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 December 30, 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 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 December
30, 1999
Common Stock, 66 2/3 cents par value 19,427,098
Class B Stock, 66 2/3 cents par value 4,041,993
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
INDEX
Page Number
--------
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Item 2.Management's Discussion and Analysis
of Financial Condition and Results of Operations 11
Item 3.Quantitative and Qualitative Disclosures
About Market Risk 20
PART II - OTHER INFORMATION
Item 1.Legal Proceedings 21
Item 4.Submission of Matters to a Vote of Security Holders 23
Item 6.Exhibits and Reports on Form 8-K 24
Signatures 26
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Thirteen Thirty-nine
Weeks Ended Weeks Ended
Dec 30, Dec 31, Dec 30, Dec 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Revenues
Admissions $183,800 $165,812 $591,431 $509,571
Concessions 78,420 77,436 257,632 239,998
Other theatre 9,627 7,032 21,565 16,083
Other 13,126 9,417 34,590 24,357
-------- -------- -------- --------
Total revenues 284,973 259,697 905,218 790,009
Costs and expenses
Film exhibition costs 98,693 88,839 329,786 278,243
Concession costs 11,406 13,356 38,995 38,499
Theatre operating expense 70,787 65,578 208,919 194,763
Rent 49,594 41,663 146,107 119,065
Other 11,606 8,999 34,095 22,362
General and administrative 12,873 12,753 38,368 40,034
Preopening expense 1,914 1,209 5,211 1,982
Theatre closure expense 2,251 - 13,943 2,801
Restructuring charge - - 12,000 -
Depreciation and
amortization 24,620 23,100 68,306 64,472
-------- -------- -------- --------
Total costs and
expenses 283,744 255,497 895,730 762,221
-------- -------- -------- --------
Operating income 1,229 4,200 9,488 27,788
Other expense (income)
Interest expense
Corporate borrowings 14,328 7,270 38,486 19,844
Capital and financing
lease obligations 2,302 2,079 6,016 6,373
Investment (income) loss 311 (434) 211 (1,085)
Gain on disposition
of assets (635) (901) (962) (2,259)
-------- -------- -------- --------
Earnings (loss) before
income taxes and
cumulative effect of
an accounting change (15,077) (3,814) (34,263) 4,915
Income tax provision (6,165) (2,100) (14,000) 1,800
-------- -------- -------- --------
Earnings (loss) before
cumulative effect of an
accounting change (8,912) (1,714) (20,263) 3,115
Cumulative effect of an
accounting change
(net of income tax
benefit of $4,095) - - (5,840) -
-------- -------- -------- --------
Net earnings (loss) $ (8,912) $ (1,714) $(26,103) $ 3,115
======== ======== ======== ========
Net earnings (loss)
per share before
cumulative effect of
an accounting change:
Basic $ (.38) $ (.07) $ (.86) $ .13
======== ======== ======== ========
Diluted $ (.38) $ (.07) $ (.86) $ .13
======== ======== ======== ========
Net earnings (loss) per share:
Basic $ (.38) $ (.07) $ (1.11) $ .13
======== ======== ======== ========
Diluted $ (.38) $ (.07) $ (1.11) $ .13
======== ======== ======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
AMC ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<CAPTION>
December 30, April 1,
1999 1999
---- ----
<S> <C> <C>
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $109,783 $13,239
Receivables, net of allowance
for doubtful accounts of $1,236
as of December 30, 1999 and $540
as of April 1, 1999 28,633 18,325
Reimbursable construction advances 30,581 22,317
Other current assets 42,211 48,707
-------- --------
Total current assets 211,208 102,588
Property, net 861,166 726,025
Intangible assets, net 17,044 18,723
Other long-term assets 136,216 128,394
-------- --------
Total assets $1,225,634 $ 975,730
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $95,402 $ 69,381
Construction payables 6,446 24,354
Accrued expenses and other liabilities 120,333 77,304
Current maturities of capital and financing
lease obligations 3,520 18,017
-------- --------
Total current liabilities 225,701 189,056
Corporate borrowings 754,090 547,045
Capital and financing lease obligations 69,298 44,558
Other long-term liabilities 86,405 79,606
-------- --------
Total liabilities 1,135,494 860,265
Stockholders' equity:
Common Stock, 66 2/3 par value; 19,447,598
shares issued as of December 30, 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 December 30, 1999 and April 1, 1999 2,695 2,695
Additional paid-in capital 106,713 106,713
Accumulated other comprehensive income (1,551) (2,690)
Retained earnings (deficit) (21,077) 5,026
-------- --------
99,745 124,709
Less:
Employee notes for Common Stock purchases 9,236 8,875
Common Stock in treasury, at cost, 20,500
shares as of December 30, 1999 and
April 1, 1999 369 369
-------- --------
Total stockholders' equity 90,140 115,465
-------- --------
Total liabilities and stockholders' equity $1,225,634 $975,730
========== ======
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>
Thirty-nine
Weeks Ended
Dec 30, Dec 31,
1999 1998
