1
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 June 29, 2000
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 219615
Kansas City, Missouri 64121-9615
(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
June 29, 2000
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 10
Item 3.Quantitative and Qualitative Disclosures About
Market Risk 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 19
<PAGE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Thirteen
Weeks Ended
June 29, July 1,
2000 1999
---- ----
<S> <C> <C>
(Unaudited)
Revenues
Admissions $193,541 $187,882
Concessions 80,715 83,713
Other theatre 6,722 5,089
Other 7,161 9,876
---------- ----------
Total revenues 288,139 286,560
Expenses
Film exhibition costs 104,109 109,548
Concession costs 12,217 12,691
Theatre operating expense 75,809 67,009
Rent 55,979 47,877
Other 8,825 10,695
General and administrative 6,635 13,211
Preopening expense 1,608 1,273
Theatre closure expense 727 9,646
Depreciation and amortization 26,378 20,657
Gain on disposition of assets (1,640) (183)
------- -------
Total costs and expenses 290,647 292,424
------- -------
Operating loss (2,508) (5,864)
Other expense (income)
Interest expense
Corporate borrowings 16,248 11,628
Capital and financing lease obligations and other 3,182 1,843
Investment income (1,100) (486)
------- -------
Loss before income taxes and
cumulative effect of an accounting change (20,838) (18,849)
Income tax provision (7,900) (7,700)
------- -------
Loss before cumulative effect of an accounting
change (12,938) (11,149)
Cumulative effect of an accounting change
(net of income tax benefit of $4,095) - (5,840)
------- -------
Net loss $ (12,938)$ (16,989)
======== ========
Loss per share before cumulative effect of
an accounting change:
Basic $ (.55)$ (.48)
======== ========
Diluted $ (.55)$ (.48)
======== ========
Loss per share:
Basic $ (.55)$ (.72)
======== ========
Diluted $ (.55)$ (.72)
======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
AMC ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<CAPTION>
June 29,March 30,
2000 2000
---- ----
<S> <C> <C>
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $ 63,839$ 119,305
Receivables, net of allowance for doubtful
accounts of $3,896 as of June 29, 2000 and
$3,576 as of March 30, 2000 19,401 18,468
Reimbursable construction advances 8,267 10,955
Other current assets 41,206 45,275
------- --------
Total current assets 132,713 194,003
Property, net 828,881 822,295
Intangible assets, net 14,426 15,289
Other long-term assets 142,244 157,218
------- -------
Total assets $1,118,264$1,188,805
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 98,773$ 99,466
Construction payables 8,130 6,897
Accrued expenses and other liabilities 124,667 114,037
Current maturities of capital and financing
lease obligations 3,349 3,205
------- -------
Total current liabilities 234,919 223,605
Corporate borrowings 684,122 754,105
Capital and financing lease obligations 63,517 65,301
Other long-term liabilities 90,988 87,125
------- ------
Total liabilities 1,073,546 1,130,136
Stockholders' equity:
Common Stock, 66 2/3 cents par value; 19,447,598
shares issued as of June 29, 2000 and
March 30, 2000 12,965 12,965
Convertible Class B Stock, 66 2/3 cents par value;
4,041,993 shares issued and outstanding as
of June 29, 2000 and March 30, 2000 2,695 2,695
Additional paid-in capital 106,713 106,713
Accumulated other comprehensive income (4,699) (3,812)
Accumulated deficit (63,099) (50,161)
------- -------
54,575 68,400
Less:
Employee notes for Common Stock purchases 9,488 9,362
Common Stock in treasury, at cost, 20,500
shares as of June 29, 2000 and March 30, 2000 369 369
------- -------
Total stockholders' equity 44,718 58,669
------- -------
Total liabilities and stockholders' equity $1,118,264$1,188,805
======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
<CAPTION>
Thirteen
Weeks Ended
June 29, July 1,
2000 1999
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (Unaudited)
Cash flows from operating activities:
Net loss $ (12,938)$ (16,989)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 26,378 20,657
Deferred income taxes (7,758) (5,028)
Gain on disposition of long-term assets (1,640) (183)
Cumulative effect of an accounting change - 5,840
Change in assets and liabilities:
Receivables (933) (6,906)
Other current assets 4,069 3,631
Accounts payable 176 (5,162)
Accrued expenses and other liabilities 13,512 23,850
Liabilities for theatre closure (405) 7,802
Other, net 924 51
------- -------
Net cash provided by operating activities 21,385 27,563
------- -------
Cash flows from investing activities:
Capital expenditures (31,876) (79,311)
Proceeds from sale/leasebacks 554 -
Net proceeds from reimbursable construction advances 229 2,389
Proceeds from disposition of long-term assets 26,134 3,528
