UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ......... to ...........
Commission File Number 1-8747
AMC ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1304369
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 West 14th Street
P.O. Box 419615
Kansas City, Missouri 64141-6615
(Address of principal executive offices) (Zip Code)
(816) 221-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No ___
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Number of Shares
Title of Each Class of Common Stock Outstanding as of
July 1, 1999
Common Stock, 66 2/3 cents par value 19,427,098
Class B Stock, 66 2/3 cents par value 4,041,993
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
INDEX
Page Number
--------
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Item 2.Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
Item 3.Quantitative and Qualitative Disclosures
About Market Risk 17
PART II - OTHER INFORMATION
Item 1.Legal Proceedings 18
Item 6.Exhibits and Reports on Form 8-K 20
Signatures 22
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Thirteen
Weeks Ended
July 1, July 2,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Revenues
Admissions $187,882 $155,020
Concessions 83,713 73,817
Other theatre 5,089 4,362
Other 11,146 7,512
-------- --------
Total revenues 287,830 240,711
Costs and expenses
Film exhibition costs 109,548 85,208
Concession costs 12,691 11,450
Theatre operating expense 67,009 64,107
Rent 47,877 37,952
Other 11,965 6,961
General and administrative 13,211 13,145
Preopening expense 1,273 385
Theatre closure expense 9,646 -
Depreciation and amortization 20,657 20,342
-------- --------
Total costs and expenses 293,877 239,550
-------- --------
Operating income (loss) (6,047) 1,161
Other expense (income)
Interest expense
Corporate borrowings 11,628 6,386
Capital lease obligations 1,843 2,160
Investment income (486) (286)
Gain on disposition of assets (183) (1,393)
-------- --------
Loss before income taxes and cumulative
effect of an accounting change (18,849) (5,706)
Income tax provision (7,700) (2,650)
-------- --------
Loss before cumulative effect of an accounting change (11,149) (3,056)
Cumulative effect of an accounting change
(net of income tax benefit of $4,095) (5,840) -
-------- --------
Net loss $ (16,989)$ (3,056)
======== ========
Net loss per share before cumulative effect
of an accounting change:
Basic $ (0.48)$ (0.13)
-------- --------
Diluted $ (0.48)$ (0.13)
======== ========
Net loss per share:
Basic $ (0.72)$ (0.13)
======== ========
Diluted $ (0.72)$ (0.13)
======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
AMC ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
July 1, April 1,
1999 1999
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 13,104 $ 13,239
Receivables, net of allowance for doubtful
accounts of $610 as of July 1, 1999 and
$540 as of April 1, 1999 25,231 18,325
Reimbursable construction advances 19,928 22,317
Other current assets 45,076 48,707
-------- --------
Total current assets 103,339 102,588
Property, net 783,650 726,025
Intangible assets, net 18,920 18,723
Other long-term assets 125,242 128,394
--------- -------
Total assets $1,031,151 $975,730
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 72,920 $ 69,381
Construction payables 13,420 24,354
Accrued expenses and other liabilities 109,674 77,304
Current maturities of corporate borrowings and
capital lease obligations 17,209 18,017
--------- -------
Total current liabilities 213,223 189,056
Corporate borrowings 589,060 547,045
Capital lease obligations 41,716 44,558
Other long-term liabilities 90,493 79,606
--------- -------
Total liabilities 934,492 860,265
Stockholders' equity:
Common Stock, 66 2/3 par value; 19,447,598
shares issued as of July 1, 1999 and
April 1, 1999 12,965 12,965
Convertible Class B Stock, 66 2/3 par value;
4,041,993 shares issued and outstanding as
of July 1, 1999 and April 1, 1999 2,695 2,695
Additional paid-in capital 106,713 106,713
Accumulated other comprehensive income (4,388) (2,690)
Retained earnings (deficit) (11,963) 5,026
--------- -------
106,022 124,709
Less:
Employee notes for Common Stock purchases 8,994 8,875
Common Stock in treasury, at cost, 20,500 shares
as of July 1, 1999 and April 1, 1999 369 369
---- ----
Total stockholders' equity 96,659 115,465
-------- --------
Total liabilities and stockholders' equity $1,031,151 $975,730
========= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
<CAPTION>
Thirteen
Weeks Ended
July 1, July 2,
1999 1998
---- ----
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (16,989) $(3,056)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 20,657 20,342
Deferred income taxes (5,028) -
Gain on disposition of long-term assets (183) (1,393)
Cumulative effect of an accounting change 5,840 -
Change in assets and liabilities:
Receivables (6,906) (2,800)
Other current assets 3,631 (3,461)
Accounts payable (5,162) 9,238
Accrued expenses and other liabilities 23,850 7,391
Liabilities for theatre closure 7,802 -
Other, net 51 155
-------- --------
Net cash provided by operating activities 27,563 26,416
-------- --------
Cash flows from investing activities:
Capital expenditures (79,311) (63,082)
Net change in reimbursable construction advances 2,389 32,917
Proceeds from disposition of long-term assets 3,528 8,354
Other, net 6,611 (2,463)
-------- --------
Net cash used in investing activities (66,783) (24,274)
-------- --------
Cash flows from financing activities:
Net borrowings under revolving Credit Facility 42,000 26,500
Principal payments under capital lease obligations (886) (1,049)
Change in cash overdrafts 8,701 4,212
Change in construction payables (10,934) (7,148)
Other, net - (98)
-------- --------
Net cash provided by financing activities 38,881 22,417
-------- --------
Effect of exchange rate changes on cash
and equivalents 204 327
-------- --------
Net increase (decrease) in cash and equivalents (135) 24,886
-------- --------
Cash and equivalents at beginning of period 13,239 9,881
-------- --------
Cash and equivalents at end of period $ 13,104 $ 34,767
======== ========
</TABLE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Thirteen
Weeks Ended
July 1, July 2,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized
of $2,122 and $1,509) $ 4,520 $ 5,118
Income taxes paid (refunded) (7,821) 2,146
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 1, 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
AMC Entertainment Inc. ("AMCE") is a holding company which, through its
direct and indirect subsidiaries, including American Multi-Cinema, Inc.
("AMC") (collectively with AMCE, unless the context otherwise requires, the
"Company"), is principally involved in the theatrical exhibition business
throughout the United States and in Japan, Portugal, Spain, China (Hong
Kong) and Canada. The Company is also involved in the business of providing
on-screen advertising and other services to AMC and other theatre circuits
through a wholly-owned subsidiary, National Cinema Network, Inc. ("NCN"),
and in various real estate pre-development activities and miscellaneous
ventures through other wholly-owned subsidiaries.
The accompanying unaudited consolidated financial statements have been
prepared in response to the requirements of Form 10-Q and should be read in
conjunction with the Company's annual report on Form 10-K for the year (52
weeks) ended April 1, 1999. In the opinion of management, these interim
financial statements reflect all adjustments (consisting primarily of normal
recurring adjustments) necessary for a fair presentation of the Company's
financial position and results of operations. Due to the seasonal nature of
the Company's business, results for the thirteen weeks ended July 1, 1999
are not necessarily indicative of the results to be expected for the fiscal
year (52 weeks) ending March 30, 2000.
The year-end consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation.