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (Unaudited)
Cash flows from operating activities:
Net earnings (loss) $ (26,103) $ 3,115
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Restructuring charge 7,754 -
Depreciation and amortization 68,306 64,472
Deferred income taxes (11,346) -
Gain on disposition of long-term assets (962) (2,259)
Cumulative effect of an accounting change 5,840 -
Change in assets and liabilities:
Receivables (10,308) (9,334)
Other current assets 6,496 (2,671)
Accounts payable 9,402 (1,207)
Accrued expenses and other liabilities 29,546 26,979
Liabilities for theatre closure 12,312 2,801
Other, net 1,446 561
-------- --------
Net cash provided by operating activities 92,383 82,457
-------- --------
Cash flows from investing activities:
Capital expenditures (236,863) (177,063)
Proceeds from sale/leasebacks 23,630 -
Net proceeds from reimbursable construction advances 6,119 42,308
Proceeds from disposition of long-term assets 5,956 10,150
Other, net (7,739) (16,203)
-------- --------
Net cash used in investing activities (208,897) (140,808)
-------- --------
Cash flows from financing activities:
Net borrowings under revolving Credit Facility 207,000 103,000
Principal payments under corporate borrowings (14,000) -
Proceeds from financing lease obligations 24,109 -
Principal payments under capital and financing
lease obligations (2,425) (5,196)
Change in cash overdrafts 16,619 10,732
Change in construction payables (17,908) (17,275)
Funding of employee notes for Common Stock
purchase, net - (8,579)
Other, net (241) (98)
-------- --------
Net cash provided by financing activities 213,154 82,584
-------- --------
Effect of exchange rate changes on cash
and equivalents (96) 163
-------- --------
Net increase in cash and equivalents 96,544 24,396
Cash and equivalents at beginning of period 13,239 9,881
-------- --------
Cash and equivalents at end of period $ 109,783 $ 34,277
======== ========
</TABLE>
<PAGE>
<TABLE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Thirty-nine
Weeks Ended
Dec 30, Dec 31,
1999 1998
---- ----
<S> <C> <C>
(Unaudited)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized
of $6,257 and $5,585) $ 39,567 $ 27,568
Income taxes paid (refunded) (7,803) 2,913
Schedule of non-cash investing activities:
Receivable from sale/leasebacks included
in reimbursable construction advances $ 14,383 $ -
</TABLE>
<PAGE>
See Notes to Consolidated Financial Statements.
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1999
(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 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 thirty-nine weeks ended December 30, 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.
General and administrative expenses of the Company's on-screen advertising
business have been combined with other costs and expenses of the on-screen
advertising business on the consolidated statements of operations.
Cash and equivalents consist of cash on hand and cash investments with
original maturities of three months or less.
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation.
<PAGE>
NOTE 2 - EARNINGS PER SHARE
<TABLE>
The following table sets forth the computation of basic and diluted
earnings per share:
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
December 30,December 31, December 30,December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
(in thousands, except per share data)
Numerator:
Earnings (loss) before
cumulative effect of
an accounting change
for basic and diluted
earnings per share $ (8,912) $ (1,714) $ (20,263) $ 3,115
======== =========== ========= ========
Denominator:
Shares for basic
earnings per share -
average shares
outstanding 23,469 23,469 23,469 23,348
Stock options - - - 174
-------- -------- -------- --------
Shares for diluted
earnings per share 23,469 23,469 23,469 23,522
======== ======== ========= ========
Basic earnings (loss)
per share before
cumulative effect of
an accounting change $ (.38) $ (.07) $ (.86)$ .13
======== ======= ========= ========
Diluted earnings (loss)
per share before
cumulative effect of
an accounting change $ (.38) $ (.07) $ (.86) $ .13
======== ========= ======= ========
</TABLE>
During the thirteen and thirty-nine weeks ended December 30, 1999 and the
thirteen weeks ended December 31, 1998, 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
<TABLE>
The components of comprehensive income are as follows:
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
Dec 30, Dec 31, Dec 30, Dec 31,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Net earnings (loss) $ (8,912) $ (1,714) $(26,103) $ 3,115
Foreign currency
translation adjustment (1,482) 1,660 1,139 2,888
-------- -------- -------- --------
Comprehensive income $(10,394) $ (54) $ (24,964) $ 6,003
======== ======== ======== ========
</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 thirty-nine weeks ended December 30,
1999 of $5,840,000 (net of income tax benefit of $4,095,000) or $.25 per share.
