partnerships or joint ventures, where
appropriate, to share risk and leverage resources. Such ventures may include
interests in projects that include restaurant, retail and other concepts. The
Company has formed a joint venture with Planet Hollywood International, Inc.
("Planet Hollywood") that will develop, own and operate megaplexes under the
brand name PLANET MOVIES BY AMC-TM-. Each megaplex facility will feature an
entertainment center that will include restaurants as well as refreshment and
merchandise kiosks. The first PLANET MOVIES BY AMC-TM- megaplex is projected to
open in the first half of calendar year 1999 near Columbus, Ohio and will
consist of a 30 screen megaplex, a PLANET HOLLYWOOD-REGISTERED TRADEMARK-
restaurant and OFFICIAL ALL STAR CAFE-REGISTERED TRADEMARK-, each with its own
integrated merchandise store, and various refreshment kiosks. Although the
Company anticipates that the joint venture will develop and operate additional
units, no minimum number of units has been agreed upon and the development of
additional sites will require the approval of both parties to the joint venture.

Through the Company's wholly-owned subsidiary, AMC Realty, Inc., the Company
plans to enhance the operating performance of its megaplexes by facilitating the
addition of complementary entertainment properties adjacent to such megaplexes.
AMC Realty, Inc.'s subsidiary, Centertainment, Inc., presently is involved in
the pre-development of several retail/entertainment projects, including a
project in downtown Kansas City, Missouri known as the "Power and Light
District."

THEATRICAL EXHIBITION INDUSTRY OVERVIEW

Motion picture theatres are the primary initial distribution channel for new
motion picture releases, and the Company believes that the theatrical success of
a motion picture is often the most important factor in establishing its value in
the cable television, videocassette and other ancillary markets. The Company
further believes that the emergence of new motion picture distribution channels
has not adversely affected attendance at theatres and that these distribution
channels do not provide an

5
<PAGE>
experience comparable to that of viewing a movie in a theatre. The Company
believes that the public will continue to recognize the advantages of viewing a
movie on a large screen with superior audio and visual quality, while enjoying a
variety of concessions and sharing the experience with a larger audience.

Annual domestic theatre attendance has averaged approximately one billion
persons since the early 1960s. During 1997, estimated domestic attendance was
1.4 billion. Variances in year-to-year attendance are primarily related to the
overall popularity and supply of motion pictures.

The theatrical exhibition industry in North America is comprised of over 400
exhibitors, approximately 250 of which operate four or more screens. Based on
the May 1, 1997 listing of exhibitors in the NATO 1997-98 Encyclopedia of
Exhibition, the ten largest exhibitors (in terms of number of screens) are
believed to operate approximately 60% of the total screens, with no one
exhibitor operating more than eleven percent of the total screens.

THE OFFERING(1)

<TABLE>
<S> <C>
Common Stock offered by Selling Stockholders(2).................. 3,300,000 shares
Common Stock to be outstanding after the Offering................ 18,953,434 shares(3)
American Stock Exchange and Pacific Stock Exchange Symbol........ AEN
Use of Proceeds.................................................. The Company will not
receive any of the net
proceeds of the
Offering.
</TABLE>

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(1) Assumes that the Underwriters' over-allotment option is not exercised. See
"Underwriting."

(2) The Selling Stockholders are Mr. Stanley H. Durwood, Co-Chairman of the
Board and Chief Executive Officer of the Company, and his six children. The
Selling Stockholders, who formerly held their stock in the Company through a
holding company, Durwood, Inc., acquired the shares being sold in the
Offering on August 15, 1997 pursuant to a merger (the "Merger") of the
Company and Durwood, Inc. As a condition to the Merger, the Selling
Stockholders entered into a Stock Agreement and a Registration Agreement
with the Company, each dated August 15, 1997, in which they agreed to offer
an aggregate of at least 3,000,000 shares in a registered secondary offering
between February 15, 1998 and August 15, 1998. Consummation of the Merger
and the registered secondary offering were conditions to a settlement of a
stockholders' derivative suit in which Mr. Stanley H. Durwood and his son,
Mr. Edward D. Durwood, who is also a Selling Stockholder, and a former
director and officer of the Company, were defendants. In the derivative
suit, plaintiffs alleged breach of fiduciary duties, mismanagement,
constructive fraud and waste of assets in connection with the provision to
the Company of film licensing, accounting and financial services by a
partnership beneficially owned by Mr. Stanley H. Durwood and members of his
family, certain other transactions with affiliates of the Company,
termination payments to a former officer of the Company, and certain other
transactions. See the discussion under Item 1, "Legal Proceedings," in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended January
1, 1998, incorporated herein by reference.

(3) Excludes 649,850 shares of Common Stock issuable upon the exercise of stock
options granted under the Company's incentive plans, of which options for
617,975 shares are presently exercisable.

6
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA

The summary financial data with respect to the Company for the five most
recent fiscal years ended April 2, 1998, are derived from the Company's
consolidated financial statements and related notes for such periods.

The summary financial data presented herein should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the audited financial statements, including the notes thereto,
and other historical financial information of the Company included elsewhere in
or incorporated by reference into this Prospectus.

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------------------
APRIL 2, APRIL 3, MARCH 28, MARCH 30, MARCH 31,
1998(1) 1997(1) 1996(1) 1995(1) 1994(1)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING
DATA)
STATEMENT OF OPERATIONS DATA
Total revenues...................... $ 846,795 $ 749,597 $ 655,972 $ 563,344 $ 586,300
Depreciation and amortization....... 70,117 52,572 42,087 37,913 38,048
Impairment of long-lived assets..... 46,998 7,231 1,799 -- --
Operating income (loss)............. (10,214) 53,145 68,669 51,029 60,736
Gain (loss) on disposition of
assets............................ 3,704 (84) (222 ) (156 ) 296
Income tax provision................ (16,600) 12,900 19,300 (9,000 ) 12,100
Earnings (loss) before extraordinary
item.............................. (24,499) 18,995 27,371 33,978 15,312
Net earnings (loss)................. (24,499) 18,995 8,021 33,978 15,312
Preferred dividends................. 4,846 5,907 7,000 7,000 538
Net earnings (loss) for common
shares............................ (29,345) 13,088 1,021 26,978 14,774
Earnings (loss) per share before
extraordinary item:
Basic............................. $ (1.59) $ .75 $ 1.23 $ 1.64 $ .90
Diluted........................... (1.59) .74 1.15 1.45 .89
Earnings (loss) per share:
Basic............................. $ (1.59) $ .75 $ .06 (2) $ 1.64 $ .90
Diluted........................... (1.59) .74 .34 1.45 .89
BALANCE SHEET DATA (AT PERIOD END)
Cash, equivalents and investments... $ 9,881 $ 24,715 $ 10,795 $ 140,377 $ 151,469
Total assets........................ 795,780 719,055 483,458 522,154 501,276
Total debt (including capital lease
obligations)...................... 403,612 373,724 188,172 267,504 268,188
Stockholders' equity................ 139,455 170,012 158,918 157,388 130,404
OTHER FINANCIAL DATA
EBITDA (as adjusted)(3)............. $ 106,901 $ 112,948 $ 112,555 $ 88,942 $ 98,784
Capital expenditures................ 389,217 253,380 120,796 56,403 10,651
Proceeds from sale/leasebacks....... 283,800 -- -- -- --
OPERATING DATA (AT PERIOD END)
Number of megaplexes operated....... 44 19 5 -- --
Number of megaplex screens
operated.......................... 987 379 98 -- --
Number of multiplexes operated...... 185 209 221 232 236
Number of multiplex screens
operated.......................... 1,455 1,578 1,621 1,630 1,603
Screens per theatre circuit wide.... 10.7 8.6 7.6 7.0 6.8
</TABLE>

- ------------------

(1) Fiscal 1997 consists of 53 weeks. All other years consist of 52 weeks.

(2) Fiscal 1996 includes a $19,350 extraordinary loss equal to $1.17 per common
share.

(3) Represents net earnings (loss) plus interest, income taxes, depreciation and
amortization and adjusted for impairment losses, gain (loss) on disposition
of assets, equity in earnings of unconsolidated affiliates and extraordinary
item. Management of the Company has included EBITDA because it believes that
EBITDA provides lenders and stockholders additional information for
estimating the Company's value and evaluating its ability to service debt.
Management of the Company believes that EBITDA is a financial measure
commonly used in the Company's industry and should not be construed as an
alternative to operating income (as determined in accordance with GAAP).
EBITDA as determined by the Company may not be comparable to EBITDA as
reported by other companies. In addition, EBITDA is not intended to
represent cash flow (as determined in accordance with GAAP) and does not
represent the measure of cash available for discretionary uses.

7
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, PRIOR TO MAKING
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH DIFFERENCES INCLUDE
THOSE DISCUSSED BELOW.

SUBSTANTIAL OBLIGATIONS

The Company had approximately $404 million of indebtedness outstanding as of
April 2, 1998, including approximately $199 million of its 9 1/2% Senior
Subordinated Notes due 2009 (the "9 1/2% Senior Subordinated Notes"), $150
million under its $425 million revolving credit facility (the "Credit Facility")
and $54.6 million in capitalized leases. The Company also has significant rental
obligations under operating leases. See Notes to Consolidated Financial
Statements for the fiscal year ended April 2, 1998 (included elsewhere herein).
The Company's expansion program will require financing in addition to the unused
commitment under the Credit Facility. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

In order to satisfy the Company's obligations under the 9 1/2% Senior
Subordinated Notes, the Credit Facility and its leases, the Company will be
required to generate substantial operating cash flow. The ability of the Company
to meet debt service, rental and other obligations will depend on the future
performance of the Company, which will be subject to prevailing economic
conditions and to financial, business and other factors beyond the control of
the Company. While the Company believes that, based upon current levels of
operations and completion of its business plan, it will be able to meet its debt
service, rental and other obligations, there can be no assurances with respect
thereto. If unable to do so, the Company may be required to refinance all or a
portion of its existing debt, to sell assets or to obtain additional financing.
There can be no assurance that any such refinancing or that any such sale of
assets or additional financing would be possible on terms favorable to the
Company. See "Selected Financial and Operating Data" for information regarding
the operating cash flow and debt service obligations of the Company.

The amount of the Company's indebtedness and lease obligations could have
important consequences to holders of Common Stock, including the following: (i)
the Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or other
purposes may be impaired and (ii) a substantial portion of the Company's cash
flow from operations will be dedicated to the payment of lease rentals and
principal and interest on its indebtedness, thereby reducing the funds available
to the Company for its operations, payment of dividends and any future business
opportunities.

DIVIDEND POLICY; RESTRICTIONS ON DIVIDENDS; HOLDING COMPANY STRUCTURE

The Company does not pay regular cash dividends on its Common Stock and does
not anticipate paying such dividends in the foreseeable future. In addition,
certain provisions of the indenture governing the 9 1/2% Senior Subordinated
Notes (the "Note Indenture") and the Credit Facility restrict the Company's
ability to pay dividends on and purchase its capital stock. Although it is not
anticipated that the most restrictive of these provisions, which are set forth
in the Credit Facility, will affect the Company's ability to pay dividends in
the foreseeable future, there can be no assurance that the Company will always
retain the ability, should it choose to do so, to pay dividends under these
provisions or that it might not agree to more restrictive provisions in the
future. See "Price Range of Common Stock and Dividend Policy."

8
<PAGE>
The Company is a holding company with no operations of its own.
Consequently, the ability of the Company to service its debt and pay dividends
is dependent upon the earnings from the businesses conducted by the Company's
subsidiaries. The distribution of those earnings, or advances or other
distributions of funds by these subsidiaries to the Company, all of which could
be subject to statutory or contractual restrictions, are contingent upon the
subsidiaries' earnings and are subject to various business considerations.

OPERATING RISKS IN THE THEATRICAL EXHIBITION INDUSTRY

The ability of the Company to operate successfully depends upon a number of
factors, the most important of which are the availability and popularity of
motion pictures, the allocation of popular motion pictures to the Company as a
result of its relationship with motion picture distributors, the terms upon
which motion pictures are licensed to the Company, and the performance of such
motion pictures in the Company's markets. As a result of these factors,
historically the Company's operating results have fluctuated significantly and
are expected to do so in future periods.

The Company predominantly licenses "first run" motion pictures. Poor
performance of, or disruption in the production of or access to, motion pictures
or a deterioration in the Company's relationship with motion picture
distributors or the terms upon which it licenses such motion pictures can
adversely affect the Company's business, and the Company has no control over the
operations of the distributors of motion pictures. For example, since fiscal
1995, the Company has licensed films of a certain distributor for a smaller
number of theatres than it otherwise would have. To the extent that the Company
is unable to license a popular film for exhibition in its theatres, its
operating results may be adversely affected. Price terms of film licenses also
affect the Company's results. As an example, between fiscal 1997 and fiscal
1998, film exhibition costs as a percentage of admissions revenues increased
from 52.5% to 54.2%. This increase results from various factors, including that
more distributors are licensing films under firm term fee arrangements, which
generally result in the Company retaining a lower percentage of admissions.
Also, films marketed by such "firm term" distributors captured a greater share
of the Company's box office in fiscal 1998 than in the prior year. See
"Business--Film Licensing." Because film distributors have historically released
those films which they anticipate will be the most successful during the summer
and holiday seasons, poor performance of such films or disruption in the release
of films during such periods could adversely affect the Company's quarterly
results for those particular periods.

The entertainment industry trend towards megaplexes is relatively recent.
Although megaplexes generally produce higher revenues per patron, they also
generally require greater capital expenditures than the previous generation of
multiplexes, special construction and limited use designs by developers of such
properties. In addition, the fixed costs of operating megaplexes generally are
higher than those related to multiplexes, which can result in greater volatility
in operating results based on changes in operating revenues. Therefore, there
can be no assurance that the Company will operate such theatres profitably or
recoup its investment on such theatres.

The success of the Company depends on general economic conditions and the
willingness of consumers to allocate their expenditures toward theatrical
exhibition. To the extent such activities become less popular or consumers spend
less on theatrical exhibition activities, the Company's operations could be
adversely affected.

SEASONALITY OF OPERATIONS

As with other exhibitors, the Company's business is seasonal in nature, with
the highest attendance and revenues generally occuring during the summer months
and holiday seasons. As a result, the Company sometimes incurs net losses in the
first and, less frequently, the fourth fiscal quarters.

9
<PAGE>
DECLINING MULTIPLEX THEATRES

A majority of the Company's theatres presently are multiplexes. As with
other exhibitors, certain of the Company's multiplexes, generally those smaller
in screen count, are subject to deteriorating financial performance and to being
rendered obsolete through the introduction of new, competing megaplexes by the
Company and other exhibitors. 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. 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 megaplexes. Primarily as a
result of the competition from newer megaplexes, attendance per screen at
comparable multiplexes declined from 62,800 in fiscal 1997 to 57,700 in fiscal
1998.

As a result, the Company recognized a non-cash impairment loss in fiscal
1998 of $46,998,000 ($ 27,728,000 after tax, or $1.50 per share) on 59
multiplexes with 412 screens in 14 states. This followed impairment losses of
$7, 231,000 ($4,266,000 after tax, or $.24 per share) on 18 multiplexes with 82
screens in nine states in fiscal 1997 and $1,799,000 ($1,061,000 after tax, or
$.06 per share) on four multiplexes with 21 screens in three states in fiscal
1996. These impairment losses were recognized because the future cash flows of
these theatres, undiscounted and without interest charges, were less than the
carrying value of the theatre assets. The Company believes that the amount of
the impairment losses which it has taken are adequate. Deterioration in the
performance of other multiplexes which may be competitively impacted in the
future could lead to the recognition by the Company of additional impairment
losses.

The Company is evaluating its future plans for the affected multiplexes,
which may include selling theatres, subleasing properties to other exhibitors or
for other uses, retrofitting certain theatres to the standards of a megaplex or
closing theatres and terminating the leases. Any or all of these options could
result in a significant impact to results of operations and financial position.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation--Impairment of Long Lived Assets" and "Business--Competition."

INTERNATIONAL OPERATIONS RISK

The Company is investigating opportunities for operating megaplexes in
Europe, Canada and Asia. In 1996, the Company opened a 13-screen theatre in
Japan and a 20-screen theatre in Portugal. As of April 2, 1998, the Company has
commenced construction of four additional international theatres, one each in
Spain, China (Hong Kong), Canada and Japan. There are significant differences
between the theatrical exhibition industry in the United States and in certain
international markets. Regulatory barriers affecting such matters as the size of
theatres, the issuance of licenses and the ownership of land may restrict market
entry. Vertical integration of production and exhibition companies in certain
international markets can have an adverse effect on the Company's ability to
license motion pictures for international exhibition. The Company's operations
in Japan previously have been negatively impacted by local film distributors who
restricted the Company's ability to obtain film product until after the
Company's competitors received it. While this issue has been resolved in Japan,
there can be no assurances that this or similar problems will not recur in the
same or other markets. The Company's international operations also face the
additional risks of fluctuating currency values. The Company does not hedge
against currency risks. Quota systems used by some countries to protect their
domestic film industry may adversely affect revenues from theatres that the
Company develops in such markets. Such differences in industry structure and
regulatory and trade practices may adversely affect the Company's ability to
expand internationally or to operate at a profit following such expansion. See
"--Substantial Capital Expenditures; Uncertainty of Theatre Development" and
"Business--Regulatory Environment."

10
<PAGE>
COMPETITION

The Company competes against both local and national exhibitors, some of
which may have substantially greater financial resources than the Company. There
are over 400 companies competing in the domestic theatrical exhibition industry,
approximately 250 of which operate four or more screens. Industry participants
vary substantially in size, from small independent operators to large
international chains. The ten largest theatrical exhibition companies (in terms
of number of screens) are believed to operate approximately 60% of the total
number of screens, based on the May 1, 1997 listing of exhibitors in the NATO
1997-1998 Encyclopedia of Exhibition.

The Company's theatres are subject to varying degrees of competition in the
geographic areas in which they operate. Competition is often intense with
respect to licensing motion pictures, attracting patrons and finding new theatre
sites. Theatres operated by national and regional circuits and by smaller
independent exhibitors compete aggressively with the Company's theatres. The
competition for patrons is dependent upon factors such as the availability of
popular motion pictures, the location and number of theatres and screens in a
market, the comfort and quality of the theatres and pricing.

The Company believes that the principal competitive factors with respect to
film licensing include licensing terms, seating capacity and location and
condition of an exhibitor's theatres. The Company expects that in the long term
the addition of new megaplexes will help it obtain more favorable allocations of
film product and other licensing terms from distributors than its competitors.
However, the earnings of new megaplexes initially may be negatively impacted
because of competition from nearby theatres that have established relationships
with distributors. See "Business--Film Licensing." The Company believes that
such competition is a factor contributing to the decline in attendance per
screen at megaplexes between fiscal 1998 and 1997, during which attendance per
screen at the Company's domestic megaplexes (those opened at the beginning of
the relevant period) was 77,400 and 96,200, respectively.

The Company also faces competition in the international markets in which it
operates. See "--International Operations Risk."

The theatrical exhibition industry also faces competition from other
distribution channels for filmed entertainment, such as cable television, pay
per view and home video systems, as well as from all other forms of
entertainment.

SUBSTANTIAL CAPITAL EXPENDITURES; UNCERTAINTY OF THEATRE DEVELOPMENT

The Company's growth strategy involves the development of new megaplexes and
may involve acquisitions of existing theatres and theatre circuits. From April
1996 to April 2, 1998, the Company opened 41 theatres and 922 screens and as of
April 2, 1998, had 13 megaplexes with an aggregate of 283 screens under
construction. The Company has plans to open approximately 350 screens, including
95 in international markets, during the period from April 2, 1998 through April
1, 1999. If the Company executes its growth strategy as planned, the Company
estimates that capital expenditures will aggregate approximately $280 million in
fiscal 1999. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources." There can be no
assurance that the Company will successfully develop new screens or successfully
complete those under construction, that there will not be cost overruns on any
such screens or that the financial performance of these screens will be
equivalent to the performance of the Company's existing screens.

The development of new theatre locations involves significant risks and
investments and is also likely to have an initial negative impact on earnings.
There is significant competition in the United States for site locations from
both theatre companies and other businesses and significant competition among
theatre companies for theatre acquisition opportunities. It typically takes the
Company 18 to 24 months to open a domestic theatre, on a site from the time the
site is identified. It generally takes an additional

11
<PAGE>
year or more to open an international theatre. Moreover, the availability of
attractive site locations can be adversely affected by changes in the national,
regional and local economic climate, local conditions such as scarcity of space
or an increase in demand for real estate in the area, demographic changes,
competition from other available space and changes in real estate, zoning and
tax laws. As the Company and its competitors continue to build megaplexes,
attractive sites may become increasingly difficult to obtain. Further, the
Company's expansion program will require financing in addition to the unused
commitment amount under the Credit Facility and internally generated funds. As a
result of the foregoing, there can be no assurance that the Company will be able
to acquire attractive site locations or existing theatres or theatre circuits on
terms it considers acceptable, that the Company will be able to acquire
financing for such theatres on acceptable terms or that the Company's strategy
will result in improvements to the business, financial condition or
profitability of the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Business--Business Strategy" and "--Competition."

RESTRICTIONS UNDER FINANCING AGREEMENTS; VARIABLE INTEREST RATE

The Credit Facility contains certain financial and other covenants,
including covenants requiring the Company to maintain certain financial ratios
and restricting the ability of the Company to incur indebtedness or to create or
suffer to exist certain liens. The Credit Facility also requires that certain
amounts of indebtedness thereunder be repaid by specified dates. The ability of
the Company to comply with such provisions may be affected by events beyond its
control.

A failure to make any required payment under the Credit Facility or to
comply with any of the financial and operating covenants included in the Credit
Facility would result in an event of default thereunder, permitting the lenders
to vote to accelerate the maturity of the indebtedness under the Credit Facility
and to vote to foreclose upon the stock of the Company's subsidiaries, if
pledged, securing the Credit Facility. Any such acceleration could also result
in the acceleration of the Company's other indebtedness. If the lenders under
the Credit Facility accelerate the maturity of the indebtedness thereunder,
there can be no assurance that the Company will have sufficient assets to
satisfy its obligations under the Credit Facility or its other indebtedness.

The Company's indebtedness under the Credit Facility bears interest at rates
that fluctuate with changes in certain prevailing interest rates (although,
subject to certain conditions, such rates may be fixed for certain periods). If
interest rates increase, the Company may be unable to meet its debt service
obligations under the Credit Facility and other indebtedness.

GOVERNMENT REGULATIONS

The Company's theatres must comply with Title III of the Americans with
Disabilities Act of 1990 (the "ADA") to the extent that such properties are
"public accommodations" and/or "commercial facilities" as defined by the ADA. In
separate matters, one of the Company's megaplexes is the subject of a private
civil action seeking to enjoin alleged violations of the ADA and two megaplexes
are the subject of a Department of Justice investigation of private complaints.
Although the Company believes that its theatres are in substantial compliance
with the ADA, no assurance can be given that these proceedings will not result
in a finding of non-compliance with the ADA or that future legal requirements
(including, without limitation, those that may result from future acts or
omissions or changes in applicable laws and regulations) will not result in
non-compliance with the ADA. See "Business--Regulatory Environment."