NOTE 2 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
Thirteen Weeks Ended
July 1, July 2,
1999 1998
---- ----
(in thousands, except per share data)
<S> <C> <C>
Numerator:
Loss before cumulative effect of an
accounting change for basic and diluted
earnings per share $(11,149) $(3,056)
======== ========
Denominator:
Shares for basic and diluted earnings
per share - average shares outstanding 23,469 23,105
======== ========
Basic earnings per share before cumulative
effect of an accounting change $ (.48) $ (.13)
======== ========
Diluted earnings per share before cumulative
effect of an accounting change $ (.48) $ (.13)
======== ========
During the thirteen weeks ended July 1, 1999 and July 2, 1998, shares
from options to purchase shares of Common Stock were excluded from the
diluted earnings per share calculation because they were anti-dilutive.
</TABLE>
NOTE 3 - COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
<TABLE>
Thirteen Weeks Ended
July 1, July 2,
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Net loss $ (16,989) $ (3,056)
Foreign currency translation adjustment (1,698) 76
-------- --------
Comprehensive income $ (18,687) $ (2,980)
======== ========
</TABLE>
NOTE 4 - ACCOUNTING FOR START-UP ACTIVITIES
On April 2, 1999, the Company adopted Statement of Position 98-5 ("SOP-
98-5"), Reporting on the Costs of Start-up Activities. SOP 98-5 requires
start-up activities to be expensed when incurred. The Company's practice had
been to capitalize such costs and amortize them over a two-year period. The
adoption of this new accounting pronouncement resulted in a one-time non-
cash charge to the Company's results of operations for the thirteen weeks
ended July 1, 1999 of $5,840,000 (net of income tax benefit of $4,095,000)
or $.24 per share.
NOTE 5 - OPERATING SEGMENTS
Information about the Company's operations by operating segment is as
follows:
<TABLE>
Thirteen Weeks Ended
Revenues July 1, 1999 July 2, 1998
-------- --------
(in thousands)
<S> <C> <C>
U.S. theatrical exhibition $263,005 $226,368
International theatrical exhibition 13,679 6,831
On-screen advertising 11,012 7,476
Other (1) 134 36
-------- --------
Total revenues $287,830 $240,711
======== ========
Thirteen Weeks Ended
Adjusted EBITDA (2) July 1, 1999 July 2, 1998
-------- --------
(in thousands)
U.S. theatrical exhibition $ 40,900 $ 33,691
International theatrical exhibition (1,341) 791
On-screen advertising (306) 1,041
Other (1) (513) (490)
-------- --------
Total segment Adjusted EBITDA 38,740 35,033
General and administrative 13,211 13,145
-------- --------
Total Adjusted EBITDA $ 25,529 $ 21,888
======== ========
Thirteen Weeks Ended
Property July 1, 1999 July 2, 1998
-------- --------
(in thousands)
U.S. theatrical exhibition $922,282 $793,665
International theatrical exhibition 80,558 17,431
On-screen advertising 11,733 9,915
-------- --------
Total segment property 1,014,573 821,011
Construction in progress 118,627 91,122
Corporate 48,939 32,280
-------- --------
Total property (3) $1,182,139 $944,413
======== ========
(1) Other amounts are comprised primarily of real estate activities and othe
r miscellaneous ventures.
(2)Represents earnings before interest, income taxes, depreciation and amortiza
tion and adjusted for, preopening expense, theatre closure expense, gain on
disposition of assets, equity in earnings of unconsolidated affiliates and
cumulative effect of an accounting change.
(3) Property is comprised of land, buildings and improvements, leasehold imp
rovements and furniture, fixtures and equipment.
</TABLE>
Item 2. 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 or close 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.
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 Form 10-Q and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
Operating Results
Set forth in the table below is a summary of revenues, cost and
expenses, general and administrative, and depreciation and amortization
expenses attributable to the Company's U.S. and international theatrical
exhibition operations and the Company's on-screen advertising and other
businesses.
<TABLE>
Thirteen Weeks Ended
July 1, July 2,
1999 1998 % Change
---- ---- ----
(dollars in thousands)
<S> <C> <C> <C>
Revenues
U.S. theatrical exhibition
Admissions $177,155 $149,469 18.5%
Concessions 81,116 72,581 11.8
Other theatre 4,734 4,318 9.6
-------- -------- --------
263,005 226,368 16.2
International theatrical exhibition
Admissions 10,727 5,551 93.2
Concessions 2,597 1,236 *
Other theatre 355 44 *
-------- -------- --------
13,679 6,831 *
Other 11,146 7,512 48.4
-------- -------- --------
Total revenues $287,830 $240,711 19.6%
======== ======== ========
Costs and Expenses
U.S. theatrical exhibition
Film exhibition costs $104,085 $ 82,330 26.4%
Concession costs 12,004 11,071 8.4
Theatre operating expense 62,535 62,635 (0.2)
Rent 43,481 36,641 18.7
Preopening expense 565 385 46.8
Theatre closure expense 9,646 -
-------- -------- --------
232,316 193,062 20.3
International theatrical exhibition
Film exhibition costs 5,463 2,878 89.8
Concession costs 687 379 81.3
Theatre operating expense 4,474 1,472 *
Rent 4,396 1,311 *
Preopening expense 708 -
-------- -------- --------
15,728 6,040 *
Other 11,965 6,961 71.9
General and administrative 13,211 13,145 .5
Depreciation and amortization 20,657 20,342 1.5%
-------- ------- --------
Total costs and expenses $293,877 $239,550 22.7%
-------- -------- --------
*Percentage change in excess of 100%.
</TABLE>
Thirteen weeks ended July 1, 1999 and July 2, 1998.
Revenues. Total revenues increased 19.6%, or $47,119,000, during the
thirteen weeks ended July 1, 1999 compared to the thirteen weeks ended July
2, 1998.
U.S. theatrical exhibition revenues increased 16.2%, or $36,637,000,
from the prior year. Admissions revenues increased 18.5%, or $27,686,000,
due to a 13.8% increase in average ticket price, which contributed
$21,506,000 of the increase, and a 4.1% increase in attendance, which
contributed $6,180,000 of the increase. Attendance at megaplexes (theatres
with predominantly stadium-style seating) increased as a result of the
addition of 10 new megaplexes with 238 screens since July 2, 1998, and a
6.7% increase in attendance at comparable megaplexes (theatres opened before
the first quarter of fiscal 1999). Attendance at multiplexes (theatres
generally without stadium-style seating) decreased due to a 15.4% decrease
in attendance at comparable multiplexes and the closure or sale of 33
multiplexes with 205 screens since July 2, 1998. 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 the first
phase of a strategic initiative implemented by the Company during the
thirteen weeks ended July 1, 1999 to selectively increase prices at
megaplexes and multiplexes and the growing number of megaplexes in the
Company's theatre circuit, which yield higher average ticket prices than
multiplexes. Concessions revenues increased 11.8%, or $8,535,000, due to a
7.3% increase in average concessions per patron, which contributed
$5,534,000 of the increase, and the increase in total attendance, which
contributed $3,001,000 of the increase. The increase in average concessions
per patron was attributable to the selective price increases discussed above
and the increasing number of megaplexes in the Company's theatre circuit,
where concession spending per patron is higher than in multiplexes.
