-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BEX8EZOhG3j5Tqlbh4+HH3WAIf2vYHdlIassjlwXMr4DPO3nvCy0Res8UVKc3Tfa uGpHSskrCIzVI0caXAHbCw== /in/edgar/work/0000722077-00-000015/0000722077-00-000015.txt : 20001107 0000722077-00-000015.hdr.sgml : 20001107 ACCESSION NUMBER: 0000722077-00-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000928 FILED AS OF DATE: 20001106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMC ENTERTAINMENT INC CENTRAL INDEX KEY: 0000722077 STANDARD INDUSTRIAL CLASSIFICATION: [7830 ] IRS NUMBER: 431304369 STATE OF INCORPORATION: DE FISCAL YEAR END: 0401 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08747 FILM NUMBER: 753789 BUSINESS ADDRESS: STREET 1: 1221 BALTIMORE STREET 2: 10TH FL CITY: KANSAS CITY STATE: MO ZIP: 64121 BUSINESS PHONE: 8164804744 MAIL ADDRESS: STREET 1: 1221 BALTIMORE STREET 2: 10TH FL CITY: KANSAS CITY STATE: MO ZIP: 64121 10-Q 1 0001.txt 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 September 28, 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 September 28, 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 19 PART II - OTHER INFORMATION Item 1.Legal Proceedings 20 Item 6.Exhibits and Reports on Form 8-K 22 Signatures 24 AMC ENTERTAINMENT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Thirteen Twenty-six Weeks Ended Weeks Ended Sept. 28, Sept. 30, Sept. 28, Sept.30, 2000 1999 2000 1999 ---- ---- ---- ---- (Unaudited) (Unaudited) Revenues Admissions $220,554 $219,749 $414,095 $407,631 Concessions 91,472 95,499 172,187 179,212 Other theatre 6,813 6,849 13,535 11,938 Other 14,425 11,588 21,586 21,464 ------- ------- ------- ------- Total revenues 333,264 333,685 621,403 620,245 Expenses Film exhibition costs 119,902 121,545 224,011 231,093 Concession costs 14,138 14,898 26,355 27,589 Theatre operating expense 76,347 71,123 152,156 138,132 Rent 57,862 48,636 113,841 96,513 Other 12,392 11,794 21,217 22,489 General and administrative 7,350 12,284 13,985 25,495 Preopening expense 875 2,024 2,483 3,297 Theatre closure expense 11,679 2,046 12,406 11,692 Restructuring charge - 12,000 - 12,000 Depreciation and amortization 25,917 23,029 52,295 43,686 Impairment of long-lived assets 3,813 - 3,813 - (Gain) loss on disposition of assets 5 (144) (1,635) (327) ------- ------- ------- ------- Total costs and expenses 330,280 319,235 620,927 611,659 ------- ------- ------- ------- Operating income 2,984 14,450 476 8,586 Other expense (income) Interest expense Corporate borrowings 15,790 12,530 32,038 24,158 Capital and financing lease obligations and other 2,996 1,871 6,178 3,714 Investment (income) loss 495 386 (605) (100) ------- ------- ------- ------- Loss before income taxes and cumulative effect of an accounting change (16,297) (337) (37,135) (19,186) Income tax provision (5,900) (135) (13,800) (7,835) ------- ------- ------- ------- Loss before cumulative effect of an accounting change (10,397) (202) (23,335) (11,351) Cumulative effect of an accounting change (net of income tax benefit of $4,095) - - - (5,840) ------- ------- ------- ------- Net loss $(10,397)$ (202) $ (23,335) $ (17,191) ======== ======== ======== ======== Net loss per share before cumulative effect of an accounting change: Basic $ (.44)$ (.01) $ (.99) $ (.48) ======== ======== ======== ======== Diluted $ (.44)$ (.01) $ (.99) $ (.48) ======== ======== ======== ======== Net loss per share: Basic $ (.44)$ (.01) $ (.99) $ (.73) ======== ======== ======== ======== Diluted $ (.44)$ (.01) $ (.99) $ (.73) ======== ======== ======== ======== See Notes to Consolidated Financial Statements.
AMC ENTERTAINMENT INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
September 28,March 30, 2000 2000 ---- ---- (Unaudited) ASSETS Current assets: Cash and equivalents $ 80,240 $ 119,305 Receivables, net of allowance for doubtful accounts of $4,006 as of September 28, 2000 and $3,576 as of March 30, 2000 22,242 18,468 Reimbursable construction advances 1,858 10,955 Other current assets 40,562 45,275 ------- ------- Total current assets 144,902 194,003 Property, net 818,237 822,295 Intangible assets, net 13,532 15,289 Other long-term assets 148,812 157,218 ------- ------- Total assets $1,125,483 $1,188,805 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 80,900 $ 99,466 Construction payables 7,783 6,897 Accrued expenses and other liabilities 122,635 114,037 Current maturities of capital and financing lease obligations 2,442 3,205 ------- ------- Total current liabilities 213,760 223,605 Corporate borrowings 734,138 754,105 Capital and financing lease obligations 56,382 65,301 Other long-term liabilities 92,538 87,125 ------- ------- Total liabilities 1,096,818 1,130,136 Stockholders' equity: Common Stock, 66 2/3 cents par value; 19,447,598 shares issued as of September 28, 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 September 28, 2000 and March 30, 2000 2,695 2,695 Additional paid-in capital 106,713 106,713 Accumulated other comprehensive income (10,227) (3,812) Accumulated deficit (73,496) (50,161) ------- ------- 38,650 68,400 Less: Employee notes for Common Stock purchases 9,616 9,362 Common Stock in treasury, at cost, 20,500 shares as of September 28, 2000 and March 30, 2000 369 369 ------- ------- Total stockholders' equity 28,665 58,669 ------- ------- Total liabilities and stockholders' equity $1,125,483$1,188,805 ======== ======== See Notes to Consolidated Financial Statements.
AMC ENTERTAINMENT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except per share data)
Twenty-six Weeks Ended September 28, September 30, 2000 1999 ---- ---- INCREASE (DECREASE) IN CASH AND EQUIVALENTS (Unaudited) Cash flows from operating activities: Net loss $ (23,335) $ (17,191) Adjustments to reconcile net loss to net cash provided by operating activities: Restructuring charge - 12,000 Depreciation and amortization 52,295 43,686 Impairment of long-lived assets 3,813 - Deferred income taxes (13,800) (5,475) Gain on disposition of long-term assets (1,635) (327) Cumulative effect of an accounting change - 5,840 Change in assets and liabilities: Receivables (3,774) (7,859) Other current assets 4,713 4,547 Accounts payable (21,312) (12,628) Accrued expenses and other liabilities (1,426) 10,497 Liabilities for theatre closure 6,621 7,332 Other, net 2,065 717 ------- ------- Net cash provided by operating activities 4,225 41,139 ------- ------- Cash flows from investing activities: Capital expenditures (56,662) (177,299) Proceeds from sale/leasebacks 6 2,940 Net proceeds from reimbursable construction advances 6,559 9,556 Proceeds from disposition of long-term assets 26,322 3,591 Other, net (2,975) 11,526 ------- ------- Net cash used in investing activities (26,750) (149,686) ------- ------- Cash flows from financing activities: Net borrowings (repayments) under revolving Credit Facility (20,000) 104,000 Principal payments under corporate borrowings - (14,000) Proceeds from financing lease obligations 2,532 8,197 Principal payments under capital and financing lease obligations (1,582) (1,639) Change in cash overdrafts 2,746 22,398 Change in construction payables 886 (13,399) Other, net - (241) ------- ------- Net cash provided by (used in) financing activities (15,418) 105,316 ------- ------- Effect of exchange rate changes on cash and equivalents (1,122) 369 ------- ------- Net decrease in cash and equivalents (39,065) (2,862) Cash and equivalents at beginning of period 119,305 13,239 ------- ------- Cash and equivalents at end of period $ 80,240 $ 10,377 ======== ========
AMC ENTERTAINMENT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Twenty-six Weeks Ended Sept. 28, Sept. 30, 2000 1999 ---- ---- (Unaudited) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest (net of amounts capitalized of $2,119 and $4,276) $44,681 $31,384 Income taxes refunded (5,482) (7,509) Schedule of non-cash investing activities: Receivable from sale/leasebacks included in reimbursable construction advances $ - $ 8,422 See Notes to Consolidated Financial Statements.