POTENTIAL CONFLICTS OF INTEREST

The Company sponsored EPT's formation, and Mr. Peter C. Brown, Co-Chairman
of the Board, President and Chief Financial Officer of the Company, serves as
Chairman of the Board of Trustees of EPT. Because of the various agreements
between the Company and EPT, including (i) leases with

12
<PAGE>
respect to 15 theatre properties, (ii) an option to purchase one additional
property and (iii) a five-year right of first refusal and first offer in favor
of EPT to purchase any megaplex and related entertainment properties acquired or
developed and owned (or ground leased) by the Company, situations may arise
where the Company and EPT have differing interests. Because of the relationships
between the Company and EPT, there exists the risk that in such situations the
Company will not achieve the same results in its dealings with EPT that it might
achieve if such relationships did not exist. Although management believes that
the existing terms of the leases and other agreements between EPT and the
Company, which were determined by management of the two entities, reflected
market conditions when they were negotiated, it is possible such terms might
have been different had they been negotiated on an arm's length basis.

CONTROLLING STOCKHOLDERS

Mr. Stanley H. Durwood, the 77-year old Co-Chairman of the Board and Chief
Executive Officer of the Company, owns all the outstanding Class B Stock and
therefore generally has voting control of the Company, subject to the right of
holders of Common Stock to elect 25% of the members of the Board of Directors.
Mr. Stanley H. Durwood has the ability to elect or remove a majority of the
Board of Directors.

A revocable voting trust and revocable INTER VIVOS trust established by Mr.
Stanley H. Durwood for his benefit hold all of the Class B Stock that he
beneficially owns. Mr. Stanley H. Durwood is the sole acting trustee of these
trusts; the named successor trustees under Mr. Stanley H. Durwood's trusts are
Messrs. Charles J. Egan, Jr., a Director of the Company, and Raymond F. Beagle,
Jr., general counsel to the Company. Under the terms of the voting trust, Mr.
Durwood has all voting powers with respect to shares held therein during his
lifetime. Thereafter, all voting rights with respect to such shares vest in his
successor trustees and any additional trustees whom they might appoint, who
shall exercise such rights by majority vote. Unless revoked by Mr. Stanley H.
Durwood or otherwise terminated or extended in accordance with its terms, the
voting trust will terminate in the year 2030.

After giving effect to the Offering, (i) Mr. Stanley H. Durwood will own
approximately 4.5 million shares of Class B Stock, representing 70.3% of the
voting interest in the Company, and (ii) his children will own an aggregate of
approximately 6.0 million shares of Common Stock. Based on the number of shares
outstanding as of April 15, 1998, the Common Stock to be owned by Mr. Durwood's
children after the Offering will represent 31.5% of the shares of Common Stock,
representing 9.3% of the voting interest in the Company.

Mr. Stanley H. Durwood has agreed with his children that if the price per
share to the public of the shares of Common Stock proposed to be sold by the
children in the Offering is less than $18, Mr. Stanley H. Durwood will pay his
children the difference between such sale price and $18 (net of applicable
underwriting commissions) with respect to 2.5 million shares, or up to $20
million in aggregate amount, in shares of Common Stock, as an adjustment to the
original allocation of shares to be received by the Durwood children in the
Merger. Mr. Stanley H. Durwood's holdings will diminish and his children's
holdings will increase if his children acquire additional shares under such
share adjustment. However, based on the number of shares of Common Stock and
Class B Stock outstanding as of April 15, 1998, such adjustment should not
result in Mr. Stanley H. Durwood owning shares with less than 50% of the
combined voting power of the outstanding Company stock unless the market price
of the Company's Common Stock at the time of the Offering is less than $8.40.
Mr. Stanley H. Durwood's voting control also will be diluted if he is obligated
to dispose of shares to honor tax and other indemnity obligations made by him
and the Company in connection with the Merger and other related transactions, or
if additional shares of Common Stock are issued under the Company's existing
employee benefit plans.

As a result of their ownership of shares of Common Stock and because
attendance at stockholders' meetings generally is less than 100%, any corporate
action requiring the approval of the holders of Common Stock voting as a class
may as a practical matter require the approval of the Durwood children.

13
<PAGE>
Matters requiring approval of holders of the Common Stock voting as a class
include any proposed amendment to the Restated and Amended Certificate of
Incorporation (the "Certificate of Incorporation") changing the authorized
number of shares of Common Stock or altering the powers, preferences or special
rights of the shares of such class so as to affect them adversely.

Holders of Common Stock are entitled to elect 25% of the Company's Board. As
stated above, the Durwood children will hold 31.5% of the shares of Common Stock
after the Offering. Until August 2000, the Durwood children have given an
irrevocable proxy to the Secretary and any Assistant Secretary of the Company to
vote their shares of Common Stock for each candidate to the Board in the same
proportion as the aggregate votes cast by all other stockholders not affiliated
with the Company, its directors and officers. Also, the Durwood children have
agreed during such period not to become a member of any group, solicit proxies
or enter into any arrangement or agreement with respect to voting shares.

POSSIBLE VOLATILITY OF STOCK PRICE

The stock market has from time to time experienced extreme price and volume
fluctuations that have been unrelated to the operating performance of particular
companies. The market price of the Common Stock may be significantly affected by
quarterly variations in the Company's operating results, changes in financial
estimates by securities analysts or failures by the Company to meet such
estimates, litigation involving the Company, general trends in the theatrical
exhibition industry, actions by governmental agencies, national economic and
stock market conditions, industry reports and other factors, many of which are
beyond the control of the Company.

ANTI-TAKEOVER MATTERS

Certain provisions of the Credit Facility and the Note Indenture may have
the effect of delaying or preventing transactions involving a "change of
control" of the Company, including transactions in which stockholders might
otherwise receive a possible substantial premium for their shares over then
current market prices, and may limit the ability of stockholders to approve
transactions that they may deem to be in their best interest.

Under the Company's Certificate of Incorporation, holders of Class B Stock
and Common Stock generally vote as a class, with each share of Common Stock
being entitled to one vote per share and each share of Class B Stock being
entitled to ten votes per share. As a result of the provisions of the
Certificate of Incorporation and the ownership of the Company, no change of
control requiring stockholder approval is possible without the consent of Mr.
Stanley H. Durwood. Certain other provisions of the Certificate of Incorporation
may have the effect of discouraging attempts to takeover the Company. See
"Description of Capital Stock--Common Stock and Class B Stock--Certain
Anti-Takeover Provisions."

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this Offering, the Company will have 18,953,434 shares
of Common Stock outstanding and 4,515,657 shares of Class B Stock outstanding,
which are convertible into a like number of shares of Common Stock. Of the
shares of Common Stock to be outstanding after the Offering or issuable upon
conversion of the Class B Stock, approximately 12,930,000 will be freely
tradeable without restriction or registration under the Securities Act of 1933,
as amended (the "Securities Act"). All of the remaining shares of Common Stock
and Class B Stock convertible into Common Stock are either held by affiliates or
are "restricted securities," as that term is defined in Rule 144 promulgated
under the Securities Act, all of which are presently eligible for sale (subject
to any applicable volume restrictions of Rule 144 and excluding 4,383,612 shares
of Common Stock owned by the Durwood children and 2,590,017 shares of Class B
Stock owned by Mr. Stanley H. Durwood, which such

14
<PAGE>
persons have agreed not to sell prior to August 15, 1999). Additional shares of
Common Stock, including shares issuable upon exercise of options, awards and
warrants, will also become eligible for sale in the public market from time to
time. However, holders of substantially all of the restricted shares have agreed
not to sell any of their shares of Common Stock for a period of 90 days from the
date of this Prospectus without the prior written consent of the Underwriters.
Following this Offering, sales of substantial amounts of Common Stock in the
public market pursuant to Rule 144 or otherwise, or even the potential for such
sales, could adversely affect the prevailing market price of the Common Stock
and impair the Company's ability to raise additional capital through the sale of
equity securities.

USE OF PROCEEDS

All of the shares of Common Stock offered hereby are being sold by the
Selling Stockholders. The Company will not receive any of the proceeds from the
sale of the shares being offered.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is listed on the American and Pacific Stock Exchanges under
the symbol "AEN". The table below sets forth, for the periods indicated, the
high and low closing prices of the Common Stock as reported on the American
Stock Exchange composite tape.

<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
--------------------
HIGH LOW
<S> <C> <C>
YEAR ENDED APRIL 3, 1997:
1st Quarter............................................................. $33 7/8 $23 1/8
2nd Quarter............................................................. 27 7/8 15 7/8
3rd Quarter............................................................. 19 1/2 13 3/4
4th Quarter............................................................. 20 1/4 13 7/8
YEAR ENDED APRIL 2, 1998:
1st Quarter............................................................. $23 3/8 $17 7/8
2nd Quarter............................................................. 20 3/4 17 5/8
3rd Quarter............................................................. 23 18 3/4
4th Quarter............................................................. 27 3/4 21 3/4
YEAR ENDING APRIL 1, 1999:
1st Quarter (through May 19, 1998)...................................... $23 3/4 $18 11/16
</TABLE>

On May 19, 1998, the last reported sale price of Common Stock on the
American Stock Exchange was $18 11/16.

The Company's Certificate of Incorporation provides that holders of Common
Stock and Class B Stock shall receive, pro rata per share, such cash dividends
as may be declared from time to time by the Board of Directors. Certain
provisions of the Note Indenture and the Credit Facility restrict the Company's
ability to declare or pay dividends on and purchase capital stock. Presently, it
is not anticipated that the most restrictive of these provisions, which are set
forth in the Credit Facility, will affect the Company's ability to pay dividends
in the foreseeable future should it choose to do so. Except for a $1.14 per
share dividend declared in connection with a recapitalization that occurred in
August 1992, the Company has not declared a dividend on shares of Common Stock
or Class B Stock since fiscal 1989. Any payment of cash dividends on Common
Stock in the future will be at the discretion of the Board and will depend upon
such factors as earnings levels, capital requirements, the Company's financial
condition and other factors deemed relevant by the Board. Currently, the Company
does not contemplate declaring or paying any dividends on its Common Stock.

15
<PAGE>
CAPITALIZATION OF THE COMPANY

The following table sets forth the total capitalization of the Company
(including short-term debt) as of April 2, 1998. This table should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto included elsewhere herein.*

<TABLE>
<CAPTION>
AS OF
APRIL 2, 1998
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C>
Short-term debt (including current maturities of capital lease obligations)................ $ 4,017
Long-term debt
Credit Facility(1)....................................................................... 150,000
9 1/2% Senior Subordinated Notes......................................................... 198,990
Capital lease obligations................................................................ 50,605
Stockholders' equity
$1.75 Cumulative Convertible Preferred Stock, par value 66 2/3 CENTS per share,
10,000,000 shares authorized; 1,800,331 shares issued and outstanding (aggregate
liquidation value of $45,008,000)(2)................................................... 1,200
Common Stock, par value 66 2/3 CENTS per share, 45,000,000 shares authorized; 15,376,821
shares issued (3)(4)(5)................................................................ 10,251
Class B Stock, par value 66 2/3 CENTS per share, 30,000,000 shares authorized; 5,015,657
shares issued and outstanding (4)(5)................................................... 3,344
Additional paid-in capital............................................................... 107,676
Foreign currency translation adjustment.................................................. (3,689)
Retained earnings........................................................................ 21,042
---------------------
139,824
Less--Common Stock in treasury, at cost, 20,500 shares................................... 369
---------------------
Total stockholders' equity......................................................... 139,455
---------------------
Total capitalization....................................................................... $ 543,067
---------------------
---------------------
</TABLE>

- --------------

(1) As of April 2, 1998, the total availability under the Credit Facility was
$395 million, of which the Company had borrowed $150 million. The amount
available under the Credit Facility is governed by the ratio of net
indebtedness to consolidated EBITDA, as defined in the Credit Facility, for
the preceding four fiscal quarters. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

(2) Subsequent to April 2, 1998, the $1.75 Cumulative Convertible Preferred
Stock was called for redemption and prior to the redemption date, April 14,
1998, the holders of 1,796,485 of such shares converted their shares to
3,097,113 shares of Common Stock. On the redemption date, the remaining
3,846 shares were redeemed.

(3) After giving effect to conversions of 1,796,485 shares of $1.75 Cumulative
Convertible Preferred Stock which occurred after April 2, 1998, there would
have been as of such date 18,473,934 shares of Common Stock issued. The
amounts shown do not include 5,015,657 shares reserved for issuance upon
conversion of Class B Stock or 519,850 shares reserved for issuance upon the
exercise of outstanding employee stock options.

(4) 500,000 shares of Class B Stock will be converted to Common Stock prior to
the Offering.

(5) After giving effect to the Offering, the aggregate par value of Common Stock
will be $10,584,000 and the aggregate par value of the Class B Stock will be
$3,011,000.

* For information concerning the Company's commitments and contingencies, see
Notes to Consolidated Financial Statements included elsewhere herein.

16
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth selected consolidated data regarding the
Company's five most recent fiscal years ended April 2, 1998. The historical
financial information for each of the fiscal years specified below is derived
from the Company's consolidated financial statements and related notes for such
periods. The historical financial data set forth below is qualified in its
entirety by reference to the Company's Consolidated Financial Statements and the
notes thereto included elsewhere in this Prospectus. The historical financial
data set forth below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
Company's Consolidated Financial Statements and the notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------------------------
APRIL 2, APRIL 3, MARCH 28, MARCH 30, MARCH 31,
1998(1) 1997(1) 1996(1) 1995(1) 1994(1)
--------- --------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues................................. $ 846,795 $ 749,597 $ 655,972 $ 563,344 $ 586,300
Total cost of operations....................... 685,540 580,002 491,358 432,763 446,957
General and administrative..................... 54,354 56,647 52,059 41,639 40,559
Depreciation and amortization.................. 70,117 52,572 42,087 37,913 38,048
Impairment of long-lived assets................ 46,998 7,231 1,799 -- --
--------- --------- ----------- ----------- -----------
Operating income (loss)........................ (10,214) 53,145 68,669 51,029 60,736
Interest expense............................... 35,679 22,022 28,828 35,908 36,375
Investment income.............................. 1,090 856 7,052 10,013 1,156
Minority interest.............................. -- -- -- -- 1,599
Gain (loss) on disposition of assets........... 3,704 (84) (222) (156) 296
--------- --------- ----------- ----------- -----------
Earnings (loss) before income taxes and
extraordinary item........................... (41,099) 31,895 46,671 24,978 27,412
Income tax provision........................... (16,600) 12,900 19,300 (9,000) 12,100
--------- --------- ----------- ----------- -----------
Earnings (loss) before extraordinary item...... (24,499) 18,995 27,371 33,978 15,312
Extraordinary item............................. -- -- (19,350) -- --
--------- --------- ----------- ----------- -----------
Net earnings (loss)............................ $ (24,499) $ 18,995 $ 8,021 $ 33,978 $ 15,312
--------- --------- ----------- ----------- -----------
--------- --------- ----------- ----------- -----------
Preferred dividends............................ 4,846 5,907 7,000 7,000 538
--------- --------- ----------- ----------- -----------
Net earnings (loss) for common shares.......... $ (29,345) $ 13,088 $ 1,021 $ 26,978 $ 14,774
--------- --------- ----------- ----------- -----------
--------- --------- ----------- ----------- -----------
Earnings (loss) per share before extraordinary
item:
Basic........................................ $ (1.59) $ .75 $ 1.23 $ 1.64 $ .90
Diluted...................................... (1.59) .74 1.15 1.45 .89
Earnings (loss) per share:
Basic........................................ $ (1.59) $ .75 $ .06(2) $ 1.64 $ .90
Diluted...................................... (1.59) .74 .34 1.45 .89
Weighted average number of shares outstanding:
Basic........................................ 18,477 17,489 16,513 16,456 16,365
Diluted...................................... 18,477 17,784 23,741 23,489 16,521
BALANCE SHEET DATA (AT PERIOD END)
Cash, equivalents and investments.............. $ 9,881 $ 24,715 $ 10,795 $ 140,377 $ 151,469
Total assets................................... 795,780 719,055 483,458 522,154 501,276
Total debt (including capital lease
obligations)................................. 403,612 373,724 188,172 267,504 268,188
Stockholders' equity........................... 139,455 170,012 158,918 157,388 130,404
OTHER FINANCIAL DATA
EBITDA (as adjusted)(3)........................ $ 106,901 $ 112,948 $ 112,555 $ 88,942 $ 98,784
Cash flows provided by operating activities.... 90,799 109,339 96,140 44,366 63,680
Cash flows provided by (used in) investing
activities................................... (133,214) (283,917) (66,848) 3,664 (111,505)
Cash flows provided by (used in) financing
activities................................... 27,703 188,717 (89,730) (9,116) 56,147
Capital expenditures........................... 389,217 253,380 120,796 56,403 10,651
Proceeds from sale/leasebacks.................. 283,800 -- -- -- --
OPERATING DATA (AT PERIOD END)
Number of megaplexes operated.................. 44 19 5 -- --
Number of megaplex screens operated............ 987 379 98 -- --
Number of multiplexes operated................. 185 209 221 232 236
Number of multiplex screens operated........... 1,455 1,578 1,621 1,630 1,603
Screens per theatre circuit wide............... 10.7 8.6 7.6 7.0 6.8
</TABLE>

17
<PAGE>
(1) Fiscal 1997 consists of 53 weeks. All other fiscal years consist of 52
weeks.

(2) Fiscal 1996 includes a $19,350 extraordinary loss equal to $1.17 per common
share.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section contains certain "forward-looking statements" intended to
qualify for the safe harbor from liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements generally can be
identified by use of statements that include words or phrases such as the
Company or its management "believes," "expects," "anticipates," "intends,"
"plans," "foresees" or other words or phrases of similar import. Similarly,
statements that describe the Company's objectives, plans or goals also are
forward-looking statements. All such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those contemplated by the relevant forward-looking statement.
Important factors that could cause actual results to differ materially from the
expectations of the Company include, among others: (i) the Company's ability to
enter into various financing programs; (ii) the performance of films licensed by
the Company; (iii) competition; (iv) construction delays; (v) the ability to
open new theatres and screens as currently planned; (vi) general economic
conditions, including adverse changes in inflation and prevailing interest
rates; (vii) demographic changes; (viii) increases in the demand for real
estate; and (ix) changes in real estate, zoning and tax laws. For a further
discussion of such risks, uncertainties and assumptions, see "Risk Factors."
Potential investors and other readers are urged to consider these factors
carefully in evaluating the forward-looking statements. The forward-looking
statements included herein are made only as of the date of this Prospectus and
the Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.

19
<PAGE>
OPERATING RESULTS
YEARS (52/53 WEEKS) ENDED APRIL 2, 1998 AND APRIL 3, 1997

<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED
APRIL 2, 1998 APRIL 3, 1997 % CHANGE
----------------- ----------------- -------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
REVENUES
Domestic
Admissions............................... $ 530,653 $ 479,629 10.6%
Concessions.............................. 251,025 222,945 12.6
Other.................................... 16,052 15,763 1.8
----------------- ----------------- ------
797,730 718,337 11.1
International
Admissions............................... 22,918 13,322 72.0
Concessions.............................. 4,992 2,222 *
Other.................................... 59 49 20.4
----------------- ----------------- ------
27,969 15,593 79.4
On-screen advertising and other 21,096 15,667 34.7
----------------- ----------------- ------
Total revenues......................... $ 846,795 $ 749,597 13.0%
----------------- ----------------- ------
----------------- ----------------- ------
COST OF OPERATIONS
Domestic
Film exhibition costs.................... $ 287,516 $ 251,090 14.5%
Concession costs......................... 40,109 36,045 11.3
Rent..................................... 100,928 75,116 34.4
Other.................................... 215,656 186,945 15.4
----------------- ----------------- ------
644,209 549,196 17.3
International
Film exhibition costs.................... 12,410 7,719 60.8
Concession costs......................... 1,953 703 *
Rent..................................... 5,791 4,945 17.1
Other.................................... 5,844 5,377 8.7
----------------- ----------------- ------
25,998 18,744 38.7
On-screen advertising and other............ 15,333 12,062 27.1
----------------- ----------------- ------
Total cost of operations............... $ 685,540 $ 580,002 18.2%
----------------- ----------------- ------
----------------- ----------------- ------
GENERAL AND ADMINISTRATIVE
Corporate and domestic................... $ 42,636 $ 45,558 (6.4)%
International............................ 6,879 6,864 .2
On-screen advertising and other.......... 4,839 4,225 14.5
----------------- ----------------- ------
Total general and administrative....... $ 54,354 $ 56,647 (4.0)%
----------------- ----------------- ------
----------------- ----------------- ------

DEPRECIATION AND AMORTIZATION
Corporate and domestic................... $ 65,168 $ 49,392 31.9%
International............................ 2,534 1,436 76.5
On-screen advertising and other.......... 2,415 1,744 38.5
----------------- ----------------- ------
Total depreciation and amortization.... $ 70,117 $ 52,572 33.4%
----------------- ----------------- ------
----------------- ----------------- ------
</TABLE>

* Percentage change in excess of 100%.

20
<PAGE>
REVENUES. Total revenues increased 13.0%, or $97,198,000, during the year
(52 weeks) ended April 2, 1998 compared to the year (53 weeks) ended April 3,
1997.

Total domestic revenues increased 11.1%, or $79,393,000, from the prior
year. Admissions revenues increased 10.6%, or $51,024,000, due to a 5.4%
increase in attendance, which contributed $25,960,000 of the increase, and a
5.0% increase in average ticket prices, which contributed $25,064,000 of the
increase. Attendance at megaplexes (theatres with predominantly stadium-style
seating) increased as a result of the addition of 23 new megaplexes with 564
screens since April 3, 1997, offset by a 4.7% decrease in attendance at
comparable megaplexes (theatres opened before fiscal 1997). Attendance at
multiplexes (theatres generally without stadium-style seating) decreased due to
a 11.9% decrease in attendance at comparable multiplexes and the closure or sale
of 23 multiplexes with 123 screens since fiscal 1997. The decline in attendance
at comparable multiplexes was related primarily to certain multiplexes
experiencing competition from new megaplexes operated by the Company and other
competing theatre circuits, a trend the Company generally anticipates will
continue. The increase in average ticket prices was due to price increases and
the growing number of megaplexes in the Company's theatre circuit, which yield
higher average ticket prices than multiplexes. Concessions revenues increased
12.6%, or $28,080,000, due to a 6.8% increase in average concessions per patron,
which contributed $16,013,000 of the increase, and the increase in total
attendance, which contributed $12,067,000 of the increase. The increase in
average concessions per patron was attributable to the increasing number of
megaplexes in the Company's theatre circuit, where concession spending per
patron is higher than in multiplexes.

Total international revenues increased 79.4%, or $12,376,000, from the prior
year. Admissions revenues increased 72.0%, or $9,596,000, 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 $2,770,000 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 relative to the Japanese yen.