International theatrical exhibition revenues increased $6,848,000 from
the prior year. Admissions revenues increased 93.2%, or $5,176,000, due
primarily to an increase in attendance from the addition of a 24-screen
megaplex in Spain, a 16-screen megaplex in Japan, an 11-screen megaplex in
China (Hong Kong) and three new megaplexes with a total of 74 screens in
Canada since July 2, 1998. Attendance at the Company's two comparable
international megaplexes decreased 20.4% for the thirteen weeks ended July
1, 1999 compared to the thirteen weeks ended July 2, 1998 due primarily to
higher than normal attendance for Titanic during the thirteen weeks ended
July 2, 1998. Concession revenues increased $1,361,000 due primarily to the
increase in total attendance. International theatrical exhibition revenues
were positively impacted by a weaker U.S. dollar, although this did not
contribute materially to consolidated net loss.
Other revenues increased 48.4%, or $3,634,000, from the prior year due
primarily to a new on-film advertising program at the Company's on-screen
advertising business which began running during the thirteen weeks ended
April 1, 1999.
Costs and expenses. Total costs and expenses increased 22.7%, or
$54,327,000, during the thirteen weeks ended July 1, 1999 compared to the
thirteen weeks ended July 2, 1998.
U.S. theatrical exhibition costs and expenses increased 20.3%, or
$39,254,000, from the prior year. Film exhibition costs increased 26.4%, or
$21,755,000, due to higher attendance, which contributed $15,250,000 of the
increase, and an increase in the percentage of admissions paid to film
distributors, which increased film exhibition costs by $6,505,000. As a
percentage of admissions revenues, film exhibition costs were 58.3% in the
current year as compared with 55.0% in the prior year. The increase in film
exhibition costs as a percentage of admissions revenues was primarily due to
Star Wars Episode I: The Phantom Menace, a film whose audience appeal led to
higher than normal film rental terms. The Company anticipates that film
exhibition costs as a percentage of admissions revenues will be more
comparable to the prior year as admissions revenues on this film decline as
a percentage of total admissions revenues. Concession costs increased 8.4%,
or $933,000, due to the increase in concessions revenues, which contributed
$1,302,000 of the increase, offset by a decrease in concession costs as a
percentage of concessions revenues, which produced a decrease in concession
costs of $369,000. As a percentage of concessions revenues, concession
costs were 14.8% in the current year compared with 15.2% in the prior year.
Theatre operating expense was comparable with the prior year. Rent expense
increased 18.7%, or $6,840,000, due to the higher number of screens in
operation and the growing number of megaplexes in the Company's theatre
circuit, which generally have higher rent per screen than multiplexes.
During the thirteen weeks ended July 1, 1999, the Company incurred
$9,646,000 of theatre closure expense related to the closure of 19
multiplexes with 131 screens. These expenses are primarily comprised of
expected payments to landlords to terminate leases. The Company anticipates
that it will incur approximately $15 million of costs related to the closure
of approximately 40 multiplexes with 270 screens in fiscal 2000.
International theatrical exhibition costs and expenses increased
$9,688,000 from the prior year. Film exhibition costs increased 89.8%, or
$2,585,000, due to higher attendance, offset by a decrease in the percentage
of admissions paid to film distributors. Rent expense increased $3,085,000
and theatre operating expense increased $3,002,000 from the prior year,
primarily due to the increased number of international screens in operation.
International theatrical exhibition costs and expenses were negatively
impacted by a weaker U.S. dollar, although this did not contribute
materially to consolidated net loss.
Other costs and expenses increased 71.9%, or $5,004,000, due primarily
to an increase in fixed costs associated with the on-film advertising
program at the Company's on-screen advertising business. The Company
anticipates that these fixed costs as a percentage of related on-film
advertising revenues will decline as the on-film advertising program
continues to grow.
General and administrative expenses increased .5%, or $66,000, during
the thirteen weeks ended July 1, 1999 as compared with the thirteen weeks
ended July 2, 1998. As a percentage of total revenues, general and
administrative expenses declined from 5.5% in the prior year to 4.6% in the
current year.
Depreciation and amortization increased 1.5%, or $315,000, during the
thirteen weeks ended July 1, 1999. This increase was primarily caused by
an increase in depreciation of $2,275,000 related to the Company's new
theatres, which was partially offset by a $2,003,000 decrease in
amortization due to a change in accounting for start-up activities.
Interest Expense. Interest expense increased 57.6%, or $4,925,000,
during the thirteen weeks ended July 1, 1999 compared to the prior year,
primarily due to an increase in average outstanding borrowings and interest
rates. The increase in interest rates was primarily due to the issuance of
$225,000,000 of 9 1/2% Senior Subordinated Notes due 2011 on January 27,
1999.
Gain on Disposition of Assets. Gain on disposition of assets
decreased $1,210,000 from a gain of $1,393,000 in the prior year to a gain
of $183,000 during the current year. The prior year results include the
sales of real estate associated with two of the Company's multiplexes.
Current year results include the sale of a real estate property held for
investment.
Income Tax Provision. The provision for income taxes decreased
$5,050,000 to a benefit of $7,700,000 during the current year from a benefit
of $2,650,000 in the prior year. The effective tax rate was 40.9% for the
current year compared to 46.4% for the previous year. The Company adjusts
its expected annual effective tax rate on a quarterly basis based on current
projections of non-deductible expenses and pre-tax earnings or losses.
Net Earnings. Net earnings decreased by $13,933,000 during the
thirteen weeks ended July 1, 1999 to a loss of $16,989,000 from a loss of
$3,056,000 in the prior year. Net loss per share was $.72 compared to a
loss of $.13 in the prior year. Current year results include the cumulative
effect of an accounting change of $5,840,000 (net of income tax benefit of
$4,095,000), which reduced earnings per share by $.24 for the thirteen weeks
ended July 1, 1999.
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 $27,563,000 and $26,416,000 for the thirteen weeks ended
July 1, 1999 and July 2, 1998, respectively.
The Company continues to expand its U.S. theatre circuit and enter
select international markets. During the current fiscal year, the Company
opened 2 megaplexes with 54 screens (including one megaplex with 30 screens
in Canada) and began operating one theatre with 30 screens pursuant to a
joint venture agreement. In addition, the Company closed 20 multiplexes
with 135 screens and returned 3 screens to the landlord of an existing
megaplex for conversion to alternative use, resulting in a circuit total of
63 megaplexes with 1,416 screens and 153 multiplexes with 1,265 screens as
of July 1, 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. During the thirteen weeks ended July
1, 1999, one new theatre with 30 screens was leased from developers.
Typically, the Company owns and pays for the equipment necessary to fixture
a theatre. As of July 1, 1999, the Company had construction in progress of
$118,627,000 and reimbursable construction advances (amounts due from
developers on leased theatres) of $19,928,000. The Company had 15
megaplexes with 337 screens under construction on July 1, 1999 (including 5
megaplexes with 110 screens in international markets). During the thirteen
weeks ended July 1, 1999, the Company had capital expenditures of
$79,311,000.
The Company expects that the net cash requirements for capital
expenditures in fiscal year 2000 will approximate $225 million. Included in
these amounts are projections of capital expenditures which are reduced by
expected proceeds from the sale of real estate assets which the Company
plans to place into sale and leaseback or other comparable financing
programs and expected reimbursements from developers.