AMC ENTERTAINMENT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 28, 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 also provides on-screen advertising through a wholly-owned subsidiary, National Cinema Network, Inc., and is involved 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 twenty-six weeks ended September 28, 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:
Thirteen Weeks Twenty-six Weeks Ended Ended Sept. 28, Sept. 30, Sept. 28, Sept. 30, 2000 1999 2000 1999 ---- ---- ---- ---- (in thousands, except per share data) Numerator: Loss before cumulative effect of an accounting change for basic and diluted earnings per share $ (10,397) $ (202) $(23,335) $ (11,351) ======== ======== ======== ======== Denominator: Shares for basic earnings per share - average shares outstanding 23,469 23,469 23,469 23,469 ======== ======== ======== ======= Basic loss per share before cumulative effect of an accounting change $ (.44) $ (.01) $ (.99) $ (.48) ======== ======== ======== ======== Diluted loss per share before cumulative effect of an accounting change $ (.44)$ (.01) $ (.99) $ (.48) ======== ======== ======== ========
During the thirteen and twenty-six weeks ended September 30, 1999, 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:
Thirteen Weeks Ended Twenty-six Weeks Ended Sept. 28, Sept. 30, Sept. 28, Sept. 30, 2000 1999 2000 1999 ---- ---- ---- ---- (in thousands) Net loss $ (10,397) $ (202) $(23,335) $(17,191) Foreign currency translation adjustment (5,297) 4,319 (6,335) 2,621 Unrealized loss on marketable securities (net of income tax benefit of $161 and $62, respectively) (231) - (80) - ------- ------- ------- ------- Comprehensive income (loss) $(15,925) $ 4,117 $(29,750) $(14,570) ======== ======== ======== ========
NOTE 4 - OPERATING SEGMENTS Information about the Company's operations by operating segment is as follows:
Thirteen Weeks Ended Twenty-six Weeks Ended Revenues Sept. 28, Sept. 30, Sept. 28, Sept. 30, 2000 1999 2000 1999 ---- ---- ---- ---- (in thousands) North America theatrical exhibition $294,613 $305,591 $559,259 $571,543 International theatrical exhibition 24,226 16,506 40,558 27,238 On-screen advertising and other 14,425 11,588 21,586 21,464 ------- ------- ------- ------- Total revenues $333,264 $333,685 $621,403 $620,245 ======== ======== ======== ======== Thirteen Weeks Ended Twenty-six Weeks Ended Adjusted EBITDA (1) Sept. 28, Sept. 30, Sept. 28, Sept. 30, 2000 1999 2000 1999 ---- ---- ---- ---- (in thousands) North America theatrical exhibition $51,162 $65,192 $ 85,656 $105,357 International theatrical exhibition (572) 703 (2,202) 97 On-screen advertising and other 2,033 (206) 369 (1,025) ------- ------- ------- ------- Total segment Adjusted EBITDA 52,623 65,689 83,823 104,429 General and administrative 7,350 12,284 13,985 25,495 ------- ------- ------- ------- Total Adjusted EBITDA $45,273 $53,405 $ 69,838 $ 78,934 ======== ======== ======== ======== Property (2) Sept. 28, Sept. 30, 2000 1999 ---- ---- (in thousands) North America theatrical exhibition $1,050,714 $1,021,691 International theatrical exhibition 84,056 61,915 On-screen advertising and other 14,309 12,107 ------- ------- Total segment property 1,149,079 1,095,713 Construction in progress 41,885 108,663 Corporate 41,968 43,596 ------- ------- 1,232,932 1,247,972 Less-accumulated depreciation and amortization 414,695 400,693 ------- ------- Property, net $ 818,237$ 847,279 ======== ======== (1)Represents net loss before income taxes, cumulative effect of an accountin g change, interest, depreciation and amortization and adjusted for impairment losses, restructuring charge, preopening expense, theatre closure expense, gain/loss on disposition of assets and equity in earnings of unconsolidated affiliates. (2) Property is comprised of land, buildings and improvements, leasehold imp rovements and furniture, fixtures and equipment.
NOTE 5 - IMPAIRMENT OF LONG-LIVED ASSETS During the twenty-six weeks ended September 28, 2000, the Company recognized a non-cash impairment loss of $3,813,000 ($2,250,000 after tax, or $.10 per share). The charge was primarily related to discontinued development of a theatre in Taiwan and on 29 North America multiplex theatres with 180 screens. The Company closed 22 of these theatres with 139 screens during the thirteen weeks ended September 28, 2000. The Company continues to operate seven of the impaired theatres with 41 screens and expects the future cash flows to decline as they face competition from newer megaplexes and plans to close these theatres during fiscal 2001. 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 Set forth in the table below is a summary of revenues, costs and expenses and operating data attributable to the Company's North America and International theatrical exhibition operations and the Company's on-screen advertising and other businesses.