Other, net (3,191) 6,611
------- -------
Net cash used in investing activities (8,150) (66,783)
------- -------
Cash flows from financing activities:
Net borrowings (repayments) under revolving
Credit Facility (70,000) 42,000
Proceeds from financing lease obligations 2,453 -
Principal payments under capital and financing
lease obligations (798) (886)
Change in cash overdrafts (869) 8,701
Change in construction payables 1,233 (10,934)
------- -------
Net cash provided by (used in) financing
activities (67,981) 38,881
-------- ------
Effect of exchange rate changes on cash
and equivalents (720) 204
------- -------
Net decrease in cash and equivalents (55,466) (135)
------- -------
Cash and equivalents at beginning of period 119,305 13,239
------- -------
Cash and equivalents at end of period $ 63,839 $ 13,104
======== ========
</TABLE>
<PAGE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Thirteen
Weeks Ended
June 29, July 1,
2000 1999
---- ----
<S> <C> <C>
(Unaudited)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized of
$1,386 and $2,122) $11,132 $ 4,520
Income taxes refunded (5,054) (7,821)
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 29, 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
AMC Entertainment Inc. ("AMCE" or the "Company") is a holding company
which, through its direct and indirect subsidiaries, is principally
involved in the theatrical exhibition business throughout North America and
in Portugal, Spain, France, Japan and China (Hong Kong). The Company is
also involved in the business of providing on-screen advertising through a
wholly-owned subsidiary, National Cinema Network, Inc., and in
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 March 30, 2000. 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 June 29, 2000 are not necessarily indicative of the results to be
expected for the fiscal year (52 weeks) ending March 29, 2001.
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>
<CAPTION>
Thirteen Weeks Ended
June 29, July 1,
2000 1999
---- ----
<S> <C> <C>
(in thousands, except per share data)
Numerator:
Net loss before cumulative effect of an
accounting change for basic
and diluted earnings per share $ (12,938)$ (11,149)
======== ========
Denominator:
Shares for basic and diluted earnings per share -
average shares outstanding 23,469 23,469
======== ========
Basic loss per share before cumulative effect
of an accounting change $ (.55) $ (.48)
======== ========
Diluted loss per share before cumulative effect
of an accounting change $ (.55) $ (.48)
======== ========
</TABLE>
During the thirteen weeks ended June 29, 2000 and July 1, 2000, shares
from options to purchase shares of Common Stock were excluded from the
diluted earnings per share calculation because they were anti-dilutive.
NOTE 3 - COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
June 29, July 1,
2000 1999
---- ----
<S> <C> <C>
(in thousands)
Net loss $ (12,938) $ (16,989)
Foreign currency translation adjustment (1,038) (1,698)
Unrealized gain on marketable securities
(net of income tax benefit of $99) 151 -
------- -----
--
Comprehensive loss $ (13,825) $ (18,687)
======== ========
</TABLE>
NOTE 4 - OPERATING SEGMENTS
Information about the Company's operations by operating segment is as
follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
June 29, July 1,
2000 1999
Revenues ---- ----
<S> <C> <C>
(in thousands)
North America theatrical exhibition $264,646 $265,952
International theatrical exhibition 16,332 10,732
On-screen advertising and other 7,161 9,876
------- -------
Total revenues $288,139 $286,560
======== ========
Thirteen Weeks Ended
June 29, July 1,
2000 1999
Adjusted EBITDA (1) ---- ----
(in thousands)
North America theatrical exhibition $ 34,494 $ 40,165
International theatrical exhibition (1,630) (606)
On-screen advertising and other (1,664) (819)
------- -------
Total segment Adjusted EBITDA 31,200 38,740
General and administrative 6,635 13,211
------- -------
Total Adjusted EBITDA $ 24,565 $25,529
======== ========
June 29, July 1,
2000 1999
Property (2) ---- ----
(in thousands)
North America theatrical exhibition $1,082,049 $ 952,475
International theatrical exhibition 77,307 50,365
On-screen advertising and other 13,465 11,733
------- -------
Total segment property 1,172,821 1,014,573
Construction in progress 39,889 118,627
Corporate 45,882 48,939
------- -------
1,258,592 1,182,139
Less-accumulated depreciation
and amortization 429,711 398,489
------- -------
Property, net $ 828,881 $ 783,650
======== ========
(1)Represents net loss before income taxes, cumulative effect of an
accounting change, interest, depreciation and amortization and adjusted for
preopening expense, theatre closure expense, gain on disposition of
assets, equity in earnings of unconsolidated affiliates.