On-screen advertising and other revenues increased 34.7%, or $5,429,000,
from the prior year 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 18.2%, or
$105,538,000, during the year (52 weeks) ended April 2, 1998 compared to the
year (53 weeks) ended April 3, 1997.

Total domestic cost of operations increased 17.3%, or $95,013,000, from the
prior year. Film exhibition costs increased 14.5%, or $36,426,000, due to higher
attendance, which contributed $26,712,000 of the increase, and an increase in
the percentage of admissions paid to film distributors, which contributed
$9,714,000 of the increase. As a percentage of admissions revenues, film
exhibition costs was 54.2% in the current year compared with 52.4% in the prior
year. This increase occurred because more popular films released during fiscal
1998 were licensed from distributors that generally have higher film rental
terms and because of the concentration of attendance in the early weeks of
several films released during the year, which typically results in higher film
exhibition costs. The 11.3%, or $4,064,000, increase in concession costs was
attributable to the increase in concessions revenues. As a percentage of
concessions revenues, concession costs was 16.0% in the current year compared
with 16.2% in the prior year. Rent expense increased 34.4%, or $25,812,000, due
to the higher number of screens in operation, the growing number of megaplexes
in the Company's theatre circuit, which generally have higher rent per screen
than multiplexes, and the sale and lease back during the year of

21
<PAGE>
the real estate assets associated with 13 megaplexes, including seven theatres
opened during fiscal 1998, to EPT in the Sale and Lease Back Transaction. Other
cost of operations increased 15.4%, or $28,711,000, from the prior year due to
the higher number of screens in operation and higher expenses associated with
the Company's theatre management development program.

Total international cost of operations increased 38.7%, or $7,254,000, from
the prior year. Film exhibition costs increased 60.8%, or $4,691,000, due to
higher attendance, offset by a decrease in the percentage of admissions paid to
film distributors. The $1,250,000 increase in concession costs was primarily
attributable to the increase in concessions revenues. Rent expense increased
17.1%, or $846,000, and other cost of operations increased 8.7%, or $467,000,
from the prior year due primarily to the full year of operations of the Arrabida
20, which opened in December of fiscal 1997. International expenses were also
impacted by the strengthening of the U.S. dollar relative to the Japanese yen.

On-screen advertising and other cost of operations increased 27.1%, or
$3,271,000, 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 decreased
4.0%, or $2,293,000, during the year (52 weeks) ended April 2, 1998.

Corporate and domestic general and administrative expenses decreased 6.4%,
or $2,922,000, due primarily to decreases in costs associated with the Company's
development of theatres and the reversal of $1,358,000 of compensation expense
recognized in prior years for performance stock awards which were not earned at
the end of the three-year performance period ended April 2, 1998. These
decreases were partially offset by increases in payroll and related costs and
professional and consulting expenses.

International general and administrative expenses increased .2%, or $15,000,
and on-screen advertising and other general and administrative expenses
increased 14.5%, or $614,000. The increase in on-screen advertising and other
resulted from an increase in costs to support the expansion program at the
Company's on-screen advertising business.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
33.4%, or $17,545,000, during the year (52 weeks) ended April 2, 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 as a result of the reduced carrying amounts of impaired multiplex
assets. The reduced carrying amount of the impaired assets from fiscal 1998 will
result in reduced depreciation and amortization in future periods. For fiscal
1998, depreciation and amortization was reduced by approximately $10,500,000.

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 $1.50 per share) on 59 multiplexes 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 estimated 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 megaplexes. The Company is evaluating its future plans for many of its
multiplexes, which may include selling theatres, subleasing properties to other
exhibitors or for other uses, retrofitting certain theatres to the standards of
a megaplex or closing theatres and terminating the leases. Any or all of these
options could result in a

22
<PAGE>
significant impact to results of operations and financial position. During
fiscal 1998, the Company closed or sold 23 multiplexes with 123 screens.

During the year (53 weeks) ended April 3, 1997, the Company recognized a
non-cash impairment loss of $7,231,000 ($4,266,000 after tax, or $.24 per share)
on 18 multiplexes with 82 screens in nine states (primarily Michigan,
Pennsylvania, California, Florida and Virginia).

INTEREST EXPENSE. Interest expense increased 62.0%, or $13,657,000, during
the year (52 weeks) ended April 2, 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
$3,788,000 during the year (52 weeks) ended April 2, 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 $29,500,000
to a benefit of $16,600,000 during the current year from an expense of
$12,900,000 in the prior year. The effective tax rate was 40.4% for the current
and the prior year.

NET EARNINGS. Net earnings decreased $43,494,000 during the year (52 weeks)
ended April 2, 1998 to a loss of $24,499,000 from earnings of $18,995,000 in the
prior year. Net loss per common share, after deducting preferred dividends, was
$1.59 compared to earnings of $.75 in the prior year.

23
<PAGE>
YEARS (53/52 WEEKS) ENDED APRIL 3, 1997 AND MARCH 28, 1996

<TABLE>
<CAPTION>
53 WEEKS ENDED 52 WEEKS ENDED
APRIL 3, 1997 MARCH 28, 1996 % CHANGE
----------------- ----------------- -------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
REVENUES
Domestic
Admissions............................... $ 479,629 $ 431,361 11.2%
Concessions.............................. 222,945 196,645 13.4
Other.................................... 15,763 15,096 4.4
----------------- ----------------- ------
718,337 643,102 11.7
International
Admissions............................... 13,322 -- --
Concessions.............................. 2,222 -- --
Other.................................... 49 -- --
----------------- ----------------- ------
15,593 -- --
On-screen advertising and other............ 15,667 12,870 21.7
----------------- ----------------- ------
Total revenues......................... $ 749,597 $ 655,972 14.3%
----------------- ----------------- ------
----------------- ----------------- ------
COST OF OPERATIONS
Domestic
Film exhibition costs.................... $ 251,090 $ 227,780 10.2%
Concession costs......................... 36,045 30,417 18.5
Rent..................................... 75,116 64,813 15.9
Other.................................... 186,945 159,406 17.3
----------------- ----------------- ------
549,196 482,416 13.8
International
Film exhibition costs.................... 7,719 -- --
Concession costs......................... 703 -- --
Rent..................................... 4,945 -- --
Other.................................... 5,377 -- --
----------------- ----------------- ------
18,744 -- --
On-screen advertising and other............ 12,062 8,942 34.9
----------------- ----------------- ------
Total cost of operations............... $ 580,002 $ 491,358 18.0%
----------------- ----------------- ------
----------------- ----------------- ------
GENERAL AND ADMINISTRATIVE
Corporate and domestic................... $ 45,558 $ 44,200 3.1%
International............................ 6,864 4,550 50.9
On-screen advertising and other.......... 4,225 3,309 27.7
----------------- ----------------- ------
Total general and administrative....... $ 56,647 $ 52,059 8.8%
----------------- ----------------- ------
----------------- ----------------- ------
DEPRECIATION AND AMORTIZATION
Corporate and domestic................... $ 49,392 $ 40,751 21.2%
International............................ 1,436 -- --
On-screen advertising and other.......... 1,744 1,336 30.5
----------------- ----------------- ------
Total depreciation and amortization.... $ 52,572 $ 42,087 24.9%
----------------- ----------------- ------
----------------- ----------------- ------
</TABLE>

24
<PAGE>
REVENUES. Total revenues increased 14.3%, or $93,625,000, during the year
(53 weeks) ended April 3, 1997 compared to the year (52 weeks) ended March 28,
1996.

Total domestic revenues increased 11.7%, or $75,235,000, from the prior
year. Admissions revenues increased 11.2%, or $48,268,000, due to a 6.4%
increase in attendance, which contributed $27,658,000 of the increase, and a
4.7% increase in average ticket prices, which contributed $20,610,000 of the
increase. The increase in attendance was due primarily to the Company's
megaplexes. Attendance at megaplexes increased as a result of the addition of 12
new megaplexes with 248 screens since March 28, 1996 and from the operation for
a full fiscal year of the five megaplexes with 98 screens that were opened in
fiscal 1996. The increase in attendance from megaplexes was partially offset by
a decrease in attendance at multiplexes and the closure or sale of 15
multiplexes with 76 screens. Attendance at multiplexes decreased as a result of
competitive factors, including competition from the Company's megaplexes. Also,
during the first nine months of the fiscal year, attendance at all theatres was
impacted by film product from the Company's key suppliers which did not deliver
the results achieved in the prior fiscal year. The increase in average ticket
prices was due to price increases and the growing number of megaplexes in the
Company's theatre circuit, which yield higher average ticket prices than
multiplexes. Concessions revenues increased 13.4%, or $26,300,000, due to a 6.9%
increase in average concessions per patron, which contributed $13,692,000 of the
increase, and the increase in total attendance, which contributed $12,608,000 of
the increase. The increase in average concessions per patron was attributable to
the introduction of new concessions products and the increasing number of
megaplexes in the Company's theatre circuit, where concession spending per
patron is higher than in multiplexes.

Total international revenues consists of admissions and concessions revenues
from the Company's two international theatres, the Canal City 13 located in
Fukuoka, Japan and the Arrabida 20 located in Porto, Portugal, which opened
during the first and third quarters of fiscal 1997, respectively. Admissions and
concessions revenues accounted for 85% and 14% of total international revenues,
respectively. The Company's initial attendance at the Canal City 13 was
negatively impacted by film distributors in Japan who restricted the Company's
ability to obtain film product until approximately two weeks after its
competitors had received it. This delay in releasing films to the Company has
generally been eliminated.

On-screen advertising and other revenues increased 21.7%, or $2,797,000, due
to an increase in the number of screens served by the Company's on-screen
advertising business, a result of an expansion program.

COST OF OPERATIONS. Total cost of operations increased 18.0%, or
$88,644,000, during the year (53 weeks) ended April 3, 1997 compared to the year
(52 weeks) ended March 28, 1996.

Total domestic cost of operations increased 13.8%, or $66,780,000, from the
prior year. Film exhibition costs increased 10.2%, or $23,310,000, due to higher
attendance, which contributed $25,488,000 of the increase, offset by a decrease
in the percentage of admissions paid to film distributors of $2,178,000. As a
percentage of admissions revenues, film exhibition costs was 52.4% in the
current year compared with 52.8% in the prior year. The 18.5%, or $5,628,000,
increase in concession costs was attributable to the increase in concessions
revenues. As a percentage of concessions revenues, concession costs increased
from 15.5% to 16.2% due primarily to increases in raw popcorn costs and lower
margins on new concessions products. Rent expense increased 15.9%, or
$10,303,000, due to the higher number of screens in operation. Other cost of
operations increased 17.3%, or $27,539,000, from the prior year due to the
higher number of screens in operation, $1,825,000 of advertising expenses
associated with the opening of new theatres and higher expenses associated with
the Company's theatre management development program.

Total international cost of operations consists of expenses associated with
the Company's new theatres in Japan and Portugal. As a percentage of admissions
revenues, film exhibition costs was 57.9%, primarily because film rentals in
Japan are generally higher than those domestically. Concession

25
<PAGE>
costs were 31.6% of concessions revenues due to the high procurement costs of
concessions products sourced from the United States. As a percentage of total
revenues, rent expense was 31.7% as a result of low initial attendance and
admissions revenues and higher real estate costs in Japan.

On-screen advertising and other cost of operations increased 34.9%, or
$3,120,000, as a result of the higher number of screens served and related
start-up expenses.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
8.8%, or $4,588,000, during the year (53 weeks) ended April 3, 1997.

Corporate and domestic general and administrative expenses increased 3.1%,
or $1,358,000, due primarily to increases in costs associated with the Company's
development of theatres and increased pension and retirement expenses of
$1,992,000. These increases were partially offset by a decrease of $3,500,000 in
the current year's bonus expense and severance payments of $967,000 for two
former executive officers made during the prior year.

International general and administrative expenses increased 50.9%, or
$2,314,000, due primarily to increases in costs associated with the Company's
development of new theatres and other expenses to support the Company's
international operations and expansion plan.

General and administrative expenses associated with on-screen advertising
and other increased 27.7%, or $916,000, due primarily to an increase in payroll
and related costs to support the expansion program at the Company's on-screen
advertising business.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
24.9%, or $10,485,000, during the year (53 weeks) ended April 3, 1997. This
increase was caused by an increase in employed theatre assets resulting from the
Company's expansion plan.

IMPAIRMENT OF LONG-LIVED ASSETS. During the year (53 weeks) ended April 3,
1997, the Company recognized a non-cash impairment loss of $7,231,000
($4,266,000 after tax, or $.24 per share) on 18 multiplexes with 82 screens in
nine states (primarily Michigan, Pennsylvania, California, Florida and Virginia)
due to expected declines in future cash flows resulting primarily from
competition from newer megaplexes. During the year (52 weeks) ended March 28,
1996, the Company recognized a non-cash impairment loss of $1,799,000
($1,061,000 after tax, or $.06 per share) on four multiplexes with 21 screens in
Arizona, Florida and California in connection with the adoption of Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. The future cash
flows of these theatres, undiscounted and without interest charges, were less
than the carrying value of the theatre assets.

INTEREST EXPENSE. Interest expense decreased 23.6%, or $6,806,000, during
the year (53 weeks) ended April 3, 1997 compared to the prior year. The decrease
in interest expense resulted from lower rates under the Company's $425 million
Credit Facility, which was partially offset by an increase in average
outstanding borrowings related to the Company's expansion plan.

INVESTMENT INCOME. Investment income decreased 87.9%, or $6,196,000, during
the year (53 weeks) ended April 3, 1997 due to a decrease in outstanding cash
and investments compared to the prior year. Cash and investments decreased as a
result of the Company's redemption of substantially all of its 11 7/8% Senior
Notes due 2000 (the "Senior Notes") and 12 5/8% Senior Subordinated Notes due
2002 (the "12 5/8% Senior Subordinated Notes") on December 28, 1995.

NET EARNINGS. Net earnings before extraordinary item decreased $8,376,000
during the year (53 weeks) ended April 3, 1997 to $18,995,000 from $27,371,000
in the prior year. Net earnings for the period were $18,995,000 compared to
$8,021,000 in the prior year, which included an extraordinary item (a loss of
$19,350,000, or $1.17 per share, in connection with the early extinguishment of
debt). Net earnings before extraordinary item per common share, after deducting
preferred dividends, was $.75 compared to $1.23 in the prior year. Net earnings
per common share, after deducting preferred dividends, was $.75 compared to $.06
in the prior year.

26
<PAGE>
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 $90,799,000, $109,339,000 and $96,140,000 in
fiscal years 1998, 1997 and 1996, respectively.

The Company is currently expanding its domestic theatre circuit and entering
select international markets. During fiscal 1998, the Company opened 23
megaplexes with 564 screens and one multiplex with six screens and expanded
three existing multiplexes by 38 screens. In addition, the Company closed or
sold 23 multiplexes with 123 screens resulting in a circuit total of 44
megaplexes with 987 screens and 185 multiplexes with 1,455 screens as of April
2, 1998. The Company plans to continue
this expansion by opening approximately 350 screens, including 95 in
international markets, in
16 megaplexes during fiscal 1999.

The costs of constructing new theatres are funded by the Company through
internally generated cash flow or borrowed funds. The Company generally leases
its theatres pursuant to long-term non-cancelable operating leases which require
the developer, who owns the property, to reimburse the Company for a portion of
the construction costs. However, the Company may decide to own the real estate
assets of new theatres and, following construction, sell and leaseback the real
estate assets pursuant to long-term non-cancelable operating leases.
Historically, the Company has owned and paid for the equipment necessary to
fixture a theatre; however, it is considering other methods of providing for its
equipment needs, including operating leases. During fiscal 1998, 17 new theatres
and 412 screens were leased from developers and seven new theatres with 182
screens were constructed by the Company and then sold and leased back. As of
April 2, 1998, the Company had construction in progress and reimbursable
construction advances (amounts due from developers on leased theatres) of
$65,914,000 and $58,488,000, respectively. The Company had 13 megaplexes with
283 screens under construction on April 2, 1998.

During fiscal 1998, the Company had capital expenditures of $389,217,000 and
estimates that total capital expenditures for 1999 will aggregate approximately
$280 million. Included in these amounts are assets which the Company has placed
or may place into sale and leaseback or other comparable financing programs,
which will have the effect of reducing the Company's net cash outlays. During
fiscal 1998, the Company received $283,800,000 from such programs.

The Company's Credit Facility permits borrowings at interest rates based on
either the bank's base rate or LIBOR and requires an annual commitment fee based
on margin ratios that could result in a rate of .1875% to .375% on the unused
portion of the commitment. The Credit Facility matures on April 10, 2004. The
commitment thereunder will be reduced by $25 million on each of December 31,
2002, March 31, 2003, June 30, 2003 and September 30, 2003 and by $50 million on
December 31, 2003. As of April 2, 1998, the Company had outstanding borrowings
of $150,000,000 under the Credit Facility at an average interest rate of 6.2%
per annum, and approximately $245,000,000 was available for borrowing under the
Credit Facility.

27
<PAGE>
activities and pledges. In addition, the Credit Facility contains certain
financial covenants. As of April 2, 1998, the Company was in compliance with all
financial covenants relating to the Credit Facility.

On March 19, 1997, the Company sold $200 million of 9 1/2% Senior
Subordinated Notes. The Note Indenture to the 9 1/2% Senior Subordinated Notes
contains certain covenants that, among other things, restrict the ability of the
Company and its subsidiaries to incur additional indebtedness and pay dividends
or make distributions in respect of their capital stock. If the 9 1/2% Senior
Subordinated Notes attain "investment grade status" (as defined in the Note
Indenture), the covenants in the Note Indenture limiting the Company's ability
to incur additional indebtedness and pay dividends will cease to apply. As of
April 2, 1998, the Company was in compliance with all financial covenants
relating to the 9 1/2% Senior Subordinated Notes.

On November 14, 1997, the Company completed the redemption of $617,000 of
its outstanding Senior Notes and $4,904,000 of its outstanding 12 5/8% Senior
Subordinated Notes.

During fiscal 1998, the Company sold the real estate assets associated with
13 megaplex theatres, including seven theatres opened during fiscal 1998, to EPT
for an aggregate purchase price of $283,800,000. Proceeds from the Sale and
Lease Back Transaction were applied to reduce indebtedness under the Company's
Credit Facility. 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 granted an option to EPT to acquire a theatre under
construction for the cost to the Company of developing and constructing such
property. 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 owned or ground-leased by the Company,
exercisable upon the Company's intended disposition of such property. As of
April 2, 1998, the Company had one megaplex under construction that would be
subject to EPT's right of first refusal and first offer to purchase should the
Company seek to dispose of such megaplex. 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. The
Company may require additional financing after fiscal 1999 to continue its
expansion program.

During the year (52 weeks) ended April 2, 1998, various holders of the
Company's $1.75 Cumulative Convertible Preferred Stock (the "Convertible
Preferred Stock") converted 1,503,269 shares into 2,591,614 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 15.5%, or $929,000, to $5,064,000 for the year (52 weeks) ended April
2, 1998 from $5,993,000 in the prior year as a result of the conversions.

Subsequent to April 2, 1998, various holders of the Company's Convertible
Preferred Stock converted 1,796,485 shares into 3,097,113 shares of Common Stock
at a conversion rate of 1.724 shares of Common Stock for each share of
Convertible Preferred Stock. On April 14, 1998, the Company redeemed the
remaining 3,846 shares of Convertible Preferred Stock at a redemption price of
$25.75 per share plus accrued and unpaid dividends.

YEAR 2000

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

28
<PAGE>
upgraded and the Company expects that its remaining systems will be upgraded
through modification or replacement by the end of fiscal 1999. As a result, the
Company does not believe that it has material exposure to the year 2000 issue
with respect to its own computer applications. The Company does not expect that
the cost of the 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, business partners, customers and other parties that
provide significant services to the Company. The Company expects to complete
during fiscal 1999 a review of potential year 2000 issues with these parties.
The Company is currently unable to predict the extent that the year 2000 will
have on these parties and, consequently, the Company.

IMPACT OF INFLATION

Historically, the principal impact of inflation and changing prices upon the
Company has been to increase the costs of the construction of new theatres, the
purchase of theatre equipment and the utility and labor costs incurred in
connection with continuing theatre operations. Film rentals expense, the largest
cost of operations of the Company, is customarily paid as a percentage of
admissions revenues and hence, while the film rental expense may increase on an
absolute basis, the percentage of admissions revenues represented by such
expense is not directly affected by inflation. Except as set forth above,
inflation and changing prices have not had a significant impact on the Company's
total revenues and results of operations.

SEASONALITY

The theatrical exhibition industry is seasonal in nature, with the highest
attendance and revenues occurring during the summer months and the holiday
seasons.

NEW ACCOUNTING PRONOUNCEMENTS

During fiscal 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), REPORTING
COMPREHENSIVE INCOME, Statement of Financial Accounting Standards No. 131 ("SFAS
131"), DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION and
Statement of Financial Accounting Standards No. 132 ("SFAS 132"), EMPLOYERS'
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS. 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. SFAS 132 requires disclosures about pension and other postretirement
benefit plans in a company's financial statements and is effective for fiscal
years beginning after December 15, 1997. These statements 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.

During fiscal 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-1"), ACCOUNTING FOR THE COSTS OF
COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1 requires
companies to capitalize certain internal-use software costs once certain
criteria are met. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. Adoption of this statement is not expected to have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.

In April of 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), REPORTING ON THE COSTS OF
START-UP ACTIVITIES. SOP 98-5 requires costs of start-up activities to be
expensed when incurred. The Company currently capitalizes such costs and
amortizes them over a two-year period. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. The Company will adopt this statement in
fiscal 2000, which will result in a cumulative effect adjustment to the
Company's results of operations and financial position based on balances as of
April 1, 1999. Had

29
<PAGE>
the Company adopted SOP 98-5 at the beginning of fiscal 1999, such adjustment
would have been approximately $10.6 million, before taxes.

BUSINESS

GENERAL

The Company is an industry leader in the development and operation of
"megaplex" and "multiplex" theatres, primarily in large metropolitan markets.
Megaplexes are theatres with predominantly stadium-style seating (seating with
an elevation between rows to provide unobstructed viewing) and other amenities
to enhance the movie-going experience. Multiplexes are theatres generally
without stadium-style seating. The Company believes that its strategy of
developing megaplexes has prompted the current theatrical exhibition industry
trend in the United States and Canada toward the development of larger theatre
complexes. This trend has accelerated the obsolescence of many existing movie
theatres, including certain multiplexes, by setting new standards for
moviegoers, who have demonstrated their preference for the more attractive
surroundings, wider variety of films, better customer services and more
comfortable seating typical of megaplexes.