The Company's $425 million revolving credit facility (the "Credit
Facility") permits borrowings at interest rates based on either the bank's
base rate or LIBOR and requires an annual commitment fee based on margin
ratios that could result in a rate of .375% or .500% 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. The total commitment under the Credit Facility
is $425 million, but the facility contains covenants that limit the
Company's ability to incur debt (whether under the Credit Facility or from
other sources). As of July 1, 1999, the Company had outstanding borrowings
of $165,000,000 under the Credit Facility at an average interest rate of
6.8% per annum, and approximately $155,000,000 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 July 1, 1999, the Company was in compliance with all
financial covenants relating to the Credit Facility.
The Company believes that cash generated from operations, existing cash
and equivalents, amounts received from sale and lease back transactions,
expected reimbursements from developers and the available commitment amount
under its Credit Facility will be sufficient to fund operations and planned
capital expenditures for the next 12 months.
Year 2000
Potential Impact on Company. The failure of information technology
("IT") and embedded, or ("non-IT") systems, because of the Year 2000 issue
or otherwise, could adversely affect the Company's operations. If not
corrected, many computer-based systems and theatre equipment, such as air
conditioning systems and fire and sprinkler systems, could encounter
difficulty differentiating between the year 1900 and the year 2000 and
interpreting other dates, resulting in system malfunctions, corruption of
data or system failure. Additionally, the Company relies upon outside third
parties ("business partners") to supply many of the products and services
that it needs in its business. Such products include films which it
exhibits and concessions products which it sells. Attendance at the
Company's theatres could be severely impacted if one or more film producers
are unable to produce new films because of Year 2000 issues. The Company
could suffer other business disruptions and loss of revenues if any other
types of material business partners fail to supply the goods or services
necessary for the Company's operations.
IT Systems. The Company utilizes a weighted methodology to evaluate
the readiness of its corporate and theatre level IT systems. For this
purpose, corporate and theatre system types include commercial off-the-shelf
software, custom in-house developed software, ticketing system software,
concession system software and hardware systems such as workstations and
servers. The Company has weighted each corporate and theatre system based
on its overall importance to the organization. The Company's readiness is
evaluated in terms of a five-phase process utilized in the Year 2000
strategic plan (the "Plan") with appropriate weighting given to each phase
based on its relative importance to IT system Year 2000 readiness. The
phases may generally be described as follows: (i) develop company-wide
awareness; (ii) inventory and assess internal systems and business partners,
and develop contingency plans for systems that cannot be renovated; (iii)
renovate critical systems and contact material business partners; (iv)
validate and test critical systems, analyze responses from critical business
partners and develop contingency plans for non-compliant partners; and (v)
implement renovated systems and contingency plans. The Company has placed a
high level of importance on its corporate and theatre software systems and a
lesser degree of importance on its hardware systems when evaluating Year
2000 readiness. As a result, the Company has focused more of its initial
efforts toward Year 2000 readiness with respect to its software systems than
it has with respect to its hardware systems. Additionally, the Company
believes that the assessment, validation and testing and implementation
phases are the most important phases in its Plan.
Based on the weighting methodology described above, the Company has
assessed 100% of its corporate IT systems and as of July 1, 1999 has
renovated 94% of those systems that require renovation as a result of the
Year 2000 issue. Of the renovated systems, 70% have been tested, verified
and implemented on a company-wide basis. In the aggregate, as of July 1,
1999, 79% of the Company's corporate IT systems have been tested and
verified as being Year 2000 ready. The percentage of corporate IT systems
that have been tested and verified as being Year 2000 ready assumes that a
significant component of commercial-off-the-shelf software, the recently
installed Oracle financial applications, is Year 2000 ready. This system was
warranted to be Year 2000 ready when purchased. Although the Company has
plans to test and verify the Oracle financial applications to validate that
the implementation is in fact Year 2000 ready, it does not believe that it
has a significant risk with respect to the Oracle financial applications.
Based on the weighting methodology described above, the Company has
assessed 100% of its theatre IT systems and as of July 1, 1999 has renovated
89% of those systems that require renovation as a result of the Year 2000
issue. Of the renovated systems, 4% have been tested, verified and
implemented on a company-wide basis. In the aggregate, as of July 1, 1999,
90% of the Company's theatre IT systems have been tested and verified as
being Year 2000 ready.
Overall, the Company has assessed its Plan with respect to IT systems
as being 80% complete as of July 1, 1999. Although, no assurance can be
given, the Company does not believe that it has material exposure to the
Year 2000 issue with respect to its internal IT systems.
Non-IT Systems. The Company's non-IT systems are in the final stages
of assessment. Based on budgeted and expended personnel hours, assessment
of critical non-IT systems was approximately 99% complete as of July 1,
1999. Testing of individual non-IT systems and resultant remediation
efforts have begun. The Company's revised goal is to complete testing and
remediation of critical individual systems by August 31, 1999, and to
complete testing and remediation of critical systems on an integrated basis
by October 30, 1999.
Third Parties. The Company is in the process of identifying and
assessing potential Year 2000 readiness risks associated with its outside
business partners. Based upon budgeted and expended personnel hours, the
inventory of the Company's business partners was complete as of April 1,
1999. Material business partners have been contacted by the Company.
Evaluation of material business partners' responses and their state of Year
2000 readiness was underway and ongoing as of July 1, 1999. The Company's
revised goals are to complete and approve contingency plans for non-ready
material partners by August 31, 1999.
Contingency Planning. Although the Company presently does not have
all contingency plans in place to address the possibility that either it or
its material business partners may not be Year 2000 ready, it has an ongoing
process to develop such plans as the results of systems testing and
remediation and the status of business partners' Year 2000 readiness become
known.
The Company's revised goals are to complete and approve contingency
plans for critical systems and material business partners by August 31,
1999. Changes to such contingency plans will be implemented as necessary in
response to additional data gathered via testing, remediation, and business
partner contacts.
Costs. Although a definitive estimate of costs associated with
required modifications to address the Year 2000 issue cannot be made until
the Company has at least completed the assessment phase of its Plan,
presently management does not expect such costs to be material to the
Company's results of operations, liquidity or financial condition. The
total amount expended from July 1, 1996 through July 30, 1999 was
approximately $500,000. Based on information presently known, the total
amount expected to be expended on the Year 2000 effort for IT systems is
approximately $800,000, primarily comprised of software upgrades and
replacement costs, internal personnel hours and consulting costs. To date,
the Year 2000 effort has been funded primarily from the IT budget.
Readers are cautioned that forward looking statements contained in this
section should be read in conjunction with the Company's disclosures under
the heading "forward looking statements". In addition to the factors listed
therein which could cause actual results to be different from those
anticipated, the following special factors could affect the Company's
ability to be Year 2000 ready: (i) the Company's ability to implement the
Plan, (ii) cooperation and participation by business partners, (iii) the
availability and cost of trained personnel and the ability to recruit and
retain them and (iv) the ability to locate all system coding requiring
correction.
