NOTE 1—BASIS OF PRESENTATION

AMC Entertainment® Inc. ("AMCE" or the "Company") is an intermediate holding company, which, through its direct and indirect subsidiaries, including American Multi-Cinema, Inc. ("AMC") and its subsidiaries (collectively with AMCE, unless the context otherwise requires, the "Company"), is principally involved in the theatrical exhibition business and owns, operates or has interests in theatres primarily located in the United States. AMCE is a wholly-owned subsidiary of AMC Entertainment Holdings, Inc. ("Parent") and an indirect, wholly-owned subsidiary of Dalian Wanda Group Co., Ltd. ("Wanda"), a Chinese private conglomerate.

On August 30, 2012, Wanda acquired Parent through a merger between Parent and 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"). In connection with the change of control pursuant to the Merger, the Company's assets and liabilities were adjusted to fair value on the closing date of the Merger by application of "push down" accounting. As a result of the application of "push down" accounting in connection with the Merger, the Company's financial statement presentations herein distinguish between a predecessor period ("Predecessor"), for periods prior to the Merger, and a successor period ("Successor"), for periods subsequent to the Merger. The Successor applied "push down" accounting and its financial statements reflect a new basis of accounting that is based on the fair value of assets acquired and liabilities assumed as of the Merger date, August 30, 2012. The Consolidated Financial Statements presented herein are those of Successor from January 1, 2013 through June 30, 2013, and those of Predecessor for all periods prior to the Merger date. As a result of the application of "push down" accounting at the time of the Merger, the financial statements for the Predecessor period and for the Successor period are presented on different bases and are, therefore, not comparable. See Note 2—Merger for additional information regarding the Merger.

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 Transition Report on Form 10-K for the transition period from March 30, 2012 to December 31, 2012. The December 31, 2012 Consolidated Balance Sheet data was derived from the audited balance sheet included in the Transition Report on Form 10-K, but does not include all disclosures required by generally accepted accounting principles in the United States ("U.S. GAAP"). In the opinion of management, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the Company's financial position and results of operations. Due to the seasonal nature of the Company's business, results for the six months ended June 30, 2013 are not necessarily indicative of the results to be expected for the calendar year ending December 31, 2013. The Company manages its business under one operating segment called Theatrical Exhibition.

Use of Estimates: Preparing the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to: (1) Impairments, (2) Film exhibition costs, (3) Income and operating taxes, (4) Theatre and other closure expense, and (5) Gift card and packaged ticket breakage. Actual results could differ from those estimates.

Fiscal Year: On November 15, 2012, the Company changed its fiscal year to a calendar year ending on December 31^st of each year. Prior to the change, the Company had a 52/53 week fiscal year ending on the Thursday closest to the last day of March. All references to "fiscal year", unless otherwise noted, refer to the 52/53 week fiscal year, which ended on the Thursday closest to the last day of March.

Out of Period Adjustments: During the three months ended June 30, 2013, management identified adjustments necessary to correct the valuation allowance for deferred tax assets recognized when push down accounting was applied at the date of the Merger and to correct changes in the valuation allowance for deferred tax assets recognized subsequent to the Merger.

Management determined that an increase to the valuation allowance at the date of the Merger was necessary to provide for deferred tax assets that more likely than not will not be realized. The out of period adjustment increased reported goodwill by $31,463,000, decreased other current assets by $33,200,000 and decreased other long-term liabilities by $1,737,000 as of June 30, 2013.

Management also determined that during the successor period from August 31, 2012 through December 31, 2012, and during the first quarter ended March 31, 2013, reductions to the valuation allowance were incorrectly recorded resulting in an understatement of tax expense and net loss from continuing operations of $5,520,000 and $2,800,000, respectively.

The out of period adjustments for each of the periods noted above have been recorded during the second quarter of calendar 2013. The impact of these adjustments increased the tax provision and reduced earnings from continuing operations by $8,320,000 from amounts that otherwise would have been recorded for the three months ended June 30, 2013. For the six months ended June 30, 2013, the out of period impact was $5,520,000, which represents the adjustment recorded for the successor period from August 31, 2012 to December 31, 2012. These corrections had no impact on reported cash flows for any period. Management does not believe the impact of these out of period adjustments materially impacts the fair presentation of the Company's operating results or financial condition for any of the periods impacted.

Goodwill: The activity for goodwill is presented below:

See Note 2—Merger and Note 3—Acquisition for additional information regarding the M

(In thousands)	Total

Balance as of December 31, 2012	$	2,219,833
Increase in Goodwill from purchase price allocation adjustments related to the Merger		31,951
Increase in Goodwill from purchase price allocation adjustments related to the Rave acquisition		13,127
Out of period adjustments to correct the valuation allowance for deferred taxes recognized when push down accounting was applied at the date of the Merger		31,463

Balance as of June 30, 2013	$	2,296,374

erger and the Rave Acquisitions.

Discontinued Operations: The results of operations for the Company's discontinued operations have been eliminated from the Company's continuing operations and classified as discontinued operations for each period presented within the Company's Consolidated Statements of Operations. During the six months ended June 30, 2013, the Company received $4,666,000 for a sales price adjustment from the sale of theatres located in Canada.

Other (Income) Expense: The following table sets forth the components of other (income) expense:

(In thousands)	Three Months Ended June 30, 2013			Thirteen Weeks Ended June 28, 2012		Six Months Ended June 30, 2013			Twenty-six Weeks Ended June 28, 2012

	(Successor)			(Predecessor)		(Successor)			(Predecessor)
Loss on redemption of 8% Senior Subordinated Notes due 2014	$	—		$	—	$	—		$	640
Loss (gain) on Senior Secured Credit Facility		(240	)		—		(240	)		383
Other (income) expense		(54	)		121		(54	)		123

Other (income) expense	$	(294	)	$	121	$	(294	)	$	1,146