In addition to providing a superior entertainment experience, megaplexes
generally realize economies of scale by serving more patrons from common support
facilities, thereby spreading costs over a higher revenue base. The Company's
megaplexes have consistently ranked among its top grossing facilities on a per
screen basis and are among the top grossing theatres in North America. During
fiscal 1998, attendance per screen at the Company's domestic megaplexes (those
opened at the beginning of the period) was 77,400 compared to 57,700 for the
Company's domestic multiplexes. (During 1997, the last period for which data is
available, the theatrical exhibition industry in the United States averaged
approximately 45,000 patrons per screen). In addition, during fiscal 1998,
average revenue per patron at such megaplexes was $6.83 compared to $6.18 for
such multiplexes, and operating cash flow before rent of such megaplexes was
37.1% of total revenues of such theatres, whereas operating cash flow before
rent of the Company's multiplexes was 33.8% of total revenues of such theatres.
Operating cash flow before rent is an internal statistic used by the Company to
measure theatre level cash flow. As of April 2, 1998, 987 screens, or 40.4%, of
the Company's screens were located in megaplexes. The average number of screens
per theatre operated by the Company as of April 2, 1998 was 10.7, compared to an
average of 6.5 for the ten largest North American theatrical exhibition
companies (based on number of screens) and 5.3 for all North American theatrical
exhibition companies, based on the listing of exhibitors in the NATO 1997-98
Encyclopedia of Exhibition, as of May 1, 1997.

The Company continually upgrades its theatre circuit by opening new theatres
(primarily megaplexes), adding new screens to existing theatres and selectively
closing or disposing of unprofitable multiplexes. Since April 1996, the Company
has opened 41 new theatres with 878 screens, representing 36% of its current
number of screens, and has added 44 screens to existing theatres. Of the 878
screens, 845 screens were located in an aggregate of 37 megaplexes. As of April
2, 1998, the Company had 13 megaplexes under construction with an aggregate of
283 screens.

Revenues for the Company are generated primarily from box office admissions
and theatre concessions sales, which accounted for 65% and 30%, respectively, of
fiscal 1998 revenues. The balance of the

30
<PAGE>
Company's revenues are generated primarily by the Company's on-screen
advertising business, video games located in theatre lobbies and the rental of
theatre auditoriums.

The Company's predecessor was founded in Kansas City, Missouri in 1920 by
the father of Mr. Stanley H. Durwood, the current Co-Chairman of the Board and
Chief Executive Officer of the Company. Mr. Stanley H. Durwood owns 100% of the
outstanding shares of the Company's Class B Stock and his children own 47.5% of
the outstanding shares of Common Stock as of May 15, 1998 (31.5% after giving
effect to the Offering), representing in the aggregate approximately 85.9%
(79.7% after giving effect to the Offering) of the voting power of outstanding
securities in matters other than the election of directors. Holders of Class B
Stock are entitled to ten votes per share and as a class are presently entitled
to elect 75% of the Company's Board. See "Principal and Selling Stockholders."

As part of its succession planning and with the approval of Mr. Stanley H.
Durwood, the Company's Board of Directors has recently appointed the Company's
President and Chief Financial Officer, Mr. Peter C. Brown, as Co-Chairman. Mr.
Brown will oversee all Company matters with Mr. Durwood.

STRATEGY

The Company's strategy is to expand its theatre circuit primarily by
developing new megaplexes in major markets in the United States and select
international markets. New theatres will primarily be megaplexes which will also
be equipped with SONY Dynamic Digital Sound-TM- (SDDS-TM-) and AMC
LoveSeat-Registered Trademark- style seating (plush, high-backed seats with
retractable armrests). Other amenities may include auditoriums with TORUS-TM-
Compound Curved Screens and High Impact Theatre Systems-TM- (HITS-TM-), which
enhance picture and sound quality, respectively.

The Company believes that significant market opportunities exist for
development of modern megaplexes in select international markets. The theatrical
exhibition business has become increasingly global and box office receipts from
international markets exceed those of the U.S. market. In addition, the
production and distribution of feature films and demand for American motion
pictures is increasing in many countries. The Company believes that its
experience in developing and operating megaplexes provides it with a significant
advantage in developing megaplexes in international markets, and the Company
intends to utilize this experience, as well as its existing relationships with
domestic motion picture studios, to enter select international markets. The
Company's strategy in these markets is to operate leased theatres. Presently,
the Company's activities in international markets are directed toward Japan,
Portugal, Spain, China (Hong Kong) and Canada, which the Company believes are
under screened.

The costs of constructing new theatres are funded by the Company through
internally generated cash flow or borrowed funds. The Company generally leases
its theatres pursuant to long-term non-

31
<PAGE>
cancelable operating leases which require the developer, who owns the property,
to reimburse the Company for a portion of the construction costs. However, the
Company may decide to own the real estate assets of new theatres and, following
construction, sell and leaseback the real estate assets pursuant to long-term
non-cancelable operating leases. Historically, the Company has owned and paid
for the equipment necessary to fixture a theatre; however, it is considering
other methods of providing for its equipment needs, including operating leases.
Recently, the Company has engaged in the Sale and Leaseback Transaction with
EPT, a real estate investment trust, through which the Company has sold to and
leased back from EPT 13 megaplexes, and granted an option to purchase and lease
back one additional megaplex scheduled to open by September 1998. The Company
also has granted EPT, for a period of five years subsequent to November 1997, a
right of first refusal and first offer to purchase and lease back to the Company
any other megaplex theatre owned or ground leased by the Company or its
subsidiaries, exercisable upon the Company's intended disposition of such
property.

The Company intends to consider partnerships or joint ventures, where
appropriate, to share risk and leverage resources. Such ventures may include
interests in projects that include restaurant, retail and other concepts. The
Company has formed a joint venture with Planet Hollywood that will develop, own
and operate megaplexes under the brand name PLANET MOVIES BY AMC-TM-. Each
megaplex facility will feature an entertainment center that will include
restaurants, as well as refreshment and merchandise kiosks. The first PLANET
MOVIES BY AMC-TM- megaplex is projected to open in the first half of calendar
year 1999 near Columbus, Ohio and will consist of a 30 screen megaplex theatre,
a PLANET HOLLYWOOD-REGISTERED TRADEMARK- restaurant and OFFICIAL ALL STAR
CAFE-REGISTERED TRADEMARK-, each with its own integrated merchandise store, and
various refreshment kiosks. Although the Company anticipates that the joint
venture will develop and operate additional units, no minimum number of units
has been agreed upon and the development of additional sites will require the
approval of both parties to the joint venture.

Through AMC Realty, Inc., the Company plans to enhance the operating
performance of its megaplexes by facilitating the addition of complementary
entertainment properties adjacent to such megaplexes. AMC Realty, Inc.'s
subsidiary, Centertainment, Inc., presently is involved in the pre-development
of several retail/entertainment projects, including a project in downtown Kansas
City, Missouri known as the "Power and Light District."

The Company continually monitors the performance of its theatres and has
improved the profitability of certain of its older theatres by converting them
to "dollar houses," which display second-run movies and charge lower admission
prices (ranging from $1.00 to $1.75). It operated 7 such theatres with 40
screens as of April 2, 1998 (1.6% of the Company's total screens). Other
strategies for underperforming theatres include selling them to discount
operators and closing them. Divestiture strategies for theatres with longer
leases include selling them to other exhibitors, closing them or converting such
theatres to other uses and subleasing them.

THEATRE CIRCUIT

The following table sets forth information concerning additions and
dispositions of theatres and screens during, and the number of theatres and
screens operated as of the end of, the last five fiscal years. The Company adds
and disposes of theatres based on industry conditions and its business strategy.

32
<PAGE>
CHANGES IN THEATRES OPERATED

<TABLE>
<CAPTION>
ADDITIONS DISPOSITIONS TOTAL OPERATED
---------------------------- -------------------------------- ----------------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
PERIOD ENDED THEATRES SCREENS THEATRES SCREENS THEATRES SCREENS
- ------------------------------------ --------------- ----------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1994...................... 2 15 9 29 236 1,603
March 30, 1995...................... 3 53 7 26 232 1,630
March 28, 1996...................... 7 150 13 61 226 1,719
April 3, 1997....................... 17 314 15 76 228 1,957
April 2, 1998....................... 24 608 23 123 229 2,442
-- --
----- ---
Total........................... 53 1,140 67 315
-- --
-- --
----- ---
----- ---
</TABLE>

As of April 2, 1998, the Company operated 44 megaplex theatres having an
aggregate of 987 screens, representing 40.4% of its screens. The following table
provides greater detail with respect to the Company's theatre circuit as of such
date.

<TABLE>
<CAPTION>
THEATRES
TOTAL TOTAL ------------------------------
DOMESTIC SCREENS THEATRES MULTIPLEX MEGAPLEX
- --------------------------------------------------------------------- ----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
California........................................................... 425 36 28 8
Florida.............................................................. 398 39 34 5
Texas................................................................ 370 27 19 8
Missouri............................................................. 151 14 11 3
Arizona.............................................................. 146 14 10 4
Georgia.............................................................. 116 9 6 3
Michigan............................................................. 106 17 17 --
Pennsylvania......................................................... 103 14 14 --
Colorado............................................................. 102 9 6 3
Ohio................................................................. 62 5 4 1
Illinois............................................................. 60 2 -- 2
Virginia............................................................. 58 7 7 --
Kansas............................................................... 56 3 1 2
New Jersey........................................................... 46 7 7 --
Maryland............................................................. 42 5 5 --
Oklahoma............................................................. 42 4 3 1
Nebraska............................................................. 24 1 -- 1
North Carolina....................................................... 22 1 -- 1
Louisiana............................................................ 20 3 3 --
Washington........................................................... 20 3 3 --
New York............................................................. 16 2 2 --
Massachusetts........................................................ 10 2 2 --
District of Columbia................................................. 9 1 1 --
Delaware............................................................. 5 2 2 --
--
----- --- ---
Total Domestic................................................... 2,409 227 185 42
--
----- --- ---

INTERNATIONAL
- ---------------------------------------------------------------------
Portugal............................................................. 20 1 -- 1
Japan................................................................ 13 1 -- 1
--
----- --- ---
Total International.............................................. 33 2 -- 2
--
----- --- ---
Total Theatre Circuit................................................ 2,442 229 185 44
--
--
----- --- ---
----- --- ---
</TABLE>

33
<PAGE>
Of the Company's 229 theatres and 2,442 screens operated as of April 2,
1998, American Multi-Cinema, Inc. was the owner or lessee of 224 theatres with
2,394 screens, and AMC Entertainment International, Inc. leased one theatre with
13 screens and its subsidiary, Actividades Multi-Cinemas E Espectaculos, LDA,
leased one theatre with 20 screens. American Multi-Cinema, Inc. also operated
three theatres with 15 screens owned by a third party.

Of the 229 theatres operated by the Company as of April 2, 1998, 8 theatres
with 62 screens were owned, 11 theatres with 101 screens were leased pursuant to
ground leases, 207 theatres with 2,264 screens were leased pursuant to building
leases and three theatres with 15 screens were managed. The Company's leases
generally have terms ranging from 13 to 25 years, with options to extend the
lease for up to 20 additional years. The leases typically require escalating
minimum annual rent payments and additional rent payments based on a percentage
of the leased theatre's revenue above a base amount and require the Company to
pay for property taxes, maintenance, insurance and certain other property-
related expenses.

In some cases, the Company's rights as tenant are subject and subordinate to
the mortgage loans of lenders to its lessors, so that if a mortgage were to be
foreclosed, the Company could lose its lease. Historically, this has never
occurred.

The majority of the concessions, projection, seating and other equipment
required for each of the Company's theatres is owned.

The Company leases its corporate headquarters, located in Kansas City,
Missouri. Division and film licensing offices are leased in Los Angeles,
California; Clearwater, Florida; Voorhees, New Jersey (Philadelphia); and
Woodland Hills, California.

THEATRE DEVELOPMENT

New theatre sites are typically selected on the basis of retail
concentration, access to surface transportation and demographic trends
identified by reference to census figures and other statistical sources. The
Company has a real estate function to identify potential sites, develop the
economic profile of the sites and present the concepts to senior management. The
Company obtains some sites through several large real estate developers of
regional and strip malls with which it has developed proven working
relationships.

When approved by senior management, the real estate representatives
negotiate lease or purchase terms and, once finalized, then turn the project
over to the construction department for construction management. The Company
typically targets for development areas, such as specialty shopping or
entertainment centers and retail space in or near suburban malls.

FILM LICENSING

The Company predominantly licenses "first-run" motion pictures from
distributors owned by major film production companies and from independent
distributors that generally distribute films for smaller production companies.
Films are licensed on a film-by-film and theatre-by-theatre basis. The Company
obtains these licenses either by negotiations directly with, or by submitting
bids to, distributors. Negotiations with distributors are based on several
factors, including theatre location, competition, season of the year and motion
picture content. Rental fees are paid by the Company under a negotiated license
and are made on either a "firm terms" basis, where final terms are negotiated at
the time of licensing, or are adjusted subsequent to the exhibition of a motion
picture in a process known as "settlement." Firm term fee arrangements generally
are more favorable to the distributor than settlement fee arrangements with
respect to the percentage of admissions revenue ultimately paid to license a
motion picture. When motion pictures are licensed through a bidding process, the
distributor decides whether to accept bids on a previewed basis or a
non-previewed ("blind-bid") basis, subject to certain state law requirements.

34
<PAGE>
In most cases, the Company licenses its motion pictures on a previewed basis.
When a film is bid on a previewed basis, exhibitors are permitted to review the
film before bidding, whereas they are not permitted to do so when films are
licensed on a non-previewed or "blind-bid" basis.

Film distributors typically establish geographic film licensing zones and
allocate available film to one theatre within that zone. Film zones generally
encompass a radius of three to five miles in metropolitan and suburban markets,
depending primarily upon population density. In film zones where the Company is
the sole exhibitor, the Company obtains film licenses by selecting a film from
among those offered and negotiating directly with the distributor. In film zones
where there is competition, a distributor will either require the exhibitors in
the zone to bid for a film or will allocate its films among the exhibitors in
the zone. When films are allocated, a distributor will choose which exhibitor is
offered a film and then that exhibitor will negotiate film rental terms directly
with the distributor for the film. Allocation of films among exhibitors may
differ from film to film. In the past few years, bidding has been used less
frequently by the industry. Presently, the Company licenses substantially all of
its films on a negotiated basis.

Licenses entered into through both negotiated and bid processes typically
state that rental fees shall be based on the higher of a gross receipts formula
or a theatre admissions revenue sharing formula. Under a gross receipts formula,
the distributor receives a specified percentage of box office receipts, with the
percentages declining over the term of the run. First-run motion picture rental
fees are generally the greater of (i) 70% of box office admissions, gradually
declining to as low as 30% over a period of four to seven weeks, and (ii) a
specified percentage (i.e., 90%) of the excess of box office receipts over a
negotiated allowance for theatre expenses (commonly known as a "90/10" clause).
Second-run motion picture rental fees typically begin at 35% of box office
admissions and often decline to 30% after the first week. The Company may pay
non-refundable guarantees of film rentals or make advance payments of film
rentals, or both, in order to obtain a license in a negotiated or bid process,
subject, in some cases, to a per capita minimum license fee.

The Company licenses films through film buyers who enable the Company to
capitalize on local trends and to take into account actions of local competitors
in the Company's negotiation and bidding strategies. Criteria considered in
licensing each motion picture include cast, director, plot, performance of
similar motion pictures, estimated motion picture rental costs and expected
rating by the Motion Pictures Association of America (the "MPAA"). Successful
licensing depends greatly upon knowledge of the tastes of the residents in
markets served by each theatre and insight into the trends in those tastes, as
well as the availability of commercially popular motion pictures. The Company at
no time licenses any one motion picture for all of its theatres.

The Company's business is dependent upon the availability of marketable
motion pictures. There are several distributors which provide a substantial
portion of quality first-run motion pictures to the exhibition industry. These
include Buena Vista Pictures (Disney), Warner Bros. Distribution, SONY Pictures
Releasing (Columbia Pictures and Tri-Star Pictures), Twentieth Century Fox,
Universal Film Exchanges, Inc. and Paramount Pictures. There are numerous other
distributors and no single distributor dominates the market. From year to year,
the Company's revenues attributable to individual distributors may vary
significantly depending upon the commercial success of each distributor's motion
pictures in any given year. In fiscal 1998, no single distributor accounted for
more than 13% of the motion pictures licensed by the Company or for more than
21% of the Company's box office admissions. Poor relationships with
distributors, poor performance of motion pictures or disruption in the
production of motion pictures by the major studios and/or independent producers
may have an adverse effect upon the business of the Company. Some of the major
distributors have announced their intention to reduce production of films.

During the period from January 1, 1990 to December 31, 1996, the annual
number of first-run motion pictures released by distributors in the United
States ranged from a low of 370 in 1995 to a high of 440 in 1993, according to
the MPAA. If a motion picture still has substantial potential following its
first-run,

35
<PAGE>
the Company may license it for a "sub-run." Although average daily sub-run
attendance is often less than average daily first-run attendance, sub-run film
rentals are also generally lower than first-run film rentals. Sub-runs enable
the Company to exhibit a variety of motion pictures during periods in which
there are few new film releases.

MARKETING

The Company relies primarily upon advertisements and movie schedules
published in newspapers to inform its patrons of motion picture titles and show
times. Radio, television and full-page newspaper advertisements are used on a
regular basis to promote new releases and special events. These expenses are
generally paid for by the distributors; however, the Company occasionally shares
the expense of such advertisements. The Company pays for newspaper "stack"
advertisements which display information on motion pictures at the Company's
theatres within a geographic area. The Company also exhibits "Now Playing" and
"Coming Soon" spots to promote motion pictures currently playing on the
Company's screens or motion pictures not yet released. The Company has the
MovieWatcher-Registered Trademark- program whereby moviegoers earn points for
each movie attended and periodically earn discount concession coupons and passes
for movies. The Company believes this frequent moviegoer program enhances
customer loyalty.

THEATRE MANAGEMENT AND OPERATIONS

The Company uses a decentralized structure to operate its business on a
day-to-day basis. Each location is viewed as a discrete profit center and a
portion of management's compensation at each theatre is linked to the operating
results of each unit. All theatre level personnel complete formal training
programs to maximize both customer service and the efficiency of the Company's
operations. Theatre management additionally attends a two-week training academy
focusing on operations administration and marketing during their first 12 to 24
months with the Company.

Theatre staffing varies depending on the size and configuration of the
theatre and levels of attendance. For example, a typical ten-screen movie
theatre may have 60 employees and five managers, while a 24-screen megaplex may
have as many as 150 employees and up to 12 managers. The Company is committed to
developing the strongest possible management teams and seeks college graduates
for career management positions.

Three division offices, each headed by a Senior Vice President of AMC,
supervise theatre operations and personnel within their respective regions. The
division Senior Vice Presidents are also responsible within their markets for
marketing, facilities, maintenance and profit center auditing. The division
offices are located in Los Angeles, California; Clearwater, Florida; and
Voorhees, New Jersey (Philadelphia).

Policy development, strategic planning, real estate development, facilities
design, construction management, finance and accounting for the Company are
managed at the Company's corporate office located in Kansas City, Missouri.
Additionally, the corporate office provides support to both the division offices
and individual theatres regarding management information systems,
administration, employee benefits and operations services. All film licensing
activity occurs in Woodland Hills, California, utilizing a structure that
facilitates interaction between theatre managers, division managers and film
buyers.

36
<PAGE>
CONCESSIONS

Concessions sales are the second largest source of revenue for the Company
after box office admissions. Concessions items include popcorn, soft drinks,
candy and other products. The Company's strategy emphasizes prominent and
appealing concessions counters designed for rapid service and efficiency.

The Company's primary concessions products are various sizes of popcorn,
soft drinks, candy and hot dogs, all of which the Company sells at each of its
theatres. However, different varieties of candy and soft drinks are offered at
theatres based on preferences in that particular geographic region. The Company
has also implemented "combo-meals" for children which offer a pre-selected
assortment of concessions products.

Newer megaplex theatres are designed to have more concessions service
capacity per seat than multiplex theatres and typically have three concessions
stands, with each stand having multiple service stations to make it easier to
serve larger numbers of customers. In addition, the primary concessions stand in
such theatres generally features the "pass-through" concept, which provides a
staging area behind the concessions equipment to prepare concessions products.
This permits the concessionist serving patrons to simply sell concessions items
instead of also preparing them, thus providing more rapid service to customers.
Strategic placement of large concessions stands within theatres heightens their
visibility, aids in reducing the length of concessions lines and improves
traffic flow around the concessions stands.

The Company negotiates prices for its concessions supplies directly with
concessions vendors on a national or regional basis to obtain high volume
discounts or bulk rates.

MANAGEMENT INFORMATION SYSTEMS

The Company has a point of sale ("POS") management information system to
further enhance its ability to maximize revenues, control costs and efficiently
manage the Company's theatre circuit. The POS information system provides
corporate management with a detailed daily admissions and concessions revenue
report by the start of business the following morning. This information allows
management to make adjustments to movie schedules, prolong runs or increase the
number of screens on which successful movies are being played and substitute
films when gross receipts cease to meet expected goals. Seating and box office
information is available to box office personnel, making it possible for theatre
management to avoid overselling a particular film and providing faster and more
accurate response to customer inquiries regarding showings and available
seating.

THEATRICAL EXHIBITION INDUSTRY OVERVIEW

Motion picture theatres are the primary initial distribution channel for new
motion picture releases and the Company believes that the theatrical success of
a motion picture is often the most important factor in establishing its value in
the cable television, videocassette and other ancillary markets. The Company
further believes that the emergence of new motion picture distribution channels
has not adversely affected attendance at theatres and that these distribution
channels do not provide an experience comparable to that of viewing a movie in a
theatre. The Company believes that the public will continue to recognize the
advantages of viewing a movie on a large screen with superior audio and visual
quality, while enjoying a variety of concessions and sharing the experience with
a larger audience.

Annual domestic theatre attendance has averaged approximately one billion
persons since the early 1960s. In 1997, estimated domestic attendance was 1.4
billion. Fluctuations and variances in year-to-year attendance are primarily
related to the overall popularity and supply of motion pictures.

The theatrical exhibition industry in North America is comprised of over 400
exhibitors, approximately 250 of which operate four or more screens. Based on
the May 1, 1997 listing of exhibitors in the

37
<PAGE>
NATO 1997-98 Encyclopedia of Exhibition, the ten largest exhibitors (in terms of
number of screens) are believed to operate approximately 60% of the total
screens, with no one exhibitor operating more than 11% of the total screens.

The following table represents the results of a survey by NATO for 1992
through 1996, outlining the historical trends in U.S. theatre attendance,
average ticket prices and box office sales, and information obtained from the
MPAA on attendance and box office revenues for 1997.

<TABLE>
<CAPTION>
U.S. BOX
OFFICE
AVERAGE SALES
ATTENDANCE TICKET (IN
YEAR (IN MILLIONS) PRICE MILLIONS)
- ----------------------------------------------------------------- ------------- ----------- ------------
<S> <C> <C> <C>
1992............................................................. 1,173 $ 4.15 $ 4,871
1993............................................................. 1,244 $ 4.14 $ 5,154
1994............................................................. 1,292 $ 4.18 $ 5,396
1995............................................................. 1,263 $ 4.35 $ 5,493
1996............................................................. 1,339 $ 4.41 $ 5,911
1997............................................................. 1,388 $ 4.59 $ 6,366
</TABLE>

COMPETITION

The Company competes against both local and national exhibitors, some of
which may have substantially greater financial resources than the Company. There
are over 400 companies competing in the domestic theatrical exhibition industry.
Industry participants vary substantially in size, from small independent
operators to large international chains. Recently, four of the industry's
largest companies have announced proposed mergers. The Company has not
determined how these mergers will affect competition.

