MERGER

6 Months Ended

Sep. 27, 2012

MERGER

MERGER

NOTE 2—MERGER

        Parent and Wanda, a Chinese private conglomerate, completed a Merger on August 30, 2012 in which Wanda acquired all of the outstanding capital stock of Parent. Parent merged with Wanda Film Exhibition Co. Ltd., ("Merger Subsidiary"), a wholly-owned indirect subsidiary of Wanda, whereby Merger Subsidiary merged with and into Parent with Parent continuing as the surviving corporation and as a wholly-owned indirect subsidiary of Wanda. The merger consideration totaled $701,811,000 with $700,000,000 invested by Wanda and $1,811,000 invested by members of management. Wanda also acquired cash, corporate borrowings and capital and financing lease obligations in connection with the Merger as described below.

        As a result of the Merger and related change of control, the Company applied "push down" accounting which requires allocation of the Merger consideration to the estimated fair values of the assets and liabilities acquired in the Merger. The allocation of Merger consideration was based on management's judgment after evaluating several factors, including a preliminary valuation assessment. The allocation of Merger consideration is preliminary and subject to changes as an appraisal of both tangible and intangible assets and liabilities is finalized. The appraisals which are not yet finalized include measurements including a combination of income and market approaches. The preliminary allocation represents managements' current best estimate of fair value, but these amounts could change as additional information is obtained and evaluated. The following is a summary of the preliminary allocation of the Merger consideration:

(In thousands)	Total
Cash	$	101,641
Receivables, net		28,278
Other current assets		51,090
Property, net(1)		1,062,115
Intangible assets, net(2)		240,200
Goodwill(3)		2,160,678
Other long-term assets(4)		448,785
Accounts payable		(134,186	)
Accrued expenses and other liabilities		(138,606	)
Deferred revenues and income(5)		(117,841	)
Corporate borrowings(6)		(2,086,926	)
Capital and financing lease obligations		(60,922	)
Deferred revenues—for exhibitor services agreement(7)		(322,620	)
Other long-term liabilities(8)		(529,875	)
Total estimated Merger consideration	$	701,811
Corporate borrowings		2,086,926
Capital and financing lease obligations		60,922
Less: cash		(101,641	)
Total estimated transaction value	$	2,748,018

(1)

Property, net consists of real estate leasehold improvements and furniture, fixtures and equipment recorded at fair value.

(2)

Intangible assets consist of a trade name, a non-compete agreement, management contracts, National CineMedia, LLC ("NCM") tax receivable agreement, and favorable leases. See Note 4—Goodwill and Other Intangible Assets for further information.

(3)

Goodwill represents the excess of the Merger consideration over the net assets recognized and represents the future expected economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Amounts recorded for goodwill are not subject to amortization and will not be deductible for tax purposes.

(4)

Other long-term assets include equity method investments, real estate and marketable equity securities recorded at fair value. Other long-term assets include net deferred tax assets resulting from temporary differences that arose as a result of the preliminary allocation of the Merger consideration and valuation allowance established at the Merger date for those deferred tax assets that management believes are not "more likely than not" of being realized. In determining the valuation allowance, management evaluated the expected future reversal of deferred tax assets and liabilities, and available tax planning strategies that are prudent and feasible.

(5)

Deferred revenues and income include deferred revenues related to the sales of gift cards, packaged tickets and AMC Stubs memberships and rewards recorded at fair value.

(6)

Corporate borrowings include borrowings under the Senior Secured Credit Facility-Term Loan due 2016, the Senior Secured Credit Facility-Term Loan due 2018, the 8.75% Senior Fixed Rate Notes due 2019 and the 9.75% Senior Subordinated Notes due 2020 recorded at fair value.

(7)

Deferred revenues for Exhibitor Services Agreement reflect the Company's long-term advertising arrangement with NCM recorded at fair value.

(8)

Other long-term liabilities consist of certain theatre leases that have been identified as unfavorable, deferred rent related to post Merger escalations of minimum rentals, adjustments for pension and postretirement medical plan liabilities and deferred RealD Inc. lease incentive recorded at fair value. Other long-term liabilities include deferred tax liabilities resulting from indefinite temporary differences that arose primarily from the application of "push down" accounting.

        The fair value measurement of tangible and intangible assets and liabilities were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows, appraisals, market comparables, and quoted market prices. Quoted market prices and observable market based inputs were used to estimate the fair value of corporate borrowings (Level 2) and the Company's investments in NCM and RealD Inc. common stock (Level 1).