Thirteen Weeks Ended Twenty-six Weeks Ended Sept. 28, Sept. 30, Sept. 28, Sept. 30, 2000 1999 % Change 2000 1999 % Change ---- ---- ---- ---- ---- ---- (Dollars in thousands) Revenues North America theatrical exhibition Admissions $201,260 $206,274 (2.4)% $381,637 $385,441(1.0)% Concessions 87,314 92,636 (5.7) 165,337 174,655(5.3) Other theatre 6,039 6,681 (9.6) 12,285 11,447 7.3 ------- ------- ---- ------- ------- ---- 294,613 305,591 (3.6) 559,259 571,543(2.1) International theatrical exhibition Admissions 19,294 13,475 43.2 32,458 22,190 46.3 Concessions 4,158 2,863 45.2 6,850 4,557 50.3 Other theatre 774 168 * 1,250 491 * ------- ------- ---- ------- ------- ---- 24,226 16,506 46.8 40,558 27,238 48.9 On-screen advertising and other 14,425 11,588 24.5 21,586 21,464 0.6 ------- ------- ---- ------- ------- ---- Total revenues $333,264 $333,685 (.1)%$621,403 $620,245 0.2% ================= ======= ================== ===== Costs of operations North America theatrical exhibition Film exhibition costs $109,369 $114,494 (4.5)% $206,697 $219,635 (5.9)% Concession costs 12,757 13,987 (8.8) 24,173 26,156 (7.6) Theatre operating expense 70,127 67,008 4.7 140,769 130,798 7.6 Rent 51,198 44,910 14.0 101,964 89,597 13.8 Preopening expense 317 1,640 (80.7) 1,659 2,650 (37.4) Theatre closure expense 11,679 2,046 * 12,406 11,692 6.1 ------- ------- ---- ------- ------- ---- 255,447 244,085 4.7 487,668 480,528 1.5 International theatrical exhibition Film exhibition costs 10,533 7,051 49.4 17,314 11,458 51.1 Concession costs 1,381 911 51.6 2,182 1,433 52.3 Theatre operating expense 6,220 4,115 51.2 11,387 7,334 55.3 Rent 6,664 3,726 78.9 11,877 6,916 71.7 Preopening expense 558 384 45.3 824 647 27.4 ------- ------- ---- ------- ------- ---- 25,356 16,187 56.6 43,584 27,788 56.8 On-screen advertising and other 12,392 11,794 5.1 21,217 22,489 (5.7) General and administrative7,350 12,284 (40.2) 13,985 25,495 (45.1) Restructuring charge - 12,000 * - 12,000 * Depreciation and amortization 25,917 23,029 12.5 52,295 43,686 19.7 Impairment of longlived assets 3,813 - * 3,813 - * (Gain) loss on disposition of assets 5 (144) * (1,635) (327) * ------- ------- ---- ------- ------- ---- Total costs and expenses $330,280 $319,235 3.5% $620,927 $611,659 1.5% ========= ======== ======= ======== ======== ===== *Percentage change in excess of 100%. Thirteen Weeks Ended Twenty-six Weeks Ended Sept. 28, Sept. 30, Sept. 28, Sept. 30, 2000 1999 2000 1999 ---- ---- ---- ---- Operating data North America theatrical exhibition Attendance (in thousands) Megaplexes 26,088 25,519 49,505 47,562 Multiplexes 12,069 16,854 23,204 31,820 Average Screens Megaplexes 1,628 1,372 1,619 1,326 Multiplexes 1,067 1,233 1,084 1,268 Number of megaplexes operated (end of period) - - 73 65 Number of megaplex screens operated (end of period) - - 1,669 1,478 Number of multiplexes operated (end of period) - - 106 143 Number of multiplex screens operated (end of period) - - 960 1,206 Screens per theatre (end of period) - - 14.7 12.9 International theatrical exhibition Attendance - Megaplexes (in thousands) 2,836 1,984 4,949 3,415 Average screens - Megaplexes 177 100 169 92 Number of megaplexes operated (end of period) - - 10 6 Number of megaplex screens operated (end of period) - - 178 102 Screens per theatre (end of period) - - 17.8 17.0
Thirteen weeks ended September 28, 2000 and September 30, 1999. Revenues. Total revenues decreased .1% during the thirteen weeks ended September 28, 2000 compared to the thirteen weeks ended September 30, 1999. North America theatrical exhibition revenues decreased 3.6% from the prior year. Admissions revenues decreased 2.4% due to a 9.9% decrease in attendance offset by a 8.3% increase in average ticket prices. 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 22.2% decrease in attendance at comparable multiplexes (theatres opened before the second quarter of fiscal 2000) and the closure or sale of 37 multiplexes with 246 screens since September 30, 1999. 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, and a decline in the overall box office performance of films during the thirteen weeks ended September 28, 2000 as compared with the same period in the prior year. Attendance at megaplexes (theatres with predominantly stadium-style seating) increased as a result of the addition of 8 new megaplexes with 191 screens since September 30, 1999. Attendance at comparable megaplexes decreased 10.7% primarily due to a decline in overall box office performance of films during the thirteen weeks ended September 28, 2000 as compared with the same period in the prior year. Concessions revenues decreased 5.7% due to the decrease in total attendance offset by a 4.7% increase in average concessions per patron. International theatrical exhibition revenues increased 46.8% from the prior year. Admissions revenues increased 43.2% due primarily to an increase in attendance from the addition of 4 new megaplexes with a total of 76 screens since September 30, 1999. Attendance at comparable megaplexes increased 1.3%. Concession revenues increased 45.2% due primarily to the increase in total attendance. International revenues were negatively impacted by a stronger U.S. dollar, although this did not contribute materially to consolidated net loss. On-screen advertising and other revenues increased 24.5% from the prior year due primarily to an increase in rolling stock advertising (filmed pre-show commercials) at the Company's on-screen advertising business. Costs and expenses. Total costs and expenses increased 3.5% during the thirteen weeks ended September 28, 2000 compared to the thirteen weeks ended September 30, 1999. North America theatrical exhibition costs and expenses increased 4.7% from the prior year. Film exhibition costs decreased 4.5% due to lower admissions revenues and a decrease in the percentage of admissions paid to film distributors. As a percentage of admissions revenues, film exhibition costs were 54.3% in the current year as compared with 55.5% in the prior year. Concession costs decreased 8.8% 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 15.1% in the prior year. As a percentage of revenues, theatre operating expense was 23.8% in the current year as compared to 21.9% 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 and revenues. Rent expense increased 14.0% 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 September 28, 2000, the Company incurred $11,679,000 of theatre closure expense comprised primarily of expected payments to landlords to terminate the leases related to 21 multiplexes with 135 screens. International theatrical exhibition costs and expenses increased 56.6% from the prior year. Film exhibition costs increased 49.4% primarily due to higher admission revenues. Rent expense increased 78.9% and theatre operating expense increased 51.2% from the prior year, primarily due to the increased number of screens in operation. International theatrical exhibition costs and expenses were positively impacted by a stronger U.S. dollar, although this did not contribute materially to consolidated net loss. On-screen advertising and other costs and expenses increased 5.1% due primarily to $1,319,000 of professional and consulting fees associated with other ventures, offset by a decrease in advertising costs at the Company's on-screen advertising business. General and administrative expenses decreased 40.2% during the thirteen weeks ended September 28, 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 3.7% in the prior year to 2.2% 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 $5,300,000, lease termination costs of $700,000 and the write-off of capitalized pre-development costs of $6,000,000. Depreciation and amortization increased 12.5%, or $2,888,000, during the thirteen weeks ended September 28, 2000. This increase was primarily caused by an increase in depreciation of $3,005,000 related to the Company's new theatres. During the thirteen weeks ended September 28, 2000, the Company recognized a non-cash impairment loss of $3,813,000 ($2,250,000 after tax, or $.10 per share). The charge was primarily related to discontinued development of a theatre in Taiwan and on 29 North America multiplex theatres with 180 screens in 12 states (primarily Florida, California, Texas, Michigan and Arizona) including a loss of $1,521,000 associated with 20 theatres that were included in impairment losses in previous periods. The Company closed 22 of these theatres with 139 screens during the thirteen weeks ended September 28, 2000. The Company continues to operate seven of the impaired theatres with 41 screens and expects the future cash flows to decline as they face competition from newer megaplexes and plans to close these theatres during fiscal 2001. Interest Expense. Interest expense increased 30.4% during the thirteen weeks ended September 28, 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 $5,900,000 during the current year from a benefit of $135,000 in the prior year. The effective tax rate was 36.2% for the current year compared to 40.1% 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 or losses. Net Earnings. Net earnings decreased during the thirteen weeks ended September 28, 2000 to a loss of $10,397,000 from a loss of $202,000 in the prior year. Net loss per share was $.44 compared to a loss of $.01 in the prior year. Current year results include a non-cash impairment loss of $3,813,000 ($2,250,000 after tax) which reduced earnings per share by $.10 for the thirteen weeks ended September 28, 2000. Prior year results include 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 $.31 for the thirteen weeks ended September 30, 1999. Twenty-six weeks ended September 28, 2000 and September 30, 1999. Revenues. Total revenues increased .2% during the twenty-six weeks ended September 28, 2000 compared to the twenty-six weeks ended September 30, 1999. North America theatrical exhibition revenues decreased 2.1% from the prior year. Admissions revenues decreased 1.0% due to an 8.4% decrease in attendance offset by a 8.1% increase in average ticket prices. 