The Company believes that the principal competitive factors with respect to
film licensing include licensing terms, seating capacity and location and
condition of an exhibitor's theatres. The Company expects that in the long term
the addition of new megaplexes will help it obtain more favorable allocation of
film product and other licensing terms from distributors than its competitors.
However, the earnings of new megaplexes initially may be negatively impacted
because of competition from existing theatres that have established
relationships with distributors. As with other exhibitors, the Company's smaller
multiplexes are subject to deteriorating financial performance and to being
rendered obsolete through the introduction of new, competing megaplexes by the
Company and other exhibitors.

REGULATORY ENVIRONMENT

The distribution of motion pictures is in large part regulated by federal
and state antitrust laws and has been the subject of numerous antitrust cases.
The consent decrees resulting from one of those cases, to which the Company was
not a party, have a material impact on the industry and the Company. Those
consent decrees bind certain major motion picture distributors and require the
motion pictures of such distributors to be offered and licensed to exhibitors,
including the Company, on a film-by-film and

38
<PAGE>
theatre-by-theatre basis. Consequently, the Company cannot assure itself of a
supply of motion pictures by entering into long-term arrangements with major
distributors, but must compete for its licenses on a film-by-film and
theatre-by-theatre basis.

Bids for new motion picture releases are made, at the discretion of the
distributor (subject to state law requirements), either on a previewed basis or
blind-bid basis. Certain states have enacted laws regulating the practice of
blind-bidding. Management believes that it may be able to make better business
decisions with respect to film licensing if it is able to preview motion
pictures prior to bidding for them, and accordingly believes that it may be less
able to capitalize on its expertise in those states which do not regulate
blind-bidding.

The Company must comply with Title III of the ADA to the extent that its
properties are "public accommodations" and/or "commercial facilities" as defined
by the ADA. Compliance with the ADA requires that public accommodations
"reasonably accommodate" individuals with disabilities and that new construction
or alterations made to "commercial facilities" conform to accessibility
guidelines unless "structurally impracticable" for new construction or
technically infeasible for alterations. Noncompliance with the ADA could result
in the imposition of injunctive relief, fines, an award of damages to private
litigants or additional capital expenditures to remedy such noncompliance. In
separate matters, one of the Company's megaplexes is the subject of a private
civil action seeking to enjoin alleged violations of the ADA and two megaplexes
are the subject of a Department of Justice investigation of private complaints.
The Company believes that its theatres substantially comply with all present
requirements under the ADA and applicable state laws.

As the Company expands internationally, it becomes subject to regulation by
foreign governments. There are significant differences between the theatrical
exhibition industry regulatory environment in the United States and in
international markets. Regulatory barriers affecting such matters as the size of
theatres, the issuance of licenses and the ownership of land may restrict market
entry. Vertical integration of production and exhibition companies in
international markets may also have an adverse effect on the Company's ability
to license motion pictures for international exhibition. The Company's
international operations also face the additional risks of fluctuating currency
values. The Company does not hedge against currency risks. Quota systems used by
some countries to protect their domestic film industry may adversely affect
revenues from theatres that the Company develops in such markets. Such
differences in industry structure and regulatory and trade practices may
adversely affect the Company's ability to expand internationally or to operate
at a profit following such expansion.

EMPLOYEES

As of April 2, 1998, the Company had approximately 1,700 full-time and
11,000 part-time employees. Approximately 19% of the part-time employees were
minors paid the minimum wage.

Fewer than one percent of the Company's employees, consisting primarily of
motion picture projectionists, are represented by a union, the International
Alliance of Theatrical Stagehand Employees and Motion Picture Machine Operators.
The Company believes that its relationship with this union is satisfactory.

As an employer covered by the ADA, the Company must make reasonable
accommodations to the limitations of employees and qualified applicants with
disabilities, provided that such reasonable accommodations do not pose an undue
hardship on the operation of the Company's business. In addition, many of the
Company's employees are covered by various government employment regulations,
including minimum wage, overtime and working conditions regulations.

39
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's capital stock as of May 15, 1998, by: (i) each person
known by the Company to own beneficially 5% or more of the outstanding shares of
any class of its capital stock; (ii) each director of the Company; (iii) each of
the Company's five most highly compensated executive officers; (iv) all
directors and executive officers as a group; and (v) the Selling Stockholders.
Except as indicated in the footnotes to this table, the Company believes that
the persons and entities named in the table have sole voting and investment
power with respect to all shares of stock shown as beneficially owned by them,
subject to community property laws where applicable.

<TABLE>
<CAPTION>
SHARES
BEING
OFFERED
-----------
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED
OWNED PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------------ --------------------------
PERCENT PERCENT
OF OF
NAME NUMBER CLASS NUMBER CLASS
- --------------------------------------------- -------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
CLASS B STOCK
Stanley H. Durwood*........................ 5,015,657(1) 100.0% -- 4,515,657(5) 100.0%
COMMON STOCK
Carol D. Journagan*........................ 1,461,203(1) 7.9 500,000 961,203 5.1
Edward D. Durwood* 1,461,203(1)(2) 7.9 633,332 827,869 4.4
Thomas A. Durwood*......................... 1,461,203(1)(3) 7.9 416,667 1,044,537 5.5
Elissa D. Grodin*.......................... 1,461,203(1) 7.9 416,667 1,044,537 5.5
Brian H. Durwood*.......................... 1,461,203(1) 7.9 416,667 1,044,537 5.5
Peter J. Durwood*.......................... 1,461,203(1) 7.9 416,667 1,044,537 5.5
EnTrust Capital Inc........................ 1,397,776(6) 7.6 1,397,776 7.4
Stanley H. Durwood*........................ 152,750(1)(4) ** 500,000(1)(5) 152,750(4) **
Peter C. Brown............................. 224,000(4) 1.2 -- 224,000(4) 1.2
Philip M. Singleton........................ 148,600(4) ** -- 148,600(4) **
Richard T. Walsh........................... 29,550(4) ** -- 29,550(4) **
Richard M. Fay............................. 1,125(4) ** -- 1,125(4) **
William T. Grant II........................ 1,500 ** -- 1,500 **
John P. Mascotte........................... 2,000 ** -- 2,000 **
Paul E. Vardeman........................... 300 ** -- 300 **
All Directors and Executive Officers as a
Group.................................... 609,868 3.2 -- 609,868 3.2
</TABLE>

- --------------

* Selling Stockholder

** Less than 1%

(1) Mrs. Carol D. Journagan, Mr. Edward D. Durwood, Mr. Thomas A. Durwood, Mrs.
Elissa D. Grodin, Mr. Brian H. Durwood and Mr. Peter J. Durwood are the
children of Mr. Stanley H. Durwood, the Co-Chairman of the Board and Chief
Executive Officer of the Company. Mr. Stanley H. Durwood and his children
(collectively, the "Selling Stockholders") formerly held their stock in the
Company through a holding company, Durwood, Inc., and acquired the shares
being sold in the offering on August 15, 1997 pursuant to the Merger of the
Company and Durwood, Inc. As a condition to the Merger, the Selling
Stockholders entered into a Stock Agreement and a Registration Agreement
with the Company, each dated August 15, 1997, in which they agreed to offer
an aggregate of at least 3,000,000 shares of Common Stock in a registered
secondary offering between February 15 and August 15, 1998. Of these
3,000,000 shares, Mr. Stanley H. Durwood has agreed to offer 500,000 shares,
which will be obtained by converting 500,000 shares of Class B Stock.
Consummation of the Merger and the registered secondary offering were
conditions of a settlement of a stockholders'

40
<PAGE>
derivative suit in which Mr. Stanley H. Durwood and his son, Mr. Edward D.
Durwood, who is also a Selling Stockholder, were defendants.

Pursuant to the terms of an Escrow Agreement among the Selling Stockholders
and Mercantile Bank of Kansas City (the "Escrow Agreement"), the Selling
Stockholders have deposited 3,000,000 shares of stock with the Escrow Agent.
A majority of the individual parties may cause shares held in the escrow to
be delivered to the Underwriters in the Offering. As a result, each of the
parties to the Escrow Agreement may be deemed to share investment power over
the shares held in escrow, although each has disclaimed beneficial ownership
of the shares held in escrow owned of record by the other Selling
Stockholders.

Mr. Stanley H. Durwood beneficially owns 150 shares of the Company's Common
Stock (not including 100 shares owned by his wife, Mrs. Mary Pamela Durwood)
and options that are presently exercisable to acquire 152,500 shares of the
Company's Common Stock, over which he has sole voting and investment power,
which constitute less than 1% of the outstanding shares of such class. Mr.
Stanley H. Durwood also beneficially owns 5,015,657 shares of the Company's
Class B Stock, which constitute 100% of the outstanding shares of such
class. Mr. Stanley H. Durwood has sole voting power over all of these shares
of the Company's Class B Stock and sole investment power over 4,515,657 of
these shares. The Company's Class B Stock and Common Stock presently
beneficially owned by Mr. Stanley H. Durwood represent 73.1% of the voting
power of the Company's stock (70.3% after giving effect to the Offering)
other than in the election of directors. Were all the shares of the
Company's Class B Stock converted into Common Stock, there would be
approximately 23,469,091 shares of Common Stock outstanding, of which Mr.
Stanley H. Durwood would beneficially own 5,015,807 shares (assuming such
conversion and disregarding the exercise of his outstanding options)
(4,515,807 shares after giving effect to the Offering), or 21.4% (19.2%
after giving effect to the Offering) of the outstanding number of shares of
Common Stock.

The Company's Class B Stock beneficially owned by Mr. Stanley H. Durwood is
held under his Revocable Trust Agreement dated April 14, 1989, as amended,
and the 1992 Durwood, Inc. Voting Trust dated December 12, 1992 (the "Voting
Trust"). The Voting Trust is the record owner of the shares reported as
beneficially owned, and Mr. Stanley H. Durwood is the settlor and sole
acting trustee of both trusts. The named successor trustees are Mr. Charles
J. Egan, Jr., a Director of the Company, and Mr. Raymond F. Beagle, Jr., the
Company's general counsel. Under the terms of his Voting Trust, Mr. Stanley
H. Durwood has all voting powers with respect to shares held therein during
his lifetime. Thereafter, all voting rights with respect to such shares vest
in his successor trustees and any additional trustees whom they might
appoint, who shall exercise such rights by majority vote. Unless revoked by
Mr. Stanley H. Durwood or otherwise terminated or extended in accordance
with its terms, the Voting Trust will terminate in 2030.

Mr. Stanley H. Durwood has agreed with his children that if the price per
share to the public of the 2.5 million shares of Common Stock proposed to be
sold by the children in the Offering is less than $18, Mr. Stanley H.
Durwood will pay his children the difference between such sale price and $18
(net of applicable underwriting commissions) with respect to 2.5 million
shares, up to $20 million in aggregate amount, in shares of Common Stock, as
an adjustment to the original allocation of shares to be received by the
Durwood children in the Merger. Mr. Stanley H. Durwood's holdings will
diminish and his children's holdings will increase if his children acquire
additional shares under such share adjustment. However, based on the number
of shares of Common Stock and Class B Stock outstanding as of May 15, 1998,
such adjustment should not result in Mr. Stanley H. Durwood owning shares
with less than 50% of the combined voting power of the outstanding Company
stock unless the market value of the Common Stock at the time of the
offering is less than $8.40. Mr. Stanley H. Durwood's voting control also
will be diluted if he is obligated to dispose of shares to honor tax and
other indemnity obligations made by him and the Company in connection with
the

41
<PAGE>
Merger and other related transactions, or if additional shares of Common
Stock are issued under the Company's existing employee benefit plans.

For a period ending on August 15, 2000, Mr. Stanley H. Durwood's children
have agreed to give an irrevocable proxy to the Secretary and each Assistant
Secretary of the Company to vote their shares of Common Stock in the
election of directors for each candidate in the same proportionate manner as
the aggregate votes cast in such elections by other holders of Common Stock
not affiliated with the Company.

(2) Until October 5, 1995, Mr. Edward D. Durwood served as Vice-Chairman of the
Board, President and a Director of the Company.

(3) Mr. Thomas A. Durwood directly owns 1,315,083 shares of the Common Stock and
indirectly owns 146,120 shares of Common Stock through The Thomas A. and
Barbara F. Durwood Family Investment Partnership, a California limited
partnership. Each of Mr. Thomas A. Durwood and his wife serve as trustees of
The Thomas A. Durwood and Barbara F. Durwood Family Trust, which is the
general partner of this partnership.

(4) Includes shares subject to presently exercisable options to purchase Common
Stock under the Company's 1983 and 1984 Stock Option Plans and the 1994
Stock Option and Incentive Plan, as follows: Mr. Stanley H. Durwood--152,500
shares; Mr. Peter C. Brown--224,000 shares; Mr. Philip M. Singleton--133,600
shares; Mr. Richard T. Walsh--29,500 shares; Mr. Richard M. Fay--1,125
shares; and all Executive Officers as a group--589,850 shares.

(5) After giving effect to the conversion of 500,000 shares of Class B Stock in
connection with the Offering.

(6) As reported in its Schedule 13G dated January 31, 1998. Of these shares,
EnTrust Capital, Inc. reports that it has shared voting power with respect
to 923,586 shares and shares dispositive power with respect to 1,397,776
shares.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company's authorized capital stock consists of 45,000,000 shares of
Common Stock, par value 66 2/3 CENTS per share, of which 18,453,434 shares were
outstanding as of May 15, 1998, 30,000,000 shares of Class B Stock of which
5,015,657 shares were outstanding as of May 15, 1998 and 10,000,000 shares of
Preferred Stock, par value 66 2/3 CENTS per share, none of which were issued and
outstanding as of May 15, 1998.

COMMON STOCK AND CLASS B STOCK

VOTING RIGHTS. The holders of Common Stock are entitled to one vote per
share and, except for the election of directors, vote together as a single class
with the Class B Stock, subject to the right to vote as a separate class as
required by law and on certain charter amendments affecting the number of
authorized shares of Common Stock or the par value or relative powers,
preferences or special rights thereof.

The holders of Class B Stock are entitled to ten votes per share and, except
for the election of directors, vote together with the Common Stock as a single
class, subject to the right to vote as a separate class as required by law and
on certain charter amendments affecting the number of authorized shares of Class
B Stock or the par value or relative powers, preferences or special rights
thereof.

Holders of Common Stock, voting separately as a class, with each share
having one vote for such purpose, generally have the right to elect 25% of the
Board. So long as any shares of Class B Stock

42
<PAGE>
remain outstanding, holders of Class B Stock, voting separately as a single
class, with each share of Class B Stock having one vote for such purpose,
generally have the right to elect 75% of the Board. If the total number of
shares of Class B Stock outstanding becomes less than 12 1/2% of the aggregate
number of shares of Common Stock and Class B Stock outstanding, then so long as
shares of Common Stock are listed on either the American Stock Exchange, The New
York Stock Exchange or The Nasdaq National Market, 75% of the Board otherwise
elected by holders of Class B Stock will be elected by holders of Common Stock
and Class B Stock voting together as a single class, with each share of Common
Stock having one vote per share and each share of Class B Stock having ten votes
per share. In the event that no shares of Class B Stock remain outstanding, the
holders of Common Stock may elect all of the Board, with each share having one
vote for such purpose. Holders of Common Stock and Class B Stock do not have
cumulative voting rights in elections of directors. Accordingly, the holder(s)
of the Company's capital stock representing more than 50% of the votes of each
class for the election of directors are capable of electing 100% of the
directors to be elected by such class.

Except as noted above, the Common Stock and Class B Stock vote as one class,
with each share of Common Stock having one vote per share and each share of
Class B Stock having ten votes per share. As a result of his holdings of Class B
Stock, Mr. Stanley H. Durwood controls the Company and has sufficient voting
power to authorize the issuance of additional shares of Common Stock and/ or
Class B Stock or the creation of senior classes of stock or to effect a merger,
sale of assets, "going private" or other corporate transaction.

CONVERSION RIGHTS. Each holder of Class B Stock is entitled to convert all
or any portion of such holder's shares of Class B Stock into the same number of
shares of Common Stock. Upon approval of the holders of a majority of the
outstanding shares of Class B Stock, a pro rata percentage of shares of Class B
Stock of each holder of record will be automatically converted into the same
number of shares of Common Stock. The Company's Certificate of Incorporation
requires the Company to reserve and keep available a sufficient number of
authorized but unissued shares of Common Stock to permit conversion of all
outstanding shares of Class B Stock.

PREEMPTIVE RIGHTS. Holders of Common Stock and Class B Stock have no
preemptive rights.

DIVIDEND AND LIQUIDATION RIGHTS. Holders of Common Stock and Class B Stock
are entitled to receive, pro rata per share, such dividends as the Board may
from time to time declare out of funds legally available for the payment of
dividends, subject to the prior rights of holders of any then outstanding
preferred stock. Upon any liquidation, dissolution or winding-up of the Company,
holders of Common Stock and Class B Stock are entitled to receive, pro rata per
share, any remaining assets of the Company available for distribution to
stockholders, subject to the prior rights of holders of any then outstanding
preferred stock.

CERTAIN STOCK TRANSACTIONS. No stock dividend, stock split, subscription
right, combination, subdivision or exchange may be paid or issued by the Company
to holders of Common Stock or 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 each
class outstanding (or subject to a subscription right) is increased or decreased
in like proportion. The Company may not merge or consolidate unless the terms
and conditions of the merger or consolidation provide that holders of Common
Stock and Class B Stock then outstanding receive, pro rata per share,
consideration of equal value.

CERTAIN ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's
Certificate of Incorporation, Bylaws and the Delaware General Corporation Law
may have the effect of discouraging unilateral tender offers or other attempts
to takeover and acquire the Company, thereby possibly limiting the opportunity
for the Company's stockholders to sell their shares at a premium over then
prevailing market prices. Certain of these provisions that may have an
anti-takeover effect are as follows:

43
<PAGE>
BLANK CHECK PREFERRED AND UNISSUED COMMON STOCK AND CLASS B STOCK. The
Company's Certificate of Incorporation authorizes the issuance of 45,000,000
shares of Common Stock, 30,000,000 shares of Class B Stock and 10,000,000 shares
of Preferred Stock. An effect of the existence of unissued stock may be to
enable the Board of Directors to render more difficult or discourage a
transaction to obtain control of the Company. This might occur were the Board to
cause shares to be issued in transactions that might make a takeover transaction
more costly to complete, as by diluting voting or other rights of the proposed
acquirer. In this regard, the Company's Certificate of Incorporation grants the
Board of Directors broad power to establish the rights and preferences of the
authorized and unissued preferred stock, one or more classes of which could be
issued entitling holders to vote separately as a class on any proposed merger or
consolidation, to convert such stock into a large number of shares of Common or
Class B Stock or other securities, to demand redemption under prescribed
circumstances related to a change of control or to exercise other rights
designed to impede a takeover.

DELAWARE "BUSINESS COMBINATION" STATUTE. The Company is subject to Section
203 of the Delaware General Corporation Law, which generally prohibits a
publicly held Delaware corporation from engaging in various "business
combination" transactions with any "interested shareholder" for a period of
three years after the date of the transaction in which the person became an
"interested shareholder," unless (i) the transaction is approved by the Board of
Directors prior to the date the interested shareholder obtained such status,
(ii) upon consummation of the transaction which resulted in the shareholder
becoming an "interested shareholder," the "interested shareholder" owned at
least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer, or (iii) on or subsequent to
such date the "business combination" is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the "interested shareholder." A "business combination" includes mergers, asset
sales and other transactions resulting in a financial benefit to a shareholder.
An "interested shareholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of a corporation's
voting stock. By virtue of the Company's decision not to elect out of the
statute's provisions, the statute applies to the Company. Mr. Stanley H. Durwood
is not an "interested stockholder" because he has beneficially owned more than
15% of the Company's stock since 1983. The statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to the Company and, accordingly, may discourage attempts to acquire the
Company.

INDEMNIFICATION OF DIRECTORS AND OFFICERS. Under Section 145 of the
Delaware General Corporation Law, a corporation has the power under specified
circumstances to indemnify its directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they were
or are such directors, officers, employees or agents, against expenses incurred
in any such action, suit or proceeding. The Company's Certificate of
Incorporation requires indemnification of directors and officers to the full
extent permitted by the Delaware General Corporation Law and provides that, in
any action by a claimant, the Company shall bear the burden of proof that the
claimant is not entitled to indemnification.

44
<PAGE>
Corporation Law (relating to liability for unauthorized acquisitions or
redemptions of, or dividends on, capital stock), or (iv) for any transaction
from which the director derived an improper personal benefit. The Certificate of
Incorporation of the Company contains the provisions permitted by Section
102(b)(7) of the Delaware General Corporation Law. The effect of these
provisions is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (iv) above.
The limitations described above, however, do not affect the ability of the
Company or its stockholders to seek non-monetary based remedies, such as an
injunction or recision, against a director for breach of his fiduciary duty nor
would such limitations limit liability under the Federal securities laws.

TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar of the
Common Stock is UMB Bank n.a., Kansas City, Missouri.

45
<PAGE>
LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Lathrop & Gage L.C., Kansas City, Missouri. Certain legal matters
will be passed upon for the Underwriters by Shearman & Sterling, New York, New
York. Certain matters will be passed upon for the Selling Stockholders by their
respective counsel. Mr. Raymond F. Beagle, Jr., a member of Lathrop & Gage L.C.,
is general counsel of the Company and a successor voting trustee under Mr.
Stanley H. Durwood's revocable voting trust.

EXPERTS

The consolidated balance sheets of AMC Entertainment Inc. and subsidiaries
as of April 2, 1998 and April 3, 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for the year (52 weeks) ended
April 2, 1998, the year (53 weeks) ended April 3, 1997, and the year (52 weeks)
ended March 28, 1996 included in this Prospectus, have been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.

The consolidated balance sheets of AMC Entertainment Inc. and subsidiaries
as of April 3, 1997 and March 28, 1996 and the related consolidated statements
of operations, stockholders' equity and cash flows for the year (53 weeks) ended
April 3, 1997 and the years (52 weeks) ended March 28, 1996 and March 30, 1995
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act") (the "Registration Statement"). This
Prospectus, which is part of the Registration Statement, does not contain all
the information set forth in the Registration Statement and the exhibits
thereto. For further information with respect to the Company and the Common
Stock, reference is made to the Registration Statement and such exhibits filed
therewith. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.

For further information with respect to the Company, and the Common Stock,
reference is made to the Registration Statement and such exhibits, copies of
which may be examined without charge at, or copies obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and will also be available for
inspection and copying at the regional offices of the Commission located at 7
World Trade Center, Suite 1300, New York, New York 10048 and at Citicorp Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511. The
Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
documents with the Commission, including the Company, and the address is
http://www.sec.gov.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. Such reports
and other information can be inspected and copied at prescribed rates at the
public reference facilities mentioned above.