NOTE 5 - OPERATING SEGMENTS
In connection with a corporate restructuring on September 30, 1999, the
Company reorganized its U.S. and International theatrical exhibition segments
into North America and International theatrical exhibition. Information about
the operations of the Company's Canadian theatres were reported within the
International theatrical exhibition segment prior to September 30, 1999.
<TABLE>
Information about the Company's operations by operating segment is as follows:
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
Revenues Dec 30, Dec 31, Dec 30, Dec 31,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
North America theatrical
exhibition $256,803 $239,619 $828,346 $739,734
International theatrical
exhibition 15,044 10,661 42,282 25,918
On-screen advertising
and other 13,126 9,417 34,590 24,357
-------- -------- -------- --------
Total revenues $284,973 $259,697 $905,218 $790,009
======== ======== ======== ========
Thirteen Weeks Ended Thirty-nine Weeks Ended
Adjusted EBITDA (1) Dec 30, Dec 31, Dec 30, Dec 31,
1999 1998 1999 1998
---- ---- --- ----
(in thousands)
North America theatrical
exhibition $41,945 $40,873 $147,302 $133,120
International theatrical
exhibition (578) (29) (481) 1,962
On-screen advertising
and other 1,520 418 495 1,995
-------- -------- -------- --------
Total segment Adjusted
EBITDA 42,887 41,262 147,316 137,077
General and
administrative 12,873 12,753 38,368 40,034
-------- -------- -------- --------
Total Adjusted EBITDA $30,014 $28,509 $108,948 $97,043
======== ======== ======== ========
Property (2) December 30, December 31,
1999 1998
---- ----
(in thousands)
North America theatrical
exhibition $1,071,140 $ 900,496
International theatrical
exhibition 70,944 46,476
On-screen advertising
and other 12,384 10,774
-------- --------
Total segment property 1,154,468 957,746
Construction in progress 64,660 50,688
Corporate 45,158 37,331
-------- --------
1,264,286 1,045,765
Less-accumulated
depreciation
and amortization 403,120 370,444
-------- --------
Property, net $ 861,166 $ 675,321
======== ========
(1)Represents earnings before interest, income taxes, depreciation and amorti
zation and adjusted for, restructuring charge, preopening expense, theatre
closure expense, gain on disposition of assets, equity in earnings of
unconsolidated affiliates and cumulative effect of an accounting change.
(2) Property is comprised of land, buildings and improvements, leasehold imp
rovements and furniture, fixtures and equipment.
</TABLE>
NOTE 6 - 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 $5,200,000, lease
termination costs of $700,000 and the write-down of property of $6,100,000. As
of September 30, 1999, the Company recorded $7,200,000 in accrued expenses and
other liabilities related to these charges. The Company anticipates that all of
the remaining restructuring costs will be paid in fiscal 2000.
The severance and other employee related costs result from a workforce
reduction of approximately 130 employees primarily at the Company's divisional
offices and at its corporate headquarters. The Company reduced its workforce by
115 employees during the thirteen weeks ended December 30, 1999. Lease
termination costs were incurred in connection with the closure of the three
divisional operations offices prior to their lease expiration dates. The charge
for property relates to the write-off of capitalized pre-development costs for
certain retail/entertainment projects.
<TABLE>
The activity impacting the accrual for restructuring charge is summarized
below:
<CAPTION>
Severance and Pre- Lease
Other Employee development Termination
Related Costs Costs Costs Total
-------- ---- ---- ----
<S> <C> <C> <C> <C>
Balance as of
September 30, 1999 $ 5,233 $ 1,331 $ 667 $ 7,231
Cash Payments (2,919) (1,097) (230) (4,246)
---- ---- ---- ----
Balance as of
December 30, 1999 $ 2,314 $ 234 $ 437 $ 2,985
======== ======== ======== ========
</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.