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 20.5% decrease in attendance at comparable multiplexes (theatres opened before the first quarter of fiscal 2000) and the closure or sale of 37 multiplexes with 246 screens since September 30, 1999. 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, and a decline in the overall box office performance of films during the twenty-six weeks ended September 28, 2000 as compared with the same period in the prior year. Attendance at megaplexes increased as a result of the addition of 8 new megaplexes with 191 screens since September 30, 1999. Attendance at comparable megaplexes decreased 10.3% primarily due to a decline in the overall box office performance of films during the twenty-six weeks ended September 28, 2000 as compared with the same period in the prior year. Concessions revenues decreased 5.3% due to the decrease in total attendance offset by a 3.4% increase in average concessions per patron. International theatrical exhibition revenues increased 48.9% from the prior year. Admissions revenues increased 46.3% due primarily to an increase in attendance from the addition of 4 new megaplexes with a total of 76 screens since September 30, 1999. Attendance at comparable megaplexes increased 2.9%. Concession revenues increased 50.3% due primarily to the increase in total attendance. International revenues were negatively impacted by a stronger U.S. dollar, although this did not contribute materially to consolidated net loss. On-screen advertising and other revenues increased .6% from the prior year due primarily to an increase in rolling stock advertising at the Company's on-screen advertising business. Costs and expenses. Total costs and expenses increased 1.5% during the twenty-six weeks ended September 28, 2000 compared to the twenty-six weeks ended September 30, 1999. North America theatrical exhibition costs and expenses increased 1.5% from the prior year. Film exhibition costs decreased 5.9% due to a decrease in the percentage of admissions paid to film distributors and the decrease in admissions revenues. As a percentage of admissions revenues, film exhibition costs were 54.2% in the current year as compared with 57.0% in the prior year. 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 twenty-six weeks ended September 30, 1999. Concession costs decreased 7.6% 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 15.0% in the prior year. As a percentage of revenues, theatre operating expense was 25.2% in the current year as compared to 22.9% 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 and revenues. Rent expense increased 13.8% 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 twenty-six weeks ended September 28, 2000, the Company incurred $12,406,000 of theatre closure expense comprised primarily of expected payments to landlords to terminate the leases related to 23 multiplexes with 147 screens. International theatrical exhibition costs and expenses increased 56.8% from the prior year. Film exhibition costs increased 51.1% primarily due to higher admission revenues. Rent expense increased 71.7% and theatre operating expense increased 55.3% from the prior year, primarily due to the increased number of screens in operation. International theatrical exhibition costs and expenses were positively impacted by a stronger U.S. dollar, although this did not contribute materially to consolidated net loss. On-screen advertising and other costs and expenses decreased 5.7% due primarily to a decrease in advertising costs at the Company's on-screen advertising business offset by $1,319,000 of professional and consulting fees associated with other ventures. General and administrative expenses decreased 45.1% during the twenty- six weeks ended September 28, 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 4.1% in the prior year to 2.3% 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 $5,300,000, lease termination costs of $700,000 and the write-off of capitalized pre-development costs of $6,000,000. Depreciation and amortization increased 19.7%, or $8,609,000, during the twenty-six weeks ended September 28, 2000. This increase was primarily caused by an increase in depreciation of $6,250,000 related to the Company's new theatres. During the twenty-six weeks ended September 28, 2000, the Company recognized a non-cash impairment loss of $3,813,000 ($2,250,000 after tax, or $.10 per share). The charge was primarily related to discontinued development of a theatre in Taiwan and on 29 North America multiplex theatres with 180 screens in 12 states (primarily Florida, California, Texas, Michigan and Arizona) including a loss of $1,521,000 associated with 20 theatres that were included in impairment losses in previous periods. The Company closed 22 of these theatres with 139 screens during the thirteen weeks ended September 28, 2000. The Company continues to operate seven of the impaired theatres with 41 screens and expects the future cash flows to decline as they face competition from newer megaplexes and plans to close these theatres during fiscal 2001. Gain on disposition of assets increased from a gain of $327,000 in the prior year to a gain of $1,635,000 during the current year. Current year and prior year results include gains related to the sales of real estate properties held for investment and multiplexes closed during the twenty-six weeks ended September 28, 2000 and September 30, 1999. Interest Expense. Interest expense increased 37.1% during the twenty- six weeks ended September 28, 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 $13,800,000 during the current year from a benefit of $7,835,000 in the prior year. The effective tax rate was 37.2% for the current year compared to 40.8% 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 or losses. Net Earnings. Net earnings decreased during the twenty-six weeks ended September 28, 2000 to a loss of $23,335,000 from a loss of $17,191,000 in the prior year. Net loss per share was $.99 compared to a loss of $.73 in the prior year. Current year results include a non-cash impairment loss of $3,813,000 ($2,250,000 after tax) which reduced earnings per share by $.10 for the twenty-six weeks ended September 28, 2000. Prior year results include a restructuring charge of $12,000,000 ($7,200,000 net of income tax benefit of $4,800,000) and 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 $.31 and $.25 for the twenty-six weeks ended September 30, 1999, respectively. 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 $4,225,000 and $41,139,000 for the twenty-six weeks ended September 28, 2000 and September 30, 1999, respectively. The decrease in operating cash flows during the period is primarily due to increased competition, the decline in the performance of films and an increase in rent, interest, and theatre closure payments. The Company continues to upgrade its North America and International theatre circuits. During the current fiscal year, the Company opened three megaplexes with 65 screens. The Company and its competitors continue to close older multiplexes in response to competition from new megaplexes, a trend the Company generally anticipates will continue in the theatrical exhibition industry. As a result, the Company closed 25 multiplexes with 161 screens, resulting in a circuit total of 83 megaplexes with 1,847 screens and 106 multiplexes with 960 screens as of September 28, 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 twenty-six weeks ended September 28, 2000, three new theatres with 65 screens were leased from developers. As of September 28, 2000, the Company had construction in progress of $41,885,000 and reimbursable construction advances (amounts due from developers and lessors on leased theatres) of $1,858,000, a decline from $108,663,000 and $21,183,000, respectively, as of September 30, 1999. The Company had six megaplexes with 104 screens under construction on September 28, 2000. During the twenty-six weeks ended September 28, 2000, the Company had capital expenditures of $56,662,000 compared with $177,299,000 during the same period in the prior year. The Company expects capital expenditures in fiscal year 2001 will approximate $125 million, down from $275 million for the fiscal year ended March 30, 2000. 