(2) Property is comprised of land, buildings and improvements, leasehold
improvements and furniture, fixtures and equipment.
</TABLE>
NOTE 5 - RESTRUCTURING CHARGE
On September 30, 1999, the Company recorded a restructuring charge of
$12,000,000 ($7,200,000 after tax or $.31 per share) related to the
consolidation of its three U.S. divisional operations offices into its
corporate headquarters and a decision to discontinue direct involvement
with pre-development activities associated with certain
retail/entertainment projects conducted through its wholly-owned
subsidiary, Centertainment, Inc. Included in this total are severance and
other employee related costs of $5,300,000, lease termination costs of
$700,000 and the write-down of property of $6,000,000. As of June 29,
2000, the Company had paid substantially all expenses related to these
charges.
The severance and other employee related costs result from a workforce
reduction of 128 employees primarily at the Company's divisional offices
and at its corporate headquarters. Lease termination costs were incurred in
connection with the closure of the three divisional operations offices
prior to their lease expiration dates.
The activity impacting the accrual for restructuring charge is summarized
below:
<TABLE>
<CAPTION>
Severance and Lease
Other Employee Termination
Related Costs Costs Total
-------------- ------- -------
<S> <C> <C> <C>
Balance as of March 30, 2000 $ 550 $ 310 $ 860
Cash Payments (543) (236) (779)
------- ------- -------
Balance as of June 29, 2000 $ 7 $ 74 $ 81
======== ====== ========
</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; (ix) changes in real estate, zoning and tax laws; and (x)
unforeseen changes in operating requirements. 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.
<PAGE>
Operating Results
Set forth in the table below is a summary of revenues, costs and
expenses attributable to the Company's North America and International
theatrical exhibition operations and the Company's on-screen advertising
and other businesses.
<TABLE>
<CAPTION>
Thirteen Weeks Ended
June 29, July 1,
2000 1999 %Change
---- ---- ----
<S> <C> <C> <C>
(Dollars in thousands)
Revenues
North America theatrical exhibition
Admissions $180,377 $179,167 0.7%
Concessions 78,023 82,019 (4.9)
Other theatre 6,246 4,766 31.1
-------- ----- ----
264,646 265,952 (0.5)
International theatrical exhibition
Admissions 13,164 8,715 51.0
Concessions 2,692 1,694 58.9
Other theatre 476 323 47.4
------- ------- ----
16,332 10,732 52.2
On-screen advertising and other 7,161 9,876 (27.5)
------- ------- ----
Total revenues $288,139 $286,560 0.6%
======== ========= =======
Cost of Operations
North America theatrical exhibition
Film exhibition costs $ 97,328 $105,141 (7.4)%
Concession costs 11,416 12,169 (6.2)
Theatre operating expense 70,642 63,790 10.7
Rent 50,766 44,687 13.6
Preopening expense 1,342 1,010 32.9
Theatre closure expense 727 9,646 (92.5)
-------- ------ -------
232,221 236,443 (1.8)
International theatrical exhibition
Film exhibition costs 6,781 4,407 53.9
Concession costs 801 522 53.4
Theatre operating expense 5,167 3,219 60.5
Rent 5,213 3,190 63.4
Preopening expense 266 263 1.1
------- -------- ------
18,228 11,601 57.1
On-screen advertising and other 8,825 10,695 (17.5)
General and administrative 6,635 13,211 (49.8)
Depreciation and amortization 26,378 20,657 27.7
Gain on disposition of assets (1,640) (183) *
------- ------- ------
Total costs and expenses $290,647 $292,424 (0.6)%
======== ========= =======
*Percentage change in excess of 100%.
</TABLE>
<PAGE>
Thirteen weeks ended June 29, 2000 and July 1, 1999.
Revenues. Total revenues increased .6% during the thirteen weeks
ended June 29, 2000 compared to the thirteen weeks ended July 1, 1999.
North America theatrical exhibition revenues decreased .5% from the
prior year. Admissions revenues increased .7% due to a 7.8% increase in
average ticket price offset by a 6.6% decrease in attendance. The increase
in average ticket prices was due to a strategic initiative implemented by
the Company to selectively increase ticket and concession price and to the
growing number of megaplexes in the Company's theatre circuit, which yield
higher average ticket prices than multiplexes. Attendance at multiplexes
(theatres generally without stadium-style seating) decreased due to a 18.9%
decrease in attendance at comparable multiplexes (theatres opened before
the first quarter of fiscal 2000), the closure or sale of 24 multiplexes
with 156 screens since July 1, 1999 and a decline in the popularity of film
product during the thirteen weeks ended June 29, 2000 as compared with the
same period in the prior year. 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.