Operating Results
<TABLE>
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.
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
Dec 30, Dec 31, Dec 30,Dec 31,
1999 1998 % Change 1999 1998 % Change
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues
North America theatrical exhibition
Admissions $171,550 $157,461 8.9% $556,991 $488,863 13.9%
Concessions 75,868 75,475 0.5 250,523 235,282 6.5
Other theatre 9,385 6,683 40.4 20,832 15,589 33.6
---- ---- ---- ---- ---- ----
256,803 239,619 7.2 828,346 739,734 12.0
International theatrical exhibition
Admissions 12,250 8,351 46.7 34,440 20,708 66.3
Concessions 2,552 1,961 30.1 7,109 4,716 50.7
Other theatre 242 349(30.7) 733 494 48.4
-------- -------- ---- ------- ------ -----
15,044 10,661 41.1 42,282 25,918 63.1
On-screen advertising
and other 13,126 9,417 39.4 34,590 24,357 42.0
-------- ------- ---- -------- -------- ----
Total revenues $284,973 $259,697 9.7% $905,218 $790,009 14.6%
======== ======= ==== ===== ====== =====
Costs and Expenses
North America
theatrical exhibition
Film exhibition costs $92,405 $84,252 9.7%$312,040 $267,043 16.9%
Concession costs 10,729 12,699 (15.5) 36,885 37,011 (0.3)
Theatre operating
expense 66,317 62,372 6.3 197,115 188,361 4.6
Rent 45,407 39,423 15.2 135,004 114,199 18.2
Preopening expense 1,606 998 60.9 4,256 1,771 *
Theatre closure
expense 2,251 - 13,943 2,801 *
-------- -------- ------- ------- ------ ------
218,715 199,744 9.5 699,243 611,186 14.4
International
theatrical exhibition
Film exhibition costs 6,288 4,587 37.1 17,746 11,200 58.4
Concession costs 677 657 3.0 2,110 1,488 41.8
Theatre operating
expense 4,470 3,206 39.4 11,804 6,402 84.4
Rent 4,187 2,240 86.9 11,103 4,866 *
Preopening expense 308 211 46.0 955 211 *
-------- -------- ---- ------- -------- ------
15,930 10,901 46.1 43,718 24,167 80.9%
On-screen advertising
and other 11,606 8,999 29.0 34,095 22,362 52.5
General and
administrative 12,873 12,753 0.9 38,368 40,034 (4.2)
Restructuring charge - - - 12,000 - *
Depreciation and
amortization 24,620 23,100 6.6 68,306 64,472 5.9
-------- -------- ----- -------- ------- ----
Total costs
and expenses $283,744$255,497 11.1%$895,730 $762,221 17.5%
======== ======== ===== ======= ======= =====
*Percentage change in excess of 100%.
</TABLE>
Thirteen weeks ended December 30, 1999 and December 31, 1998.
Revenues. Total revenues increased 9.7% during the thirteen weeks ended
December 30, 1999 compared to the thirteen weeks ended December 31, 1998.
North America theatrical exhibition revenues increased 7.2% from the prior
year. Admissions revenues increased 8.9% due to a 13.6% increase in average
ticket price offset by a 4.1% 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 prices 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 19.2% decrease in attendance at
comparable multiplexes (theatres opened before the third quarter of fiscal 1999)
and the closure or sale of 43 multiplexes with 264 screens since December 31,
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. Attendance at megaplexes (theatres with
predominantly stadium-style seating) increased as a result of the
addition of 15 new megaplexes with 346 screens since December 31, 1998.
Attendance at comparable megaplexes decreased 5.7%, primarily due to a decline
in the popularity of film product during the thirteen weeks ended
December 30, 1999 as compared with the same period in the prior year.
Concessions revenues increased .5% due to a 4.8% increase in average
concessions per patron offset by the decrease in total
attendance. The increase in average concessions per patron was attributable to
selective price increases 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 41.1% from the prior
year. Admissions revenues increased 46.7% due primarily to an increase in
attendance from the addition of three new megaplexes with a total of 62 screens
since December 31, 1998. Attendance at comparable megaplexes increased 6.0%.