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 September 28, 2000, the Company had outstanding borrowings of $310,000,000 under the Credit Facility at an average interest rate of 9.3% per annum, and approximately $38,000,000 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. The most restrictive of these covenants are the Total Leverage Ratio and Cash Flow Coverage Ratio, as defined in the Credit Facility. The Total Leverage Ratio requires a maximum ratio of 6.0:1 through (and including) March 29, 2001, 5.5:1 from March 30, 2001 through (and including) March 28, 2002 and 5.0:1 each fiscal quarter thereafter. The Cash Flow Coverage Ratio requires a minimum ratio of 1.40:1. As of September 28, 2000 the Company's Total Leverage Ratio and Cash Flow Coverage Ratio complied with the covenants imposed by 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 September 28, 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, increased competition and unforeseen changes in operating requirements could affect the Company's ability to continue to upgrade its circuit 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 September 30, 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 recently made public by the SEC staff is evaluated. 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 9.3% per annum, a 100 basis point increase in market interest rates would increase annual interest expense and decrease earnings before income taxes by approximately $3.1 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 $1.3 million and $14.8 million, respectively. PART II - OTHER INFORMATION Item 1. Legal Proceedings. A purported class action has been filed against the Company and Loews Cineplex Entertainment Corporation ("Loews") in the United States District Court for the District of Columbia, Case No. 1:00CV00867, on behalf of all deaf individuals who desire to attend first run movies with captioning and interpretative aids at theatres in the United States which are owned, operated or controlled by the Company or Loews, alleging that the Company and Loews had violated the ADA by failing to reasonably accommodate plaintiffs by implementing captioning and other interpretative aids. The suit seeks injunctive relief requiring the Company and Loews to implement captioning and other interpretative aids, attorneys' fees and costs. The Company has entered its appearance and filed a motion to dismiss the complaint which is pending before the Court. The Company intends to deny the claim. As previously reported, 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 filed an answer denying the allegations and asserting that the DOJ was engaging in unlawful rulemaking. A similar claim was 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. In Lara v. Cinemark USA, Inc., No. 99-50204, the United States Court of Appeals for the Fifth Circuit rejected the DOJ's current position, which the court characterized as merely a litigation position and held that the regulations under the ADA do not impose a viewing angle requirement for wheelchair locations. Based upon the Fifth Circuit's decision, the United States District Court of the Central District of California has dismissed the Company's claim asserting that the DOJ had engaged in unlawful rulemaking. The similar claim made by Cinemark USA, Inc. in the United States District Court for the Northern District of Texas was dismissed on the same ground. 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. As previously reported, on July 27, 1998, in the United States District Court for the Northern District of California, Drexler Technology Corporation filed actions against each of Sony Corporation and its affiliated companies and Dolby Laboratories, Inc., and has included as defendants various motion picture distributors and exhibitors, including AMC, Drexler Technology Corp. v. Sony Corp. et al, C98-02936, and Drexler Technology Corp. v. Dolby Labs. et al, C98-02935. These actions allege infringement of two patents relating to optical data storage and retrieval systems, which are allegedly infringed by the encoding of digital sound on motion picture films. These infringement allegations are based on the production, distribution and exhibition of film with Sony Dynamic Digital Sound (SDDS) or Dolby Digital technology. AMC currently utilizes SDDS systems with respect to 2,300 of its screens and owns 159 portable systems employing Dolby Digital technology. Plaintiff seeks an injunction against continued use of this technology and also seeks damages. AMC has filed counter claims alleging that plaintiff's patents are invalid. The court has ordered that the issues of liability and damages be tried separately. AMC is the beneficiary of indemnification arrangements with respect to these actions. Pursuant to AMC's contractual arrangements with Sony Cinema Products Corporation ("Sony Cinema"), a subsidiary of Sony Corporation of America, Sony Cinema is obligated to indemnify, defend and hold harmless AMC from and against any and all liabilities, damages, losses, costs and expenses (including attorneys' fees) suffered or incurred by AMC in connection with any third party claim for alleged infringement of any patent, trademark or similar right relating to the SDDS systems. The agreement with Sony Cinema provides that Sony Cinema at its expense and option, shall (i) settle or defend against such a claim, (ii) procure for AMC the right to use the SDDS systems in a manner that will cause them to perform as originally intended under the agreement between AMC and Sony Cinema; (iii) replace or modify the SDDS systems to avoid infringement; or (iv) remove the SDDS systems from AMC's facilities (at such time and in such manner as to not disrupt AMC's business operations) and refund to AMC the purchase price less depreciation. Dolby Laboratories has agreed (i) to defend, indemnify and hold AMC harmless from any losses arising out of the Drexler v. Dolby Labs. action and (ii) in the event the Dolby Digital technology is found to infringe on one or more of the Drexler patents, to procure for AMC at Dolby's expense the right to make, use and sell the Dolby Digital technology or to modify it so that it is non-infringing. As a result, although no assurance can be given, the Company believes that these actions will not have a material adverse effect on the Company's financial condition, liquidity or results of operations. On August 18, 2000, the United States District Court for the Northern District of California granted summary judgment dismissing Drexler Technology Corporation's claim for patent infringement in the Sony Corp. suit. The Court found both that Drexler Technology Corporation's patent was invalid and that Sony Corp.'s SDDS system did not infringe the patent. Drexler Technology Corporation may appeal the decision. As previously reported, two cases, Nonoy Mendoza, et al. v. AMC Entertainment Inc., American Multi-Cinema, Inc., et al.filed on July 1, 1999 in the Probate Court of Dallas County, Texas ("Mendoza"), and Mabayoje Erinkitola, et al. v. AMC Entertainment Inc., American Multi-Cinema, Inc., et al. filed on July 15, 1999 in the Probate Court of Dallas County, Texas, arise out of the murders of two patrons, Roxanne Mendoza and Foluke Erinkitola, in the parking lot of the Grand Theatre in Dallas, Texas on August 13, 1997. The defendants are being sued on various theories related to allegations of improper or inadequate security. Each complaint seeks the recovery of damages for wrongful death, survival damages and exemplary damages, although neither complaint states specific monetary demands. A plaintiff in the Mendoza lawsuit also seeks abatement of the theatre as a public nuisance. The Company has answered both lawsuits and has removed both cases to the United States District Court, of Texas, Dallas Division, as of August 13, 1999, where the two cases have been combined. Discovery in the combined case has been completed, and the court has set a trial date of February, 2001. 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 March 30, 2000. The Company is party to various 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). *4.2(c) Agreement of Resignation, Appointment and Acceptance, dated August 30, 2000, among the Company, The Bank of New York and HSBC Bank USA respecting AMC Entertainment Inc.'s 9 1/2% Senior Subordinated Notes due 2009. 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. *4.3(a) Agreement of Resignation, Appointment and Acceptance, dated August 30, 2000, among the Company, The Bank of New York and HSBC Bank USA respecting AMC Entertainment Inc.'s 9 1/2% Senior Subordinated Notes due 2011. 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 September 28, 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: November 6, 2000 /s/ Peter C. Brown ---------------------------- Peter C. Brown Chairman of the Board, Chief Executive Officer and President Date: November 6, 2000 /s/ Craig R. Ramsey ---------------------------- Senior Vice President, Finance, Chief Financial Officer and Chief Accounting Officer EX-27 2 0002.txt
5 The schedule contains summary financial information extracted from the Consolidated Financial Statements of AMC Entertainment Inc. as of and for the twenty-six weeks ended September 28, 2000 submitted in response to the requirements to Form 10-Q and is qualified in its entirety by reference to such financial statements. 6-MOS MAR-29-2001 SEP-28-2000 80,240 0 28,106 4,006 0 144,902 1,232,932 414,695 1,125,483 213,760 790,520 0 0 15,660 13,005 1,125,483 172,187 621,403 26,355 540,063 66,879 0 38,216 (37,135) (13,800) (23,335) 0 0 0 (23,335) (.99) (.99)