Euro Conversion
A single currency called the euro was introduced in Europe in January
1, 1999. Certain member countries of the European Union adopted the euro as
their common legal currency on that date. Fixed conversion rates between
these participating countries' existing currencies (the "legacy currencies")
and the euro were established as of that date. The transition period for
the introduction of the Euro is scheduled to phase in over a period ending
January 1, 2002, with the legacy currencies being completely removed from
circulation on July 1, 2002. During this transition period, parties may pay
for items using either the euro or a participating country's legacy
currency.
The Company currently operates one theatre in Portugal and one theatre
in Spain. Both countries are member countries that adopted the euro as of
January 1, 1999. The Company has implemented necessary changes to
accounting, operational, and payment systems to accommodate the introduction
of the euro. The Company does not anticipate that the conversion will have
a material impact on its consolidated financial position, results of
operations or cash flows.
New Accounting Pronouncements
During fiscal 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting
for Derivative Instruments and Hedging Activities. The statement requires
companies to recognize all derivatives as either assets or liabilities, with
the instruments measured at fair value. The accounting for changes in fair
value of a derivative depends on the intended use of the derivative and the
resulting designation. The statement is effective for all fiscal years
beginning after June 15, 2000. The statement will become effective for the
Company in fiscal 2002. 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.
Other
A subsidiary of the Company is involved with the pre-development of a
retail/entertainment district in downtown Kansas City, Missouri known as the
"Power & Light District." Under the terms of the subsidiary's agreement
with the Tax Increment Financing Commission of Kansas City, Missouri and the
City of Kansas City, Missouri, the subsidiary is required to meet certain
financial and other conditions in order to receive assistance in financing
the project. In the event that the Company is not successful in meeting
those requirements, carrying costs related to the project will have to be
expensed. Carrying costs related to the project were approximately $3
million as of July 1, 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to various market risks including interest rate
risk and foreign currency exchange rate risk. The Company does not hold any
derivative financial instruments.
Market risk on variable rate financial instruments. 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. Increases in market interest rates would cause interest expense to
increase and earnings before income taxes to decrease. The change in
interest expense and earnings before income taxes would be dependent upon
the weighted average outstanding borrowings during the reporting period
following an increase in market interest rates. Based on the Company's
current outstanding borrowings under the Credit Facility at an average
interest rate of 6.8% per annum, a 100 basis point increase in market
interest rates would increase interest expense and decrease earnings before
income taxes by approximately $1.6 million.
Market risk on fixed-rate financial instruments. Included in long-term
debt are $200 million of 9 1/2% Senior Subordinated Notes due 2009 and $225
million of 9 1/2% Senior Subordinated Notes due 2011. Increases in market
interest rates would generally cause a decrease in the fair value of the
Notes due 2009 and the Notes due 2011 and a decrease in market interest
rates would generally cause an increase in fair value of the Notes due 2009
and the Notes due 2011.
Foreign currency exchange rates. The Company currently operates
theatres in Portugal, Japan, Spain, China (Hong Kong) and Canada and is
currently developing theatres in other international markets. As a result
of these operations, the Company has assets, liabilities, revenues and
expenses denominated in foreign currencies. The strengthening of the U.S.
dollar against the respective currencies causes a decrease in the carrying
values of assets, liabilities, revenues and expenses denominated in such
foreign currencies and the weakening of the U.S. dollar against the
respective currencies causes an increase in the carrying values of these
items. The increases and decreases in assets, liabilities, revenues and
expenses are included in accumulated other comprehensive income. Changes in
foreign currency exchange rates also impact the comparability of earnings in
these countries on a year-to-year basis. As the U.S. dollar strengthens
comparative translated earnings decrease and as the U.S. dollar weakens
comparative translated earnings from foreign operations increase. Although
the Company does not currently hedge against foreign currency exchange rate
risk, it does not intend to repatriate funds from the operations of its
Japanese and European theatres but instead intends to use them to fund
additional expansion. A 10% fluctuation in the value of the U.S. dollar
against all foreign currencies of countries where the Company currently
operates theatres would either increase or decrease earnings before income
taxes and accumulated other comprehensive income by approximately $0.6
million and $11 million, respectively.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On January 29, 1999, the Department of Justice ("DOJ") filed suit
against the Company in the United States District Court for the Central
District of California, United States of America v. AMC Entertainment Inc.
and American Multi-Cinema, Inc. The complaint alleges that the Company has
designed, constructed and operated two of its motion picture theatres in the
Los Angeles area and unidentified theatres elsewhere that have stadium-style
seating in violation of DOJ regulations implementing Title III of the ADA
and related "Standards for Accessible Design" (the "Standards"). The
complaint alleges various types of non-compliance with the DOJ's Standards,
but relates primarily to issues relating to lines of sight. The DOJ seeks
declaratory and injunctive relief regarding existing and future theatres
with stadium-style seating, compensatory damages and a civil penalty.
The current DOJ position appears to be that theatres must provide
wheelchair seating locations and transfer seats with viewing angles to the
screen that are at the median or better, counting all seats in the
auditorium. Heretofore, the Company has attempted to conform to the
evolving standards imposed by the DOJ and believes its theatres are in
substantial compliance with the ADA. However, the Company believes that the
DOJ's current position has no basis in the ADA or related regulations and is
an attempt to amend the ADA regulations without complying with the
Administrative Procedures Act. The Company has filed an answer denying the
allegations and asserting that the DOJ is engaging in unlawful rulemaking.
A similar claim has been made by another exhibitor, Cinemark USA, Inc. v.
United States Department of Justice, United States District Court for the
Northern District of Texas, Case No. 399CV0183-L. Although no assurances
can be given, based on existing precedent involving stadiums or stadium
seating, the Company believes that an adverse decision in this matter is not
likely to have a material adverse effect on its financial condition,
liquidity or results of operations. However, there have been only a few
cases involving stadiums or stadium seating.
On November 30, 1998, Cyndi Soto filed suit in the United States
District Court for the Central District of California, Cyndi Soto v.
American Multi-Cinema, Inc. and JANSS/TYS Long Beach Associates,
CV989547SLRNBX, alleging that one of the Company's theatres violated the ADA
and California law by failing to remove certain barriers to access. The
suit seeks an unspecified amount of general, special and punitive damages
under California law and an injunction requiring the Company remove the
alleged barriers. The Company has filed an answer denying the allegations in
the Soto suit. On March 4, 1999, William P. Storrs filed a purported class
action lawsuit in the United States District Court for the Southern District
of Texas, William P. Storrs v. AMC Entertainment, Inc., Case No. H-99-061,
alleging that sight lines at a Houston area megaplex violate the Americans
with Disabilities Act and Chapter 121 of the Texas Human Resources Code.
The suit seeks injunctive, declaratory and monetary relief. AMC has filed
its answer denying the allegations and asserting a number of affirmative
defenses. In addition, AMC has asked the Court to stay the suit pending
resolution of the Department of Justice litigation filed in California
referred to above.