Concession revenues increased 30.1% 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 increased 39.4% from the prior
year due primarily to the introduction of a new advertising product at the
Company's on-screen advertising business.
Costs and expenses. Total costs and expenses increased 11.1% during the
thirteen weeks ended December 30, 1999 compared to the thirteen weeks ended
December 31, 1998.
North America theatrical exhibition costs and expenses increased 9.5% from
the prior year. Film exhibition costs increased 9.7% due to higher admissions
revenues and an increase in the percentage of admissions paid to film
distributors. As a percentage of admissions revenues, film exhibition costs were
53.8% in the current year as compared with 53.5% in the prior year. Concession
costs decreased 15.5% due to a decrease in concession costs as a percentage of
concessions revenues offset by the increase in concessions revenues. As a
percentage of concessions revenues, concession costs were 14.1% in the current
year compared with 16.8% in the prior year due primarily to concession price
increases. As a percentage of revenues, theatre operating expense was 25.8% in
the current year as compared to 26.0% in the prior year. Rent expense increased
15.2% 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 December 30, 1999,
the Company incurred $2,251,000 of theatre closure expense comprised of expected
payments to landlords to terminate leases related primarily to the closure of 2
multiplexes with 17 screens.
International theatrical exhibition costs and expenses increased 46.1% from
the prior year. Film exhibition costs increased 37.1% primarily due to higher
admission revenues, offset by a decrease in the percentage of admissions paid to
film distributors. Rent expense increased 86.9% and theatre operating expense
increased 39.4% 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 increased 29.0% due
primarily to an increase in costs associated with the new advertising product at
the Company's on-screen advertising business. The Company anticipates that
these costs as a percentage of the related advertising revenues will decline as
revenues from the new advertising product continue to grow.
General and administrative expenses increased .9% during the thirteen weeks
ended December 30, 1999 and include $1,140,000 of non-recurring relocation costs
related to the Company's September 30, 1999 consolidation of its three U.S.
divisional operations offices into its corporate headquarters. As a percentage
of total revenues, recurring general and administrative expenses declined from
4.9% in the prior year to 4.1% in the current year.
Depreciation and amortization increased 6.6%, or $1,520,000, during the
thirteen weeks ended December 30, 1999. This increase was primarily caused by
an increase in depreciation of $3,545,000 related to the Company's new theatres,
which was partially offset by a $2,345,000 decrease in amortization due to a
change in accounting for start-up activities.
Interest Expense. Interest expense increased 77.9% during the thirteen
weeks ended December 30, 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
from a gain of $901,000 in the prior year to a gain of $635,000 during the
current year. Current year and prior year results include gains related to the
sales of the real estate assets associated with a multiplex theatre.
Income Tax Provision. The provision for income taxes decreased to a
benefit of $6,165,000 during the current year from a benefit of $2,100,000 in
the prior year. The effective tax rate was 40.9% for the current year compared
to 55.1% 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 during the thirteen weeks ended
December 30, 1999 to a loss of $8,912,000 from a loss of $1,714,000 in the
prior year. Net loss per share was $.38 compared to a loss of $.07 in the prior
year.
Thirty-nine weeks ended December 30, 1999 and December 31, 1998.
Revenues. Total revenues increased 14.6% during the thirty-nine weeks
ended December 30, 1999 compared to the thirty-nine weeks ended December 31,
1998.
North America theatrical exhibition revenues increased 12.0% from the prior
year. Admissions revenues increased 13.9% due to a 13.1% increase in average
ticket price and a .8% increase in attendance. The increase in average ticket
prices was due to a strategic initiative implemented by the Company to
selectively increase ticket and concession
prices and the growing number of megaplexes in the Company's theatre circuit,
which yield higher average ticket prices than multiplexes. Attendance at
megaplexes increased as a result of the addition of 15 new megaplexes with 346
screens since December 31, 1998, offset by a .1% decrease in attendance at
comparable megaplexes (theatres opened before the first quarter of fiscal 1999).
Attendance at multiplexes decreased due to a 15.8% decrease in attendance at
comparable multiplexes and the closure or sale of 43 multiplexes with 264
screens since December 31, 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.