EX-4.2(C) 3 0003.txt AGREEMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE, dated as of August 30, 2000 by and among AMC Entertainment Inc., a corporation duly organized and existing under the laws of the State of Delaware and having its principal office at 106 West 14th Street, Kansas City, Missouri 64105 (the "Company"), The Bank of New York, a banking corporation duly organized and existing under the laws of the State of New York and having its principal corporate trust office at 101 Barclay Street 21W, New York, New York 10286 (the "Resigning Trustee") and HSBC Bank USA a banking corporation and trust company duly organized and existing under the laws of the State of New York and having its principal corporate trust office at 140 Broadway, New York, New York 10005-1180 (the "Successor Trustee"). RECITALS: WHEREAS, there is currently authorized and issued $200,000,000 aggregate principal amount of the Company's 9 ? % Senior Subordinated Notes due 2009 under an Indenture dated as of March 19, 1997, by and between the Company and the Resigning Trustee, as amended by the First Supplemental Indenture dated as of June 9, 1997, by and between the Company and the Resigning Trustee (said Notes are hereinafter referred to as "Securities" and said Indenture, as amended, is hereinafter referred to as the "Indenture"); WHEREAS, Section 609 of the Indenture provides that the Trustee may at any time resign by giving written notice of such resignation to the Company, which resignation shall become effective upon the acceptance by a successor Trustee of its appointment as a successor Trustee; WHEREAS, Section 609 of the Indenture provides that, if the Trustee shall resign, the Company, by a Board Resolution, shall promptly appoint a successor Trustee; WHEREAS, the Company, by a Board Resolution, has provided for the appointment of such a successor Trustee; WHEREAS, Section 610 of the Indenture provides that any successor Trustee appointed in accordance with the Indenture shall execute, acknowledge and deliver to the Company and the retiring Trustee an instrument accepting such appointment under the Indenture, and thereupon the resignation of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, trusts and duties of the retiring Trustee; WHEREAS, Section 610 of the Indenture provides that on the written request of the Company or the successor Trustee, the retiring Trustee shall upon payment by the Company of all amounts due the retiring Trustee under Section 606 of the Indenture execute and deliver an instrument transferring to such successor Trustee all the rights, powers, duties and obligations of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee under the Indenture; WHEREAS, pursuant to Sections 1002 and 305 of the Indenture, Resigning Trustee was appointed Security Registrar and Paying Agent with respect to all the Securities authenticated and delivered under the Indenture; WHEREAS, the Company desires to appoint Successor Trustee as Trustee, Paying Agent and Security Registrar with respect to all the Securities heretofore and hereafter authenticated and delivered under the Indenture to succeed Resigning Trustee under the Indenture; and WHEREAS, Successor Trustee is willing to accept such appointment as Trustee, Paying Agent and Security Registrar under the Indenture; NOW, THEREFORE, the Company, Resigning Trustee and Successor Trustee, for and in consideration of the premises and of other good valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby consent and agree as follows: ARTICLE I THE RESIGNING TRUSTEE --------------------- SECTION 1.1. Pursuant to Section 609 of the Indenture, Resigning Trustee hereby notifies the Company that Resigning Trustee is hereby resigning as Trustee, Paying Agent and Security Registrar under the Indenture. SECTION 1.2. Resigning Trustee hereby represents and warrants to Successor Trustee that: (a) No covenant or condition contained in the Indenture has been waived by Resigning Trustee or, to the best of the knowledge of the Responsible Officers of Resigning Trustee's Corporate Trust and Agency Group, by the Holders of the percentage in aggregate principal amount of the Securities required by the Indenture to effect any such waiver. (b) There is no action, suit or proceeding pending or, to the best of the knowledge of the Responsible Officers assigned to Resigning Trustee's Corporate Trust and Agency Group, threatened against Resigning Trustee before any court or any governmental authority arising out of any action or omission by Resigning Trustee as Trustee, Paying Agent or Security Registrar under the Indenture. (c) As of the effective date of this Agreement, Resigning Trustee will hold no property under the Indenture. (d) Pursuant to Section 303 of the Indenture, Resigning Trustee duly authenticated and delivered, on various dates, $200,000,000 aggregate principal amount of Securities which are outstanding as of the effective date hereof. (e) Each person who so authenticated the Securities was duly elected, qualified and acting as an officer of Resigning Trustee and empowered to authenticate the Securities at the respective times of such authentication and the signature of such person or persons appearing on such Securities is each such person's genuine signature. (f) This Agreement has been duly authorized, executed and delivered on behalf of Resigning Trustee and constitutes its legal, valid and binding obligation. (g) To the best of the knowledge of the Responsible Officers of the Resigning Trustee's Corporate Trust and Agency Group, no event has occurred and is continuing which is, or after notice or lapse of time would become, an Event of Default under Section 501 of the Indenture. SECTION 1.3. Resigning Trustee hereby assigns, transfers, delivers and confirms to Successor Trustee all right, title and interest of Resigning Trustee in and to the trust under the Indenture, all the rights, powers, trusts and duties of the Trustee under the Indenture and all property and money held by such Resigning Trustee under the Indenture. Resigning Trustee shall execute and deliver such further instruments and shall do such other things as Successor Trustee may reasonably require so as to more fully and certainly vest and confirm in Successor Trustee all the rights, trusts and powers hereby assigned, transferred, delivered and confirmed to Successor Trustee as Trustee, Paying Agent and Security Registrar. SECTION 1.4 Resigning Trustee shall deliver to Successor Trustee, as of or immediately after the effective date hereof, all of the documents listed on Exhibit A hereto. ARTICLE II THE COMPANY --------------------- SECTION 2.1. The Company hereby accepts the resignation of Resigning Trustee as Trustee, Paying Agent and Security Registrar under the Indenture with respect to all Securities heretofore or hereafter authenticated and delivered pursuant thereto. SECTION 2.2. Attached as Exhibit B is a certificate the Secretary or Assistant Secretary of the Company certifying as to the resolutions adopted by the Board of Directors of the Company relating to this Agreement and which are in full force and effect on the date hereof. SECTION 2.3. The Company hereby appoints Successor Trustee as Trustee, Paying Agent and Security Registrar under the Indenture with respect to all Securities heretofore authenticated and delivered pursuant thereto, to succeed to, and hereby vests Successor Trustee with, all the rights, powers, trusts and duties of Resigning Trustee under the Indenture as Trustee, Paying Agent and Security Registrar from the effective date of its appointment forward. SECTION 2.4. Within a reasonable period of time after the effective date of this Agreement, the Company shall cause a notice, substantially in the form of Exhibit C annexed hereto, to be sent to each Holder of the Securities in accordance with the provisions of Section 609 of the Indenture. SECTION 2.5. The Company hereby represents and warrants to Resigning Trustee and Successor Trustee that: (a) The Company is a corporation duly and validly organized and existing pursuant to the laws of the State of Delaware. (b) The Indenture and the First Supplemental Indenture were validly and lawfully executed and delivered by the Company and that except for the First Supplemental Indenture dated June 9, 1997, the Indenture has not been amended or modified, is in full force and effect, and the Securities are validly issued securities of the Company. (c) The Company has performed or fulfilled prior to the date hereof, and will continue to perform and fulfill after the date hereof, each covenant, agreement, condition, obligation and responsibility under the Indenture. (d) No event has occurred and is continuing which is, or after notice or lapse of time would become, an Event of Default under Section 501 of the Indenture. (e) No covenant or condition contained in the Indenture has been waived by Company or, to the best of Company's knowledge, by Holders of the percentage in aggregate principal