        The unaudited pro forma financial information presented below sets forth the Company's historical statements of operations for the periods indicated and gives effect to the Merger as if "push down" accounting had been applied as of the beginning of fiscal 2012. Such information is presented for comparative purposes to the Consolidated Statements of Operations only and does not purport to represent what the Company's results of operations would actually have been had these transactions occurred on the date indicated or to project its results of operations for any future period or date.

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	Pro forma June 29, 2012 through September 27, 2012			Pro forma July 01, 2011 through September 29, 2011			Pro forma March 30, 2012 through September 27, 2012			Pro forma March 29, 2011 through September 29, 2011
	(unaudited)						(unaudited)
Revenues
Admissions	$	440,805		$	459,985		$	892,387		$	923,470
Concessions		185,945			182,517			374,495			369,750
Other theatre		24,158			20,661			47,691			38,237
Total revenues		650,908			663,163			1,314,573			1,331,457
Operating Costs and Expenses
Film exhibition costs		228,471			248,188			471,198			499,693
Concession costs		25,505			24,520			52,104			49,873
Operating expense		175,134			183,972			348,029			359,144
Rent		109,674			110,503			220,279			219,982
General and administrative:
Merger, acquisition and transaction costs		913			724			1,221			1,336
Management fee		—			—			—			—
Other		18,747			14,020			33,755			28,699
Depreciation and amortization		51,050			52,291			101,162			105,170
Operating costs and expenses		609,494			634,218			1,227,748			1,263,897
Operating income		41,414			28,945			86,825			67,560
Other expense (income)
Other expense		888			24			1,009			364
Interest expense
Corporate borrowings		34,184			35,484			69,097			70,735
Capital and financing lease obligations		1,414			1,493			2,832			2,991
Equity in (earnings) losses of non-consolidated entities		1,993			3,304			(6,592	)		236
Investment expense		283			289			556			69
Total other expense		38,762			40,594			66,902			74,395
Earnings (loss) from continuing operations before income taxes		2,652			(11,649	)		19,923			(6,835	)
Income tax provision (benefit)		4,100			(255	)		3,200			1,370
Earnings (loss) from continuing operations		(1,448	)		(11,394	)		16,723			(8,205	)
Earnings (loss) from discontinued operations		37,671			(161	)		35,722			(1,258	)
Net earnings (loss)	$	36,223		$	(11,555	)	$	52,445		$	(9,463	)

        The following are statements of Stockholder's Equity for the Successor from Inception on August 31, 2012 through September 27, 2012 and for the Predecessor from March 29, 2012 through August 30, 2012.

Predecessor from March 29, 2012 through August 30, 2012

	Common Stock						Accumulated Other Comprehensive Income (Loss)
					Additional Paid-in Capital					Accumulated Deficit			Total Stockholder's Equity
(In thousands, except share and per share data)	Shares		Amount
Balance, March 29, 2012		1	$	—	$	444,336	$	(20,203	)	$	(269,793	)	$	154,340
Comprehensive loss:
Net earnings		—		—		—		—			94,400			94,400
Comprehensive earnings		—		—		—		9,034			—			9,034
Stock-based compensation		—		—		830		—			—			830
Balance August 30, 2012		1	$	—	$	445,166	$	(11,169	)	$	(175,393	)	$	258,604

Successor from Inception on August 31, 2012 through September 27, 2012

	Common Stock						Accumulated Other Comprehensive Income (Loss)
					Additional Paid-in Capital					Accumulated Deficit			Total Stockholder's Equity
(In thousands, except share and per share data)	Shares		Amount
Balance, August 31, 2012		1	$	—	$	—	$	—		$	—		$	—
Net loss		—		—		—		—			(43,043	)		(43,043	)
Comprehensive earnings		—		—		—		(1,627	)		—			(1,627	)
Merger consideration		—		—		701,811		—			—			701,811
Capital contributions from Wanda		—		—		100,000		—			—			100,000
Balance September 27, 2012		1	$	—	$	801,811	$	(1,627	)	$	(43,043	)	$	757,141

        The merger consideration represents total consideration of $700,000,000 invested by Wanda and $1,811,000 invested by members of management.