Concessions revenues increased 6.5% due to a 5.7% increase in average
concessions per patron and the increase in total attendance. The increase in
average concessions per patron was attributable to selective price increases 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 63.1% from the prior
year. Admissions revenues increased 66.3% due primarily to an increase in
attendance from the addition of three new megaplexes with a total of 62 screens
since December 31, 1998. Attendance at the Company's comparable megaplexes
decreased 13.5% due primarily to the popularity of Titanic in Japan during the
thirty-nine weeks ended December 31, 1998 and competition from new theatrical
exhibitors in Japan. Concession revenues increased 50.7% 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.
On-screen advertising and other revenues increased 42.0% from the prior
year due primarily to the introduction of a new advertising product at the
Company's on-screen advertising business.
Costs and expenses. Total costs and expenses increased 17.5% during the
thirty-nine weeks ended December 30, 1999 compared to the thirty-nine weeks
ended December 31, 1998.
North America theatrical exhibition costs and expenses increased 14.4% from
the prior year. Film exhibition costs increased 16.9% due to higher admissions
revenues and an increase in the percentage of admissions paid to film
distributors. As a percentage of admissions revenues, film exhibition costs were
56.0% in the current year as compared with 54.6% 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 for
fiscal 2000 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 decreased .3% due
to a decrease in concession costs as a percentage of concessions revenues which
was offset by the increase in concessions revenues. As a percentage of
concessions revenues, concession costs were 14.7% in the current year compared
with 15.7% in the prior year due primarily to concession price increases.
Theatre operating expense as a percentage of revenues was 23.8% in the current
year as compared with 25.5% in the prior year due primarily to a decrease in
payroll costs as a percentage of revenues. Rent expense increased 18.2% 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 thirty-nine weeks ended December 30, 1999, the
Company incurred $13,943,000 of theatre closure expense related to the closure
of 30 multiplexes with 201 screens as compared with $2,801,000 in the prior year
related to other multiplex closures. These expenses are primarily comprised of
expected payments to landlords to terminate leases. The Company anticipates
that it will incur a total of $16-20 million of costs related to the
closure of approximately 240 to 270 multiplex screens in fiscal 2000.
International theatrical exhibition costs and expenses increased 80.9% from
the prior year. Film exhibition costs increased 58.4% due to higher admissions
revenues offset by a decrease in the percentage of admissions paid to film
distributors. Rent expense increased $6,237,000 and theatre operating expense
increased 84.4% 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 increased 52.5% due
primarily to an increase in costs associated with the new advertising product at
the Company's on-screen advertising business. The Company anticipates that
these costs as a percentage of the related advertising revenues will decline as
revenues from the new advertising product continue to grow.
General and administrative expenses decreased 4.2% during the thirty-nine
weeks ended December 30, 1999 as compared with the thirty-nine weeks ended
December 31, 1998 due primarily to declines in administrative salaries expense.
Current year results include $1,140,000 of non-recurring relocation costs
related to the Company's September 30, 1999 consolidation of its three U.S.
divisional operations offices into its corporate headquarters. As a percentage
of total revenues, recurring general and administrative expenses declined from
5.1% in the prior year to 4.1% in the current year.
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 $5,200,000, lease
termination costs of $700,000 and the write-off of capitalized pre-development
costs of $6,100,000. As a result of the restructuring the Company anticipates it
will realize general and administrative expense reductions which will increase
to approximately $20 million annually in fiscal 2001. Unforeseen changes in
operating requirements and other factors referred to in the first paragraph of
this Item 2. could cause actual general and administrative expense reductions to
differ materially from anticipated reductions.
Depreciation and amortization increased 5.9%, or $3,834,000, during the
thirty-nine weeks ended December 30, 1999. This increase was primarily caused by
an increase in depreciation of $9,665,000 related to the Company's new theatres,
which was partially offset by a $6,502,000 decrease in amortization due to a
change in accounting for start-up activities.
Interest Expense. Interest expense increased 69.7% during the thirty-nine
weeks ended December 30, 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
from a gain of $2,259,000 in the prior year to a gain of $962,000 during the
current year. The prior year results include the sales of real estate
associated with three of the Company's multiplexes. Current year results include
a gain on the sale of a real estate property held for investment and gains on
two of the Company's multiplex theatres closed during the thirty-nine weeks
ended December 30, 1999.