amount of the Securities required to effect any such waiver. (f) There is no action, suit or proceeding pending or, to the best of Company's knowledge, threatened against the Company before any court or any governmental authority arising out of any action or omission by the Company under the Indenture. (g) This Agreement has been duly authorized, executed and delivered on behalf of Company and constitutes its legal, valid and binding obligation. (h) All conditions precedent relating to the appointment of HSBC Bank USA, as Successor Trustee, Paying Agent and Security Registrar under the Indenture have been complied with by the Company. ARTICLE III THE SUCCESSOR TRUSTEE --------------------- SECTION 3.1. Successor Trustee hereby represents and warrants to Resigning Trustee and to the Company that: (a) Successor Trustee is qualified and eligible under the provisions of Article Six of the Indenture and under the Trust Indenture Act to act as Trustee under the Indenture. In making this representation and warranty, the Successor Trustee is relying upon the representations and warranties of both the Resigning Trustee and the Company regarding the Indenture. (b) This Agreement has been duly authorized, executed and delivered on behalf of Successor Trustee and constitutes its legal, valid and binding obligation. SECTION 3.2. Successor Trustee hereby accepts its appointment as successor Trustee, Paying Agent and Security Registrar under the Indenture with respect to all Securities heretofore or hereafter authenticated and delivered pursuant thereto and all property and money held or to be held under the Indenture and accepts the rights, powers, trusts, duties and obligations of Resigning Trustee as Trustee, Paying Agent and Security Registrar, under the Indenture with respect to all Securities heretofore or hereafter authenticated and delivered pursuant thereto and all property and money held or to be held under the Indenture, upon the terms and conditions set forth therein, with like effect as if originally named as Trustee, Paying Agent and Security Registrar under the Indenture. SECTION 3.3. References in the Indenture to "Corporate Trust Office" or other similar terms shall be deemed to refer to the Corporate Trust Office of Successor Trustee at 140 Broadway, New York, New York 10005-1180 or any other office of Successor Trustee at which, at any particular time, its corporate trust business shall be administered. ARTICLE IV MISCELLANEOUS -------------- SECTION 4.1. Capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Indenture. SECTION 4.2. This Agreement and the resignation, appointment and acceptance effected hereby shall be effective as of the close of business on the first date set forth herein above. SECTION 4.3. Resigning Trustee hereby acknowledges payment or provision for payment in full by the Company of compensation for all services rendered by Resigning Trustee under Section 606 of the Indenture and reimbursement in full by the Company of the expenses, disbursements and advances incurred or made by Resigning Trustee in accordance with the provisions of the Indenture. Resigning Trustee acknowledges that it relinquishes any lien it may have upon all property or funds held or collected by it to secure any amounts due it pursuant to the provisions of Section 606 of the Indenture. The Company acknowledges its obligation set forth in Section 606 of the Indenture to indemnify Resigning Trustee for, and to hold Resigning Trustee harmless against, any loss, liability and expense incurred without negligence or bad faith on the part of the Resigning Trustee and arising out of or in connection with the acceptance or administration of the trust evidenced by the Indenture prior to the date hereof (which obligation shall survive the execution hereof). SECTION 4.4. This Agreement shall be governed by and construed in accordance with the laws of the jurisdiction which governs the Indenture. SECTION 4.5. This Agreement may be executed in any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 4.6. The Company, Resigning Trustee and Successor Trustee hereby acknowledge receipt of an executed and acknowledged counterpart of this Agreement and the effectiveness thereof. IN WITNESS WHEREOF, the parties hereby have caused this Agreement of Resignation, Appointment and Acceptance to be duly executed and acknowledged and their respective seals to be affixed thereunto and duly attested all as of the day and year first above written. Company: AMC Entertainment Inc. By: /s/ James V. Beynon --------------------- Name: James V. Beynon Title: Sr. Vice President & Treasurer Resigning Trustee: The Bank of New York By: /s/ Irene Siegel --------------------- Name: Irene Siegel Title: Vice President Successor Trustee: HSBC Bank USA By: /s/ Robert A. Conrad --------------------- Name: Robert A. Conrad Title: Vice President EX-4.3(A) 4 0004.txt - 1 - AGREEMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE, dated as of August 30, 2000 by and among AMC Entertainment Inc., a corporation duly organized and existing under the laws of the State of Delaware and having its principal office at 106 West 14th Street, Kansas City, Missouri 64105 (the "Company"), The Bank of New York, a banking corporation duly organized and existing under the laws of the State of New York and having its principal corporate trust office at 101 Barclay Street 21W, New York, New York 10286 (the "Resigning Trustee") and HSBC Bank USA a banking corporation and trust company duly organized and existing under the laws of the State of New York and having its principal corporate trust office at 140 Broadway, New York, New York 10005-1180 (the "Successor Trustee"). RECITALS: WHEREAS, there is currently authorized and issued $225,000,000 aggregate principal amount of the Company's 9 1/2 % Senior Subordinated Notes due 2011 under an Indenture, dated as of January 27, 1999, by and between the Company and the Resigning Trustee (said Notes are hereinafter referred to as "Securities" and said Indenture is hereinafter referred to as the "Indenture"); WHEREAS, Section 7.08 of the Indenture provides that the Trustee may at any time resign by giving written notice of such resignation to the Company, which resignation shall become effective upon the acceptance by a successor Trustee of its appointment as a successor Trustee; WHEREAS, Section 7.08 of the Indenture provides that, if the Trustee shall resign, the Company shall promptly appoint a successor Trustee; WHEREAS, Section 7.08 of the Indenture provides that any successor Trustee appointed in accordance with the Indenture shall execute, acknowledge and deliver to the Company and the retiring Trustee an instrument accepting such appointment under the Indenture, and thereupon the resignation of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, trusts and duties of the predecessor Trustee from the effective date forward; WHEREAS, Section 7.08 of the Indenture provides that the retiring Trustee shall upon receipt of the successor Trustee's acceptance of appointment promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07 of the Indenture, and execute and deliver an instrument transferring to such successor Trustee all the rights, powers, duties and obligations of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee under the Indenture; WHEREAS, pursuant to Section 2.04 of the Indenture, Resigning Trustee was appointed Security Registrar and Paying Agent with respect to all the Securities authenticated and delivered under the Indenture; WHEREAS, the Company desires to appoint Successor Trustee as Trustee, Paying Agent and Security Registrar with respect to all the Securities heretofore and hereafter authenticated and delivered under the Indenture to succeed Resigning Trustee under the Indenture; and WHEREAS, Successor Trustee is willing to accept such appointment as Trustee, Paying Agent and Security Registrar under the Indenture; NOW, THEREFORE, the Company, Resigning Trustee and Successor Trustee, for and in consideration of the premises and of other good valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby consent and agree as follows: ARTICLE I THE RESIGNING TRUSTEE ------------------------------------------ SECTION 1.1. Pursuant to Section 7.08 of the Indenture, Resigning Trustee hereby notifies the Company that Resigning Trustee is hereby resigning as Trustee under the Indenture. SECTION 1.2. Resigning Trustee hereby represents and warrants to Successor Trustee that: (a) No covenant or condition contained in the Indenture has been waived by Resigning Trustee or, to the best of the knowledge of the Responsible Officers of Resigning Trustee's Corporate Trust and Agency Group, by the Holders of the percentage in aggregate principal amount of the Securities required by the Indenture to effect any such waiver. (b) There is no action, suit or proceeding pending or, to the best of the knowledge of the Responsible Officers assigned to Resigning Trustee's Corporate Trust and Agency Group, threatened against Resigning Trustee before any court or any governmental authority arising out of any action or omission by Resigning Trustee as Trustee, Paying Agent or Security Registrar under the Indenture. (c) As of the effective date of this