Attendance at megaplexes (theatres with predominantly stadium-style
seating) increased as a result of the addition of 14 new megaplexes with
313 screens since July 1, 1999. Attendance at comparable megaplexes
decreased 9.8% primarily due to a decline in the popularity of film product
during the thirteen weeks ended June 29, 2000 as compared with the same
period in the prior year. Concessions revenues decreased 4.9% due to the
decrease in total attendance offset by a 1.9% increase in average
concessions per patron.
International theatrical exhibition revenues increased 52.2% from the
prior year. Admissions revenues increased 51.0% due primarily to an
increase in attendance from the addition of 4 new megaplexes with a total
of 78 screens since July 1, 1999. Attendance at comparable megaplexes
increased 5.0%. Concession revenues increased 58.9% due primarily to the
increase in total attendance. International revenues were positively
impacted by a weaker U.S. dollar, although this did not contribute
materially to consolidated net loss.
On-screen advertising and other revenues decreased 27.5% from the
prior year due primarily to a decrease in rolling stock advertising (filmed
pre-show commercials) at the Company's on-screen advertising business.
Costs and expenses. Total costs and expenses decreased .6% during the
thirteen weeks ended June 29, 2000 compared to the thirteen weeks ended
July 1, 1999.
North America theatrical exhibition costs and expenses decreased 1.8%
from the prior year. Film exhibition costs decreased 7.4% due to a
decrease in the percentage of admissions paid to film distributors offset
by higher admissions revenues. The decrease 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 during the thirteen weeks ended July 1, 1999. As a
percentage of admissions revenues, film exhibition costs were 54.0% in the
current year as compared with 58.7% in the prior year. Concession costs
decreased 6.2% due to the decrease in concessions revenues and a decrease
in concession costs as a percentage of concessions revenues. As a
percentage of concessions revenues, concession costs were 14.6% in the
current year compared with 14.8% in the prior year. As a percentage of
revenues, theatre operating expense was 26.7% in the current year as
compared to 24.0% in the prior year primarily due to an increase in fixed
costs associated with the increase in the number of screens operated and
the decrease in attendance. Rent expense increased 13.6% 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 June 29, 2000, the Company
incurred $727,000 of theatre closure expense comprised primarily of
expected payments to a landlord to terminate the lease related to the
closure of one multiplex with six screens.
International theatrical exhibition costs and expenses increased 57.1%
from the prior year. Film exhibition costs increased 53.9% primarily due
to higher admission revenues. Rent expense increased 63.4% and theatre
operating expense increased 60.5% from the prior year, primarily due to the
increased number of 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.
On-screen advertising and other costs and expenses decreased 17.5% due
primarily to the decrease in rolling stock advertising at the Company's on-
screen advertising business.
General and administrative expenses decreased 49.8% during the
thirteen weeks ended June 29, 2000 due primarily to the September 30, 1999
consolidation of the Company's three U.S. divisional operations offices
into its corporate headquarters and a decrease in incentive compensation
expense. As a percentage of total revenues, general and administrative
expenses declined from 4.6% in the prior year to 2.3% in the current year.
Depreciation and amortization increased 27.7%, or $5,721,000, during
the thirteen weeks ended June 29, 2000. This increase was primarily
caused by an increase in depreciation of $3,284,000 related to the
Company's new theatres.
Gain on disposition of assets increased from a gain of $183,000 in the
prior year to a gain of $1,640,000 during the current year. Current year
and prior year results include gains related to the sales of real estate
properties held for investment.
Interest Expense. Interest expense increased 44.2% during the
thirteen weeks ended June 29, 2000 compared to the prior year, primarily
due to an increase in average outstanding borrowings and interest rates.
Income Tax Provision. The provision for income taxes decreased to a
benefit of $7,900,000 during the current year from a benefit of $7,700,000
in the prior year. The effective tax rate was 37.9% for the current year
compared to 40.9% for the previous year. The Company adjusts its expected
annual tax rate on a quarterly basis based on current projections of non-
deductible expenses and pre-tax earnings on losses.
Net Earnings. Net earnings increased during the thirteen weeks ended
June 29, 2000 to a loss of $12,938,000 from a loss of $16,989,000 in the
prior year. Net loss per share was $.55 compared to a loss of $.72 in the
prior year. Prior 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 $21,385,000 and $27,563,000 for the thirteen
weeks ended June 29, 2000 and July 1, 1999, respectively.