Income Tax Provision. The provision for income taxes decreased to a
benefit of $14,000,000 during the current year from an expense of $1,800,000 in
the prior year. The effective tax rate was 40.9% for the current year compared
to 36.6% 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 during the thirty-nine weeks ended
December 30, 1999 to a loss of $26,103,000 from earnings of $3,115,000 in the
prior year. Net loss per share was $1.11 compared to earnings 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) and a
restructuring charge of $12,000,000 ($7,200,000 net of income tax benefit of
$4,800,000), which reduced earnings per share by $.25 and $.31, respectively,
for the thirty-nine weeks ended December 30, 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 $92,383,000 and $82,457,000 for the thirty-nine
weeks ended December 30, 1999 and December 31, 1998, respectively.
The Company continues to expand its North America and International theatre
circuits. During the current fiscal year, the Company opened 17 megaplexes with
384 screens and began operating one theatre with 30 screens pursuant to a joint
venture agreement. In addition, the Company closed 36 multiplexes with 230
screens and returned 3 screens to the landlord of an existing megaplex for
conversion to an alternative use, resulting in a circuit total of 78 megaplexes
with 1,746 screens and 137 multiplexes with 1,170 screens as of December 30,
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 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 thirty-nine weeks ended December 30, 1999, 14 new theatres
with 312 screens were leased from developers. Typically, the Company owns and
pays for the equipment necessary to fixture a theatre. However, the Company may
decide to lease or sell and leaseback the theatre equipment pursuant to
non-cancelable operating leases. As of December 30, 1999,
the Company had construction in progress of $64,660,000 and reimbursable
construction advances (amounts due from developers and lessors on leased
theatres and equipment) of $30,581,000. The Company had 5 megaplexes with 99
screens under construction on December 30, 1999. During the thirty-nine weeks
ended December 30, 1999, the Company had capital expenditures of $236,863,000.
The Company expects that the net cash requirements for capital expenditures
in fiscal year 2000 will approximate $200-225 million. The Company estimates
net cash requirements for capital expenditures for fiscal 2001 will approximate
$50-80 million. Included in these amounts are projections of the expected
proceeds from the sales of real estate assets and equipment necessary to
fixture a theatre which the Company plans to place into sale and leaseback
or other comparable financing programs. The Company expects proceeds from sale
and leaseback transactions to approximate $60-90 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 December 30,
1999, the Company had outstanding borrowings of $330,000,000 under the Credit
Facility at an average interest rate of 8.66% per annum, and approximately
$15,600,000 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 December 30, 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 leaseback 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. However, the ability to enter into
sale and leaseback or other comparable financing programs as contemplated, 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.
Year 2000
Systems. Subsequent to December 30, 1999, the Company has not experienced
any material information technology ("IT") or embedded ("non-IT") systems
disruptions or failures and anticipates no material systems problems for
Corporate or Theatre operations.
Third Parties. Evaluation of material business partners' Year 2000
readiness status was essentially complete as of December 30, 1999. The Company
continues to monitor for any additional information pertaining to these
partners' Year 2000 readiness. The Company has not experienced and does not
anticipate any Year 2000 performance issues related to its material business
partners.
Costs. The total amount expended from July 1, 1996 through, December 30,
1999 was approximately $579,000. Based on information presently known, the
total amount expected to be expended on the Year 2000 effort for IT systems is
approximately $600,000 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.
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. 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.
<PAGE>
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 8.66% per annum, a 100 basis point
increase in market interest rates would increase interest expense and decrease
earnings before income taxes by approximately $3.3 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 $1.7 million and $13
million, respectively.
<PAGE>
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. The Court has stayed the suit pending resolution of the Department of
Justice litigation filed in California referred to above.
On December 16, 1999, Alberta Rose Investments, Inc. filed suit in the
Court of Queen's Bench of Alberta (Canada), Judicial District of Edmonton,
Alberta Rose Investments, Inc. v. AMC Theatres of Canada, Inc. and AMC
Entertainment Inc., Action Number: 9903-23494, alleging a breach of a lease
agreement concerning a proposed theatre in Edmonton, Alberta. The suit seeks
damages in excess of $CAN25 million (approximately $U.S.17.0 million). Although
the Company has not yet been served with the Statement of Claim, it intends to
file a Statement of Defence denying these allegations and seeking a dismissal
with costs.
For information on other legal proceedings to which the Company is a party,
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 and Item 1. Legal
Proceedings of the Company's Quarterly Report on Form 10-Q for the thirteen
weeks ended July 1, 1999 for information concerning Drexler Technology Corp.
v. Sony Corp., et al., as well as Item 1. Legal Proceedings of the Company's
Quarterly Report on Form 10-Q for the thirteen weeks ended September 30, 1999
for information concerning Mendoza, et al. v. AMC Entertainment Inc., et al.,
and Erinkitola, et al. v. AMC Entertainment Inc., et al.