        The Merger on August 30, 2012, triggered the payment of an aggregate of $32,340,000 for success fees to financial advisors, bond amendment consent fees, professional and consulting fees, payments for cancellation of stock based compensation and management success bonuses that were contingent on the consummation of the Merger. The Company has determined that its accounting policy for any cost that will be triggered by the consummation of the Merger is to recognize the cost when the Merger is consummated. Accordingly, the fees discussed above have not been recorded in the Consolidated Statement of Operations for the Predecessor period since that statement depicts the results of operations just prior to consummation of the transaction. In addition, since the Successor period reflects the effects of push-down accounting, these costs have also not been recorded as an expense in the Successor period. However, the costs were reflected in the purchase accounting adjustments which were applied in arriving at the opening balances of the Successor.

Corporate Borrowings

        Notes due 2014.    On April 6, 2012, the Company redeemed $51,035,000 aggregate principal amount of its 8.00% Senior Subordinated Notes due 2014 (the "Notes due 2014") pursuant to a cash tender offer at a price of $1,000 per $1,000 principal amount. The Company used the net proceeds from the issuance of the Senior Secured Credit Facility term loans (the "Term Loan due 2018"), which was borrowed on February 22, 2012, to pay for the consideration of the cash tender offer plus accrued and unpaid interest on the principal amount of the Notes due 2014. On August 30, 2012, prior to the consummation of the Merger, the Company issued a call notice for all of its remaining outstanding Notes due 2014 at a redemption price of 100% of the principal amount thereof, plus accrued and unpaid interest, to the redemption date. On August 30, 2012, the Company irrevocably deposited $141,027,000, plus accrued interest to September 1, 2012 with a trustee to satisfy and to discharge its obligations under the Notes due 2014 and its indenture. The Company used a combination of cash on hand and funds contributed by Wanda. The Company recorded a loss on redemption of $1,337,000 prior to the Merger related to the extinguishment of the Notes due 2014.

        Consent Solicitation and Senior Secured Credit Facility Amendment.    On June 22, 2012, the Company announced it had received the requisite consents from holders of each of its 8.75% Senior Notes due 2019 (the "Notes due 2019") and its 9.75% Senior Subordinated Notes due 2020 (the "Notes due 2020" and, collectively with the Notes due 2019, the "Notes") for (i) a waiver of the requirement for AMCE to comply with the "change of control" covenant in each of the Indenture governing the Notes due 2019 and the Indenture governing the Notes due 2020 and, together, (the "Indentures") in connection with the Merger (the "Waivers"), including the Company's obligation to make a "change of control offer" in connection with the Merger with respect to each series of Notes, and (ii) certain amendments to the Indentures to reflect the change in ownership going forward by adding Wanda and its affiliates to the definition of "Permitted Holder" under each of the Indentures. The Company entered into supplemental indentures to give effect to the Waivers and certain amendments to the Indentures, which became operative upon payment of the applicable consent fee immediately prior to the closing of the Merger. The holders of each of the Notes due 2019 and Notes due 2020, who validly consented to the Waiver and the proposed amendments, received a consent fee of $2.50 per $1,000 principal amount at the closing date of the Merger. The total consent fees of $2,376,000 were reflected in the purchase accounting fair value adjustments which were applied in arriving at the opening balances of the Successor.

        On July 2, 2012, the Company entered into a waiver and fourth amendment to its Senior Secured Credit Facility dated as of January 26, 2006 to, among other things: (i) waive a certain specified default that would otherwise occur upon the change of control effected by the Merger, (ii) permit AMCE to change its fiscal year after completion of the Merger, (iii) reflect the change in ownership going forward by restating the definition of "Permitted Holder" to include only Wanda and its affiliates under the Senior Secured Credit Facility in connection with the Merger, (iv) provide for a minimum LIBOR percentage of 1.00%, from, and only after, the completion of the Merger, in determining the interest rate to the Senior Secured Credit Facility term loans due December 2016 ("Term Loan due 2016"), and (v) provide for an interest rate of LIBOR plus 375 basis points to the Senior Secured Credit Facility term loans due January 2018 ("Term Loan due 2018"), from and only after, the completion of the Merger. The current interest rates for borrowings under the Term Loan due 2016 is 4.25%, which is based on LIBOR plus 3.25% and is subject to a 1.00% minimum LIBOR rate with respect to LIBOR borrowings, and the interest rates for borrowings under the Term Loan due 2018 is 4.75%, which is based on LIBOR plus 3.75% and is subject to a 1.00% minimum LIBOR rate with respect to LIBOR borrowings.

        Financial Covenants.    As of September 27, 2012, the Company was in compliance with all financial covenants relating to the Senior Secured Credit Facility, the Notes due 2020, and the Notes due 2019.