The Company continues to expand its North America and International
theatre circuits. During the current fiscal year, the Company opened one
megaplex with 25 screens. In addition, the Company closed two multiplexes
with twelve screens, resulting in a circuit total of 81 megaplexes with
1,807 screens and 129 multiplexes with 1,109 screens as of June 29, 2000.
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 may 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 June 29, 2000, one new theatre with 25 screens was leased from a
developer.
As of June 29, 2000, the Company had construction in progress of
$39,889,000 and reimbursable construction advances (amounts due from
developers and lessors on leased theatres) of $8,267,000. The Company had
five megaplexes with 88 screens under construction on June 29, 2000. During
the thirteen weeks ended June 29, 2000, the Company had capital
expenditures of $31,876,000. The Company expects that the net cash
requirements for capital expenditures in fiscal year 2001 will approximate
$110 to 120 million. Included in these amounts are projections of the
expected proceeds from the sales of real estate assets which the Company
plans to place into sale and leaseback or other comparable financing
programs. The Company expects proceeds from sale and leaseback transactions
of up to $10 million for fiscal 2001. Consummation of sale and leaseback
or other comparable financing programs are dependent upon favorable market
conditions.
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 June 29, 2000, the Company had outstanding
borrowings of $260,000,000 under the Credit Facility at an average interest
rate of 8.7% per annum, and approximately $77,000,000 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 June 29, 2000, the Company was in
compliance with all financial covenants relating to the Credit Facility.
Covenants under the Indentures relating to the Company's 9 1/2% Senior
Subordinated Notes due 2009 and the Company's 9 1/2% Senior Subordinated
Notes due 2011 are substantially the same and impose limitations on the
incurrence of indebtedness, dividends, purchases or redemptions of stock,
transactions with affiliates, and mergers and sales of assets. As of June
29, 2000, the Company was in compliance with all financial covenants
relating to the Notes due 2009 and the Notes due 2011. However, as of such
date, under provisions of the Notes due 2009 and the Notes due 2011, the
Company is currently prohibited from incurring additional indebtedness
other than additional borrowings under the Credit Facility and other
permitted indebtedness, as defined in the Indentures, and paying dividends
or making distributions in respect of its capital stock.
The Company believes that cash generated from operations, existing
cash and equivalents, amounts received from sale and leaseback
transactions, expected reimbursements from developers and the available
commitment amount under its Credit Facility will be sufficient to fund
operations, planned capital expenditures and payments to landlords to
terminate leases on closed theatres for the next 12 months. However, the
performance of films licensed by the Company and unforeseen changes in
operating requirements could affect the Company's ability to continue its
expansion program as well as comply with certain financial covenants in the
Credit Facility.
Euro Conversion
A single currency called the euro was introduced in Europe on 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 no later than 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, two theatres
in Spain and one in France. These 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 which was
amended by Statement of Financial Accounting Standards No. 138 issued in
June 2000. 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.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition
in Financial Statements. SAB 101 draws upon the existing accounting rules
and explains those rules, by analogy, to other transactions that the
existing rules do not specifically address. The Company has reviewed its
revenue recognition policies and will make a final evaluation of the
impact, if any, of SAB 101 after additional guidance is made public by the
SEC staff.
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 8.7% per annum, a 100 basis point increase in market
interest rates would increase interest expense and decrease earnings before
income taxes by approximately $2.6 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 Canada, Portugal, Spain, France, Japan, and China (Hong Kong)
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 international 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 $.6 million and $11.6 million, respectively.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Item 3. Legal Proceedings of the Company's Annual
Report on Form 10-K for the fiscal year ended March 30, 2000.
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).
4.1(d) Fourth Amendment, dated March 29, 2000, to Amended and Restated
Credit Agreement dated as of April 10, 1997. (Incorporated by
reference from Exhibit 4.1(d) to the Company's Form 10-K (file
1-8747) for the fiscal year ended March 30, 2000).
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.
*27 Financial Data Schedule
_______
* Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed or required to be filed during
the thirteen weeks ended June 29, 2000.
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 11, 2000 /s/ Peter C. Brown
----------------------------
Peter C. Brown
Chairman of the Board,
Chief Executive Officer and
President
Date: August 11, 2000 /s/ Craig R. Ramsey
----------------------------
Craig R. Ramsey
Senior Vice President,Finance,
Chief Financial Officer and
Chief Accounting Officer