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 4. Submission of Matters To a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on December 2, 1999.
(b) At the meeting, the following matters were voted upon by the stockholders:
(i) The election of Directors for the upcoming year.
(ii)A proposal to ratify the appointment of PricewaterhouseCoopers LLP
as independent accountants of the Company for the fiscal year ending
March 30, 2000.
(iii) A proposal to approve the AMC Entertainment Inc. 1999 Stock Option
and Incentive Plan.
(iv) A proposal to approve the AMC Entertainment Inc. 1999 Stock Option Plan
for Outside Directors.
The Board of Directors of the Company is composed of five (5) members.
Three (3) of the directors are elected by the holders of Class B Stock, voting
as a class, and two (2) of the directors are elected by the holders of Common
Stock, voting as a class.
The following were the nominees of management voted upon and elected by the
holders of the Company's Class B Stock and Common Stock as of the record date:
Class B Stock Common Stock
Peter C. Brown W. Thomas Grant, II
Charles J. Egan, Jr. Charles S. Paul
Paul E. Vardeman
All of the shares of Class B Stock (4,041,993 shares) were voted for the
nominees of management. In the election of directors by the holders of Common
Stock, there were 14,738,432 votes "for" W. Thomas Grant, II and 683,832 votes
"against" and 13,800,353 votes "for" Charles S. Paul and 1,621,911 votes
"against".
The total votes cast concerning the ratification of the appointment of
PricewaterhouseCoopers LLP were as follows: 55,810,236 voted "for", 28,843 voted
"against" and 3,115 "abstentions".
The total votes cast concerning the proposal regarding the approval of the
AMC Entertainment Inc. 1999 Stock Option and Incentive Plan were as follows:
46,026,811 "for", 5,603,437 voted "against", 247,542 "abstentions" and 3,964,404
broker non-votes.
The total votes cast concerning the proposal regarding the approval of the
AMC Entertainment Inc. 1999 Stock Option Plan for Outside Directors were as
follows: 47,488,046 "for", 4,133,799 voted "against", 255,945 "abstentions" and
3,964,404 broker non-votes.
<PAGE>
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.
10.1 AMC Entertainment Inc. 1999 Stock Option and Incentive Plan,
as amended. (Incorporated by reference from Exhibit 4.3 to
the Company's Registration Statement on Form S-8 (File No.
333-92615) filed December 13, 1999).
10.2 AMC Entertainment Inc. 1999 Stock Option Plan for outside
Directors (Incorporated by reference from Exhibit 4.3 to the
Company's Registration Statement on Form S-8 (File No. 333-
92617) filed December 13, 1999).
*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 December 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMC ENTERTAINMENT INC.
Date: February 10, 2000 /s/ Peter C. Brown
---------------
Peter C. Brown
Chairman of the Board,
Chief Executive Officer
and President
Date: February 10, 2000 /s/ Craig R. Ramsey
----------------
Craig R. Ramsey
Senior Vice President, Finance
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
thirty-nine weeks ended December 30, 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> YEAR
<FISCAL-YEAR-END> MAR-30-2000
<PERIOD-END> DEC-30-1999
<CASH> 109,783
<SECURITIES> 0
<RECEIVABLES> 60,450
<ALLOWANCES> 1,236
<INVENTORY> 0
<CURRENT-ASSETS> 211,208
<PP&E> 1,264,286
<DEPRECIATION> 403,120
<TOTAL-ASSETS> 1,225,634
<CURRENT-LIABILITIES> 225,701
<BONDS> 823,388
0
0
<COMMON> 15,660
<OTHER-SE> 74,480
<TOTAL-LIABILITY-AND-EQUITY> 1,225,634
<SALES> 257,632
<TOTAL-REVENUES> 905,218
<CGS> 38,995
<TOTAL-COSTS> 763,113
<OTHER-EXPENSES> 94,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,502
<INCOME-PRETAX> (34,263)
<INCOME-TAX> (14,000)
<INCOME-CONTINUING> (20,263)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (5,840)
<NET-INCOME> (26,103)
<EPS-BASIC> (1.11)
<EPS-DILUTED> (1.11)
</TABLE>