Two cases, Nonoy Mendoza, et al. v. AMC Entertainment Inc., American
Multi-Cinema, Inc., Neil Katcher, Michael Johannes, Susan Navarro, Nancy
Garcia, and Matt Quinn filed on July 1, 1999 in the Probate Court of Dallas
County, Texas ("Mendoza"), and Mabayoje Erinkitola, et al. v. AMC
Entertainment Inc., American Multi-Cinema, Inc., Neil Katcher, Michael
Johannes, Susan Navarro, Nancy Garcia, and Matt Quinn filed on July 15, 1999
in the Probate Court of Dallas County, Texas, arise out of the murders of
two patrons, Roxanne Mendoza and Foluke Erinkitola, in the parking lot of
the Grand Theatre in Dallas, Texas on August 13, 1997. The defendants are
being sued on various theories related to allegations of improper or
inadequate security. Each complaint seeks the recovery of damages for
wrongful death, survival damages and exemplary damages, although neither
complaint states specific monetary demands. A plaintiff in the Mendoza
lawsuit also seeks abatement of the theatre as a public nuisance. The
Company has answered the Mendoza lawsuit and is seeking to remove both cases
to federal court.
A trial date in the Drexler Technology Corp. v. Sony Corp., et al,
matter has been set for October 30, 1999.
Reference is also made to Item 3. Legal Proceedings of the Company's
Annual Report on Form 10-K for the fiscal year ended April 1, 1999.
The Company is a party to various other legal proceedings in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
3.1 Amended and Restated Certificate of Incorporation of AMC
Entertainment Inc. (as amended on December 2, 1997)
(Incorporated by reference from Exhibit 3.1 to AMCE's Form
10-Q (File No. 1-8747) dated January 1, 1998).
3.2 Bylaws of AMC Entertainment Inc. (Incorporated by reference
from Exhibit 3.3 to AMCE's Form 10-Q (File No. 0-12429) for
the quarter ended December 26, 1996).
4.1(a) 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).
4.1(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).
4.1(c) Third Amendment, dated March 15, 1999, to amended and
Restated Credit Agreement dated as of April 10, 1997
(Incorporated by reference from Exhibit 4 to the Company's
Form 8-K (File No. 1-8747) dated March 25, 1999).
4.2(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).
4.2(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).
4.3 Indenture, dated January 27, 1999, respecting AMC
Entertainment Inc's 9 1/2% Senior Subordinated Notes due 2011
(Incorporated by reference from Exhibit 4.3 to the Company's
10-Q (File No. 1-8747) for the quarter ended December 31, 1998.
4.4 Registration Rights Agreement, dated January 27, 1999,
respecting AMC Entertainment Inc.'s 9 1/2% Senior Subordinated
notes due 2011 (Incorporated by reference from Exhibit 4.4 to
the Company's 10-Q (file No. 1-8747) for the quarter ended
December 31, 1998)
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.
9.1 Amended and Restated1992 Durwood, Inc. Voting Trust
Agreement dated August 12, 1997. (Incorporated by reference
from Exhibit 99.2 of Schedule 13D filed on July 22, 1999 by
Raymond F. Beagle, Jr. and Charles J. Egan on behalf of and
as successor trustees of the 1992 Durwood, Inc. Voting Trust
dated December 12, 1992, as amended and restated on August
12, 1997, on behalf of and as successor trustees of the
Revocable Trust Agreement dated August 14, 1989 of Stanley
H. Durwood, as amended and restated on May 12, 1999, and as
surviving trustees of the Stanley H. Durwood Foundation, and
by Charles J. Egan, Jr. as trustee of the Pamela Yax Durwood
Marital Trust to be created under the Revocable Trust.)
*10.1 Non-Qualified (Non-ISO) Stock Option Agreement used in June
18, 1999 option grants to Mr. Richard M. Fay and Mr. Richard
T. Walsh.
*27 Financial Data Schedule
_______
* Filed herewith
(b) Reports on Form 8-K
On July 23, 1999, the Company filed a Form 8-K reporting under Item 1
that as a result of the death of Mr. Stanley H. Durwood, former Co-Chairman
and Chief Executive Officer of the Company, a change in control of the
Company may be deemed to have occurred.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMC ENTERTAINMENT INC.
Date: August 13, 1999 /s/ Peter C. Brown
--------------------------
Peter C. Brown
Chairman of the Board,
President and Chief Executive
Officer
Date: August 13, 1999 /s/ Richard L. Obert
-------------------------
Richard L. Obert
Senior Vice President and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Financial Statements of AMC Entertainment Inc. as of and for the
thirteen weeks ended July 1, 1999 submitted in response to the requirements to
Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-2000
<PERIOD-END> JUL-01-1999
<CASH> 13,104
<SECURITIES> 0
<RECEIVABLES> 45,769
<ALLOWANCES> 610
<INVENTORY> 0
<CURRENT-ASSETS> 103,339
<PP&E> 1,182,139
<DEPRECIATION> 398,489
<TOTAL-ASSETS> 1,031,151
<CURRENT-LIABILITIES> 213,223
<BONDS> 630,776
0
0
<COMMON> 15,660
<OTHER-SE> 80,999
<TOTAL-LIABILITY-AND-EQUITY> 1,031,151
<SALES> 83,713
<TOTAL-REVENUES> 287,830
<CGS> 12,691
<TOTAL-COSTS> 250,363
<OTHER-EXPENSES> 30,303
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,471
<INCOME-PRETAX> (18,849)
<INCOME-TAX> (7,700)
<INCOME-CONTINUING> (11,149)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (5,840)
<NET-INCOME> (16,989)
<EPS-BASIC> (.72)
<EPS-DILUTED> (.72)
</TABLE>
Exhibit 10.1
NON-QUALIFIED (NON-ISO) STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement"), made
as of the 18th day of June, 1999 (the "Date of Grant"), by and between AMC
Entertainment Inc. ("AMCE") and Richard T. Walsh (the "Grantee"),
evidences the grant, by AMCE, of a Stock Option (the "Option") to
the Grantee on such date and the Grantee's acceptance of the Option in
accordance with the provisions of the AMCE 1994 Stock Option and
Incentive Plan, as amended (the "Plan"). AMCE and the Grantee agree as
follows:
1.Shares Optioned and Option Price. The Grantee shall have an
option to purchase 15,500 shares of AMCE Common Stock for $17.6875
per share, subject to the terms and conditions of this Agreement and
of the Plan, the provisions of which are hereby incorporated herein by
reference.
The shares subject to the Option are not, nor are they intended to
be, Incentive Stock Option (ISO) shares as described in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2.Vesting. Except as otherwise provided in section 3 below or
in the Plan, this Option shall be deemed vested with respect to
the number of shares described in section 1 as follows: (a) the right to
purchase 50% of the shares subject to this Option shall be vested as of the
Date of Grant, and (b) the right to purchase the balance of the shares
subject to this Option shall be vested on the first anniversary of the Date
of Grant. Notwithstanding the foregoing provisions of this section 2, if the
Grantee's employment with AMCE or a subsidiary (as defined in the
Plan) terminates on account of death, disability (as defined in the
Plan) or retirement (as defined in the Plan), or if the Grantee's
employment is terminated for any reason within one year after the Occurrence of
a Change in Control Event (as defined in the Plan), whether such
termination is voluntary or involuntary, the Option shall be deemed vested as to
all shares described in section 1 hereof as of the date of such
termination of employment.