The Company's Common Stock is listed on the American Stock Exchange and is
also listed also on the Pacific Stock Exchange. The Company's periodic reports
and proxy statements filed under the Exchange Act as well as other information
concerning the Company can be requested at the American

46
<PAGE>
Stock Exchange, 86 Trinity Place, New York, New York 10086 and at the Pacific
Stock Exchange, 301 Pine Street, Suite 1104, San Francisco, California 94104.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission (File No.
1-8747) are incorporated in this Prospectus by reference and hereby made a part
hereof:

1. The Company's Annual Report on Form 10-K for the fiscal year ended April
3, 1997;

2. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended July 3, 1997, October 2, 1997 and January 1, 1998;

3. The Company's Current Reports on Form 8-K filed, January 9, 1998,
December 9, 1997, August 22, 1997 and August 11, 1997;

4. The Company's proxy statement for use at its annual meeting of
stockholders held on December 2, 1997; and

5. The description of the Common Stock contained in the Company's Form 8-A
filed August 18, 1983.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of the initial registration statement
and prior to the effective date of the Registration Statement, and after the
effective date of the Registration Statement and prior to the termination of the
Offering by the Company to which the Registration Statement relates, shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing such documents.

Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated by
reference or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company will provide without charge to each person to whom a copy of the
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference, other than
exhibits to such documents. Requests should be directed to AMC Entertainment
Inc., Attention: Ms. Nancy L. Gallagher, Vice President and Secretary, 106 West
14th Street, Kansas City, Missouri 64105 (telephone: (816) 221-4000).

47
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
AUDITED FINANCIAL STATEMENTS: PAGE
- ----------------------------------------------------------------------------------------------------------- ---------
<S> <C>
Report of Independent Accountants........................................................................ F-2
Consolidated Statements of Operations for the year (52 weeks) ended April 2, 1998, the year (53 weeks)
ended April 3, 1997 and the year (52 weeks) ended March 28, 1996....................................... F-3
Consolidated Balance Sheets as of April 2, 1998 and April 3, 1997........................................ F-4
Consolidated Statements of Cash Flows for the year (52 weeks) ended April 2, 1998, the year (53 weeks)
ended April 3, 1997 and the year (52 weeks) ended March 28, 1996....................................... F-5
Consolidated Statements of Stockholders' Equity for the year (52 weeks) ended April 2, 1998, the year (53
weeks) ended April 3, 1997 and the year (52 weeks) ended March 28, 1996................................ F-6
Notes to Consolidated Financial Statements............................................................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

--------------

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF AMC ENTERTAINMENT INC.
KANSAS CITY, MISSOURI

--------------

We have audited the accompanying consolidated balance sheets of AMC
Entertainment Inc. and subsidiaries as of April 2, 1998 and April 3, 1997, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year (52 weeks) ended April 2, 1998, the year (53 weeks) ended
April 3, 1997 and the year (52 weeks) ended March 28, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AMC
Entertainment Inc. and subsidiaries as of April 2, 1998 and April 3, 1997, and
the consolidated results of their operations and their cash flows for the year
(52 weeks) ended April 2, 1998, the year (53 weeks) ended April 3, 1997 and the
year (52 weeks) ended March 28, 1996, in conformity with generally accepted
accounting principles.

/s/ COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
May 1, 1998

F-2
<PAGE>
AMC ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
APRIL 2, APRIL 3, MARCH 28,
1998 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues
Admissions............................................. $ 553,571 $ 492,951 $ 431,361
Concessions............................................ 256,017 225,167 196,645
Other.................................................. 37,207 31,479 27,966
----------------- ----------------- -----------------
Total revenues....................................... 846,795 749,597 655,972
Expenses
Film exhibition costs.................................. 299,926 258,809 227,780
Concession costs....................................... 42,062 36,748 30,417
Other.................................................. 343,552 284,445 233,161
----------------- ----------------- -----------------
Total cost of operations............................. 685,540 580,002 491,358
General and administrative............................. 54,354 56,647 52,059
Depreciation and amortization.......................... 70,117 52,572 42,087
Impairment of long-lived assets........................ 46,998 7,231 1,799
----------------- ----------------- -----------------
Total expenses....................................... 857,009 696,452 587,303
----------------- ----------------- -----------------
Operating income (loss).............................. (10,214) 53,145 68,669
Other expense (income)
Interest expense
Corporate borrowings................................... 26,353 12,016 18,099
Capital lease obligations.............................. 9,326 10,006 10,729
Investment income........................................ (1,090) (856) (7,052)
Loss (gain) on disposition of assets..................... (3,704) 84 222
----------------- ----------------- -----------------
Earnings (loss) before income taxes and extraordinary
item................................................... (41,099) 31,895 46,671
Income tax provision..................................... (16,600) 12,900 19,300
----------------- ----------------- -----------------
Earnings (loss) before extraordinary item................ (24,499) 18,995 27,371
Extraordinary item--Loss on extinguishment of debt (net
of income tax benefit of $13,400)...................... -- -- (19,350)
----------------- ----------------- -----------------
Net earnings (loss)...................................... $ (24,499) $ 18,995 $ 8,021
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Preferred dividends...................................... 4,846 5,907 7,000
----------------- ----------------- -----------------
Net earnings (loss) for common shares.................... $ (29,345) $ 13,088 $ 1,021
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Earnings (loss) per share before
extraordinary item:
Basic.................................................. $ (1.59) $ .75 $ 1.23
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Diluted................................................ $ (1.59) $ .74 $ 1.15
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Earnings (loss) per share:
Basic.................................................. $ (1.59) $ .75 $ .06
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Diluted................................................ $ (1.59) $ .74 $ .34
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>

See Notes to Consolidated Financial Statements.

F-3
<PAGE>
AMC ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
APRIL 2, APRIL 3,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................................................. $ 9,881 $ 24,715
Receivables, net of allowance for doubtful accounts of $706 as of April 2, 1998 and
$704 as of April 3, 1997............................................................ 13,540 9,837
Reimbursable construction advances.................................................... 58,488 33,193
Other current assets.................................................................. 25,736 16,769
----------- -----------
Total current assets................................................................ 107,645 84,514

Property, net........................................................................... 562,158 543,058
Intangible assets, net.................................................................. 22,066 28,679
Other long-term assets.................................................................. 103,911 62,804
----------- -----------
Total assets........................................................................ $ 795,780 $ 719,055
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................................... $ 72,633 $ 61,876
Construction payables................................................................. 24,588 26,491
Accrued expenses and other liabilities................................................ 72,598 43,301
Current maturities of corporate borrowings and capital lease obligations.............. 4,017 3,441
----------- -----------
Total current liabilities........................................................... 173,836 135,109

Corporate borrowings.................................................................... 348,990 315,046
Capital lease obligations............................................................... 50,605 55,237
Other long-term liabilities............................................................. 82,894 43,651
----------- -----------
Total liabilities................................................................... 656,325 549,043

Commitments and contingencies

Stockholders' equity:
$1.75 Cumulative Convertible Preferred Stock, 66 2/3 CENTS par value; 1,800,331 and
3,303,600 shares issued and outstanding as of April 2, 1998 and April 3, 1997,
respectively (aggregate liquidation preference of $45,008 and $82,590 as of April 2,
1998 and April 3, 1997, respectively)............................................... 1,200 2,202
Common Stock, 66 2/3 CENTS par value; 15,376,821 and 6,604,469 shares issued as of
April 2, 1998 and April 3, 1997, respectively....................................... 10,251 4,403
Convertible Class B Stock, 66 2/3 CENTS par value; 5,015,657 and 11,157,000 shares
issued and outstanding as of April 2, 1998 and April 3, 1997, respectively.......... 3,344 7,438
Additional paid-in capital.............................................................. 107,676 107,781
Foreign currency translation adjustment................................................. (3,689) (2,048)
Retained earnings....................................................................... 21,042 50,605
----------- -----------
139,824 170,381
Less--Common Stock in treasury, at cost, 20,500 shares as of April 2, 1998 and April
3, 1997............................................................................. 369 369
----------- -----------
Total stockholders' equity.......................................................... 139,455 170,012
----------- -----------
Total liabilities and stockholders' equity.......................................... $ 795,780 $ 719,055
----------- -----------
----------- -----------
</TABLE>

See Notes to Consolidated Financial Statements.

F-4
<PAGE>
AMC ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)

<TABLE>
<CAPTION>
52 WEEKS ENDED 53 WEEKS ENDED 52 WEEKS ENDED
APRIL 2, APRIL 3, MARCH 28,
1998 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)..................................... $ (24,499) $ 18,995 $ 8,021
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Impairment of long-lived assets..................... 46,998 7,231 1,799
Depreciation and amortization....................... 70,117 52,572 42,087
Deferred income taxes............................... (37,325) (2,476) (1,328)
Extraordinary item.................................. -- -- 19,350
Loss (gain) on disposition of long-term assets...... (3,704) 84 222
Change in assets and liabilities:
Receivables....................................... (3,703) (1,451) (1,537)
Other current assets.............................. (4,835) 1,578 10,167
Accounts payable.................................. 6,066 16,751 6,751
Accrued expenses and other liabilities............ 42,231 13,283 7,640
Other, net.......................................... (547) 2,772 2,968
----------------- ----------------- -----------------
Net cash provided by operating activities............... 90,799 109,339 96,140
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (389,217) (253,380) (120,796)
Proceeds from sale/leasebacks........................... 283,800 -- --
Investments in real estate.............................. (4,349) (7,692) --
Purchases of available for sale investments............. -- -- (424,134)
Proceeds from maturities of available for sale
investments........................................... -- -- 493,278
Proceeds from disposition of long-term assets........... 18,111 15,054 2,243
Net change in reimbursable construction advances........ (25,295) (21,076) (10,394)
Other, net.............................................. (16,264) (16,823) (7,045)
----------------- ----------------- -----------------
Net cash used in investing activities................... (133,214) (283,917) (66,848)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under Credit Facility....... 40,000 (10,000) 120,000
Proceeds from issuance of 9 1/2% Senior Subordinated
Notes................................................. -- 198,938 --
Principal payments under capital lease obligations and
other................................................. (3,385) (2,835) (2,859)
Repurchase of 11 7/8% Senior and 12 5/8% Senior
Subordinated Notes.................................... (5,817) -- (220,734)
Cash overdrafts......................................... 4,691 (11,673) 22,848
Change in construction payables......................... (1,903) 24,735 707
Proceeds from exercise of options on Common Stock....... 647 140 878
Dividends paid on $1.75 Preferred Stock................. (5,064) (5,993) (7,000)
Other, net.............................................. (1,466) (4,595) (3,570)
----------------- ----------------- -----------------
Net cash provided by (used in) financing activities..... 27,703 188,717 (89,730)
----------------- ----------------- -----------------
Effect of exchange rate changes on cash and
equivalents........................................... (122) (219) --
----------------- ----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS........... (14,834) 13,920 (60,438)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR................. 24,715 10,795 71,233
----------------- ----------------- -----------------
CASH AND EQUIVALENTS AT END OF YEAR....................... $ 9,881 $ 24,715 $ 10,795
----------------- ----------------- -----------------
----------------- ----------------- -----------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized of $8,264, $3,344
and $3,003)......................................... $ 42,901 $ 24,188 $ 34,775
Income taxes, net..................................... 22,287 6,285 9,787
</TABLE>

See Notes to Consolidated Financial Statements.

F-5
<PAGE>
AMC ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
$1.75 CUMULATIVE
CONVERTIBLE PREFERRED CONVERTIBLE
STOCK COMMON STOCK CLASS B STOCK ADDITIONAL
----------------------- ----------------------- ------------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1995................ 4,000,000 $ 2,667 5,306,380 $ 3,538 11,157,000 $ 7,438 $ 107,163
Net earnings......................... -- -- -- -- -- -- --
Exercise of options on Common Stock.. -- -- 82,500 55 -- -- 823
Dividends declared: $1.75 Preferred
Stock.............................. -- -- -- -- -- -- --
Acquisition of Common Stock in
Treasury........................... -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- ----------- -----------
Balance, March 28, 1996................ 4,000,000 2,667 5,388,880 3,593 11,157,000 7,438 107,986
Net earnings......................... -- -- -- -- -- -- --
Exercise of options on Common Stock.. -- -- 15,000 10 -- -- 130
$1.75 Preferred Stock conversions.... (696,400) (465) 1,200,589 800 -- -- (335)
Dividends declared: $1.75 Preferred
Stock.............................. -- -- -- -- -- -- --
Foreign currency translation
adjustment......................... -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- ----------- -----------
Balance, April 3, 1997................. 3,303,600 2,202 6,604,469 4,403 11,157,000 7,438 107,781
Net loss............................. -- -- -- -- -- -- --
Exercise of options on Common Stock.. -- -- 39,400 26 -- -- 621
$1.75 Preferred Stock conversions.... (1,503,269) (1,002) 2,591,614 1,728 -- -- (726)
Dividends declared: $1.75 Preferred
Stock.............................. -- -- -- -- -- -- --
Cancellation of Common and Class B
Stock owned by Durwood, Inc........ -- -- (2,641,951) (1,762) (11,157,000) (7,438) --
Issuance of Common and Class B
Stock.............................. -- -- 8,783,289 5,856 5,015,657 3,344 --
Foreign currency translation
adjustment......................... -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- ----------- -----------
Balance, April 2, 1998................. 1,800,331 $ 1,200 15,376,821 $ 10,251 5,015,657 $ 3,344 $ 107,676
---------- ----------- ---------- ----------- ----------- ----------- -----------
---------- ----------- ---------- ----------- ----------- ----------- -----------

FOREIGN COMMON STOCK IN TREASURY
CURRENCY TOTAL
TRANSLATION RETAINED ------------------------ STOCKHOLDERS'
ADJUSTMENT EARNINGS SHARES AMOUNT EQUITY
------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1995................ $ -- $ 36,582 -- $ -- $ 157,388
Net earnings......................... -- 8,021 -- -- 8,021
Exercise of options on Common Stock.. -- -- -- -- 878
Dividends declared: $1.75 Preferred
Stock.............................. -- (7,000) -- -- (7,000)
Acquisition of Common Stock in
Treasury........................... -- -- 20,500 (369) (369)
------------- ----------- ----------- ----------- --------------
Balance, March 28, 1996................ -- 37,603 20,500 (369) 158,918
Net earnings......................... -- 18,995 -- -- 18,995
Exercise of options on Common Stock.. -- -- -- -- 140
$1.75 Preferred Stock conversions.... -- -- -- -- --
Dividends declared: $1.75 Preferred
Stock.............................. -- (5,993) -- -- (5,993)
Foreign currency translation
adjustment......................... (2,048) -- -- -- (2,048)
------------- ----------- ----------- ----------- --------------
Balance, April 3, 1997................. (2,048) 50,605 20,500 (369) 170,012
Net loss............................. -- (24,499) -- -- (24,499)
Exercise of options on Common Stock.. -- -- -- -- 647
$1.75 Preferred Stock conversions.... -- -- -- -- --
Dividends declared: $1.75 Preferred
Stock.............................. -- (5,064) -- -- (5,064)
Cancellation of Common and Class B
Stock owned by Durwood, Inc........ -- -- -- -- (9,200)
Issuance of Common and Class B
Stock.............................. -- -- -- -- 9,200
Foreign currency translation
adjustment......................... (1,641) -- -- -- (1,641)
------------- ----------- ----------- ----------- --------------
Balance, April 2, 1998................. $ (3,689) $ 21,042 20,500 $ (369) $ 139,455
------------- ----------- ----------- ----------- --------------
------------- ----------- ----------- ----------- --------------
</TABLE>

See Notes to Consolidated Financial Statements

F-6
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

AMC Entertainment Inc. ("AMCE") is a holding company, which through its
direct and indirect subsidiaries, including American Multi-Cinema, Inc. ("AMC")
and its subsidiaries (collectively with AMCE, unless the context otherwise
requires, the "Company"), is principally involved in the operation of motion
picture theatres throughout the United States and in Japan and Portugal. The
Company is also involved in the business of providing on-screen advertising and
other services to AMC and other theatre circuits through a wholly-owned
subsidiary, National Cinema Network, Inc.

USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although these estimates are based on
management's knowledge of current events and actions it may undertake in the
future, they may ultimately differ from actual results.

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of AMCE and all subsidiaries. All significant intercompany balances
and transactions have been eliminated.

FISCAL YEAR: The Company has a 52/53 week fiscal year ending on the
Thursday closest to the last day of March. The 1998 fiscal year reflects a 52
week period, fiscal year 1997 reflects a 53 week period and fiscal year 1996
reflects a 52 week period. Fiscal year 1999 will reflect a 52 week period.

REVENUES AND FILM EXHIBITION COSTS: Revenues are recognized when admissions
and concessions sales are received at the theatres. Film exhibition costs are
recognized based on the applicable box office receipts and the terms of the film
licenses.

CASH AND EQUIVALENTS: Cash and equivalents consist of cash on hand and
temporary cash investments with original maturities of less than thirty days.
The Company invests excess cash in deposits with major banks and in temporary
cash investments. Such investments are made only in instruments issued or
enhanced by high quality financial institutions (investment grade or better).
Amounts invested in a single institution are limited to minimize risk.

Under the Company's cash management system, checks issued but not presented
to banks frequently result in overdraft balances for accounting purposes and are
classified within accounts payable in the balance sheet. The amount of these
checks included in accounts payable as of April 2, 1998 and April 3, 1997 was
$15,866,000 and $11,175,000, respectively.

REIMBURSABLE CONSTRUCTION ADVANCES: Reimbursable construction advances
consist of amounts due from developers to fund a portion of the construction
costs of new theatres that are to be operated by the Company pursuant to lease
agreements. The amounts are repaid by the developers either during construction
or shortly after completion of the theatre.

F-7
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY: Property is recorded at cost. The Company uses the straight-line
method in computing depreciation and amortization for financial reporting
purposes and accelerated methods, with respect to certain assets, for income tax
purposes. The estimated useful lives are generally as follows:

<TABLE>
<S> <C>
Buildings and improvements.................. 20 to 40 years
Leasehold improvements...................... 5 to 25 years
Furniture, fixtures and equipment........... 3 to 10 years
</TABLE>

Expenditures for additions (including interest during construction), major
renewals and betterments are capitalized, and expenditures for maintenance and
repairs are charged to expense as incurred. The cost of assets retired or
otherwise disposed of and the related accumulated depreciation and amortization
are eliminated from the accounts in the year of disposal. Gains or losses
resulting from property disposals are credited or charged to operations
currently.

INTANGIBLE ASSETS: Intangible assets are recorded at cost and are comprised
of lease rights, amounts assigned to theatre leases assumed under favorable
terms, and location premiums on acquired theatres, both of which are being
amortized on a straight-line basis over the estimated remaining useful life of
the theatre. Accumulated amortization on intangible assets was $39,381,000 and
$41,690,000 as of April 2, 1998 and April 3, 1997, respectively.

OTHER LONG-TERM ASSETS: Other long-term assets are comprised principally of
costs incurred in connection with the issuance of debt securities which are
being amortized over the respective life of the issue; investments in real
estate; preopening costs related to new theatres which are being amortized over
two years; and long-term deferred income taxes.

IMPAIRMENT OF LONG-LIVED ASSETS: The Company reviews long-lived assets,
including intangibles, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. If the sum of the estimated future cash flows, undiscounted and
without interest charges, is less than the carrying amount of the asset, an
impairment loss is recognized on the amount by which the carrying value of the
asset exceeds its estimated fair value. Assets are evaluated for impairment on
an individual theatre basis, which management believes is the lowest level for
which there are identifiable cash flows. The fair value of assets is determined
as either the expected selling price less selling costs or the present value of
the estimated future cash flows.

During 1996, the Company recognized a non-cash impairment loss of $1,799,000
($1,061,000 after tax, or $.06 per share) on four multiplexes with 21 screens.
During 1997, as a result of expected declines in future cash flows of certain
theatres, the Company recognized a non-cash impairment loss of $7,231,000
($4,266,000 after tax, or $.24 per share) on 18 multiplexes with 82 screens.
During 1998, the financial results of certain multiplexes of the Company were
significantly less than anticipated due primarily to competition from newer
megaplexes. As a result, the Company recognized an impairment loss of
$46,998,000 ($27,728,000 after tax, or $1.50 per share) on 59 multiplexes with
412 screens.

The reduced carrying amount of the impaired assets from 1998 will result in
reduced depreciation and amortization in future periods. For 1998, depreciation
and amortization was reduced by approximately $10,500,000.

F-8
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION: Operations outside the United States are
generally measured using the local currency as the functional currency. Assets
and liabilities are translated at the rates of exchange at the balance sheet
date. Income and expense items are translated at average rates of exchange. The
resultant translation adjustments are included in foreign currency translation
adjustment, a separate component of stockholders' equity. Gains and losses from
foreign currency transactions are included in net earnings and have not been
material.

EARNINGS PER SHARE: During 1998, the Company adopted the provisions of
Statement of Financial Standards No. 128 ("SFAS 128"), EARNINGS PER SHARE. Under
SFAS 128, basic earnings per share is computed by dividing net earnings (loss)
for common shares by the weighted-average number of common shares outstanding.
Diluted earnings per share includes the effects of the conversion of the $1.75
Cumulative Convertible Preferred Stock, outstanding stock options and
contingently issuable shares, if dilutive. All prior period earnings per share
data has been restated to conform with the new statement.

STOCK-BASED COMPENSATION: The Company accounts for stock-based awards using
the intrinsic value-based method.

NEW ACCOUNTING PRONOUNCEMENTS: During 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130
("SFAS 130"), REPORTING COMPREHENSIVE INCOME, Statement of Financial Accounting
Standards No. 131 ("SFAS 131"), DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION and Statement of Financial Accounting Standards No. 132
("SFAS 132"), EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT
BENEFITS. 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. SFAS 132 requires disclosures about
pension and other postretirement benefit plans in a company's financial
statements and is effective for fiscal years beginning after December 15, 1997.
These statements will become effective for the Company in 1999. Adoption of
these statements will not impact the Company's consolidated financial position,
results of operations or cash flows.

During 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 ("SOP 98-1"), ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1 requires companies to
capitalize certain internal-use software costs once certain criteria are met.
SOP 98-1 is effective for fiscal years beginning after December 15, 1998.
Adoption of this statement is not expected to have a material impact on the
Company's consolidated financial position, results of operations or cash flows.

In April of 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), REPORTING ON THE COSTS OF
START-UP ACTIVITIES. SOP 98-5 requires costs of start-up activities to be
expensed when incurred. The Company currently capitalizes such costs and
amortizes them over a two-year period. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. The Company will adopt this statement in
2000, which will result in a cumulative effect adjustment to the Company's
results of operations and financial position based on balances as of April 1,
1999. Had the

F-9
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company adopted SOP 98-5 at the beginning of fiscal 1999, such adjustment would
have been approximately $10.6 million, before taxes.

PRESENTATION: Certain amounts have been reclassified from prior period
consolidated financial statements to conform with the current year presentation.

NOTE 2--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. During 1998, a company affiliated with Stanley H.
Durwood, Co-Chairman of the Board of Directors, Chief Executive Officer and
majority voting stockholder, and members of his family reimbursed the Company
$1,000,000 for expenses related to the Merger.