Agreement, Resigning Trustee will hold no property under the Indenture. (d) Pursuant to Section 2.03 of the Indenture, Resigning Trustee duly authenticated and delivered, on various dates, $225,000,000 aggregate principal amount of Securities which are outstanding as of the effective date hereof. (e) Each person who so authenticated the Securities was duly elected, qualified and acting as an officer of Resigning Trustee and empowered to authenticate the Securities at the respective times of such authentication and the signature of such person or persons appearing on such Securities is each such person's genuine signature. (f) This Agreement has been duly authorized, executed and delivered on behalf of Resigning Trustee and constitutes its legal, valid and binding obligation. (g) To the best of the knowledge of the Responsible Officers of the Resigning Trustee's Corporate Trust and Agency Group, no event has occurred and is continuing which is, or after notice or lapse of time would become, an Event of Default under Section 6.01 of the Indenture. SECTION 1.3. Resigning Trustee hereby assigns, transfers, delivers and confirms to Successor Trustee all right, title and interest of Resigning Trustee in and to the trust under the Indenture, all the rights, powers, trusts and duties of the Trustee under the Indenture and all property and money held by such Resigning Trustee under the Indenture. Resigning Trustee shall execute and deliver such further instruments and shall do such other things as Successor Trustee may reasonably require so as to more fully and certainly vest and confirm in Successor Trustee all the rights, trusts and powers hereby assigned, transferred, delivered and confirmed to Successor Trustee as Trustee, Paying Agent and Security Registrar. SECTION 1.4. Resigning Trustee shall deliver to Successor Trustee, as of or immediately after the effective date hereof, all of the documents listed on Exhibit A hereto. ARTICLE II THE COMPANY -------------- SECTION 2.1. The Company hereby accepts the resignation of Resigning Trustee as Trustee, Paying Agent and Security Registrar under the Indenture with respect to all Securities heretofore or hereafter authenticated and delivered pursuant thereto. SECTION 2.2. The Company hereby appoints Successor Trustee as Trustee, Paying Agent and Security Registrar under the Indenture with respect to all Securities heretofore authenticated and delivered pursuant thereto, to succeed to, and hereby vests Successor Trustee with, all the rights, powers, trusts and duties of Resigning Trustee under the Indenture as Trustee, Paying Agent and Security Registrar from the effective date of its appointment forward. SECTION 2.3. Attached as Exhibit B is a Certification of the Secretary or Assistant Secretary of the Company certifying as to the resolutions adopted by the Board of Directors of the Company relating to this Agreement and which are in full force and effect on the date hereof. SECTION 2.4. The Company hereby represents and warrants to Resigning Trustee and Successor Trustee that: (a) The Company is a corporation duly and validly organized and existing pursuant to the laws of the State of Delaware. (b) The Indenture was validly and lawfully executed and delivered by the Company; the Indenture has not been amended or modified and is in full force and effect, and the Securities are validly issued securities of the Company. (c) The Company has performed or fulfilled prior to the date hereof, and will continue to perform and fulfill after the date hereof, each covenant, agreement, condition, obligation and responsibility under the Indenture. (d) No event has occurred and is continuing which is, or after notice or lapse of time would become, an Event of Default under Section 6.01 of the Indenture. (e) No covenant or condition contained in the Indenture has been waived by Company or, to the best of Company's knowledge, by Holders of the percentage in aggregate principal amount of the Securities required to effect any such waiver. (f) There is no action, suit or proceeding pending or, to the best of Company's knowledge, threatened against the Company before any court or any governmental authority arising out of any action or omission by the Company under the Indenture. (g) This Agreement has been duly authorized, executed and delivered on behalf of Company and constitutes its legal, valid and binding obligation. (h) All conditions precedent relating to the appointment of HSBC Bank USA, as Successor Trustee, Paying Agent and Security Registrar under the Indenture have been complied with by the Company. ARTICLE III THE SUCCESSOR TRUSTEE ------------------------------------------ SECTION 3.1. Successor Trustee hereby represents and warrants to Resigning Trustee and to the Company that: (a) Successor Trustee is qualified and eligible under the provisions of Article Seven of the Indenture and under the Trust Indenture Act to act as Trustee under the Indenture. In making this representation and warranty, the Successor Trustee is relying upon the representations and warranties of both the Resigning Trustee and the Company regarding the Indenture. (b) This Agreement has been duly authorized, executed and delivered on behalf of Successor Trustee and constitutes its legal, valid and binding obligation. SECTION 3.2. (a) Successor Trustee hereby accepts its appointment as successor Trustee, Paying Agent and Security Registrar under the Indenture with respect to all Securities heretofore or hereafter authenticated and delivered pursuant thereto and all property and money held or to be held under the Indenture and accepts the rights, powers, trusts, duties and obligations of Resigning Trustee as Trustee, Paying Agent and Security Registrar, under the Indenture with respect to all Securities heretofore or hereafter authenticated and delivered pursuant thereto and all property and money held or to be held under the Indenture, upon the terms and conditions set forth therein, as Trustee, Paying Agent and Security Registrar under the Indenture from the effective date of its appointment forward. (b) Within a reasonable time after the effective date of this Agreement, the successor Trustee shall cause a notice, substantially in the form of Exhibit C annexed hereto, to be sent to each Holder of the Securities in accordance with the provisions of Section 7.08 of the Indenture. SECTION 3.3. References in the Indenture to "Corporate Trust Office" or other similar terms shall be deemed to refer to the Corporate Trust Office of Successor Trustee at 140 Broadway, New York, New York 10005-1180 or any other office of Successor Trustee at which, at any particular time, its corporate trust business shall be administered. ARTICLE IV MISCELLANEOUS ---------------------------------- SECTION 4.1. Capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Indenture. SECTION 4.2. This Agreement and the resignation, appointment and acceptance effected hereby shall be effective as of the close of business on the date first set forth herein above. SECTION 4.3. Resigning Trustee hereby acknowledges payment or provision for payment in full by the Company of compensation for all services rendered by Resigning Trustee under Section 7.07 of the Indenture and reimbursement in full by the Company of the expenses, disbursements and advances incurred or made by Resigning Trustee in accordance with the provisions of the Indenture. Resigning Trustee acknowledges that it relinquishes any lien it may have upon all property or funds held or collected by it to secure any amounts due it pursuant to the provisions of Section 7.07 of the Indenture. The Company acknowledges its obligation set forth in Section 7.07 of the Indenture to indemnify Resigning Trustee for, and to hold Resigning Trustee harmless against, any loss, liability and expense incurred without negligence or bad faith or willful misconduct on the part of the Resigning Trustee and arising out of or in connection with the acceptance or administration of the trust evidenced by the Indenture prior to the date hereof (which obligation shall survive the execution hereof). SECTION 4.4. This Agreement shall be governed by and construed in accordance with the laws of the jurisdiction which governs the Indenture. SECTION 4.5. This Agreement may be executed in any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 4.6. The Company, Resigning Trustee and Successor Trustee hereby acknowledge receipt of an executed and acknowledged counterpart of this Agreement and the effectiveness thereof. IN WITNESS WHEREOF, the parties hereby have caused this Agreement of Resignation, Appointment and Acceptance to be duly executed and acknowledged and their respective seals to be affixed thereunto and duly attested all as of the day and year first above written. Company: AMC Entertainment Inc. By: /s/ James V. Beynon____________ ---------------------------- Name: James V. Beynon Title: Sr. V. P. & Treasurer Resigning Trustee: The Bank of New York By: /s/ Irene Siegel________________ ---------------------------- Name: Irene Siegel Title: Vice President Successor Trustee: HSBC Bank USA By: /s/ Robert A. Conrad___________ ---------------------------- Name: Robert A. Conrad Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----