3.Exercise Period. The Option may be exercised from time to
time with respect to all or any number of the then unexercised shares
as to which the Option has vested under section 2, on any regular
business day of AMCE at its then executive offices, until the earliest to occur
of the following dates:
(a) the tenth anniversary of the Date of Grant;
(b) the first anniversary of the date of the Grantee's
termination of employment with AMCE and all Subsidiaries (as
defined in the Plan) on account of death or disability;
(c) the third anniversary of the Grantee's retirement;
(d) the date three (3) months following the date upon which the
Grantee's employment with AMCE and all Subsidiaries terminates
for any reason other than those described in subsections (b) or (c) next
above or in (e) below; or
(e) the date Grantee is terminated for cause, provided that for
purposes of this Option no termination of employment occurring
within one year after the occurrence of a Change in Control Event shall
be deemed a termination for cause.
4.Exercise.
(a) During the period that the Option is exercisable, it may be
exercised in full or in part by the Grantee, his or her legal
representatives, guardian or Successor, as defined in the Plan,
by delivering or mailing written notice of the exercise to the
Secretary of AMCE. The written notice shall be signed by each person
entitled to exercise the Option and shall specify the address and Social
Security number of each such person. If any person other than
the Grantee purports to be entitled to exercise all or any portion of
the Option, the written notice shall be accompanied by proof,
satisfactory to the Secretary of AMCE, of that entitlement.
(b) The written notice shall be accompanied by full payment of
the exercise price for the shares as to which the Option is
exercised either (i) in cash, certified or bank cashier's check or money
order, payable to AMCE, (ii) in shares of AMCE Common Stock that have
been held by the Grantee for at least six months and evidenced by
certificates either endorsed or with stock powers attached
transferring ownership to AMCE, with an aggregate Fair Market Value (as
defined in the Plan) equal to said exercise price on the date the written
notice is received by the Secretary, or (iii) in any combination of the
foregoing.
(c) Notwithstanding the provisions of subsection (b) next above,
shares acquired through the exercise of an Incentive Stock Option
granted under the Plan or any predecessor stock option plan
providing for options on shares of AMCE Common Stock may be used as payment
at exercise hereunder only if such shares have been held for at
least 12 months following such acquisition.
(d) The written notice of exercise will be effective and the
Option shall be deemed exercised to the extent specified in the
notice on the date that the written notice (together with required
accompaniments respecting payment of the exercise price) is
received by the Secretary of AMCE at its then executive offices during
regular business hours.
5.Transfer of Shares; Tax Withholding.
(a) As soon as practicable after receipt of an effective written
notice of exercise and full payment of the exercise price as
provided in section 4 above, the Secretary of AMCE shall cause ownership
of the appropriate number of shares of AMCE Common Stock to be
transferred to the person or persons exercising the Option by having a
certificate or certificates for such number of shares registered in the name of
such person or persons and shall have each certificate delivered to
the appropriate person. Notwithstanding the foregoing, if AMCE or a
Subsidiary requires reimbursement of any tax required by law to
be withheld with respect to shares of AMCE Common Stock, the
Secretary shall not transfer ownership of shares until the required payment
is made.
(b) Subject to the approval of the Committee and to the
provisions of the Plan, the Grantee may satisfy his tax
withholding obligations hereunder by electing to have shares otherwise
issuable upon exercise of this Option withheld, which shares shall have a
Fair Market Value on the date of exercise equal to the amount of
Grantee's tax withholding liability resulting from such exercise. Any such
election shall be made at or prior to exercise of the Option by
delivering written notice thereof to the Secretary of the
Company.
6.Transferability. Except for assignments made with the
Committee's prior written approval (which may be denied or
conditioned in the sole discretion of the Committee), the rights under this
Agreement may not be transferred except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employment Retirement
Income Security Act, or the rules promulgated thereunder. The rights
under this Agreement may be exercised during the lifetime of the
Grantee only by the Grantee (or by his guardian, legal representative or
Successor, as defined in the Plan). The terms of this Option shall be
binding upon the executors, administrators, heirs, successors, and
assigns of the Grantee.
7.Authorized Leave. Authorized leaves of absence from AMCE or a
Subsidiary shall not constitute a termination of employment for
purposes of the Agreement. For purposes of this Agreement, an
authorized leave of absence shall be an absence while the Grantee
is on military leave, sick leave, or other bona fide leave of
absence so long as the Grantee's right to employment with AMCE or a
Subsidiary is guaranteed by statute, contract, or company policy.
8.Requirements of Law. This Option may not be exercised if the
issuance of shares of AMCE Common Stock upon such exercise would
constitute a violation of any applicable federal or state
securities or other law or valid regulation. The Grantee, as a condition to
his exercise of this Option, shall represent to AMCE that the shares
of AMCE Common Stock to be acquired by exercise of this Option are
being acquired for investment and not with a present view to
distribution or resale, unless counsel for AMCE is then of the opinion that such
a representation is not required under the Securities Act of 1933
or any other applicable law, regulation, or rule of any governmental
agency.
9.Forfeiture. To the extent this Option is unexercised, it will
be forfeited along with all rights thereunder effective as of the
date the Committee determines that the Grantee, at any time during the
period of the Grantee's employment and for one (1) year
thereafter, without the Committee's written consent, engaged directly or
indirectly in any manner or capacity as principal, agent, partner, officer,
director, employee, or otherwise, in any business or activity
competitive with the business conducted by AMCE or its
Subsidiaries, in the geographic area in which AMCE or its Subsidiaries does
business, or in any manner which is inimical to the best interests of AMCE.
IN WITNESS WHEREOF, The Compensation Committee of the Board of
Directors has approved this Agreement and AMCE, by its duly
authorized officer, and the Grantee have signed this Agreement as of the date
first above written.
AMC ENTERTAINMENT INC.
By:/s/ Peter C. Brown
Peter C. Brown, Co-Chairman, President & Chief
Financial Officer
/s/ Richard T. Walsh
Richard T. Walsh, Grantee
The Grantee acknowledges receipt of copies of the Plan and the
Prospectus respecting the Plan. The Grantee represents that he is
familiar with the terms and provisions of the Plan and Prospectus.
The Grantee hereby accepts this Option subject to all the terms and
provisions of the Plan, including but not limited to Section 20 ("Adjustments
for Corporate Changes") thereof. The Grantee hereby agrees to accept
as binding, conclusive, and final all decisions and interpretations
of the Board of Directors and, where applicable, the Committee (as
defined in the Plan), respecting any questions arising under the Plan.
/s/ Richard T. Walsh
Richard T. Walsh, Grantee
NON-QUALIFIED (NON-ISO) STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement"), made
as of the 18th day of June, 1999 (the "Date of Grant"), by and between AMC
Entertainment Inc. ("AMCE") and Richard M. Fay (the "Grantee"), evidences the
grant, by AMCE, of a Stock Option (the "Option") to the Grantee on such date and
the Grantee's acceptance of the Option in accordance with the provisions of the
AMCE 1994 Stock Option and Incentive Plan, as amended (the "Plan"). AMCE
and the Grantee agree as follows:
1.Shares Optioned and Option Price. The Grantee shall have an
option to purchase 42,750 shares of AMCE Common Stock for $17.6875 per
share, subject to the terms and conditions of this Agreement and of the
Plan, the provisions of which are hereby incorporated herein by reference.
The shares subject to the Option are not, nor are they intended to be,
Incentive Stock Option (ISO) shares as described in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2.Vesting. Except as otherwise provided in section 3 below or
in the Plan, this Option shall be deemed vested with respect to the
number of shares described in section 1 as follows: (a) the right to purchase
50% of the shares subject to this Option shall be vested as of the Date of
Grant, and (b) the right to purchase the balance of the shares subject to this
Option shall be vested on the first anniversary of the Date of Grant.