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 3--PROPERTY

A summary of property is as follows (in thousands):

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Property owned:
Land................................................................................ $ 32,102 $ 60,090
Buildings and improvements.......................................................... 115,260 221,396
Leasehold improvements.............................................................. 320,410 211,720
Furniture, fixtures and equipment................................................... 364,022 264,619
----------- -----------
831,794 757,825
Less-accumulated depreciation and amortization.......................................... 288,503 246,476
----------- -----------
543,291 511,349
Property leased under capital leases:
Buildings and improvements.......................................................... 63,955 66,074
Less-accumulated amortization....................................................... 45,088 34,365
----------- -----------
18,867 31,709
----------- -----------
$ 562,158 $ 543,058
----------- -----------
----------- -----------
</TABLE>

F-10
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 3--PROPERTY (CONTINUED)
Included in property is $65,914,000 and $83,558,000 of construction in
progress as of April 2, 1998 and April 3, 1997, respectively.

NOTE 4--SUPPLEMENTAL BALANCE SHEET INFORMATION

Other assets and liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Other current assets:
Prepaid rent........................................................................ $ 10,843 $ 7,366
Deferred income taxes............................................................... 10,542 6,376
Other............................................................................... 4,351 3,027
----------- -----------
$ 25,736 $ 16,769
----------- -----------
----------- -----------
Other long-term assets:
Investments in real estate.......................................................... $ 14,702 $ 15,329
Deferred financing costs............................................................ 8,098 7,539
Deferred income taxes............................................................... 56,972 23,813
Preopening costs.................................................................... 10,614 6,519
Other............................................................................... 13,525 9,604
----------- -----------
$ 103,911 $ 62,804
----------- -----------
----------- -----------
Accrued expenses and other liabilities:
Taxes other than income............................................................. $ 13,952 $ 10,030
Income taxes........................................................................ 4,180 6,017
Interest............................................................................ 1,498 1,512
Payroll and vacation................................................................ 5,297 4,982
Casualty claims and premiums........................................................ 5,295 4,655
Deferred income..................................................................... 22,056 10,042
Accrued bonus....................................................................... 5,621 3,974
Other............................................................................... 14,699 2,089
----------- -----------
$ 72,598 $ 43,301
----------- -----------
----------- -----------
</TABLE>

F-11
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 5--CORPORATE BORROWINGS AND CAPITAL LEASE OBLIGATIONS

A summary of corporate borrowings and capital lease obligations is as
follows (in thousands):

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
$425 million Credit Facility due 2004................................................... $ 150,000 $ 110,000
11 7/8% Senior Notes due 2000........................................................... -- 615
9 1/2% Senior Subordinated Notes due 2009............................................... 198,990 198,940
12 5/8% Senior Subordinated Notes due 2002.............................................. -- 4,882
Capital lease obligations, interest ranging from 7 1/4% to 20%.......................... 54,622 58,652
Other indebtedness...................................................................... -- 635
----------- -----------
403,612 373,724
Less-current maturities................................................................. 4,017 3,441
----------- -----------
$ 399,595 $ 370,283
----------- -----------
----------- -----------
</TABLE>

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 on April 10, 2004. The commitment
thereunder will be reduced by $25 million on each of December 31, 2002, March
31, 2003, June 30, 2003 and September 30, 2003 and by $50 million on December
31, 2003. As of April 2, 1998, the Company had outstanding borrowings of
$150,000,000 under the Credit Facility at an average interest rate of 6.2% per
annum and approximately $245,000,000 was available for borrowing under the
Credit Facility.

Covenants under 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. In addition, the Credit Facility contains certain financial covenants.
As of April 2, 1998, the Company was in compliance with all financial covenants
relating to the Credit Facility.

Costs related to the establishment of the Credit Facility were capitalized
and are charged to interest expense over the life of the Credit Facility.
Unamortized issuance costs of $2,970,000 as of April 2, 1998 are included in
other long-term assets.

On March 19, 1997, the Company sold $200 million of 9 1/2% Senior
Subordinated Notes due 2009 (the "Notes"). As required by the Indenture to the
Notes, the Company consummated a registered offer on August 5, 1997 to exchange
the Notes for notes of the Company with terms identical in all material respects
to the Notes. The Notes bear interest at the rate of 9 1/2% per annum, payable
in March and September. The Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after March 15, 2002 at 104.75% of the
principal amount thereof, declining ratably to 100% of the principal amount
thereof on or after March 15, 2006, plus in each case interest accrued to the
redemption date. Upon a change of control (as defined in the Indenture), each
holder of the Notes will have the right to require the Company to repurchase
such holder's Notes at a price equal to 101% of the principal amount thereof
plus accrued and unpaid interest to the date of repurchase. The Notes are
subordinated to all existing and future senior indebtedness, as defined in the
Indenture, of the Company.

F-12
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 5--CORPORATE BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
The Indenture contains certain covenants that, among other things, restrict
the ability of the Company and its subsidiaries to incur additional indebtedness
and pay dividends or make distributions in respect of their capital stock. If
the Notes attain "investment grade status" (as defined in the Indenture), the
covenants in the Indenture limiting the Company's ability to incur additional
indebtedness and pay dividends will cease to apply. As of April 2, 1998, the
Company was in compliance with all financial covenants relating to the Notes.

The discount on the Notes is being amortized to interest expense following
the interest method. Costs related to the issuance of the Notes were capitalized
and are charged to interest expense, following the interest method, over the
life of the securities. Unamortized issuance costs of $5,128,000 as of April 2,
1998 are included in other long-term assets.

On December 28, 1995, the Company completed the redemption of $99,383,000 of
its outstanding 11 7/8% Senior Notes due 2000 (the "Senior Notes") at a price of
$1,117.90 per $1,000 principal amount and $95,096,000 of its outstanding 12 5/8%
Senior Subordinated Notes due 2002 (the "12 5/8% Senior Subordinated Notes") at
a price of $1,144.95 per $1,000 principal amount. In addition, the terms of the
Indentures governing the remaining Senior Notes and 12 5/8% Senior Subordinated
Notes were amended to eliminate certain restrictive covenants. Premiums paid to
redeem the Senior Notes and 12 5/8% Senior Subordinated Notes, together with the
write-off of unamortized debt issue costs and other costs directly related to
the debt redemptions, resulted in an extraordinary loss of $19,350,000, net of
income tax benefit of $13,400,000. The extraordinary loss reduced earnings per
share by $1.17 for the year (52 weeks) ended March 28, 1996.

On November 14, 1997, the Company completed the redemption of $617,000 of
its outstanding Senior Notes and $4,904,000 of its outstanding 12 5/8% Senior
Subordinated Notes.

Minimum annual payments required under existing capital lease obligations
(net present value thereof) and maturities of corporate borrowings as of April
2, 1998, are as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL LEASE OBLIGATIONS
---------------------------------
MINIMUM NET
LEASE LESS PRESENT CORPORATE
PAYMENTS INTEREST VALUE BORROWINGS TOTAL
----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1999.............................................. $ 12,638 $ 8,621 $ 4,017 $ -- $ 4,017
2000.............................................. 12,049 7,943 4,106 -- 4,106
2001.............................................. 11,777 7,224 4,553 -- 4,553
2002.............................................. 10,949 6,476 4,473 -- 4,473
2003.............................................. 10,332 5,715 4,617 -- 4,617
Thereafter........................................ 59,503 26,647 32,856 348,990 381,846
----------- --------- --------- ----------- -----------
Total............................................. $ 117,248 $ 62,626 $ 54,622 $ 348,990 $ 403,612
----------- --------- --------- ----------- -----------
----------- --------- --------- ----------- -----------
</TABLE>

The Company maintains a letter of credit in the normal course of its business.
The unused portion of the letter of credit was $3,108,000 as of April 2, 1998.

F-13
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 6--STOCKHOLDERS' EQUITY

The authorized common stock of AMCE consists of two classes of stock. Except
for the election of directors, each holder of Common Stock (66 2/3 CENTS par
value; 45,000,000 shares authorized) is entitled to one vote per share, and each
holder of Class B Stock (66 2/3 CENTS par value; 30,000,000 shares authorized)
is entitled to 10 votes per share. Common stockholders voting as a class are
presently entitled to elect two of the seven members of AMCE's Board of
Directors with Class B stockholders electing the remainder.

Holders of the Company's stock have no pre-emptive or subscription rights.
Holders of Common Stock have no conversion rights, but holders of Class B Stock
may elect to convert at any time on a share-for-share basis into Common Stock.

The Company has authorized 10,000,000 shares of Preferred Stock
(66 2/3 CENTS par value), of which 1,800,331 shares of $1.75 Cumulative
Convertible Preferred Stock (66 2/3 CENTS par value) (the "Convertible Preferred
Stock") are issued and outstanding. Dividends are payable quarterly at an annual
rate of $1.75 per share.

The Convertible Preferred Stock has preference in liquidation in the amount
of $25 per share plus accrued and unpaid dividends. The Convertible Preferred
Stock is convertible at the option of the holder into shares of Common Stock at
a conversion price of $14.50 per share of Common Stock, subject to change in
certain events. During 1998 and 1997, various holders of the Company's
Convertible Preferred Stock converted 1,503,269 and 696,400 shares into
2,591,614 and 1,200,589 shares, respectively, of Common Stock at a conversion
rate of 1.724 shares of Common Stock for each share of Convertible Preferred
Stock. In lieu of conversion, the Company may, at its option, pay to the holder
cash equal to the then market value of the Common Stock. The Company may redeem
in whole or in part the Convertible Preferred Stock at a redemption price
beginning at $26.00 per share after March 15, 1997, declining ratably to $25.00
per share after March 15, 2001.

STOCK-BASED COMPENSATION

In November 1994, AMCE adopted a stock option and incentive plan (the "1994
Plan"). This plan provides for three basic types of awards: (i) grants of stock
options which are either incentive or non-qualified stock options, (ii) grants
of stock awards, which may be either performance or restricted stock awards, and
(iii) performance unit awards. The number of shares of Common Stock which may be
sold or granted under the plan may not exceed 1,000,000 shares. The 1994 Plan
provides that the exercise price for stock options may not be less than the fair
market value of the stock at the date of grant and unexercised options expire no
later than ten years after date of grant. Options issued under the 1994 Plan
vest over two years from the date of issuance.

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION.
Accordingly, no compensation expense has been recognized for the Company's
stock-based compensation other than for performance-based

F-14
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
stock awards. In 1997 and 1996, the Company granted stock awards to certain
individuals which are issuable at the end of a performance period ended April 2,
1998 based on certain performance criteria. No performance-based stock awards
were earned at the end of the performance period. The Company recognized
compensation expense for performance stock awards of ($1,358,000), $586,000 and
$772,000 in 1998, 1997 and 1996, respectively. Had compensation expense for the
Company's stock options and awards been determined based on the fair value at
the grant dates, the Company's net earnings (loss) and net earnings (loss) for
common shares would have been the following (in thousands, except per share
data):

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Net earnings (loss)
As reported.................................................................. $ (24,499) $ 18,995 $ 8,021
Pro forma.................................................................... $ (26,007) $ 18,664 $ 8,210
Net earnings (loss) per common share
As reported.................................................................. $ (1.59) $ .75 $ .06
Pro forma.................................................................... $ (1.67) $ .73 $ .07
</TABLE>

The following table reflects the weighted average fair value per option
granted during the year, as well as the significant weighted average assumptions
used in determining fair value using the Black-Scholes option-pricing model:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Fair value on grant date........................................................... $ 9.69 $ 11.63 $ 6.96
Risk-free interest rate............................................................ 6.0% 6.2% 5.6%
Expected life (years).............................................................. 5 5 5
Expected volatility................................................................ 42.0% 42.9% 46.0%
Expected dividend yield............................................................ -- -- --
</TABLE>

F-15
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
A summary of stock option activity under all plans is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---------------------------- ---------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE PRICE NUMBER OF EXERCISE PRICE NUMBER OF EXERCISE PRICE
SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE
----------- --------------- ----------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year..................... 558,500 $ 12.47 487,500 $ 9.67 776,500 $ 9.57
Granted.................... 2,250 $ 21.21 103,250 $ 24.80 23,250 $ 14.50
Canceled................... (1,500) $ 26.38 (17,250) $ 10.04 (229,750) $ 9.46
Exercised.................. (39,400) $ 9.49 (15,000) $ 9.38 (82,500) $ 10.65
----------- ------- ----------- ------- ---------- -------
Outstanding at
end of year.............. 519,850 $ 12.69 558,500 $ 12.47 487,500 $ 9.67
----------- ------- ----------- ------- ---------- -------
----------- ------- ----------- ------- ---------- -------
Exercisable at
end of year.............. 487,975 $ 11.90 365,875 $ 10.51 233,250 $ 9.45
----------- ------- ----------- ------- ---------- -------
----------- ------- ----------- ------- ---------- -------
Available for grant at end
of year.................. 845,750 630,500 746,500
----------- ----------- ----------
----------- ----------- ----------
</TABLE>

The following table summarizes information about stock options as of April
2, 1998:

<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS
--------------------------------------------------- EXERCISABLE STOCK OPTIONS
WEIGHTED-AVERAGE -------------------------------
RANGE OF NUMBER OF REMAINING WEIGHTED-AVERAGE NUMBER OF WEIGHTED-AVERAGE
EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
- ----------------------------- ----------- ------------------ ------------------ ----------- ------------------
<S> <C> <C> <C> <C> <C>
$ 9.25 to $11.75 398,600 5.3 years $ 9.48 398,600 $ 9.48
$14.50 to $20.75 29,250 7.8 years $ 16.26 22,500 $ 15.43
$22.13 to $26.38 92,000 8.1 years $ 25.47 66,875 $ 25.18
----------- ---------- ------- ----------- -------
$ 9.25 to $26.38 519,850 6.0 years $ 12.69 487,975 $ 11.90
----------- ---------- ------- ----------- -------
----------- ---------- ------- ----------- -------
</TABLE>

F-16
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 7--EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share data):

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Numerator:
Earnings (loss) before extraordinary item............... $ (24,499) $ 18,995 $ 27,371
Less: Preferred dividends............................... 4,846 5,907 7,000
---------- --------- ---------
Earnings (loss) before extraordinary item for basic
earnings per share.................................... (29,345) 13,088 20,371
Convertible Preferred Stock............................. -- -- 7,000
---------- --------- ---------
Earnings (loss) before extraordinary item for diluted
earnings per share.................................... $ (29,345) $ 13,088 $ 27,371
---------- --------- ---------
---------- --------- ---------

Denominator:
Shares for basic earnings per share--average shares
outstanding........................................... 18,477 17,489 16,513
Convertible Preferred Stock............................. -- -- 6,896
Stock options........................................... -- 237 283
Contingently issuable shares............................ -- 58 49
---------- --------- ---------
Shares for diluted earnings per share................... 18,477 17,784 23,741
---------- --------- ---------
---------- --------- ---------
Basic earnings per share before extraordinary item........ $ (1.59) $ 0.75 $ 1.23
---------- --------- ---------
---------- --------- ---------
Diluted earnings per share before extraordinary item...... $ (1.59) $ 0.74 $ 1.15
---------- --------- ---------
---------- --------- ---------
</TABLE>

In 1998 and 1997, dividends and shares from conversion of Convertible
Preferred Stock were excluded from the diluted earnings per share before
extraordinary item calculation because they were anti-dilutive. In 1998, shares
from options to purchase shares of Common Stock were excluded from the diluted
earnings per share before extraordinary item calculation because they were
anti-dilutive. In 1998, contingently issuable shares were excluded from the
diluted earnings per share calculation because the conditions necessary for
their issuance were not satisfied.

F-17
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 8--INCOME TAXES

Income taxes reflected in the Consolidated Statements of Operations for the
three years ended April 2, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Current:
Federal................................................. $ 15,600 $ 11,418 $ 5,134
State................................................... 5,125 3,958 2,094
---------- --------- ---------
Total current......................................... 20,725 15,376 7,228

Deferred:
Federal................................................. (31,860) (2,114) (1,121)
State................................................... (5,465) (362) (207)
---------- --------- ---------
Total deferred........................................ (37,325) (2,476) (1,328)
---------- --------- ---------
Total provision........................................... (16,600) 12,900 5,900
Tax benefit of extraordinary item--extinguishment of
debt..................................................... -- -- 13,400
---------- --------- ---------
Total provision before extraordinary item................. $ (16,600) $ 12,900 $ 19,300
---------- --------- ---------
---------- --------- ---------
</TABLE>

The difference between the effective tax rate on earnings before
extraordinary item and the U.S. federal income tax statutory rate is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal statutory rate.................................... (35.0% ) 35.0% 35.0%
State income taxes, net of federal tax benefit............ (6.2) 7.1 6.8
Other, net................................................ .8 (1.7) (.4)
--------- --------- ---------
Effective tax rate........................................ (40.4%) 40.4% 41.4%
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-18
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 8--INCOME TAXES (CONTINUED)
The significant components of deferred income tax assets and liabilities as
of April 2, 1998 and April 3, 1997 are as follows (in thousands) :

<TABLE>
<CAPTION>
1998 1997
DEFERRED INCOME TAX DEFERRED INCOME TAX
---------------------- ----------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Accrued reserves and liabilities........... $ 14,447 $ -- $ 9,189 $ 179
Capital lease obligations.................. 14,660 -- 11,464 --
Property................................... 33,832 -- 5,587 --
Deferred rents............................. 7,533 -- 6,254 --
Other...................................... 1,862 4,820 550 2,676
--------- ----------- --------- -----------
Total...................................... 72,334 4,820 33,044 2,855
Less: Current deferred income taxes........ 10,542 -- 6,586 210
--------- ----------- --------- -----------
Total noncurrent deferred
income taxes........................... $ 61,792 $ 4,820 $ 26,458 $ 2,645
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Net noncurrent deferred
income taxes........................... $ 56,972 $ 23,813
--------- ---------
--------- ---------
</TABLE>

Based upon positive earnings in recent years and the expectation that
taxable income will continue for the foreseeable future, management believes it
is more likely than not that the Company will realize its deferred tax assets
and, accordingly, no valuation allowance has been provided as of April 2, 1998
and April 3, 1997.

NOTE 9--LEASES

The majority of the Company's operations are conducted in premises occupied
under lease agreements with base terms ranging generally from 13 to 25 years,
with certain leases containing options to extend the leases for up to an
additional 20 years. The leases provide for fixed rentals and/or rentals based
on revenues with a guaranteed minimum. The Company also leases certain equipment
under leases expiring at various dates. The majority of the leases provide that
the Company will pay all, or substantially all, taxes, maintenance, insurance
and certain other operating expenses. Assets held under capital lease
obligations are included in property.

During 1998, the Company sold the real estate assets associated with 13
megaplexes to Entertainment Properties Trust ("EPT"), a real estate investment
trust, for an aggregate purchase price of $283,800,000 (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. The Company has accounted
for this transaction as a sale and leaseback in accordance with Statement of
Financial Accounting Standards No. 98,

F-19
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 9--LEASES (CONTINUED)
ACCOUNTING FOR LEASES. The land and building and improvements have been removed
from the Consolidated Balance Sheet and the gain of $15,130,000 on the sales has
been deferred and is being amortized to rent expense over the life of the
leases.

The Co-Chairman of the Board, President and Chief Financial Officer of the
Company is also the Chairman of the Board of Trustees of EPT.

Following is a schedule, by year, of future minimum rental payments required
under existing operating leases that have initial or remaining non-cancelable
terms in excess of one year as of April 2, 1998 (in thousands):

<TABLE>
<CAPTION>
<S> <C>
1999.......................................................... $ 131,676
2000.......................................................... 132,062
2001.......................................................... 130,161
2002.......................................................... 127,295
2003.......................................................... 123,409
Thereafter.................................................... 1,376,799
------------
Total minimum payments required............................... $2,021,402
------------
------------
</TABLE>

The Company has also entered into agreements to lease space for the
operation of theatres not yet fully constructed. The scheduled completion of
construction and theatre openings are at various dates during 1999. The future
minimum rental payments required under the terms of these leases total
approximately $409 million.

The Company records rent expense on a straight-line basis over the term of
the lease. Included in long-term liabilities as of April 2, 1998 and April 3,
1997 is $19,862,000 and $16,278,000, respectively, of deferred rent representing
pro rata future minimum rental payments for leases with scheduled rent
increases.

Rent expense is summarized as follows (in thousands) :

<TABLE>
<CAPTION>
1998 1997 1996
----------- --------- ---------
<S> <C> <C> <C>
Minimum rentals.......................................... $ 94,103 $ 69,845 $ 54,727
Common area expenses..................................... 12,011 10,555 9,930
Percentage rentals based on revenues..................... 2,869 2,278 2,354
----------- --------- ---------
$ 108,983 $ 82,678 $ 67,011
----------- --------- ---------
----------- --------- ---------
</TABLE>

F-20
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 10--EMPLOYEE BENEFIT PLANS

The Company sponsors a non-contributory defined benefit pension plan
covering, after a minimum of one year of employment, all employees age 21 or
older who have completed 1,000 hours of service in their first twelve months of
employment or in a calendar year and who are not covered by a collective
bargaining agreement.

The plan calls for benefits to be paid to eligible employees at retirement
based primarily upon years of credited service with the Company (not exceeding
thirty-five) and the employee's highest five year average compensation.
Contributions to the plan reflect benefits attributed to employees' services to
date, as well as services expected to be earned in the future. Plan assets are
invested in a group annuity contract with an insurance company pursuant to which
the plan's benefits are paid to retired and terminated employees and the
beneficiaries of deceased employees.

The following table sets forth the plan's funded status as of December 31,
1997 and 1996 (plan valuation dates) and the amounts included in the
Consolidated Balance Sheets as of April 2, 1998 and April 3, 1997 (in
thousands):

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation, including
vested benefits of $12,550 and $11,139................................ $ 12,777 $ 11,309
--------- ---------
--------- ---------
Projected benefit obligation for service rendered to date.............. $ 21,346 $ 18,489
Plan assets at fair value.............................................. (12,991) (10,857)
--------- ---------
Projected benefit obligation in excess of plan assets.................. 8,355 7,632
Unrecognized net loss from past experience different from that assumed
and effects of changes in assumptions................................. (490) (686)
Unrecognized net obligation upon adoption being recognized over 15
years................................................................. (1,235) (1,411)
--------- ---------
Pension liability...................................................... $ 6,630 $ 5,535
--------- ---------
--------- ---------
</TABLE>

Net pension expense includes the following components (in thousands):

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Service cost................................................ $ 1,274 $ 1,191 $ 855
Interest cost............................................... 1,290 1,188 966
Actual return on plan assets................................ (1,674) (1,218) (1,630)
Net amortization and deferral............................... 918 563 1,096
--------- --------- ---------
Net pension expense......................................... $ 1,808 $ 1,724 $ 1,287
--------- --------- ---------
--------- --------- ---------
</TABLE>

The Company also sponsors two non-contributory deferred compensation plans
which provide certain employees additional pension benefits. The actuarial
present value of accumulated plan benefits related to the plans was $1,051,000
and $856,000 as of April 2, 1998 and April 3, 1997, respectively, which is
reflected in the Consolidated Balance Sheets.

F-21
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 10--EMPLOYEE BENEFIT PLANS (CONTINUED)
The weighted average discount rate used to measure the plans' projected
benefit obligations was 7.0% for 1998, 1997 and 1996. The rate of increase in
future compensation levels was 6.0% for 1998, 1997 and 1996 and the expected
long-term rate of return on assets was 8.5% for 1998, 1997 and 1996. A limited
number of employees are covered by collective bargaining agreements under which
payments are made to a union-administered fund.

The Company sponsors a voluntary thrift savings plan covering the same
employees eligible for the pension plan. Since inception of the savings plan,
the Company has matched 50% of each eligible employee's elective contributions,
limited to 3% of the employee's salary. The Company's expense under the thrift
savings plan was $1,308,000, $1,270,000 and $1,032,000 for 1998, 1997 and 1996,
respectively.

The Company currently offers eligible retirees the opportunity to
participate in a health plan (medical and dental) and a life insurance plan.
Substantially all employees may become eligible for these benefits provided that
the employee must be at least 55 years of age and have 15 years of credited
service at retirement. The health plan is contributory, with retiree
contributions adjusted annually; the life insurance plan is noncontributory. The
accounting for the health plan anticipates future modifications to the
cost-sharing provisions to provide for retiree premium contributions of
approximately 20% of total premiums, increases in deductibles and co-insurance
at the medical inflation rate and coordination with Medicare. Retiree health and
life insurance plans are not funded. The Company is amortizing the transition
obligation on the straight-line method over a period of 20 years.

The following table sets forth the plans' accumulated postretirement benefit
obligation reconciled with the amounts included in the Consolidated Balance
Sheets as of April 2, 1998 and April 3, 1997 (in thousands) :

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................... $ 616 $ 618
Fully eligible active plan participants................................ 537 513
Other active plan participants......................................... 2,175 1,777
--------- ---------
Accumulated postretirement benefit obligation............................ 3,328 2,908
Unrecognized net obligation upon adoption being
recognized over 20 years................................................ (647) (697)
Unrecognized loss........................................................ (195) (190)
--------- ---------
Postretirement benefit liability......................................... $ 2,486 $ 2,021
--------- ---------
--------- ---------
</TABLE>

F-22
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 10--EMPLOYEE BENEFIT PLANS (CONTINUED)
Postretirement expense includes the following components (in thousands) :

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Service cost......................................................... $ 229 $ 199 $ 192
Interest cost........................................................ 218 172 208
Net amortization and deferral........................................ 50 50 66
--------- --------- ---------
Postretirement expense............................................... $ 497 $ 421 $ 466
--------- --------- ---------
--------- --------- ---------
</TABLE>

For measurement purposes, the annual rate of increase in the per capita cost
of covered health care benefits assumed for 1998 was 7.0% for medical and 4.5%
for dental. The rates were assumed to decrease gradually to 5.0% for medical and
3.0% for dental at 2020 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
April 2, 1998 by $997,000 and the aggregate of the service and interest cost
components of postretirement expense for 1998 by $176,000. The weighted-average
discount rate used in determining the accumulated postretirement benefit
obligation was 7.0% for 1998, 1997 and 1996.

NOTE 11--CONTINGENCIES

The Company, in the normal course of business, is party to various legal
actions. Management believes that the potential exposure, if any, from such
matters would not have a material adverse effect on the financial condition,
cash flows or results of operations of the Company.

NOTE 12--FUTURE DISPOSITION OF ASSETS

The Company has provided reserves for estimated losses from discontinuing
the operation of fast food restaurants, for theatres which have been or are
expected to be closed and for other future dispositions of assets.

In conjunction with the opening of certain new theatres in 1986 through
1988, the Company expanded its food services by leasing additional space
adjacent to those theatres to operate specialty fast food restaurants. The
Company discontinued operating the restaurants due to unprofitability. The
Company continues to sub-lease or to convert to other uses the space leased for
these restaurants. The Company is obligated under long-term lease commitments
with remaining terms of up to 13 years. As of April 2, 1998, the base rents
aggregated approximately $1,159,000 annually, and $9,654,000 over the remaining
terms of the leases. As of April 2, 1998, the Company had subleased
approximately 64% of the space with remaining terms ranging from two months to
153 months. Non-cancelable subleases aggregated approximately $913,000 annually,
and $5,664,000 over the remaining terms of the subleases.

NOTE 13--FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it was practicable to estimate
that value.

F-23
<PAGE>
AMC ENTERTAINMENT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (52 WEEKS) ENDED APRIL 2, 1998, YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND

YEAR (52 WEEKS) ENDED MARCH 28, 1996

NOTE 13--FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying value of cash and equivalents approximates fair value because
of the short duration of those instruments. The fair value of publicly held
corporate borrowings was based upon quoted market prices. For other corporate
borrowings, the fair value was based upon rates available to the Company from
bank loan agreements or rates based upon the estimated premium over U.S.
treasury notes with similar average maturities.

The estimated fair values of the Company's financial instruments are as
follows (in thousands):

<TABLE>
<CAPTION>
1998 1997
------------------------ ------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and equivalents................... $ 9,881 $ 9,881 $ 24,715 $ 24,715
Financial liabilities:
Cash overdrafts........................ $ 15,866 $ 15,866 $ 11,175 $ 11,175
Corporate borrowings................... 348,990 361,000 315,072 315,804
</TABLE>

F-24
<PAGE>
AMC ENTERTAINMENT INC.
STATEMENTS OF OPERATIONS BY QUARTER
<TABLE>
<CAPTION>
JULY 3, JUNE 27, OCTOBER 2, SEPTEMBER 26, JANUARY 1, DECEMBER 26, APRIL 2,
1997 1996 1997 1996 1998 1996 1998
--------- --------- ----------- -------------- ----------- -------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues........................ $ 194,462 $ 161,927 $ 219,589 $ 202,436 $ 215,839 $ 163,192 $ 216,905
Total cost of operations.............. 159,670 132,821 170,469 155,593 172,308 130,464 183,093
General and administrative............ 14,755 13,025 12,097 11,647 15,041 13,910 12,461
Depreciation and amortization......... 16,367 11,674 16,522 12,740 17,227 13,129 20,001
Impairment of long-lived assets....... -- -- 46,998 -- -- -- --
--------- --------- ----------- -------------- ----------- -------------- ---------
Operating income (loss)............... 3,670 4,407 (26,497) 22,456 11,263 5,689 1,350
Interest expense...................... 8,245 4,909 9,405 4,852 9,870 5,275 8,159
Investment income..................... 172 182 509 139 124 343 285
Gain (loss) on disposition of
assets.............................. 1,178 18 1,318 (49) 864 (53) 344
--------- --------- ----------- -------------- ----------- -------------- ---------
Earnings (loss) before income taxes... (3,225) (302) (34,075) 17,694 2,381 704 (6,180)
Income tax provision.................. (1,386) (125) (13,714) 7,125 950 285 (2,450)
--------- --------- ----------- -------------- ----------- -------------- ---------
Net earnings (loss)................... $ (1,839) $ (177) $ (20,361) $ 10,569 $ 1,431 $ 419 $ (3,730)
--------- --------- ----------- -------------- ----------- -------------- ---------
--------- --------- ----------- -------------- ----------- -------------- ---------
Preferred dividends................... 1,369 1,546 1,283 1,454 1,198 1,454 996
--------- --------- ----------- -------------- ----------- -------------- ---------
Net earnings (loss) for common
shares.............................. $ (3,208) $ (1,723) $ (21,644) $ 9,115 $ 233 $ (1,035) $ (4,726)
--------- --------- ----------- -------------- ----------- -------------- ---------
--------- --------- ----------- -------------- ----------- -------------- ---------
Earnings (loss) per share:
Basic............................... $ (.18) $ (.10) $ (1.18) $ .51 $ .01 $ (.06) $ (0.25)
--------- --------- ----------- -------------- ----------- -------------- ---------
--------- --------- ----------- -------------- ----------- -------------- ---------
Diluted............................. $ (.18) $ (.10) $ (1.18) $ .45 $ .01 $ (.06) $ (0.25)
--------- --------- ----------- -------------- ----------- -------------- ---------
--------- --------- ----------- -------------- ----------- -------------- ---------

<CAPTION>
FISCAL YEAR
APRIL 3, --------------------
1997(1) 1998 1997(1)
--------- --------- ---------

<S> <C> <C> <C>
Total revenues........................ $ 222,042 $ 846,795 $ 749,597
Total cost of operations.............. 161,124 685,540 580,002
General and administrative............ 18,065 54,354 56,647
Depreciation and amortization......... 15,029 70,117 52,572
Impairment of long-lived assets....... 7,231 46,998 7,231
--------- --------- ---------
Operating income (loss)............... 20,593 (10,214) 53,145
Interest expense...................... 6,986 35,679 22,022
Investment income..................... 192 1,090 856
Gain (loss) on disposition of
assets.............................. -- 3,704 (84)
--------- --------- ---------
Earnings (loss) before income taxes... 13,799 (41,099) 31,895
Income tax provision.................. 5,615 (16,600) 12,900
--------- --------- ---------
Net earnings (loss)................... $ 8,184 $ (24,499) $ 18,995
--------- --------- ---------
--------- --------- ---------
Preferred dividends................... 1,453 4,846 5,907
--------- --------- ---------
Net earnings (loss) for common
shares.............................. $ 6,731 $ (29,345) $ 13,088
--------- --------- ---------
--------- --------- ---------
Earnings (loss) per share:
Basic............................... $ .38 $ (1.59) $ .75
--------- --------- ---------
--------- --------- ---------
Diluted............................. $ .34 $ (1.59) $ .74
--------- --------- ---------
--------- --------- ---------
</TABLE>

- --------------

(1) Fiscal year 1997 consists of 53 weeks and the fiscal quarter ended April 3,
1997 consists of 14 weeks.

F-25
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Selling Stockholders have agreed to sell to each of the Underwriters named
below, and each of such Underwriters, for whom Goldman, Sachs & Co., Smith
Barney Inc., Bear, Stearns & Co. Inc., Furman Selz LLC and Morgan Stanley & Co.
Incorporated are acting as representatives, has severally agreed to purchase
from the Selling Stockholders, the respective number of shares of Common Stock
set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
------------------
<S> <C>
Goldman, Sachs & Co. ...............................................................
Smith Barney Inc....................................................................
Bear, Stearns & Co. Inc. ...........................................................
Furman Selz LLC.....................................................................
Morgan Stanley & Co. Incorporated...................................................

----------
Total........................................................................... 3,300,000
----------
----------
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the representatives.

The Selling Stockholders have granted the Underwriters an option exercisable
for 30 days after the date of this Prospectus to purchase up to an aggregate of
495,000 additional shares solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 3,300,000 shares of Common
Stock offered.

The Company and the Selling Stockholders have agreed that, during the period
beginning from the date of this Prospectus and continuing to and including the
date 90 days after the date of the Prospectus, they will not offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of Common Stock
or which are convertible into or exchangeable for securities which are
substantially similar to the shares of Common Stock without the prior written
consent of the representatives, except for the shares of Common Stock offered in
connection with the Offering.

In connection with the Offering, the Underwriters may purchase and sell the
shares in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the shares; and syndicate short positions involve the
sale by the Underwriters of a greater number of shares than they are required to
purchase from the Selling Stockholders in the Offering. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-

U-1
<PAGE>
dealers in respect of the shares sold in the Offering for their account may be
reclaimed by the syndicate if such Shares are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the shares, which may be higher than the
price that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
on the American Stock Exchange, in the over-the-counter market or otherwise.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters, and the Company has agreed to indemnify the Selling
Stockholders (other than Mr. Stanley H. Durwood) against certain liabilities,
including liabilities under the Securities Act.

Mr. Stanley H. Durwood and Delta Properties, Inc., a corporation owned by
the Selling Stockholders, have agreed to pay the Company's expenses of the
Offering. Each Selling Stockholder will pay his or her pro rata portion of
underwriting discounts or commissions attributable to the shares sold in the
Offering.

From time to time, Goldman, Sachs & Co. has provided investment banking
services to the Company, including acting as lead manager in connection with the
offering of 9 1/2% Senior Subordinated Notes by the Company. Furman Selz LLC
acted as financial advisor to the Special Committee of the Company's Board of
Directors in connection with the Merger of Durwood, Inc. into the Company. An
affiliate of Goldman, Sachs & Co. serves as a lender under EPT's credit
facility.

U-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
Use of Proceeds........................................................... 15
Price Range of Common Stock and Dividend Policy........................... 15
Capitalization of the Company............................................. 16
Selected Financial and Operating Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 19
Business.................................................................. 30
Principal and Selling Stockholders........................................ 40
Description of Capital Stock.............................................. 42
Legal Matters............................................................. 46
Experts................................................................... 46
Available Information..................................................... 46
Incorporation of Certain Documents by Reference........................... 47
Index to Consolidated Financial Statements................................ F-1
Underwriting.............................................................. U-1
</TABLE>

3,300,000 SHARES

AMC ENTERTAINMENT INC.

COMMON STOCK

(PAR VALUE 66 2/3 CENTS PER SHARE)

-----------

PROSPECTUS

-----------

GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.

FURMAN SELZ
MORGAN STANLEY DEAN WITTER
REPRESENTATIVES OF THE UNDERWRITERS

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Securities Act Registration Fee.................................. *
Printing and Engraving Expenses.................................. *
Legal Fees and Expenses.......................................... *
Accounting Fees and Expenses..................................... *
Miscellaneous.................................................... *
---------
---------
</TABLE>

- --------------

* To be provided by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

AMC Entertainment Inc. is incorporated in Delaware. Under Section 145 of the
Delaware General Corporation Law, a corporation has the power under specified
circumstances to indemnify its directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they were
or are such directors, officers, employees or agents, against expenses incurred
in any such action, suit or proceeding. The Company's Certificate of
Incorporation requires indemnification of directors and officers to the full
extent permitted by the Delaware General Corporation Law and provides that, in
any action by a claimant, the Company shall bear the burden of proof that the
claimant is not entitled to indemnification.

Section 102(b)(7) of the Delaware General Corporation Law provides that a
certificate of incorporation may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 (relating to
liability for unauthorized acquisitions or redemptions of, or dividends on,
capital stock) of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit. The
Certificate of Incorporation of the Company contains the provisions permitted by
Section 102(b)(7) of the Delaware General Corporation Law.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
**1. Underwriting Agreement
2.1 Agreement and Plan of Merger dated as of March 31, 1997 between AMC
Entertainment Inc. and Durwood, Inc. (together with Exhibit A,
"Pre-Merger Action Plan") (Incorporated by reference from Exhibit 2.1 to
the Company'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).
</TABLE>

II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
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., the Durwood Family Stockholders and Delta
Properties, Inc., together with Exhibit B thereto (Escrow Agreement)
(Incorporated by reference from Exhibit 2.4(a) to the Company's
Registration Statement on Form S-4 (File No. 333-25755) filed April 24,
1997).
2.4(b) Durwood Family Settlement Agreement (Incorporated by reference from
Exhibit 99.1 to Schedule 13-D of Durwood, Inc. and Stanley H. Durwood
filed May 7, 1996).
2.4(c) First Amendment to Durwood Family Settlement Agreement (Incorporated by
reference from Exhibit 2.4(c) to the Company'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).
4.3(a) 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 the Company's Registration Statement on Form S-4 (File No.
333-25755) filed April 24, 1997).
4.3(b) Second Amendment, dated January 16, 1998, to Amended and Restated Credit
Agreement dated as of April 10, 1997 (Incorporated by Reference from
Exhibit 4.2 to the Company's Form 10-Q (File No. 1-8747) for the Quarter
ended January 1, 1998.
4.4(a) Indenture dated March 19, 1997, respecting AMC Entertainment Inc.'s 9 1/2%
Senior Subordinated Notes due 2009 (Incorporated by reference from
Exhibit 4.1 to the Company's Form 8-K (File No. 1-8747) dated March 19,
1997).
4.4(b) 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 the Company's Registration
Statement on Form S-4 (File No.333-29155) filed August 4, 1997).
4.5 In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, certain
instruments respecting long term debt of the Registrant have been
omitted but will be furnished to the Commission upon request.
**5.1 Opinion of Lathrop & Gage L.C.
*21 Subsidiaries of AMC Entertainment Inc.
*23.1 Consent of Coopers & Lybrand L.L.P.
**23.2 Consent of Lathrop & Gage L.C. to the use of its opinion filed as Exhibit
5.1 (Incorporated in Exhibit 5.2).
*24 Power of Attorney. (At Page II-4)
*27 Financial Data Schedule.
</TABLE>

- --------------
* Filed herewith.

** To be filed by amendment.

II-2
<PAGE>
ITEM 17. UNDERTAKINGS.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(2) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(3) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

(4) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

II-3
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF KANSAS CITY, MISSOURI, ON MAY 21, 1998.

<TABLE>
<S> <C> <C>
AMC ENTERTAINMENT INC.

By: /s/ PETER C. BROWN
-----------------------------------------
Peter C. Brown
CO-CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>

POWER OF ATTORNEY

WE, THE UNDERSIGNED OFFICERS AND DIRECTORS OF AMC ENTERTAINMENT INC., HEREBY
SEVERALLY AND INDIVIDUALLY CONSTITUTE AND APPOINT PETER C. BROWN AND RICHARD L.
OBERT, OR ANY OF THEM, EACH ACTING ALONE, THE TRUE AND LAWFUL ATTORNEYS AND
AGENTS WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR EACH OF US TO
EXECUTE IN THE NAME, PLACE AND STEAD OF EACH OF US (INDIVIDUALLY AND IN ANY
CAPACITY STATED BELOW) ANY AND ALL AMENDMENTS TO THIS REGISTRATION STATEMENT ON
FORM S-3 AND ANY ADDITIONAL REGISTRATION STATEMENT FILED PURSUANT TO RULE 462(B)
UNDER THE SECURITIES ACT OF 1933, AND ALL INSTRUMENTS NECESSARY OR ADVISABLE IN
CONNECTION THEREWITH AND TO FILE THE SAME WITH THE SECURITIES AND EXCHANGE
COMMISSION, EACH OF SAID ATTORNEYS AND AGENTS TO HAVE POWER TO ACT WITH OR
WITHOUT THE OTHER AND TO HAVE FULL POWER AND AUTHORITY TO DO AND PERFORM IN THE
NAME AND ON BEHALF OF EACH OF THE UNDERSIGNED EVERY ACT WHATSOEVER NECESSARY OR
ADVISABLE TO BE DONE IN THE PREMISES AS FULLY AND TO ALL INTENTS AND PURPOSES AS
ANY OF THE UNDERSIGNED MIGHT OR COULD DO IN PERSON, AND WE HEREBY RATIFY AND
CONFIRM OUR SIGNATURES AS THEY MAY BE SIGNED BY OUR SAID ATTORNEYS AND AGENTS
AND EACH OF THEM TO ANY AND ALL SUCH AMENDMENT AND AMENDMENTS.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

TITLE DATE
-------------------------- -------------------

/s/ STANLEY H. DURWOOD Co-Chairman of the Board,
- ------------------------------ Chief Executive Officer May 21, 1998
Stanley H. Durwood and Director

/s/ PAUL E. VARDEMAN
- ------------------------------ Director May 21, 1998
Paul E. Vardeman

II-4
<PAGE>

TITLE DATE
-------------------------- -------------------

/s/ CHARLES J. EGAN, JR.
- ------------------------------ Director May 21, 1998
Charles J. Egan, Jr.

/s/ WILLIAM T. GRANT II
- ------------------------------ Director May 21, 1998
William T. Grant II

/s/ JOHN P. MASCOTTE
- ------------------------------ Director May 21, 1998
John P. Mascotte

Co-Chairman of the Board,
/s/ PETER C. BROWN President, Chief
- ------------------------------ Financial Officer and May 21, 1998
Peter C. Brown Director

/s/ PHILIP M. SINGLETON Executive Vice President,
- ------------------------------ Chief Operating Officer May 21, 1998
Philip M. Singleton and Director

/s/ RICHARD L. OBERT Senior Vice President,
- ------------------------------ Chief Accounting and May 21, 1998
Richard L. Obert Information Officer

II-5

<PAGE>
EXHIBIT 21.

AMC ENTERTAINMENT INC. AND SUBSIDIARIES

AMC ENTERTAINMENT INC.

American Multi-Cinema, Inc.

AMC Entertainment International, Inc.

AMC Entertainment International Limited

AMC Entertainment Espana S.A.

Actividades Multi-Cinemas E Espectaculos, LDA

AMC Theatres of U.K., Limited

AMC De Mexico, S.A., De C.V.

AMC Europe S.A.

National Cinema Network, Inc.

AMC Realty, Inc.

Centertainment, Inc.

AMC License Corp.

AMCPH Holdings, Inc.

All Subsidiaries are wholly-owned.

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of AMC Entertainment Inc.
Kansas City, Missouri

We consent to the inclusion in this registration statement on Form S-3 of our
report dated May 1, 1998, on our audits of the financial statements of AMC
Entertainment Inc. and subsidiaries as of April 2, 1998 and April 3, 1997, and
the year (52 weeks) ended April 2, 1998, the year (53 weeks) ended April 3, 1997
and the year (52 weeks) ended March 28, 1996. We also consent to the
incorporation by reference in this registration statement on Form S-3 of our
report dated May 16, 1997, on our audits of the financial statements and
financial statement schedule of AMC Entertainment Inc. and subsidiaries as of
April 3, 1997 and March 28, 1996, and the year (53 weeks) ended April 3, 1997
and the years (52 weeks) ended March 28, 1996 and March 30, 1995 which report is
incorporated by reference in this Form S-3 and included in AMC Entertainment
Inc.'s Annual Report on Form 10-K for the year ended April 3, 1997. We also
consent to the references to our firm under the caption "Experts".

/s/ COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
May 20, 1998

<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Financial Statements of AMC Entertainment Inc. as of and for the
fifty-two weeks ended April 2, 1998, submitted in response to the requirements
to Form S-3 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-02-1998
<PERIOD-END> APR-02-1998
<CASH> 9,881
<SECURITIES> 0
<RECEIVABLES> 72,028
<ALLOWANCES> 706
<INVENTORY> 0
<CURRENT-ASSETS> 107,645
<PP&E> 895,749
<DEPRECIATION> 333,591
<TOTAL-ASSETS> 795,780
<CURRENT-LIABILITIES> 173,836
<BONDS> 399,595
0
1,200
<COMMON> 13,595
<OTHER-SE> 124,660
<TOTAL-LIABILITY-AND-EQUITY> 795,780
<SALES> 256,017
<TOTAL-REVENUES> 846,795
<CGS> 42,062
<TOTAL-COSTS> 685,540
<OTHER-EXPENSES> 117,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,679
<INCOME-PRETAX> (41,099)
<INCOME-TAX> (16,600)
<INCOME-CONTINUING> (24,499)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,499)
<EPS-PRIMARY> (1.59)
<EPS-DILUTED> (1.59)

</TABLE>