Notwithstanding the foregoing provisions of this section 2, if the Grantee's
employment with AMCE or a subsidiary (as defined in the Plan) terminates on
account of death, disability (as defined in the Plan) or retirement (as defined
in the Plan), or if the Grantee's employment is terminated for any reason within
one year after the Occurrence of a Change in Control Event (as defined in the
Plan), whether such termination is voluntary or involuntary, the Option shall be
deemed vested as to all shares described in section 1 hereof as of the date of
such termination of employment.
3.Exercise Period. The Option may be exercised from time to
time with respect to all or any number of the then unexercised shares as to
which the Option has vested under section 2, on any regular business day of
AMCE at its then executive offices, until the earliest to occur of the
following dates:
(a) the tenth anniversary of the Date of Grant;
(b) the first anniversary of the date of the Grantee's
termination of employment with AMCE and all Subsidiaries (as defined in the
Plan) on account of death or disability;
(c) the third anniversary of the Grantee's retirement;
(d) the date three (3) months following the date upon which the
Grantee's employment with AMCE and all Subsidiaries terminates
for any reason other than those described in subsections (b) or (c) next
above or in (e) below; or
(e) the date Grantee is terminated for cause, provided that for
purposes of this Option no termination of employment occurring
within one year after the occurrence of a Change in Control Event shall be
deemed a termination for cause.
4.Exercise.
(a) During the period that the Option is exercisable, it may be
exercised in full or in part by the Grantee, his or her legal
representatives, guardian or Successor, as defined in the Plan,
by delivering or mailing written notice of the exercise to the
Secretary of AMCE. The written notice shall be signed by each person entitled
to exercise the Option and shall specify the address and Social
Security number of each such person. If any person other than the Grantee
purports to be entitled to exercise all or any portion of the Option, the
written notice shall be accompanied by proof, satisfactory to the
Secretary of AMCE, of that entitlement.
(b) The written notice shall be accompanied by full payment of
the exercise price for the shares as to which the Option is exercised
either (i) in cash, certified or bank cashier's check or money order,
payable to AMCE, (ii) in shares of AMCE Common Stock that have been held by
the Grantee for at least six months and evidenced by certificates
either endorsed or with stock powers attached transferring ownership to
AMCE, with an aggregate Fair Market Value (as defined in the Plan) equal to
said exercise price on the date the written notice is received by the
Secretary, or (iii) in any combination of the foregoing.
(c) Notwithstanding the provisions of subsection (b) next above,
shares acquired through the exercise of an Incentive Stock Option
granted under the Plan or any predecessor stock option plan providing for
options on shares of AMCE Common Stock may be used as payment at exercise
hereunder only if such shares have been held for at least 12 months
following such acquisition.
(d) The written notice of exercise will be effective and the
Option shall be deemed exercised to the extent specified in the notice
on the date that the written notice (together with required accompaniments
respecting payment of the exercise price) is received by the Secretary of
AMCE at its then executive offices during regular business hours.
5.Transfer of Shares; Tax Withholding.
(a) As soon as practicable after receipt of an effective written
notice of exercise and full payment of the exercise price as
provided in section 4 above, the Secretary of AMCE shall cause ownership of
the appropriate number of shares of AMCE Common Stock to be
transferred to the person or persons exercising the Option by having a
certificate or certificates for such number of shares registered in the name of
such person or persons and shall have each certificate delivered to
the appropriate person. Notwithstanding the foregoing, if AMCE or a
Subsidiary requires reimbursement of any tax required by law to be withheld
with respect to shares of AMCE Common Stock, the Secretary shall not
transfer ownership of shares until the required payment is made.
(b) Subject to the approval of the Committee and to the
provisions of the Plan, the Grantee may satisfy his tax withholding
obligations hereunder by electing to have shares otherwise issuable upon
exercise of this Option withheld, which shares shall have a Fair Market
Value on the date of exercise equal to the amount of Grantee's tax withholding
liability resulting from such exercise. Any such election shall be made
at or prior to exercise of the Option by delivering written notice
thereof to the Secretary of the Company.
6.Transferability. Except for assignments made with the
Committee's prior written approval (which may be denied or conditioned in the
sole discretion of the Committee), the rights under this Agreement may
not be transferred except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employment Retirement Income Security Act, or the
rules promulgated thereunder. The rights under this Agreement may be
exercised during the lifetime of the Grantee only by the Grantee (or by his
guardian, legal representative or Successor, as defined in the Plan). The
terms of this Option shall be binding upon the executors, administrators,
heirs, successors, and assigns of the Grantee.
7.Authorized Leave. Authorized leaves of absence from AMCE or a
Subsidiary shall not constitute a termination of employment for
purposes of the Agreement. For purposes of this Agreement, an authorized
leave of absence shall be an absence while the Grantee is on military
leave, sick leave, or other bona fide leave of absence so long as the
Grantee's right to employment with AMCE or a Subsidiary is guaranteed by
statute, contract, or company policy.
8.Requirements of Law. This Option may not be exercised if the
issuance of shares of AMCE Common Stock upon such exercise would
constitute a violation of any applicable federal or state securities or
other law or valid regulation. The Grantee, as a condition to his exercise of
this Option, shall represent to AMCE that the shares of AMCE Common
Stock to be acquired by exercise of this Option are being acquired for
investment and not with a present view to distribution or resale, unless counsel
for AMCE is then of the opinion that such a representation is not required
under the Securities Act of 1933 or any other applicable law, regulation,
or rule of any governmental agency.
9.Forfeiture. To the extent this Option is unexercised, it will
be forfeited along with all rights thereunder effective as of the
date the Committee determines that the Grantee, at any time during the
period of the Grantee's employment and for one (1) year thereafter, without the
Committee's written consent, engaged directly or indirectly in
any manner or capacity as principal, agent, partner, officer, director,
employee, or otherwise, in any business or activity competitive with the
business conducted by AMCE or its Subsidiaries, in the geographic area in
which AMCE or its Subsidiaries does business, or in any manner which is
inimical to the best interests of AMCE.
IN WITNESS WHEREOF, The Compensation Committee of the Board of
Directors has approved this Agreement and AMCE, by its duly authorized
officer, and the Grantee have signed this Agreement as of the date first above
written.
AMC ENTERTAINMENT INC.
By: /s/ Peter C. Brown
Peter C. Brown, Co-Chairman, President & Chief
Financial Officer
/s/ Richard M. Fay
Richard M. Fay, Grantee
The Grantee acknowledges receipt of copies of the Plan and the
Prospectus respecting the Plan. The Grantee represents that he is familiar
with the terms and provisions of the Plan and Prospectus. The Grantee hereby
accepts this Option subject to all the terms and provisions of the Plan,
including but not limited to Section 20 ("Adjustments for Corporate Changes")
thereof. The Grantee hereby agrees to accept as binding, conclusive, and final
all decisions and interpretations of the Board of Directors and, where
applicable, the Committee (as defined in the Plan), respecting any questions
arising under the Plan.
/s/ Richard M. Fay
Richard M. Fay, Grantee
